BankThink

"Regulators from the U.S. and the United Kingdom took a major step Monday toward proving that they could dismantle a large globally active financial institution, outlining how the two sides would cooperate in the event of a cross-border resolution," writesAmerican Banker's Joe Adler.

Some readers quickly labeled all 19 megabanks' failure to pass the Office of the Comptroller of the Currency's new risk tests as evidence that "Too Big to Fail" remains very much alive. Others blamed the OCC's stricter standards.

Banks are assuming greater risk on the strategic side, by entering unfamiliar product territory, and on the cost side, by devoting fewer resources for risk management.

Receiving Wide Coverage ...Rates Tied to Unemployment: Holy mackerel. The Delphic confusion of Fedspeak past vanished from headlines on the central bank's policy statement Wednesday. Both the Journal and the Times went with "Fed Ties Rates to Joblessness," and FT wasn't far off (different font, different space to fill, presumably).

This platform will need to be enterprise-level to ensure consistency in the application of economic scenarios, model use and reporting.

If U.S. banks can decrease costs in routine transactions, they will be able to serve mass segments more profitably and invest disproportionately in high-margin services for the affluent.

Tax incentives and penalties drive behavior regardless of whether or not they represent sound economic reality. And banks will be asked to provide lending and investment support accordingly.

While some may suggest the practice is warranted so agency attorneys can address deficiencies hurting consumers, ultimately everyone loses when opportunities for frank discussion are lost.

Receiving Wide Coverage ...HSBC Settlement Redux: Wednesday was the tail end of the HSBC money laundering news cycle, with major papers scrutinizing the bank's $1.9 billion deferred prosecution agreement with the U.S. According to the 21 law enforcement officials, the bank's misconduct was egregious, sustained, and possibly willful. (Either that or nobody noticed when people started regularly showing up at Mexican HSBC branches with boxes of cash that fit precisely through the holes in the teller windows.) But HSBC's behavior wasn't termed criminal, because the government decided that there would be too much collateral damage and opted for a "deferred" prosecution. The FT delves into the terms of the deal more deeply than its U.S. counterparts, reporting that HSBC will spend "$700 million on a global "know your customer" program, one of 26 points of a compliance agreement. Click on any of the links in the paragraph above and you'll find HSBC chief Stuart Gulliver apologizing.

Regulators need to create an environment where firms are not afraid to speak out. Banks need to come up with clearer explanations of their business models to prevent the creation of unnecessary rules.