The IFR has published a story in its seminal IFR Deals of the Year piece entitled "Breaking up the Bank" by Philip Scipo. There is some interesting insight to share from this piece beyond the facts I have previously written about on the scale of bank fines and relation to risk governance.
Firstly, the pice argues that the scale of fines have taken off to new, previously unheard of levels. "The size of the fines marks a step change, with Peter Henning, professor of law at Wayne State University saying "Regulators fell compelled to fine big if they want to get the attention of a large insitution... Now, anything less than a $1 billion fine is considered chump change".
Firstly, the pice argues that the scale of fines have taken off to new, previously unheard of levels. "The size of the fines marks a step change, with Peter Henning, professor of law at Wayne State University saying "Regulators fell compelled to fine big if they want to get the attention of a large insitution... Now, anything less than a $1 billion fine is considered chump change".
Another interesting item of note is effectively as the US banking system is well on its way of being healed from the financial crisis, the ability to assess larger fines is now considered fair game. At lease one bank investor, Neil Woodford, is reported to have exited his HSBC holdings given the rising risk of "fine inflation", according to this piece and other media. Woodford is quoted in the article saying that fines may be sized by "their ability to pay, rather than the extent of the transgression". Interestingly as well, this piece also indicates that well know US Bank Analyst Dick Bove "argues the fines have ballooned because the banks themselves have been too willing to settle with regulators", implying the alternative of facing criminal prosecution is increasingly un-palatable, such as the CS settlement over aiding tax evasion and related $2.9 billion fine.
Others might argue fine setting might include factors such as the (low) level of bank co-operation and the quality of historical compliance management. Tell that to Standard Chartered Bank after last year's events! I now understand the emerging markets bank is one of the first firms to set up at the board level a "financial crime risk committee" to oversee the establishment and oversight of polices to prevent crimes in the bank. This takes risk governance to a new level. There are some in the compliance community that say it is now or never for banks to make a permanent change in their culture. See Mary Clarke's article for a different take on this at https://www.trainingjournal.com/articles/opinion/banking-fines-highlight-urgent-need-banking-culture-change and the check out the IFR's website at http://www.ifre.com/.
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