BankThink

Receiving Wide Coverage ...The Signs Are Bad …: The market volatility of the summer is beginning to take its toll on results at the large diversified banks (we have taken a vow to avoid as much as possible that apple-and-orange smoothie of a catchphrase, "Wall Street"). JPMorgan Chase executive Jes Staley warned investors at the Barclays conference in New York that trading revenue will probably slip 30% for the third quarter, the Financial Times reported. Banks that have investment-banking operations, including JPMorgan Chase, Bank of America and Citigroup, are expected to post poor results for the third quarter on lower trading volume and weaker income from providing advice for stock and debt offerings, according to the New York Times.

Here is a common scenario. A bank executive develops a new product, maybe a fee-generation concept. Properly following procedure, he consults the compliance officer, who performs a check-the-box review and signs off — but raises a "fairness" concern because the product is controversial with regulators and consumer groups.

Hackers are able to intercept the security text messages banks send to online banking customers' phones to validate them as they log in.

Receiving Wide Coverage ...The Vickers Report: We missed this yesterday, but it's still well worth bringing to your attention, if only to put the regulatory debate in this country into perspective: the U.K. Independent Commission on Banking, led by Sir John Vickers, issued a 358-page report recommending an overhaul of the country's banking system. Central to its blueprint is the "ring-fencing" of retail banking operations — isolating them from a corporate parent's wholesale and investment banking activities. The ring-fenced portion of a bank would have its own board separate from the rest of the institution, and a rather plush 20% capital cushion (including 10% equity, plus other loss-absorbing investments like unsecured "bail-in" bonds or contingent capital), among other protections. Capital could move from the ring-fenced bank to the investment bank — as long as the latter's capital ratio did not fall below the 10% minimum. This "structural separation should make it easier and less costly to resolve banks that get into trouble," the report says. Reuters' blogger Felix Salmon admiringly calls this plan "the Volcker rule on steroids … It's essentially a break-up, in all but name, of the big banks with both retail arms and investment-banking operations." (In light of this, Salmon finds JPMorgan Chase CEO Jamie Dimon's recent complaints about Basel III galling). Chris Skinner of the Financial Services Club blog is less impressed: "The proposal to leave banks as integrated universal operators — good for Barclays — by purely creating a delineation between their domestic commercial and retail banking operations versus their global links is a duck out. Why? Because it does not address the issue of why banks fail, but just what to do when they fail. … Sure, it's a good thing to know what to do when a bank fails ... but why not try to deal with the core of failure as, even if we know what to do, a bank failure in its investment arm will still destroy value in its overall operations?" The Journal's "Heard on the Street," while awed by the scope of the proposed reforms, calls the plan "a major gamble" on various unknowns, such as the market's willingness to float bail-in debt and shareholders' willingness to accept lower returns on equity from banks. Finally, the FT's editorial page declares the Vickers plan "a necessary reform of British banking" that would effectively tackle the problem of too-big-to-fail. The editorial writers do warn that regulatory arbitrage could, in the long run, undermine the reform: "the big European governments are … unlikely to abandon their universal banks. That means the Vickers plan does not have time on its side. For now, the single market in retail banking works better in theory than in practice but, sooner or later, European banks will try to poach UK retail business and weaken the effect of Vickers rules that apply only to UK banks." Still, "that is a case for implementing them while they do the most good" — i.e. tout suite. Wall Street Journal, New York Times, Financial Times, BBS News

In her final appearance before the Senate Banking Committee, former FDIC Chairman Sheila Bair confirmed that the Dodd-Frank Act would prevent bailouts along the lines we saw during the last financial crisis. This is the conventional view but, as the markets react to rumors of deteriorating economic conditions leading to the need for bailouts of Eurozone banks, and perhaps a contagion affecting U.S. banks, that confidence may be ill-placed.

Up to 40,000 credit and debit cards used with arcade machines supplied by Vacationland Vendors were affected in a breach of the company's card processing system.

Receiving Wide Coverage ...Remembering 9/11: Of special interest to this audience, the Times' "Dealbook" interviews several financial services executives who were working at the World Trade Center the day of the attacks: a security officer for the NYSE, a Merrill Lynch trader, a Cantor Fitzgerald tech officer and a CFTC lawyer.

Receiving Wide Coverage ...Obama's Speech: Among other things, the president called for a national infrastructure bank and said he'd take steps to spur mortgage refinancings during his address to a joint session of Congress. Wall Street Journal, New York Times, Washington Post

The oft-referred-to credit union "community" is really one of "communities." And sitting atop those communities and acting as a United Nations of Financial Co-ops is the World Council of Credit Unions, which has a new CEO at the helm.

The president and CEO of NASCUS says the credit union system, regulators and industry have a valuable opportunity to realign our regulatory framework in a way that supports and enhances the movement into the future.