RBS and Lloyds among UK banks still facing £19bn misconduct bill – S&P

In a new report, the ratings agency said Britain’s banks and customer-owned lenders had incurred £48 billion in misconduct and litigation charges over the past five years.

Britain’s four biggest banks – Edinburgh-based Lloyds Banking Group and Royal Bank of Scotland, along with Barclays and HSBC – accounted for £42 billion of that total, equivalent to about 7.5 per cent of their revenues.

S&P said the mis-selling of payment protection insurance (PPI) on loans and mortgages had so far cost the banks more than £26 billion. It expects banks to face over £5 billion of further PPI charges in the next two years.

Banks also face litigation charges arising from investigations into the alleged rigging of foreign exchange markets and benchmark interest rates and probes into breaches of anti-money laundering controls.

S&P said it believed the affected banks had sufficient capital buffers to cope with the charges.

The charges came on top of almost £16 billion spent by the banks restructuring their business models following the 2007-2009 financial crisis and £5 billion of expenses relating to the government’s bank levy, S&P said.

The S&P said the industry is making “substantial strides” to making sure products being sold today do not leave them open to similar scandals in the future with sales practices now less aggressive and or focused on the short term.

The ratings agency also said banks are now providing more evidence about customer care and many chief compliance officers are reporting directly to chief executives.

The report said: “While such developments are good examples of progress, we believe that they cannot on their own mitigate against mis-selling or conduct risk; the fundamental changes in culture being enacted will take many years to permeate all areas of large and complex banking groups.”