Consumer ‘Big Data,’ Philippine Currency: Compliance

The Consumer Financial Protection Bureau is demanding records from U.S. banks and is buying anonymous information about at least 10 million consumers from companies including Experian Plc.

The consumer bureau is gearing up to monitor how millions of Americans use credit cards, take out mortgages and overdraw their checking accounts. Banks are not pleased at the development. While the goal is to sharpen enforcement and rule-making, banking executives have questioned why the bureau is collecting so much without being more specific about the benefits.

CFPB Director Richard Cordray has said that the consumer bureau needs raw material to make “data-driven” decisions based on how financial products and services are used or abused. Research will improve regulation as well as the marketplace, he said.

The agency’s approach dovetails with a trend toward data analytics, often dubbed “Big Data,” by firms such as Inc., Google Inc., International Business Machines Corp. and General Electric Co. Those companies are mining massive pools of information for insight into areas including consumer behavior, manufacturing, dairy farming and genetics.

The consumer bureau, created by the Dodd-Frank law of 2010, consolidates and expands U.S. oversight of consumer finance. It supervises banks with assets over $10 billion, including JPMorgan Chase & Co. and Wells Fargo & Co. as well as payday lenders, mortgage originators, debt collectors and credit bureaus.

Dodd-Frank bars the agency from collecting data “for purposes of gathering or analyzing the personally identifiable financial information of consumers.”

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Compliance Policy

FCA Publishes Its Approach to Regulatory Failure

The Financial Conduct Authority published its approach to investigating and reporting on regulatory failure.

“A regulatory system that removed all risk would be prohibitively expensive and could stifle innovation and competition,” the agency’s Chief Executive Officer Martin Wheatley said in a statement on its website. “The instances where we investigate and report to Treasury will be significant events and serious failures, when things have gone badly wrong, and this paper sets out how we will identify and deal with these exceptional cases.”

German Concerns Won’t Delay Bank Union, Austrian Regulator Says

German Finance Minister Wolfgang Schaeuble’s concerns about the legal basis for a common European authority and fund for bank failures won’t delay the creation of the system, Austria’s financial watchdog said.

The schedule for introducing all elements of a planned European Union banking union hasn’t changed, Helmut Ettl, co-chairman of the Finanzmarktaufsicht regulator, or FMA, told journalists in Vienna late yesterday.

The European Central Bank and Michel Barnier, the EU’s financial services chief, have called for a European Resolution Authority to intervene at crisis-hit banks, saying the step is essential to untangle the fates of lenders and sovereigns. Barnier said he will present draft legislation in June.

Schaeuble told his EU counterparts at a meeting in Dublin last week that setting up a central authority to deal with failing banks requires treaty changes. The German minister has also argued that revising the bloc’s rules would benefit the ECB’s bank supervision arm by ensuring independence from monetary policy.

Austrian Finance Minister Maria Fekter has backed Schaeuble’s view.

Ministers in Dublin endorsed plans to hand supervision powers to the ECB, a step billed by Barnier as a cornerstone of the banking union.

Philippines Relaxes Curbs on Dollar Buying to Stem Peso Gains

The Philippine central bank doubled the amount of dollars residents can freely buy and broadened the range of approved outward investments in a bid to spur capital outflows and slow peso gains.

Residents can now purchase as much as $120,000 from banks without documentation, Bangko Sentral ng Pilipinas Deputy Governor Nestor Espenilla said today at a press briefing in Manila. Investments in overseas property as well as foreign-currency mutual funds and debt are now allowed using greenback bought locally, he said. Companies can also obtain U.S. currency in the domestic market this year to meet payments on foreign-currency loans that are not registered with the central bank, a move that may boost dollar demand by as much as $1 billion, Director Patria Angeles said.

“This is meant to signal that they want to increase demand for U.S. dollars so their intervention in the foreign-exchange market will be lessened,” said Paul Joseph Garcia, who helps manage the equivalent of $18.4 bilion at BPI Asset Management in Manila. “But the problem is, you cannot fight the inflows. We’re one of the hottest emerging markets right now.”

