Major banks have now set aside $219bn (£144bn) to pay fines and legal costs since the financial crisis.
Ratings agency Moody’s, which calculated the vast provisions, ranked Barclays, HSBC and Royal Bank of Scotland at high risk from on-going investigations.
The agency also sounded an alert over the risk of criminal proceedings against banks which could threaten their future profitability.
Despite the huge sums set aside by 15 major investment banks between 2008 and 2014, Moody’s warned that scrutiny of the activities of bankers was not receding. “Regulatory investigations into the business practices and potential criminal activities of financial institutions have been proceeding rapidly both in the US and abroad,” said Moody’s.
“These probes of legacy conduct issues show no sign of abating and present significant risk for bondholders of large diversified global banks with significant capital markets business.”
Two US banks – Bank of America and JP Morgan – account for half of all the $219bn of provisions with $70bn and $37bn each, largely as a result of US settlements relating to the way they sold mortgages and mortgage bonds in early part of the banking crisis.
One of the reasons that RBS is ranked as high risk for further penalties is a looming punishment for the sale of these mortgage bonds in the run-up to the crisis. The 74%-taxpayer owned bank has set aside $2.5bn in preparation, although this is not expected to be enough. The bank had hoped for this penalty to be agreed this year.
HSBC is regarded as high risk because of its breaches of money laundering rules in the US, and Barclays because of allegations about the way it raised money during the 2008 crisis from investors in the Middle East.
“Most US and European global investment banks have set aside large provisions for future litigation costs,” said Moody’s. “However, the complexity, uncertainty and the escalating nature of these costs present tail risk that is difficult to quantify in any stress test.”
The Bank of England has also warned about the impact of fines on banks. In June the Bank of England governor, Mark Carney, said about $150bn worth of fines have been imposed on major banks since 2008, depriving the real economy of $3tn of credit and potentially holding back the global economy.
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