JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon has pledged billions of dollars to improve compliance and cybersecurity. That’s not stopping regulators from treating the bank as if it were riskier than ever.
The firm’s operational risk-weighted assets, a measure devised by regulators that determines how much capital the bank needs to hold against potential losses from human error, external threats, fraud and litigation, rose 6.7 percent in the second quarter to $400 billion, according to an August filing. Regulators can point to $23 billion of legal settlements last year and a cyber-attack discovered last month as they push JPMorgan to boost its buffer against unforeseen losses.
Wall Street firms including Citigroup Inc. and Bank of America Corp. that together racked up more than $100 billion in post-financial crisis legal costs are facing similar pressures. At JPMorgan, the largest U.S. bank, that means more than $35 billion that can’t be used for dividends or buybacks, prompting Dimon to call it “stranded capital.”
JPMorgan will spend an additional $2 billion from 2012 through this year on improving controls, with an annual $250 million on cybersecurity, Dimon said in April in his annual shareholder letter.
Hedge Fund Seeks Evidence from Citigroup Over Argentina Threats
The U.S. judge overseeing a fight between Argentina and its defaulted bondholders set a hearing for Sept. 10 on a hedge fund’s subpoena for evidence that Citibank was threatened by the South American nation.
Citibank’s parent, Citigroup Inc., argued it might lose its Argentine branch and face “grave sanctions” at the hands of the Argentine government if a U.S. appeals court doesn’t allow it to distribute money to Argentina’s restructured bondholders, a move barred by U.S. District Judge Thomas Griesa in Manhattan, unless defaulted debtholders are also paid.
The hedge fund NML Capital, a defaulted debtholder controlled by billionaire Paul Singer, wants to compel the bank to provide evidence of claims that Argentina threatened it with punitive measures if it continues to comply with Griesa’s order.
NML said Citibank has presented no evidence of Argentina’s threats other than a letter to the appeals court.
Danielle Romero-Apsilos, a spokeswoman for Citigroup, didn’t immediately return a call seeking comment on the filing.
The case is NML Capital Ltd. v. Republic of Argentina, 08-cv-06978, U.S. District Court, Southern District of New York (Manhattan).
Almunia Says Samsung to Philips Fined for Chip Cartel
European Competition Commissioner Joaquin Almunia talked about the fines handed down to Samsung Electronics Co., Royal Philips NV and Infineon Technologies AG for fixing the price of chips used in mobile phones and bank cards.
For the video, click here.
Countrywide’s Mozilo Says He’s Shocked by U.S. Lawsuit Plans
Bloomberg’s Max Abelson recounted his conversation with former Countrywide chief executive officer Angelo Mozilo as he reacted to plans by the U.S. government to sue him in a civil case over subprime loans. He spoke on “Bloomberg Surveillance.”
For the video, click here.
Comings and Goings
Ex-Republican Leader Cantor Gets Job at U.S. Investment Bank
Former House Majority Leader Eric Cantor has taken a job at the investment bank Moelis & Co. that will pay him at least $3.4 million, according to the company’s filings with the U.S. Securities and Exchange Commission.
Cantor, 51, quit Congress effective Aug. 18 after losing the Republican June primary in his congressional district near Richmond, Virginia, to a Tea Party-backed newcomer, David Brat.
In seven terms in Congress, Cantor became a chief critic of President Barack Obama, fighting such White House priorities as the 2009 economic stimulus package and the 2010 health-care overhaul. Moelis said that in his new role, Cantor, who fought to lower taxes and unburden businesses from excessive regulation, will provide strategic counsel to corporate and institutional clients on key issues.