By Vikas Shukla. Originally published at ValueWalk.
Banks are an integral part of the world economy. They have been around for centuries, and will probably be here for a long time. They are supposed to act in a fair and transparent manner with their customers and investors. But sometimes they don’t. When they commit financial crimes of massive proportions, regulators punish them with monetary fines. And sometimes banks choose to settle the case by paying a hefty fine. Here we take a look at the top 10 largest bank settlements ever.
In the 15-month period through 2019, banks were fined a staggering $10 billion, according to data from Fenergo. Last year, the European Union regulators slapped a $1.2 billion fine on five banks running two cartels to collude on foreign-exchange trading. The five banks were Citigroup, JPMorgan Chase, Royal Bank of Scotland, Barclays, and Mitsubishi UFJ Financial Group.
However, our banking institutions have seen much bigger penalties in the past, mostly after the 2008 financial crisis. No wonder Americans are rapidly losing faith in traditional banks. A report published by Keefe, Bruyette and Woods in 2018 showed that Bank of America alone had paid a staggering $76.1 billion in fines since the 2008 financial crisis. JPMorgan Chase wasn’t far behind with $43.7 billion.
Ranked: The largest bank settlements ever
Here we will be throwing around the word ‘billions’ a lot. And after doing extensive research for this post, I realized that regulators can instantly reduce the world’s financial crimes by 50% by shutting down Bank of America, JPMorgan Chase, and Credit Suisse. Just these three names are enough.
10- Credit Suisse, $2.6 billion
In 2014, the Swiss bank agreed to pay $2.6 billion penalty to reach a settlement with the US Department of Justice. It was the first financial institution in years to admit that it helped its US clients avoid taxes.
9- JPMorgan Chase, $5.29 billion
In February 2012, the US Department of Housing and Urban Development, Department of Justice and the 49 states reached an agreement called the National Mortgage Settlement. The five largest banks in the country were fined $25 billion, and JPMorgan’s share was $5.29 billion. All the five banks were accused of, prior to the 2008 crisis, having signed and notarized documents without any verification.
8- Credit Suisse, $5.3 billion
In December 2016, Credit Suisse agreed to a $5.3 billion US mortgage settlement. It was accused of mis-selling toxic debt to investors ahead of the 2008 financial crisis. It paid $2.5 billion to authorities and $2.8 billion in consumer relief. The final deal was within the $5 billion-$7 billion range the Department of Justice had asked Credit Suisse to pay before the negotiations.
7- Wells Fargo, $5.35 billion
Wells Fargo was among the five banks targeted by the National Mortgage Settlement in 2012. It had to pay $5.35 billion, slightly higher than JPMorgan to settle the case. Wells Fargo wasn’t just signing and notarizing documents without verification. It was even accused of losing important paperwork.
6- Deutsche Bank, $7.2 billion
Towards the end of 2016, Deutsche Bank finally agreed to pay $7.2 billion. Just like many others on the list, Deutsche Bank had also sold toxic residential mortgage-backed securities. About $4.1 billion of the settlement amount would go towards consumer relief over a period of five years.
5- Bank of America, $8.5 billion
Bank of American has suffered three out of the five largest bank settlements in history. Being one of the world’s largest banks by assets, it was capable of paying out billions of dollars that regulators demanded. Bank of America acquired Countrywide in 2008. Countrywide had sold an estimated $174 billion worth of subprime mortgage-backed securities. In 2011, Bank of America agreed to pay $8.5 billion for Countrywide’s misdeeds.
4- BNP Paribas, $8.97 billion
The largest bank in France was created in 2000 following the merger of Banque Nationale de Paris (BNP) and Paribas. In June 2014, it pleaded guilty to two felony counts and agreed to pay $8.97 billion to settle the case. It had violated US sanctions against Iran, Sudan and Cuba. BNP Paribas had processed thousands of transactions through the US financial systems for its clients in Iran, Sudan, and Cuba.
3- Bank of America, $11.8 billion
As part of the National Mortgage Settlement in 2012, Bank of America alone was asked to shell out $11.8 billion over subprime mortgages sold to Fannie Mae. About $1 billion of it went to the Federal Housing Authority, which was conned by Bank of America’s Countrywide subsidiary. As part of the deal, its principal mortgage deductions were $100,000 per mortgage.
2- JPMorgan Chase, $13 billion
JPMorgan Chase reached a $13 billion deal with the US Department of Justice in October 2013 to settle a number of lawsuits and investigations. Almost all of the investigations and lawsuits were related to mis-selling of toxic mortgage debt to investors. JPMorgan purchased Washington Mutual and Bear Stearns during the 2008 crisis. It also inherited their legal obligations in the process.
1- Bank of America, $16.65 billion
The crown of the largest bank settlement in history goes to the Bank of America. The bank paid a record $16.65 billion in 2014 to settle allegations that it misled investors into buying subprime mortgage-backed securities. It acquired Merrill Lynch and Countrywide Financial during the 2008 financial crisis. The claims were related to mis-selling done by Countrywide and Merrill Lynch before the crisis.
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