Receiving Wide Coverage ...
Making the Grade: If European regulators were being graded on their newly released banking stress tests, what kind of marks would they receive? The European Central Bank would probably have a few points shaved off for the errors and inconsistencies reported by the Wall Street Journal: it misstated the capital ratio of a "large Italian bank" and failed to report on a review of Polish banks' balance sheets because the data was submitted behind schedule. The ECB and the European Banking Authority also "came up with drastically different figures for an important Deutsche data point," the paper reports. But these relatively minor problems don't add up to a loss of credibility for the tests, according to analysts. Indeed, the New York Times' analysis suggests European regulators cut the mustard: "While no large banks failed, the tests did not appear to be a whitewash either." The Times suggests the tests' perceived reliability may soothe skittish markets about the health of Europe's banking system, thereby encouraging banks to boost lending. Meanwhile, a "Heard on the Street" column recommends one key area for improvement: eurozone regulators should demand that banks exclude unreliable deferred-tax assets from their capital calculations.
Earnings Update: UBS's third-quarter profits were tempered by a nearly $2 billion litigation charge as regulators continued their investigation into whether the Swiss bank attempted to manipulate the foreign-exchange market. The bank nonetheless posted higher year-over-year profits, earning 762 million francs in the third quarter, up from 577 million francs during the same period a year ago. Wall Street Journal, Financial Times
Wall Street Journal
"The SEC is deadlocked on whether to allow Bank of America, which recently settled an SEC probe into flawed mortgage-backed securities, to continue selling shares in hedge funds and startups to wealthy investors," according to the usual anonymice. BofA wants a waiver that will allow the bank to go about its usual business in the aftermath of its $16.7 billion mortgage settlement in August, but the SEC's Democratic commissioners say they're concerned about giving the bank a pass on bad behavior.
Alibaba wants to team up with Apple on payments, the Chinese company's executive chairman said at a Wall Street Journal conference. Apple chief Tim Cook also said at the conference that the companies are meeting later this week "to discuss potential partnerships."
Former SEC chair Arthur Levitt has agreed to join the advisory boards of Bitcoin companies BitPay and Vaurum. Levitt tells the paper he will focus on helping the companies "understand the imperative of a robust approach to regulation."
The Federal Reserve's quantitative easing may leave a "toxic legacy" of having driven yield-hungry investors into riskier assets such as securities backed by subprime auto loans, according to the paper. The article also investigates the possibility "the liquidity unleashed by the Fed has stimulated demand in financial markets more than in the real economy."
New York Times
When regulators punish companies for relatively small violations, do they help make the overall financial system safer? Law professor Peter J. Henning ponders this and other questions in an article about the tug of war between regulators and the Wall Street companies they oversee. "As one side threatens to crack down harder and the other side complains about too much enforcement, the question is whether there will ever be an equilibrium where both sides are satisfied," Henning writes, concluding that the answer is probably "nope."
Nobel Prize-winning economist Joseph Stiglitz and financial industry gadfly Anat Admati are among the bold-faced names arguing about the Fed's role in addressing income inequality in "Room for Debate." Several representatives from the conservative-leaning American Enterprise Institute make an appearance as well, including visiting scholar Edward Conard and resident scholar Michael Strain.