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Sometimes banks make mistakes — and they’re usually extremely costly, to the tune of millions or even billions of dollars. Take a look at some of the craziest bank mishaps, what caused the errors, and what the banks did to try to remedy the situation. In some cases, the blunders resulted in a permanent change of policy after multiple similar mistakes were made. In the most extreme cases, the money was never recovered.
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While acting as a loan agent for embattled cosmetics company Revlon, Citibank accidentally transferred $900 million to the company’s creditors. The mishap, which took place in August 2020, was due to a “clerical error” and resulted in Citigroup being forced to restate its fourth-quarter earnings for that year. In addition to doing a good deal of explaining to its banking regulators, the banking giant has yet to recover approximately $500 million from the accidental transfer due to some of the lenders holding onto the money they felt was owed to them by Revlon (even though the funds belonged to Citigroup and not Revlon.) In February 2021, a U.S. District Court Judge ruled in favor of Revlon’s creditors and said Citibank is not entitled to recover the lost money.
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Dubbed “Germany’s dumbest bank,” by local newspaper Bild, KfW bank erroneously sent approximately 5 billion euros ($5.4 billion) to four banks in February 2017 because of a “technical glitch that repeated single payments multiple times.” Sources familiar with the matter told Bloomberg that once the mistake was detected, the bank was successful in mitigating the mistake by “rectifying the error and recalling the money without suffering any financial damage.” One of the people who spoke to Bloomberg under the condition of anonymity said the total amount involved in the accident transfer may have been as high as 6 billion euros.
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This wasn’t the first time the Frankfurt-based bank has committed a mistake of epic proportions. Back in September 2008, KfW mistakenly transferred 320 million euros (approximately $338 million) to the Lehman Brothers firm during the 2008 financial crisis. The transfer was made on the day the now-fallen firm filed for bankruptcy, Sept. 15, 2008 — resulting in a “political outcry” — according to The New York Times. It remains unclear whether the German bank has been successful in recovering any of those funds.
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German investment bank Deutsche Bank accidentally transferred $35 billion In April 2018 to one of its external accounts in what was called a “fat finger error.” According to Bloomberg, the bad transfer was quickly reversed and no financial damage was done. The mishap highlighted the need for banks to revamp their internal controls and tech structures to prevent human errors, or typos, from being processed, though. In 2015, Deutsche Bank underwent a similar incident when a trader accidentally sent $6 billion to an incorrect hedge fund in the U.S. The mistakes resulted in a permanent change for the bank’s internal workings whereby large wires have to undergo a final check before being approved.
British bank Santander accidentally wired £130 million (about $175 million) in duplicated payments to its customers last Dec. 25. The Christmas day mistake was split over 75,000 transactions for 2,000 of the company’s corporate and commercial customers, a statement released by the company said. Santander blamed the mistake on a scheduling issue, and said the problem had been "quickly identified and rectified." It is unclear whether the Spain-based bank has been successful in recovering all the funds, though a spokesperson told Fortune magazine on New Year’s Eve that the recovery process was "underway and working effectively.”
Four days after a man named Reynaldo Pacheco was found brutally murdered in the California desert in September, compliance officers paid HSBC bank a visit after getting warnings of “millions of dollars flowing into a big-dollar scammer account in Hong Kong.” Prosecutors claimed that the banking giant had been “serving as a middleman for Mexican drug cartels,” and ordered it to pay $1.9 billion to regulators in a settlement, along with five years of probation. HSBC also agreed to have its banking activities monitored by a court-appointed watchdog for an undetermined amount of time.
In June 2012, the British bank admitted that it had manipulated the London Interbank Offered Rate — a benchmark interest rate used in the operation of international financial markets throughout banks in the U.K. and Europe as the basis for trillions of dollars of financial transactions. Between 2005 and 2009, Barclays revealed that it had manipulated LIBOR to “gain profits and/or limit losses from derivative trades.” The bank was ordered to pay $450 million in fines during a settlement hearing with U.K and U.S. regulators, and saw the sacking of CEO Robert Diamond a few days later.
