Banking woes set to continue

A report by the Bank of Spain has identified the continued risk of litigation as the biggest risk to the banking sector. The report states that “legal risks have increased significantly in recent years and there is still a major potential for further litigation as procedures are reviewed.” Banks have been caught up in a number of mis-selling and bad advice scandals in recent years, resulting in over 2 billion euros being paid in compensation. Sales of mortgages is highlighted as one potentially vulnerable area and the sector is waiting for an EU ruling that may plunge them into a further round of compensation claims. Other risk factors include the level of debt that the economy and individuals have and a lack of a clear fiscal policy in a country that is regularly swinging between the left and right in government.