Reputation Premium at Work
So the Spanish mega bank Banco Santander announced today that it is repaying customers who lost money in their Optimal Strategic US Equity Fund which was invested with fraudster Bernie Madoff. The bank is paying 100% to the victims (not to institutional investors) by handing out €1.38 billion in shares. This move puts off legal actions and helps to preserve its reputation. As I see it, the reputation premium is at work.