BankThink

While face-to-face interactions may be nowhere near the most common banking transaction these days, they continue to have an inordinate influence on how customers think and feel about a bank. We cannot afford to waste them.

Receiving Wide Coverage ...HSBC Hit with Foreclosure Suit: Eric Schneiderman has struck again. This time it's at HSBC, which, on Tuesday, became the latest bank on the receiving end of a lawsuit from the New York Attorney General. This lawsuit accuses HSBC of ignoring a state law by failing to file forms that would have entitled homeowners facing foreclosure to loan modification negotiations. The Journal reports Schneiderman "may bring actions against other banks over the behavior he alleged against HSBC." He is also still "eyeing" lawsuits against Bank of America and Wells Fargo for violating terms of the national mortgage settlement. (American Banker readers will recall the NY AG's initial attempt to pursue the litigation against Wells and B of A was hampered by his own paperwork problems.) For HSBC, the suit is the "latest legal setback in the U.S.", the FT notes, following last year's settlement with regulators over money-laundering charges. Regarding Schneiderman's lawsuit, "the good news is that alleged offense is the kind that banks habitually get in trouble over," the FT's Lombard column argues. "And for HSBC that marks a kind of moral rehabilitation."

The Financial Stability Oversight Council voted to identify an initial group of nonbank firms as potential threats to financial stability. Under the Dodd-Frank reform law, the FSOC has the responsibility to name several nonbank financial companies as systemically risky.

Let’s be cautious about scrapping the Camels rating system without fully understanding why it supposedly failed. Any human endeavor is prone to failure, as any system is subject to improvement.

The trend is decidedly away from shared roles and to a separation of the board from management.

Brown-Vitter is a welcome display of bipartisanship. But its proposed solution to “too big to fail,” equity capital, is only marginally effective in imposing discipline on management.

The FDIC's decision to fund its emergency needs by calling upon banks to prepay future premiums back in 2009 suggests that the line to the Treasury may never be used.

Receiving Wide Coverage ...Systemically Important: The Financial Stability Oversight Council took an important step toward implementing a key provision of Dodd-Frank when it voted on a proposal to designate a group of nonbank financial firms as systemically important on Monday. FSOC isn't saying what companies made the list just yet, but AIG, Prudential and GE Capital have disclosed that they received the designations. These firms now have 30 days to fight the proposal. Per reports, GE is reviewing the details and Prudential is evaluating an appeal. AIG wasn't commenting, but Bloomberg points out the insurer "previously said it wouldn't oppose such a ruling." The Journal cites "concern about companies forcing hearings or bringing lawsuits" as "one of the reasons it has taken regulators so long to name the first round of nonbanks." Of course, resistance may ultimately prove futile. As American Banker reported earlier, "While it's likely any number of the companies named will protest the decision, their ability to successfully reverse it is slim." And there's some debate over whether these companies should want to. Similar to arguments surrounding systemically important banks, some analysts suggest the designation serves as an implicit guarantee that the government will bail out the firm should it get into trouble, which, in turn, could create a competitive advantage, the Washington Post notes. Others, however, believe the additional oversight from regulators could help reduce risk in the financial sector and stave off another crisis. In either case, yesterday's vote is only the beginning. Per an unnamed source cited in the Post article, "Monday's vote is the first of many to come as the council considers whether to include several other nonbank firms." Insurer MetLife is also expecting to receive the designation at some point.

Reforming the housing finance system cannot and should not be rushed, especially since we lack basic information on the likely impact of the various proposed alternatives.

American Banker Magazine's recent article on the Small Business Administration's Karen Mills was quite a love-fest. Here's the other side of the story that would be good for the public to hear.