European banks may be strangled under the weight of litigation costs and fines, according to Morgan Stanley analysts, Reuters reports. Because of alleged manipulation of interest rates, mortgage mis-selling and foreign exchange manipulation, the various fines and litigation costs could be a staggering $52 billion, on top of the $104 billion they have already paid out. The most burdened banks are the Royal Bank of Scotland and Barclay’s.
The fines and other expenses could strain operations and constrict the amount of dividend payments. In November, six banks were fined $4.3 billion on charges they tried to manipulate foreign exchange markets. According to Reuters, analyst Huw van Steenis said, “FX settlements underscore the need to prove culture and business models are transformed before returns and payouts can rise.”
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Future litigation expenses are estimated at $7.5 billion for foreign exchange manipulation, $6.5 billion for interest rates benchmarks Libor and Euribor and $9.4 billion in connection with U.S. mortgages. The big four British banks may be responsible for 15.1 billion pounds or $22.8 billion related to litigation until 2017, in addition to the 11.6 billion they have yet to pay.
