Banco Popular de Puerto Rico

Receiving Wide Coverage ...Sons and Daughters: Documents, including spreadsheets and emails, shine some light on how hiring the children of prominent businesspeople in China may have helped JPMorgan Chase land business with state-controlled companies. For example, in one email a senior JPM banker in Hong Kong writes, "You all know I have always been a big believer of the Sons and Daughters program — it almost has a linear relationship" with winning assignments. JPMorgan handed the documents over to U.S. authorities, who have been investigating the bank for possible violations of the Foreign Corrupt Practices Act. There's an interesting contrast between the papers' opening paragraphs. The Times (which made this the lead story — front page, upper-right hand — on Sunday): "Federal authorities have obtained confidential documents…" The Journal (page C3 Monday): "A J.P. Morgan Chase & Co. investigation of its overseas hiring has found…"

Receiving Wide Coverage ...Final Lap for Volcker Rule? A final version of the Volcker Rule, arguably the most controversial element of the Dodd-Frank Act, is expected to be approved by the five U.S. federal banking regulatory agencies today. The law is meant to prevent banks from engaging in risky trading for their own accounts, considered a factor in the downfall of some Wall Street firms in 2008. (A more modern example is JPMorgan Chase's London Whale incident, which resulted in a $6 billion loss for the bank.) Some say the Volcker rule, which was first announced in January 2010, is too tough, others that it's not tough enough.

Receiving Wide Coverage ...Central Banks Warn Private Sector to Act: The world's central banks have done their job; now it's time for political leaders to do theirs. That's the message delivered by the Bank for International Settlements, colloquially known as the central bankers' bank, in the wake of Federal Reserve Chairman Ben Bernanke's comments that the Fed may slow its bond-buying program later this year. "Cheap and plentiful central bank money had merely bought time," the BIS said in its annual report, and additional stimulus will only make it more difficult for the global economy to return to health, the FT reported. Two leaders of the BIS, whose members include the Federal Reserve Board and the European Central Bank, said that "returning to stability and prosperity is a shared responsibility" and the "The balance between costs and benefits is deteriorating," the Times noted. The most dangerous aspect of the efforts of central banks is that it deludes the private sector from making its own reforms, with a BIS executive saying "low interest rates and unconventional monetary policies have made it easy for the private sector to postpone deleveraging," the Journal reported. Financial Times, New York Times, Wall Street Journal

Receiving Wide Coverage ...Hawks, Doves, Hogs, Turkeys: It hardly compares to 2008, but liquidity in the bond market is drying up fast as investors prepare for a world without stimulus. With recent economic trends punctuated by Federal Reserve Chairman Ben Bernanke's comments last Wednesday about the timetable for slowing the Fed's bond purchases, investors have pulled near-record amounts of cash from the bond markets in recent weeks, the Journal reports. Meanwhile, Dallas Fed President Richard Fisher tells the FT that the markets are full of feral hogs ("If they detect a weakness or a bad scent, they'll go after it") trying to pressure the Fed into reversing its thinking. Fisher, known for having some of the more hawkish views among Fed officials, says that while it "made sense to socialize the idea that quantitative easing is not a one-way street," he did not want "to go from Wild Turkey to 'cold turkey' overnight." The Times, meanwhile, notes that the slow sell-off in bonds that market strategists had been predicting for years quickly turned into an all-out stampede, the force of which has spilled into the stock markets and into exchange-traded funds that hold bonds. "We don't think we've seen the capitulation we need to hit bottom yet," TF Market Advisors' Peter Tchir tells the paper. And Dealbook columnist Andrew Ross Sorkin asks whether the normally reserved Bernanke is now the man who said too much. But lest we accuse the Fed chief of engaging in some financial TMI, Sorkin himself notes it's possible the markets would have acted "even more erratically" if Bernanke's communication style had been any less straightforward.

Receiving Wide Coverage ...Senate Housing Finance Reform Plan Drops: The newly unveiled Corker-Warner plan enjoyed strong support Tuesday from various quarters — senators of both parties, the White House and mortgage industry reps all sounded positive notes — but the papers remind their readers that the overhaul is still likely going nowhere. Right now House Financial Services Committee Chairman Jeb Hensarling, R-Texas, is the most obvious obstacle. But as American Banker's Victoria Finkle notes, the top Democrat (Sen. Tim Johnson) and Republican (Sen. Mike Crapo) on the Senate Banking Committee might be another roadblock, since neither endorsed the plan. The FT reports that the price of preferred shares of Fannie Mae and Freddie Mac were largely unchanged Tuesday, reflecting an apparent belief among investors that the two mortgage giants might still be resurrected in some form. On the substance of the bipartisan Senate plan, the Washington Post provides some detail on its downpayment and skin-in-the-game requirements.

