Bank of America Corp (BAC), Wells Fargo & Co (WFC), JPMorgan Chase & Co. (JPM): Big Banks Face New Legal and Regulatory Woes

First, the bank is still under the microscope of federal investigators regarding the $6.2 billion credit default swap trading loss last year. Analysts are also said to be betting whether the regulator of U.S. power markets will pursue manipulation charges against JPMorgan Chase & Co. (NYSE:JPM). That affair arises from a report by the Federal Energy Regulatory Commission detailing how the bank shape shifted money-losing power plants into powerful profit centers.

Finally, the OCC is also expected to issue a cease-and-desist order against the bank for failing to conduct adequate due diligence on Bernard Madoff. The order is believed to require JPMorgan Chase & Co. (NYSE:JPM) to improve its anti-money laundering controls.

The Bottom Line

The question for investors is how these legal and regulatory matters affect the big banks. While the too big to fail players have returned to profitability (fueled mostly by The Federal Reserve’s never ending easy money policy), settling these legal and regulatory challenges will take a bite out of the big banks profits.

And this is not the end of the line for the legal and regulatory cases against the banks. There are ongoing investigations into the banks’ collective role in the secondary mortgage market meltdown. Moreover, the probe by government authorities here and abroad in the EU and the UK regarding the Libor rigging scandal is still ongoing.

While the big banks will have the cash to pony up to settle these matters, the ongoing wave of legal and regulatory actions creates uncertainty. That uncertainty leaves unanswered questions as to how these matters could force the banks to make changes in their executive lineups. And all of these concerns could put downward pressure on the share prices of these firms. In other words, let the buyer beware.

The article Big Banks Face New Legal and Regulatory Woes originally appeared on Fool.com and is written by Kyle Colona.

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