Legal fees and remediation costs for conduct issues will continue to pose downside risks for Britain's biggest banks, Moody's Investors Service is warning today.
In a new report out this morning, the credit rating giant said conduct charges are on the rise – and will continue to constrain profitability at the UK's five largest lenders for years to come.
"Conduct litigation charges for the UK's five largest banks increased significantly in 2015 by approximately 40 per cent to £15bn," said Laurie Mayers, an associate managing director at Moody's. "This significant increase in 2015, despite some decline in 2013 and 2014, demonstrates that these charges continue to present considerable tail risk."
Lloyds alone reported £4bn in PPI provisions, while Barclays paid £2.2bn.
Moody's said it expects banks to make even more provisions for litigation and conduct remediation costs in the next two years, amid expectations that more PPI claims will be filed ahead of the looming Financial Conduct Authority (FCA) deadline for claims in 2018.