Banco Popular de Puerto Rico

Receiving Wide Coverage ...Ring Fenced: Credit Suisse has begun to wall off its Swiss banking business from riskier investment banking operations in the U.S. and U.K. in order to address regulators' concerns over "too big to fail." The plan includes combining two London subsidiaries and transferring its U.S. derivatives business to its U.S. subsidiary. (The unit currently operates out of London.) UBS similarly announced plans to ring fence its banking operations last month. Wall Street Journal, New York Times, Financial Times

Receiving Wide Coverage ...Yellen in Home Stretch: The Senate Banking Committee voted to confirm Janet Yellen's nomination for Federal Reserve chairman, and a change in Senate filibuster rules virtually guarantees she'll be confirmed by the full chamber. That change in parliamentary procedure — the "nuclear option" Majority Leader Harry Reid's been brandishing — will prevent filibusters for most presidential nominees. As such, it "represents a substantial power shift in a chamber that for more than two centuries has prided itself on affording more rights to the minority party than any other legislative body in the world," the Post notes. We're going to resist the temptation to go off on a tangent here, since this is American Banker, where the phrase "checks and balances" means something different than in the field of Constitutional law. So back to Yellen: In a Journal op-ed, former Senator Phil Gramm and economist Thomas Saving argue that the next Fed chairman will need an exit strategy for quantitative easing. (An economist critical of easy-money policies named Thomas Saving — what are the odds?) And in his Times column, economist Simon Johnson critiques Philadelphia Fed President Charles Plosser's recent proposal to place limits on the Federal Reserve, including its asset purchases and lender-of-last-resort activities. "Plosser is right to want to scale back the role of the Fed," Johnson writes. "Unfortunately, unless he also scales back the largest banks and the risks that they and other parts of the financial system can pose, his suggested solution would become a noncredible commitment," since the Fed would end up having to bail out behemoths again.

Receiving Wide Coverage ...Co-op Bank Probe: The U.K. Treasury has launched a probe into Co-operative Bank that will examine how the bank was run (and regulated) in the years leading up to its current crisis. Scan readers will recall that the bank is in the middle of bailing itself out largely by ceding control to institutional investors. The Journal says the inquiry "may prove uncomfortable for Britain's politicians, particularly in the opposition Labour Party, some of whom championed Co-op Bank as a model of responsible lending following the financial crisis." The U.K.'s Prudential Regulation Authority and the Financial Conduct Authority are also mulling inquiries. Late last week, former Co-op chairman Paul Flowers was arrested as part of a drug investigation.

Receiving Wide Coverage ...A Battle over Board Member Bonuses: A small bank holding company has set the stage for a battle over whether activist hedge funds should be allowed to pay preferred board members bonuses. More specifically, Institutional Shareholder Services (of "dethrone Jamie Dimon" fame) is calling on shareholders to vote out three Provident Financial Holdings directors after they unilaterally approved a bylaw barring investor-paid incentives. The vote is indicative of larger tensions that have resulted after several hedge funds tried to compensate certain directors. Law firm Wachtell, Lipton, Rosen & Katz recommended companies adopt bylaws prohibiting any third party from paying board members for their service. The activists argue that their bonuses link pay to performance and help companies attract better board members. But critics think the incentives are actually more like bribes and create decided conflicts of interest. Calmer heads suggest a compromise is in order: let hedge funds, for instance, compensate their directors for campaign expenses or allow directors' incentives based on the company's results, not the hedge funds'. Wall Street Journal, New York Times

Receiving Wide Coverage ...Questioned: The Securities and Exchange Commission has stepped up its probe into Wall Street's foreign hiring practices. Anonymice are telling their favorite news outlets that Citigroup and Morgan Stanley have both received letters requesting information to determine whether the banks violated the Foreign Corrupt Practices Act. Scan readers will recall that, back in August, JPMorgan Chase revealed the regulator was investigating whether the bank habitually hired the children of prominent Chinese officials to win business. Sources told the FT the new requests "did not amount to a formal investigation and that multiple banks had been contacted with similar questions in the wake of the JPMorgan allegations."

Receiving Wide Coverage ...UBS' Restructuring Efforts: An internal memo reviewed by the New York Times revealed UBS' plan to combine its currency, interest rates and credit trading businesses into a single unit. The move, confirmed by the bank, is part of UBS' ongoing efforts to "to shrink its investment bank and shift focus away from riskier trading activities to its wealth management and retail operations," Dealbook notes. The bank also plans to buy back bonds to cut borrowing costs and shrink its balance sheet ahead of ahead of more stringent Basel capital rules, the FT reports.

Receiving Wide Coverage ...Settled: Bank of America has agreed to pay $404 million to Freddie Mac to settle disputes over residential mortgage loans sold to Freddie between 2000 and 2009. Some good news for the bank? "The deal should largely shield Bank of America from any further 'put-backs' of crisis-era loans sold" to both government-sponsored enterprises, notes the Journal. B of A already agreed to a $1.28 billion repurchase settlement with Freddie back in 2011. (That settlement, however, covered loans sold by Countrywide.) It also already settled twice with Fannie Mae. The bank plans to use existing reserves to cover the latest payout. Freddie previously struck similar deals with Citigroup, Wells Fargo, JPMorgan Chase and SunTrust Bank.

Breaking News This Morning ...Fined: European Union regulators have fined eight financial institutions, including Deutsche Bank, Société Générale, Royal Bank of Scotland, Citigroup and JPMorgan Chase, for colluding in attempts to manipulate key global benchmark interest rates. Penalties total $2.32 billion. Future penalties are possible. Wall Street Journal, Financial Times, New York Times

Receiving Wide Coverage ...On the Regulatory Horizon: An anonymouse tells the Journal that the forthcoming Volcker Rule won't allow banks to use "portfolio hedging," thanks to JPMorgan Chase's whole "London Whale" debacle. "Regulators, in response to [JPM's disclosure its trades were a hedge], pushed to write a rule that would ensure banks couldn't engage in such trades," the paper reports. "The move will come as a blow to banks, which lobbied regulators to keep language allowing portfolio hedging in the rule." But finishing Volcker does not necessarily mean finishing Dodd-Frank. Dealbook reports that U.S. Treasury Secretary Jacob Lew is set to give a speech Thursday that champions the financial reform act, but leaves open the possibility of adding more measures to end too big to fail in the future. "Lew is pushing for new measures to reduce the risks posed by money-market mutual funds," the article notes. "In addition, he argues that vulnerabilities still exist in the short-term debt markets that Wall Street firms tap heavily." Meanwhile, three Wall Street trade groups — the Securities Industry and Financial Markets Association, the International Swaps and Derivatives Association and the Institute of International Bankers — are suing the Commodity Futures Trading Commission for allegedly wrongfully issuing new directions for swaps as guidance rather than a formal rule. "At its heart, the challenge reflects a broad worry among industry activists and conservative lawmakers in Washington that the trading commission … has gone too far," Dealbook notes, while the Journal reports: "SIFMA and ISDA sued the CFTC before, in December 2011, which resulted in the CFTC revising a rule aimed at curtailing bets in commodities markets."

Receiving Wide Coverage ...Waiting for Volcker: News on the contents of the Volcker Rule continues to trickle in ahead of next week's vote on the long-awaited Dodd-Frank provision. The Journal reports that the rule will require bank executives to guarantee their firms are in compliance with the regulation, which, incidentally, marks another requirement banks lobbied against that wound up in regulators' final proposal. Meanwhile, an unnamed senior Treasury official tells the FT the rule will "be quite short, leaving room for regulators' discretion."