Receiving Wide Coverage ...
U.S. Trains Sights on Commerzbank: U.S. regulators are accusing another European bank of violating U.S. economic sanctions after striking an $8.9 billion deal with French lender BNP Paribas over the same charge last week. Germany's Commerzbank is on the hot seat for allegedly doing business with companies in Iran and Sudan, according to the New York Times. Because Germany owns 17% of Commerzbank, the Times wonders whether "settlement talks could inflame diplomatic tensions between Washington and Berlin." The settlement, which is likely to include at least $500 million in penalties and a deferred prosecution agreement, could be struck as early as this summer, according to the usual anonymice. The news of the charges against Commerzbank is likely to further inflame the debate over whether "the U.S. is going too far in using financial regulation to pursue foreign policy aims," a question explored in a column by Financial Times banking editor Martin Arnold. "If the U.S. pushes its pursuit of foreign banks too far it could backfire, driving the world to diversify away from the currency that gives Wall Street banks such an advantage," Arnold argues.
Wall Street Journal
Compliance costs and rising compensation packages are hampering the big banks' penny-pinching efforts. Noninterest expenses, which include both salaries and compliance costs, rose 9.6% at the six biggest U.S. banks between 2009 and 2013; profits fell 9.7% during that period. "Because executives are loath to cut pay for employees who generate revenue, they are looking across their operations for other ways to slim down," Andrew Johnson reports. JPMorgan Chase has been installing more high-tech kiosks in a move that may allow the bank to cut branch staff, while KeyCorp and Regions Financial are squeezing into tighter corporate quarters.
The American Express trial is underway as the company defends itself against federal charges that it unfairly limits competition by barring merchants from telling customers that they prefer to accept other cards.
U.S. regulators have faced criticism for scrapping an independent review of 13 banks' foreclosure practices in favor of a $9.3 billion settlement in the aftermath of the housing crisis. But the Federal Reserve says it made the right call, arguing in a report that the settlement got funds to borrowers faster and that banks would have wound up paying less had the review been complete. Regulators have disbursed $3.1 billion in reimbursement checks thus far. "The data suggest that the independent consultants were not finding errors by servicers resulting in financial industry that were pervasive," the Fed says in the report. The Journal's own findings suggest otherwise.
European banks are using alternative capital primarily contingent convertible bonds to boost their leverage ratios. That's a problem for multiple reasons, according to "Heard on the Street." "For starters, it isn't real equity," writes Paul J. Davies. "And there is a worry that this capital, which is meant to convert into equity when a bank hits trouble, is being priced too cheaply."
"Several Swiss banks have threatened to freeze American clients' accounts unless they prove they are, or take steps to become, tax compliant, as the country's lenders hurry to resolve a tax evasion dispute with the U.S.," the paper reports. Swiss banks have until the end of July to identify above-board American accounts.
The European Banking Authority plans to start scoring banks' financial strength on a scale of 1 to 4 in order to "limit inconsistencies between the practices of different supervisors" in the euro area and in non-euro countries.
New York Times
Prominent bank analyst Brad Hintz is heading to an ivory tower. Hintz will leave Sanford C. Bernstein & Company in order to join New York University's Stern School of Business as an adjunct professor of finance.
Former Barclays chief executive Robert Diamond has succumbed to the lure of Twitter. Diamond, who resigned from Barclays in 2012 in the wake of the Libor rate-rigging scandal, has yet to post anything on the social media platform. But he had amassed impressive 684 followers as of press time.