Banco Popular de Puerto Rico

Receiving Wide Coverage ...Laundry Bills: The whispers were out there last week, now it's official: HSBC has admitted it ignored signs of money laundering for years and agreed to pay a record $1.9 billion in a settlement with U.S. authorities. (Wall Street Journal, Financial Times, New York Times.) Fellow British bank Standard Chartered agreed to a $327 million settlement for violating U.S. sanctions against Iran, Libya and other nations (Journal, New York Times), bringing its total fines in this matter to $667 million. Crain's New York Business says the latest StanChart settlement vindicates Benjamin Lawsky, the New York financial regulator who was accused of going rogue when he went after the bank this past summer. The FT's "Lex" column finds the penalties paid by HSBC and StanChart unimpressive — a "rap on the knuckles." The paper's Business Blog says the settlements show "that what used to be regarded as these banks' biggest virtues — their exposure to emerging markets and new growth economies — are also weaknesses. … In emerging markets, retail banking and money transfer often have higher margins and growth ratings, but carry regulatory risks. HSBC got caught by not overseeing its Mexican operations rigorously." (Citigroup stakeholders, take note.) The Journal offers a mini-profile of Stuart Levey, HSBC's chief legal officer, who led the settlement talks with the U.S. And the Times reports on the bank's hiring of a former U.S. Treasury official to direct financial crime compliance, a newly created role.

Receiving Wide Coverage ...HSBC Settlement Redux: Wednesday was the tail end of the HSBC money laundering news cycle, with major papers scrutinizing the bank's $1.9 billion deferred prosecution agreement with the U.S. According to the 21 law enforcement officials, the bank's misconduct was egregious, sustained, and possibly willful. (Either that or nobody noticed when people started regularly showing up at Mexican HSBC branches with boxes of cash that fit precisely through the holes in the teller windows.) But HSBC's behavior wasn't termed criminal, because the government decided that there would be too much collateral damage and opted for a "deferred" prosecution. The FT delves into the terms of the deal more deeply than its U.S. counterparts, reporting that HSBC will spend "$700 million on a global "know your customer" program, one of 26 points of a compliance agreement. Click on any of the links in the paragraph above and you'll find HSBC chief Stuart Gulliver apologizing.

Receiving Wide Coverage ...Rates Tied to Unemployment: Holy mackerel. The Delphic confusion of Fedspeak past vanished from headlines on the central bank's policy statement Wednesday. Both the Journal and the Times went with "Fed Ties Rates to Joblessness," and FT wasn't far off (different font, different space to fill, presumably).

Receiving Wide Coverage ...UBS Settlement: The Swiss bank is negotiating a deal with international regulators in which it will pay $1 billion in fines for manipulating Libor, the papers report. UBS' Japanese unit will enter a guilty plea to a criminal charge, the first such capitulation by a bank in over a decade, according to the New York Times. "Federal prosecutors are trying to strike a balance," the paper says. "By levying a charge against the subsidiary, authorities send a powerful message, but stop far short of putting the company out of business" — a known hazard of indicting corporations for the actions of individual employees (see: Arthur Andersen). Wall Street Journal, Financial Times, New York Times

Receiving Wide Coverage ...AIG Is Having (Another) Share Sale: The newly private (or perhaps newly re-private) AIG is set to sell its shares in Asian life insurer AIA. Prices have yet to be set, but the sale is expected to net the company anywhere from $6.4 billion to $6.7 billion, depending on what paper you ask. AIG told Dealbook it will "sell the shares to institutional investors" and "use the proceeds from the deal for general corporate purposes," but other news outlets point out the firm has been "shedding noncore assets" steadily — just last week, the insurer announced plans to sell its 90% stake in an airplane leasing business — as it continues to pay off government loans. News outlets also point out AIG isn't getting out of Asia entirely, however. Last month, the firm said it plans to launch a joint venture with the People's Insurance Company (Group) of China. Wall Street Journal, Financial Times

Receiving Wide Coverage ...Facebook IPO Settlement: Morgan Stanley's paying $5 million to settle a Massachusetts probe of how it handled the Facebook IPO. According to a Journal story crosschecked between the state's attorney general's office and people "familiar with the matter," star tech analyst Michael Grimes wrote a script with detailed, non-public information for Facebook's CFO to share with investors. Then, in what might seem a cynical approach to dealing with Morgan Stanley's supposed Chinese walls, Grimes walked down the hall so that he was out of earshot when the CFO read it. "I took extra precaution to do that, and sat on the floor," Grimes later said, according to the Massachusetts order. The two takeaways from this one are: that Morgan Stanley's actions do appear to run against post-Spitzer prohibitions of selective disclosures and analysts in bed with bankers, and that nobody seems to care enough to do anything serious about it. Financial Times, New York Times

Receiving Wide Coverage ...UBS Fined in Libor Probe: An irony of the Libor probe is that it's looking nearly as choreographed and negotiated as the long-running rate manipulation that preceded it. Early this morning UBS and Swiss regulators announced the bank had agreed to a $1.5 billion settlement, and arrests of people connected with the Swiss bank are expected today, according to anonymous sources. RBS is next in line to settle, these same sources say. As for that $1.5 billion UBS fine: despite rolling over early in the international probe, the bank played a central role in the manipulation, anonymous investigators believe. A Japanese subsidiary stepped up to take a single fraud conviction, though that doesn't seem to risk bringing UBS down Arthur Andersen style.

Holiday Notice: The Morning Scan will publish next on Thursday, Jan. 3, 2013. Happy holidays from all of us at American Banker.

Receiving Wide Coverage ...The Fiscal, Uh, Valley: The budget deal reached at the beginning of this year extends an obscure but important tax break for U.S. banks that do business overseas, according to the FT. Under the "subpart F exception for active financing income" (rolls off the tongue, don't it?), income earned on certain transactions outside U.S. borders is taxed only when brought back into the country. The exception was introduced in the late 1990s as a "temporary" measure, but it's been extended every few years since. The latest extension is forecast to cost the Treasury some $9 billion this year. Megabank lobbyists argued, as lobbyists often do, that continuing the relief was necessary for U.S. companies to remain competitive with foreign firms taxed at lower rates. We suspect this news may rub salt in the wounds of some community bankers, in light of Congress' failure to similarly renew the also-originally-temporary TAG program, which expired at yearend. The big banks are in good company, though: "Hollywood, the railroad industry and rum producers" also retained tax breaks as part of the budget deal according to the Times. And the drama isn't even over yet: "Fresh Budget Fights Brewing," says the Journal); "Lawmakers Gird for Next Fiscal Clash, on the Debt Ceiling," per the Times. The Journal's "Heard on the Street" column warns investors that Wednesday's relief rally may be premature. The same point, more or less, is made in the Post: "Business leaders say the agreement won't ease economic uncertainty and warn that the market gains could evaporate once lawmakers move on to the next battle over raising the federal borrowing limit." On the Journal editorial page, economist Martin Feldstein faults the Fed's bond-buying program for (among other things) keeping long-term rates low and thus taking the pressure off Congress and the president to deal with deficits.

Receiving Wide Coverage ...Unease with Easing: How low can interest rates go? Maybe no lower than where they are now.