Receiving Wide Coverage ...
Beyond Basel: U.S. regulators proposed Tuesday that the nation's biggest banks adhere to a 5% leverage ratio with their FDIC-insured bank subsidiaries subject to a 6% ratio, double the requirement set by Basel III. The Journal calls the proposal "the first in a series of steps regulators plan to take to address ongoing concerns that banks remain so large, complex and interconnected that they could require another government bailout in the event of a future crisis." The FT notes "the U.S. plan could refocus pressure on other jurisdictions where banks continue to operate with relatively low leverage ratios." Several news outlets cite a Keefe, Bruyette & Woods analysis that shows only two of the eight firms affected by the U.S. proposal Bank of America and Wells Fargo currently meet the new threshold. Under the plan, banks facing capital shortfalls "have until the end of 2017 to comply with the higher requirements," the Times reports, but the article notes regulators' "latest push could meet fierce resistance, however." In fact, the proposal has already garnered criticism. "On one side are some top regulators, including Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig, and some lawmakers on Capitol Hill who argue the plan does not go far enough," reports American Banker's Donna Borak. "On the other are bankers and their representatives who contend the proposal is excessive."
A Systemically Important Decision: U.S. regulators kept pretty busy yesterday. The Financial Stability Oversight Council voted to formally designate nonbank financial firms AIG and GE Capital as systemically important. ("Wait, AIG is systemically important?" tweeted Buzzfeed business reporter Matt Zeitlin. "Why didn't someone tell us earlier!") The two companies, which have decided not to fight the decision, will now be subject to additional U.S. oversight, heightened capital requirements and Dodd-Frank's living will provision. The Journal reports FSOC's "concern about a potential run on [AIG's] resources" signal Prudential Financial which plans to appeal its designation as systemically important "might have trouble convincing the panel it isn't systemically important," citing Prudential as a larger life insurer than AIG. The paper also says MetLife is widely expected to receive strong consideration for the designation in coming months.
Libor Update: The Washington Post and the New York Times, among others, are now also reporting that stock exchange operator NYSE Euronext will take over supervision of the London interbank offered rate. "The London Stock Exchange must be mortified to have lost the contest to manage [Libor]," notes Jonathan Guthrie in the FT's Lombard column. "Like NYSE it had the advantage of a focus on market users. But the LSE may have fluffed it by teaming up with Thomson Reuters, on whose watch benchmarks were scammed by traders."
Stay Tuned: The Securities and Exchange Commission's civil case against former Goldman Sachs officer Fabrice Tourre is set to start next week. Tourre is charged with misleading investors about a synthetic collateralized debt obligation. "For the SEC, an agency still dogged by its failure to thwart the crisis, the trial is a defining moment that follows one courtroom disappointment after another," notes the Times in its curtain raiser. Meanwhile, the Journal reports that Tourre's lawyers have moved to "exclude several colorful emails that securities regulators say are pivotal to their case including one in which he dubs himself 'the fabulous Fab.'"
Wall Street Journal
This news should come as no surprise to American Banker readers: An internal review conducted by JPMorgan Chase "shows that errors occurred as the bank sued its credit-card users for the delinquent amounts."
The European Union is set to propose having sole authority when it comes to winding down failed banks in the Eurozone.
UBS has overtaken Bank of America as the largest wealth manager in the world.
Investors are "sanguine" heading into second-quarter bank earnings reporting season, which kick off on Friday, "That is probably fair," says this Lex column: "Valuations are not insane and higher rates and a better U.S. economy have historically been good for banking."
New York Times
Another story you may be familiar with: "Federal regulators are cracking down on questionable debt collection practices by some of the nation's biggest lenders."
Bank mergers are what's really killing bank branches: "A number of large banks in the same markets have merged like Wachovia and Wells Fargo, or BB&T and Colonial and decided to save on real estate costs by closing down branches."
Wells Fargo has become the subject of some bad press after reports surfaced that it is refusing to honor $10,000 in cashier's checks a now-ill man purchased from Central Fidelity Bank in Virginia back in 1982. "Wells Fargo which now owns Wachovia, which had previously acquired Central Fidelity claimed it had no record of these checks and refused to honor them, even after a court ordered it to," explains The Consumerist. Wells has appealed the court ruling, "claiming that Florida law sets a five-year limit on cashier's checks."