Receiving Wide Coverage ...
Swiss Search HSBC Offices: Geneva public prosecutors launched what appeared to be a surprise raid on HSBC's Swiss offices Wednesday morning as part of a criminal probe into the bank's alleged money-laundering misdeeds. Prosecutors issued a public statement saying the search came in response to "recent public revelations" about the Swiss unit, an apparent reference to the vast files provided by whistleblower Herve Falciani to several media outlets. Among other things, the bank reportedly held secret accounts for "dictators and arms dealers" and gave clients advice on how best to dodge their tax obligations, as the Wall Street Journal summarizes. The Geneva prosecutor's office said it plans to go after individuals implicated in its investigation, according to the Financial Times, which also notes "the first some of the bank's executives knew of [the search] was when the Geneva prosecutor put out a press release as the raid started." The New York Times includes the interesting tidbit that HSBC took out a full-page ad in British newspapers Sunday in order to offer a public apology from chief executive Stuart Gulliver. The FT's Lex team has one bright piece of news for HSBC: "The impact of HSBC's Swiss private banking scandal on the stock's investment case can be summarized in a wordzip," the authors write. Shareholders are confident in Gulliver's cleanup skills, they suggest, plus the practices in question reportedly took place a decade ago. On the other hand, as American Banker reported Tuesday, the scandal may give rise to fresh concerns that the bank's compliance problems are "too big to manage."
Wall Street Journal
Bank of America head Brian Moynihan is taking a $1 million pay cut. The move to cut the bank chief executive and chairman's pay by 7%, to $13 million, shows that the board "kept [Moynihan's] paycheck moving in the same direction as the company's bottom line," the paper reports. As you may recall, last year wasn't Bank of America's best ever. The bank revealed a major accounting blunder that had led it to miscalculate its capital levels for years and shelled out $16.7 billion in a mortgage-backed securities settlement with the Justice Department.
Concerns about the consequences of a slight interest-rate hike are way overblown, former Wall Street futures trader Omid Malekan writes in the op-ed section. He points out the Federal Reserve's likely move is to increase the fed-funds rate to 0.25%, an amount he says, that is unlikely to wreak havoc. "The fact that there is a debate about a quarter-point rate hike tells us that extraordinarily low interest rates have mostly failed to deliver a robust recovery," he argues. "The thinking seems to be that six years into near-zero policy, the only reason it hasn't worked is because it hasn't been tried long enough."
"Bank of New York Mellon has restated the fourth-quarter results it announced last month, taking a $598 million litigation charge that suggests it is heading towards a settlement of cases including a three-year-old foreign exchange suit filed by the Department of Justice," the paper reports. The litigation charge slashed the bank's quarterly profits from $807 million to $209 million and reduced its net income for the year by a fifth, to $2.5 billion, according to the paper. An analyst tells the FT investors are likely to take the news in stride, since BNY Mellon is still profitable and presumably has an end to the forex lawsuit in sight.
It's last call at the DOJ for prosecutions against individuals tied to the financial crisis. Outgoing Attorney General Eric Holder gave prosecutors 90 days to decide whether they have sufficient evidence to bring criminal or civil charges. Don't everybody rush in all at once! Realistically, the paper suggests the deadline is unlikely to bring about a wave of new actions. "A Wall Street lawyer who has been involved in crisis-related settlements was skeptical that the DOJ would be successful in going after individuals, given that the department had been investigating cases for years without prosecuting executives."
The fact that many banks' risk models failed to consider the possibility the Swiss central bank would unpeg the franc from the euro suggests "rank incompetence," according to columnist John Kay. It appears "most risk modelseven if they have uses in everyday liquidity managementare unsuitable for the principal purpose for which they are devised: protecting financial institutions against severe embarrassment or catastrophic failure," he writes.