Question

Many banks have been involved with a number of settlements concerning lawsuits and regulatory fees. Answer the following questions.

1. Detail five penalties or settlements the bank has incurred over the last decade. Include information like: why did the penalties occur, did the bank admit wrongdoing? were employees of the bank jailed or fired? how did this impact their stock price and has it rebounded? Etc.

2. Were all the legal troubles based in the US or were they on a global scale?

3. What types of risks were these situations – operational, credit, liquidity, etc.

4. What does this analysis tell us about the bank’s culture and their risk management procedures?

5. Did they have more than five penalties or settlements over the last decade?

6. Do you have any suggestions for the bank to mitigate these risks in the future?

Answer 1

Answer

1.

The five penalties or settlement which took place over the last decade are discussed below:

• Recently big banks in the US faced around $5.7 billion penalties for the purpose of illegally manipulating prices in the currency exchange.
• UBS which falls under the big banks faced lumpsum amount of penalty for manipulating key interest rate.
• Bank of America is also fined a staggering amount and the reason behind that is unable to meet the debt or loan in time. This led this big bank into huge financial crisis.
• Due to certain financial scandals, it quite becomes hard for the banks to maintain the interest of the potential shareholders associated with the business.
• Mortgage crisis and huge debt is the ultimate reason behind the financial crisis of the big financial institutions which are the JP Morgan Chase, Bank of America, Barclays and many more.

2.

There were various legal troubles which took place in the US which impacted the stock markets in the US due to the financial crisis. Globally this created an impact on the economic situation is US resulting in the loss of home and many more circumstances. Penalties and fines are quite a common settlement for the big banks as the rates or rather the foreign exchange rates are highly manipulated in an illegal manner.

3.

Credit risk was huge was the manipulation with the rates, on the other hand, increased the financial crisis. This financial crisis not only created a dent in the economic condition of US but also the financial institution was in a debt trap with all the fines and related settlements.  

4.

Based on the current scenario and banking culture it is quite significant for especially the big banks to make stringent the banking policies in such a manner that this kind of fraud can be reduced. Strict policies will help the banks to avoid fines related to internal manipulation of rates and frauds associated with it.

5.

The five key penalties which actually took place in the recent decade are discussed in the first point accordingly.

6.

Bringing potential changes in the policy and regulation structure in the banking system will help to mitigate the risks. It is important for the banks to stop manipulation and further concentrate on the profit generation and the working capital system of the banks. It is also important to ensure by the top-level management system of the bank to make the timely payment of debts associated with the company.