Libra may lose PayPal backing; CFTC levies rare swaps fine

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Mortgage mess

The European Court of Justice ruled that “Polish consumers with mortgages linked to the Swiss franc can ask national courts to annul them. More than half a million Poles took out loans linked to the franc in the years after Poland joined the EU, drawn by the prospect of lower interest rates. But when the franc surged in the financial crisis, and again in 2015, borrowers found themselves facing higher repayments. Thousands went to court to challenge their contracts, in particular clauses that set how banks calculated repayments,” the Financial Times reports.

“The Polish operations of Commerzbank, Santander and Portugal’s Banco Comercial Português sold these types of mortgages, as did some Polish banks,” according to the Wall Street Journal.

Wall Street Journal

No luck

“Investors shouldn’t bet on any big changes” to banks’ capital rules following the recent “clogs in the plumbing of the financial system” that forced the Federal Reserve to intervene in the money market. The turmoil “invigorated banks’ long-running campaign to revisit capital rules,” and “might lead bank-stock investors to hope that regulators will revisit some of those rules and potentially free up capital or liquidity to help banks be nimbler in the future. But this doesn’t seem very likely.”

Swaps rule violation

The Commodity Futures Trading Commission fined the American subsidiary of HSBC $650,000 for “violating rules that require financial institutions to establish a governing body and internal policies to oversee data reporting for swaps dealers.” The fine, which the bank agreed to pay to settle the case, is the first time the agency has “charged a bank with violating risk-management rules adopted after the financial crisis, a signal to the industry to bolster internal controls in their swaps businesses,” the paper says.

“The enforcement action shows the regulator underscoring the importance of post-crisis rules that otherwise haven’t received much attention among the wave of changes adopted under the 2010 Dodd-Frank financial-regulatory overhaul.”

Coming soon

The Federal Reserve said it would vote next Thursday “to complete some of the most significant changes to bank rules since President Trump took office, setting up a new way of deciding which large banks are hit with its toughest regulations.” One of the measures would “ease liquidity and capital rules for large U.S. banks, signing off on a plan that may lower regulatory costs for regional U.S. lenders under the $700 billion asset line. Foreign banks with operations in the U.S. are also expected to win relief.” The Fed also said it would ease requirements on living wills.

No collusion

The Financial Times said a two-month investigation by an outside law firm it hired “found no collusion” between the paper’s reporters and traders short-selling the stock of Wirecard, the German payments company," The Journal reports. Wirecard is suing the FT, “alleging it falsely represented confidential information” and of working with short sellers.

“The FT over the past few years published a series of articles raising questions about accounting practices and potential financial misconduct at Wirecard,” which “has consistently denied the FT’s reporting,” the paper says.

Financial Times

No show

PayPal is close to quitting Facebook’s Libra project, the paper says, “after having pulled out of a key meeting in Washington on Thursday. All 28 backers of Facebook’s plan for a new global digital currency were due to gather to discuss how Libra would tackle increasing opposition from regulators, but people familiar with the event said PayPal had not been present — the only one not to show.”

David Paul Morris/Bloomberg

“A decision by the payments [company] to quit Libra would be a big blow for the project, which is being steered by David Marcus, a Facebook executive who was previously PayPal’s president. One person close to PayPal said the company was concerned that Facebook has not done enough to address the backlash against the project, especially over money-laundering concerns.”

Quotable

“All but the very biggest banks doing business in the United States will receive significant regulatory relief.” — Karen Petrou, head of Federal Financial Analytics, on proposed measures the Federal Reserve is expected to approve next week