Comment: Bad banks stay bad, regulators get tainted

Allegations of price fixing and manipulation of benchmarks affecting the US$5.3 trillion-a day foreign exchange market ended with five of the world's major banks being fined almost US$6 billion by global financial market regulators.

The UK's Financial Conduct Authority imposed fines totalling more than US$1.7 billion on Citibank, HSBC, JPMorgan Chase, The Royal Bank of Scotland and Switzerland's UBS.  

Other regulators followed suit, leading the Financial Times to note that that the total fines agreed to in separate settlements with UBS, Citi, JPMorgan Chase, HSBC, Royal Bank of Scotland and Bank of America, was already close to the US$6 billion paid so far by many of the same banks in the long-running Libor rate-rigging probe.

The fines, large as they undoubtedly are, will become just another reference point in an ever-expanding dossier marked "bad banks" - maybe "too good to miss".

The fines took the total issued by US regulators this year to US$56.5 billion, making it the most expensive year for banks since 2007, according to research by the Financial
Times.

Other analysts noted that this is half of all fines levied on misbehaving banks since the start of the financial crisis in 2007.

Overall, the world's largest banks have collectively paid over US$200 billion in the past five years, most of it to regulators, leading The Economist to dub this the world's most lucrative shakedown operation.

What is truly concerning is that no rules have been drawn up, no cases have been settled in the courts, merely behind closed doors.  So no precedents have been set for others to follow, and there has been no public ventilation of issues, leaving shareholders none the wiser as to how and why their funds have been paid out.

If the G20 meeting and those on the sidelines of the main events achieve one thing today and it's stopping these situations in their track, it would be a weekend well spent.  US$300 billion has been taken out of the banking system at a time when, more than ever, decent businesses need funding to recover.

More concerning is the clear realisation that some regulators are hooked on the income from fining larger corporations.

True banking reform that works for everyone is about more than capital ratios.