Banco Popular de Puerto Rico

Receiving Wide Coverage ...More Time for Mortgage Modifications: The Obama administration's announcement Thursday that it will extend the Making Home Affordable Program for another two years comes "despite signs of revival in housing," the Times notes. The program, which gives financial incentives to lenders to modify the loans of eligible borrowers, "did not come near to fulfilling the administration's promise of relief for several million homeowners," according to the publication. As of March 31, the program had helped 1.1 million borrowers, although the administration initially had anticipated aiding three million to four million homeowners. The new deadline for the program, Dec. 31, 2015, aligns it with other mortgage relief that has been extended, including the Home Affordable Refinance Program and the Streamlined Modification Initiative, for mortgages that are guaranteed by Fannie Mae and Freddie Mac, the Times notes. New York Times, American Banker

Receiving Wide Coverage ...AIG vs. B of A: The battle over Countrywide's bad mortgage-backed securities continues as the New York State Supreme Court is set to hear arguments on Monday over whether the $8.5 billion settlement Bank of America reached with investors over the soured investments should be approved. Insurer AIG is leading opposition to the settlement, believing its sum should be much higher. The Journal calls the hearing "part of a broader battle … over which company should bear the brunt of losses suffered during the financial crisis." AIG is also pushing B of A to settle its separate $10.5 billion claim over mortgage-backed securities losses and "people familiar with the matter" tell the paper the insurer would drop objections to the investor settlement if the bank were to negotiate deal on those claims. The FT, which makes a point of noting that AIG and B of A collectively received $225 billion in government bailouts during the financial crisis, says denial of the settlement could ultimately saddle B of A with a bigger bill while approval, though "an important step forward" in the "subprime mortgage mess," is likely to be met by an appeal from AIG. This Lex column elaborates on what settlement approval would mean for the bank: "B of A faces other cases, but if this settlement stands, it will go a long way to clearing out the crisis-related clouds that have followed the bank."

Receiving Wide Coverage ...Systemically Important: The Financial Stability Oversight Council took an important step toward implementing a key provision of Dodd-Frank when it voted on a proposal to designate a group of nonbank financial firms as systemically important on Monday. FSOC isn't saying what companies made the list just yet, but AIG, Prudential and GE Capital have disclosed that they received the designations. These firms now have 30 days to fight the proposal. Per reports, GE is reviewing the details and Prudential is evaluating an appeal. AIG wasn't commenting, but Bloomberg points out the insurer "previously said it wouldn't oppose such a ruling." The Journal cites "concern about companies forcing hearings or bringing lawsuits" as "one of the reasons it has taken regulators so long to name the first round of nonbanks." Of course, resistance may ultimately prove futile. As American Banker reported earlier, "While it's likely any number of the companies named will protest the decision, their ability to successfully reverse it is slim." And there's some debate over whether these companies should want to. Similar to arguments surrounding systemically important banks, some analysts suggest the designation serves as an implicit guarantee that the government will bail out the firm should it get into trouble, which, in turn, could create a competitive advantage, the Washington Post notes. Others, however, believe the additional oversight from regulators could help reduce risk in the financial sector and stave off another crisis. In either case, yesterday's vote is only the beginning. Per an unnamed source cited in the Post article, "Monday's vote is the first of many to come as the council considers whether to include several other nonbank firms." Insurer MetLife is also expecting to receive the designation at some point.

Receiving Wide Coverage ...HSBC Hit with Foreclosure Suit: Eric Schneiderman has struck again. This time it's at HSBC, which, on Tuesday, became the latest bank on the receiving end of a lawsuit from the New York Attorney General. This lawsuit accuses HSBC of ignoring a state law by failing to file forms that would have entitled homeowners facing foreclosure to loan modification negotiations. The Journal reports Schneiderman "may bring actions against other banks over the behavior he alleged against HSBC." He is also still "eyeing" lawsuits against Bank of America and Wells Fargo for violating terms of the national mortgage settlement. (American Banker readers will recall the NY AG's initial attempt to pursue the litigation against Wells and B of A was hampered by his own paperwork problems.) For HSBC, the suit is the "latest legal setback in the U.S.", the FT notes, following last year's settlement with regulators over money-laundering charges. Regarding Schneiderman's lawsuit, "the good news is that alleged offense is the kind that banks habitually get in trouble over," the FT's Lombard column argues. "And for HSBC that marks a kind of moral rehabilitation."

