Money-laundering probe puts HSBC in penalty box 17 Jul 2012 U.S. Senate revelations of the bank’s “pervasively polluted” approach to handling suspect cash have tarnished its status as a crisis survivor. Beefing up compliance is a smart response. But with a criminal investigation and big fine looming, HSBC can’t afford any more mistakes.
Goldman’s pay-earnings balancing act looks wobbly 17 Jul 2012 The firm has tweaked capital and trimmed costs to boost returns to shareholders. But it still set aside 44 pct of Q2 revenue for pay. With return on equity running at just 5.4 pct, that looks unsustainable. Absent a market rebound, cutting comp is the least investors will expect.
City of London watchdogs roughed up over Libor 17 Jul 2012 The Bank of England governor and the FSA chairman each took a blow in the latest parliamentary hearings into the rate-fixing scandal. But MPs still failed to ask a key question. The central bank’s Court may need to take over the role of inquisitor.
What if banks boycott Libor? 17 Jul 2012 The Barclays scandal is prompting banks to rethink their role in setting interest rates. But a mass boycott of Libor could throw markets into a tailspin. Regulators need to decide urgently how the benchmark for hundreds of trillions of dollars of contracts should be reformed.
Euro bank union should spur fatter capital buffers 17 Jul 2012 As the euro zone inches towards creating a collective safety net for banks, it will focus on reducing the cost to taxpayers. Witness the ECB’s volte-face on haircutting bondholders. One way forward is to copy the UK and require lenders to issue a minimum amount of bail-in debt.
Libor jailbirds would be hollow symbols 16 Jul 2012 Rate-rigging sentences might assuage public lust for Wall Street scalps. But U.S. prosecutors have missed big on financial-crisis villains. Al Capone was nailed for tax evasion. Libor convictions would also miss the point - and might only get real banksters’ distant cousins.
A Vanguard bank might struggle to find assets 16 Jul 2012 The $1.6 trln U.S. mutual fund giant is mulling a deeper move into retail banking. Vanguard could leverage its gold-plated reputation to woo customers and sidestep stricter fund rules. But consumer lending is a higher-risk business than it’s used to that could sully its image.
Citi global retail bank worth more than the whole 16 Jul 2012 It’s big in Asia and Latam as well as in mature markets. But ascribing just a low-growth multiple makes it worth $83 bln. That’s more than Citi’s market cap. Sure, the consumer business is Citi’s biggest unit by profit and revenue. Even so, something doesn’t add up.
Jamie Dimon can’t swim past the whale just yet 13 Jul 2012 The JPMorgan boss reckons the CIO trading debacle is behind him. Explanations and fixes from Dimon and his deputies are solid. But it’s still unclear if they’ll pay a price. And newly revealed bad risk data and mismarked trades mean JPMorgan still has a lot of trust to win back.
Wells Fargo displays its anti-JPMorgan colors 13 Jul 2012 Like its New York rival, the San Francisco-based bank posted a profitable quarter, but its results came with almost none of the baggage. Wells is hardly pure, paying $175 mln to settle charges of discriminatory lending. But it continues to reap the rewards of keeping it simple.
Guide for the perplexed: Libor litigation 12 Jul 2012 It’s unclear who got hurt in the rate-rigging mess, but banks will pay big bucks just fighting mounting lawsuits. How much is still anyone’s guess. Bank investors can hope for full disclosure and quick settlements, but as this primer shows, the legal battles have just begun.
Wells Fargo’s mortgage strength is U.S. weakness 12 Jul 2012 The San Francisco-based bank accounts for a third of the country’s new home loans and is the largest servicer, too. That’s great for Wells’ bottom line. But such a dominant market share, if sustained, could be bad news for consumers and taxpayers. Rivals need to up their game.
Europe’s bank recap strategy has reached its limit 11 Jul 2012 The continent’s lenders have bolstered capital buffers by 94 billion euros since September, ahead of regulatory targets. Yet funding markets remain closed and confidence is scarce. Rebuilding trust now depends on cleaning up loan books and solving the euro zone’s sovereign woes.
Does Barclays need a new broom or Rake in chair? 11 Jul 2012 The bank would ideally appoint external candidates as both chairman and CEO to make a clean break with the Bob Diamond era. But if it can’t find a strong outsider to be chairman fast, deputy chairman Mike Rake would be a good internal appointment. He has been pushing for change.
BoE governor’s arm-twisting raises tricky issues 10 Jul 2012 Barclays’ chairman says Mervyn King made it plain to him that Bob Diamond no longer enjoyed the support of regulators. While the bank should have got rid of its CEO, King had no official authority to tell it to do so. So what exactly happened?
Regulators have to tackle flawed benchmarks 10 Jul 2012 Britain and the EU are considering official control of Libor and other indices. Criminal sanctions would help to deter future misbehaviour, though intervention could have unintended consequences. There’s no point pretending market barometers are a purely private matter.
Tucker bloody but still standing post Libor ordeal 9 Jul 2012 The Bank of England deputy convincingly denied political pressure prompted Barclays to rig interbank rates. But his explanation lacked clarity, and he was pummelled for not heeding earlier warnings. The encounter has somewhat damaged his chances of taking charge of the BoE.
Libor scandal rhymes with history 9 Jul 2012 In 1957 traders dumped gilts just before the Bank of England hiked rates, allowing them to avoid losses and prompting allegations of insider trading. The opposition Labour party demanded a judicial inquiry. The BoE governor’s first name was Cameron. His deputy was called Mynors.
Hugo Dixon: The perils of an indispensable boss 9 Jul 2012 Barclays’ board operated for 15 years on the assumption that Bob Diamond was irreplaceable. As a result, the CEO became more powerful. Now that he has been kicked out, the bank is indeed struggling to find new leadership. Directors should never have let this happen.
Argentina’s heavy hand now puts squeeze on banks 6 Jul 2012 Fresh from nationalizing YPF, President Cristina Fernandez now wants to strong-arm banks into subsidizing loans to businesses. The move shouldn’t have too big an impact on bank profits, but it marks an escalation in her war on private enterprise which may spread further.