BankThink

The financial services industry has surpassed the healthcare industry as the top victim of data breaches, according to the Ponemon Institute's 2013 Live Threat Intelligence Impact Report.

Digital wallets are a hot topic in financial services-and with good reason. According to a "Global Study 2013" conducted by PayPal, a whopping 86% of us would rather leave our traditional wallets at home if we could in favor of a mobile alternative.

Receiving Wide Coverage ...JPM Settlement(s) Update: In case you missed it, late on Friday, JPMorgan Chase agreed to pay $5.1 billion in a deal with the Federal Housing Finance Agency to settle allegations it sold bad mortgages to Fannie and Freddie in the years leading up to the financial crisis. The deal is part of the broader, reported $13 billion mortgage-related settlement the bank has been trying to broker with federal regulators and the Justice Department over the last month or so. Negotiations, however, over that broader settlement have stalled after the DOJ asked the bank to agree not to pass liabilities from the failed Washington Mutual, which JPM bought back in 2008, to the Federal Deposit Insurance Corp. The stakes over the ultimate outcome here are high. "Wall Street executives and some lawyers warn that if [JPM] is found liable for the WaMu bonds, otherbanks will think twice before buying failed rivals," Francesco Guerrera of the Wall Street Journal explains. "But if [JPM] prevails and gets the FDIC to pay, it could wipe out most of the $2.7 billion reserved for bondholders and other WaMu investors." The FHFA deal, meanwhile, represents a kind of, sort of victory for JPM. A provision in the settlement essentially allows JPM to try to recoup about $1 billion from the FDIC. The bank was also not required to admit wrongdoing as part of the settlement. "The results show that, even as [JPM] is facing an onslaught from the government, the bank is seeking to contain the fallout — and is succeeding on some fronts," Dealbook notes. "The government may be split over how to punish the bank for misrepresenting the quality of mortgage securities it sold to investors before the 2008 financial crisis." A Journal review of the FHFA settlement, meanwhile, concludes thatJPM's subprime troubles ran deep: "The bank dealt with some of the biggest subprime lenders of the time, including Countrywide Financial Corp., Fremont Investment & Loan and WMC Mortgage Corp., a former unit of General Electric." And JPM's legal woes are far from over. The bank still faces, among other things, a criminal investigation of its role in Bernie Madoff's Ponzi scheme and a probe into its Chinese hiring practices. Financial Times, American Banker

A successful prosecution of JPMorgan would throw into disarray the bank’s substantial and highly lucrative asset management business, among other disincentives for the government to pursue a criminal case.

A recap of the informed opinions (and the discussions they generated) on BankThink this week.

Six financial regulators issue new racial and gender diversity policies. Directors of each regulator's diversity division helped form new policies that were required under the Dodd-Frank Act.

Five banking and credit union regulators issued a joint statement Tuesday stating that lenders who provide qualified mortgages should not be concerned about inadvertently violating the fair-lending law known as the Equal Credit Opportunity Act.

A dedicated federal insurance regulator would understand the risks of the insurance business – which are fundamentally different from those in banking – while monitoring systemic dangers posed by the largest insurers.

Receiving Wide Coverage ...Unveiled: The Federal Reserve proposed stricter liquidity rules for the biggest U.S. banks on Thursday. (American Banker's Donna Borak breaks down the proposal's specifics here.) The Journal notes the proposed rules, which will be open for public comment for 90 days and would go into full effect in 2017, are "unlikely to cause major changes at U.S. banks, which have largely improved their funding positions since the 2008 financial crisis." But the Times suggests the liquidity rule "could dent the profits of banks, particularly Wall Street firms that rely on huge amounts of short-term market borrowing" and also warns that additional measures to reduce risk at the big banks should be expected. The FT notes "at times, the U.S. has been tougher on standards than regulators in Europe."

The Federal Reserve Board, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency released a proposal on Thursday that would institute tougher liquidity requirements on U.S. financial institutions.