Banks hail CRA reform; Fighting identity theft of minors

Receiving Wide Coverage ...

Expanding CRA: The Office of the Comptroller of the Currency proposed broad changes to the Community Reinvestment Act “that could allow institutions to redirect billions of dollars spent on loans and investments” in poor communities. The plan includes “expanding the types of loans and activities that banks can count toward their CRA performance, publishing those results periodically, and broadening the geographic scope of the rules for each bank.”

Andrew Harrer/Bloomberg

“The OCC’s paper drew a positive response from banks, which support making the rules more flexible,” the Wall Street Journal says, while “consumer groups said they worried about the impact on local communities.” Wall Street Journal, American Banker

Jesse Van Tol, the chief executive of the National Community Reinvestment Coalition, says the propose changes, while “promoted as ways to simplify the law, will, in fact, be a huge step backward,” in an op-ed. “We can’t allow banks to cherry-pick where they lend. One easy formula is no substitute for a commitment to invest in all of America’s communities.”

Mobile payment battleground: Paytm, India’s largest mobile payments company, confirmed that Berkshire Hathaway has taken a stake in its parent company and that it will use the money, reportedly at least $300 million, to double the number of merchants on its system to 17 million. “I take this as a validation of Indian entrepreneurs fighting the global companies in this country,” said Vijay Shekhar Sharma, Paytm’s founder, referring to Google, Amazon and other foreign-based competitors. “Paytm is building a truly world-class business out of India — a business capable of standing alone.”

Not to be outdone, Google “is raising its mobile-payments game in India with new functions and services as global players race to woo the nation’s legions of consumers who are skipping credit cards and transacting on smartphones instead.” The U.S. tech giant is expanding its mobile money service and partnering with local banks to offer consumer loans within its mobile app. It is also adding more online and physical merchants to its platform, which allows users to transfer money electronically without the use of a credit or a debit card.

Good to go: The Senate voted to confirm Richard Clarida as vice chairman of the Federal Reserve. He was approved by a 69-26 vote, with 46 Republicans and 23 Democrats voting yes. Only one Republican, Sen. Rand Paul of Kentucky, voted against. Wall Street Journal, Financial Times, New York Times, Washington Post, American Banker

The Senate also confirmed Dawn Stump and Dan M. Berkovitz to fill, respectively, the Republican and Democrat seats on Commodity Futures Trading Commission, bringing the agency to full strength for the first time in four years.

Wall Street Journal

Protecting children: A federal law that takes effect next month will make it easier for parents to look into their children’s credit files and freeze their accounts at no cost to combat the growing problem of identity fraud of minors. The measure is part of a broader banking law that allows unlimited, free credit freezes for adults.

Settled: Swiss bank Basler Kantonalbank agreed to pay $60.4 million in penalties to settle U.S. charges that it helped Americans avoid paying taxes. The bank admitted that, from 2002 to 2012, “it conspired with its employees, external asset managers and clients to defraud the U.S. on taxes, commit tax evasion and file false federal tax returns.” The penalties include $17.2 million in restitution to the Internal Revenue Service, $29.7 million in forfeiture and a $13.5 million criminal fine.

Financial Times

Debating capital requirements: The Federal Reserve is debating whether it should “fight the risk of financial instability by boosting big banks’ capital requirements — a move that would risk political blowback from Republicans eager to ease regulation.” At least three regional Fed bank presidents “have advocated lifting the so-called countercyclical capital buffer, a Fed measure aimed at bolstering global banks’ strength during periods when risks are rising in the financial system.”

Meanwhile, the Fed Tuesday "issued a rule that will allow more banks to benefit from certain capital and reporting exemptions available to smaller holding companies."

Buy back: Credit Suisse said it will buy back $6 billion of high-rate debt from the Qatar Investment Authority and a wealthy Saudi Arabian family in order to reduce its funding costs. The bank sold contingent convertible bonds six years ago to help it comply with Swiss rules to raise extra loss-absorbing capital. The so-called “coco” bonds are convertible to equity if a bank’s capital ratio falls below a certain level.

Quotable

“Bringing CRA into the 21st century will ensure community investment dollars are put to work where they are most needed.” — Richard Hunt, president and CEO of the Consumer Bankers Association.