Wary institutions backing away from banks in wake of scandals

Institutional savers are nervous that banks may struggle to afford punishments doled out to those guilty of rigging interest rates, mis-selling products and performing inadequate checks against money laundering.

Cost estimates on rate-rigging alone top £12bn.

“We’re already seeing an increase in inquiries from people who want guidance on how to spread their money across more names,” said Tom Meade, investment director at Royal London Cash Management, a Royal London Asset Management division with £6bn under management.

“Historically, if a bank was seen as systemically important, like a Lloyds or an RBS, that used to be enough. But that point of view is changing,” he added.

Many of the world’s biggest lenders are fighting to maintain the confidence of regulators and customers as ratings agencies cast doubts on their creditworthiness.

But these efforts have been undermined by recent revelations that bank staff took part in conspiracies to rig the Libor interbank lending rate, which underpins transactions worth trillions of pounds.