Robert Jenkins' partial list of bank misdeeds - UPDATED 8 June 2016
This partial list was compiled by Robert Jenkins, formerly a member of the Bank of England's Financial Policy Committee and now Adjunct Professor of Finance, London Business School and Senior Fellow at Better Markets, and first delivered at the Finance Watch conference "Confidence, ethics, and incentives in the financial sector" on 17 November 2015.
Jenkins’ partial list of banking misdeeds to date:
Mis-selling of payment protection insurance
Mis-selling interest rate swaps
Mis-selling credit card theft insurance
Mis-selling of mortgage-backed securities
Mis-selling of municipal bond investment strategies
Mis-selling of structured deposit investments
Mis-selling of foreign exchange products
Fraud related to the packaging and selling of mortgage-backed securities that institutions knew to be “toxic waste”
Misleading statements to investors involving capital-raising rights issue
Misleading investors in the sale of collateralised debt obligations
Abusive small business lending practices
Predatory mortgage practices
Abusive or in inappropriate foreclosure practices
Aiding and abetting tax evasion
Aiding and abetting money laundering for violent drug cartels
Violations of rogue-regime sanctions
Manipulation of Euribor
Manipulation of FX markets
Manipulation of gold fixing (London)
Manipulation of commodity markets via metals warehousing practices
Manipulation of electricity markets (California)
Manipulation of the swaps market benchmark index (Isdafix)
Collusion relating to credit default swap market dealing in violation of US anti-trust laws (“settlement” reached with authorities to resolve allegations)
Filing false statements with the SEC (London Whale)
Keeping false books and records (London Whale)
Reporting failures relating to Madoff
Withholding of critical information from Italian regulators
Bribing civil service employees in Japan
Mis-reporting related to Barclays emergency capital raising
Stealing confidential regulatory information by a banker
Collusion with Greek authorities to mislead EU policy makers on meeting Euro criteria
Financial engineering with the aim of moving Italian debt off-balance sheet
Manipulation of risk models with the aim of minimizing reported Risk Weighted Assets / capital requirements
Electronic FX trading related market manipulation
Process and control failures with respect to dealings with the ultra-wealthy/ “politically exposed persons”
Failure to prevent bribery of African officials
Peddling complex tax avoidance strategies to corporate clients
Improperly providing information about a Japanese company to its clients
Abuses relating to dark pool trading platforms
Failure to disclose conflict of interests to wealth management clients
Misleading investors with wrong / incomplete information
Conspiracy to commit multi-million dollar securities fraud
Overcharging customers for FX transactions
Failure to meet the terms of the 2013 Mortgage foreclosure abuses settlement
Repeated violation of federal laws connected with sourcing securities for client shorting
Manipulation of Korean stock market
Unfairly jumping the creditor queue to secure (confiscate?) collateral relating to Lehman
Publishing research and trading in the shares of a company it was advising
Other mortgage related abuses including: failing to accurately track payments by borrowers; charging unauthorised fees; and providing false and misleading information in response to complaints by customers
Use of minority owned non-consolidated subsidiaries to arbitrage capital requirements
Investment bank analysts altering stock research recommendations to curry favour with companies they are researching
Use of illegal offshore schemes to avoid paying income tax on bonuses
And currently under investigation…
Manipulation of precious metals markets (gold/silver/platinum/palladium - Switzerland)
Manipulation / collusion of the US Treasury Market auction/client sales
Manipulation of energy markets
Short changing clients a second time in not paying settlements in full
Violations connected with emergency fund raisings
Falsifying customer data and records
Misleading shareholders ahead of RBS rights issue
Misleading shareholder information with respect to Lloyds takeover of HBOs
Conspiracy to force small businesses into bankruptcy to the benefit of the lender
Insertion of illegal rate floors in Spanish mortgage lending
Faking customer files to justify predatory foreclosure practices
Misleading profit and capital statements based on questionable accounting practices
Bribing (“Improper payments”) officials in connection with license applications in Saudi Arabia
Hiring sons and daughters of senior officials in return for favours
Fabricating complaint letters after the fact to justify dismissal of a whistle-blower who raised alarms over possible mis-selling of mutual funds.
