Receiving Wide Coverage ...
Tough New Big Bank Requirement: The eight biggest banks in the U.S. may have to add up to a total of $68 billion in capital to meet a new leverage ratio finalized by regulators. Under the rule, banks with more than $700 billion of assets will have to must meet a 5% leverage ratio, and 6% at their federally insured banking units. The ratio, approved by the Office of the Comptroller of the Currency, the Federal Reserve and the Federal Deposit Insurance Corp., is meant to help institutions survive in times of stress. The rule, which takes effect Jan. 1, 2018, mostly follows a plan released in July but also includes a proposed change that could force banks to classify more of their assets as possibly exposed. Though these requirements are likely to be tougher than what is adopted in other countries, this could turn out to be an advantage for U.S. banks, the Wall Street Journal's Heard on the Street states. "Higher levels of capital allow banks to better withstand shocks. So while leverage constraints may damp returns on equity, they reduce the risk borne by shareholders and creditors. That can actually be positive for both share and debt prices," John Carney writes. Wall Street Journal, Financial Times, New York Times, American Banker
New Cybersecurity Threat: Experts have uncovered a flaw in OpenSSL protocol, which encrypts sessions between consumer devices and websites, possibly leaving consumer information exposed. Up to two-thirds of websites use that technology, and many large websites have already made adjustments to fix the problem. The potential effect on consumers is still being studied but researchers said it could be significant and could touch on sensitive information, such as passwords and bank information. New York Times, Financial Times
Wall Street Journal
Investors in Fannie Mae and Freddie Mac are fighting to protect their interests in the mortgage-finance giants. A push for legislation to protect the rights of investors in the government-sponsored enterprises was launched by a new tax-exempt group called the Coalition for Mortgage Security. The group's message is similar to that of hedge funds and others suing the government over its oversight of Fannie and Freddie. Additionally, the 60 Plus Association, a conservative senior group, announced it bought $1.6 million in advertising to target politicians that have showed support for housing-finance reform.
Two proxy advisory firms, Egan-Jones and Glass Lewis, advised shareholders to vote against Citigroup's executive pay package, arguing that pay wasn't properly aligned with the firm's performance. In 2012, shareholders rejected the $15 million compensation package for Vikram Pandit, who was chief executive at the time, in a non-binding vote. A third proxy firm, Institutional Shareholder Services recommended that investors vote for the suggested compensation.
Goldman Sachs is contemplating closing its private stock-trading venue, according to unnamed sources in the Journal. Executives are considering whether the revenue that the firm, known as Sigma X, brings in is worth the risks of the business line.
Three nominees for the Commodity Futures Trading Commission Timothy Massad, a senior Treasury official, Sharon Bowen, a securities lawyer, and J. Christopher Giancarlo, a brokerage executive were approved by a Senate panel on Tuesday. The full Senate will vote on their confirmation, though the timing is unclear.
Spain's "bad bank," which is known by its Spanish acronym Sareb, will change how it markets and sells around $68.5 billion worth of real estate loans and properties. Currently the nine banks that unloaded troubled assets onto the bad bank also market and sell the properties and loans. However, this creates a conflict as these banks are also trying to sell their own real estate assets that weren't transferred to Sareb. Sareb will use a bidding process to select new servicers.
A European Union court upheld a ruling that Dutch lender ABN Amro is banned from buying other banks. The decision is a setback for ABN, which is preparing for a stock offering. The European Commission set the ban in 2011 as a condition of a government bailout of ABN.
Citigroup plans to close almost 30% of its 190 branches in South Korea as profits in the country continue to decline. The company will focus on six major cities. Currently nine out of 10 transactions in South Korea happen outside of a branch, according to the Financial Times.
Gerald Hassell, chairman and chief executive of Bank of New York Mellon, dismissed calls for the company to spin off its asset management business. Hassell told investors that such a move had already been considered and rejected because it didn't make sense. The bank recently faced shareholder criticism over costs, executive pay and profitability.
Sir Win Bischoff, a former chairman of the Lloyds Banking Group, said the cost of alleged misconduct at banks in recent years had surpassed provisions to cover bad loans. He described it as an "extraordinary change." KPMG released a report this week that found the cost of litigation and compensation for bank misconduct used up 80% of profits at the five largest British banks last year.
New York Times
A group of students at the University of Virginia School of Law are challenging federal prosecutors to release details on settlements with big banks and other corporations.