The Philippines, which won its first investment-grade credit ranking from Fitch Ratings last month, is seeking to slow a surge in capital inflows that made the peso the second-best performer in the region and drove local shares to a record high. Foreign portfolio inflows into the $225 billion economy jumped 79 percent from a year earlier to $7.3 billion in the first quarter, after rising to a decade-high in 2012.

Compliance Action

Commodities Traders Brace for Transparency and Stay Private

Commodity traders expect the industry to become more transparent amid the rising need for financing and regulatory pressure, even as some merchants remain closely held, company executives said.

Physical commodity traders raised $19.9 billion in equity and debt last year, up from $10.6 billion in 2010 and $1 billion in 2002, according to First Reserve Corp., a private equity energy firm. Senior executives at Cargill Inc., the largest closely held U.S. company, and Trafigura Beheer BV, which buys and sells oil and other commodities, said trading companies’ characteristic secrecy will probably diminish over time as they tap capital markets to grow their businesses.

Switzerland rejected calls for tougher regulation of commodity traders last month, in favor of a voluntary industry code. The government will study the impact of introducing transparency requirements similar to those in the U.S. and the European Union before deciding how to proceed, Economy Minister Johann Schneider-Ammann said. The alpine nation started investigating the industry in May saying the country was “exposed to risks to its reputation” by being an oil, grain and coffee trading hub.

Vitol Group, Trafigura and Litasco are among privately-held trading companies that operate from offices in Switzerland. Commodity trading, concentrated in Geneva and Zug, boosted its share of the Swiss economy 10-fold over the past decade, according to Zurich’s KOF research institute.

Glencore International Plc went through a $10 billion IPO that ended more than three decades of operating as a closely held company. In contrast to Glencore, several traders said they would stay closely held.

Ian Taylor, chief executive officer of Vitol Group, the world’s largest independent oil trader, told the conference that the “long-term” interest of the firm is to remain private. The company, which competes in the oil market with traders such as Trafigura and Glencore as well as international companies such as BP Plc, said its revenue increased 2 percent to $303 billion last year.

Marco Dunand, chief executive officer of Geneva-based Mercuria Energy Trading SA, didn’t expect more large commodity merchants to carry out IPOs.

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Samsung Ends Anonymous Reviews Amid Taiwan Regulatory Probe

Samsung Electronics Co. ended an online campaign in Taiwan amid a local regulator’s probe into whether the company broke the law by paying for positive reviews of its products and negative comments about rivals.

Taiwan’s Fair Trade Commission is gathering information after receiving e-mails earlier this month alleging posts to online forums were suspicious, Sun Lih-Chyun, a commissioner at the regulator, said in a telephone interview yesterday. Samsung said in a statement the situation was “unfortunate” and it ceased using anonymous comments in online marketing last year.

Samsung, which has overtaken Apple Inc. and Nokia Oyj to lead the $294 billion smartphone market, last month unveiled its new Galaxy S4 handset during an event in New York’s Radio City Music Hall. Taoyuan, Taiwan-based HTC Corp., which released its flagship HTC One for sale last month, has lost market share amid competition and delays in shipments of own products.

Posts to online forums are alleged to have included criticism of rival smartphones, including those made by HTC, and praise of Samsung’s products, Sun said. HTC has been asked to provide information, while Samsung has yet to be contacted by the commission, he said.

The situation “occurred due to insufficient understanding of these fundamental principles” of transparent and honest communications with consumers, Samsung said yesterday.


Bloomberg LP Sues U.S. Regulator Over Swap Collateral Rules

Bloomberg LP sued the top U.S. derivatives regulator over rules setting higher collateral standards for swaps than comparable futures, arguing the requirements are arbitrary.

The Commodity Futures Trading Commission, which by law is required to evaluate the costs and benefits of proposed regulations “offered only a fleeting, bare-bones discussion of economic effects that contained no financial or quantitative estimates,” Bloomberg LP, the parent company of Bloomberg News, said in a complaint filed April 16 in federal court in Washington.

