Wall Street Journal
Dark clouds are hovering over the effort to amend Dodd-Frank and other bank regulations, in some measure because the new GOP leadership on Capitol Hill is trying to make changes beyond what banks have asked for. At a recent meeting at a Washington hotel, according to anonymous sources, Sen. Richard Shelby, R-Ala., reiterated his stance that he wants to axe the Consumer Financial Protection Bureau's independent funding stream; and Rep. Jeb Hensarling, R-Texas, wants to scrap the idea of systemically important financial institutions. Both policy goals will be tough to achieve, and at the same time threaten the chance of success for the industry's more-modest goals. Those include the creation of a second tier of scaled-back regulations for community banks; and changing the $50 billion threshold that subjects a bank to Dodd-Frank's tougher requirements, a top priority of regional banks.
Royal Bank of Scotland is expected to write down the value of its U.S. unit, Citizens Financial Group, by about $6.2 billion, Reuters reported, citing unnamed sources. The writedown likely means RBS paid too much for many of its acquisitions and it's unlikely to recoup that value through its recent Citizens IPO, an anonymous source told Financial Times.
In news from another large British bank, HSBC CEO Stuart Gulliver on Monday morning said the Swiss tax evasion allegations were "a source of shame" for him and several of his colleagues and that "one of the impacts is on morale inside HSBC." HSBC confirmed that Gulliver does hold some personal assets in a Swiss bank account. On Monday, HSBC reported a decline in yearly profit and cut its target for returns on equity from 12% to 15% down to "greater than 10%," in part because of higher capital requirements.
New York Times
The Times editorial page is pessimistic that the settlement agreements likely forthcoming on alleged manipulation of foreign-exchange rates will do much in the way of delivering justice. Citigroup and JPMorgan Chase are expected to settle the charges of price rigging, and the Justice Department has told the banks they must plead guilty to criminal charges in order to settle. But the deals are "likely to be structured in ways that minimize damage to the banks, while sparing high-ranking officials from accountability." Currency traders will be pursued for wrongdoing, but not senior executives, the column predicts.
Bloomberg takes a look at why banks are hoarding their excess liquidity in Treasuries and other ultra-safe bonds. First, the evidence: Banks have increased their stakes in Treasuries and debt from federal agencies for 16 consecutive months, the longest stretch since 2003. Higher capital requirements imposed on banks are, of course, one reason for that increase. But additional reasons include: still-tepid loan demand; and the widening spread between Treasuries and leaving cash at the Fed. The yield on the 5-year U.S. Treasury note was 1.59% in Monday morning trading in London. That compares to the 25 basis-point yield that cash produces at the Fed. The 5-year Treasury's yield also affords banks a chance to earn a decent spread over the rates paid out to depositors.