More Jitters in Europe After Elections in France and Greece

Receiving Wide Coverage ...

Europe: The euro fell to its lowest level against the dollar since January this morning, and the continent's equity and bond markets sold off, following elections in France and Greece in which voters repudiated incumbents' fiscal austerity policies. The Journal reports that European banks "are increasingly hoarding their cash at central banks, anxious the continent's crisis could intensify." According to the Times, two of Spain's healthiest banks, Santander and BBVA (both owners of significant retail banks here in the U.S.) are resisting a government plan to bail out their country's financial sector by creating a "bad bank" to acquire toxic assets. Wall Street Journal, Financial Times, New York Times, Washington Post

Wall Street Journal

We're reassured to know it's not just us who got a little confused by regulators' two-year grace period for Volcker rule compliance. Industry lawyers are telling their banking clients they can continue proprietary trading as long as they make a sincere effort to be compliant by July 21, 2014, the Journal reports. But prominent industry critics like Simon Johnson and Sen. Carl Levin doubt regulators would let banks do so, reasoning that a true "good faith" effort should mean gradually phasing out prop trading, rather than keeping it going until the last minute.

Growth in unused credit lines for businesses is an encouraging sign for bank earnings and the economy as a whole, according to "Heard on the Street." The column quotes U.S. Bancorp CEO Richard Davis as saying commercial clients are still "husbanding cash" but that the "remarkable" increase in unused loan commitments indicates "they're planning to use them."

Financial Times

Barclays is offering an online savings account in the U.S., the British bank's first retail banking foray in this country in decades. It has no plans to open branches on this side of the pond, though. The motivation here is stable and cheap funding for Barclays' U.S. credit card business.

New York Times

In her Sunday column, Gretchen Morgenson checks in on Ally Financial, formerly known as GMAC. The auto finance company has yet to pay back the bailout money it got from the government during the crisis, and while Ally is profitable and overall performance is improving, its mortgage subsidiary, Residential Capital, “is in deep trouble.” The unit missed a debt payment last month and “speculation is rife that ResCap will file for bankruptcy.” Morgenson gives a number of reasons why a ResCap bankruptcy might not be a favorable outcome for the parent company: for example, Ally would be out $1.4 billion in intercompany loans.