ABA, banks sue CFPB to block rule; Equifax eyes clawbacks

Receiving Wide Coverage ...
CFPB sued: More than a dozen American banks, the American Bankers Association and several business groups sued the Consumer Financial Protection Bureau Friday in what the Washington Post called a “last-ditch effort” to block the rule that prohibits banks from requiring customers to use arbitration to settle disputes. The lawsuit charges that the structure of the CFPB is unconstitutional and the rule, which would allow customers to pursue class-action suits, will not help consumers. Washington Post, American Banker

SIFI no more: The Financial Stability Oversight Council voted 6-3 Friday to remove the “systemically important financial institution” label from American International Group. “The move is one of the most tangible steps yet in the Trump administration’s push to re-evaluate financial regulations,” the Wall Street Journal comments. The move “frees the insurance company of stricter oversight by the federal government, such as tighter capital rules, federal approval for large mergers and placement of government examiners at the firm.” The move will save AIG as much as $150 million in annual compliance costs, the Financial Times says. "The ruling for AIG was a win for activist investor Carl Icahn, who has pushed for ending the designation since taking a stake in the insurer two years ago, and for Brian Duperreault, who took over as chief executive officer in May," according to American Banker. Wall Street Journal, Financial Times here and here, New York Times, American Banker

Victor J. Blue/Bloomberg

Big FX fine: The Federal Reserve fined HSBC $175 million for “unsafe and unsound practices” in its foreign exchange trading business. “The firm failed to detect and address its traders misusing confidential customer information, as well as using electronic chat rooms to communicate with competitors about their trading positions,” the Fed said. Financial Times, American Banker

Bitcoin crazy: While China has clamped down on bitcoin trading activity, two other Asian countries are picking up the slack. “Hundreds of thousands of Japanese have thrown themselves into bitcoin trading,” the New York Times reports. At the same time, South Koreans “have also shown a sudden interest in virtual currencies, though they have generally opted for bitcoin competitors like Ethereum and Ripple.”

But the chief strengths of digital currencies could also prove to be their undoing, columnist Antony Currie warns. “Freedom from regulation was the big draw of Bitcoin, Ether and their counterparts,” he writes. “But the exchanges set up to trade them often lack basic controls over identity, fraud, technology and even trading volume. Without fixes, such weaknesses will consign those currencies to the financial fringe.”

The Journal offers a primer on initial coin offerings … while the Times provides one on bitcoin … and Ethereum.

Wall Street Journal
Bye bye bonus: Equifax may announce soon that it plans to claw back pay and bonuses from some top executives, including former CEO Richard Smith and Susan Mauldin, the company’s former chief security officer, as a result of the massive data breach the company suffered, the paper reports. Penalties may include the forfeiture of pay for this year as well as money that hasn’t yet vested.

The actions of John J. Kelley, Equifax’s chief legal officer, may be under close scrutiny from the company’s board as it investigates the hack. Specifically, the paper reports, Kelley “had the ultimate responsibility for approving share sales by top executives days after the company discovered in late July that it had been hacked. He also is central to broader questions facing the board because he is responsible for security at the company.” Mauldin reported to him before she retired shortly after the hack was revealed.

Financial Times
Who wants money?: Peer-to-peer online lenders are facing an unusual problem: Plenty of money to lend but not enough customers to borrow it. “The problem for the industry in the U.S. and U.K. is not really on the funding side; it’s attracting borrowers,” said Bryan Zhang, co-founder of the Cambridge Centre for Alternative Finance.

Quotable
“The banking sector depends on economic growth, and to the extent we get tax reform that flows through to better growth, that supports the stocks.” — Jason Benowitz, senior portfolio manager at Roosevelt Investment Group, who says the Trump proposal “is a tailwind for the sector.”