Receiving Wide Coverage ...
Intergalactically Systemic: The list of really, really, waywayway too-big-to-fail banks is out, and Citigroup and JPMorgan Chase are on it. The Financial Stability Board, which is coordinating the international regulatory reform effort for the G20 economies, said Thursday that it had put the two New York banks in an echelon that would subject them to a 2.5% capital surcharge. That means that they would have to maintain common equity equal to 9.5% of risk-weighted assets, compared with a universal 7% baseline. Deutsche Bank and HSBC are also in the 2.5% bucket, while other American firms like Bank of America and Goldman Sachs are in the 1.5% bucket and Wells Fargo is at 1%. The list is subject to change and the requirements for the additional loss cushions will be phased in beginning in 2016.
The FSB also issued reports on progress on living wills and efforts to intensify supervision. Regarding the former, the Journal said the body was "scathing in its criticism of the banks' first drafts, accusing them of being blasé about the losses they could incur and about the legal difficulties of resolving a cross-border failure."
In the Times, Peter Eavis wrote under the headline "The List That Big Banks Don't Wish to Be On," and addressed concerns that even 9.5% is far too low to address the TBTF problem. American Banker, Wall Street Journal, Financial Times
Another Sheriff in Town: The Times took a broader look at the Federal Energy Regulatory Commission's enforcement arm after the agency's $500 million case against Barclays over alleged manipulation of the electricity market. "The agency — building on a 2005 law, additional resources and a string of personnel moves — is increasingly exercising its new enforcement muscle to pursue not only energy companies but some of the nation's biggest banks" And the banks are fighting back, the paper reports. Another item focused on the nature of the charges against Barclays, which involve accusations that the bank played with prices in the physical market to profit on derivative bets. An article in FT highlighted colorful emails and text messages from Barclays traders.
Meanwhile, Wells Fargo argued in a court filing Thursday that the $25 billion mortgage servicing settlement bars a lawsuit the government filed last month over "reckless origination and underwriting of its retail FHA loans." American Banker, Wall Street Journal
…And the Times reported that Preet Bharara, the U.S. attorney behind the Wells Fargo suit, got name-checked by Bruce Springsteen at a concert Bharara attended last week.
Sandy, Week One: The Journal covered banks' efforts to get cash to customers as demand for paper money surged in storm-ravaged areas. FT ran an article on bankers and traders working from "darkened homes" and improvised offices.
New York Times
The paper's editors register their alarm over junk bonds "growing junkier by the day." More money is going to pay dividends to private equity owners in recent deals, they write, and regulators, who are pushing investors into the instruments through low rate policies, must protect the market against recklessness and abuse.