Financial institutions have coped a lot of flak in recent years, following their dubious activity resulting in the financial crisis as well as a range of fraudulent activities on the heels of the crisis, including the Libor rigging scandal. Today moves are being made to clean up the industry, moving financial institutions away from their systematic chase of profit and bonuses, towards an environment where banks conduct better ethical behaviour. In terms of the levels of fines, $150.9 billion has been levelled at the industry since 2008.
The financial crisis, following from the collapse of the sub-prime mortgage market, saw a number of financial institutions go under – requiring considerable tax-payer funded bailouts. Following the crisis, serious questions were fired at the leadership of financial institutions, including to those auditing the ‘too big to fail’ institutions. In the years that followed, a spate of systematic financial crimes were uncovered, including the rigging of the London Interbank Offered Rate, better known as Libor.
In recent years the regulator, and their law enforcement instruments, have caught up with the sometimes dubious, and at other times, down right illegal practices conducted at financial institutions. Institutions caught in the US, UK and wider EU were fined $9 billion for the Libor fiasco, while average fines have increased from $22 million in 2008 to nearly $1.6 billion in 2014. Since 2009 the game is up for many financial activities that violate laws and regulations. In total fines for violations has increased 2850%, up from $2 billion in 2009 to reach $57.7 billion in 2014. Since 2012 increasingly large total fines have been levelled at financial institutions. Total accumulated fines have now reached $150.9 billion.
In response to increasing fines, banks are being more careful about weighing the material risks of unethical, and downright illegal, activity and the potential regulatory slap on the wrist. According to analysis by Oliver Wyman, banks are responding by setting up “techniques used by more commonly associated with spy agencies such as the CIA and MI5.” Through the techniques the banks are seeking out unethical and illegal behaviour, attempting to clean up their act – as well as change the unethical culture that sees the violation of the law and associated fines as merely another risk. The consultancy remarks that “if the banks hope to be profitable, they had better learn to also be good.”