The right and proper 'financial' consequences to [mis]conduct is (and will continue to be) a subject on which we will encounter polarised opinion.
The ‘huge’ fines being meted out by law enforcement agencies and regulators across the banking sector are ‘material’ (by most stakeholder's reckoning). Prudential regulators are certainly alive to these costs. Take for instance, the impact of conduct cost expenses on UBS’s bottom line – the bank reported on Tuesday that the Swiss Financial Market Supervisory Authority was forcing it to hold more capital because of "known or unknown litigation, compliance and other operational risk matters" (see the article by Jill Treanor in The Guardian entitled, “UBS forced to hold more capital amid currency probe” (29 October 2013). And this was, we understand, in spite of the bank increasing its headline Pillar I capital by reducing its risk weights assets over the recent past. But what of particular note is the Swiss authorities’ concern over the ‘unknown’ and well as the known risk factors. The capital adequacy consequences reflected a judgement-based, forward-looking evaluation of the bank’s risk profile.
The right and proper financial consequences to (mis) conduct, by Chris Stears