US legal settlements cost banks €100bn

Wall Street banks and their foreign rivals have paid out $100 billion in US legal settlements since the financial crisis, according to research by the Financial Times , with more than half of the penalties extracted in the past year.

The sum reflects a substantial shift in political attitudes towards banks as regulators and the Obama administration seek to counter perceptions that bankers have got off lightly for their role in the financial crisis.

The milestone comes amid signs that banks’ legal costs could rise further, with a number of large banks still under investigation by the task force set up by US president Barack Obama in 2012.

During stress tests last week, the Federal Reserve found the biggest banks could still face a further $151 billion bill for operational risk, repurchasing soured mortgage bonds and dealing with the falling value of buildings they own. Lawyers believe the bulk of this estimate is made up of expected litigation costs, suggesting the Fed believes banks have misjudged their legal exposure.

Last week's $885 million deal between Credit Suisse and the Federal Housing Finance Agency took the total settlements to $99.5 billion, of which $15.5 billion came from foreign banks, according to a study of 200 fines and restitutions since 2007. Just over $52 billion of the total was paid out in 2013.

America's six big banks – JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Morgan Stanley and Goldman Sachs – had combined earnings of $76 billion in 2013, just short of their collective peak in 2006.

The individual settlements and restitutions range from a high of $11.8 billion, agreed to by Bank of America, to fines as low as $1 million. – Copyright Financial Times Limited 2014