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Saturday, 29 March 2014 00:00
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JPMorgan Chase tops the list, with payouts of 30% of the total of $110bn—and counting—in US settlements

With Bank of America(BofA) agreeing to pay $9.5 billion to settle with the US housing regulator, this takes the total paid by top US and other global banks to $110 billion of US fines to settle cases relating to mis-selling of assets. Though there are still big minefields to be negotiated in terms of the investigations into the rigging of Libor and Euribor—benchmarks for settling trillions of dollars for complex derivatives—the latest Federal Reserve’s stress test has a broad estimate of how much more of hits the banks will need to take. According to the Financial Times, the Fed found the biggest banks could still face another $150 billion bill for repurchasing dud mortgage bonds as well as a fall in the value of real estate they have repossessed. The bulk of this, the FT report says, comprises likely litigation costs. In the case of the BofA settlement, estimates are this would reduce profits by 20 cents a share, or roughly 40% of Q1 profits. The ‘finest’ bank, going by the value of the fines, is JPMorgan Chase which has paid out around 30% of the total fines after the financial crisis.

The big question here is whether the fines add up to a big deterrent or whether they are just seen as the cost of doing business. Given how the boards of banks like JPMorgan have continued to back the existing management, the conclusion seems to be banks are seeing this as a slap on the wrist, albeit a hard one. What makes things worse for the Obama administration which has been seen as soft on big banks is that, with the exception of Citigroup and the US operations of banks like HSBC and RBS, 25 banks are being allowed to return billions of dollars to shareholders by way of share buybacks and increased dividends.


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