The UK’s four biggest banks face paying out £19.5bn in fines, compensation and legal expenses this year and next, taking the total since 2011 to more than £75bn, according to the ratings agency Standard & Poor’s.
Over the five years to 2015, Barclays, HSBC and the bailed-out Lloyds Banking Group and Royal Bank of Scotland have together incurred costs of £55.8bn to cover so-called conduct and litigation issues, after being penalised for rigging Libor and foreign exchange markets, and having to compensate customers for misselling payment protection insurance.
“This staggering amount represents around 9% of these banks’ revenues during this period and about 90% of all conduct and litigation charges for the UK banking system,” S&P said.
The total cost for the UK banking industry was £62.5bn.
While the ratings agency is now predicting charges of £19.5bn by the end of 2017, it also describes this year as the “last year for mega charges”. This is, in part, because of an expectation that the cost of the PPI scandal, which has reached £34bn, will ease off.
“We maintain our view that 2016 will likely be the last year for mega conduct and litigation charges. That said, we also believe that conduct and litigation matters have become a ‘way of life’ for UK banks,” S&P said.
“We do not believe that future retail conduct redress, including relatively new issues such as packaged bank accounts, will come close to the scale of PPI,” it added.
S&P published its report as the big four banks prepare to publish their first-quarter results, which will be scoured for signs of any further PPI provisions.
