Wall Street Journal
The paper profiles Andrea Smith, a human resources executive at Bank of America, who was tapped to lead its stress test submission, which is due Tuesday. B of A has fallen short on the test three of the past five years, and the bank has opted this year to employ a manager, not a numbers cruncher, to lead the team working to satisfy the complicated and controversial post-crisis regulation. The Charlotte, N.C., firm was the only U.S. bank required to rework and resubmit the test last year, which cost B of A $100 million. On approving the re-submission, the Fed said the bank needs to show "steady, demonstrable progress." Regulators believe B of A has to approach the test as a routine part of capital management, instead of merely a yearly exercise. Smith, who has taken on full responsibility for the test, agrees a change in mindset is needed. "This is about how we do our job every day," she said.
Meanwhile, B of A is gearing up for a court fight with two hedge funds seeking a $500 million portion of the bank's pending $8.5 billion settlement over subprime mortgage bonds. The hedge funds, Tilden Park and Prosiris, which hold bonds issued by 14 of the 530 trusts covered under the settlement, contend they are entitled to be paid before the holders of more senior bonds. B of A agreed to the settlement in 2011, on the grounds that Countrywide Financial, the mortgage company it acquired during the credit crisis, misled investors about the quality of the loans underlying its mortgage-backed securities. Last week, a tentative agreement was made on payout of about $8 billion, but trustees and the court have not yet signed off, the paper said.
New York Times
In another legal case brought by hedge funds, Puerto Rico's Government Development Bank faces a lawsuit that seeks to freeze its assets. A group of hedge funds filed suit in U.S. District Court in San Juan on Monday, claiming the bank was insolvent and failed to provide financial information that creditors were entitled to under federal law. The hedge funds, which own Puerto Rico bonds, contend the GDB is spending its remaining funds to prop up the island's financially troubled government, and asked the court to bar further non-essential cash transfers by the bank. The bank's president, Melba Acosta, called the suit's accusations "erroneous" and said the bank was acting lawfully. "The central claim of G.D.B.'s creditors, that G.D.B. has knowingly withheld financial information in order to prefer certain depositors over its bondholders, is wholly false and without basis in fact," Acosta said. The paper says a $422 million debt payment is due on May 1, and analysts doubt the GDB will be able to make it. Meanwhile, Congress continues to work to allow Puerto to restructure its debt, since bankruptcy code bars Puerto Rico from Chapter 9.
Bloomberg: Banks are concerned that the leak of confidential documents about the use of offshore tax havens by everyone from political leaders to sports stars, the so-called Panama Papers, may result in yet more scrutiny, regulations, risk of fines and calls for further transparency. The documents, leaked by the International Consortium of Investigative Journalists, reveal that HSBC asked Mossack Fonseca, a Panama law firm, to set up offshore companies for clients, and the bank's annual report features more than a hundred entities operating in countries deemed offshore tax havens. Credit Suisse, UBS, Societe Generale and Royal Bank of Scotland are also mentioned in the leaked documents.
There is nothing illegal about operating in offshore jurisdictions, there are legitimate reasons to have subsidiaries in low-tax nations, and banks say their disclosure of such operations align with regulations, Bloomberg notes. "The banks can argue they didn't engage in setting up the shell companies — that was the role of the law firm," Bloomberg says. "But in a post-crisis world where governments are strapped for cash and keen to close as many tax loopholes as possible, scrutiny is unlikely to go away."