Brokers Acquitted in Libor Case; BofA Big on Blockchain
Receiving Wide Coverage ...
Fed Holds Steady: In its first meeting of 2016, the Federal Open Market Committee chose to keep interest rates the same, as expected, but the central bank did not rule out future increases. The FOMC post-meeting statement conveyed concerns about global growth and the state of financial markets. To some observers, that indicates the Fed's view of the economy has worsened since it hiked rates in December, according to the New York Times. With no one expecting a rate hike at this meeting, the question was would the Fed signal when its next move will be. The central bank reiterated its plan to gradually increase interest rates, the Wall Street Journal notes, much to the dismay of those hoping the Fed would offer a more dovish outlook, given the economy's apparent sluggishness since its last meeting. Indeed, some analysts still think the Fed will raise rates in March, despite the current economic and market turmoil. Of particular concern is whether a rate increase would coincide with reports of shrinking corporate profits, which could cause major issues for many companies' stock valuations.
Brokers Acquitted in Libor Case: A U.K. jury acquitted six brokers accused of conspiring with a former trader to rig the benchmark interest rate. Earlier, after the jury found the men not guilty except for one charge against one broker, the court instructed the jury to continue deliberating on the count against Darrell Read, a former broker with ICAP, and ultimately found him not guilty on that count as well. The acquittal represents a major blow to the seven-year, international investigation into the manipulation of the Libor. Authorities alleged the six men had coordinated with former UBS and Citigroup trader Tom Hayes to manipulate Libor. Hayes was found guilty of eight charges in August, and was sentenced 11 years in prison. In an editorial, the Wall Street Journal hailed the latest verdict, arguing authorities in the U.S. and the U.K. need to reevaluate how they target bankers. The editorial contends that by issuing elaborate press releases, the governments essentially scared banks into billion-dollar settlements to make the problem go away. As the Journal put it, the verdict was "a salutary reminder that not every banker engaged in Libor-related trades is a criminal." A third trial related to the Libor case is set to begin soon.
Deutsche Bank Lands in the Red: For the first time since the financial crisis, Deutsche Bank reported a full-year loss. The downturn reflects the troubles the bank has had in attempting a corporate restructuring and settling litigation. Revenues for the bank were also down – in particular, Deutsche's investment banking unit reported a 30% decrease in revenue on poor returns from its equities and origination and advisory units. Despite the unfortunate results, Deutsche chief John Cryan remained optimistic about the bank's restructuring plans. During the bank's earnings call Cryan accepted responsibility for the loss. The call was not without its lighter moments though – Cryan at one point cracked a joke that he'd prefer to run Wells Fargo these days because he "would love to make 400 basis points in retail banking and have a relatively easy life."
Wall Street Journal
The Justice Department anticipates collecting at least $1.36 billion from 80 Swiss banks and financial firms in a deal that would allow the companies to avoid prosecution. The companies admitted to encouraging U.S. taxpayers to use their services to hide money abroad, with most of the firms identified being small or midsize. The campaign against secret offshore account ramped up beginning in 2009 after UBS admitted to serving as a tax haven for Americans. UBS and Credit Suisse have already settled charges. The Justice Department indicated it is investigating similar activities by financial entities in Israel and the Caribbean.
It seems that MetLife's plan to split up was on folks' minds much earlier than originally thought. New court documents filed Wednesday show that MetLife chief Steven Kandarian had warned regulators of a break-up in 2014 just weeks before the insurer received the "systemically important" designation. The remarks were made during a closed-door meeting with the Financial Stability Oversight Council. During that meeting, Kandarian was quoted as saying he was warning the regulators of the possibility so they were not caught off-guard. MetLife is challenging the SIFI designation in court, arguing it doesn't pose a risk to the financial system.
Attempts by the U.K.'s Financial Conduct Authority to woo Australia's top financial regulator have produced some very awkward results. In its hunt for a new chief, the Financial Conduct Authority had approached the heads of other countries' regulatory bodies. These included Greg Medcraft, the head of the Australian Securities and Investment Commission, and Mark Branson, the head of the Swiss Financial Market Supervisory Authority. As it turns out, Medcraft apparently believed he had nabbed the job. Headhunters had approached him months ago, and he had even reportedly traveled to London to search for a home and has chatted with Mark Carney, Bank of England governor. The paper notes that Medcraft's first hint he didn't get the job likely came at Davos this weekend, when FCA chancellor George Osborne didn't meet with him despite it being the first time they were in the same location. The British regulator ended up naming Andrew Bailey to the job.
Banco Santander executive chairman Ana Botin has given the bank's U.S. division an ultimatum: fix yourself in two years, or else. Botin has had to stave off investor calls for a sale of the division, particularly after it reported a 90% drop in fourth-quarter earnings. The decline in profits came as regulatory costs outweighed revenue growth. The bank was also hurt by auto lender Santander Consumer USA's drop in earnings – the Spanish bank has a controlling stake in the company. Adding to the pressure the U.S. division faces is the fact that it has failed Federal Reserve stress tests two years in a row, and it is expected to perform similarly this year.
CNBC: Bank of America has doubled down on blockchain technology. The bank is attempting to patent certain uses of blockchain technology, having already filed for 15 patents with the U.S. Patent and Trademark Office with plans to file another 20 later this month. Ten of Bank of America's applications were published in December by the patent agency, which points to Bank of America's longstanding plans with the technology since the office only publishes applications 18 months after they were filed. Bank of America technology chief Catherine Bessant said during an event at Davos last week the bank's interest in blockchain comes from "a balance between not wanting to be Neanderthal but not wanting to put something out in a commercial application where the commercial application is still very unclear as a technologist."
San Francisco Chronicle: JPMorgan Chase has scored a naming rights deal with the National Basketball Association's Golden State Warriors for their new arena in San Francisco. The 18,000-seat arena is expected to open for the 2019-2020 basketball season and will be called the Chase Center. The deal is unusual, since naming rights normally are not awarded until after a venue is under construction. However, the Warriors have chosen to privately finance the construction of the $1 billion arena. Financial terms of the agreement were not released, but analysts have suggested it probably dwarfs the $200 million deal between Barclays and the Brooklyn Nets. The arena is also the focus of two lawsuits that allege it will have a negative impact on the Mission Bay neighborhood it would call home and a nearby hospital.