Cypriot Bailout Almost as Good as Greece's

Receiving Wide Coverage ...

Cyprus Bailout: Remember that time back in college when your professor told you your score on the final exam would be the entirety of your grade, so you sort of blew off those little quizzes he gave throughout the semester? And how you ended up panicking a few days before the test, staying up all night on coffee or something stronger, and miraculously pulled off a B-minus?

Well Europe just did that with its third smallest economy. According to the terms of the new bailout, Cyprus Popular Bank will be getting wound down, with large depositors and bondholders alike taking a hit — a first for the Eurozone, the Financial Times notes. Its larger rival, the Bank of Cyprus, will also get downsized and spread pain among large depositors with a haircut that "could be significantly" higher than 20%. The plan doesn't require the approval of the country's parliament because it's a restructuring, not a tax.

That gets the country a $10 billion bailout, though the Wall Street Journal notes that the whole deal is based on the premise that Cypress's economy will now stabilize. Given that the country's now-wrecked off-shore banking center status accounted for half of its economic activity, that's a terrible bet: One analyst says that the country would be lucky to come out in the same shape as Greece.

Look, the country might have gotten booted out of the Eurozone, but, even if it had, it's a really small one. That calm reaction from markets has caught the eyes of a number of different outlets, from the Journal to the FT. Unfortunately, we reporters are still having a hard time understanding how to measure low volatility, much less explain it. It seems like everyone else is struggling, too.

Wall Street Journal

Count the Federal Reserve's Sarah Bloom Raskin among those who are deeply disappointed with the performance of banking regulators. In a speech last week, she faulted the Office of the Comptroller of the Currency and the Fed for a "not swift" and "not decisive" response to foreclousre processing failures. She also argued for more community involvement in assessing how banks serve their communities, and praised consumer groups for giving regulators hell.

Bank of America is stocking its board of directors with executives from "heavily regulated, highly competitive industries often plagued by thin profit margins." Drawing from industries like healthcare and defense, the crew will replace financial-sector directors who were drafted to help the bank right itself post-crisis. An anonymous person "familiar with the board" says that those departing folks were among the subset of directors who asked "tough questions."

We've read plenty about bankers who cynically designed mortgage-backed securities deals that failed. On a macro-level, however, some compelling research suggests that most mortgage-backed securities professionals didn't see the bust coming. Researchers from the University of Michigan's Ross School of Business unearthed the real estate transaction records for 400 attendees at the 2006 American Securitization Forum conference and compared them to those of bankers outside of the securitization industry. Not only did securitization professionals fail to predict the crisis, "they were far more apt to swap into more expensive homes and buy second homes than the control groups were. And workers at firms like Bear Stearns and Lehman Brothers were among the most aggressive with their own home purchases."

High frequency traders are finding themselves having to sell out for lobbyists more than in the past.

JPMorgan beat out a manufacturer of troubled medical devices and a gasoline refiner that suffered crippling fires to win "best crisis management" at an investment relations awards dinner held by IR Magazine. Yes, of course it won for the Whale. Can they do as well this year? (Will they need to?)

Financial Times

A "highly technical" bit of guidance from the Basel Committee on Banking Supervision will prevent banks from arbitraging their regulatory capital standards by buying credit protection on high-risk loans. The U.S. Federal Reserve has already raised qualms about the practice, but the message didn't sink in: Citigroup has recently been buying credit protection from Blackstone.

According to PwC research for the Financial Times, "Investment bankers still get paid much more than other professionals, including doctors and engineers, but for the first time in a generation, the gap is narrowing."

In an article that seems perhaps a bit speculative, the FT reports that "US lawmakers are considering limiting the tax deductibility of interest payments for businesses." That would be ambitious — arguably more so than, say, passing a budget.

For many years, asset managers paid client money to "fixers" for meetings with high-level executives of companies they might want to invest in. This, it turns out, is not legal. So now the "fixers" are rebranding the meetings as "specialist research" and inviting analysts to tag along.

New York Times

Nonbinding budgetary amendments in legislation that is unlikely to be passed still poses a significant threat to Dodd-Frank rulemaking, Dealbook says. Republicans are pushing additional economic impact reviews of new regulation, something that would likely gum up the process.

Elsewhere ...

The Senate will likely hold April hearings on how regulators botched the independent foreclosure reviews, according to a Bloomberg story.

At JPMorgan, it pays slightly less to be the king. Three of Jamie Dimon's deputies outearned him this year. Also, the bank clawed back $100 million from those involved in the Whale debacle.

Correction: The email version of Friday's Scan inaccurately referred to Bitcoin as a company. It is a dispersed network with no central authority. The new Fincen guidelines apply to firms that exchange dollars for the Bitcoin currency or other digital money.