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UBS Near Libor Settlement; The Case Against 'Arthur Andresen'-ing HSBC

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UBS Settlement: The Swiss bank is negotiating a deal with international regulators in which it will pay $1 billion in fines for manipulating Libor, the papers report. UBS' Japanese unit will enter a guilty plea to a criminal charge, the first such capitulation by a bank in over a decade, according to the New York Times. "Federal prosecutors are trying to strike a balance," the paper says. "By levying a charge against the subsidiary, authorities send a powerful message, but stop far short of putting the company out of business" — a known hazard of indicting corporations for the actions of individual employees (see: Arthur Andersen). Wall Street Journal, Financial Times, New York Times

Collective Punishment Debated: Andrew Bailey, who has been tapped to run the Bank of England's new Prudential Regulatory Authority, tells the U.K. Daily Telegraph that large banks have become too big to prosecute. "It would be a very destabilising issue. It's another version of too important to fail," he says. "Because of the confidence issue with banks, a major criminal indictment, which we haven't seen and I'm not saying we are going to see… this is not an ordinary criminal indictment." Felix Salmon, the Reuters blogger, more vigorously rebuts the Madame Defarge types who were outraged that the U.S. did not indict HSBC itself. "Even if the bank survived … there would certainly be massive job losses — and we can be sure that somewhere between 99% and 100% of those job losses would fall on people who had absolutely nothing at all to do with the money laundering that HSBC was getting up to." (After receiving some nasty comments, Salmon had to clarify that he was arguing against indicting a whole bank, not individual bankers, but that was pretty clear to us on the first read.) A Times reader, responding to the paper's indignant editorial posted Tuesday, similarly wrote: "In the same sense that we might object to killing a dictator with a bomb that would also kill a great number of civilians, it might be considered wrong to punish a bank so severely that it would destroy the livelihoods of millions of people."

Wall Street Journal

Securities industry jobs are moving from traditional centers like New York to smaller cities like St. Louis and Columbus, Ohio, according to a feature story on the front page of the "Money & Investing" section.

Financial Times

JPMorgan is deploying the same data-crunching technology used for counterterrorism to spot internal fraud.

Here's an op-ed by the inimitable James Grant arguing for the virtues of the pre-FDIC banking days, before risk was socialized, when bank owners faced "double liability" for failures — similar to what he told us in this video last year.

The Fed "is carrying out its first ever system-wide stress test of bank liquidity in a move that could force banks to change their funding sources." It's the liquidity equivalent of the capital stress tests we've seen the last few years — C-LAR instead of CCAR.

New York Times

"Late Credit Card Payments Low and Expected to Stay There," reports the "Bucks" blog.

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(Image: Bloomberg News)

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