Units of JPMorgan Chase & Co., Goldman Sachs Group Inc. and Barclays Plc are among banks that registered as swap dealers under the Dodd-Frank Act that requires higher capital, collateral and trading standards.
The list of firms referred to as “provisionally registered” included Societe Generale SA, Macquarie Bank Ltd., Newedge USA LLC, Morgan Stanley and Standard Chartered Bank, according to the website of the National Futures Association. No firms were listed as major swap participants, a lower threshold under Dodd Frank for activity that may capture energy companies or hedge funds.
The rules, more than two years in the making, will improve oversight of a market that for three decades has largely escaped federal regulation, Commodity Futures Trading Commission Chairman Gary Gensler said Oct. 10.
The financial firms that dominate swap dealing generate more than $30 billion in annual profit, according to an estimate from consulting firm Oliver Wyman, a unit of Marsh & McLennan Cos. Companies with $8 billion or more in dealing business must register with the CFTC.
The biggest swaps dealer in the U.S. is JPMorgan, followed by Bank of America Corp.
‘Too Big to Fail’ Benefits Face Congressional Watchdog Scrutiny
U.S. banks’ benefits from being “too big to fail” will be examined by congressional watchdogs in response to a bipartisan request from senators who say the government hasn’t done enough to prevent future bailouts.
The Government Accountability Office said yesterday that it plans to study the “economic benefit” banks such as JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. in response to a request from Senators David Vitter, a Louisiana Republican, and Sherrod Brown, an Ohio Democrat.
Vitter and Brown made the request that the GAO look at bank holding companies with assets more than $500 billion after leaders in the Republican-controlled House refused to take up their Senate bill, which passed unanimously.
Lawmakers and regulators have said that Dodd-Frank, the 2010 measure enacted in response to the worst financial crisis since the Great Depression, ended too-big-to-fail by creating ways to unwind complex banks without taxpayer assistance.
The study sought by Vitter and Brown would look at whether the pricing of the banks’ assets relative to their risk profile results in a perception that they would get bailouts if needed, whether they get favorable funding as a result of increased credit ratings based on the view that they are too big to fail and how they benefit from access to the Federal Reserve’s discount window.
Nine systemically important banks got a total of $125 billion in taxpayer aid from the Troubled Asset Relief Program after a credit freeze following the September 2008 collapse of Lehman Brothers Holdings Inc.
Polish Banks to Pay Higher Fees to Rescue Fund, Government Says
Poland’s government backed a proposal to introduce a new fee banks will have to pay to the country’s rescue fund to help recapitalize troubled lenders in a move to boost confidence in its banking industry.
Polish banks, whose combined profit climbed to a record 12 billion zloty ($3.9 billion) in the first nine months of the year, face slower growth as the country’s weakening economy cuts demand for credits and makes lenders increase provisions for bad debt. The industry’s solvency ratio, a measure of its capital strength, was 12.7 percent in September, more than the required 8 percent, according to the Polish financial regulator.
Polish banks already pay 0.1 percent of risk-weighted assets to the Banking Guarantee Fund to ensure payback of clients’ deposits in the event of a lender’s collapse. The Fund will manage both contributions, according to government plans.
The proposals need to be approved by the Parliament and signed by the President to become a law.
Egypt Religious Scholars to Review Draft Sukuk Law, MENA Says
Egypt’s Grand Sheikh of Al-Azhar, Ahmed el-Tayeb, asked a panel of senior religious scholars to issue its opinion about a new draft law for sukuk, the state-run Middle East News Agency reported. President Mohamed Mursi has referred the draft to el-Tayeb to determine how compliant it is with Islamic law, MENA said.
The Finance Ministry has asked for the quick implementation of the law after it’s approved, according to MENA.
Google Said to Be Set to End FTC Antitrust Probe With Agreement
Google Inc. will resolve a 20-month antitrust probe by U.S. regulators today with a voluntary agreement and a consent decree on the company’s alleged misuse of patents, three people familiar with the matter said.
The U.S. Federal Trade Commission is poised to announce that Google has agreed to voluntarily change some business practices and settle allegations it misused patents to thwart competitors in smartphone technology, said the people, who asked not to be named because the decision isn’t public.
The FTC is expected to close its investigation into whether Google, operator of the world’s most popular search engine, skews its search results to favor its own services without enforcement action, the people said. The FTC’s decision not to take action is a blow to competitors including Microsoft Corp., Yelp Inc. and Expedia Inc. and comes at a time when the European Union is seeking a “detailed commitment” on search to end its probe into allegations that Google discriminates against rivals.
As part of its voluntary concessions, Google will make changes in the way it uses content from other websites and allow advertisers to export data to other platforms, the people said.
The expected FTC decision drew criticism from Google opponents, including the FairSearch.org coalition, an alliance that includes Microsoft and Expedia.
Peter Kaplan, a spokesman for the FTC, and Niki Fenwick, a Google spokeswoman, declined to comment on the resolution of the probe.
LSE’s Regulatory News Service Resumes Operation Following Glitch
London Stock Exchange Group Plc’s Regulatory News Service resumed operation after a technical issue that disrupted dissemination of company information to investors and traders.
Mark Wisken, an RNS executive at LSE, described it “connectivity issue.” RNS didn’t publish any release between 5 a.m. and 8:36 a.m. in London yesterday, the first trading day of 2013, according to data compiled by Bloomberg.
The service carries almost 175,000 statements each year via data vendors such as Thomson Reuters Corp. and Bloomberg LP, the parent of Bloomberg News. LSE says it features more than 70 percent of price-sensitive U.K. announcements. Companies and public-relations agencies pay to publish releases.
