WASHINGTON - Regulators plan to employ a strategy for handling big failing banks that would help stabilize the financial system by preserving the banks' healthy operations, the head of the Federal Deposit Insurance Corp. says.
FDIC acting Chairman Martin Gruenberg outlined the agency's strategy in a speech Thursday. Under the 2010 financial-overhaul law, the agency has the authority to seize and dismantle big financial firms that could collapse and threaten the broader system. The aim is to avoid another taxpayer bailout of Wall Street banks in another financial crisis.
Gruenberg said that under the strategy, the FDIC would take over a failing bank's parent company but allow its healthy subsidiaries to continue operating. He said that would reduce disruption and permit normal financial transactions.
Because the subsidiaries would keep operating, their trading and other relationships with other big financial institutions also would continue normally and "mitigate systemic consequences," Gruenberg said in the speech at a Federal Reserve conference in Chicago. That would reduce the chance that closely connected big financial firms would fall like dominoes.
In shutting down a bank's parent company, the FDIC would transfer its assets, especially holdings in its subsidiaries, to a new "bridge" company. Shareholders would lose their investment. Its creditors would receive equity stakes in the "bridge" company.
Eventually, the bridge company would become a healthy company in private hands, Gruenberg said.
FDIC officials cite Lehman Brothers' collapse in 2008 that precipitated the financial meltdown and Great Recession. Despite Lehman's extensive losses, there were valuable assets in some subsidiaries, especially its European operation, based in London, they say. When Lehman failed, that operation had to be dissolved under British law. The FDIC strategy would permit such an operation to continue.
by Marcy Gordon - May. 10, 2012 06:21 PM Associated Press
FDIC to spare healthy units of failing banks
Showing posts with label banking. Show all posts
Showing posts with label banking. Show all posts
Sunday, May 13, 2012
$2 Trillion JP Morgan Trading Loss Renews Push To Curb Bank Risk; Dodd-Frank Found Wanting - Investors.com
JPMorgan Chase's (JPM) $2 billion trading loss has renewed concerns about how the nation's largest banks manage risk and raised doubt as to whether the 2010 financial overhaul adequately protects taxpayers.
Overnight, CEO Jamie Dimon seems to have gone from exhibit A in the case that too-big-to-fail banks can be safely run without tighter regulatory handcuffs to exhibit A that they can't.
In one respect, the shift may be unwarranted: The trading loss looks like a superficial wound — not even big enough to wipe out half ofJPMorgan's Q1 profit. At least when it comes to absorbing this particular loss, "too big" may not be so bad.
JPMorgan Chase CEO Jamie Dimon reassured the bank's employees on Friday that the company is "very strong." He is pictured in San Francisco on Jan. 13.
But banking experts understand that financial crises are a fact of life. As long as banks are playing with federally insured deposits — and an implicit broader bailout backstop — taxpayers have an interest in making sure they don't take on excessive risk.
That's where the Volcker Rule, passed as part of the Dodd-Frank reforms, is supposed to come in. But the rule remains unfinished as regulators struggle to translate Congress' mandate to keep banks from taking risky bets into clear, workable guidelines.
Rep. Barney Frank, D-Mass., sounded a note of vindication: "The argument that financial institutions do not need new rules .. . is at least $2 billion harder to make today."
Yet it's unclear if the Volcker Rule would even restrict the activity that burned JPMorgan. Dimon suggested on Thursday's conference call that the trade in question was done to hedge risk and, therefore, would be permissible under the Volcker Rule.
The rule targets proprietary trading — making trades not to provide customers with liquidity or hedge risk, but for pure profit.
"The Volcker Rule judges very much by the intent" behind a trade, said Brookings Institution scholar Douglas Elliott. "If a bank does its hedging incompetently," that's beyond the ability of regulators to police, he said.
And for good reason: "If we didn't have these exceptions, (the Volcker Rule) would effectively forbid a large majority of the things that banks do."
Elliott, for one, is no fan of the Volcker Rule, which aims to ban unnecessary risk, rather than preventing excessive risk-taking. In that sense, it seems designed to rid bank culture of a "trading mentality," he said.
Other analysts also see it as somewhat besides the point in heading off financial crises.
"Banks usually go broke from making bad loans," not proprietary trading, said American Enterprise Institute banking expert Alex Pollock.
by Jed Graham Investor's Business Daily May 11, 2012
$2 Trillion JP Morgan Trading Loss Renews Push To Curb Bank Risk; Dodd-Frank Found Wanting - Investors.com
Overnight, CEO Jamie Dimon seems to have gone from exhibit A in the case that too-big-to-fail banks can be safely run without tighter regulatory handcuffs to exhibit A that they can't.
