Receiving Wide Coverage ...
JPM Déjà vu: JPMorgan Chase is having a hard time getting through the day without news of a probe surfacing. Following reports that the Securities and Exchange Commission was investigating whether the bank routinely hired the children of well-connected families in China, anony-mice told the Journal and, later, the FT that the Justice Department is now looking into whether JPM manipulated U.S. energy markets. Scan readers will recall that the bank agreed to pay $410 million to the Federal Energy Regulatory Commission as part of a civil settlement over energy market manipulations just last month. JPM "didn't admit to wrongdoing as part of the settlement," the Journal makes a point of noting. "It did name Blythe Masters, the bank's head of commodities, three times in the filing," the FT adds. JPM, Masters and the DOJ have yet to formally comment on the new probe. Several pundits, however, are weighing in on the recently unveiled China investigation. Both a Journal article and a Dealbook op-ed from Andrew Ross Sorkin suggest, to varying degrees, that nepotism isn't always a crime. "Given that many of the children of the elite have some of the best educations and thriving networks of contacts, it is hard to see how businesses are supposed to not seek them out, let alone turn them away," Sorkin argues. Meanwhile, the FT's Patrick Jenkins writes that while it remains unclear whether JPM committed any wrongdoing, cultural traditions cannot be used as an excuse for rule-breaking. "Regulators in China and Qatar should be rooting out wrongdoing as eagerly as western authorities in the interest of both the banks and the future appeal of the markets themselves," he writes.
Obama on Dodd-Frank: President Barack Obama urged top banking regulators to speed up the implementation of the Dodd-Frank Act in a private meeting yesterday. The meeting "comes just ahead of next month's five-year anniversary of the collapse of Lehman Brothers and AIG which triggered a financial crisis and a deep recession, as well as a huge bailout of financial institutions by the U.S. government," the FT notes. New York Times, Wall Street Journal
Fed Advisory: The Federal Reserve released a new report on Monday that cites significant shortcomings in big banks' capital planning as part of an effort to improve its stress tests. Per the Times, some banks failed to "take into account the possibility of falling house prices when valuing certain mortgage-related assets," while others "assumed they would be strong enough to take business away from competitors in times of stress." The report, which details other shortcomings, also suggests that banks "establish capital targets above their capital goals to ensure that capital levels will not fall below the goals during periods of stress." The FT says this suggestion is likely "to fuel speculation that the Fed has in effect created another minimum capital requirement for the industry." The Journal echoes this sentiment and adds that a push for higher capital is "likely to further inflame bank executives, who have complained the Fed's annual stress tests have become a de facto capital requirement."
RBS Branch Bidding War: U.K. firm W&G Investments has put in a $2.35 billion bid to buy 316 Royal Bank of Scotland branches that are on sale as a condition of the bank's 2008 government bailout. RBS has two other offers one from Corsair Capital and Centerbridge Partners and one from Anacap Financial Partners and Blackstone on the table. The FT says "a decision on a buyer likely to be made within two weeks."
An Admission of Wrongdoing: Harbinger Capital hedge fund manager Philip Falcone has agreed to admit wrongdoing and accept a five-year ban from the financial services industry as part of a civil settlement with the SEC over market manipulation allegations. The Journal calls the development "a landmark in the government's new drive to push defendants to acknowledge their bad behavior." New York Times, Washington Post
Wall Street Journal
Chinese banks are circumventing government lending limits by "making corporate loans appear on their balance sheets as less risky loans to banks."
An op-ed from Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig takes issue with big banks' major complaints against higher capital requirements. "The U.S. is a market economy, and we know that capital is a source of strength, not a burden," he concludes.
Part one of the paper's new series on digitization from McKinsey looks at how firms can find their digital sweet spot: "Organizations will need to assess the value at stake, invest proportionally to that value, and align their business and operating models accordingly.