Banco Popular de Puerto Rico

Receiving Wide Coverage ...Fallout from RBS's Hester Ousting: The Royal Bank of Scotland's firing of its chief executive, Stephen Hester, will send bank staff morale "to rock bottom," the Financial Times reports, and more defections are expected. In a related note, RBS announced Thursday it would wind down its remaining equities sales and trading businesses and will cease to offer structured retail investor products and equity derivatives; this is expected to lead to 2,000 job cuts. The New York Times' Dealbook reports British lawmakers are displeased with Hester's departure. One Labour politician, Chris Leslie, "accused the government of a 'shambolic and uncertain approach' to the bank," according to the paper.

Receiving Wide Coverage ...Co-op Bank 'Bails In' Bondholders: As part of its efforts to raise an additional $2.4 billion in capital, U.K. lender Co-operative Bank is asking subordinated bondholders to swap their debt securities for shares in the bank. "By requiring bondholders to exchange their debt securities for shares, Co-operative Bank is trying to avoid turning to the British government for help," Dealbook notes. Participation in the swap is currently voluntary. Analysts tell the Journal "there could be legal issues" if bondholders are forced to participate. Few details are being offered about the exchange, which is expected to take place in October. Co-op Bank CEO Euan Sutherland did issue this statement: "This solution, under which [bondholders] will own a significant minority stake in the bank, will then allow them to share in the upside of the transformation of the bank." The bank will gain a quote on the London Stock Exchange for shares given to debtholders, according to the FT's Lombard column, which notes "the Rochdale Pioneers, who created the Co-op in the 19th century as a proto-socialist counter balance to proprietary businesses, must be spinning in their nonconformist graves."

Breaking News This Morning ...Charges Filed: The U.K.'s Serious Fraud Office has charged former UBS and Citibank trader Tom Hayes with eight counts of fraud in connection with the London interbank offered rate-rigging scandal. The charges represent the first time U.K. authorities have pursued criminal penalties against someone allegedly involved in the manipulation of Libor, says the Journal. Per the FT, the move sets up "a potential conflict" between the U.S. and the U.K. since Hayes is already facing charges from the Department of Justice and, generally, "criminal matters are resolved in a defendant's home country before any extradition request is considered." Dealbook notes Hayes "figured prominently" in the $1.5 billion UBS Libor settlement this December. The news outlets don't indicate whether other individuals will find themselves facing similar allegations, but the Journal previously reported that sometime this summer U.K. and U.S. authorities are expected to file criminal charges against former Barclays employees for their alleged roles in the Libor scandal.

Receiving Wide Coverage ...Consultant Crackdown: Deloitte Financial Advisory Services has struck an agreement with New York's Department of Financial Services that will see the advisory firm pay $10 million and receive a one-year ban from soliciting new work in the state in order to settle allegations it mishandled its anti-money laundering review of U.K. bank Standard Chartered. The agreement, which also requires Deloitte "to implement reforms designed to address conflicts of interest," is part of DFS leader Benjamin Lawsky's "unparalleled crackdown on independent consulting firms." According to the FT, Lawsky used an obscure state banking law "to revoke consultants' access to confidential supervisory information if the access does not 'serve the ends of justice and the public advantage.'" In a statement, New York Governor Andrew Cuomo said the move against Deloitte was laying the groundwork for broader change in the financial services consulting industry. However, there's no real consensus yet on whether other states or federal authorities will follow Lawsky's lead or if it's time to dust off his old nickname. While he was taking action against Deloitte, Dealbook notes, the Federal Reserve was ordering a large regional bank to hire a consulting firm to go through high-risk customer accounts. "It is unclear whether actions by state regulators like Mr. Lawsky — who has a history of irking his federal counterparts by running ahead of them — portend an overhaul of the consulting industry or a coming clash of state and federal banking regulators," the article (semi-)concludes.

Receiving Wide Coverage ...U.K.'S Capital Needs: British regulators have told their biggest banks to raise a combined $20.7 billion in capital by the end of the year to cover shortfalls. The announcement builds on earlier capital directives from the Prudential Regulation Authority, which has been attempting to bolster banks' balance sheets in an effort to stem off future financial shocks. Barclays, Royal Bank of Scotland and Lloyds Banking Group, which would need to raise the bulk of the $20.7 billion, told the Journal they "would sell assets and shrink parts of their businesses to address the shortfalls, and won't need to issue new shares." In other U.K. banking news, Chancellor of the Exchequer George Osborne said he would consider a proposal to split RBS into "good" and "bad" banks in order to deal with toxic loans. He also hinted that the U.K.'s stake in Lloyds was now being prepared for a sale. New York Times, Financial Times