“Mis-informing” (lying) to 4500 people over existence of dormant accounts
Use of “mirror trades” ($10 billions worth) to circumvent Russian related sanctions
Overcharging customers who are past due on their credit cards
Market rigging of Gilt trading
Hiding failed Loans in the commercial real estate portfolio in 2009 and 2010 whilst issuing new stock to repay government bail-out money
Non transparent and excess charges for FX transfers by major UK banks to small businesses in the UK
Manipulating shareholdings around dividend payment dates to trigger dishonestly acquired tax reimbursements
Manipulation of the Australian “bank bill swap rates”
Manipulation of the government sponsored bond market (supranational, sub-sovereign and government agency debt or “SSA market”)
Use of secret / undisclosed payments of circa $500mio connected with emergency capital funding
Knowingly acquiring “dirty debt” (a loan used as part of a multi-million pound embezzlement scheme) and using it to demand compensation from an African government
Conspiracy with borrower to falsify work estimates totalling $400 million of fraudulent accounts receivable
Facilitating fraudulent activity by customers via use of import advance payments
“Spoofing” in trading of US government bonds
Laundering the proceeds of Petrobras related corruption
Mis-selling of “lobo” loans to UK Local Councils
Fraud and criminal mismanagement in connection with account management for the former prime minister of Georgia
Forcing customers to switch from variable (“tracker”) mortgages into fixed rate mortgages – in a falling / low rate environment
Mis-selling expensive life insurance products to little old ladies in France
Facilitating African money laundering on a grand scale
Misleading Libor submissions with the aim of boosting confidence in the bank’s perceived credit worthiness
Conspiring to facilitate VAT evasion through manipulative carbon trading transactions
Knowingly misleading a major investor in a high stakes deal
Additions since 17 November 2015 are shown in italics.
#2 APR4SMEs 31 January 2016
Good to see that others agree that 'abusive small business lending practices' are an issue and need redress. We have started a campaign to get an APR for SME finance so that there is less opportunity for banks and others to hide costs from unsuspecting businesses. Please sign the petition at www.APR4SMEs.co.uk if you agree.
#1 GP 8 January 2016
The ethical founders of todays banks (the ones that remained until recently the survivors from huundreds that were reckless in the 1800s) would be turning in their grave and those that have been allowed in the banking industry and not blackballed by the city for life
Countrywide settles with eleven states over predatory lending allegations including, relaxing underwriting standards, structuring loans with risky features, and misleading consumers with hidden fees and fake marketing claims like its "no closing costs loan."
$8.4 billion in "direct loan relief." At the time, "it was the largest predatory lending settlement in history, far exceeding the $484 million deal struck in 2002 with the Household Finance Corporation."
Merrill Lynch settles securities fraud case with institutional investors in its common and preferred shares between Oct. 17, 2006 and Dec. 31, 2008. The plaintiffs alleged that the investment bank inflated the price of collateralized debt obligations (CDOs) in order to boost its own share price.
Bank of America finalizes settlement with SEC and several states over alleged misrepresentations that the bank made to customers about the safety and liquidity of auction-rate securities.
$4.5 billion in "restored liquidity" to the ARS market
Bank of America settles racial discrimination class action accusing it of "routinely giving black workers short shrift with respect to pay, advancement and resources."
Bank of America finalizes settlement with the SEC over its failure to "properly disclose employee bonuses and financial losses at Merrill Lynch before shareholders approved the merger of the companies in December 2008."
Countrywide settles class action securities fraud claims made by institutional investors, including New York pension funds, alleging that the lender misled them about its health. The settlement was approved by judge in February of 2011.
Countrywide settles with the FTC over allegations that it overcharged customers who were struggling to hang onto their homes.
Bank of America settles class action antitrust claims regarding credit card arbitration.
$0 (injunctive relief)
Bank of America covers part of former Countrywide CEO Angelo Mozilo's $67.5 million civil fraud settlement with the SEC.
Countrywide settles class action lawsuit related to overcharging for mortgage insurance in violation of the Real Estate Settlement Procedures Act of 1974 (RESPA). Approved by a judge in July 2011.
Bank of America settles with 19 state attorneys general and four federal agencies over bid-rigging charges in the muni-bond market.
Deal with Fannie Mae to settle claims on 12,045Countrywide loans in the period 2004-2008.
Deal with Freddie Mac to "end all claims, including future claims, related to mortgages sold through 2008 by Countrywide."
Bank of America settles class action debit-card overdraft lawsuit. Here's how one plaintiff described it: "The bank actively provides false or misleading balance information to these customers, including plaintiff, that in turn deceives these customers into making additional transactions that, in turn, will generate even more overdraft fees for the bank." Approved by judge in Nov. 2011.
Bank of America settles class action lawsuit claiming that it "improperly increased the interest rate on delinquent or defaulted FIA, MBNA and Bank of America credit cards by calculating the rate increase starting at the beginning of the billing cycle in which the default or delinquency occurred."
