Banks lobby to change accounting rule; digital trade platform coming

Receiving Wide Coverage ...

Just the banks
As expected, the Financial Stability Oversight Council voted unanimously Wednesday to remove the “systemically important financial institution” label from Prudential Financial, “the strongest signal yet that the risk of heightened post-financial-crisis supervision is fading for firms outside the banking sector.” Prudential was the last nonbank to have the SIFI designation removed, meaning “only the biggest banks, because of their size and complexity, are considered systemically important in the U.S.”

“The decision in effect kills off a main plank of the Dodd-Frank reforms.” Wall Street Journal, Financial Times, New York Times, Washington Post, American Banker here and here

Busted
A senior employee at the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, was arrested Wednesday and charged with providing sensitive financial transaction information to a reporter. Natalie Mayflower Sours Edwards was charged with leaking materials related to the Russia investigation to a BuzzFeed News reporter over the past two years. The leaked documents allegedly included “suspicious activity reports,” which banks file to FinCEN. Wall Street Journal, New York Times

Wall Street Journal

Calling on Congress
A group of banks is lobbying Congress to help them fight off a new accounting rule that requires lenders to record all expected future losses on loans as soon as they are made. Banks argue the rules, formulated by the Financial Accounting Standards Board and set to take effect in 2020, “will have dire consequences when the next economic downturn comes, saying the rule could reduce their ability to lend during a future recession.” Rep. Blaine Luetkemeyer, R-Mo., who met with the bankers, said a “legislative fix” might be needed, although Congress doesn’t normally intervene in accounting rules.

Paul Brady/pabrady63 - stock.adobe.com

Lending boost
U.S. Bancorp reported a 16% increase in its third quarter net income, “thanks to higher lending in areas such as credit cards and residential mortgages.” The bank is working to boost lending.

Inside position?
Michael Grimes, Morgan Stanley’s top technology banker, may be in the driver’s seat to win Uber’s IPO underwriting assignment. The reason: He’s been moonlighting as a driver for the ride-hailing service for years.

Financial Times

Working together
Several of the world’s largest banks — including Citigroup, Deutsche Bank and HSBC — are working together to build a digital platform that would “give access to all banks and corporations to directly exchange and verify trade information in the hopes of lowering the risks — and the cost — of financing smaller companies currently ignored by large banks.” The Trade Information Network is expected to start by the end of the year.

Futures warning
Commodity Futures Trading Commission Chairman J. Christopher Giancarlo threatened to stop European banks from using the American futures markets if the European Union refuses to modify post-Brexit plans to supervise clearing houses. Giancarlo called the oversight plan “completely irresponsible.”

“Giancarlo’s fierce warning comes as U.K. authorities try to remove tensions with the EU around the issue of clearing as the U.K.’s departure from the bloc nears. If a resolution could not be found, he warned the CFTC could unilaterally take its own action — including barring EU banks from using critical U.S. infrastructure such as the Chicago Mercantile Exchange.”

Guilty
Two former Deutsche Bank traders were found guilty by a New York jury on Wednesday of rigging the Libor rate. Matthew Connolly, who supervised the bank’s New York pool trading desk, and Gavin Black, a London-based derivatives trader, were convicted of wire fraud and conspiracy. “The convictions are a victory for the U.S. Department of Justice, which has extracted billions of dollars in fines from banks for manipulating Libor but has successfully prosecuted relatively few individuals.”

Quotable

“The banks I talk to are still livid about this.” — Rep. Blaine Luetkemeyer, R-Mo., a member of the House Financial Services Committee, about an accounting rule that would require banks to estimate losses on loans as soon as they are made.