Receiving Wide Coverage ...
AML Déjà Vu: Standard Chartered has agreed to pay $300 million, accept temporary restrictions on its dollar-clearing activity and cut ties with some business clients in the United Arab Emirates in order to settle charges related to flaws in its system for identifying suspicious transactions. This is the second time the New York State Department of Financial Services has hit the British Bank with an anti-money laundering penalty in just two years. The bank forked over $340 million in 2012 over allegations it violated U.S. sanctions by doing business with clients in countries including Iran. The deal "represents a rare regulatory strike against corporate recidivism," according to the New York Times. Anonymice told the Grey Lady that DFS superintendent Benjamin Lawsky "is considering an effort to routinely double-check banks' transactions for signs of money-laundering, a step that could portend other actions against Wall Street banks." The Financial Times says while Standard Chartered "was quick to play down the impact" of the settlement, "shareholders are concerned that the emerging markets bank is looking increasingly accident prone." Investors' disillusionment may mean bank chief Peter Sands should start polishing up his resume, according to a separate article in the FT. An anonymous top 10 shareholder told the paper, "Peter is in the last chance saloon. If the second-half results are bad, he is gone." The Wall Street Journal has a fairly straightforward take.
Citi Weighs Japan Exit: Citigroup is thinking about shuttering its retail banking operations in Japan, according to the usual anonymice. The Wall Street Journal ties the possible exit to Citi's post-crisis efforts to become "simpler and easier to manage." The paper notes that since Michael Corbat took the reins of the bank in 2012, Citi has pulled out of retail banking in Honduras, Turkey, Romania, Uruguay, Paraguay, Greece and Spain. Citi has already been scaling back in Japan for years, which the Journal suggests is partly a result of regulatory run-ins with the country's authorities. The Financial Times places more emphasis on the difficulties faced by foreign banks in Japan, noting the country's "rock-bottom interest rates and fierce competition from domestic lenders." "Citi's basic problem is that they can't make any money" in Japan, Keefe, Bruyette & Woods researcher David Threadgold told the FT. That does sound like a bit of an issue.
'Co' No More: The role of chief operating officer at Bank of America is now a solo act. Former co-COO David Darnell has given up the title to become vice chairman at the bank, leaving Thomas Montag in charge of consumer banking as well as investment banking. The FT says the move "cements [Montag's] position as a possible successor to chief executive Brian Moynihan." Dealbook agrees and further opines that Montag's position of power "reflects the bank's growing prowess on Wall Street." His rise at the company has been driven by his role overseeing the integration of investment firm Merrill Lynch, which the bank acquired in 2009. The Journal also notes that "Montag gained notoriety when a Senate subcommittee in 2010 released an email from his Goldman days in which he described a collateralized debt obligation that Goldman sold as 'one sh- deal.'"
Come in from the Cold: The housing market appears to have recovered from the punishment of the polar vortex. "Home construction increased sharply in July, the Commerce Department reported on Tuesday, as Home Depot, whose fate is tied closely to the housing market, announced a strong quarter," the Times reports. Housing starts were up 16% from the previous month and 22% year-over-year, though analysts caution that growth of that size is unlikely to continue. The Wall Street Journal has a similar take on the housing recovery, noting the market's winter plunge "wasn't the end of the recovery cycle but the result of the harsh winter."
Wall Street Journal
"Wells Fargo aims to double the size of its asset-management unit to $1 trillion over the next decade through acquisitions and more aggressive sales to big investors," according to the paper. The plan is internally known as a "Big Hairy Audacious Goal," though the paper notes that Wells tends to have a more conservative definition of audacious than some of its competitors.
Derivatives are making a comeback as yield-hungry investors take on more risk. "Some market participants say the rise of these derivatives raises questions about the effectiveness of financial reform undertaken since 2008," the FT reports. Tavaokoli Structured Finance president Janet Tavakoli tells the paper, "We've reformed nothing."
The Federal Reserve should "hold off rate rises to tackle persistent unemployment that threatens permanent harm," writes Peterson Institute for International Economics president Adam Posen. He argues the risk of higher inflation in the current economic climate pales in comparison to the risk of further depression of the labor market.
New York Times
Ocwen Financial has received a subpoena from the Securities and Exchange Commission for an investigation into potential conflicts of interest in the mortgage servicer's ties to companies with which it does business. "Ocwen's executive chairman, William C. Erbey, is also chairman of some of the other companies, which do things like buy up delinquent loans and rent out foreclosed houses," the Times reports.
Attorney General Eric Holder settles with banks when he should be prosecuting them, according to former mergers and acquisitions banker William D. Cohan. "The American people are deprived of knowing precisely how bad things got inside these banks in the years leading up to the financial crisis, and the banks, knowing they will be saved the humiliation caused by the public airing of a trove of emails and documents, will no doubt soon be repeating their callous and indifferent behavior," he writes.