Seeking Alpha

Banks stay mum on litigation reserves

  • Notably not disclosing its litigation reserve this quarter was JPMorgan (JPM -0.2%), which had taken the unusual step of doing so last October (it was $23B) ahead of the major DOJ settlement.
  • Even as litigation has become of such material import to banks, the lenders generally don't disclose how much they've set aside for settlements and fines. The reason is clear: Whatever number that may be becomes a target for opposing attorneys.
  • “I definitely feel that the disclosures around this aren’t great ... I thought JPMorgan disclosing it was going to put pressure on more banks to start doing it,” says Goldman's Richard Ramsden. Most don't believe banks are sitting on catastrophically low reserves (BAC has paid in about $50B to its reserve since the financial crisis, says Bernstein), and the number can often be pieced together, but it's hard to know sometimes what banks have drawn down to settle cases.
  • While the SEC has asked lenders to offer better disclosure on things like European bond holdings, it has requested nothing on litigation reserves, though they're causing more financial pain than Europe is.
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