InvestmentsApr 27 2015

S&P: Major UK banks to face £19bn charges

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S&P: Major UK banks to face £19bn charges

The UK’s four biggest banks could face further fines and charges of up to £19bn in the next two years, according to a report from Standard & Poor’s (S&P).

The ratings agency said the banks, which have already paid a combined £42bn in compensation and fines in the past five years, face further charges for things such as mis-sold payment protection insurance (PPI) or interest rate hedging products.

The firm said the charges, which it termed conduct and litigation charges, were now “a way of life” for the UK banking industry, adding “some form of charge seems probable every year for the larger banks”, though it admitted its £19bn figure “cannot be a precise estimate”.

The £42bn paid out in the past five years was equivalent to 7.5 per cent of the four banks’ combined revenues and the S&P report said future payouts would be an “ongoing burden weighing on the statutory earnings and reputation of these banks”.

But S&P credit analyst Nigel Greenwood said: “We doubt that we will lower our assessment of their unsupported group credit profiles--the intrinsic creditworthiness of the group--during this period.”

Mr Greenwood explained there was “probably a sufficient buffer in our capital assessment for each of these banks to absorb these possible charges and costs”, particularly if the improvement in the UK economic outlook continues.