Fines & Penalties Monitor: September 2016

October 13, 2016 at 6:56 PM


September brought with it one fine and one settlement for our bank group – the 18 largest institutions headquartered in the U.S. and E.U. The fine, incurred by Wells Fargo, and the settlement, incurred by RBS, increased the year-to-date total by $1.3 billion, to $17.5 billion.

On September 8th, regulators fined Wells Fargo $185 million for illegally and secretly opening unauthorized deposit and credit card accounts. According to the CFPB, Wells Fargo employees opened more than 2.0 million accounts without the knowledge or consent of customers to increase sales figures and meet aggressive sales targets. The aftermath of this event has been well documented in the news. Several lawsuits have arisen, the Department of Justice and several other entities are beginning additional investigations of Wells Fargo, and key executives have been forced to forfeit bonuses and other compensation. The event has also given lawmakers additional reason for combatting arbitration clauses. Several legislators have stated that they believe the creation of fake accounts at Wells Fargo lasted as long as it did because customers who tried to sue were forced into closed-door arbitration by these clauses.

Meanwhile, on September 28th, RBS settled with the US National Credit Union Administration for $1.1 billion over allegations that it missold RMBS in the run-up to the financial crisis. The two credit unions that RBS sold to, US Central Federal Credit Union and Western Corporate Federal Credit Union, failed during the financial crisis.  The bank has stated that the settlement is “substantially covered by existing provisions.”  As a result of the settlement, the NCUA will drop all pending lawsuits against RBS. RBS did not admit fault under the terms of the settlement.

As we move into the fourth quarter, a sizeable gap remains between our year-to-date 2016 total and our 2015 total. We know that there is at least one other large settlement in the pipeline – Deutsche Bank is in the process of negotiating a settlement with the DOJ to resolve a suit related to its RMBS activity that could be anywhere from $2.0 billion to $14.0 billion. Will there be enough activity to close the gap between 2016 and 2015, or will fines, penalties, and settlements continue to decrease?


Lauren Rosenberg

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