Equifax hit with consent order; Fed to release 2d round of stress tests

Receiving Wide Coverage ...

Beefing up security: Regulators in eight states, including Texas, California and New York, issued a consent order on Equifax demanding that the credit bureau improve how it protects data against cyberattacks. The order “is the first major regulatory punishment for Equifax” following last year’s hack, the Wall Street Journal says. Equifax, “which agreed to the order but neither admitted nor denied wrongdoing,” will have 90 days to “strengthen its information-security defenses … and disaster response,” and a month to create an annual internal audit program monitored by its board. Wall Street Journal, New York Times

On the bubble: The Federal Reserve Thursday releases the results of round two of its stress tests, when banks will learn whether they can raise dividends and buy back stock. The spotlight will be on three key banks. Goldman Sachs and Morgan Stanley “barely squeaked by on the first part of the stress tests last week, posting capital margins in a theoretical meltdown that narrowly exceeded the required minimum.” That could affect how much they will be allowed to pay out to shareholders. Some analysts are also watching whether the Fed will reject Wells Fargo’s plan on “qualitative” rather than quantitative grounds in order to “send a message” to the scandal-ridden bank.

Deutsche Bank, which has had its own problems, may also come up short.

Andrew Harrer/Bloomberg News

Wall Street Journal

Odd man out?: Randal Quarles, the Fed’s vice chairman for supervision, defended American participation in international committees that set minimum financial rules. That puts him as odds with some regulators and Republicans, “who worry that international regulatory discussions have unduly influenced U.S. rules.” For example, Federal Deposit Insurance Corp. Chairman Jelena McWilliams recently said she was “suspicious” of international regulatory bodies.

Financial Times

Dog days: U.S. bank stocks aren’t the only ones in a slump. European banks aren’t doing so hot, either. Shares in the continent’s largest banks have lost almost a fifth of their value in the past four months and “are the worst performing sector in the European Stoxx 600 index so far this year, a sharp reversal from being the index’s third biggest gainer last year as financial markets priced in a robust recovery in Europe.” Now, however, “hopes that economic growth will spur a recovery in financials [have] crumbled.”

Wedge issue: This week’s Supreme Court decision upholding American Express’ policy of preventing retailers from offering consumers incentives to pay with cheaper cards allows “giant middlemen” to drive a “wedge” between sellers and buyers. “Unless Congress acts to reverse it, the decision in Ohio v. American Express will make it harder to bring even the most rudimentary forms of antitrust complaints,” Barry Lynn, executive director of the Open Markets Institute, writes in an op-ed. “This is likely to translate into higher prices and less choice.”

New York Times

Blockchain everywhere: Blockchain technology isn’t just about digital currencies like bitcoin. “Corporations and governments around the world have also become interested in ways to use the technology to reliably store vast amounts of data.” The paper devotes much ink to the topic, including a look at “some of the most ambitious blockchain projects” and the key players behind the technology.

Investment (here and here) and regulatory issues (here and here) affecting blockchain and cryptocurrencies are covered as well.

Quotable

“The breach never should have happened. This order will help ensure it doesn’t happen again.” — Jan Owen, commissioner of the California Department of Business Oversight, on the Equifax consent order.