Receiving Wide Coverage ...
Banks' Stock Slump: Investors have turned on the world's biggest banks so far this year. The KBW Nasdaq Bank Index slipped more than 3% on Monday and has fallen roughly 20% since the start of the year. And many of the largest banks' stock dropped more than 4% Monday. The health of banking behemoths has become a trigger for worry – since a slump in bank stocks can signal turbulence in the economy or vulnerability to big losses. But what exactly is causing stocks to fall? Some believe investors are shedding their bank stocks precisely because the global economy has entered a long, drawn out slowdown. Another major issue is the threat to bank profitability, as exemplified by the difference in yields on 10-year and two-year U.S. Treasuries. On Monday, that 2-10 spread dropped to 1.09 basis points, which is the lowest it's been in five years. The spread is used by many as a proxy for bank profitably, specifically how much banks can earn from taking deposits and lending that money out. A lower spread means banks will struggle to make a profit, particularly as low interest rates make it basically impossible to reduce lending costs. Of course, these factors just begin to scratch the surface – the list of factors also includes lowered expectations of a U.S. rate hike, worsening credit quality, the troubles faced by European banks and the high price of bank stocks before the sell-off.
London's Banking Dilemma: London's financial industry, also known as the City, has become increasingly concerned as talk of a U.K. departure from the European Union has intensified. A referendum on the subject will take place before the end of next year, and while public sentiment seems to be drifting toward a Brexit, the term for Britain's exit from the EU, the City is clear it wants the U.K. to remain an EU member. Leaving the EU would diminish London's status as a financial gateway between the EU and the rest of the world. And were a Brexit to transpire, many banks may consider downsizing their presence in London or exit the city altogether. The trouble for banks is they fail to attract much sympathy since the financial crisis, so they have made few comments on the subject. Still, London need not go into full panic mode just yet, as some are doubling down on their commitment to the city. HSBC, which has had a protracted internal debate about where it should locate its headquarters, is expected to announceit has decided to stay in London after all.
Wall Street Journal
Technology firms are experimenting with turning phones into digital keys as part of an effort to eliminate passwords, and banks are getting in on the act. Smartphones are now seen as a secure but easy alternative to the traditional password. Both Google and Apple have begun experimenting with the device itself acting as a security threshold, in the place of a password or other identification. Apple has had its Touch ID fingerprint technology in place for a while, while Google is beta testing a "Sign in with your phone" program that lets Android users log into any Google service without a password. Meanwhile, banks have also come to embrace the smartphone's security functions. Citigroup and Wells Fargo have begun to test systems that display a code on a phone that customers can then use to withdraw cash. The shift from passwords is very much a result of their impracticality and how vulnerable they can be to hackers.
A report criticizes the Federal Reserve for its lack of diversity in leadership. The report, from the Center for Popular Democracy's Fed Up campaign, reiterated that all members of the central bank's Federal Open Market Committee are white. And only two of the 12 Fed presidents and two of the five governors are women. The report was also critical of the fact that much of the Fed's leadership has been drawn directly from the banking industry. The Fed responded to the report, noting that minority representation on its boards has risen to 24% from 16% in 2010. Female representation has also risen, and overall women or racial minorities make up 46% of regional directors. The Center for Popular Democracy chose to focus on this issue because, as it argues, the Fed was intended to draw its membership from different industries and interests.
Sen. Bernie Sanders may have a bone to pick with Wall Street, but as he criticizes the financial services industry he also denigrates those who work within it. That's the argument from the paper's columnist Bret Stephens, largely in response to comments Sanders made in his most recent debate with former Secretary of State Hillary Clinton. Sanders argued, "the business model of Wall Street is fraud," later adding "corruption is rampant." Such statements, Stephens argues, function as a criticism of all folks who work in this massive industry. And because of the general climate surrounding the industry post-financial crisis, Stephens says hardly anyone bats an eyelash. Ultimately, Stephens feels such rhetoric approaches the level of prejudice that has been seen over on the Republican side of the aisle with Donald Trump's comments about immigrants.
Pressure is mounting across the pond for banks to share customer data to aid consumers in comparing bank products and to boost competition. The calls have come from the Open Banking Working Group, which was convened by the U.K. government last year to review the industry. In a report, the group has recommended that banks share information on their products and customers more readily via digital services such as comparison sites. Opening up this data would help to stoke competition among U.K. retail banks. In Britain, the retail banking industry is heavily dominated by the "big four": Barclays, Lloyds Banking Group, Royal Bank of Scotland and HSBC.
New York Times
There may be a few more traffic cones blocking the road from Wall Street board rooms to Washington. With the presidential campaign season in full swing, a bevy of financial bigwigs has begun to separate itself from the pack for the envied position of Treasury secretary. These individuals include Hamilton James of Blackstone Group, Laurence Fink of BlackRock and Roger Altman of Evercore. But according to Andrew Ross Sorkin, there's a good chance none of them will get the job. Democrats and Republicans alike have practically scoffed at the idea of nominating a Wall Street executive to the position, given the industry's poor reputation among voters. Of course, Wall Street officials have also shied away from approaching the spotlight of such a high-profile gig, in part because of the scrutiny they would face to be confirmed.
A case involving HSBC is will serve as a judicial test of whether reports from bank monitors must be disclosed to the public. In 2012, HSBC agreed to pay $1.92 billion and bring in an outside monitor for five years as part of a deferred prosecution agreement over money laundering allegations. The bank's monitor, Michael Cherkasky, filed a report to prosecutors last year that details HSBC's efforts to improve compliance. Since then, an individual suing HSBC over a loan modification has requested that the judge who oversaw the deferred prosecution agreement unseal the monitor's report, which was only required to be submitted to the Justice Department. The judge agreed, but now Justice is looking for a stay of the decision ahead of an appeal. The case points to the lack of clarity over the role the judicial system should have in resolving corporate wrongdoing. But if the judge's decision remains in place, it could cause a wave of similar requests regarding other closed monitor reports.