Receiving Wide Coverage ...
Dodd-Frank's Good and Bad Sides: Monday's stock market meltdown offered up a case study in how Dodd-Frank has helped banks and how it's hurt banks. The market madness also cast serious doubt on the Fed's plans to raise interest rates next month.
On the positive side for Dodd-Frank, banks have been forced to build up their defenses because of the law and they should be much better equipped to weather the storm of the next prolonged downturn. That, at least, was UBS analyst Brennan Hawken's argument in light of the stock market's bloodbath, in which bank stocks didn't fare well.
The KBW Bank Index fell 5.44%, worse than the 3.6% decline in the Dow Jones Industrial Average and the worst day for the Bank Index since November 2011, according to the Wall Street Journal.
Hawken argued banks shouldn't have taken it on the chin in the stock market's collapse. "Banks are meaningfully less risky than they were," he wrote. If the market agrees with Hawken, perhaps bank stocks will rebound, as investors come to the realization that banks have spent the past several years loading up on capital and, ostensibly, derisking their balance sheets.
"The banks are in a much better position than they have been," said Peter Kovalski, a money manager at Alpine Funds who invests in bank stocks.
Some market observers offered up the notion it might even be a good time to buy bank stocks. Five national and regional banks have seen their stock prices fall by more than 13% over the past month, according to Motley Fool. Those are Bank of America, Citigroup, Regions Financial, KeyCorp and BB&T. On top of that, B of A, Citi and Regions all trade at "substantial discounts to their book values," John Maxfield wrote for the Fool.
Then there's the bad. Dodd-Frank's Volcker Rule has made it difficult for banks to take advantage of market volatility, and Monday was all about volatility.
Before Dodd-Frank, "banks would be bathing in gold because of all the volatility," banking consultant Mayra Rodríguez Valladares told American Banker.
Instead, banks with large foreign-exchange trading desks likely weren't prepared for China's unexpected devaluation of the yuan and "wouldn't have had their hedges in place," Rodríguez Valladares said. Citigroup, JPMorgan Chase and B of A all have large forex desks.
Just in case you started to have the notion that perhaps Citigroup has turned a corner, Monday's madness should put a stop to those thoughts. Thanks in part to Citi's oversized exposure to China, Citi shares fell 6.1% on Monday, the biggest drop of the six largest banks. Citigroup reported exposure to China totaling $21.1 billion in the second quarter.
As for the Fed's plans to raise rates, Karen Shaw Petrou, managing partner at Federal Financial Analytics, told American Banker it's a foregone conclusion the central bank won't raise rates next month. Other Fed watchers agreed. Ted Truman, a former Fed official who now works for the Peterson Institute for International Economics, told the FT, "if anything, it will cause them to delay."
Not everyone is so convinced. The Fed doesn't want to be seen as being hog-tied to the gyrations of the stock market, Michael Feroli, a JPMorgan Chase economist, told the FT.
And in perhaps the strangest bit of news from Monday, Starbucks CEO Howard Schultz sent a memo to his company's 190,000 employees that baristas need to be nicer to customers because of the "increased level of anxiety and concern" they're experiencing from the market collapse, according to the Washington Post.
"Let's be very sensitive to the pressures our customers may be feeling, and do everything we can to individually and collectively exceed their expectations," Schultz wrote.
Wall Street Journal
A federal appellate court ruled the Federal Trade Commission can bring lawsuits against companies for not doing enough to protect consumers' data from cyber thieves. Companies must take steps to protect data, such as not leaving customer data unprotected by firewalls or using outdated software. The ruling came from a case brought by the hotel chain Wyndham Worldwide challenging the FTC's authority. Jig Patel, the new chief information officer at UMB Financial, said his first task at the Kansas City, Mo., company will be to implement Enterprise Technology Services, a "branded, centralized IT service provider" that will be used at all of UMB's operating units. The project will organize and rearrange information technology service for UMB, with the goal of improving reliability.
The paper profiles René Bruelhart, who's in charge of enforcing anti-money laundering lawsin Vatican City. As chairman of the Vatican's Financial Information Authority, Bruelhart is trying to implement a sweeping reform plan for the Vatican and its finances, although he's running into some opposition. "Where we have change, not everyone is going to be happy," he said.
Charlotte Observer: So you had started to put your bank's pneumatic tubes up for sale on eBay, because you thought drive-up lanes were dead, huh? Maybe hang on to those tubes a bit longer. Bank of America tried to kill off its drive-through lanes at its Myers Park neighborhood branch in Charlotte, N.C. But customers complained, B of A listened and the lanes are still open. University of North Carolina-Charlotte finance professor Tony Plath noted B of A's decision may be an isolated incident, since Myers Park is one of the most affluent sections of Charlotte and the bank wouldn't want to alienate those customers.
Sarasota Herald-Tribune: The paper notes that Florida's community banks didn't fare so well in the Independent Community Bankers of America's recent survey of social media offerings. Only the $1.6 billion-asset C1 Bank in St. Petersburg, Fla., made the list of Sunshine State banks doing notable things on Facebook, YouTube, LinkedIn and other socially suave sites.