Banks cost investors almost £150billion after string of scandals since the financial crisis, says report



Banks have cost their shareholders nearly £150bn with a string of scandals during the financial crisis, according to the London School of Economics.

The tally for bad behaviour such as loan insurance mis-selling and sanction-busting, is larger than the annual economic output of Ireland.

Between 2008 and 2012, ten leading banks suffered some £148billion in fines and provisions for litigation and financial penalties, according to the LSE’s report.

Lloyds leads: Of the British banks, part state-owned lender Lloyds took the unwanted position at the head of the table for bad conduct costs

The sum does not even include losses from rogue trader scandals such as the London Whale affair that cost JP Morgan some £3.8billion.

The running total is set to rise much further, with probes still underway into misdeeds such as the fiddling of the Libor interest rate, mis-sold products and allegations of foreign exchange manipulation.

Bank of America topped the table as the ‘worst offender’ with its costs, including provisions and liabilities, stacking up to £54billion between 2008 and 2012.

JP Morgan, which recently reached an £8billion settlement with US regulators for misleading investors during the housing crisis, came in second place in the league of shame.

The bank, led by Jamie Dimon, racked up total costs for bad behaviour of £24.7billion in the five years to the end of 2012, equal with UBS.

The total for the Swiss bank does not include the £1.4billion it lost due to the actions of rogue trader Kweku Adoboli.

Of the British banks, part state-owned lender Lloyds took the unwanted position at the head of the table for bad conduct costs.

Scandals such as the mis-selling of PPI loan insurance saw it take a hit of £9.24billion during the period, with HSBC behind it on £6.3billion, Barclays on £5.1billion and 81 per cent taxpayer-owned RBS on £4.2billion.

Lloyds was fined another £28million for exploiting customers earlier this month, after the table was compiled.

The study by the LSE did not include Standard Chartered, which reached a £407million settlement last year with the US authorities over issues including the breaching of sanctions with Iran.

The total cost of £148billion for just ten banks is larger than the economic output of relatively large countries such as Ireland, Pakistan and the Czech Republic.

Professor Roger McCormick of the LSE said: ‘The fundamental question is whether these costs will start going down soon, if these banks now have sound ethical cultures.’

‘If not, why not? Banks are required by regulators to “know your customer” but do we know as much as we should about them?’

He said customers should change banks if they believe their lender’s public efforts to turn over a new leaf are merely a ‘PR message’.