Receiving Wide Coverage ...
The Results Are In: Most of the eurozone's big banks have enough capital to survive an economic upset, according to the results of regulators' long-awaited stress tests. Of the 130 banks under review, 13 were identified as needing to shore up $12 billion in additional capital. Italy had the largest share of financial flunkies, with Greece and Cyprus next in line. The Wall Street Journal applauds the European Central Bank for including a "thorough" evaluation of banks' bad loans as part of the review, making data about individual bank performance public and thereby potentially helping the region to move toward "a true eurozone banking union in which lenders are judged by their own creditworthiness rather than that of their governments." The Financial Times and the New York Times zoom in on the question of the test's credibility. The consensus seems to be that the exercise is more credible than its predecessors, though both papers leave plenty of wiggle room should that early take be disproven. A separate Lex team column suggests the stress tests may prompt more bank consolidation, since the results on asset valuations and loan-loss provisions suggest that "banks keep bad loans going simply because they are too small to take the hit to capital from resolving them."
Defensive Maneuvers: Banks aren't messing around on cybersecurity, if two recent reports are any indication. Big financial institutions are stepping up their security demands on outside law firms in an effort to better guard sensitive data, according to the Journal. "Law firms now are being asked to have their own vendor-security programs, to prevent data from leaking out through third-party contractors the lawyers hire, such as word-processing firms or print shops," the paper reports. Meanwhile, the FT reports that more banks are investing in cybersecurity start-ups, a noteworthy development since they usually concentrate on start-ups that offer a competitive advantage. The venture capital arms of Citigroup and Wells Fargo have each taken stakes in up-and-coming cybersecurity firms in an effort to bolster their defenses against hackers and other threats.
Wall Street Journal
Citigroup's troubled Mexican division Banamex has lost seven of 22 high-ranking executives in the last year, according to the paper. The article suggests the management shakeup is largely the result of Citigroup's efforts to bring the unit in line, although it takes a long time to mention two recently uncovered incidents of alleged fraud at Banamex that seem likely to have influenced all of this turnover.
The expected announcement this week that the Federal Reserve's will end its asset-purchasing program will require the Federal Open Market Committee to update the language on its promise to keep interest rates low "for a considerable time after the asset purchase program ends." The FT weighs a few possible options, including getting rid of the asset purchase reference and substituting "some time" for considerable time."
New York Times
The government's civil asset forfeiture practices come out looking pretty dodgy in the paper's in-depth report on Americans who have had their property seized despite the fact that no criminal charges were ever filed against them. The paper suggests the fact that "law enforcement agencies get to keep a share of whatever is forfeited" has led the Internal Revenue Service to scour bank reports, "looking for accounts to seize." Banks are required by the Bank Secrecy Act to flag people who regularly make cash deposits in amounts slightly under $10,000, a practice that is not illegal but is sometimes used by criminals to avoid the reporting requirement for deposits above that sum. The IRS can then seize the accounts of people they suspect are trying to duck the requirement, even if the agency never files criminal charges. In response to the Times investigation, the IRS has said it will "curtail the practice, focusing instead on cases where the money is believed to have been acquired illegally or seizure is deemed justified by 'exceptional circumstances.'"
Banks and credit unions in the D.C. area "are reinventing themselves as quasi-technology companies, coming up with new branch prototypes, payment systems and security protocols," the paper reports. PNC's universal branches get a shout-out, as does Capital One's tech incubator.
Businessweek: Apple Pay hit a stumbling block last week when drugstore chains CVS and Rite-Aid stopped accepting it. "This act by CVS and Rite Aid heralds the advent of the imminent battle in the mobile pay system," an information-technology professor tells Businessweek, referring to the drugstores' involvement with competing mobile payment system CurrentC. CurrentC, created by the retailer-backed group Merchant Customer Exchange, is set to roll out next year.