Hefty fines have been imposed over the financial malpractice that caused the global crash, but many fear the punishment has had little impact on banking culture

The clean-up is continuing after the sub-prime mortgage crisis in the US, which triggered a broader banking crisis in North America and Europe, and subsequent government debt crises and austerity drives.

Lenders that packaged up dubious mortgages and sold them to investors are being thoroughly spanked. In the US, hefty fines have been the regulators' favourite tool. Worldwide, in 2012 and 2013, banks paid a massive $138bn in fines and penalties, largely related to mortgage malpractice, according to The Banker magazine.

The latest example is a fine of $7bn levied on Citigroup by the US government. US Attorney General Eric Holder said the bank had “admitted to its misdeeds in great detail”. These included knowingly selling to investors problematic packages of sub-prime mortgages – a practice that was encouraged by the huge commissions traders could make on the sales.

Richard Hopkin, managing director of the securitisation division for the Association for Financial Markets in Europe (AFME), says that one factor in the US sub-prime debacle was an “originate to distribute” model in which US businesses created and packaged up mortgages, sold them, and then washed their hands of them. “The person creating the mortgage had no interest in the long-term performance of...

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