The heavy burden of regulatory settlements

How a few tail losses can skew capital calculations

Marcelo Cruz

Over the past few months, high legal settlements on the financial industry have been in the headlines. Though these settlements were initially mostly legacy from the financial crisis and the role of banks in the mortgage market collapse, the legal problems are now spreading into tax issues and dealings with prohibited countries. The cost to banks of these legal settlements and penalties is now hitting the multibillion dollar mark – quite a few of them are over $10 billion, and this does