Giant banks have racked up more than $4 billion in U.S. penalties in a wave of settlements weeks before the presidential election. That says a lot about an industry that once vowed to behave after the 2008 financial crisis — and about the regulatory risks it sees ahead.
Goldman Sachs Group Inc. recently incurred a record punishment for foreign bribery under a roughly $3 billion package of accords for its role in Malaysia’s plundered 1MDB investment fund. JPMorgan Chase & Co. resolved a market-manipulation probe for more than $920 million. Citigroup Inc. was fined $400 million for failing to maintain adequate risk controls.
For the industry, that bulge of settlements — plus others — removes the threat of stiffer fines if President Donald Trump loses this week and challenger Joe Biden installs more aggressive regulators to take over active probes.
But the penalties also cast fresh light on the persistence of financial professionals’ misbehavior, with investigators noting that the schemes at Goldman and JPMorgan began brewing before the 2008 crisis was fully over. That’s an untimely stain as banks brace for the potential arrival of new sheriffs.
“To the extent that some of the lessons from the financial crisis seem to be going unlearned, I think that is a problem,” said Christopher Wolfe, head of North American banks coverage at Fitch Ratings Inc. “You would think by now that everybody knows you’re going to get caught — these things always get found out and there’s always going to be consequences for it, but yet people still engage in this behavior.”
Recurring misconduct doesn’t only antagonize regulators. Fines can indicate governance failings that can weigh on banks’ credit ratings, especially in a more difficult economic environment, Wolfe wrote in a report last week. Investors also are increasingly focusing on environmental, social and governance matters, which may become a bigger issue for banks regardless of who wins the election, Wolfe said.
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The three giant U.S. banks aren’t alone in settling recently. Since the start of August, Deutsche Bank AG, Capital One Financial Corp., Bank of Nova Scotia and Toronto-Dominion Bank also have resolved probes with penalties that piled up into the hundreds of millions of dollars.
If Trump loses, more banks may rush to wrap up cases before Biden’s inauguration.