A study has revealed that U.K.’s retail banks have paid almost £53 billion as fines for financial misconduct since 2000. Over the years, this has affected the ability of the banks to rebuild capital, reduced dividends for investors and limited their lending capacity.
UK’s financial institutions have persistently faced accusations of misconduct with multiple scandals coming to light in the past 15 years including rigging of interest-rate benchmarks, irregular practices in selling insurance products and risky interest-rate hedging products.
According the study carried out by New City Agenda which is a think-tank based in London, the repeated lapses has led the banks to lose 1 pound for every 4 pounds of pre-tax profits earned.
In a statement, John McFall a director of New City Agenda and former Chairman of U.K.’s Treasury Committee said,
The profitability of U.K. retail banks has been imperiled by persistent misconduct. This has made every citizen poorer through our pension funds and our ownership of the bailed out banks.
The study identified the Payment Protection Insurance scandal as the biggest scandal that resulted in the highest damage. This scandal cost UK banks dearly as they had to pay a combined fine of close to £37.3 billion.
Financial Times
Other major scandals to hit the UK include the improper selling of interest rate swaps which cost the banks £4.8 billion in the years between 2012 and 2015. Issues with selling of endowment mortgages caused the banks to set aside £1.9 billion in the time period between 2002 and 2006. Last year three of UK Banks agreed a payout of $924m for forex rigging.
The biggest offender of financial misconduct was Lloyds bank who had to set aside £14 billion in fines. The second biggest offender was Barclays Bank who had to pay out £7.3 billion followed by the Royal Bank of Scotland who had to shell out £6.4 billion.
While these are enormous sums of money that the banks have had to pay in penalties, senior management in these banks have not had to face a reduction in salary or bonuses. While shareholders have had to bear the brunt in falling share prices, senior banking executives continued to receive their full salaries and incentives which ran into billions of pounds in total costs.
Banking analysts in the UK want shareholders to initiate a campaign for changing bank culture and improving accountability of banks by demanding the reversal of bonuses issued to accountable bank staff.
