Receiving Wide Coverage ...
Bad Day for Promontory: Get ready for a battle of the titans: New York's banking regulator versus financial consulting heavyweight Promontory Financial Group. New York's Department of Financial Services on Monday suspended Promontory from consulting with banks licensed in the state, accusing the firm of covering up the extent of Standard Chartered's sanctions violations in a 2011 report.
The action is a major blow for Promontory, a highly influential consultancy that's been called banking's "shadow regulator." The firm has vowed to appeal the DFS action in court. As American Banker noted Monday, the ban will likely impact only a few of Promontory's cases a year but could lead to significant reputational damage particularly since the firm's allure lies in its ability to work well with regulators.
The action also confirms the spirit of New York's recently departed financial watchdog Benjamin Lawsky lives on at the DFS.
The New York Times offers some backstory on how negotiations between Promontory and New York regulators broke down last week, as the consultancy resisted demands to admit wrongdoing or else assent to a temporary suspension in the state. The Wall Street Journal adds Promontory was pushing for a $20 million settlement without either of those conditions.
Meanwhile, the Financial Times interviews an anonymous "executive at a foreign bank in New York" who expresses surprise at the action, noting that Promontory's founder former Comptroller of the Currency Eugene Ludwig has "a lot of friends in high places."
First Libor Conviction: Former UBS and Citigroup trader Tom Hayes was found guilty of attempting to manipulate the Libor benchmark interest rate Monday and sentenced to 14 years in prison. Hayes is the first person to be convicted in the rate-rigging conspiracy.
The Journal describes him as a "mildly autistic mathematician whose quirky personality traits earned him the nickname 'Rain Man'" and reports the judge handed down an unusually harsh sentence in an attempt to deter future misbehavior on Wall Street. The FT adds that while the prosecution cast Hayes as a "calculating, greedy manipulator," his colleagues portrayed the former trader as a low-key, eccentric type who preferred hot chocolate over beer and often appeared disheveled at the office.
The Times says the verdict is a big win for British authorities, "who have been criticized in the United States for not being as aggressive as the Justice Department when it comes to pursuing financial crime." It may surprise some readers that Justice Department prosecutions are being used as a measuring stick, as the U.S. agency has itself taken heat for failing to prosecute top bankers involved in the financial crisis.
Wall Street Journal
A federal judge on Monday challenged the Securities and Exchange Commission's in-house court system, suggesting that the agency's method of appointing judges may be unconstitutional. U.S. District Judge Leigh Martin May said judges should be appointed by SEC commissioners rather than by employees lower on the totem pole. He gave the agency seven days to notify the court of any intention to change the system.
A few big banks are easing lending standards in pursuit of consumers' credit-card business, according to John Carney of "Heard on the Street." He predicts large institutions are likely to continue looking to expand credit cards as demand is up and delinquency rates are low.
U.S. regulators' efforts to rein in leveraged lending could put highly indebted companies in a tough spot, according to a Moody's report. The report suggests highly indebted companies may have a hard time refinancing their debt as a result of restrictions on banks' loan terms.
HSBC should take the money from the sale of its Brazil unit and invest it in something that will get shareholders' blood racing, the Lex team suggests. The column notes the bank's first-half performance in Asia looks fairly enticing, although that's not reflected in its share price.
New York Times
Catching money launderers is a challenge for financial institutions large and small, Peter J. Henning writes in his latest column. Citigroup's troubles with Banamex USA and its larger Mexican subsidiary get a shout-out, as does an alleged plot to take over a small New Jersey credit union in order to funnel proceeds from an illegal Bitcoin money-transmission business.