Banco Popular de Puerto Rico

Breaking News This MorningHSBC Faces New Inquiry: British tax authorities say they are looking into a list of HSBC clients with bank accounts in Jersey, the largest island in the English Channel, after receiving a tip from a whistle-blower. The data allegedly shows that "drug dealers, gun runners and bankers facing major fraud investigations had accounts with the bank in Jersey," the FT reports. HSBC told the Times it was aware (and subsequently looking into) a client data breach, but that it has not been formally made aware of the external investigation yet. The bank added it plans to "cooperate fully" with the authorities.

Receiving Wide Coverage ...Burying the News 101: It's a PR trick as old as Wall Street. If you're going to release ugly news, do it when nobody's watching. That appears to be the play Citigroup (NYSE:C) called late Friday when just before Veteran's Day weekend it disclosed that its recently ousted chief executive, Vikram Pandit, will receive $6.7 million in pay for 2012. That's on top of $8.8 million for 2011, bringing Pandit's two-year total north of $15 million, notes the Financial Times. Pandit's right-hand man, John Havens, who was forced out at the same time from his position as Citi's president and chief operating officer, will receive $6.8 million for the current year. Pandit's payout is the latest upswing in what has proven a highly volatile paycheck during his Citi tenure. The banking company paid $800 million for the former money manager's hedge fund, Old Lane Partners (which it promptly shut down), prior to naming him CEO. Pandit later agreed to work for $1 in 2010 as Citi struggled to survive with the help of a $45 billion government bailout. As CEO, Pandit shrank and stabilized Citi'’s operations but was also criticized for a number of miscues. They included submitting a request to pay a shareholder dividend that was rejected by regulators. His own pay package was also rejected by Citi shareholders earlier this year. Citi Chairman Michael O'Neill was widely credited with orchestrating an October surprise and firing Pandit and Havens one day after the company released its quarterly earnings. On Friday, O'Neill said in a written statement that "Vikram steered Citi through the financial crisis, realigned its strategy, bolstered its risk-management processes and returned it to profitability ... We remain grateful for [Pandit's and Havens'] contributions and wish them well." To the extent that they're noticed, the payments to Pandit and Havens are likely to bolster Citi's reputation for miscues within its senior ranks and boardroom. Just a year ago, Citi's directors awarded Pandit a multimillion-dollar pay package to ensure he'd remain at the helm for at least four more years, the Journal notes. Since Pandit's departure "the mood among some senior executives has been grim," the New York Times reports, citing several people close to the bank. "The executives felt that the board's actions last month were particularly brutal and humiliating to Mr. Pandit, considering his role in reviving the bank." It seems the mixed messages from Citi are destined to continue. Pandit received nearly $7 million in performance pay for the current year, but he will forego severance and is prohibited during the next year from working for 13 rivals. They include Bank of America (BAC), JPMorgan Chase (JPM) and Wells Fargo (WFC). New York Times, Wall Street Journal, Financial Times

Receiving Wide Coverage ...Basel: Following U.S. regulators' delay in implementating Basel III, the Journal presents two different views on the international capital standards' applicability in this country. In the "Heard on the Street" column, David Reilly focuses on the Basel III requirement that capital calculations include unrealized gains or losses on securities. Community banks want to be exempt from this rule (along with the rest of Basel III), arguing that since they intend to hold most securities to maturity, counting paper gains and losses would paint an unnecessarily volatile picture of capital. But Reilly argues that granting this particular exemption would be a mistake. "As many banks learned during the financial crisis, market storms have a way of swamping intentions. A bank facing a funding crunch may be forced to sell holdings, and recognize losses, even if it didn't originally plan to do so." Transparency is particularly important now, as banks try to compensate for low rates and squeezed margins by loading up on ever-longer-dated securities, Reilly says. An editorial in the Journal, on the other hand, says the U.S. should follow FDIC director Thomas Hoenig's advice and scrap Basel altogether. The writers take particular issue with the capital standards' complexity and incentives for banks to invest in particular instruments, such as sovereign debt. "What banks should own are assets that are judged safe by markets, not by politicians or regulators. The world has already run the latter experiment, with disastrous results" (i.e., the mortgage bubble, which previous iterations of Basel are said to have abetted by encouraging banks to pile in to supposedly safe triple-A-rated mortgage securities).

Receiving Wide Coverage ...Money Market Funds Redux: Take 2 on money market funds is coming from the Financial Stability Oversight Council. The SEC couldn't get its act together on regulating money market funds — which have a longstanding tradition of telling investors they have a fixed value even though they kinda don't — so FSOC's stepping in. The council has told the SEC to pick the issue up again, though it's not being didactic. The SEC still can choose whether a floating net asset value or capital buffers would be appropriate. But if the agency doesn't act, the FSOC says it will. The concern for the money market industry is that, at some point, regulators get so fed up that the FSOC simply delegates the issue to the Federal Reserve and imposes a fluctuating asset value on the funds. That's "the easiest solution," one expert tells the Washington Post. While the mandate to the SEC is being viewed as the first instance of the FSOC flexing its muscles, we're not sure that it's proof of the council's robustness. Ever since a major fund "broke the buck" during the financial crisis and caused a massive dislocation in the short-term credit markets, pretty much everyone aside from the funds themselves has agreed that money markets are in clear need of greater regulation. The Financial Times provides a reminder of how slow and cautious the FSOC process is: the body is still working to determine whether AIG is systemically important, though the determination is under "advanced consideration."

Receiving Wide Coverage ...The Next Bailout? The Journal and the Times report today that the Federal Housing Administration's annual report, due later this week, will show that its financial condition has worsened considerably. The Journal story prominently suggests the agency may need to draw on taxpayer funds, a prospect downplayed somewhat in the Times article. If you're feeling déjà vu, it may be because on Tuesday American Banker's Kate Berry reported that the FHA was facing its own fiscal cliff.

