Fines & Penalties Monitor: December 2016

January 12, 2017 at 3:30 PM


In December, our large bank group – the 18 largest institutions headquartered in the U.S. and E.U. – reached two particularly large settlements, bringing total fines, penalties, and settlements assessed in 2016 in line with the previous year.

Deutsche Bank agreed to pay a total of $7.2 billion (including a $3.1 billion civil monetary penalty and $4.1 billion in consumer relief) to settle a DOJ investigation into its sale of mortgage-backed securities in the U.S. from 2005 to 2007. Credit Suisse also settled a similar investigation by agreeing to pay a total of $5.3 billion (including a penalty of $2.48 billion and $2.8 billion in consumer relief).

The reason for incurring a fine or penalty was much less varied in 2016 than in the previous year. Settlements related to the sales of mortgage-backed securities during the financial crisis years accounted for 77% of total fines, penalties, and settlements in 2016, versus 43% in 2015. Activities such as LIBOR rigging and foreign exchange rate rigging and manipulation appeared just as frequently in the headlines; however, most of the large penalties associated with those activities were assessed last year. In 2016, penalties associated with these actions accounted for only 3.4% of the total, compared to 34.8% of the 2015 total.



Looking ahead, we expect RMBS-related settlements to continue to contribute significantly to our totals, as the U.S. looks to sue remaining relevant parties (e.g., Barclays) before the statute of limitations on those events is reached. We also expect improper credit marketing, billing, and collection practices to continue to be on the radar of the regulatory agencies. Finally, we expect that we have not seen the last fines, penalties, or settlements related to illegal account opening practices at Wells Fargo. The original event prompted a rash of additional investigations and inquiries into activities at Wells Fargo and other institutions, which will likely lead to the assessment of further penalties in 2017.

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