Breaking News This Morning ...
Subpoenaed: PNC Financial disclosed in a regulatory filing that it has received subpoenas from prosecutors over certain mortgage-lending practices. The bank has also received subpoenas from the Justice Department and Consumer Financial Protection Bureau about the return rate for its payment-processor clients. Wall Street Journal, Bloomberg
Receiving Wide Coverage ...
Citigroup Fraud Problems: News broke late last week that Citigroup was revising its 2013 earnings after discovering evidence of fraud in its Mexican unit, involving about $585 million in short-term loans made to an oil-services company. The Financial Times reports that the Securities and Exchange Commission is investigating. "Potential areas of inquiry could range from financial reporting issues to accounting fraud and bribery," the article notes. The New York field office of the Federal Bureau of Investigation is also reviewing the matter, says the Journal, and Mexican police have questioned a Citi employee about the alleged fraud. These developments "are the latest steps in what has already been an intense investigation for the third largest bank in the U.S. by assets," the paper notes. But the fraud is likely to cause some problems for Citi's ongoing rehabilitation, whether or not it is, as the bank suggests, simply attributable to a few bad eggs. "The problem is that the lender has been cheated out of the cash in one of the most basic businesses in banking," writes columnist Antony Currie. "That should worry Citigroup's rivals, too."
All About Bitcoin: Everybody's still talking about Mt. Gox and what the Bitcoin exchange's collapse means for the crytopcurrency. A few articles suggest regulation is likely, though the question remains as to what agency's jurisdiction Bitcoin falls under. "The FTC and Consumer Financial Protection Bureau each have held staff briefings on virtual currencies in recent weeks," reports the Journal. "The Securities and Exchange Commission, the Commodity Futures Trading Commission and banking regulators also have been studying the issue." Meanwhile, the Washington Post talked to a computer scientist who has some ideas of how to catch the hackers who stole the Mt. Gox bitcoins. And Dealbook offers a play-by-play of what led to the exchange's demise. The short version: "It was that steady erosion of faith in the Bitcoin community that ultimately served as the death knell Without the public backing of Bitcoin believers, Mt. Gox lacked the ability to get the financing it needed, those with knowledge of the discussions say."
Wall Street Journal
Mutual fund investor Bruce Berkowitz has sent letters to the boards of Fannie Mae and Freddie Mac, chiding them for not protecting shareholders. "Mr. Berkowitz's letters serve as the latest reminder of how big profits at both firms could complicate the Obama administration's commitment to 'wind down' the mortgage giants and leave nothing for shareholders," the paper notes.
Royal Bank of Scotland is pulling back on its U.S. business in response to the Federal Reserve's foreign banks rules. "The U.K. lender is planning to more than halve the assets in its broker-dealer operation in New York in order to pull assets below the $50 billion threshold," the paper reports.
New York Times
BankThink contributor Mayra Rodríguez Valladares explains why the bank leverage ratio is important: "It could serve as a backstop for the existing Basel III risk-weighted asset capital framework that presently exists if supervised and enforced stringently, it can influence banks to sell riskier assets and off-balance sheet items, making them smaller."
High-interest internet banks are catching on in China. "Analysts say the government's decision to permit Internet companies to offer a wide range of investment and financial services is an effort to create alternatives to state banks and, in effect, loosen interest rate controls," the paper reports.