Banks settle fines as trust erodes

Jamie Dimon, Chairman, President and Chief Executive Officer, JP Morgan, speaks at the Institute Of International Finance Annual Membership Meeting in Washington, D.C., U.S., on Saturday, Oct. 12, 2013. Photographer: Pete Marovich/Bloomberg

Jamie Dimon, Chairman, President and Chief Executive Officer, JP Morgan, speaks at the Institute Of International Finance Annual Membership Meeting in Washington, D.C., U.S., on Saturday, Oct. 12, 2013. Photographer: Pete Marovich/Bloomberg

Published Jan 22, 2014

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Milan - Jamie Dimon was right. Speaking at a televised session during the World Economic Forum (WEF) in Davos last year, the JPMorgan Chase chief executive predicted that condemnation of bankers was far from over.

This year, Dimon returns to Davos with no public appearances scheduled as head of a bank that paid more than $23 billion (R250bn) in the past year in fines and settlements. He will be joined by the leaders of other Western lenders that have been beset by record legal costs, fresh allegations of wrongdoing and lower profits.

Trust is on the agenda in Davos, along with market safety, as financiers gather after a year of punishment and tougher regulation designed to avert another blow-up. Those have eaten into profits and promise more pain.

Deutsche Bank co-chief executive Anshu Jain will talk about rebuilding Europe’s banks, a project whose success rests on greater scrutiny by the region’s new supervisor.

“Some banks are too weakly capitalised and potentially insolvent, and the system remains dysfunctional and continues to be reckless,” said Anat Admati, a Stanford University finance professor and author of The Bankers’ New Clothes: What’s wrong with banking, who is moderating the market safety panel.

A year ago, Dimon defended banks from blame for the crisis and said regulators were “trying to do too much, too fast”. Since then, JPMorgan has settled claims involving mortgage bond sales, lax oversight and turning a blind eye to Bernard Madoff’s Ponzi scheme.

Investigations and lawsuits may preoccupy the biggest Western banks for years as they face inquiries into the manipulation of interest rates and currency benchmarks. At least a dozen firms have been contacted by authorities in the UK, the US and Switzerland probing allegations that traders manipulated spot foreign exchange rates for at least a decade.

The six biggest US banks set aside more for legal costs last year than any year since at least 2008, and in Europe, the 11 banks with the highest legal costs over the past two years racked up at least $10.8 billion (R117bn) in fines and settlements last year. That was 61 percent more than in 2012.

There are no Western bankers among the co-chairs of this year’s meeting. The slot held previously by UBS chairman Axel Weber, Dimon and Standard Chartered chief executive Peter Sands is being filled by Jiang Jianqing, the chairman of Industrial & Commercial Bank of China (ICBC). He is the first Chinese banker to be a co-chairman at Davos.

The WEF leadership role held by ICBC reflects the rising influence of China’s state-controlled banks, which have added more assets since the 2008 crisis than are in the US banking system. – Bloomberg

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