Wall Street Journal

Loyalty trumps lucrativeness, at least for the time being, in the world of credit cards. Issuers like American Express, JPMorgan Chase and Commerce Bancshares in Kansas City are all picking up the pace in securing co-branded partnerships with merchants. The reason? Some merchants' customer bases are deemed more loyal, even if they generate less fee income, and a partnership with a merchant is a considered a more efficient way to grow a customer portfolio than sending bulk-mail offers via the U.S. Postal Service. Merchants know they have the upper hand, as they are extracting better terms from banks for the right to issue a card with their prized brand on it. (See the Costco-Amex-Visa saga.)

Citigroup has closed a special product offering for "coveted clients" that allowed them to make bets on foreign currency markets, unnamed sources said. Citi's product, called the Alternative Credit Program, was not run through normal bank channels, allowing the trades to sidestep the normal risk-management procedures and reviews. Citi shut down the product, which it had offered since 2007, after big swings in the Swiss franc set up some of the coveted clients for potential big losses. The product was made available to about 40 clients, including so-called family offices that manage money on behalf of wealthy families, and hedge funds. One industry analyst told the Journal he was not aware of any other bank that had a similar product offering.

Here's a spot of potentially good news for banks that have been hit hard by their exposure to the energy sector: Shale-oil producers are getting ready to restart some rigs in response to rising crude prices. Comerica, PacWest Bancorp and Zions Bancorp are among the banks that have increased the number of criticized energy loans.

The lack of rigorous financial analysisof the effects of Dodd-Frank is going to make it harder to determine the best course to take on the proposed pullback of bank regulations, Greg Ip wrote. "No one knows the true costs or benefits of the blizzard of laws, rules and penalties imposed since the financial crisis," he wrote. "Unlike with rules governing pollution and automobile safety, the costs and benefits of big new financial rules are seldom rigorously quantified."

"Heard on the Street" asks why the proposed regulatory-reform bill filed by Sen. Richard Shelby, R-Ala., overlooks cybersecurity issues. The question turns out to be hypothetical, as the column does not suggest a possible answer.

Financial Times

Mortgages, specifically the qualified mortgage rule, may be one of Democrats' primary battlefronts in the war over regulatory reform. "This returns us to the same misaligned incentives that led us to the crisis, with lenders making money whether or not the person could afford the home," Julia Gordon, an analyst with the liberal-leaning Center for American Progress, told the FT.

Risk management isn't getting enough attention at the world's largest banks, according to a new Deloitte study, based on a survey of 71 financial institutions worldwide. Despite new regulations intended to force banks to clamp down on reckless behavior, there is still a lack of emphasis on risk-management at the board level inside banking companies.

New York Times

Five large banks, including JPMorgan Chase and Citigroup, are expected to plead guilty to criminal antitrust violations as soon as next week, and pay several billion dollars to settle charges of rigging foreign-currency markets, unnamed sources said. The banks' holding companies are expected to enter the pleas; previously, only subsidiaries had entered guilty pleas. Barclays, Royal Bank of Scotland and UBS are the other three banks expected to participate in the mass pleas and agree to pay fines. Attorneys for the banks are trying to ensure that the guilty pleas will not result in regulators barring them from participating in certain business practices. If the banks are successful in obtaining those waivers, it may raise the question of the effectiveness of the guilty pleas. "The government needs to be careful that it doesn't turn a guilty plea into a deferred-prosecution agreement with just another name," said David O'Neil, an attorney who represented BNP Paribas in previous negotiations with the Justice Department.

A lawsuit that pursued a novel way to challenge banks' practices in mortgage foreclosures has hit a roadblock. A federal judge denied a legal aid group's attempt to act as a whistleblower in challenging U.S. Bancorp's foreclosure practices. U.S. Bank did not follow rules requiring banks to work with borrowers who have defaulted on FHA loans to help them find ways to get current; that's the challenge made by Advocates for Basic Legal Equality, the legal-aid group. The judge said the group relied on public information to make the challenge. Individual whistleblowers do not use public information, but instead on information that they obtained through their workplace position.

Elsewhere ...

St. Louis Post-Dispatch: A jury awarded $77 million to a Missouri woman who accused Wells Fargo of mismanaging her family trusts. Barbara Burton Morriss sued Wells Fargo in March 2012, claiming the bank failed to disclose financial transactions made by her son within the trust. The son, B. Douglas Morriss, was sentenced in 2013 to five years in federal prison for tax evasion. Morriss claimed her son pledged millions of dollars from the trusts as collateral for risky business ventures, and Wells Fargo should have alerted her to what was going on. "Wells Fargo and Doug Morriss were closely aligned in a scheme to defraud the trusts," she alleged in her complaint. Former U.S. Sen. John Danforth, R-Mo., testified during the trial on behalf of Barbara Morriss and said he encouraged her to sue Wells Fargo. The $77 million award is believed to be the largest in the history of St. Louis County, Mo. An attorney for Wells Fargo declined to say if his client will appeal.

BobSullivan.net: Scammers have targeted Starbucks' mobile-payment app and gift-card users, draining money from customers' accounts without them realizing it. The hackers are accessing customers' credit cards through the Starbucks mobile-payment platform or through gift cards' auto-reload function. "While I'm not able to comment on an individual customer's account, what you're describing is not connected to mobile payment — linking the two is inaccurate," Starbucks spokeswoman Maggie Jantzen said. The story was first reported by consumer blogger Bob Sullivan, and later picked up by numerous media outlets, including the Christian Science Monitor, CNBC and CNN Money.

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