Receiving Wide Coverage ...SEC's Money Market Plan: The Securities and Exchange Commission has (finally) proposed rules to overhaul the money market fund industry. The rules present two alternatives. One would require prime funds to abandon their $1 fixed share price and use a floating net asset value, allowing share prices to reflect changing market-based value. The other permits stable share prices, but would impose temporary suspensions (or "gates") and 2% liquidity fees on redemptions in times of crisis. The proposals will now be subject to a 90-day comment period. "A key test will be whether they survive … continued efforts by the mutual-fund industry to scale them back," says the Journal. The industry could have faced a tougher battle. "The proposal is less sweeping than the approach initiated last year by then-SEC Chairman Mary Schapiro," the Washington Post notes, and general consensus from observers seems to be that the proposed reforms don't go far enough. This Journal op-ed criticizes, among other things, the plan's failure to remove endorsements of credit-rating agencies from money-fund rules and the SEC's alternate proposal to erect gates hindering investors from selling shares during a crisis. "These [gates] look like new triggers that could inflame a panic," the op-ed notes. "Just as 'breaking the buck' added to the drama of 2008, we wonder if regulators won't be on weekend conference calls fretting over a potential 'shutting of the gate' at some large fund in the future." On the plan as a whole, one consumer advocate tells Dealbook: "It is really worse than no reform at all because it's false comfort. It's like putting in a nice shiny fire alarm system in a building that doesn't work."

Receiving Wide Coverage ...Libor Update: Some big Libor news this Friday morning, courtesy of the Wall Street Journal — U.K. and U.S. authorities are preparing to file criminal charges against former Barclays employees for their alleged roles in the London interbank offered rate-rigging scandal. Sources familiar with the matter tell the paper charges are "likely to be filed this summer," but that "the plans aren't finalized and could be delayed or modified." The sources don't appear to be naming names (or specifying what the charges will be), but authorities are believed to be targeting "midlevel traders," not top-tier execs. The article notes "the planned criminal cases indicate that government investigations into Libor manipulation, which have been under way since 2008 and until now have targeted mostly institutions rather than individuals, are moving into a new phase." It also mentions that more legal settlements between regulators and other banks are expected this summer. In other Libor news, the Financial Times' banking editor Patrick Jenkins shares his thoughts on the European Union's push to move Libor out of London and under the oversight of the Paris-based European Securities and Markets Authority. "Esma … may not have the power or resources to intervene directly, according to one U.K. official," he writes. "Even if these proposals ever materialize as rule changes, it seems the consequences will be largely symbolic and political rather than material."

Receiving Wide Coverage ...Big Brother and Banking: The financial services industry has made a few cameos in the unfolding story of the National Security Agency's vast surveillance of phone "metadata" and Internet communications. First, Edward Snowden, the (probably now former) Booz Allen contractor who leaked NSA documents to the Guardian and the Washington Post, says he grew disillusioned while working for the CIA in Geneva in 2007. "CIA operatives were attempting to recruit a Swiss banker to obtain secret banking information. Snowden said they achieved this by purposely getting the banker drunk and encouraging him to drive home in his car. When the banker was arrested for drunk driving, the undercover agent seeking to befriend him offered to help, and a bond was formed that led to successful recruitment." A Times article notes that Palantir, a tech firm founded by PayPal vets including Peter Thiel, has been a key partner for the spy agencies. The same article says U.S. privacy laws "offer virtually no protection to … non-telephone-related data like credit card transactions." And the Journal reports the NSA has indeed "cataloged credit-card transactions," though it's unclear if the "credit card companies" giving the agency this data are issuers or networks, since none of those "credit card companies" are named.

