Breaking News This Morning ...
JPMorgan Settles Lehman Claims: JPMorgan Chase & Co. will pay $1.42 billion in cash to the Lehman Brothers Holdings creditors, settling most of the remaining claims from the failed investment bank. In particular, the settlement relates to $6.3 billion of clearing-related claims and $2.3 billion of derivatives-related claims, two of the three major pieces of litigation pending between the two entities, the Financial Times noted. Lawyers for the estate of Lehman Brothers claimed that JPMorgan called in billions of dollars worth of collateral before the bank failed to create a "slush fund," according to the Wall Street Journal. But JPMorgan had its own bone to pick – as one of Lehman's largest creditors and its chief clearing bank, it funneled nearly $100 billion per day in cash advances to facilitate repurchase agreements. This past fall, a federal judge threw out most of Lehman's claims to $8.6 billion taken as collateral by JPMorgan. Wall Street Journal, Financial Times
A Big Merger in Ohio: Huntington Bancshares plans to buy FirstMerit Corp. in a deal that was unveiled late Monday night. FirstMerit shareholders would receive 1.72 shares of Huntington stock and $5 in cash for each share owned, according to the New York Times. Four FirstMerit board members will also join Huntington's board. The deal comes at a time when many regional banks are exploring mergers to ease the burden of regulatory costs and low interest rates. The combined bank would have roughly $96 billion in assets and would see the two Midwestern banks join overlapping footprints, which would lead to branch closures but also a more concentrated presence in the region, the Wall Street Journal wrote. In particular, Huntington has committed to maintaining FirstMerit's major employee base and charitable giving efforts in Akron, Ohio. For more on the deal, check out American Banker's take on this latest merger.
AIG to Stick Together, Mostly: American Insurance Group has revealed plans to streamline its operations, spurning investor calls for a break-up. The company will sell its broker-dealer network and perform an initial public offering for its mortgage insurance unit, AIG CEO Peter Hancock said in an investor update. AIG also plans to reorganize the company into nine units, each of which it could divest if they don't meet financial targets. The insurer also promised other cost-cutting measures as well as roughly $25 billion worth of share buybacks and dividends aimed at pleasing investors. The plan serves to quell calls from investors including Carl Icahn for the insurer to break up after it was designated a systemically important financial institution by regulators. Companies like MetLife and General Electric have broken up or shed core units to evade that designation, leading many to speculate that AIG would follow suit.
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FCA Taps Bailey: The U.K.'s got a brand new regulatory chief. The Financial Conduct Authority has named Andrew Bailey as its new head. Bailey is deputy governor for prudential regulation at the Bank of England and the chief executive of the Prudential Regulation Authority. He will remain on the PRA's board after taking up the new position. Bailey seems like a natural choice for the role – he's been a career central banker, having even served as chief cashier – a role that required his signature on the country's banknotes. His hiring points to the FCA's interest in bringing onboard someone with experience and stability – in fact, Bailey had not even applied for the position, but was scouted for his storied background. Bailey will step into the new role once his successor at the PRA is named. Wall Street Journal, New York Times
Wall Street Journal
Italy's banking industry is suffocating under a mountain of bad loans, and solutions have been slow to materialize. Italian banks hold roughly $299 billion in bad loans, the most of any country according to the European Banking Authority. And with banks lacking the funds to write off the loans, they're just sitting there, making it very difficult for the banks to issue new debt. The problems are made all the worse by Italy's fragmented banking system. Many of the country's banks are customer-owned mutuals, which makes mergers that could help breathe life into institutions fairly difficult. Italy is pushing for banks to convert to private companies to facilitate mergers and is attempting to broker a deal with European authorities to move the bad loans off banks' books. In the meantime, Italian banks are shuttering branches and laying off scores of workers, garnering the ire of many people throughout the country.
A new regulator has cropped up in the Eurozone, aiming to provide some consistency within the disjointed banking community across the continent. The Single Resolution Board will attempt to clarify the rules for failed banks, with its first objective requiring banks to catalog liabilities that can be written down in case of a failure. The board will set minimum requirements for these liabilities later in the year. In its short existence, the Single Resolution Board has already faced troubles. Namely, some countries' central banks have their own rigorous reorganization schemes for small- to mid-size banks, aimed at solving issues before they appear on the Board's doorstep. To function at its fullest, the Board will need to fill in the gaps among countries' different regulation schemes quickly, while still carrying out its other goals.
One of the world's most prominent markets regulators is urging the financial services industry to shore up the safety of blockchain technology. Greg Medcraft, chair of the International Organization of Securities Commissions, which sets standards for securities regulators, did not deny the importance the technology held for investors and issuers. But he said blockchain backers need to take a closer look at tamping down fraud if the technology wants to gain the support of consumers. "One way to get consumer confidence is that someone has to look after the issue of fraud. At least at the start, exchanges will have to guarantee the customer behind [the trade]," he told the paper.