Skip to main content

In wake of JPMorgan settlement, big banks add to defense funds

Several large U.S. banks have set aside extra money to pay for potential legal costs in part because of JPMorgan Chase & Co's massive $13 billion settlement with U.S. authorities over bad mortgages, according to two sources familiar with the situation.

The size of the JPMorgan settlement, which the government called the largest in U.S. history, led many banks to realize that the cost of resolving some of their own legal problems was likely to be higher than they had initially believed, the sources said.

Justice Department officials have said in public statements they want to use the JPMorgan settlement as a template for deals with other banks.

Bank of America, Citigroup, Goldman Sachs and Morgan Stanley all added hundreds of millions of dollars to funds they have set aside to pay for the cost of litigation, including legal fees, fines and settlements. All four banks are facing mortgage-related investigations by federal prosecutors located in different parts of the country.

The increase in such funds impacted the fourth quarter results of the banks published this week, surprising many analysts.

The total amount of the four banks' increases in litigation reserves could not be determined because the banks reported them in different formats. A U.S. Securities and Exchange Commission rule says companies must only reserve funds for losses that are "probable and estimable," but does not require companies to disclose how the reserves match their specific expectations.

Spokesmen at all four banks declined to comment.

The additions to legal reserves show how cases related to practices that sometimes date back to before the financial crisis are likely to continue to cause pain to the U.S. banking industry. U.S. and European regulators fined banks record amounts last year, imposing penalties and settlements of more than $43 billion as authorities work more closely across borders to clean up the financial sector.

The U.S. government's Residential Mortgage Backed Securities Working Group, a network of federal and state prosecutors and investigators set up in 2012, has been poring over records and testimony relating to residential mortgage-backed securities (RMBS). Many of these assets were stuffed with home loans that were badly underwritten and issued in the years leading up to the crisis.

"Where the industry thought they were at the tail end of it there's reason to wonder whether there's a whole new round of broader suits that may be brought," said Joshua Rosner, a managing partner at Graham Fisher & Co, an independent research consultancy.

Goldman Sachs said its net provisions for legal expenses in 2013 amounted to $962 million, up from the $448 million it reserved throughout 2012. Bank of America said it had added $2.3 billion to its reserves during the fourth quarter, up from $1.1 billion in the third quarter. Citi added $809 million in the fourth quarter after adding $677 million in the third quarter.

Morgan Stanley added $1.2 billion in the fourth quarter to its litigation reserves, and specifically cited investigations "related to residential mortgage-backed securities and the credit crisis" as the motivation for doing so.

Citigroup Chief Financial Officer John Gerspach said in a conference call with analysts to discuss quarterly earnings that he expected the bank's legal expenses relating to its "legacy assets" would "remain elevated." Legacy assets include mortgage-backed securities that the bank packaged and sold before the crisis.

"It's driven by the higher level of litigation-related activity throughout the industry," Gerspach said on Thursday, adding that Citi's consideration of the landscape had included "things that you've seen hit the press as far as the industry."

Popular posts from this blog

Study Abroad USA, College of Charleston, Popular Courses, Alumni

Thinking for Study Abroad USA. School of Charleston, the wonderful grounds is situated in the actual middle of a verifiable city - Charleston. Get snatched up by the wonderful and customary engineering, beautiful pathways, or look at the advanced steel and glass building which houses the School of Business. The grounds additionally gives students simple admittance to a few major tech organizations like Amazon's CreateSpace, Google, TwitPic, and so on. The school offers students nearby as well as off-grounds convenience going from completely outfitted home lobbies to memorable homes. It is prepared to offer different types of assistance and facilities like clubs, associations, sporting exercises, support administrations, etc. To put it plainly, the school grounds is rising with energy and there will never be a dull second for students at the College of Charleston. Concentrate on Abroad USA is improving and remunerating for your future. The energetic grounds likewise houses various

Best MBA Online Colleges in the USA

“Opportunities never open, instead we create them for us”. Beginning with this amazing saying, let’s unbox today’s knowledge. Love Business and marketing? Want to make a high-paid career in business administration? Well, if yes, then mate, we have got you something amazing to do!   We all imagine an effortless future with a cozy house and a laptop. Well, well! You can make this happen. Today, with this guide, we will be exploring some of the top-notch online MBA universities and institutes in the USA. Let’s get started! Why learn Online MBA from the USA? Access to More Options This online era has given a second chance to children who want to reflect on their careers while managing their hectic schedules. In this, the internet has played a very crucial in rejuvenating schools, institutes, and colleges to give the best education to students across the globe. Graduating with Less Debt Regular classes from high reputed institutes often charge heavy tuition fees. However onl

Sickening moment maskless 'Karen' COUGHS in the face of grocery store customer, then claims she doesn't have to wear a mask because she 'isn't sick'

A woman was captured on camera following a customer through a supermarket as she coughs on her after claiming she does not need a mask because she is not sick.  Video of the incident, which has garnered hundreds of thousands of views on Twitter alone, allegedly took place in a Su per Saver in Lincoln, Nebraska according to Twitter user @davenewworld_2. In it, an unidentified woman was captured dramatically coughing as she smiles saying 'Excuse me! I'm coming through' in the direction of the customer recording her. Scroll down for video An unidentified woman was captured dramatically coughing as she smiles saying 'Excuse me! I'm coming through' in the direction of a woman recording her A woman was captured on camera following a customer as she coughs on her in a supermarket without a mask on claiming she does not need one because she is not sick @chaiteabugz #karen #covid #karens #karensgonewild #karensalert #masks we were just wearing a mask at the store. ¿ o