Receiving Wide Coverage ...
HSBC Under Fire: HSBC's Swiss unit colluded with wealthy clients including "international criminals" to help them avoid paying millions of dollars in taxes, according to what The Guardian calls "the biggest bank leak in history." The Swiss private bank routinely handed untraceable bricks of cash over to clients and conspired with clients to hide undeclared accounts from tax authorities, according to files from the period between 2005 and 2007 that were obtained by The Guardian and several other international news organizations. HSBC admitted to "past compliance and control errors" in a statement, saying the Swiss unit had operated with limited oversight until 2011. U.S. authorities have known about the leaked files since 2010 and are conducting a criminal investigation of the bank, according to The Guardian. Now that the data has been made public, the paper says the Internal Revenue Service may get grilled about its attempts to recover back taxes and investigate individual tax evaders, while the Department of Justice may face pressure to bring charges against HSBC or its executives. This all looks bad for a lot of people, particularly former HSBC chairman Lord Stephen Green, who one U.K. government official tells the Financial Times was either "asleep at the wheel" or "involved in dodgy tax practices." The New York Times has a succinct overview of the news.
In Memoriam: John Whitehead, a former Goldman Sachs co-chairman who was instrumental in the investment bank's overseas expansion, died on Saturday at age 92. Whitehead "introduced a culture of salesmanship" at Goldman, according to the Financial Times. The Wall Street Journal emphasizes the role he played in defining the bank's core principles, which can still be read on Goldman's site. The New York Times foregrounds Whitehead's later work spearheading the redevelopment of lower Manhattan and rebuilding the World Trade Center towers in the aftermath of September 11. During that period, Whitehead also clashed publicly with former New York Attorney General Eliot Spitzer while rising to the defense of ex-AIG chief Maurice "Hank" Greenberg.
Wall Street Journal
A strong U.S. dollar could weaken big banks, according officials from Citigroup, Bank of America, Goldman Sachs and Morgan Stanley. They argue the Federal Reserve's proposed capital surcharge would put them at a disadvantage against foreign competitors if the dollar's value continues to rise, "because the high exchange rate makes their dollar-denominated assets and operations look larger relative to their European peers."
Lending Club and a consortium of community banks are teaming up to take a bite out of big bankers' dominance in the consumer lending market. "The banks will each commit to buy a certain amount of loans from Lending Club, which will vet borrowers for their ability to repay," the paper reports. This will theoretically allow small banks to save on the underwriting costs that have previously prevented them from making consumer loans under $35,000 while building up a substantial pool to protect themselves against credit risk. Lending Club, meanwhile, benefits by gaining access to customers at 200 community banks.
Big banks are resisting a proposal that would force them to hold a certain amount of their liabilities in long-term debt. But a "Heard on the Street" column suggests banks can use it to their advantage. "Having already taken deposit rates about as low as possible, the next move has been to minimize their issuance of more costly long-term debt. But that means forgoing what could prove to be big savings. With long-term yields low, banks can lock in rates that may be extremely advantageous a few years down the line," writes David Reilly.
The DOJ is expanding its probe into possible manipulation of the foreign exchange markets with an investigation into Barclays' and UBS' profit disclosures during structured-product sales, according to the paper.
In news that will surprise few American Banker readers, a study has concluded community banks were the hardest hit by the onslaught of regulations in the aftermath of the financial crisis. The study was conducted by Marshall Lux, a former JPMorgan Chase executive turned senior fellow at Harvard University's Kennedy School. Lux penned a recent BankThink post advocating for streamlined regulation.
New York Times
Who's behind the shell companies that own a majority of condos at the towering Time Warner Center? Oh, just your usual cross-section of finance types, doctors and tech gurus, plus some accused international fraudsters, members of the Saudi royal family and allegedly corrupt Russian senators. The Times' massive deep dive into the identities of the condo owners reveals how the customer screening requirements imposed on banks were never applied to the increasingly opaque world of high-end real estate. This has obvious implications for money laundering. Think changes are coming anytime soon?
The paper offers a sneak preview of the payday lending rules under consideration by the Consumer Financial Protection Bureau, including underwriting requirements that would force lenders to determine borrowers' ability to repay the entirety of the loan at the end of a two-week period and restrict the number of times lenders can roll over loans over the course of a year.
New York Observer: In case you missed it last week, the New York Observer covers the epic tale of the war between digital currency companies Ripple Labs and Stellar and the life and times of Jed McCaleb, the man who founded both of them. Wells Fargo also plays a part in the article, having come close to diving into the world of cryptocurrency before the collapse of Bitcoin exchange Mt. Gox in February 2014. The bank responded by shutting down the accounts of cryptocurrency companies. But it is the merchant bank for payments company Stripe, which is a major Stellar investor. "So Wells Fargo, which was unwilling to bank companies like Stellar, is now funding the primary backer of Stellar," the paper reports.