Japanese investment banking company Mizuho Securities paid a hefty price after one of its stockbroker’s mistyped one crucial piece of data in 2015. The employee was trying to sell a single share of job-recruiting firm J-Com for 610,000 yen (about $5,000) on the New York Stock Exchange, but instead traded 610,000 shares for 1 yen (less than a penny). The typing error resulted in a loss of 27 billion yen ($225 million) for the company, and prompted regulators to open an investigation into the firm’s first fiscal quarter for that year.
Although technically not a bank, PayPal offers digital-payment services that are similar to banks, and partners with certain banking institutions to offer financial products such as debit, prepaid, credit cards, and lines of credit. In 2013, the tech company accidentally sent $92 quadrillion to a man named Chris Reynolds in Pennsylvania. After the deposit was made, PayPal admitted the error and paid an undisclosed amount as compensation to Reynolds for the “technical mistake.” (To put the astronomical figure into perspective, a quadrillion dollars is equal to a thousand trillion, or a million billion dollars!)
Sherry Hunt witnessed fraudulent activities and sloppy paperwork as vice president and chief underwriter at the CitiMortgage headquarters in Missouri. In 2011, after seven years of secretly compiling and recording every bad loan and email from her superiors “telling her to keep the defective loan rate low,” Hunt filed a lawsuit against the country’s largest mortgage lender. Backed by the Department of Justice, Hunt succeeded in her suit against CitiGroup and walked away with a $30 million settlement. The company was also ordered to pay nearly $158 million in fines for its “predatory lending practices.”
NatWest, previously known as the Royal Bank of Scotland, was fined £56 million (almost $69 million) in late 2014 after a software issue rendered millions of users unable to access their bank accounts. The computer glitch affected credit scores and delayed payroll payments and utility bills, as deposits were not going through due to the glitch. The mishap was the “worst computer system outage the U.K. financial system has ever seen,” according to Forbes, and cost the bank an estimated total of £175 million (about $214 million) to revamp its information technology software and pay compensation to affected customers.
Several investors filed a $100 million lawsuit In November 2011 against Scott Rothstein, a prominent South Florida lawyer accused of orchestrating a “massive Ponzi scheme” with the help of TD Bank’s U.S. subsidiaries and other financial accomplices. The lawsuit claimed that numerous red flags were ignored — such as the transferring of approximately $500 million through Rothstein accounts at a TD Bank branch in Fort Lauderdale within the span of one month. The Canada-based bank ultimately agreed to pay $15 million in settlement and administrative fees to the state of Florida, and Rothstein was sentenced to 50 years in prison for his role in the scheme.
A joint investigation by the Justice Department and the U.S. Securities and Exchange Commission into investment firm JPMorgan Chase’s Asia-Pacific region revealed that the company had engaged in “unethical hiring practices.” The 2013 investigation uncovered a spreadsheet that “allegedly linked well-heeled hires — in many cases, the sons and daughters of industry titans — to specific deals being pursued by the bank,” according to a report by Bloomberg. Once the blunder was made public, JP Morgan agreed to pay $200 million in SEC fines, as well as additional penalties for “misstating financial results and lacking effective internal controls,” for its traders.
City Federal Savings saw its demise during a sweeping crackdown targeting banks’ large portfolios and junk bonds in the late 1980s and early 1990s. The Texas-based bank had become heavily invested in real estate and mortgage banking, but as interest rates began to stabilize, new Congressional capital requirements were imposed to cap banks’ excessive lending practices, City Federal could not survive on its own. In its final quarter of 1989, the bank reported losses upward of $224 million before declaring bankruptcy and going under.
Barclays Chairman Nigel Higgins revealed this year that the company had suffered a “multimillion-dollar trading error” due to a trader making “some mistakes on simple tasks.” Higgins said he found it exasperating and embarrassing having to explain the mishap to investors at an annual shareholder meeting, adding that, “We were dismayed that after so much progress, we had this entirely self-inflicted problem.” The U.K.-based bank has been riddled with financial problems recently, and revealed in March that it had seen a profit loss in its first quarter as well as the potential restatement of two account units from last year.
