Mega fines for the UK banking industry might be about to end

Jake Cordell
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The sun may be setting on the era of multi-billion pound fines at London's biggest banks
The sun may be setting on the era of multi-billion pound fines at London's biggest banks (Source: Getty)

The era of multi-billion pound fines, compensation payouts and litigation charges for UK banks could be drawing to a close, one of the world's leading ratings agencies has said today.

In a new report that is sure to make for welcome reading in City boardrooms, Standard and Poor's (S&P) said that 2016 will be the final year of "mega conduct and litigation issues" for UK lenders.

Fines have cost Barclays, HSBC, Lloyds and RBS £55.8bn since 2011. That equates to nine per cent of combined revenues or a staggering 72 per cent of total profits.

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Analysts expect conduct charges to fall to £19.5bn over the next two years and to trail off after 2017. If fines come in at this level, it would represent 10.5 per cent of forecast revenues.

The report read: "The good news for UK banks is that 2016 will likely be the last year for mega conduct and litigation issues. While new conduct issues may emerge, we expect total conduct and litigation charges to gradually subside from 2017."

Following a string of reports which sounded alarm over the health of the City and warned of huge job cuts, S&P said it was relatively optimistic about the health of the UK banking industry.

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"The largest UK banks have improved their underlying earnings capacity and built large capital buffers to absorb additional charges," S&P said.

"This has been supported by a strong improvement in loan book performance, coupled with a relatively stable UK economic environment, which we think will likely keep credit loan losses low for even longer."

However, S&P warned that the timing of any fines or compensation payments was hard to predict, and drawn out legal action could result in banks still paying fines into the last few years of the decade.

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