In one respect, the shift may be unwarranted: The trading loss looks like a superficial wound — not even big enough to wipe out half ofJPMorgan's Q1 profit. At least when it comes to absorbing this particular loss, "too big" may not be so bad.
JPMorgan Chase CEO Jamie Dimon reassured the bank's employees on Friday that the company is "very strong." He is pictured in San Francisco on Jan. 13.
But banking experts understand that financial crises are a fact of life. As long as banks are playing with federally insured deposits — and an implicit broader bailout backstop — taxpayers have an interest in making sure they don't take on excessive risk.
That's where the Volcker Rule, passed as part of the Dodd-Frank reforms, is supposed to come in. But the rule remains unfinished as regulators struggle to translate Congress' mandate to keep banks from taking risky bets into clear, workable guidelines.
Rep. Barney Frank, D-Mass., sounded a note of vindication: "The argument that financial institutions do not need new rules .. . is at least $2 billion harder to make today."
Yet it's unclear if the Volcker Rule would even restrict the activity that burned JPMorgan. Dimon suggested on Thursday's conference call that the trade in question was done to hedge risk and, therefore, would be permissible under the Volcker Rule.
The rule targets proprietary trading — making trades not to provide customers with liquidity or hedge risk, but for pure profit.
"The Volcker Rule judges very much by the intent" behind a trade, said Brookings Institution scholar Douglas Elliott. "If a bank does its hedging incompetently," that's beyond the ability of regulators to police, he said.
And for good reason: "If we didn't have these exceptions, (the Volcker Rule) would effectively forbid a large majority of the things that banks do."
Elliott, for one, is no fan of the Volcker Rule, which aims to ban unnecessary risk, rather than preventing excessive risk-taking. In that sense, it seems designed to rid bank culture of a "trading mentality," he said.
Other analysts also see it as somewhat besides the point in heading off financial crises.
"Banks usually go broke from making bad loans," not proprietary trading, said American Enterprise Institute banking expert Alex Pollock.
by Jed Graham Investor's Business Daily May 11, 2012
$2 Trillion JP Morgan Trading Loss Renews Push To Curb Bank Risk; Dodd-Frank Found Wanting - Investors.com
Thursday, December 1, 2011
Asian stocks soar on joint central bank action | CanadianBusiness.com
BANGKOK (AP) — Asian stock markets soared Thursday after major central banks acted in concert to lower borrowing costs, hoping to prevent a global credit crisis similar to the one that followed the collapse of Lehman Brothers in 2008.
Benchmark oil rose above $100 per barrel and the dollar fell against the euro but rose against the yen.
Japan's Nikkei 225 index jumped 2.4 percent to 8,638.72. South Korea's Kospi surged 4.2 percent to 1,925.17 and Hong Kong's Hang Seng vaulted 5.9 percent to 19,041.36. Benchmarks in Australia, India, Singapore and Taiwan all rose more than 2.5 percent. Mainland Chinese shares on benchmark indexes in Shanghai and Shenzhen rose more than 3 percent.
On Wednesday, the central banks of Europe, the U.S., Britain, Canada, Japan and Switzerland reduced the rates that banks must pay to borrow dollars in order to make loans cheaper so that banks can continue to operate smoothly.
"The moves were cheered by markets as it shows central banks are willing to work together to ease Europe's sovereign debt crisis," Stan Shamu of IG Markets in Melbourne said in a report.
Separately, China's central bank also acted to release money for lending and help shore up slowing growth by lowering bank reserve levels for the first time in three years. The action late Wednesday signaled a key change in monetary policy, analysts said.
"I think the government has the faith now that inflation has peaked, and that now it's time to change the monetary policy from a tight one to a loose one," said Francis Lun, managing director of Lyncean Holdings in Hong Kong.
Chinese banks soared on the news. Hong Kong-listed Industrial & Commercial Bank of China, the world's largest bank by market value, surged 10.4 percent.
By easing reserve requirements, the central bank made available some 350 billion yuan ($55 billion) that otherwise would have been locked up in reserves. Given typical investment trends, much of that money could find its way back into the property sector.
Hong Kong-listed China Resources Land rose 11.6 percent and Poly Real Estate Group added 8.7 percent.
