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Fines and lawsuits cost banks $260 billion

Fines and lawsuits have cost US and European banks $260 billion since the 2008 financial crisis, according to research by Morgan Stanley that has been seen by the Financial Times.25 Aug 2015

A survey of the five biggest banks in the US and the 20 largest in Europe found that $137 billion, or 53% of the total, was paid by Morgan Stanley, Bank of America, JPMorgan, Citi and Goldman Sachs, the Financial Times said.

The 25 banks surveyed will have to pay another $60bn over the next two years, with most of this coming from European banks who have around $50bn to pay, Morgan Stanley managing director Huw van Steenis told the newspaper.

The fines are having a serious effect on the industry, van Steenis said.

"Litigation not only takes a bite out of your equity but has a much longer lasting impact on the amount of capital you need to hold," he told the Financial Times.

The report found that US mortgages were responsible for the biggest fines, with costs of $110bn across the banks, followed by PPI at $43bn, foreign exchange rate rigging at $15bn and money laundering also $15bn, the Financial Times said. Civil suits on foreign exchange rigging are likely to amount to tens of billions more, it said.

Bank of America has paid the most in litigation charges, at $65.6bn to date, followed by JPMorgan at $42.4bn, the Financial Times said.

This month, nine of the world's largest banks have agreed to pay a total of $2 billion in compensation to investors in the US over the manipulation of exchange rates, and to cooperate in litigation against 12 other defendants.

Earlier this month the UK Serious Fraud Office reported that the first City trader charged as a result of an ongoing criminal investigation into the manipulation of the London Interbank Offered Rate (LIBOR) benchmark had been sentenced to 14 years in prison.