Alternative Headlines, or, Putting Financial Penalties in Context
“Royal Bank of Scotland Group PLC on Wednesday agreed to pay $5.5 billion to the U.S. Federal Housing Finance Agency to settle a probe into its sale of toxic mortgage-backed securities in the run up to the financial crisis.”
—The Wall Street Journal (July 12, 2017).
Shelling out $5.5 billion sure sounds like a lot, right?
Not for a global mega-bank like Royal Bank of Scotland (“RBS”).
In fact, against RBS’s $1 trillion balance sheet, that $5.5 billion comes to a rather measly .55% of the bank’s assets.
In other words, a veritable wrist slap.
A Modest Proposal
To help out non-Wall Street types, I propose that financial journalists report future settlements as a percentage of the miscreant’s size — or, if you prefer, its annual profits or revenues.
The result?
This headline: “RBS Agrees to Pay Fine Equal to < 1% of Assets Over Sale of Mortgage Securities During Crisis.”
P.S.: Also problematic: 1) the punishment is civil, not criminal; and 2) the fine is paid by the corporate entity, not the responsible individuals.