Receiving Wide Coverage ...Lawsky Strikes Again: Benjamin Lawsky has certainly had a busy week. The New York state regulator followed up his $10 million Deloitte settlement with a $250 million settlement with Bank of Tokyo-Mitsubishi UFJ over money-laundering allegations on Thursday. True to form, the settlement upstages an $8.5 million fine the Japanese bank paid to federal regulators last December. (Scan readers will recall that last year, Lawsky reached a $340 million money-laundering settlement with the U.K.'s Standard Chartered last August. The move preceded a $330 million settlement with federal agencies in December.) In the Bank of Tokyo settlement, "the disparity stemmed partly from the wider latitude that Mr. Lawsky has to dole out punishments on the banking industry," Dealbook explains. "The Treasury Department is somewhat hamstrung by a quirk in federal law that permitted certain transactions with Iran until 2008." Law quirks aside, Lawsky's latest action, which could unsettle regulators globally, has drawn ire from those on Wall Street and in Washington. "The contrast reinforces the perception that the feds are going light on large financial institutions, and that Lawsky is out to fill the vacuum where he can using New York state laws," argues Bloomberg columnist Jonathan Weil, following up an earlier op-ed entitled "World Needs More Hardheads Like Benjamin Lawsky." And New York magazine's Kevin Roose offered this more diplomatic assessment of New York's rebel regulator, prior to the Bank of Tokyo settlement: "There's a bit of populist grandstanding in Lawsky's approach, of course … But for years, many of the regulators who are supposed to be enforcing the law on Wall Street have been lulled into inaction by their fear of doing the wrong thing. And, in that context, Lawsky's hard-headed crusade for justice makes him one of the most fascinating people around." Financial Times, Wall Street Journal

Receiving Wide Coverage ...Stuck in the Middle: Banks are once again caught between a crusading regulator and a frowned-upon fringe of the financial industry. New York Department of Financial Services Superintendent Benjamin Lawsky warned 35 online lenders to stop offering loans that violate the state usury cap, and asked 117 banks to stop these lenders from debiting borrowers' accounts via ACH. "Banks have proven to be — even if unintentionally — an essential cog in the vicious machinery that these purveyors of predatory loans use to do an end-run around New York law," Lawsky said. According to the Times, JPMorgan Chase "is now reporting lenders that try to make unauthorized withdrawals" to Nacha, the group that oversees the automated clearing house system. (Recall that back in February, Chase was prominently featured in a Times article fingering banks for continuing to automatically debit borrowers' accounts even after the customers asked them to stop.) Not to be outdone by Lawsky, New York's aspiring gov, er, attorney general Eric Schneiderman is investigating the online payday lender Western Sky for violating the state usury law, the Journal reports, citing an anonymous source. For its part, Western Sky gave the papers a heartstring-tugging variation on the usual canned corporate statement: "Western Sky Financial is the largest private employer on the impoverished Cheyenne River Indian Reservation and complies with all applicable laws and business practices." Wall Street Journal, New York Times

Receiving Wide Coverage ...Sued: Well, we know this was coming — The U.S. Justice Department and the Securities and Exchange Commission filed parallel civil lawsuits on Tuesday, alleging Bank of America misled investors about the quality of $850 million in mortgage-backed securities sold in the lead up to the financial crisis. Important to note: the case deals with prime jumbo mortgages that were securitized and sold by B of A, not its much-maligned acquisition Countrywide. The bank plans to fight the charges. Per a spokesperson's statement to various news outlets, "these were prime mortgages sold to sophisticated investors who had ample access to the underlying data and we will demonstrate that." The case represents the latest mortgage-related woes for Bank of America, which, for instance, reached an $8.5 billion settlement with mortgage-backed securities investors in June 2011 that is currently pending approval. But a Dealbook article on the latest action ends with this note: "While the accusations add to the pressure on Bank of America, which has been working to move past the crisis, previous government lawsuits against it that began with much fanfare have lost some of their momentum." Wall Street Journal, Washington Post

Receiving Wide Coverage ...JPM Under Fire: JPMorgan Chase disclosed in a filing on Wednesday that the U.S. Justice Department has opened up a criminal and civil probe into its sale of mortgage-backed securities leading up to the crisis. Per the filing, investigators have "preliminarily concluded that the firm violated certain federal securities laws" while selling subprime mortgage securities to investors. Both JPM and the DOJ are declining to comment further at this time. News outlet say the investigation is powered by President Obama's federal mortgage task force, announced back in January 2012. Per the Washington Post, "the investigation is the latest sign that federal prosecutors and regulators are not letting up in their efforts to hold Wall Street accountable for actions related to the crisis," which, yes, conflicts, with a Journal report from earlier this week that suggested the SEC, at least, was losing steam when it came to crisis-related investigations. The Journal's more recent article on JPM's latest woes calls the DOJ's potential action against the bank "another illustration of how regulators and government investigators are still working through a backlog of cases focused on banks' activities during the housing downturn and financial crisis." (Scan readers will recall that on Tuesday federal prosecutors filed civil actions against Bank of America for alleging misleading mortgage-backed securities investors in 2008.) The Journal also notes the potential penalties "open up a new set of problems for JPMorgan, a bank already operating under four enforcement actions, more than any other big U.S. bank." Dealbook concurs: "Once a darling in regulatory circles, JPMorgan has become a magnet for scrutiny in recent years, drawing attention from at least eight federal agencies, a state regulator and two European nations."

Receiving Wide Coverage ...London Whale Investigations: Federal probes into JPMorgan Chase's disastrous 'London Whale' trades may finally be coming to a close. The Journal reported that Whale trader Bruno Iksil is "unlikely to face charges" from the fiasco, but that "Mr. Iksil is no longer a focus of investigators, people familiar with the situation said." The FT said the bank is set "to admit wrongdoing in a civil settlement with" U.S. and U.K. officials. The admission "would be a departure from the controversial practice of banks neither admitting nor denying culpability." The Times said such a concession to the Securities and Exchange Commission "would set an important precedent" for the agency. Up to this point, the Post said, "the agency has routinely used boilerplate language that allows defendants to pay fines without acknowledging liability, a policy that has been criticized by some judges."