FT Alphaville does like a good Senate Banking Hearing. Especially when they feature a political body slam on proper statistical methods. And so we are proud to announce this month’s Ultimate Statistics Fighter… [dramatic pause]… is Senator Elizabeth Warren!
Warren demonstrated her moves on Thursday during a hearing on Outsourcing Accountability? Examining the Role of Independent Consultants. (Don’t let the incredibly dull title of the hearing deter you. That would be a mistake. Don’t be that person.) Read more
On Monday, the Office of the Comptroller of the Currency and the Federal Reserve issued “enforcement actions” against JPMorgan, which makes it sound a lot more exciting than it is.
The slaps on the wrist for the “London whale” trades, and failures concerning anti-money laundering procedures, come with no fines and no admission or denial of any wrongdoing. The Fed does, however, reserve the right to take further action and the UK’s Financial Services authority said it’s still looking into it. Read more
HSBC came in for a kicking in the Senate Subcommittee on Investigations into anti-money laundering and exposure of the US financial system to drug and terrorism financing.
Some of this is old news; as the FT notes, HSBC has not been formally accused of wrongdoing in connection with the most recent investigation, but it has twice been ordered by US regulators to take action on deficient anti-money laundering practices. However investigation by the US Department of Justice, the US Treasury and the Manhattan district attorney, is under way into many of the allegations raised in the Senate report, and some analysts expect fines of up to $1bn to result. Read more
The WSJ reported on Thursday that JPMorgan’s regulators will conduct a thorough review of the bank’s models, according to “people close to the situation”.
Thanks to a letter from the the Office of the Comptroller of the Currency to Senator Sherrod Brown, we know that one particular model — the VaR model that JPMorgan’s Chief Investment Office switched to in January 2012, and which failed to alert management to outsized risks the division was taking — did not require regulatory approval before being used. Read more
Citigroup has come under attack from a prominent analyst and accountancy experts for failing to disclose regulatory criticism of its valuation of troubled securities during the financial crisis, reports the FT. Documents show that on Feb 14 2008, the Office of the Comptroller of the Currency, one of Citi’s key regulators, wrote to Vikram Pandit, Citi’s CEO, to warn about the way the bank valued illiquid collateralised debt obligations. Citi suffered more than $50bn in losses in the crisis, largely on CDO writedowns, leading to its $45bn government bail-out. Mike Mayo, a CLSA bank analyst, said in a client note that Citi “should have known about internal controls problems” and urged the bank’s board and regulators to investigate. The OCC letter was released by the Congress- appointed Financial Crisis Inquiry Commission. Read more
That’s an old Valentine’s day letter — sent on February 14, 2008 — from John Lyons at the Office of the Comptroller (OCC) to Citigroup CEO Vikram Pandit. We bring it up because it’s the subject of a new column by Bloomberg’s Jonathan Weil, provocatively titled; “What Vikram Pandit Knew, and When He Knew it.” The document itself was released recently by the the Financial Crisis Inquiry Commission. Read more
Regulators are preparing to issue mortgage servicers with fines after a report found ‘critical deficiencies’ in the way they handled foreclosures, Reuters reports. Prepared congressional testimony by the acting head of the OCC reveals that investigators have found violations of state laws by servicers, including a ‘small number’ of wrongful evictions. The commissioner of the Federal Housing Administration said on Wednesday that penalties could range from fines to loan modifications or forgiveness of principal. Punishments could be announced for institutions including Wells Fargo, JPMorgan and Bank of America within days, according to the WSJ. Read more
HSBC has been ordered by US regulators to overhaul its internal controls in the US after a probe found the bank’s ineffective compliance programmes created “a significant potential for unreported money laundering or terrorist financing”, the FT reports. Thursday’s actions by the Federal Reserve and the Office of the Comptroller of the Currency are the latest blow to HSBC, which announced the retirement of its top US executive in June and is under a separate investigation by the Department of Justice and the US Attorney’s Office. Read more
Before you accuse US banking regulators of being slow to act on the ongoing sovereign shakeout, Comptroller of the Currency John Dugan wants you to know that they’re on the case.
As Reuters reported on Monday: Read more
Shock, horror! Huffington Post tells us on Tuesday that derivative is “one of the dirty words of the financial crisis”.
“Though these often-risky bets were blamed by many for helping fuel the credit crunch and the downfall of Lehman Brothers and AIG, it seems that Wall Street has yet to learn its lesson”, it thunders. Read more
The Office of the Comptroller of the Currency has released its quarterly report on bank trading and derivatives activities for Q2 2009, and as usual, it makes for interesting reading.
Some highlights: Read more
The Office of the Comptroller of the Currency is an under-remarked institution, given its mandate:
The Office of the Comptroller of the Currency (OCC) charters, regulates, and supervises all national banks. It also supervises the federal branches and agencies of foreign banks. Headquartered in Washington, D.C., the OCC has four district offices plus an office in London to supervise the international activities of national banks. Read more
US federal banking regulators have created a national charter system to allow private equity groups and other investors to buy troubled or failed institutions. The move comes as regulators brace for a growing number of bank collapses following 20 failures so far this year. The FDIC, which insures customer deposits, brokers the sale of failed banks to other banks or savings and loan institutions. Under a “shelf charter” system, the Office of the Comptroller of the Currency would grant conditional preliminary approval of a national bank charter to non-bank investors, thereby expanding the pool of potential qualified buyers. The 18-month conditional charter would remain inactive or “on the shelf” until an investor group is in a position to acquire a troubled bank. It would allow the group access to the FDIC’s list of failed or troubled banks and let it bid for them. A final charter approval can be granted once a bid is accepted. The OCC said Friday it had granted the first such preliminary approval to an investor group led by a 30-year banking veteran, Gerald Ford. Read more