Analysts are estimating a further £19bn of conduct and litigation changes to hit the big four high-street banks before the end of 2016.
Barclays, HSBC, Royal Bank of Scotland and Lloyds Banking Group continue to pay for their past mistakes. The expected £19bn comes on top of the £42bn paid between 2009- 2014.
It is expected that the total cost of the scandals which will hit 13 financial firms, including Clydesdale, Yorkshire, Co-op, Nationwide and Yorkshire building societies, will amount to £48bn.
Lloyds which is now less than 20% owned by the taxpayer has more costs to pay than any of its rivals; this is because of mis-sold payment protection insurance. The PPI bill has reached £12bn, taking the bank’s total charges for such conduct to more than £14bn.
Standard and Poor has stated that the cost of the PPI scandal has reached £26bn. The analysts at S&P explain that the provisions for mis-selling interest rate products to small businesses are coming down and that the worst of the PPI period is over.
They added that they expect some banks will “incur material investment banking-related litigation charges in 2015” and these could “outstrip retail conduct charges”, but 2015 will see the last of the big payments.
Banks have already been hit by fines for rigging Libor and the £3.5tn-a-day foreign exchange markets. Barclays is the first to be fined and is yet to agree a settlement for their manipulation.
The £19bn estimated for the big four banks in the next two years is less than the £22bn for the past two years and the bill for past errors could start to subside. The extra costs are due to continuing compensation for retail customers but also other issues, such as foreign exchange.
S&P said that banks are making efforts to avoid running up future costs for their current treatment of customers and behaviour in financial markets.
It said: “Examples of change from the past include the greater role and measurement of conduct issues within banks’ risk appetite framework, banks’ focus on providing evidence that they are doing the right thing for customers, and changed sales practices that are less aggressive or short-termist in nature. Furthermore, chief compliance officers, often hired from regulators, are now typically executive committee members and report directly to the banks’ CEOs.”