Banco Popular de Puerto Rico

Receiving Wide Coverage ...Nice Try, Guys: The Fed will require foreign banks with major operations here to house them in entities subject to the same capital rules as U.S. banks, central bank Gov. Daniel Tarullo said. The papers interpret his speech as a thinly veiled repudiation of Deutsche Bank and Barclays, which moved their stateside investment banking shops out of Fed-supervised holding companies to avoid having to inject them with billions of dollars. The Journal's "Heard on the Street" column calls the regulator's move prudent, considering that "the Fed had to lend billions of dollars to foreign banks during the financial crisis … The Fed is rightly taking the view that it, and U.S. taxpayers, can't risk being left holding the bag should parent companies be unable, or unwilling, to provide a backstop" — an unfortunately plausible scenario given the state Europe's in.

Receiving Wide Coverage ...Mortgage Morass, Continued: Bankers can be forgiven for mistaking the mortgage cops for a pack of raving hyenas that just won't end its pursuit. In the latest twist, the Justice Department argued Wednesday that the $25 billion mortgage settlement finalized earlier this year between the federal and state governments on one side and five big banks on the other doesn't buy Wells Fargo (WFC) immunity from being sued by the feds yet again over mortgage foreclosure practices, Bloomberg reports. Wells had earlier declared that it no longer regards itself as liable for the claims — a view DOJ lawyers termed "flatly inconsistent" with the terms of the earlier settlement. The current case, in a New York federal court, is premised on accusations that Wells officials originated loans insured by the Federal Housing Administration that they knew failed to meet its requirements and resulted in "substantial losses," says Bloomberg. The DOJ submitted its claims to U.S. District Judge Rosemary Collyer, who earlier this year approved the $25 billion pact. In another sign that that deal has done little to end the stream of mortgage-related lawsuits, another federal judge earlier this week ruled that the Federal Housing Finance Agency may proceed with cases charging Bank of America (BAC), Citigroup (NYSE: C), HSBC and Credit Suisse (CS) of wrongdoing in the sale of securities backed by residential mortgages. Bloomberg, Reuters, American Banker

Receiving Wide Coverage ...UBS Nears Libor Deal: UBS is expected to reach a settlement with U.K. and U.S. authorities over its involvement in the London interbank offered rate-rigging scandal by the end of this year, several news outlets are reporting this morning. Even more notable is the fact that this settlement is expected to supersede the $450 million Barclays agreed to pay over similar charges. (A unnamed FT source "close to the talks" estimates the fine is likely to be higher than $500 million.) UBS acknowledged that talks are underway, but declined to comment on the specifics. Should it pan out, a large settlement "would increase the likelihood that other financial institutions would face stiff penalties," the New York Times' Dealbook reports. The Royal Bank of Scotland is also apparently in "advanced talks" with regulators, though a resolution is less imminent. Financial Times, New York Times, Wall Street Journal

Receiving Wide Coverage ...SEC Sues Auditing Firms: The Securities and Exchange Commission is suing Chinese affiliates of the Big Four accounting firms Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers as well as BDO for failing to produce documents related to fraud investigations at nine China-based companies. Charges were filed against the auditors as part of a larger investigation into the Chinese companies themselves, following a string of "so-called reverse mergers" that led to billions of dollars in investor losses. Depending on how this plays out, the case could wind up having broad implications. The Journal reports the affiliates could wind up being barred from auditing U.S.-traded firms, which "could complicate the audits of multinational companies doing business in China." Meanwhile the FT says the move "could lead to the wholesale delisting of Chinese companies from the U.S. stock market" since it could leave Chinese companies in the U.S. without auditors. (The Journal actually echoes these concerns in a separate article.) Not surprisingly, the Big Four auditors say they plan on working with regulators to find a "diplomatic solution."

Receiving Wide Coverage ...HSBC Sells Insurer: Well, we knew this was coming. HSBC has sold its entire stake in Chinese insurer Ping An to the Charoen Pokphand Group, a conglomerate backed by Thai billionaire Dhanin Chearavanont. (Interesting to note, as most papers do, the group is primarily known for its agribusiness, not financial services, empire, "particularly the production of livestock feed, chicken farming and rice trading.") The deal netted HSBC $9.4 billion, which means, over the long haul, the bank is "is making six times what it paid for" the insurer. The sale is part of HSBC's ongoing effort to shed assets, cut costs and streamline its business. According to Dealbook, the bank "has sold more than 40 noncore assets and has booked about $4 billion in gains on those sales this year alone" following chief executive Stuart Gulliver's takeover at the beginning of 2011. Following the deal, Gulliver said ''China remains a key market for the group.'' The bank has expressed interest in increasing its stake in China's Bank of Communications, though it will need regulatory approval to do so. Wall Street Journal, Financial Times

Receiving Wide Coverage ...StanChart to Settle … Again: Standard Chartered expects to pay another $330 million in order to settle claims by U.S. agencies that it violated U.S. sanctions. Negotiations with the U.S. Department of Justice, the U.S. Treasury Department, the Federal Reserve and the Manhattan district attorney's office are currently underway and expected to close "very shortly." You may recall that the U.K.-based bank has already paid $340 million to settle rebel regulator Benjamin Lawsky's anti-money-laundering allegations related to transactions with Iran earlier this year. That charge will affect the bank's earnings in March, but StanChart still expects pretax profit to be roughly 5% higher than last year's $6.78 billion and, according to Finance Director Richard Meddings, the bank remains "firmly in growth mode." Wall Street Journal, New York Times, Financial Times

Receiving Wide Coverage ...Bonds, Bonds, Bonds: The FT and the Journal printed articles this morning that indicate the bond market is booming. According to the FT, "in order to lure conservative investors away" from the much maligned money market fund industry, fund management groups are launching (and pushing) "ultra-short" bond funds that will invest in short-term government and corporate paper. This type of investment vehicle, launched by six fund managers over the last few months and being eyed by several others, is worth considering because, as one manager told the paper, "it retains a lot of the features that give flexibility to money market funds, things like check-writing and no trading restrictions." But these investments may be short-term for a reason. According to the Journal's article — which also nods to a spike in investor interest in bonds over the past few years — some fund managers (perhaps, not the same ones the FT talked to?) believe there are "hidden dangers lurking" in the market. "Bond math dictates that losses will be magnified when interest rates are low, and when bond maturities are long, as they are now," the paper notes.

Wall Street JournalIn what is either an oversight or an extreme dislike of jargon, the Journal managed to write an 800-word article on the imminent expiration of the Transaction Guarantee Program (TAG) without once using the phrases "Transaction Guarantee Program" or "TAG." The gist is that the Senate would re-up the program, the Republican-dominated House won't, and small banks are seething and fighting for an extension.

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.