Bank Regulation

Investors Warned To Heed Big Bank Regulator Fines

Regulators Urge Tech Use Against Financial Crime

Investors shouldn’t shrug off fines against big banks that run afoul of banking regulations because they impact returns over the longer term.

That’s according to The Wall Street Journal, which reported that regulations put on large banks after the great recession — combined with pressure to identify and stop illicit financial crimes such as money laundering — is hurting returns as they struggle to comply. The paper noted that the rash of banks embroiled in AML scandals, with Danske Bank being the most recent, is rooted in the globalization of finance and bank data that has been going on since the 1990s. Its also being driven by a political and regulatory environment in which the banks share more in the policing of financial crimes.

In the current environment, banks are required to report suspicious transactions at a higher rate, which makes it hard for them to win new customers. Their promises to customers can be hurt by regulation, and the last things these banks want to do is tell a new client or one expanding their business no, reported the Wall Street Journal.  While Danske is seen as a surprise, the WSJ reported other big banks’ small foreign branches have been caught up in scandals because of a lack of oversight. The paper pointed to HSBC’s Mexican unit, Deutsche Bank’s mirror trades in Russia and Goldman Bank’s bond scandal in Malaysia, in which it handled bond deals for the government of Malaysia, which was corrupt.

In order to prevent big fines, the WSJ said the banks need to be more careful. It noted that at the same time that the Danske scandal was emerging, ING, the Dutch Bank, got slammed with €775 million, or $893 million, in fines. Meanwhile, Credit Suisse was called out by the regulator for not having enough oversight, although it wasn't hit with any fines. The paper noted that the Justice Department is looking at Danske and that could result in a much larger fine.



About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.