Living Wills Rejected; Deutsche’s N.C. Bypass

Breaking News This Morning ...

Judgment Day: Regulators have rejected the living wills of JPMorgan, Wells Fargo, Bank of America, BNY Mellon and State Street Bank. The Federal Reserve and Federal Deposit Insurance Corp. said they don't meet the standard outlined by Dodd Frank – that banks come up with a credible plan of action that would spare taxpayers from having to bail them out should they start to fail. The firms have until Oct. 1 to revise their plans or regulators could impose higher capital requirements, restrictions on growth or activities, or other sanctions. The FDIC said neither the plans of Goldman Sachs nor Morgan Stanley met the legal standard, although the Fed did not give a negative assessment. Citigroup’s plan has “shortcomings” to address by July 2017, but its plan was not rejected by either the Fed or FDIC. Wall Street Journal, New York Times, Financial Times, American Banker

JPM Announces Earnings: Profits at JPMorgan Chase fell more than 8% on a year-over-year basis on weak performance in the investment banking unit. JPM still beat analysts’ estimates of $1.26 per share by 10 cents. This is the fifth quarter in a row JPM has beaten forecasts. “While challenging markets impacted the industry, we maintained our leadership positions and market share in the corporate and investment bank and asset management, reflecting the strength of our platform,” CEO Jamie Dimon said. Wall Street Journal, New York Times, Financial Times

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Deutsche Disapproval: Deutsche Bank announced it will exclude North Carolina from its U.S. expansion plans, in protest of a law passed last month that eliminates antidiscrimination protections based on sexual orientation. The bank had planned to add about 250 new jobs in its Cary location, just outside of Raleigh. The technology development center currently employs about 900 staff. “We’re proud of our operations and employees in Cary and regret that as a result of this legislation we are unwilling to include North Carolina in our U.S. expansion plans for now,” said co-chief executive John Cryan. “We very much hope that we can revisit our plans to grow this location in the near future.” Wall Street Journal, New York Times, Financial Times

Getting Information Faster: Investors should have more information available to them earlier in the initial public offering process, says the Financial Conduct Authority. The U.K. regulator is considering whether to overhaul its system for public stock listings. Often, investors don't receive an initial prospectus until two weeks ahead of a company’s IPO and don't receive a final approved prospectus until day one of trading. By contrast, U.S. companies can only use the prospectus to market an offering, and it is updated throughout the process. IPO listings have surged in London in 2014 and 2015 but have slowed this year on uncertainty about outcome of June's Brexit vote. New York Times, Financial Times

Wall Street Journal

The 10 biggest U.S. banks have disclosed $147 billion in unfunded lines of credit to energy companies – the majority of them pledged by the Big Four. While the loans are as yet untaken, they remain a weight on banks, which may have been trying to reduce their loan exposure. The commitments are expected to show in banks' quarterly earnings statements. For JPMorgan Chase, most unfunded loans have been promised to investment-grade companies unlikely to need access to additional cash, chief executive Jamie Dimon said. But, the unfunded loans are “the most unpredictable part of our assumptions” about the bank’s energy exposure, he added.

JPMorgan Chase is in talks to move its worldwide trading systems to an Internet-based platform instead of transferring trade data over the phone and recording conversations. Banks are interested in shifting these processes to a cloud-based system, which would allow them to rent computing power from companies with large data servers instead of running their own data centers and thereby cut costs. It would give traders the flexibility to work from anywhere – it also has higher voice quality and data security than the current system – and erase the need for a separate facility for disaster recovery. However, security and dependency on an Internet connection are big concerns JPM is working through.

Financial Times

JPMorgan has cut 30 jobs, or 20% of its relationship managers, in its Asia private bank, which has turned its focus to wealth management. The move follows a similar refocusing of the U.S. bank, which has merged its private banking and wealth management businesses in the last year and doubled the required investable assets for its clients to $10 million.