Receiving Wide Coverage ...Basel: Tacitly acknowledging that risk-based capital measures are susceptible to manipulation, the Basel Committee announced a supplementary, simple 3% equity-to-assets requirement that banks worldwide will have to achieve by 2018. Disclosures of leverage ratios under the new formula are to start in 2015. Investment banks will have to count derivatives on a gross basis, rather than netting out collateral or offsetting trades. This will make the U.S. firms look more leveraged than they currently appear and bring them in line with their European counterparts, according to Reuters Breakingviews. However, a Times story says "the new rules would probably fall hardest on large European institutions," which may have to raise billions in capital. Another effect, according to the FT, is that "rules that will limit banks' ability to net exposures to the same counterparty will constrain bank payment systems, which tend to maintain large credit and debit balances for customers."

Receiving Wide Coverage ...Corzine in CFTC Crosshairs: Officials filed a civil lawsuit against John Corzine, the former head of MF Global on Thursday, charging misuse of almost $1 billion in customer funds. The Commodity Futures Trading Commission complaint alleges that the former New Jersey governor and U.S. senator did more than just sit on the sidelines as the company spiraled into bankruptcy, though it's still unclear how deeply he was involved with illegal money transfers. The lawsuit suggests that Corzine was "instrumental in making decisions that put customer accounts at risk," according to the Wall Street Journal. But the New York Times says the CFTC does not accuse Corzine of signing off on the breach of customer funds or "even knowing that the wrongdoing had happened," instead focusing on the claim that he failed to "diligently supervise" the firm and "a more ambitious claim" that he is responsible for the actions of employees below him. The lawsuit also implicates one of Corzine's top lieutenants, Edith O'Brien. Meanwhile, regulators settled with MF Global — the company agreed to pay back all customer funds and fork over a $100 million fine. Wall Street Journal, New York Times, Financial Times, Washington Post

Receiving Wide Coverage ...A Deluge of EU News: You can tell that a U.S. holiday weekend is on the horizon as Monday's news is largely coming from overseas. Reuters reports that EU regulators have charged Markit, the International Swaps and Derivatives Association and 13 banks with breaching anti-trust rules by blocking rival exchanges in the credit derivatives business. The banks include Bank of America Merrill Lynch, Citigroup, Morgan Stanley, Goldman Sachs, HSBC and JPMorgan. Elsewhere, this FT op-ed criticizes the EU's failure to get its banking union, off the ground despite agreeing on rules to force losses on creditors in failed banks. "In theory, a bail-in rule should shift some of the financial burden away from the bank's home state. But this only works to the extent that some of those shareholders and bondholders are foreigners," writes columnist Wolfgang Munchau. "The trouble is that the banks have become more national since the crisis." And for those paying attention to the ongoing U.S. spying story, the Wall Street Journal and the FT report the National Security Agency has been accused of spying on European Union officials after a German magazine over the weekend cited secret documents obtained by former NSA contractor Eric Snowden.

Receiving Wide Coverage ...Citi Settles: Citigroup has agreed to pay $968 million to settle claims it sold bad mortgages to Fannie Mae. Analysts tell the Wall Street Journal Citi may settle with Freddie Mac over similar charges as well, though official spokesmen for both parties are declining to comment. Citi did say that the settlement charges would be covered by its existing mortgage repurchase reserves. The bank plans to add $245 million to this reserve in the second quarter. Scan readers will recall Bank of America agreed to pay $10.3 billion to settle similar claims with Fannie Mae back in January. The FT notes the Citi deal "brings the banking industry a step closer to paying for past wrongdoing related to mortgages, which has cost tens of billions of dollars in claims for compensation, lawsuits and fines." Wells Fargo and JPMorgan Chase remain as the "banks with the largest demands from Fannie" that have yet to settle. New York Times, Washington Post

Dunno about you (and by "you" I mean, say, the chief risk officer of Bank of Kokomo who'll also have to cover the teller window today on the eve of a holiday) but email traffic to my inbox slumped off last night — a sure sign people may be starting vacation early. However, the news kept churning yesterday and overnight, and if you are reading this you thirst for news, so here we go ...