A great resource from Shearman & Sterling, in their note marking the end of the briefing war in the Argentine vs holdouts pari passu saga.
It’s a schematic of the arguments which the Second Circuit will likely consider when deciding appeals against an order for Argentina to pay holdouts alongside restructured bondholders. Some of the arguments are key. Some are not so key. Read more
The city and state of New York and US Department of Justice have filed separate lawsuits against Bank of New York Mellon, alleging the world’s largest custody bank defrauded pension funds, US banks and millions of investors nationwide on currency transactions for 10 years, the FT reports. Tuesday’s New York action, which seeks to recover more than $2bn in alleged ill-gotten gains, marks the third lawsuit this year filed by a state legal officer against the bank. In August, Florida and Virginia sued the company for allegedly wrongfully overcharging their local pension funds on foreign-exchange trades. According to the Wall Street Journal, the suits allege that BNY Mellon defrauded or misled state and public pension funds, private companies, universities and banks in a decade-long scheme of overcharging for foreign exchange. The move by the U.S. attorney in Manhattan is the first time federal prosecutors have filed a legal action in the mushrooming currency case. In a statement, a BNY Mellon spokesman said: “The U.S. Attorney does not appear to have made any serious independent effort to assess the validity of the claims in this lawsuit. We will fight these claims vigorously and are confident we will prevail.”
Bank of New York Mellon has ousted Robert Kelly as CEO, citing “differences in approach to managing the company”, and appointed Gerald Hassell, a 30-year veteran of the bank, as his successor, the FT says. “We’ve got some management issues,” said a person close to the situation. “This is not a precipitous thing. It was over a period of time. We thought we had to make a change. We’ve got a good guy in Gerald.” CNBC reports that the board of directors felt his management technique was hurting morale, and feared that staff may leave the company as a result. NYT Dealbook adds that Gerald L. Hassell, 59, the bank’s president and a board member since 1998, was appointed chairman and chief executive.
Florida and Virginia have filed suits against Bank of New York Mellon alleging that it failed to properly price FX trades for state retirement funds, Bloomberg reports. Florida’s state attorney general said that the bank had overcharged by millions of dollars. “BNY Mellon added hidden spreads, including markups and markdowns to those foreign exchange trades rather than pricing the trades at the exchange rate at which it actually executed the transactions,” the suit charges. BNY Mellon has strongly denied the allegations, but the stakes are rising and the suits reflect long-running controversy over whether the bank gave investors unfavourable rates, the WSJ says.
New York’s attorney-general has moved to block an $8.5bn settlement between Bank of America and investors in mortgage securities that plunged in value during the financial crisis, the FT reports. Eric Schneiderman, New York AG, filed court papers on Thursday that accuse Bank of New York Mellon, one of the parties to the disputed settlement, of having “engaged in repeated fraud and illegality” in its role as trustee to investors in hundreds of billions of dollars of mortgage securities. The filing with the New York Supreme Court is the latest twist in a complex legal drama that seeks to address wrongdoing arising from the way mortgages were sold to homeowners and packaged into securities that then collapsed as the crisis deepened in 2008. BofA had proposed to pay $8.5bn to investors to settle claims related to its mortgage procedures and the activities of Countrywide, which it bought in 2008. The New York AG said BNY Mellon had a conflict of interest in agreeing to the settlement as it would be indemnified by BofA for related legal action.
Bank of New York Mellon said it would start charging a fee on large deposits in response to a “sudden” and “significant” increase in its balance sheet from investors searching for a haven to stash their cash, reports the FT. Accounts with an average deposit of more than $50m will be charged a 13 basis point annual fee on the excess and an additional fee if short-term Treasury bills produce negative yields. FT Alphaville has more on what it calls the cash killers.
Cash may be king but it’s going to cost the subjects. Negative interest-rates are here and that’s rarely a good sign. Click through for the two-page explanatory note sent to clients by BNY Mellon. A 13 basis point fee will be charged on accounts with an average monthly balance of over $50m “per client relationship”. An additional fee will be levied if 1-month T-bill yields fall below zero; at pixel-time they were yielding a quarter of a basis point.
BNY Mellon to charge on $50m-plus deposits – FT
The search for a safe haven just got even trickier. BNY Mellon announced on Thursday that it is to charge a fee on all those cash deposits piling in as investors flee risk assets. Presenting, then, the latest cash killers — flashes courtesy of Reuters:
Thursday, August 04, 2011 10:54:35 AM RTRS – BNY MELLON SAYS TO CHARGE FEE ON “EXTRAORDINARY” DEPOSITS; TRADERS CITE THIS FOR US T-BILL DEMAND BK.N Read more
Bondholders have combined to challenge an $8.5bn deal that Bank of America struck last week with other investors to settle claims that its Countrywide Financial unit mis-sold MBS, the FT reports. The Walnut Place group of investors has accused BNY Mellon, the trustee on the MBS deals, of putting its interests ahead of other shareholders in the Countrywide trusts, and failing to force Countrywide to repurchase faulty and poorly-underwritten loans. The investors therefore argue that BofA should be held liable for up to $242bn of buybacks across the 530 trusts involved in the settlement.