Receiving Wide Coverage ...Overzealous Overdrafts: As if it weren't tough enough to be a commercial banker these days, the Consumer Financial Protection Bureau is taking aim at account overdraft fees—a $32 billion source of industry revenue. In a report released early Tuesday, the agency criticizes U.S. banks for everything from confusing consumers with overdraft fee rules to reordering transactions to increase the fees individual customers pay, the Wall Street Journal reports. "What is marketed as overdraft protection can, in some instances, put consumers at greater risk of harm," Richard Cordray, the CFPB's acting director, told reporters during a heads-up briefing prior to the report's official release. "Consumers need to be able to control their costs and expenses, and they deserve clarity on those issues," he added. Cordray said the consumer bureau is not making a policy recommendation per se but will continue to examine the issue, the Washington Post said. The CFPB found that heavy users of overdraft coverage pay about $900 a year more than consumers who don't incur overdraft fees. The bureau over a year ago put out a request for information and began studying how the banks it supervises were charging the fees. Banks with less than $10 billion in assets were excluded from the study. The CFPB's just-released report zeroes in on the big banks, which usually charge higher overdraft fees than smaller banks. At banks with more than $25 billion in assets, the median overdraft fee was $35 at the end of 2012, the Journal says, citing statistics from Moebs Services. Banks with less than $100 million in assets charged a median price of $25. Even so, community banks are even more heavily reliant on overdraft fees to generate revenues than are their larger rivals, the CFPB said, citing industry research. The bureau's latest scrutiny of overdraft fees comes three years after a Federal Reserve crackdown, which prohibited banks from allowing customers to automatically overdraft checking accounts and incur high fees in the process. The move was portrayed at the time as seeking to prevent consumers from getting hit with $35 overdraft fees for $3 lattes. Bad publicity and the 2010 regulatory squeeze have prompted many big banks to reduce their reliance on overdraft fees and encourage customers who rack up a lot of them to take their business elsewhere, the Journal says. Since 2007, nearly 24 million checking-account customers have switched from big banks to small banks and credit unions, it adds, quoting Mike Moebs, chief executive of Moebs. "They've lost checking accounts and they've lost them on purpose," he said. Wall Street Journal, Washington Post, Politico, American Banker

Receiving Wide Coverage ...Dodd-Frank's Swap Trading Transition: The Office of the Comptroller of the Currency has sent letters to some of America's biggest banks granting them a two-year transition period to comply with a Dodd-Frank requirement that could curtail swap trading, Reuters reports. The rule, the wire service says, "attempts to keep certain risky trading activity out of entities that receive government backstops, such as deposit insurance or access to the Federal Reserve's discount window." The Wall Street Journal quoted Kenneth E. Bentsen Jr., president of the Securities Industry and Financial Markets Association, saying: "The action from the OCC gives them clarity on what they need to do, and when they need to take action, to restructure this part of their businesses." New York Times, Wall Street Journal

Receiving Wide Coverage ...Royal Goodbye: Royal Bank of Scotland is pushing out its chief executive, Stephen Hester, and cutting about 2,000 jobs as the bank's board tries to get ready to wean itself off the British government's 81% ownership stake. Hester has recently "clashed with [RBS Chairman Philip] Hampton and senior government officials over the bank's strategy," anonymous sources tell the Wall Street Journal. Hester is the sixth British big-bank CEO to get the ax since the financial crisis, the Journal notes, and consensus is that he's the least deserving. RBS shares fell 6% after the announcement. Lex says "shareholders have a lot to thank" him for, while Reuters' Felix Salmon noted an unusual outpouring of Twitter sympathy for Hester.