Receiving Wide Coverage ...
Break Up or Buckle Up: JPMorgan Chase will be the bank hardest hit by the Federal Reserve's proposed capital surcharges on the country's biggest banks. Fed vice chairman Stanley Fischer let slip that JPMorgan faces a $22 billion shortfall to meet the forthcoming capital rule during a question and answer session, as American Banker reported last night. Other banks are apparently at or near the minimum levels, and JPMorgan has until 2019 to catch up. But a Wall Street Journal article points out the new rules may inhibit banks' capital returns, prompting investors to push for too big to fail types to slim down or break up. A "Heard on the Street" column adds, if banks want relief from higher capital surcharges, they can also opt to scale back on short-term funding and minimize their ties with other megabanks. Some people in the industry are unimpressed with that solution, as the New York Times notes, quoting a Financial Services Roundtable representative who argues the rule will hamper the ability of U.S. banks to compete in a global market. Meanwhile, the Financial Times focuses mostly on the JPMorgan reveal, calling it "a blow to a bank which has long boasted of a 'fortress balance sheet.'"
Investors Say 'Aaagh': Citigroup's disclosure of an expected $2.7 billion legal charge in the fourth quarter has some investors feeling a kinship with Charlie Brown (never a good sign in the world of finance). "I kind of feel like Lucy and the football as it relates to these repositioning charges and legal costs, and it is not just you but it is a lot of banks," a disappointed shareholder said during the bank's investor conference Tuesday, according to the Journal. The consensus seems to be that Citi's turnaround year has turned out to be more of a slump. Not only will the litigation charge eat up most of its fourth-quarter profit, 2014 also brought Citi the Banamex scandal, a mortgage-securities settlement and the Fed's rejection of a proposed dividend increase. "Investors face calculational chaos when evaluating Citigroup's future profitability," according to a "Heard on the Street" column. Wall Street Journal, Financial Times, New York Times
Shown the Door: HSBC has fired its head of currencies trading, Stuart Scott, in the aftermath of the foreign-exchange trading scandal. There's little information about the particulars of Scott's actions, but the Journal and the FT offer quick rundowns of the allegations against HSBC.
Under the Microscope: Standard Chartered's 2012 settlement with U.S. authorities over alleged sanctions violations has been extended for another three years as prosecutors investigate whether the bank was truthful about the full extent of its dealings with Iran and other countries. The news doesn't look good for Standard chief executive Peter Sands, who's been trying to get the U.K. lender out of regulators' sightlines, according to multiple reports. Wall Street Journal, Financial Times, New York Times
A Blow to Dodd-Frank? Bank lobbyists were attempting to smuggle proposed changes to the Dodd-Frank Act into the spending bill as of Tuesday afternoon, according to the Times. Lawmakers unveiled the $11 trillion budget bill Tuesday night and its contents are still being reviewed, but it looks like at least some of the changes made it in. Bloomberg says the bill would repeal a swaps provision, and an Associated Press article refers to elements that "weaken the 2010 Dodd-Frank regulation of risky financial instruments." The House of Representatives is slated to vote on the bill Thursday.
Wall Street Journal
Bank of America and Citi expect lower trading revenues in the fourth quarter, suggesting the previous period's uptick may have been a blip on the radar.
New York's top financial watchdog Benjamin Lawsky is issuing new cybersecurity guidance to banks in his jurisdiction, according to the paper. "The stricter rules cover corporate governance, login security, management of third-party vendors and cyber security insurance, among other issues," the paper reports. "Those new topics will be added to the bank examinations conducted by [New York's Department of Financial Services]."
Is global domination still a goal for big banks? Large institutions like HSBC and Citigroup have been pulling out of foreign markets, suggesting that change is in the air, according to the paper's Martin Arnold and Camilla Hall. The party line is banks don't want to waste their time in less-profitable countries. But "some financiers argue the real cause of the retreat is the vast pile of regulation thrown at the industry since the crisis, accompanied by expensive fines for any breaches of increasingly strict compliance standards," the authors write.
Inc.: With Lending Club's much-anticipated initial public offering expected this week, Maria Aspan (formerly of American Banker) asks the question that's on many observers' minds: "Can entrepreneurs succeed in disrupting the highly-regulated, highly-consolidated, highly-technicaland, let's admit it, often highly-boringfinancial industry?"