Yellen Says Banks Must Improve Risk Management; Banks Crack Down on PFM Site Access

Receiving Wide Coverage ...

Yellen Speaks: Risk management still leaves something to be desired at the largest banks, Fed Chair Janet Yellen said during a congressional hearing on Wednesday. "While we have seen some evidence of improved risk management, internal controls, and governance … compliance breakdowns in recent years have undermined confidence," Yellen testified before the House Financial Services Committee.

The 16 largest banks were Yellen's target and she pointedly told those banks (though not naming any explicitly) to address the issues "directly and comprehensively." Regulators haven't been satisfied with banks' submitted living wills and Yellen indicated she and the Fed may be considering a directive that banks make "significant changes" if the new round of living wills doesn't pass muster.

The New York Times, Financial Times and Washington Post attempted to parse Yellen's comments, body language, nervous tics, etc., for any indicator on how the Fed is leaning on the subject of raising interest rates. Good signals (if you want rates to rise): The economy is "performing well" and "it could be appropriate" to raise rates in December. Bad sign: Instead of focusing so much "on the initial move … markets and the public should be thinking about the entire path of policy rates over time," she said. And, she said, "no decision at all has been made" on whether to raise rates in December.

American Banker's coverage focused on the lack of an appointment of a vice chairman, small bank regulation, executive compensation and living wills. Wall Street Journal, New York Times, Washington Post, Financial Times, American Banker

Bitcoin Is Back: The Journal and Times each observe the price of bitcoin has risen of late. Does that mean bitcoin is here to stay? Some of the signs indicate it is. The Journal notes the European Union's decision to classify bitcoin as currency and not commodity could give the digital currency the establishment mark of approval it needs. It's also noted the numerous attempts by legitimate companies to study and implement ways to use bitcoin and/or blockchain technology could further its entry into the mainstream.

American Banker notes as much in a story about how USAA is incorporating a new technology into one of its products, to show users their current bitcoin balance. There's also bitcoin's steady rise in price over the past several weeks, climbing above $500 on some exchanges, the Times said.

But the FT has a story about growing interest in China in a "social financial network" called MMM that appears to be a pyramid scheme; new members of MMM must buy bitcoin to join it. The MMM network was developed by a Russian who has since been jailed for fraud. No wonder banks are so adamant that they're not researching ways to use bitcoin, but instead are looking at the underlying blockchain technology. Wall Street Journal, New York Times, Financial Times, American Banker

Wall Street Journal

Sites like Intuit's Mint, Envestnet's Yodlee and Credit Karma provide consumers with the ability to create a total view of their financial holdings. They do so by aggregating content from multiple financial institutions and synthesizing it into a single point of entry. To achieve this, aggregators ask users to provide their usernames and passwords to access their financial data from multiple providers. At least two big banks want to put a stop to this.

JPMorgan Chase and Wells Fargo have decided to make it much more difficult for aggregators to aggregate, unnamed sources told the Journal. These banks are becoming more protective of the customer information they hold and have started to limit the data they let aggregators access. JPMorgan and Wells Fargo recently shut down Mint's access to its customers' accounts for several days.

Banks say consumers are putting their financial data at risk, by placing a concentrated amount of their information in a single place. Of course, banks must have their own selfish reasons for wanting to put the kibosh on aggregators. Banks are facing competition from a growing number of well-funded startups, many of whom are trying to steal banks' business while at the same time using the banks' infrastructure.

About a year ago, American Banker reported how banks were growing wary of the concept of sharing data with these types of aggregation sites. Read AB's coverage on personal financial management (PFM) here and on screen-scraping here.

Bank of America calls Charlotte, N.C., its hometown. That doesn't mean its top executives actually work there. Brian Moynihan, chairman and chief executive, lives near Boston. B of A's chief operating officer, chief risk officer and general counsel all live in New York. The incoming chief financial officer and human resources chief also live in New York.

In total, 10 of the top 15 senior executives at B of A live somewhere other than North Carolina. That wasn't the case back in 2008, when a majority lived in Charlotte. The Journal notes Charlotte still outnumbers New York in total employee count, 15,000 to 10,000. And Boston is far behind both, with only 2,000 B of A employees.

The city-by-city comparison isn't just an exercise for chambers of commerce or hometown bragging rights. Analysts complain B of A's travel costs are elevated because of the dispersion of executives. Management experts also say there is a real value in face-to-face meetings and an overreliance on technology for employee meetings is a mistake.

B of A is unlikely to shift its HQ to New York or Boston (even though one of Moynihan's top lieutenants advised him to do that), because North Carolina's effective tax rate of 10% is less than New York's 25% rate and Massachusetts' 15% rate.

The Treasury Department may begin auctions of two-month securities, which they believe would be popular with money-market funds. One money manager with JPMorgan Asset Management said he would buy bills in that category, noting investors in short-term markets are "starved" for liquid and high-quality assets.

The Federal Trade Commission shut down four debt-collection companies, as it ramps up its campaign to target industry players that use harassing phone calls and false claims of lawsuits. Advocates for creditors' rights claim some of the firms shut down were unfairly targeted and their industry is "unfairly stigmatized."

New York Times

Jes Staley, the ex-JPMorgan Chase executive who's the incoming CEO at Barclays, bought about $10 million worth of the British company's stock. Staley is required, as an executive director of Barclays, to hold shares totaling at least four times his yearly salary; the purchase exceeds the threshold.