Receiving Wide Coverage ...
Just Compensation?: Despite announcing planned changes to its executive pay scale, including capping incentive compensation, some corporate advisory firms say Citigroup isn't changing enough. Under Citi’s prior plan on performance-based awards, executive could earn more if Citi outperformed its peers, even if absolute shareholder returns were negative. Citi on Wednesday announced an update on that essentially says executives can’t earn bonuses if shareholders returns are negative, regardless of how well the bank performs compared to its peers. Institutional Shareholder Services and Glass Lewis both told investors to vote against the changes. ISS contends the formula doesn’t require the bank to outperform its peers for executives to get a full payout, and noted that its stock lags behind its peers. Citi justified the pay deal for senior managers, noting the bank last year posted its largest annual profit since 2006, $17.2 billion of net income, and that it passed a stress test.
To Hike or Not to Hike...: What have analysts parsed from the minutes from the Federal Open Market Committee’s policy meeting in March? That an interest rake hike in April is unlikely and policymakers will tread cautiously until the global economy shows a pattern of growth. The minutes, released Wednesday, in part read: “Many participants expressed a view that the global economic and financial situation still posed appreciable downside risks to the domestic economic outlook.” While several Fed officials at last month’s meeting discussed a possible interest rate hike in April, at least two participants wanted to raise rates in March. The minutes further revealed officials were concerned with volatility in the financial markets and events overseas that made it more difficult to assess prospects for the U.S. economy and inflation, one analyst said.
Recent economic data suggests output grew at an annual rate of just 0.4% in the first quarter. The minutes showed many officials were preoccupied with the risk that economic output and inflation would undershoot their estimates. Eight of 17 officials said risks to the economy leaned toward the downside, while 11 saw a risk inflation would come in below 2%. The Fed expressed such concerns more forcefully in the minutes than in its post-meeting statement, suggesting the central bank is reluctant to raise rates soon. The Fed is scheduled to meet next April 26-27. New York Times, Financial Times, Washington Post
Dimon Backs Banks: In his annual letter to shareholders, Jamie Dimon, chairman and chief executive of JPMorgan Chase, went on the defensive against those clamoring for the breakup of the nation’s biggest banks, warning such a measure could undercut the United States’ leadership in financial services. Dimon also defended his bank’s ability to absorb the effects of another financial meltdown. Dimon’s letter comes at a time when Vermont senator Bernie Sanders and other presidential candidates are calling for the dismantling of financial institutions deemed “too big to fail,” on the premise this would ensure they could never again pose a “catastrophic” risk to the economy. In his letter, Dimon wrote that the financial services industry does not conform to “simple narratives” of “a winner-take-all fight between opposing interests: big versus small, Main Street versus Wall Street,” and that the industry is “a complex ecosystem that depends on diverse business models coexisting because there is no other way to effectively serve America’s vast array of customers and clients.” Dimon’s letter went on to take particular aim at the Federal Reserve’s stress tests, calling last year’s test “extremely severe” on credit risk. He contends JPMorgan alone has enough resources to absorb all the losses assumed by this regulation, at no risk to taxpayers. Wall Street Journal, New York Times, Bloomberg
New York Times
In the wake of disclosure of the Panama Papers, the United States government may issue regulations requiring financial institutions to identify the owners behind shell companies. The regulations aim to close a loophole in the American banking system that allows for the type of secretive financial maneuvers revealed by the leak of millions of documents from Mossack Fonseca, the Panama law firm that is among the world’s largest incorporators of shell companies, the paper writes. The documents revealed in part that many shell companies that do business with major international banks, including Credit Suisse and HSBC, rely on access to the American banking system. Banks must “know their customers,” the paper says, "but those rules have been significantly weakened because banks have not been required to find out the identities of customers who set up accounts in the names of shell companies."
Elsewhere ...
Star Tribune: Wells Fargo and the NFL’s Minnesota Vikings were ordered to a settlement conference regarding alleged "photo-bombing" signs. A federal judge wants the two parties to settle their dispute at a conference on April 26 over Wells Fargo’s placement of signs on the bank's towers near the football team’s U.S. Bank Stadium in Minneapolis. "The Vikings want Wells Fargo to remove signs raised 18 inches on the rooftops of their two 17-story towers near the new stadium," the paper said. "The team says the signs violate a hard-negotiated agreement allowing the bank to paint 56-by-56 foot logos on the rooftops."
