Conduct Costs

Bad conduct always has its costs, as we learn when we miss our curfew, get thrown out of class, or smash up Mom's car.

Banks have also been accused of bad or unethical behavior and must make settlement payments as a result of fines, regulatory decisions, or litigation against them. Known as conduct costs, they refer to money that banks set aside in case they are accused of anything in the future. The world's largest banks frequently pay hundreds of billions of dollars in conduct costs.

These costs affect the returns for their investors, as well as the rates for the loans they make.

These actions could be for such actions as giving out mortgages to those who don't qualify, manipulating commodity costs, or signing customers up for checking accounts that they don't even know about.

It's nice to know regulators are keeping an eye on banks' behavior, so the money we entrust to them remains safe.

Oh, wait…never mind. The regulators tend to work for the banks before joining a regulatory agency. Then they go back once they’ve learned all the loopholes.