Claims against FTSE 100 companies more than double
Banks account for two-thirds of all High Court cases involving UK's largest companies
The banking sector is facing a rising tide of big ticket legal claims, according to a new study.
Research from Thomson Reuters shows the number of High Court cases involving FTSE 100-listed companies in 2015/16 hit a five-year high of 279 '“ up 6 per cent on the previous year and more than double the 114 cases of five years ago.
Cases involving FTSE 100 banks, specifically, jumped 14 per cent to 179 court cases last year, from 132 the year before. This is more than double the number of court cases involving the same banks two years ago '“ with just 69 cases in 2013/14.
Banks were, therefore, involved in almost two-thirds of all High Court cases involving FTSE 100 companies last year, compared to half in the previous year. Thomson Reuters' analysis shows that banks were the defendants in around 75 per cent of cases (112) they were involved in.
'As we approach the tenth anniversary of the financial crisis, the number of major cases being fought by banks is rising, rather than falling '“ a trend that is being echoed across the FTSE 100 companies as a whole,' said Raichel Hopkinson, head of the Practical Law dispute resolution service at Thomson Reuters.
'We are seeing a handful of big banks involved in the majority of High Court claims affecting the FTSE 100. Evidently, the banking sector still has to fight many fires on a number of fronts as the legacy of mis-selling of derivatives and fallout from the Libor market manipulation continues.'
Hopkinson suggested that banks are taking 'a robust view' about their prospects of defending themselves in court, 'indicating a willingness to fight claims, rather than settle early'.
'Increasingly it seems that banks involved in litigation are less concerned about the sort of adverse publicity that can be associated with the public disclosures and cross examination that come with court hearings,' she said.
'Whether this is because the claims are perceived as unmeritorious or because banks no longer feel quite as sensitive to exposure, having been in the spotlight for so long, it is difficult to say.'
The immediate financial costs of defending against complex legal claims can be substantial, with recent press reports suggesting the Royal Bank of Scotland has racked up more than £100m in legal costs defending itself against an action brought by retail investors and institutions over a £12bn rights issue in 2008.
Banks are also claimants in several cases against professional services firms, such as accountants or surveyors, suggesting they retain an appetite to pursue professional negligence claims.