Receiving Wide Coverage ...
Are stress tests too easy?: Bank stress tests "are getting easier," the Wall Street Journal writes. That's because Federal Reserve officials "now envision a system where firms would generally only fail the test if their capital levels dipped below the level the Fed views as healthy — in other words for quantitative reasons, not qualitative ones. That likely means fewer test failures." Over the past three years, it notes, eight of the nine banks that have failed did so for qualitative, or subjective, reasons — only one did for having a low capital ratio.
Gretchen Morgenson, the New York Times' financial editor and columnist, says bank stress-test results shouldn't always be trusted. Looking at the recent failure of Banco Popular, Spain's fifth largest bank, she notes that as recently as last year the bank's stress test, conducted in cooperation with the European Banking Authority, "told a rosier story" than what was revealed recently, which showed the bank was undercapitalized.
The Financial Times looks at the U.S. stress test's "supplementary leverage ratio," which it says could impact how much cash banks would be allowed to return to shareholders. "Bankers are critical of the ratio, which is seen as especially punitive for some custodians and investment banks with chunky derivative books," it says.
Italy to the rescue: The Italian government agreed to provide an immediate €5 billion of taxpayer money to two failing regional banks. It also agreed to provide an additional €12 billion in guarantees to cover losses from the two banks' bad loans. The banks' good assets would be transferred to Intesa Sanpaolo, the country's strongest bank, for a nominal sum. Wall Street Journal, Financial Times, New York Times
One of the problems with European banks, the Journal's Heard on the Street column says, is that there are too many of them. "Overcapacity is a problem across Europe, more so than the U.S.," it says. "Europe should move faster to create a true single market for banking — like that in the U.S. That would help consolidation the most."
Wall Street Journal
No pay in P2P: Companies like JPMorgan Chase and Apple are willing to forgo profits on their person-to-person payments systems. "The reason: even if such services aren't profitable today, companies believe they are vital to getting and keeping consumers, especially coveted millennials."
Déjà vu: More than 20 years ago, when IBM "made the decision to embrace the internet and make it the centerpiece of its strategic directions," Irving Wladawsky-Berger, who worked at the computer giant for 37 years, said "The Internet has the potential to transform the economy, society and our personal lives." Now, he says, "when discussing the long-term potential of blockchain, I once more find myself saying something like: Blockchain has the potential to transform the economy, society and our personal lives."
Chilling effect: The Financial Choice Act may be a "potential heyday for the banking sector," but is a "blatant attack" on the rights of bank shareholders, says Madison Marriage, deputy editor of FTfm. While most of the coverage of the bill has focused on its rolling back many of the Obama administration's post-financial crisis banking regulations, the measure also includes "a set of proposals that would hinder investors' ability to file motions at shareholder meetings significantly," Marriage writes. "Limiting the ability to file shareholder resolutions to a handful of the biggest U.S. investment houses would be a huge step backwards for corporate governance practices. The Financial Choice Act is a blatant attack on shareholder rights, and any politician worth their salt should reject it."
New York Times
Improving credit reports: Starting July 1, about 12 million people will see their credit scores improve as the three major credit reporting companies "wipe from their records two major sources of negative information about borrowers: tax liens and civil judgments," the paper reports. "The change will benefit borrowers with negative public records, but it will also help thousands of people who have battled, often in vain, to have incorrect information removed from their files."
"We don't charge customers. So you all quite rightly will ask me, 'Well, what's the revenue model?' And the revenue model is that the customer is engaged on our banking app." — Gordon Smith, head of consumer banking at JPMorgan Chase, about the bank's P2P efforts.