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Balance Sheet: A Scorecard for this Summer's Bank Scandals

Who did what and who's paying for it

by and

As many have noted, this summer has seen one bank after another slapped with fines or rocked by reports of wrongdoing. You've probably heard something about Libor, or credit card overcharges, or money-laundering, but it can be hard to keep track. ProPublica has laid out the details on some of the most notable cases, including fines, resignations and which investigations aren't over yet.



Key



Libor Fixing

The Banks

Barclays, JPMorgan Chase, Citigroup, UBS, Deutsche Bank and more.

The Details

In late June, Barclays settled with British and American regulators over charges that it manipulated the Libor, a critical international interest rate set in London each day by a panel of banks. Barclays traders tried to rig the rate (and its Eurozone counterpart, the Euribor) in order to benefit particular trades, schemes clear from emails where traders promised one another bottles of champagne for their help. Also, during the financial crisis, Barclays submitted artificially low rates to make the bank look stable.

This kind of behavior wasn't limited to Barclays, and the investigation is still growing. Regulators first started getting worried about Libor in 2008. And in the wake of Barclays' settlement, officials at the Bank of England and the New York Fed have come under fire for not pressuring the British Bankers' Association--the industry trade group that oversees the Libor--to do more to reform the way the rate was set then.

Who's Been Hurt

Ordinary consumers and investors.

Libor is used as a benchmark for trillions of dollars in financial contracts, from derivatives on down to student loans and credit cards. If the rate was messed with, consumers could have paid artificially high rates, or investors could have lost out if rates were too low. And submitting artificially low rates during the financial crisis could have misled the public and regulators about the health of the banking system.

Who's Taken a Fall

Barclays' CEO, chairman and chief operating officer have all stepped down. The Libor itself is also being targeted for reforms by the British government.

Penalties

$453 million in a settlement from Barclays to the U.S. Justice Department and Commodity Futures Trading Commission, and the U.K.'s Financial Services Authority.

What Does Barclays Say?

In its settlement with the Justice Department, the bank admitted that traders tried to rig rates and also acknowledged lowballing rates during the financial crisis. CEO Robert Diamond has said no one "above desk supervisor level" knew about traders' scheming and that he did not know about rate suppression by the bank until the settlement was reached this summer.

Who's Still Under Investigation

More than a dozen banks have disclosed that they are under investigation by U.S. or other regulators. They have all said they are cooperating with requests for information.

• UBS reported in early 2011 that some regulators--including the antitrust division of the U.S. Justice Department--had promised them leniency in exchange for cooperating with the investigation, but the bank could still face charges from other regulators. Some individual traders have also reportedly been offered non-prosecution agreements. The bank has reportedly fired or suspended more than 20 staff in the wake of the scandal. UBS was sanctioned by Japanese regulators in December for traders trying to manipulate the Tibor, Tokyo's Libor equivalent.

• Citigroup disclosed ongoing investigations in a recent filing. Japanese regulators also sanctioned Citigroup in December as part of their investigation into rate rigging by Tokyo traders.

• In July, Deutsche Bank said that an internal investigation had identified a "limited number" of staff who were involved in rate manipulations and cleared all senior management.

• Royal Bank of Scotland says it has fired four employees and maintains that the wrongdoing is confined to a "handful" of individuals.

• Credit Suisse, HSBC, JPMorgan Chase, Bank of America and a few other international banks have also acknowledged they are part of the Libor probe.



A Blind Eye to Money Laundering

The Bank

HSBC.

The Details

A scathing report released by the U.S. Senate this July alleged that HSBC failed over the last decade to perform basic anti-money-laundering protections and evaded Treasury sanctions against Iran, Myanmar and others. The report says HSBC allowed billions in cash to flow between Mexico and the United States despite warnings drug money was involved, opened Cayman Island accounts for customers with little-to-no background information and provided cash to banks with terror ties. The report also faulted the government's Office of the Comptroller of the Currency for taking virtually no action against the bank despite being aware of problems for years.

Who's Been Hurt

Well, we know who's not been hurt: Mexican drug cartels, Saudi Arabian banks and others who may have moved money with little scrutiny.

Who's Taken a Fall

HSBC's head of compliance resigned July 18.

Penalties

$27.5 million in a fine to Mexican regulators.

In a recent financial disclosure, HSBC said it had put aside $700 million as a "best estimate" of what it may have to pay U.S. regulators. The Justice Department, OCC, Treasury and others are investigating.

What Does HSBC Say?

The bank has apologized and promised reforms are already under way. It made similar claims back in 2003, when it was cited for similar violations.



The London Whale's Big Losses

The Bank

JPMorgan Chase.

The Details

This spring, JPMorgan Chase reported staggering losses from a risky derivatives trade run by the bank's London office. Since then the estimated losses have almost tripled to $5.8 billion.

Who's Taken a Fall?

Bruno Iksil, aka the "London Whale," who was the trader in charge of the blown-up trade, left the bank in July. Ina Drew, who was in charge of the bank's investment unit, resigned in May and in July agreed to return two years of pay to the bank.

What's JPMorgan Chase Say?

CEO Jamie Dimon has apologized for inadequate risk management and for initially dismissing reports of losses as "a tempest in a teapot," but maintained that it was shareholder money lost--not customers' or taxpayers'.

Who's Investigating?

At least 11 state, federal and British agencies are investigating the losses as of August. In June, the Securities and Exchange Commission and the CFTC told Congress they are looking into how JPMorgan disclosed risks to shareholders and regulators. The OCC, the Federal Reserve and the Federal Deposit Insurance Corporation each said that they were examining JPMorgan's risk management oversight.

Why Does it Matter?

JPMorgan has lobbied heavily against regulations that could put a damper on risky trades like this one. For example, the Volcker Rule is meant to ban proprietary trading--when a bank trades for profit, using its own, rather than customers' funds. The rule hasn't yet been fully implemented. The head of the OCC said in June that the agency hasn't determined whether the rule would have covered JPMorgan's trade.