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S&P Global Ratings: UK banks turning corner on conduct, litigation charges

The U.K.'s biggest banks seem to have turned a corner regarding conduct and litigation charges, and 2016 will probably be the last year of "outsized" charges, according to S&P Global Ratings.

Barclays Plc, HSBC Holdings Plc, Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc were hit with conduct and litigation charges of £10.8 billion in 2016, S&P Global Ratings calculations show, which is a £3.7 billion decline from the six-year peak of £14.5 billion in 2015.

S&P Global Ratings expects these charges to continue to "gradually subside" over the course of 2017, but acknowledged that new conduct issues could emerge, and that pending legal settlements could result in some of the 2017 charges dragging into 2018.

The U.K. Financial Conduct Authority has extended the deadline for payment protection insurance complaints to August 2019, which could contribute to further charges, but S&P Global Ratings nevertheless expects PPI charges to fall in 2017.

The agency said it does not expect to lower ratings of U.K. banks as a direct consequence of their conduct and litigation issues over its two-year outlook horizon. However, higher-than-expected charges could "constrain ratings upside," it added.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.