The big four UK banks racked up more than £10bn in fines and legal charges during 2016 – but it will prove to be the last year they incur “outsized” penalties, according to ratings agency Standard & Poor’s.
The combined bill for conduct and litigation charges at Barclays, HSBC, Lloyds Banking Group and RBS was £10.8bn in 2016, S&P said in a report on June 7.
That was £3.7bn less than the £14.5bn total in 2015, which was UK banks’ annus horribilis for fines and charges – and the highest since 2011.
S&P points out the big four have now been handed a “staggering” £66bn in fines and legal charges since 2011 – or 10% of their revenues – but the ratings agency expects prospects to improve from now on.
Its analysts wrote: “We expect 2016 will prove to be the last year in which the major UK banks incur outsized conduct and litigation charges, though pending legal settlements could mean that some of the 2017 charges drag on into 2018.”
One of the most costly of the UK banks’ misdemeanours was the widespread mis-selling of Payment Protection Insurance to retail customers in the decade running up to the financial crisis.
The UK’s markets regulator, the Financial Conduct Authority, decided in March to extend the deadline for retail customers to make claims for PPI compensation to August 2019.
But S&P says the rate of claims has been falling, and banks should be able to cover fresh compensation payments out of the money they have already put aside. The debt-assessors said they did not expect to lower their ratings on any of the UK banks.