Legal costs eat up one-third of EU bank profits
EU financial institutions have already spent approximately a third of their net gains on provisions in an attempt to cover expected legal costs since the beginning of the 2008 economic crisis, according to the ECB’s report on Monday.
Between 2008 and 2015, EU banks have set aside up to $160 billion in their provisions for legal costs. That’s equal to near half of their net income for that period.
This simply means their gains could have been at least almost one-third higher if there weren’t that spending.
For some companies such as Germany's Deutsche Bank, Switzerland's UBS as well as UK’s Lloyds provisions by far outperformed net revenues over the period.
The ECB stressed that the given trend might resume, with financial institutions provisioning for another $50 billion worth of legal costs as at the end of 2015.
UK banks put aside nearly half of that sum, in particular for settling costs closely connected with the misselling of payment protection insurance.
Notwithstanding the huge number of conducted cases as well as settlements to date, the supposed costs of past misconduct are still substantial.