BankThink

Receiving Wide Coverage ...China's Banking Woes: Multiple stories this morning touch on concerns about China's banks, and not just about credit quality. Finishing up a two-part series about China's banking sector, the Journal reported the growing risk from banks selling bonds to raise cash. China had tried to limit its currency supply in June to constrain funding for "shadow banks", but that created the "unintended consequence" of banks "scrambling for cash. The bond market was drawn into the turmoil when some lenders rushed to sell bond holdings, especially short-term bonds, which tend to be more liquid." The Times explored the fears about China's shadow banking more broadly, as several cities face a "painful credit crisis" and an overall hit to their business sectors. The FT had two stories about the county's flood of non-performing loans. One looked at the more prominent role played by asset-management companies — funded by the state and established over a decade ago to assume the bad debts of the nation's largest banks. "This role in buying a broader set of non-performing loans and receivables from across the financial sector is what many bankers and analysts see as the market-based future of how China will deal with bad debts." The paper also reported talks that Goldman Sachs, Morgan Stanley and Deutsche Bank have held with Huarong, one of China's largest troubled banks, about making a big capital infusion in the institution. "The move is one sign that the Chinese government will not entirely bail out the next round of problem loans emerging from China's credit boom, but will instead rely more on market driven remedies."

In preparation of the mortgage rules due to take effect next year, the Consumer Financial Protection Bureau released updated exam procedures on Thursday.

NCUA's Larry Fazio discusses the Corporate Stabilization Fund, NCUA Guaranteed Notes and the future of corporate CU assessments.

Community banks need help. Bigger banks can provide them a lifeline. But it comes with a cost: the loss of bankers who understand the local community.

The latest municipal attempt to seize underwater mortgages by eminent domain is an abuse of this most awesome governmental power.

A response to Bill Isaac's Aug. 13 post, "Why Payday Loans are Good for Millions of People."

Receiving Wide Coverage ...It's Official: In a widely expected announcement, prosecutors formally charged Javier Martin-Artajo and Julien Grout for their actions to allegedly try to hide JPMorgan Chase losses stemming from the disastrous "London Whale" trades last year. But in addition to the straight news reporting by the Journal, Times, FT and Washington Post, three of the papers also dug into the details around how Bruno Iksil — the London Whale himself — avoided prosecution by cooperating with authorities building a case against his colleagues. The Journal pointed out that Iksil's name was left out of the criminal complaints, but he is identified under the handle "CW-1." "Prosecutors chose to give Mr. Iksil a relatively rare 'nonprosecution agreement,' partly because he pushed back against his colleagues' alleged efforts to conceal losses." The Times said the decision to make Iksil a potential "top witness" in any future trial "is a step the Justice Department rarely takes, more commonly having an individual plead guilty in exchange for an agreement to cooperate." The FT also observed how Iksil allegedly tried to convince his colleagues that the bank "should take a one-time hit to get the values in line with market prices but was rebuffed." The Times included analysis on how the case reflects the risks banks face trying to value derivatives. "On Wall Street, bets worth hundreds of billions of dollars are valued using a considerable amount of guesswork. The dangers of that approach were revealed on Wednesday in the government's criminal complaints against two former JPMorgan Chase traders."

The Summers vs. Yellen scrum is a fascinating nomination contest, and not just for the obvious reasons.

Simplification of the Basel capital rules — the topic of my first post — will get a full airing at the Salzburg Global Seminar's upcoming confab.

The Occupy Wall Street protests a few years ago set the stage for the coming return of fair-lending gadflies like the "mother of CRA," Gale Cincotta.