Receiving Wide Coverage ...
HSBC in Regulators' Crosshairs: Loose lips sink ships, as American propaganda posters during World War II once proclaimed, but it seems some bank employees are unaware of the idiom. The Wall Street Journal reports the Justice Department has launched a probe into allegations that an HSBC trader alerted a major hedge fund to confidential details about an imminent currency exchange deal in 2010. The probe "suggests that the U.S. is eyeing a new front in the currencies investigation: market-sensitive information that banks may have shared with favored clients," the paper speculates. "It also introduces the prospect that actions by bank traders might have contributed to sharp swings in currencies." Meanwhile, the New York Times reports HSBC's Swiss private banking unit has agreed to pay $12.5 million to settle charges it neglected to register with the Securities and Exchange Commission before advising American clients. The settlement is evidence of the government's continuing crusade against "the covert nature of the Swiss banking world," according to the paper.
Not Her Father's Bank: Banco Santander executive chairman Ana Botín put a stamp on the role she inherited from her father this week by announcing a management shakeup, but will the bank's new leadership team lead to real change? The Journal's Paul J. Davies seems inclined to think the moves are a step in the right direction, noting that outgoing chief executive Javier Marín was perceived "as a weak choice" whereas his replacement, Santander chief financial officer José Antonio Álvarez, "is well known and well liked by investors and analysts." Davies urges Botín to focus next on slashing dividends in order to bolster the bank's capital levels. The Financial Times' Lex team, on the other hand, thinks an outside choice for CEO would have been a better bet. Álvarez is "part of the furniture hardly likely, therefore, to suggest radical reforms," the paper opines. The column also argues Santander needs to act quickly to boost capital and develop an acquisition strategy.
Wall Street Journal
The Federal Reserve's proposed requirements for General Electric's GE Capital unit include higher capital ratios and an increase in independent board members, according to the paper. The proposal is aimed at ensuring the unit's ability to withstand another big economic downturn and "effectively seeks to regulate GE Capital as if it were a bank holding company," the paper reports.
Much like a sharknado, activist investors sometimes descend upon companies without warning and turn everything upside-down. That can be a good thing, the paper argues in an article detailing how handling activists like Carl Icahn and Dan Loeb has become an increasingly important CEO responsibility. Activist investors have gained a reputation for offering forward-thinking strategies rather than simply pushing companies to sell, the paper reports, and "their successes in creating value have increased shareholders' expectations that chief executives engage with them."
Consumer borrowing is on the rise after a long period of deleveraging, according to the latest report from the Federal Reserve Bank of New York. Americans took on more new home loans and increased car and credit-card debt over the summer, all within reason, according to the Fed. On the downside, the Fed warns the increase in student loan delinquencies is worrisome. American Banker offers more analysis of the report.
"America's banks posted their largest quarterly revenue increase since 2009, stoking optimism that the banking industry is turning a corner following a long period of soft growth," according to the latest data from the Federal Deposit Insurance Corp. Banks' third-quarter revenue was up 4.8% from the same period a year ago, rising to $171.3 billion.
Fannie Mae and Freddie Mac will permit borrowers who lost their homes to foreclosure to buy back the property at market value rather than requiring them to pay the full balance of the mortgage. A relatively small number of borrowers will benefit from the change, since it applies only to "the 121,000 homes that Fannie and Freddie have already foreclosed on and own, a provision that's intended to curtail any incentive for borrowers in good standing to default."
Bank of America's European unit Merrill Lynch International needs to shape up its risk management practices, according to a letter from British regulators reviewed by the Journal. The letter says the unit "needs to be 'more comprehensive' in evaluating the risks posed by its top business partners," among other criticisms.
Banks can't depend on loan-loss reserves to drive profits much longer, but the good news is that a strengthening economy should help banks replace the lost earnings with loan growth, according to "Heard on the Street." That echoes American Banker's dive into the news from the FDIC.
Deutsche Bank has launched an in-house magazine, Konzept, in an effort to extend the reach of the bank's research, according to the paper. The 74-page glossy, written and managed by Deutsche researchers, is low on art (no photos or charts) but chock-full of puns.
New York Times
Bitcoiners who lost money in the collapse of digital currency exchange Mt. Gox may yet be reimbursed. "The bankruptcy trustee for Mt. Gox, which is based in Tokyo, announced on Wednesday that it would work with a California-based Bitcoin exchange, Kraken, to return the money left in the estate to the company's 127,000 creditors," the paper reports.
Editor's note: Morning Scan will not publish on Thursday, Nov. 27 or Friday, Nov. 28 in observance of the Thanksgiving Day holiday. We'll be back on Monday, Dec. 1.