Wall Street Journal

The paper provides additional details on expected proposed changes to the Federal Reserve that could be included in the regulatory-reform bill forthcoming from Sen. Richard Shelby. A look at all of the various expected aspects of Shelby's bill was reported in detail in American Banker. According to the Wall Street Journal, Shelby's bill could require the Federal Reserve's Federal Open Market Committee to send to Congress "more details of the analysis and data on which it bases its monetary policy decision." Additionally, the Fed would be ordered to send the report to Congress four times a year instead of just twice. Unlike the House's version of Fed-reform legislation, Shelby's bill would not require the Fed to adopt and follow an official policy rule. Shelby's proposal is also expected to shift authority for setting the interest rates the Fed pays banks on reserves parked at the Fed; instead of that authority being held by the FOMC, it would move to the Fed's regional banks. Shelby is also expected to order a nonbinding study on restructuring the Fed's 12 regional districts. In a tip of the cap to Sen. Elizabeth Warren, D-Mass., Shelby's bill could include a measure to let Fed governors hire four of their own staff members. Shelby's eight-section, 216-page draft bill is expected to be released Tuesday around noon.

Shelby's reform bill is also expected to raise the $50 billion-asset threshold for when banks are subjected to tougher regulation, perhaps to $500 billion. "Heard on the Street" does not think that will happen. The $500 billion-asset threshold is too high, as it would exempt U.S. Bancorp, PNC Financial Services Group, Bank of New York Mellon and State Street, any of which would "seriously strain the deposit-insurance fund" if one was to fail. "Heard on the Street" thinks the proposed threshold will be $100 billion.

TBTF isn't over, but it's far less likely to happen, Federal Deposit Insurance Corp. Chairman Martin Gruenberg told the paper Monday, ahead of a speech Tuesday. The next time a large, global financial institution runs the risk of failure, "they would be allowed to fail and suffer the consequences of that failure," Gruenberg said in an interview. It's much more likely that a bankruptcy proceeding or government-run resolution would occur "in which shareholders would be wiped out, creditors suffer losses and culpable management would be fired—all without bailouts or damage to the economy." Former Fed Chairman Paul Volcker agrees, saying "I'm amazed they've been able to do the amount of coordination that they have in fact done."

Financial Times

JPMorgan and Citigroup are expected to pay $1 billion each to settle an investigation into the rigging of foreign-exchange markets. Royal Bank of Scotland is also expected to pay $1 billion, while Barclays may fork over $3.1 billion and UBS "less than $800 million," unnamed sources told the Financial Times. In this specific instance, all the banks, except UBS, are settling with the U.S. Justice Department and the Federal Reserve. An announcement on the settlements could come as soon as Wednesday.

Banks are pushing back against proposed changes that would make it harder for them to earn fees on their own investment products. The Department of Labor's proposal would require banks to do more to place their clients' interests ahead of their own. Banks are arguing the proposal would make investing more expensive for the general public. Banks are "keen to preserve" the noninterest income they get from pushing wealth-management products. The segment has risen year-over-year at Wells Fargo, for example.

The paper profiles Primary Bank, the proposed de novo bank in Bedford, N.H. Regulators approved Primary's application in March. Terry Jorde of the Independent Community Bankers of America told the FT the group hopes Primary's application will "open the floodgates" for more de novo community banks.

New York Times

Nomura Holdings and Royal Bank of Scotland were presented with a stern rebuke by a federal judge in their challenge of the government's lawsuit involving mortgage-backed securities. U.S. District Court Judge Denise L. Cote ruled the two banks misled Fannie Mae and Freddie Mac in selling them faulty mortgage bonds. "The magnitude of falsity, conservatively measured, is enormous," Cote wrote. Nomura will appeal and an RBS spokesman could not be reached. Other banks involved in the same lawsuit had previously settled, paying a combined $18 billion in penalties.

Barclays has suffered the departure of two high-ranking executives in separate moves. JPMorgan Chase hired Keith Canton to head its private capital markets division. Meanwhile, Valerie Sorrano Keating, head of credit cards at Barclays, is leaving after a six-year stint.

Elsewhere ...

Buffalo News: KeyBank will close three branches in western New York. KeyBank's holding company, KeyCorp in Cleveland, acquired 26 former HSBC branches in 2012 and has since trimmed its local network to reduce overlap.

San Francisco Chronicle: An elderly couple has sued JPMorgan Chase after they claim a branch manager at a former Washington Mutual branch persuaded them to draw down two home equity lines of credit and lend all the money to him. The couple's attorney said they lost more than $200,000. JPMorgan declined to comment.

Miami Herald: A federal judge has approved a $3.2 million settlement between Wells Fargo and victims of a Ponzi scheme. George Theodule is alleged to have run the Ponzi scheme through Wachovia in 2008, with the bank turning a blind eye to his suspicious transactions. The settlement was sought by a receiver appointed by the Securities and Exchange Commission.

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