Receiving Wide Coverage ...
Basel: Tacitly acknowledging that risk-based capital measures are susceptible to manipulation, the Basel Committee announced a supplementary, simple 3% equity-to-assets requirement that banks worldwide will have to achieve by 2018. Disclosures of leverage ratios under the new formula are to start in 2015. Investment banks will have to count derivatives on a gross basis, rather than netting out collateral or offsetting trades. This will make the U.S. firms look more leveraged than they currently appear and bring them in line with their European counterparts, according to Reuters Breakingviews. However, a Times story says "the new rules would probably fall hardest on large European institutions," which may have to raise billions in capital. Another effect, according to the FT, is that "rules that will limit banks' ability to net exposures to the same counterparty will constrain bank payment systems, which tend to maintain large credit and debit balances for customers."
The Rate Rebound: Long-term interest rates have risen sharply since Federal Reserve Board Chairman Ben Bernanke said last week that the Fed may "taper" asset purchases by the middle of next year if the economy improves sufficiently. A front-page story in the Journal says the rate jump may "threaten sales of homes, cars and other big-ticket items that have helped drive the U.S. economic recovery just as the economy's lagging growth had showed welcome signs of improvement, raising worries among consumers and company executives." A story in the Post says the Fed itself is worried about tapering's impact on the housing market recovery. In another Post story, IMF Director Christine Lagarde offers reassurances that the world economy can withstand such a withdrawal by the U.S. central bank "as long as it is 'gradual' and 'properly announced.'"
Wall Street Journal
Call it the Rakoff Rule. "Securities and Exchange Commission enforcement chiefs have drawn up a hit list of impending cases where officials intend to test their new policy of requiring admissions of wrongdoing when settling civil charges," rather than allowing the boilerplate "neither admit nor deny" language.
"Regulators Have Created a Mortgage Minefield" An op-ed by the ABA's Frank Keating on disparate impact and QM rules. "Bankers will be damned if they do and damned if they don't. If they follow the QM guidelines and thus tighten credit, they will run afoul of the novel disparate-impact interpretation of housing laws. If they loosen lending standards to ensure that lending outcomes are identical for every protected group, then they expose themselves to risk of litigation "
Also in the opinion section, the Journal's editorial board is delighted that the Supreme Court will hear a case challenging the constitutionality of Obama's "non-recess recess appointments." Although the case directly concerns the National Labor Relations Board, a defeat for the administration could undermine rules written by the CFPB under recess-appointed Director Richard Cordray, as American Banker has reported.
"More Small Businesses Embrace Bitcoin" One reason these small merchants accept the digital currency: "credit-card swipe fees can be as high as 3% of sales, while Bitcoin services typically charge less than 1%. And, [merchants] say, Bitcoin transactions are final, unlike credit-card charges, which can be disputed. A merchant using Bitcoin can decide whether to issue a refund, though this could be a turnoff for some customers." You know, just like with cash, except without the fussy, germy bills and coins. The volatile exchange rate is a problem for retailers that get paid in bitcoins, but they can lay off this risk by hiring services like BitPay to immediately convert the virtual money into dollars. (Of course, you could call the dollar a virtual currency, too, but that's a whole other conversation.)
New York Times
"The 'say on pay' experiment is a bust." Columnist Jesse Eisinger is disappointed to see shareholders "fall[ing] over themselves to approve" executive compensation packages. "More companies are achieving Fidel Castro-like election results this year than in the first two years since Dodd-Frank started requiring such votes. These results demonstrate that shareholders don't care about pay if their stocks are going up." Should they care if they're getting richer, too? Interesting comment thread on this question.
"Fugitive financier pardoned by Clinton" An obituary for Marc Rich, the onetime "King of Commodities" who died Wednesday.