UK Banks’ Have Payed Out Up To £53 Billion Due To Misconduct

April 11, 2016
UK Banks’ Have Payed Out Up To £53 Billion Due To Misconduct August 9, 2018 Clive Nelson

UK BanksA 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.

About the Author

Clive Nelson

Clive Nelson Author

Hi, my name is Clive Nelson and welcome to Traders Bible. Just to tell you bit about myself…I have been trading FX and binary options for the best part of 10 years now. After graduating with honours in economics, I began working for an investment bank in New York as an assistant trader before working my way up. After a few years, I went on to work as a broker in London, England and then eventually came back to the U.S to work in a hedge fund, where I manage $800 million of my clients’ investments. There have been times over the course of my career where I’ve had to take a hit, but I’ve accepted that losing is part of the game, it’s a learning curve. I’ve learnt from my mistakes and you don’t have to make the same errors I did. A lot of my education came from when I was a broker and this is why I’m here to tell you that Traders’ Bible offers you the foundations of how to become a great trader.

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