The disruption yesterday came as LSE was considering charging banks and brokers for the service. Data providers already pay to redistribute it. As part of a consultation last year on the workings of RNS, LSE asked to be provided with users’ details, sparking concern it will start charging them because it’s unlikely to need the data for any other purpose.
Publicly listed companies in the U.K. must disseminate statements through one of the seven approved Regulated Information Services, or RISs, to ensure that investors receive market-moving news at the same instant.
The RNS had a monopoly for regulatory statements until 2002, when the U.K.’s Financial Services Authority introduced competition. At that point, LSE started to charge companies to publish announcements, having previously provided the service for free.
Niche Players and Big Banks Vie for Prepaid Debit Card Market
The allure of the fast-growing U.S. market for prepaid debit cards is pitting niche players against financial giants including JPMorgan Chase & Co. and American Express Co.
Both factions want to sell more of the cards, a part of the financial services business that holds as much as $1.7 billion in potential fees for banks seeking new revenue streams as they face growing competition and regulation. The Consumer Financial Protection Bureau may write new rules for the cards. It sought public input about the prepaid market in May.
Myriad players, including a firm catering to recovering drug addicts and alcoholics, are stepping up with their own products on the theory that some consumers may pay a slight premium for a card with novel functions, such as pictures of celebrity investors.
Players also face more regulation and small firms will encounter pressure to consolidate as competition squeezes fees, Madeline Aufseeser, senior analyst with the Boston-based Aite Group, said in an e-mail.
JPMorgan and American Express are testing whether their sheer size and efficiency can bring greater market share by offering lower fees. Smaller players hope to fill smaller market niches and leave the nuts and bolts of the cards to others.
Prepaid cards can take different forms, though they share the quality that consumers usually can’t spend more than has been deposited onto the cards. One type of prepaid card mimics a checking account, allowing consumers to load and reload funds, have paychecks deposited directly, make purchases and withdraw money from ATMs. Employees can also get paid on a separate employer-issued card.
Americans are projected to increase purchases made with prepaid cards by 5.3 percent annually to $139.4 billion in 2017, according to Beth Robertson, director of payments research at Pleasanton, California-based Javelin Strategy & Research Inc. Aufseeser of Aite said the market, including general purpose and payroll cards, could reach $168 billion by 2016, with about 1 percent of that going to fees.
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OCC Says Almost 500,000 Seek Reparations for Faulty Foreclosures
After a deadline-inspired surge, nearly 500,000 borrowers are seeking formal reviews of their 2009 and 2010 foreclosures for mistakes by lenders, the U.S. Office of the Comptroller of the Currency reported.
The tally of applicants spiked from 356,000 on Dec. 13 to 495,000 by the Dec. 31 deadline, said Bryan Hubbard, an OCC spokesman.
Federal regulators are set to replace the existing victim-by-victim compensation effort with about $10 billion in flat penalties against the banks, according to five people briefed on the talks who asked not to be named because the discussions are private.
A group of 14 of the largest mortgage servicers including JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. were ordered by the OCC and other banking regulators in 2011 to clean up their foreclosure practices and hire independent consultants to see whether they hurt customers unfairly. The regulators sent letters to 4.4 million potential claimants inviting them to seek reviews.
The 14 firms could be instructed to give lump-sum payments of between $500 and $125,000 in each case involving improper practices, the agencies said in June. No wronged borrowers have been paid, Hubbard said.
It’s unclear how much in payouts the existing system would have resulted in, nor what people would receive in the pending action. Also unclear is whether the independent consultants hired by the lenders will continue to conduct the reviews under the new enforcement action. An announcement of the new action could come as soon as this week, the people said.
OFI AM Fined by AMF For ‘Madoff Risk,’ CityWire Global Says
OFI Asset Management was fined EU300,000 by Autorite des Marches Financieres, the French market regulator, for “failings in its due diligence” leading it to hold funds linked to convicted con artist Bernard Madoff, CityWire Global reported.
AMF began an investigation in mid-2009 and found that at the time the Madoff Ponzi scheme had been discovered in 2008, “four funds from OFI’s alternative multimanagement division were invested in Madoff vehicles,” the newspaper said.
The regulator determined that AMF showed a “lack of professionalism and diligence” in monitoring the funds, according to CityWire. The AMF also fined two directors at the time of the events, the paper reported.
U.K. Treasury May Get Windfall in Fines, Telegraph Says
The U.K. Treasury is expected to reap a windfall in fines this year, as much as GBP200 million, U.K.’s Daily Telegraph reported, without citing anyone.
RBS is likely to be the next bank to settle over the Libor controversy, and is expected to pay about GBP350 million, the Telegraph reported.
The money raised from fines previously has gone to the Financial Services Authority; it will now go straight to Treasury, the Telegraph said.
Comings and Goings/Executive Pay
Goldman Sachs Sped Up $65 Million in Stock Awards to Dec. 31
Goldman Sachs Group Inc. accelerated delivery of $65 million in stock awards to 10 executives, including Chief Executive Officer Lloyd C. Blankfein, helping them avoid higher tax rates that take effect this year.
The awards are of restricted stock granted for years prior to 2012, according to 10 separate filings made public at about 8 p.m. New York time on Dec. 31. Each executive sold between 45 percent and 50 percent of their stock in order to pay taxes, according to the filings.
Goldman Sachs, the fifth-biggest U.S. bank by assets, typically delivers executives’ restricted stock during the month of January. The decision to speed up this year’s awards came as the U.S. Congress debated and ultimately passed a bill that would increase tax rates on capital gains and on individuals who make taxable income of $400,000 or more.
“The December delivery of shares went to a wider group of employees than the named executive officers” who were included in the filings, Michael DuVally, a spokesman for the New York-based firm, said. He declined to comment on the reason for the accelerated delivery.
The filing included a table showing the stock delivered to each of the executives and the amount sold for withholding purposes, according to company filings.
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