Receiving Wide Coverage ...
Living Wills Need Do-Over: Eleven big banks remain dangerously unprepared to wind down in the event of a crisis, according to U.S. regulators. "The Federal Reserve and the Federal Deposit Insurance Corp. said bankruptcy plans submitted by big banks make 'unrealistic or inadequately supported' assumptions and 'fail to make, or even to identify, the kinds of changes in firm structure and practices that would be necessary to enhance the prospects for' an orderly failure," the Wall Street Journal reports. The regulators said if banks do not fix the problems in their living wills by July 2015, they would consider hiking capital and leverage requirements and even forcing the banks to break up their businesses. The banks that received letters detailing their plans' shortcomings were Bank of America, Citigroup, JPMorgan Chase, Bank of New York Mellon, Goldman Sachs, Morgan Stanley, State Street and the U.S. divisions of Barclays, Credit Suisse, Deutsche Bank and UBS. The Financial Times analyzes the differences in the language of the regulators: "The FDIC took the more severe stance of deeming the plans 'not credible,' a finding that paves the way for potentially punitive action. The Fed said the banks could have another chance they must 'take immediate action' to rectify the 'shortcomings' or it would join the FDIC." The New York Times says regulators pointed to derivatives as an area in particular need of reform. The regulators' rebuke is likely to buoy the spirits of those who have long argued that large financial institutions remain too big to fail. David Reilly of "Heard on the Street" cheered the regulators for taking "the nuclear option" and predicted "the Fed and FDIC may finally be hitting at what is really at the heart of the too-big-to-fail problem: the monstrous complexity of these firms." On Twitter, consultant Richard Field called for more transparency in living wills: "This is needed so 3rd parties can value each bank's exposures," he wrote.
Standard Chartered to Face AML Fine: Standard Chartered has once again stumbled into the sights of New York banking regulator Benjamin Lawsky. Lawsky "is preparing an action against the bank over breakdowns in a computer system that was supposed to detect transactions vulnerable to money laundering," the New York Times reports. Two years ago, Lawsky and other government authorities reached a settlement with Standard Chartered over charges it violated U.S. sanctions by doing business with countries including Iraq and Sudan. The expected enforcement action is likely to include a penalty in the nine-figure range, according to the Times. Standard Chartered chief Peter Sands has been trying to soften the blow in recent months, the paper reports, arguing "that the computer errors were technical problems rather than deliberate attempts to flout the law." The FT says the talks "come amid growing disquiet among some of the bank's biggest shareholders" over Sands and chairman Sir John Peace. The Wall Street Journal's rundown is short and to the point.
Russian Gang's Massive Cyber-Heist: Is it time to change our passwords again? Russian hackers have stolen 1.2 billion user names and passwords, "the largest known collection of stolen Internet credentials," according to the Times. Hold Security, the Milwaukee firm that discovered the breach, is keeping the names of the affected companies confidential, but says that 420,000 sites of both large and small firms were impacted. The filched records can be highly profitable on the black market, but the Times reports that so far the Russian hackers "appear to be using the stolen information to send spam on social networks like Twitter at the behest of other groups, collecting fees for their work." New York Times, Wall Street Journal
Rakoff OKs Citi-SEC Deal: U.S. District Judge Jed Rakoff on Tuesday signed off Tuesday on the $285 million settlement between Citigroup and the Securities and Exchange Commission that he'd once tried to block but he wasn't happy about it. The Times says he approved the settlement "reluctantly," while the Journal describes him as "sulky." Rakoff himself admitted to "sour grapes" in his opinion, noting that he believed an appeals court had erred in forcing him to green-light a deal that is "pocket change to any entity as large as Citigroup." New York Times, Wall Street Journal
Wall Street Journal
New York financial watchdog Benjamin Lawsky and several lawmakers are expressing reservations about the need for federal oversight of insurance company MetLife. In a letter to the Financial Stability Oversight Council, Lawsky said MetLife "has an active primary regulator carefully monitoring the conditions of the firm" and "doesn't engage in any non-traditional, non-insurance activities."
A group of major financial firms is attempting to revive interest in mortgage-backed securities that are not guaranteed by the U.S. government. The trade group Structured Finance Industry Group is working to standardize private-label mortgage securities, the FT reports: "At the heart of the SFIG project is an attempt to reform the 'representations and warranties' embedded into the documentation of mortgage bonds and which promise investors that loans included in the debt are properly underwritten and not fraudulent."
Former Small Business Administration head Karen Mills says lackluster small business lending is slowing the economic recovery. "If we're going to raise the trajectory of job creation, we must focus on microeconomic strategies that give small businesses and entrepreneurs the resources they need to grow and create more well-paying jobs," she writes in a recent research paper. "One of the most critical of these is capital."