The banking industry has changed since the global financial crisis convulsed markets on a historic scale. After a number of record bailouts and government actions, markets, and eventually the financial services industry, recovered, though they have been forced to do so in a much more regulated world.
Since the worst years of the crisis in 2007-2008, the regulatory regime in the US has undergone a profound change, with more stringent measures and regulations, including Dodd-Frank creating a more tightly monitored environment for banks and other financial services providers.
In tandem with these regulations, banks have seen their fines rise since the crisis itself as regulators have cracked down on fraud and abuse – according to recent data from Boston Consulting Group, big banks have incurred total fines in excess of $320 billion, following regulatory lapses, global currency scandals, and market manipulation.
A number of factors have helped drive this trend, including a more concerted focus from US regulators such as the US’ Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). However, an overall more aggressive tone from US regulators has helped punish fraudulent behavior, accruing record fines over this period, according to a recent Bloomberg report.
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This figure is only expected to rise as regulatory regimes in Europe and Asia continue to sharpen their teeth and follow suit. The past few years have also seen two massive scandals roil the financial services industry, with LIBOR and FX rate rigging manipulation rackets costing banks billions.
Fines reached a nadir in 2010, topping out at nearly $9.0 billion for big banks – by 2014 this number had swelled to over $76.0 billion, corresponding with the aforementioned scandals. Despite falling over the past two years, 2016 still saw over $42.0 billion in fines doled out.
One factor that could change the rules of the game is the presidency of Donald Trump in the US, who has pledged to roll back regulations and specifically Dodd-Frank, which has become one of the most visual and omnipresent edicts hanging over the banking industry in the US.
The rise of regulations, specifically in the US and other jurisdictions such as the UK, has also helped erode profitability for banks. Nowhere has this been more pronounced than in the UK, where lenders have been forced to scale back operations, leading to widespread job cuts.