BANKTHINK

Wall Street Gives the Fed an Earful on Counterparty Credit Limits

Receiving Wide Coverage ...

Counterparty Credit Limits: Today several financial services CEOs will meet with Fed Governor Daniel Tarullo to plead their case against (among other things) the regulator's proposed rule limiting banks' exposure to one another. Under the rule, credit to any counterparty would be capped at 25% of regulatory capital for most institutions and 10% for the biggest ones. The FT reports on "strident" comment letters about the proposal sent to the Fed by Goldman Sachs and Morgan Stanley. The former investment bank sounds familiar warnings about the threat to the U.S. economy and jobs. In his Times column, Peter Eavis parses another comment letter arguing against the rule, this one filed by the Clearing House, a trade group that's been taking on a higher profile and a broader agenda in the last few years. American Banker's Donna Borak has written a helpful explainer about the Tarullo meeting, which will also cover the recent stress test results that confused and angered the bankers and other regulatory proposals under Dodd-Frank that make them nervous. And for an opinionated take on the pow-wow, go to BankThink, where Akshat Tewary, a lawyer, FINRA arbitrator and member of Occupy the SEC (a "subgroup" of the Occupy Wall Street movement) argues that counterparty limits will ultimately benefit the financial services industry itself along with taxpayers, consumers and nonfinancial firms.

Executive Pay: At UBS' annual meeting tomorrow, the bank's management will be confronted by "a significant number" of angry investors who will vote against the 2011 pay awards, the FT reports. How significant? The "no" votes could garner a bigger percentage than the more than one-third of voting shareholders who cast their ballots against the pay package at fellow Swiss bank Credit Suisse, the paper says. (Reminder: these are all nonbinding, advisor votes.) In the Times, "Deal Professor" columnist Steven M. Davidoff says the recent shareholder protests over pay "are more likely to dissipate once the media attention surrounding them dies down" than metastasize into "a corporate Arab spring." The investor revolts at Barclays, Citi and Chesapeake Energy say more about those companies' egregious practices than the prevailing mood among investors, Davidoff argues. (Our friend Francine McKenna made much the same argument in her BankThink column last week. And for the record, American Banker also used the Arab Spring analogy first, albeit with a tad more subtlety.) While we're shamelessly promoting our colleagues' content, make sure you read American Banker's ongoing special report on executive compensation, including a new sortable, interactive version of our proxy season scorecard that we'll be updating as the say-on-pay votes come in.

FINRA: The securities industry’s self-regulating body fined Wells Fargo, Citi, Morgan Stanley and UBS a combined $9.1 million for improperly selling complex ETFs to individual investors, “some of whom were in their 90s and lost large portions of their savings,” the FT reports. Separately, it must have been a little awkward last week for FINRA when it banned one of its board members, Joel R. Blumenschein, from running his own firm for three months, as part of a settlement of a case where he allegedly “failed to supervise a broker … who put more than half of a customer's retirement savings of $80,000 into unsuitable penny stocks, including a mining company with no operations.” Blumenschein insisted at the time he would serve out his two-year FINRA directorship, but yesterday he said he’ll resign. A Journal reader sums it up best in the comment thread on the story: “One word: DUHH?”

May Day: There were traffic jams and arrests but generally yesterday’s Occupy street protests were peaceful, at least in New York. There was no general strike, no bridge blockades as threatened. Some jerk sent envelopes containing white powder and threatening notes to several banks in the city, but the suspicious substance turned out to be corn starch. Violence did break out at demonstrations in the Bay Area, though, and May Day events in Cleveland were cancelled after it was revealed that five self-described anarchists had been arrested for plotting to blow up an Ohio bridge. Occupy Cleveland said the suspects were “associated” with the local group but “were in no way representing or acting on [its] behalf.” Wall Street Journal, Financial Times, New York Times, ABC News

Wall Street Journal

Small banks are benefiting from their exemption from the Durbin rule’s cap on debit interchange fees, the Fed said, as they were able to hold their average rate steady at 43 cents per transaction in the fourth quarter while the industry average fell to 24 cents. Community bankers still fear that their advantage will be short-lived and market forces will pressure them to lower their fees to compete with banks subject to the cap.

Financial Times

Goldman Sachs is looking to hire a social media strategist. Wait, isn’t that what @GSElevator does? (That's a joke; look up his Twitter feed at your own risk.)

 

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