The cost to banks of cleaning up past misdeeds has soared over $100 billion and is leaving lenders running scared from areas that put them in potential danger of upsetting regulators.
This week alone, Deutsche Bank, UBS and Lloyds revealed mounting legal bills and Dutch agricultural specialist Rabobank became the latest lender to be fined in a global scandal over interest rate rigging with a $1.1 billion penalty.
Bankers fear that paying for the sins of the past and preventing future misdemeanours could be the biggest headache yet for an industry still trying to bulk up on capital and liquidity reserves in the wake of the 2007-09 financial crisis.
"This is a new world of regulation that has emerged post the financial crisis and I think the whole industry is struggling to catch up with it," Mike Rees, head of wholesale banking at Standard Chartered said.
"Everyone has focused on the liquidity standards and the capital standards, but I think the bigger cost for the industry will be about meeting the standards being required of us in terms of the code of conduct."
JPMorgan - which had emerged from the financial crisis as the poster child for good risk management - is close to a record $13 billion settlement with US authorities over the mis-selling of mortgage-backed bonds.
That could take the cost of credit crisis and mortgage-related settlements by US banks to almost $85 billion in the last four years, according to SNL Financial. European firms, mostly in Britain, have paid or set aside more than $40 billion to compensate customers or pay various fines.
Further penalties are expected to hurt profits for years to come and are encouraging banks to quit business lines and less-regulated countries to shield themselves from future risk.
"Banks have to stand back and say what's strategically important, where's the risk, what's the strategic value? And they have to make some choices," said a senior bank executive.
In many cases, businesses are not worth the cost of policing their potential risks.
HSBC has pulled out of a number of business areas and countries, including Panama and other Latin American countries, since being fined a