Steel and industrial shares also jumped. Japanese steel producer JFE Holdings shot up 9.6 percent and South Korean steel giant POSCO gained 7.5 percent.
Worries about Europe's financial system — and the reluctance of the European Central Bank to intervene — have caused borrowing rates for European nations to skyrocket. Central banks will now make it cheaper for commercial banks in their countries to borrow dollars, the dominant currency of trade.
But it does little to solve the underlying problem of mountains of government debt. Analysts said that unless there is dramatic action at an upcoming summit of European leaders on the debt crisis, markets are in for further shaky times.
"Until we see some definitely agreed on and, when necessary, legislated initiatives from Europe, optimism can be premature," said Ric Spooner, chief market analyst at CMC Markets in Sydney. "Until we see that sort of thing, there will be a ceiling on the rally."
The central banks' move sent the Dow Jones industrial average soaring 490 points, its biggest gain since March 2009 and the seventh-largest of all time.
The Dow rose 4.2 percent to close at 12,045. The Standard & Poor's 500 closed up 4.3 percent at 1,247. The Nasdaq composite index closed up 4.2 percent at 2,620.
In energy trading, benchmark crude for January delivery was up 39 cents to $100.75 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 57 cents to settle to $100.36 on Wednesday.
In currencies, the euro rose to $1.3463 from $1.3435 late Wednesday in New York. The dollar rose to 77.67 yen from 77.56 yen.
by Associated Press Dec 1, 2011
Asian stocks soar on joint central bank action | CanadianBusiness.com
Benchmark oil rose above $100 per barrel and the dollar fell against the euro but rose against the yen.
Japan's Nikkei 225 index jumped 2.4 percent to 8,638.72. South Korea's Kospi surged 4.2 percent to 1,925.17 and Hong Kong's Hang Seng vaulted 5.9 percent to 19,041.36. Benchmarks in Australia, India, Singapore and Taiwan all rose more than 2.5 percent. Mainland Chinese shares on benchmark indexes in Shanghai and Shenzhen rose more than 3 percent.
On Wednesday, the central banks of Europe, the U.S., Britain, Canada, Japan and Switzerland reduced the rates that banks must pay to borrow dollars in order to make loans cheaper so that banks can continue to operate smoothly.
"The moves were cheered by markets as it shows central banks are willing to work together to ease Europe's sovereign debt crisis," Stan Shamu of IG Markets in Melbourne said in a report.
Separately, China's central bank also acted to release money for lending and help shore up slowing growth by lowering bank reserve levels for the first time in three years. The action late Wednesday signaled a key change in monetary policy, analysts said.
"I think the government has the faith now that inflation has peaked, and that now it's time to change the monetary policy from a tight one to a loose one," said Francis Lun, managing director of Lyncean Holdings in Hong Kong.
Chinese banks soared on the news. Hong Kong-listed Industrial & Commercial Bank of China, the world's largest bank by market value, surged 10.4 percent.
By easing reserve requirements, the central bank made available some 350 billion yuan ($55 billion) that otherwise would have been locked up in reserves. Given typical investment trends, much of that money could find its way back into the property sector.
Hong Kong-listed China Resources Land rose 11.6 percent and Poly Real Estate Group added 8.7 percent.
Steel and industrial shares also jumped. Japanese steel producer JFE Holdings shot up 9.6 percent and South Korean steel giant POSCO gained 7.5 percent.
Worries about Europe's financial system — and the reluctance of the European Central Bank to intervene — have caused borrowing rates for European nations to skyrocket. Central banks will now make it cheaper for commercial banks in their countries to borrow dollars, the dominant currency of trade.
But it does little to solve the underlying problem of mountains of government debt. Analysts said that unless there is dramatic action at an upcoming summit of European leaders on the debt crisis, markets are in for further shaky times.
"Until we see some definitely agreed on and, when necessary, legislated initiatives from Europe, optimism can be premature," said Ric Spooner, chief market analyst at CMC Markets in Sydney. "Until we see that sort of thing, there will be a ceiling on the rally."
The central banks' move sent the Dow Jones industrial average soaring 490 points, its biggest gain since March 2009 and the seventh-largest of all time.
The Dow rose 4.2 percent to close at 12,045. The Standard & Poor's 500 closed up 4.3 percent at 1,247. The Nasdaq composite index closed up 4.2 percent at 2,620.
In energy trading, benchmark crude for January delivery was up 39 cents to $100.75 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 57 cents to settle to $100.36 on Wednesday.
