Britain’s biggest banks have paid out £71 billion for misconduct in the decade since the financial crisis, a Mail on Sunday investigation reveals.
The staggering costs for Royal Bank of Scotland, Lloyds Banking Group, Barclays and HSBC since the 2008 meltdown stem from fines, legal fees and compensation for mistreated customers.
The MoS audit comes as banks continue to grapple with the toxic legacy from the financial crisis triggered by the collapse a decade ago of Wall Street bank Lehman Brothers.
Collapse: A Lehman Brothers worker when the bank fell in 2008
Multi-billion pound fines were levied for a variety of sins including banks’ roles in rigging Libor interest rates, interfering with foreign exchange markets and failing to prevent money laundering as well as for mis-selling derivatives.
Our analysis reveals Lloyds is the bank that has suffered the heaviest penalties with at least £23.4 billion in conduct-related costs and write-offs since 2008. These are largely due to fines and compensation to customers from the payment protection insurance scandal.
RBS is second on the list. Its conduct and litigation costs since 2008, including amounts it has earmarked but not yet used, add up to £20.6 billion.
Earlier this month, the bailed-out bank agreed to pay £3.6 billion to settle an investigation by the US Department of Justice (DoJ) for mis-selling mortgage-backed securities – the bonds at the heart of the 2008 crisis in America.
A few weeks after the collapse in September 2008 of Lehman Brothers, the UK Government announced it was to bail out RBS and Lloyds to the tune of £45.5 billion and £20.3 billion respectively. The taxpayer still owns 62 per cent of RBS and faces multi-billion pound losses on its stake, but sold its remaining Lloyds shares last year.
Fines, legal fees and customer compensation costs for Barclays since the crisis are close to £17 billion.
That includes a £1.4 billion settlement with the DoJ in the US earlier this year for misleading investors in the run-up to the crisis about the quality of the mortgage-backed securities it sold them. The penalty was half the amount the authorities initially demanded.
Barclays avoided a UK state bailout – but only by taking £12 billion in emergency funding from the state of Qatar. This move has proved just as controversial. The Serious Fraud Office applied last month to the High Court to reinstate charges over the deal that had previously been dismissed.
The SFO had charged Barclays and four former directors in 2017 with conspiracy to commit fraud. It described a £2 billion loan given to Qatar by Barclays in November 2008 as ‘unlawful financial assistance’.
Fined: Since 2008, HSBC has had to pay nearly £10 billion in fines
HSBC has forked out nearly £10 billion in fines and other costs for its conduct since 2008. This included a £1.5 billion fine in 2012 for failing to prevent Mexican drugs cartels from money laundering and for violating US sanctions by working with Iran.
A study by the CCP Research Foundation – which analyses banks’ so-called ‘conduct costs’ – revealed that the biggest 20 banks worldwide, including the biggest four in Britain, had paid or set aside £264 billion in the five years to 2017.
Chris Stears, research director of the CCP, said: ‘Trust in, and the trustworthiness of, the banks must surely correlate to, and be conditional on, banks’ conduct costs.’
He added that the persistent need for the banks to set aside large sums to provide for fines and redress is ‘worrying’.
Auditors have also come under scrutiny – for their work on large companies, especially in the wake of the failures of Carillion and BHS.
KPMG, one of the ‘Big Four’ auditors, was last week fined £3 million for its work on Ted Baker’s accounts. This takes the total amount of penalties handed out over ten years by the Financial Reporting Council, the accountancy watchdog, to more than £50 million.