It has been over a decade since the global financial crisis, and big banks are still struggling to recover. This recovery effort has been significantly impeded by the regular misconduct of many financial corporations, who incur fines from regulators such as the FCA and LSE that can be in the millions of pounds.

However, according to new research conducted by the University of Oxford, fines on banks are not as detrimental to the company as the resulting reputational damage. In fact, researchers found that announcements of financial penalties resulted in share-price losses almost ten times larger than the penalties themselves. However, it’s worth noting that these losses only occurred when the firm’s misconduct directly affected its customers, suppliers, or investors. If the misconduct affected third parties, such as reports of market misconduct or failure to comply with reports to other firms, then there were minimal or no losses in stock price.

This is due to the fact that reputational damage is largely the result of a loss of trust by the consumer. Mark Carney, governor of the Bank of England, once said, “Trust arrives by foot and leaves by Ferrari.” Indeed, according to business management consultancy Oliver Wyman, 12.6% of sudden stock price drops are related to “reputation” or “image” (where “sudden stock price drops” are defined as a decrease in stock price of over 20% in less than ten days). It then takes an average of 80 weeks, according to their report, for a company’s stock price to recover after a sudden drop.

With losses so quick and significant, and recovery so slow moving and unsure, banks must be careful to consider the damage to their reputation, in addition to the legal consequences, when choosing their actions. Colin Mayer, Peter Moores professor of management studies at the Saïd Business School at University of Oxford, said that he hopes “that firms understand the damage that they are inflicting on their own reputations when they do something to deserve a fine from the regulators. This should act as a powerful incentive not to bend the rules, especially when it comes to customer relationships.”

There is currently a mistrust of financial services throughout the UK, stemming from the mid-2007 financial crisis, and now further damaged by Brexit. According to the Edelman Trust Barometer, in 2017 the United Kingdom’s distrust of financial services grew by 4%, with only 45% of residents trusting the financial services industry. This increase is in part due to the uncertainty and instability surrounding Brexit. There is a fear that financial jobs may be moved to other countries due to the economic crisis, and some speculate that London’s status as a global financial capital may be endangered.

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