Receiving Wide Coverage ...
Preparing for an Energy Bust?: The list of banks coming to terms with the downturn in the energy industry has grown rapidly in the past week. Wednesday, Wells Fargo reported in a regulatory filing that it set aside $1.2 billion in reserves for potential oil- and gas-related loan losses. It's far from alone: JP Morgan disclosed Tuesday a $44 billion total exposure to the energy industry, nearly three-quarters of which is unfunded. And Bank of America reported Wednesday it holds $22.6 billion in unfunded energy loans. Regional banks are also implicated in the downturn: Regions Financial Corp. said it has $2.9 billion in unfunded energy loans, while SunTrust Banks has $6.2 billion in unfunded loans. And the Royal Bank of Canada jacked up its provisions for credit losses during the company's first quarter to roughly $298 million thanks to the energy woes. Altogether, one analyst called these banks' recent disclosures "a grudging admission of the truth," a sign most likely of the frustration banks must be feeling with their choices to lend to the once-booming oil and gas industry.
Wall Street Journal
A Russian bond deal has drawn the attention of U.S. authorities, with officials warning banks to steer clear. Russia plans to issue roughly $3 billion in foreign bonds – its first issuance since 2013 and since the U.S. imposed sanctions on the country for its involvement in the Ukrainian civil war. Officials from the State and Treasury Departments argue that Wall Street banks would violate the sanctions by participating in the deal, since the bond issuance's goal is to support the struggling Russian economy. Moscow invited numerous banks worldwide to participate, including JPMorgan Chase, Goldman Sachs, Morgan Stanley, Citigroup and Bank of America. As of now, the banks in question have yet to reach a consensus as to whether the risk of the deal is worth the reward, as many have profited off of Russian business in the past.
Speaking of sanctions, those have done nothing to dissuade many financiers across the Middle East from helping funnel money throughout the region for the Islamic State. The terrorist group has essentially set up a de facto banking network, made up of small-time money transfer and trade finance shops. And the businesses don't seem to mind who their customers are – one owner of Iraqi money-exchange offices told the paper he can charge twice the normal rate to ISIS. Others have noted the group is particularly pragmatic when it comes to finances, unlike in other realms. Of course, some of these businesses are also supporting militia groups working against the Islamic State. And the governments in the region may find it hard to stifle the system: Iraq alone has more than 1,600 money-transfer businesses.
International banks based in the United Kingdom are now facing a higher-than-expected taxes thanks to new government levy plans. The government had previously signaled that it would cut the bank levy, but the cuts appear to be smaller than once thought. Now, the likes of HSBC, Standard Chartered and Barclays will have to cough up millions more than they had expected. The levy was put in place in 2011 and involves the banks' funding and debt. The tax is an especially hard pill to swallow for HSBC, since it just decided to keep its headquarters in the UK despite regulatory and tax burdens.
New York Times
European banks won't have to worry about passing or failing their latest stress tests, but that doesn't mean they can rest easy. The European Banking Authority revealed preliminary details regarding the latest round of stress testing. These new tests, unlike those of the past, will not include a minimum capital threshold that banks must meet to pass, meaning, technically speaking, there's no way to pass or fail the exam. Nonetheless, banks will need to stay on their toes. The European Union's banking authority instead will ask local regulators, such as the Bank of England and the European Central Bank, to use their findings to determine the need for additional action. Altogether, 51 European Banks will participate in the stress tests, but the mix of banks is not quite proportional: Just one Greek bank will take the tests, and none from Portugal have been included.
A small overseas bank has scored a rare win against U.S. regulators. Last week, the Financial Crimes Enforcement Network reversed a previous decision regarding a small Andorran bank, Banca Privada d'Andorra. FinCEN held the bank was helping organized crime, garnering it a money-laundering designation. But the bank fought back, suing the Treasury Department. The Andorran company argues the label was issued without warning and FinCEN gave it no opportunity to plead its case. The lawsuit follows a temporary injunction granted to FBME Bank of Tanzania, which had similarly faced a money-laundering designation. Of course, the watchdog's reversal of its designation for Banca Privada d'Andorra may also be a reflection of improved business practices – after all, the country's government fired the bank's board, and the bank's Spanish unit filed for bankruptcy.