Receiving Wide Coverage ...
Foreign Banks to Face the Music: Banks outside the U.S. will have to deal with loan losses sooner under a new accounting rule issued by the International Accounting Standards Board. "Under the new standard, non-U.S. banks will have to book loan losses based on their expectation that future losses will occur, beginning in 2018," the Wall Street Journal reports. "That is expected to speed up the booking of losses and require greater loan-loss reserves." The U.S. is expected to reveal a similar rule later this year, though the Journal notes that differences between the two could make it harder to compare the finances of U.S. banks and their foreign counterparts. The Financial Times' Lex team approves of the new rule, writing that despite some drawbacks, it "should result in a more robust system in which outsiders can have more faith that a balance sheet is a fair and sensible reflection of what a bank is worth." The New York Times warns that the rule "could also make it less attractive for banks to make loans in the first place because every loan will lead to an immediate reported loss."
Morgan Stanley Makes a Deal: Morgan Stanley has agreed to pay $275 million to the Securities and Exchange Commission to settle charges that it misled investors about the quality of the mortgages backing its securities. The deal is likely to wrap up the SEC's slew of lawsuits against big banks tied to the financial crisis, according to multiple reports. New York Times, Financial Times, Wall Street Journal
Barclays Defends Dark Pool: Barclays is going to battle against a lawsuit filed last month by New York Attorney General Eric Schneiderman. The British lender denied charges that it lied to customers about high-frequency trading activity in its dark pool, arguing that its clients are experienced enough to know what they were getting into. Barclay's motion to dismiss the case also disputes Schneiderman's jurisdiction over dark pools, arguing that he's stepping onto the SEC's territory. Wall Street Journal, Financial Times, New York Times.
Wall Street Journal
The housing market will have a hard time making a robust recovery as long as Americans are saddled with student loan debt and stagnant wages. That's one of the big takeaways from the Journal's report on new home sales, which fell nearly 5% in the first half of the year compared to the same period a year ago. Sharp increases in new home prices have also reduced demand, according to the report. And homeowners burned by the housing crisis have long memories.
Visa's earnings rose 11% in its fiscal third quarter, but the company expects growth to be held back "by a slowdown in cross-border transactions and a reduction in currency volatility."
New York Times
In "Yellen Settles for a Slingshot Instead of a Shotgun," former M&A banker William D. Cohan wonders if the Fed chairman has already "jumped the shark" in threatening to use "nothing more than its supervisory authority over the big Wall Street banks to try to rein in excessive risk-taking." Cohan says she should instead wield her true weapon an ability to raise interest rates and argues that "banks aren't going to change their behavior simply because their 'prudential' regulator tells them to do so." One reader suggests an alternative remedy for the risk-taking. "[B]anks are not behaving well, in part by forgoing certain types of guarantees, such as loan to cash flow ratios," writes a commenter named Shoshon. "Perhaps we need to require such covenants for these types of loans, rather than blame the Fed for the bad behavior of banks and 'investors.'"