Countrywide settles with mortgage-bond insurerAssured Guaranty over toxic Countrywide-issued mortgage-backed securities.
Countrywide settles with the U.S. Department of Justice over allegations that Countrywide "wrongfully foreclosed upon active duty servicemembers without first obtaining court orders."
Countrywide reaches preliminary $8.5 billion settlement with The Bank of New York Mellon and 22 institutional investors (including Goldman Sachs and BlackRock) over toxic mortgage-backed securities issued. Approval of this deal is currently pending before a judge in New York.
Bank of America settlement with the City of San Francisco over allegations that the bank's FIA Card Services used a rigged system to arbitrate credit card debt collection disputes.
Settlement of class action suit against Merrill Lynchbrought by investors alleging that the investment bank misled them about the risks associated with $16.5 billion of mortgage-backed securities in 18 offerings made between 2006 and 2007.
Settlement of U.S. Justice Department charges thatCountrywide carried out a "widespread pattern or practice of discrimination against qualified African-American and Hispanic borrowers."
Bank of America settlement with federal and state regulators and agencies related to faulty foreclosure and servicing practices.
$11.82 billion ($3.2 billion in federal and state payments, $8.58 billion in relief to borrowers)
Settlement with Syncora Holdings regarding claims that the mortgage-bond insurer was duped into insuring Countrywide-issued mortgage-backed securities.
Bank of America settlement of class action lawsuit alleging that the bank "used deceptive marketing tactics to sign up and charge credit card customers for a useless credit-protection service."
Bank of America settlement of class action lawsuit brought by B of A's shareholders alleging that the bank provided "false and misleading statements about the health of" Merrill Lynch in the lead up to the acquisition. The deal was approved by a judge in April of 2013.
Settlement with Fannie Mae resolving claims that Bank of America (mostlyCountrywide) sold tens of billions of dollars' worth of faulty mortgages to the government-sponsored entity.
On the same day as the Fannie Mae settlement,Bank of America joined with nine other lenders to resolve claims of foreclosure abuse related to the financial crisis. The aggregate settlement for all participants was $8.5 billion.
Settlement to resolve a class action lawsuit alleging thatBank of America violated the Real Estate Settlement Procedures Act by failing to respond to mortgagees' requests for information relating to the servicing of their home loans.
Settlement to resolve allegations that Merrill Lynch failed to pay proper overtime to its client associates.
Bank of America settlement with the National Credit Union Administration to resolve claims stemming from sales of mortgage-backed securities to corporate credit unions that led them to fail.
Settlement with private investors in a class action lawsuit involvingCountrywide-issued mortgage-backed securities.
Settlement to resolve claims brought by mortgage-bond insurer MBIA (NYSE:MBI)related primarily to toxic mortgages originated mainly by Countrywide.
Fined by the Financial Industry Regulatory Authority after an investigation found that Bank of America's brokers steered retail investors toward a type of mutual fund that was riskier than what they were seeking.
Settlement to resolve claims that Countrywide"deceptively lured consumers into buying loans with higher interest rates than originally promised."
Settlement to resolve a class action racial discrimination lawsuit alleging that Merrill Lynch segregated its workforce by, among other things, steering black brokers into clerical positions and reassigning their accounts to white workers.
Merrill Lynch settlement to resolve a class action gender discrimination lawsuit brought by female brokers alleging they were "paid less than men and deprived of handling their fair share of lucrative accounts."
Bank of America fined by U.S. Department of Labor for hiring practices that kept qualified black job applicants from getting jobs.
Settlement to resolve claims that Bank of Americaemployees made harassing debt collection calls to customers' cell phones in violation of the 1991 Telephone Consumer Protection Act.
Found liable for fraud over defective mortgages sold to Fannie Mae and Freddie Mac as a part of a shoddy home loan process atCountrywide known as the "Hustle."
$850 million (the court has yet to rule on damages, but this is roughly what the government is seeking)
Countrywide settlement with Freddie Mac related to faulty mortgages sold to the government-sponsored entity from 2000 to 2009.
Merrill Lynch settlement with the Securities & Exchange Commission related to the structuring and sale of complex mortgage securities to institutional investors in 2006 and 2007.
SOURCES: THE NEW YORK TIMES, THE WALL STREET JOURNAL, DEALBOOK, REUTERS, BLOOMBERG, U.S. SECURITIES & EXCHANGE COMMISSION, FEDERAL TRADE COMMISSION, U.S. DEPARTMENT OF JUSTICE, MBIA, AND BANK OF AMERICA.