Swiss bank fines dwarfed by US/British peers

The amount paid out in fines by major Swiss banks pales in comparison to the litigation costs of many international peers, according to a study by United States bank Morgan Stanley. Furthermore, only around 1% of total fines globally have been related to tax evasion.

UBS ($7.4 billion or CHF7 billion) and Credit Suisse ($4.8 billion) have been served with the biggest fines of all Swiss banks since 2009, according to the research. But these figures are dwarfed by the total cost to all banks from criminal and civil litigation of $259 billion.

And this leaves out fines paid by Morgan Stanley itself, which in February alone agreed to a $2.6 billion settlement related to the sale of mortgage backed securities. The bank left out this information because it is common practice for any institution not to report on itself.

Bank of America ($65.6 billion), JP Morgan ($42.4 billion) and Britain’s Lloyds ($26.6 billion), Royal Bank of Scotland ($16.7 billion) and Barclays (16.5 billion) are the top five global offenders so far since the financial crisis, according to the Morgan Stanley research.

And it looks like there is much more to come: Morgan Stanley estimates the global banking industry will have to fork out an additional $65 billion in fines for an array of offences up until the end of 2017.

UBS is forecast to face an extra $2.3 billion and Credit Suisse some $2.9 billion – in both cases, mainly in connection with alleged Libor and foreign exchange offences. And this comes on top of the $2.5 billion and $1.1 billion already provisioned by UBS and Credit Suisse, respectively.

But these predictions come with the disclaimer that “given the challenges of forecasting litigation” there could be a “wide range of outcomes”.

UBS ($780 million) and Credit Suisse ($2.8 billion) both cleared up their biggest tax evasion cases – each with the United States – in 2009 and 2014 respectively. But a stream of other smaller banks have been reaching settlements with the US Justice Department this year, under the terms of a non-prosecution agreement signed between Switzerland and the United States.

In the grand scheme of things, however, tax evasion has been a minor issue when compared to Libor and Forex manipulation, the mis-selling of financial products, such as mortgage backed securities in the US and payment protection insurance in Britain, plus deals that violated international sanctions on various countries.

Just 1% of fines handed out worldwide have related to banking secrecy compared to the sale of mortgage backed securities (37%).

Of the $259 billion already paid out, the top five US banks have shouldered the lion’s share ($137 billion) with the top 25 European banks shelling out $122 billion).

But the tide is turning, according to Morgan Stanley, with US banks now facing around $14 billion in extra fines in the next two and a half years and European counterparts $49 billion)