Receiving Wide Coverage ...
Downsizing After Volcker: In what the Journal pegs as an "unforeseen consequence" of the recently released Volcker Rule, more than a dozen small and regional banks will likely need to sell collateralized debt obligations. Case in point: Zions Bancorp, which said it would take a $387 million charge to get rid of a large CDO portfolio, as a result of the Volcker Rule's treatment of CDOs comprised of trust preferred securities. "The unexpected announcement by Zions
is an indication that the impact of the Volcker Rule will not just be felt at traditional Wall Street firms but at other kinds of banks as well," echoes Dealbook. JPMorgan Chase, meanwhile, is selling an Asia-based principal investment business, valued at more than $1 billion. Potential buyers include Blackstone, Carlyle and KKR. According to the FT, "while the operation
does not directly fall foul of the new Volcker rule restricting proprietary investments, bankers at JPMorgan say it is only a matter of time before regulators may decide it is a risk-taking business." The FT also reports that Citigroup and Santander have sold $1 billion of trade finance assets in a securitization, though that sale is attributed primarily to new Basel capital rules, which "hurt the profitability of assets that banks would have typically held."
Libor Manipulation Case Update: Former UBS trader Tom Hayes and former RP Martin Holdings brokers Terry Farr and James Gilmour pleaded not guilty to London interbank offered rate manipulation charges in a London court on Tuesday. According to the Journal, the pleas will "pose a challenge" to U.K. prosecutors, who up until few months ago, had expected Hayes to plead guilty and testify against alleged co-conspirators. Trials are expected to start in early 2015. Meanwhile, the Journal also reports, that former Barclays CEO Bob Diamond who stepped down following the bank's $455 million Libor settlement in July of 2012 is set to launch his Africa-focused acquisition firm. The firm, Atlas Mara Co-Nvest Ltd., has raised $325 million and will start dealings on the London Stock Exchange sometime Tuesday.
Tough Break for Tourre: The Securities and Exchange Commission is seeking more than $1 million in fines and other payments from former Goldman Sachs trader Fabrice Tourre, who was found liable for six counts of securities fraud in August. Tourre's camp is declining to comment on the request, which was disclosed in a court filing. Notes the filing: "Nothing in the record suggests that Tourre is incapable of paying a large penalty." Wall Street Journal, New York Times
Wall Street Journal
An anonymouse tells the paper the Commodity Futures Trading Commission is moving to impose its swaps rule on foreign financial firms. Per the paper, the move is "likely to stoke criticism the U.S. is bidding to become the de facto global financial regulator."
More Swiss banks have agreed to participate in a U.S. program designed to identify lenders that aided tax evasion.
The Federal Reserve is altering stress tests so that it will now make its own projections about how bank balance sheets will fluctuate during a future recession, rather than rely on the banks for projections. One analyst tells the paper: "This to me is further evidence that the Fed is not satisfied that they have fortified the industry balance sheet enough to allow the biggest banks to open the floodgates on returning capital."
Financial Times
Royal Bank of Scotland is moving to cancel its participation in a U.K. government guarantee program. RBS says the cancellation is "another important milestone in the bank's recovery from the 2008 financial crisis."
New York Times
Dealbook columnist Peter J. Henning predicts we won't see eye-popping fines for Volcker Rule violations. "The vagueness of the rule's prohibition on certain types of proprietary trading will make it difficult to show that a trader knowingly violated it, or even acted recklessly, because it will be easy for an individual to claim ignorance," he writes.
"Hedge funds, asset managers and anyone who has anything to do with initial public offerings" are the ones making the big bonuses on Wall Street, writes Andrew Ross Sorkin.
Columnist Jared Bernstein bestows some praise on the Federal Housing Administration. "What we have here is an agency ramping up in true countercyclical fashion to meet and push back on a vast market failure," he writes. "Its ramp-up was not without cost, but it had demonstrably effective results in housing finance, one of the most damaged parts of the economy during the downturn."
