Banks: here we go again Shocking news from Switzerland. There are suspicions of foul play in the financial sector. Finma, the Swiss financial markets regulator, is investigating possible manipulation of the foreign exchange market. The UK's Financial Conduct Authority is already looking into it. Memories of the Libor scandal, which has led to $2.5bn of settlements, flood back. The market's reaction? Meh. Finma has not said which banks are under review but shares in UBS and Credit Suisse, Switzerland's two largest banks, edged up slightly on Friday. The reaction is understandable. It is early days for the investigation and the setting of benchmark rates in the highly liquid FX market is very different from the precarious way in which Libor used to be set. This may turn out to be, as Jamie Dimon would say, a tempest in a teapot. But the new investigation is a reminder that these days provisions for litigation and misconduct are a regular feature of bank earnings, not one-off exceptionals. UBS's latest annual report, for example, lists 18 areas of litigation or regulatory risk. The cost of these issues mounts up quickly. According to analysts at Barclays, since 1999 reported profits at large European banks (ie those that actually go to shareholders) have been €100bn lower than underlying profits. Not all of that is due to conduct charges. Non-core assets, gains or losses on disposals and restructuring charges are also to blame. But that is an awful lot of shareholder value destroyed. And investors seeking a refuge from these costs cannot simply turn to old-fashioned retail banks. Misconduct is not just the preserve of bonus-hungry traders. The UK's payment protection insurance scandal has cost its retail banks £11.5bn so far. The only way for investors to cope with this is to get out of the sector or, depressingly, to accept conduct problems as a fact of life. European bank shares are up a quarter in the past year - soundly beating the wider market - but even after that they trade only in line with book value. Investors, it seems, are sceptical that economic recovery will result in higher book values. In other words, they are expecting something to eat up profits. Finma's investigation is an example of what that might be.