Receiving Wide Coverage ...Stress Tests: The Fed released the scenarios for the next round of modeling exercises mandated by Dodd-Frank for 30 or so large banks. The hypothetical economic shocks this time include a sharp slowdown in China. An industry lobbyist tells the Journal that these theoretical stressors are "the most extreme to date." But Times columnist Peter Eavis wonders why 1970s-style runaway inflation isn't considered in the stress tests. Remote as that scenario may be, "stress tests are meant to capture the unexpected. Remember that housing crash hardly anyone foresaw?" Unlike the last two rounds of stress tests, this time the Fed will let banks whose dividend or share-buyback requests would cause them to fail the tests avoid embarrassment by revising their plans before results are published. Wall Street Journal, Financial Times, New York Times

Receiving Wide Coverage ...For Sale: HSBC is in talks to sell its stake in China's Ping An Insurance, which is worth $9 billion to $9.5 billion, depending on which paper you believe. A deal could net the bank around $7.5 billion. The FT name drops "Thai billionaire Dhanin Chearavanont, who controls the Charoen Pokphand Group" as a potential buyer. While the move is apparently not in line with HSBC chief executive Stuart Gulliver's statement last year that he had no intention of selling its big stake in Chinese companies, it does fit in with his modus operandi of making "streamlining HSBC's sprawling global operations and increasing profitability" a priority. Papers also attribute the sale to stricter capital requirements set to go into effect next year that make holding a stake in financial institutions more "onerous." HSBC is, however, likely to retain its stake in other Chinese companies, including in the Bank of Communications. Financial Times, New York Times, Wall Street Journal

Receiving Wide Coverage ...JPMorgan Shuffles in New CFO: JPMorgan Chase has named Marianne Lake as its new chief financial officer. As this American Banker article points out, the appointment of a new CFO was to be expected, given Doug Braunstein's apparent demotion back in July following the more than $6 billion in trading losses caused by the London Whale. (It should be noted that, on the record, the bank's CEO Jamie Dimon is telling news outlets the move has "nothing" to do with the trading losses and that Braunstein is transitioning to a role as vice chairman at the company in order to return "to his true love of investment banking.") The selection of Lake, on the other hand, was a bit less predictable, given the current financial chief of JPM's retail banking unit is, as Reuters notes, "a little-known executive" within the financial institution. (Other internal candidates up for the job included commodities chief Blythe Masters and Lou Rauchenberger, a top aide within the corporate and investment bank.) It also bucks the trend "of large banks often looking outside their finance departments for their CFOs lately," the Journal says. Dimon listed Lake's talent with numbers, high IQ and experience "on the consumer side and wholesale side" among her strengths while discussing the appointment. And, while he also maintained appointing a woman to the finance-chief job "wasn't a consideration at all," many news outlets were apt to give a nod to JPM for promoting gender equity in the C-suit, with the Journal and the Times quick to anoint Lake one of the most powerful women on Wall Street. As American Banker magazine Editor in Chief Heather Landy tweeted "Marianne Lake may not be the 1st female CFO of a giant U.S. bank - see @SallieKrawcheck - but this still feels like a big leap for womankind."

Receiving Wide Coverage ...Schneiderman Strikes Again: More details have emerged regarding New York Attorney General Eric Schneiderman's mortgage-backed securities case against Credit Suisse, now that it has formally been filed, and while there are definite nuances and different key players, the general gist of the allegations may sound a bit familiar. To summarize, prosecutors allege the investment bank misled investors about the quality of the home loans that made up its mortgage securities back in 2006 and 2007. In another bout of déjà vu, there are also apparently incriminating staff emails to back these claims up. (See American Banker's candid crisis catchphrases slideshow for a good refresher on earlier examples of internal correspondence gone awry.) Credit Suisse is rejecting the complaint, saying (and this might also ring a bell) that it "recycles baseless claims from private lawsuits" and uses an "inaccurate and exaggerated" number. (Schneiderman is seeking damages related to $11.2 billion in losses.) But perhaps the most important thing to note, post-filing, is that the attorney general reinforced his pledge to pursue legal action against "other institutions" for mortgage-related wrongdoing. And a New York state law with a 10-year statute of limitations provides him with plenty of time to do so. Financial Times, Wall Street Journal, Washington Post, American Banker

Receiving Wide Coverage ...Breakthrough in MMF Debate: You might have missed this over the long holiday weekend: Charles Schwab is now backing reform of money market mutual funds. Specifically, the brokerage's CEO, Walt Bettinger, wrote in a Journal op-ed that his company would support requiring a floating net asset value for "institutional prime" money market funds. "Institutional" meaning funds whose shares are concentrated in the hands of relatively few holders, making them more prone to runs than more-distributed retail funds. "Prime" meaning funds that invest in riskier paper, like corporate obligations, making them more likely to "break the buck." The "nonprime" MMFs, which invest in safer stuff like Treasuries, could continue to report a stable NAV of $1 under Schwab's plan, as could "retail prime" funds, though the latter would be subject to additional oversight. (Funny how in MMF-land, "prime" and "nonprime" mean more or less the opposite of what they mean in lending.) Schwab manages institutional and retail prime funds, so its break from the industry pack to propose a compromise with reformers could be viewed as a "Nixon in China" moment. Or it could be viewed as Schwab blinking, given that the Financial Stability Oversight Council recently put its weight behind reform. The Journal's editorial board, which favors floating NAVs for all money market funds, nevertheless lauded Schwab's openness to change.