US federal securities regulators are stepping up their examination of the role of big banks in executing currency trades for clients, reports the WSJ, citing a person familiar with the matter. The SEC is examining whether two big banks made proper representations to pension-fund clients about how their currency trades would be handled and priced. At issue is whether “custody” banks – which handle securities and back-office tasks for institutional investors – are overcharging public pension funds for trading in the $4-trillion- a-day forex market. The SEC probe is examining currency-trading activities of Bank of New York Mellon and State Street; it comes on the heels of previously publicised probes by the Justice Department and three state attorneys general into whether the banks fairly charged clients for currencies. State Street and BNY Mellon say they have done nothing wrong and will defend themselves.
BNY Mellon Asset Management has won regulatory approval to set up a joint-venture fund manager in China, the first such agreement in about two years, reports the FT. The venture with Western Securities, a Xi’an-based securities house, gives BNY Mellon a 49% share in newly formed BNY Mellon Western Fund Management, with the rest owned by Western. The stake is larger than the 20-33% typically allocated to foreign companies in such deals, said Jon Little, vice-chairman of BNY Mellon Asset Management.
Bank of New York Mellon on Tuesday announced it would pay $2.31bn to acquire the back-office operations of PNC Financial Services Group, fuelling expectations that more financial firms will shed businesses to shore up capital and repay bail-out funds. The deal will allow PNC to exit a non-core business while helping to repay $7.6bn in government Tarp funds. PNC also said it would sell $3bn of common stock and up to $2bn of senior notes to repay federal aid.
Bank of America’s search for a new chief executive took another detour on Monday when key candidate Robert Kelly, chief executive of BNY Mellon, said he was not leaving his current position. In an email to staff on Monday, Kelly said he had “firmly concluded” he should stay with BNY Mellon. Kelly’s announcement restored stability to the management ranks of BNY Mellon, less than a week after he disclosed to his board that he had held talks with BofA about replacing Ken Lewis as CEO when Lewis retires at year-end.
Bank of New York Mellon chief executive Robert Kelly was recently approached about taking the CEO position at Bank of America but has shown no interest in the job, the WSJ reported. Kelly was approached more than once about potentially succeeding incumbent CEO Kenneth Lewis, who will retire at the end of this year, it said.
Globe Pub Company, the ailing pub operator owned by property entrepreneur Robert Tchenguiz, was on the brink of administrative receivership on Wednesday night. The Bank of New York Mellon, which became the trustee to Globe’s bondholders after the group defaulted on a £257m asset-backed loan in April, has lined up Zolfo Cooper as receivers. The appointment, which could be announced on Thursday, would see Globe sold to a new vehicle backed by Heineken. The Dutch brewer could pay £180m to buy the assets.
Bank of New York Mellon sees more acquisition opportunities in Europe than in Asia, according to Robert Kelly, the bank’s chairman and CEO, reports Reuters. Kelly said European financial institutions had been harder hit by the financial crisis than their Asian counterparts and were refocusing as a consequence. However, BNY is in the final stages of gaining regulatory approval in China for its planned fund management joint venture with Xian-based Western Securities, in which it will hold a 49% stake, he added.
Russia dropped a $22.5bn lawsuit against Bank of New York Mellon on Thursday after agreeing an out-of-court settlement in a case related to a decade-old money laundering scandal. A judge in Moscow’s arbitration court said Russia’s federal customs service, the plaintiff, had ordered the case to be closed. The customs service in May 2007 accused BNY Mellon of illegally helping to wire more than $7bn out of the country in the late 1990s and sought more than triple the amount in damages.
The US Federal Reserve is considering big changes to the giant repurchase – or repo – markets where banks raise overnight dollar loans. The plans include the creation of a mechanism to replace the clearing banks that handle transactions – the biggest of which are JPMorgan Chase and Bank of New York Mellon - serving as intermediaries between borrowers and lenders. Fed officials plan to meet next month with market participants to discuss reforms.
BlackRock was on Sunday in discussions with Barclays as it raced to seal the purchase of Barclays Global Investors and see off an 11th-hour challenge from Bank of New York Mellon. Barclays is expected to decide early this week on who should buy its BGI unit. If BlackRock succeeds, Barclays is likely to take a stake of up to 20% in the US money manager, said people briefed on the deal. BlackRock is considered the most probable buyer, but if it fails to offer an attractive price, BNY Mellon could step in.
In case you missed these stories from the Weekend FT:
- RBS starts Asian asset sale
RBS, the stricken UK bank, started the divestment process for many of its Asian assets on Thursday, distributing an official sale document covering businesses in 12 countries.
- HSBC and BNY Mellon sued over ‘minibonds’
A group of investors has sued HSBC and Bank of New York Mellon, alleging they failed to protect Hong Kong buyers that bought into ‘minibonds’ – complex derivative instruments linked to the now defunct Lehman Brothers. Read more