The current regulation harms plans by Bloomberg and others to operate swap-execution facilities, according to a news release and letter to the CFTC dated March 11 from the company’s outside counsel, Eugene Scalia, a partner at Gibson Dunn & Crutcher LLP.

The regulation “will drive liquidity away from standardized swaps to ‘swap futures’ that lack the post-trade transparency and regulatory requirements” that Congress determined “would best further the public interest,” Bloomberg said.

Steven Adamske, a spokesman for the CFTC, declined to comment on the lawsuit.

The case is Bloomberg LP v. Commodity Futures Trading Commission, 13-cv-00523, U.S. District Court, District of Columbia (Washington).


CFTC Is Looking at Gold, Silver Moves, Chilton Says

Bart Chilton, a commissioner at the U.S. Commodity Futures Trading Commission, talked about commodities trades and market regulations.

He spoke with Erik Schatzker and Sara Eisen on Bloomberg Television’s “Market Makers.”

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Fed’s Stein Backs Using Surcharges to Reduce Bank Risks

Federal Reserve Governor Jeremy Stein, Jean Tirole, a professor at the Toulouse School of Economics, and John Vickers, a professor at the University of Oxford, spoke about global financial regulation.

Former Federal Deposit Insurance Corp. Chairman Sheila Bair moderated the panel at the International Monetary Fund in Washington.

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Rosengren Says Banks With Broker-Dealer Units Need More Capital

Boston Federal Reserve President Eric Rosengren said banks should hold more capital if they own a broker-dealer unit because such businesses pose greater risks during periods of financial stress.

Rosengren’s comments were part of prepared remarks for a speech yesterday in New York.

He made his call as members of Congress and regulators try to reduce the risk that a large bank failure might result in a taxpayer-funded bailout. Senate Republicans and Democrats are discussing legislation that would boost capital standards. Fed officials are considering ways to curb balance-sheet expansion at the largest banks and toughen capital requirements for the largest firms.

“Despite the central role that broker-dealers played in exacerbating the crisis, too little has changed to avoid a repeat of the problem,” Rosengren said at the 22nd Annual Hyman P. Minsky Conference in New York, referring to the economic crisis of 2008. “I firmly believe that a reexamination of the solvency risks of large broker-dealers is warranted.”

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Comings and Goings

Former Consumer Bureau Deputy Date Starts Consulting Firm

Raj Date, the former deputy director of the U.S. Consumer Financial Protection Bureau, has formed a consulting firm to focus on the industry his agency regulated.

Fenway Summer LLC, Date’s new Washington-based firm, will advise clients on business strategy, work on mergers and acquisitions, and help new firms, Date said in an interview. In his new role he won’t lobby for clients or advise them on government relations, he said.

Date, 42, was the first deputy director of the bureau, which was created by the 2010 Dodd-Frank Act that overhauled U.S. financial regulation. He helped Democratic Senator Elizabeth Warren of Massachusetts, then an adviser to President Barack Obama, set up the agency 2010 and 2011. He briefly led the bureau before Obama named Richard Cordray director in January 2012.

Date is also an external adviser to McKinsey & Co., one of his former employers, according to a person briefed on his work. He declined to speak about that engagement.

McKinsey spokeswoman Yolande Daeninck did not respond to a request for comment.

Deutsche Bank Appoints Weber-Rey as Chief Governance Officer

Deutsche Bank AG, continental Europe’s biggest bank by assets, hired Daniela Weber-Rey from law firm Clifford Chance LLP to be chief governance officer and deputy global head of compliance.

Weber-Rey, 55, who focused on financial institutions at Clifford Chance, will join the bank in Frankfurt on June 1, the lender said yesterday in an e-mailed statement.

Deutsche Bank recently lost at least three female bankers, potentially setting back its effort to boost the representation of women in management. The firm, which has no women on either of its two highest executive committees, intends to increase the number of female senior executives it employs to 25 percent by the end of 2018 from 18 percent in 2012, company filings show.

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