The series of scandals that have hit UK banks in recent months has damaged their prospects for restoring credit-worthiness, a leading ratings agency warned.
Libor-rigging, compensation for mis-sold payment protection insurance and interest-rate swaps to small businesses, money laundering allegations and IT failures will reduce earnings for the rest of 2012 and into 2013, Standard and Poor's (S-amp;P) said.
While the UK's banks have "come a long way" in strengthening their balance sheets since the financial crisis, recent first-half results suggest the banks' recovery is slower than expected due to one-off charges such as fines and compensation bills.
The report comes at a time of severe turmoil for the British banking industry, which has triggered a fierce debate in the sector and in Westminster over ethics and culture.
The S-amp;P report said: "Prolonged political, public, and regulatory pressures as a consequence of continued mis-steps and governance failures could strain our assessment of some UK banks' business positions."
The mis-selling of payment protection insurance is on course to be the costliest financial scandal in British financial history. The combined cost to the UK's high street banks hit £10bn in recent weeks and could escalate.
PPI claims volumes remain "unpredictable" and there are uncertainties regarding the compensation costs, S-amp;P said in its report.
Shockwaves were sent through the banking industry in June when US and UK regulators landed Barclays with a £290m fine for manipulating Libor - the key interbank lending rate that affects mortgages and loans.
S-amp;P said: "We anticipate material regulatory penalties for some of the other banks involved in the industry-wide investigation."
Libor "could be a significant drag on statutory earnings over future periods".
Also in June, Barclays, HSBC, Lloyds and Royal Bank of Scotland all agreed to compensate customers for the mis-selling of complex financial products to small businesses, known as interest rate swaps.
A US Senate investigation accused HSBC of allowing "rogue states" and drugs cartels to launder billions of pounds through its US arm.
And Standard Chartered was then accused by US authorities of hiding $250bn (£160bn) worth of transactions with Iran, exposing the country to arms dealers and terrorists.
S-amp;P added: "While we believe these issues have made post-crisis recovery more challenging for certain institutions, they do not, at this time, lead us to fundamentally alter our view of industry-wide creditworthiness."