Fed sets bank exposure caps; Equifax hires IBM AI expert

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Limited exposure: The Federal Reserve has completed a new rule that limits the exposure the largest banks operating in the U.S. can have with each other, reducing "the chance of snowballing credit risk in the financial system during times of crisis." The rule, which implements one of the last provisions of the Dodd-Frank law, limits the exposure that the eight "systemically important" U.S. banks have with each other to 15% of high-quality capital. The same limit would apply to large foreign banks operating in the U.S. In addition, all banks with $250 billion in total assets will have to limit their credit exposure to anther bank to 25% of capital. Wall Street Journal, Financial Times, American Banker

Ether exempted: A top Securities and Exchange Commission official said ether, the second-most valuable cryptocurrency, isn't a security and shouldn't be subject to the same regulations as stocks and bonds. Bitcoin, the most popular digital currency, also isn't subject to SEC regulations. "Based on my understanding of the present state of ether, the Ethereum network and its decentralized structure, current offers and sales of ether are not securities transactions," William Hinman, the agency's director of corporation finance, said in a speech in San Francisco conference. The price of ether jumped on the news. Wall Street Journal here and here, Financial Times

"Hinman's remarks suggest that, unlike companies, which are required to educate stock investors about the health of their businesses, the developers behind bitcoin and ether face no such obligations." (Washington Post)

Wall Street Journal

We're open: While the overall trend in bank branches is decidedly down, as large banks close offices, "many smaller banks are in building mode, a sign that broader economic growth is taking hold and community lenders are recovering after lean postcrisis years. Smaller banks have been adding branches both to drive growth and to accentuate their commitment to the local community."

Forgive us our debts: Despite laws that mostly prevent student loans from being extinguished in bankruptcy, "some judges are throwing lifelines to people struggling to repay their debt." Unlike most other types of debt, student loans generally can't be forgiven in bankruptcy. But many judges "are being more flexible," and "growing sympathy among judges is making lenders more willing to reach resolutions out of court."

"If the law's not going to be improved by Congress, we have to help these young people who are drowning in student loan debt," U.S. Bankruptcy Court Judge John Waites told the Journal.

Key tech hire: Equifax has hired the former head of IBM's Watson artificial intelligence division to run its global information technology strategy and development. Mark Begor, the credit bureau's CEO, said the hiring of Bryson Koehler "is paramount to our future success as we advance our technology capabilities, and enhance data security."

No snooping: Some big institutional investors are pushing back on some Wall Street banks' policies of tracking what their research customers are reading. "Banks are increasingly employing some of the same techniques adopted by advertising and media companies, such as tracking who has access to the notes to ensure everyone is paying. They also want to keep track of what clients are reading to help better price research products." But some investors aren't happy about that and want the banks to limit their inquisitiveness.

Guilty: A federal jury in Brooklyn found a former high-ranking executive of HSBC guilty of "frontrunning," or using information about a client's currency trade to make a profit for the bank. "Mark Johnson exploited confidential information provided by a client of the bank to execute trades that were intended to generate millions of dollars in profits for him and the bank at the expense of their client," said Bridget M. Rohde, the acting U.S. Attorney. Johnson, the bank's former head of global foreign-exchange cash trading, was convicted on eight counts of wire fraud and one count of conspiracy.


Repo man for the rich: Yahoo Finance interviews high-end repo man Ken Cage, president of International Recovery and Remarketing Group, who has repossessed "over 2,600 private jets, helicopters, and luxury yachts" over the past 13 years. "When the bank gets to the charge-off date, they tend to lose a lot of money, so they hire me halfway to that charge-off point," he says.


"This final rule, which limits the exposures that large firms can have to each other from a wide range of activity, is intended to reduce the threat of contagion to financial stability." — Randal Quarles, Fed vice chairman for supervision, on the Fed's new rule limiting big banks' exposure to each other.

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TBTF Cryptocurrencies Ether Branch banking Student loan debt Artificial intelligence SEC Federal Reserve Equifax