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Living Will Letdowns: When it comes to living wills, banks face a tough crowd. So it may not come as a total shock that regulators rejected the living wills of foreign banks BNP Paribas, HSBC and Royal Bank of Scotland Group, instructing them to address deficiencies in their wind-down plans for U.S. units by the end of the year or face possible sanctions. Eleven U.S. banks received similar orders from the Federal Reserve and Federal Deposit Insurance Corp. in August 2014. The Financial Times notes the regulatory agencies once again brought varying degrees of harshness to their assessments, with the FDIC maintaining a "more draconian approach" by deeming the wills "not credible" and the Fed merely calling on the banks to take "immediate action." Both regulators would have to determine the wills "not credible" before sanctions could be imposed.

In the Wall Street Journal, analyst Karen Shaw Petrou says the foreign banks will now have to "look very hard at their U.S. operations to identify what the problemsÂ…are and whether they can be resolved to U.S. satisfaction without damage to the franchise." The FT implies it may not be possible for banks to create living wills that satisfy regulators. The article says banks have spent "several years and hundreds of millions of dollars trying to make their businesses more streamlined" but some officials in the FDIC "seem particularly unlikely to be convinced, such as Tom Hoenig, vice chairman, who has suggested publicly that the largest banks should be broken up." Some FT commenters sided with the regulators, while others seemed torn. "It seems very sensible for regulators to be ultra-cautious," wrote Chris Dickinson, who thinks a crisis in the next 10 years is likely. A commenter using the name "Groucho Marx" wondered if the problem lies with banks' "half-baked" plans or if regulators are "moving the goalposts in order to ensure failure (for their own reasons)?"

Wall Street Journal

Ocwen Financial could get booted off the New York Stock Exchange for missing the deadline to file its 2004 annual financial statement, according to the firm's Monday filing. Ocwen says it's late with the papers because it's reviewing whether affiliate Home Loan Servicing Solutions "has the 'ability to continue to meet its obligations to fund new servicing advances.'"

If low interest rates persist, financial companies including MetLife may have trouble achieving their return on equity goals, MetLife head Steven Kandarian warned in a letter to shareholders Monday. John Carney of "Heard on the Street" agrees that "earnings in the financial sector could disappoint this year" if rates stay low.

But in the event that rates do rise, banks are preparing by reshuffling their bond portfolios. Banks have moved more securities investments into the "held to maturity" category in order to protect their capital levels.

Financial Times

It's hard to parse banks' financial health when they're constantly changing the way they determine reserves for loan losses and legal penalties, writes Tom Braithwaite. He says regulators have sent "mixed messages" about how conservative banks should be in socking away money to cover loan losses and that there is "a lamentable lack of consistency in banks' ability to account for legal threats as part of quarterly results."

Royal Bank of Scotland plans to sell off more of its stake in U.S. subsidiary Citizens Financial in order to boost capital, lowering its ownership to less than 50%.

The Fed could wind up fueling "an asset price bubble" if it keeps interest rates low much longer, warns St. Louis Fed head James Bullard. "When asset bubbles start, they keep going until they blow up out of control with devastating consequences," he tells the FT.

New York Times

Former Congresssman Barney Frank and ex-Fed chief Paul Volcker agree: the U.S. regulatory framework needs fixing. BankThink contributor Mayra Rodríguez Valladares saw both financial reformers speak at the Federal Reserve conference at George Washington University last week. She offers a rundown of their critiques, as well as other speakers' concerns about big banks' risk exposures and subpar capital levels.

Rep. Maxine Waters plans to introduce a bill Tuesday that aims to hold the Securities and Exchange Commission more accountable for its decisions about whether to grant waivers to financial firms that have violated securities laws. The bill "would require the S.E.C. to maintain public records of all waiver requests and denials." It also "requires the agency to make waiver requests public, and gives the public the opportunity to comment and ask for a hearing on whether a company should be granted a waiver."

Washington Post

Apple Pay may be too easy to use for its own good, according to the paper. Security analysts tell the paper that the simplicity of the mobile wallet's set-up process has paved the way for an uptick in fraudulent transactions, although there seems to be disagreement over whether it's up to banks or Apple, or both, to bolster security procedures.

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