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Big Banks

BOE Official: Bank Legal Costs Since 2008 Reach $275 Billion

October 20, 2016

A top Bank of England official said the tally for global banks’ legal woes in the wake of the 2008 meltdown, including fines, has reached $275 billion.  That would translate into $5 trillion of ‘reduced lending capacity.’


Ms. Minouche Shafik, deputy governor in markets and banking at the Bank of England, revealed the staggering figure at a Federal Reserve Bank of New York conference on bank culture failings in lower Manhattan.  She said the scale of misconduct that has emerged in the wake of the financial crisis is unprecedented. “Never before has misconduct occurred so systemically, in such a scale and across multiple jurisdictions.”


Ms. Shafik bemoaned the “ethical drift” that has led to a decline in banking standards and urged coordination between the industry and the official sector to raise standards.  She also urged investors to participate in the debate, and vote with their feet, because investors pay the costs of bad culture when fines lead to reduced dividends.


Ms. Shafik said there is early evidence that Bank of England initiatives to address culture issues are bearing fruit. U.K. rules now request a portion of bonus awards to be deferred for up to seven years for senior managers. Ms. Shafik said this allows for unpaid bonus awards to be canceled or reduced, or bonuses to be returned or “clawed back” if misconduct is later uncovered. Adjustments in unpaid bonus amounts within major U.K. banks has more than tripled to about £300 million in 2014 from £100 million in 2010.