In currencies, the euro rose to $1.3463 from $1.3435 late Wednesday in New York. The dollar rose to 77.67 yen from 77.56 yen.
by Associated Press Dec 1, 2011
Asian stocks soar on joint central bank action | CanadianBusiness.com
Sunday, November 6, 2011
Chase, Wells Fargo drop plan to charge fee for debit cards
A month after Bank of America got pummeled by consumers and lawmakers for introducing a monthly debit-card fee, other big banks are backing off plans to charge customers for using their debit cards.
JPMorgan Chase has decided not to charge customers to use their debit cards, according to a source with knowledge of the plans but who isn't authorized to discuss the matter.
Wells Fargo also announced late Friday that it has cancelled plans to test a debit card fee in five states. "Wells Fargo remains committed to helping our customers succeed financially and we believe this decision is in the best interest of our customers," a Well Fargo spokesperson said.
In February, Chase launched a pilot program that charged customers in Georgia and Wisconsin a $3 monthly debit card fee. The program will expire in November and Chase doesn't plan to extend it, according to the source.
Consumers Union applauded the decision and called on Bank of America to rescind its plans to start charging customers a $5 monthly debit card fee, starting in 2012.
"Consumers Union has heard from thousands of consumers across the country who are outraged that Bank of America is instituting the $5 monthly debit card fee," said Norma Garcia, manager of Consumers Union's financial services program.
"We always take into consideration feedback we receive from our customers," a Bank of America spokesperson said in response, "and are committed to being clear and transparent about our fees so that customers understand their options in paying for services and ways they can avoid fees."
Starting in November, SunTrust, a major regional bank, will charge customers a $5 monthly debit card fee. Regions Financial, based in Birmingham, Ala., has also added a $4 monthly debit card fee. Wells Fargo is testing a $3 monthly fee in some of its markets.
Banks that have raised their fees said a regulation that took effect Oct. 1 left them with no other choice. That regulation cut in half the fees financial institutions can charge retailers whenever consumers use their debit cards for purchases. The regulation exempted banks and credit unions with assets of less than $10 billion.
But other big banks have made of a point of publicizing the fact that they don't charge a debit card fee. Citibank earlier said it decided not to charge a debit card fee because customers made it clear that they didn't want to pay for the convenience of using their cards. TD Bank put out a press release Friday stating that it will continue to offer its customers debit cards with no monthly fee.
TD Bank said a survey of its customers revealed that 70% would discontinue their account if the bank charged a debit card fee.
Most small banks and credit unions don't charge debit card fees. In an effort to attract new deposits, some of those institutions have launched advertising campaigns urging angry customers of big banks to switch accounts.
A grassroots effort on Facebook has designated Nov. 5 "Bank Transfer Day" and is encouraging consumers who are unhappy with new bank fees to move their accounts to credit unions or community banks.
by Sandra Block USA Today Oct. 28, 2011 04:25 PM
Chase, Wells Fargo drop plan to charge fee for debit cards
JPMorgan Chase has decided not to charge customers to use their debit cards, according to a source with knowledge of the plans but who isn't authorized to discuss the matter.
Wells Fargo also announced late Friday that it has cancelled plans to test a debit card fee in five states. "Wells Fargo remains committed to helping our customers succeed financially and we believe this decision is in the best interest of our customers," a Well Fargo spokesperson said.
In February, Chase launched a pilot program that charged customers in Georgia and Wisconsin a $3 monthly debit card fee. The program will expire in November and Chase doesn't plan to extend it, according to the source.
Consumers Union applauded the decision and called on Bank of America to rescind its plans to start charging customers a $5 monthly debit card fee, starting in 2012.
"Consumers Union has heard from thousands of consumers across the country who are outraged that Bank of America is instituting the $5 monthly debit card fee," said Norma Garcia, manager of Consumers Union's financial services program.
"We always take into consideration feedback we receive from our customers," a Bank of America spokesperson said in response, "and are committed to being clear and transparent about our fees so that customers understand their options in paying for services and ways they can avoid fees."
Starting in November, SunTrust, a major regional bank, will charge customers a $5 monthly debit card fee. Regions Financial, based in Birmingham, Ala., has also added a $4 monthly debit card fee. Wells Fargo is testing a $3 monthly fee in some of its markets.
Banks that have raised their fees said a regulation that took effect Oct. 1 left them with no other choice. That regulation cut in half the fees financial institutions can charge retailers whenever consumers use their debit cards for purchases. The regulation exempted banks and credit unions with assets of less than $10 billion.
But other big banks have made of a point of publicizing the fact that they don't charge a debit card fee. Citibank earlier said it decided not to charge a debit card fee because customers made it clear that they didn't want to pay for the convenience of using their cards. TD Bank put out a press release Friday stating that it will continue to offer its customers debit cards with no monthly fee.
TD Bank said a survey of its customers revealed that 70% would discontinue their account if the bank charged a debit card fee.
Most small banks and credit unions don't charge debit card fees. In an effort to attract new deposits, some of those institutions have launched advertising campaigns urging angry customers of big banks to switch accounts.
A grassroots effort on Facebook has designated Nov. 5 "Bank Transfer Day" and is encouraging consumers who are unhappy with new bank fees to move their accounts to credit unions or community banks.
by Sandra Block USA Today Oct. 28, 2011 04:25 PM
Chase, Wells Fargo drop plan to charge fee for debit cards
Tuesday, October 25, 2011
Banks score higher in satisfaction survey
Despite criticism of banks over rising fees, tight-lending policies and more, the industry generally received an improved score in a new satisfaction survey.
Researcher J.D. Power and Associates found that small-business customers gave banks an average score of 717 on a 1,000-point scale, up from 711 in 2010. Results were based on responses from nearly 7,000 decision makers at small companies -- those with annual sales from $100,000 to $10 million.
The survey evaluated 24 larger banks, including eight with notable operations in Arizona. Banks were evaluated on eight criteria, including products, fees, account management and problem resolution. Compared with 2010, customer satisfaction rose in all areas except fees.
"Contrary to popular belief that most customers are unhappy with their bank, small-business banking customers are more satisfied than last year across nearly all aspects of the banking experience," Michael Beird, a J.D. Power director, said in a statement. "In addition, credit availability has increased, indicating greater stability and a return to some degree of normalcy within the small-business banking environment."
M&I Bank got the highest overall score, 768.
"Although M&I Bank has a higher incidence of maintenance fees than other banks ranked in the study, customers clearly perceive value for their money," Beird said. "While much of the negative press surrounding banks focuses on fees, it's more important to focus on what really matters -- providing a highly satisfying banking experience and ensuring that customers are seeing the value in any fees they pay."
Other banks operating in Arizona that beat the average score of 717 included Comerica Bank (745), Bank of the West and U.S. Bank (738 each) and BBVA Compass (728).
The three largest banks operating in Arizona scored below average. Chase received a grade of 711, Wells Fargo was next to last at 683 and Bank of America was last at 669.
The survey by J.D. Power, based in Westlake Village, Calif., was conducted in August and September.
by Russ Wiles The Arizona Republic Oct. 24, 2011 04:26 PM
Banks score higher in satisfaction survey
Researcher J.D. Power and Associates found that small-business customers gave banks an average score of 717 on a 1,000-point scale, up from 711 in 2010. Results were based on responses from nearly 7,000 decision makers at small companies -- those with annual sales from $100,000 to $10 million.
The survey evaluated 24 larger banks, including eight with notable operations in Arizona. Banks were evaluated on eight criteria, including products, fees, account management and problem resolution. Compared with 2010, customer satisfaction rose in all areas except fees.
"Contrary to popular belief that most customers are unhappy with their bank, small-business banking customers are more satisfied than last year across nearly all aspects of the banking experience," Michael Beird, a J.D. Power director, said in a statement. "In addition, credit availability has increased, indicating greater stability and a return to some degree of normalcy within the small-business banking environment."
M&I Bank got the highest overall score, 768.
"Although M&I Bank has a higher incidence of maintenance fees than other banks ranked in the study, customers clearly perceive value for their money," Beird said. "While much of the negative press surrounding banks focuses on fees, it's more important to focus on what really matters -- providing a highly satisfying banking experience and ensuring that customers are seeing the value in any fees they pay."
Other banks operating in Arizona that beat the average score of 717 included Comerica Bank (745), Bank of the West and U.S. Bank (738 each) and BBVA Compass (728).
The three largest banks operating in Arizona scored below average. Chase received a grade of 711, Wells Fargo was next to last at 683 and Bank of America was last at 669.
The survey by J.D. Power, based in Westlake Village, Calif., was conducted in August and September.
by Russ Wiles The Arizona Republic Oct. 24, 2011 04:26 PM
Banks score higher in satisfaction survey
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