The SEC is investigating the sale of $850M in bonds issued by Mozambique, the latest development in a scandal that is exposing the links between the country, three international banks and a defense contractor.
In 2013, Credit Suisse (NYSE:CS), Russian bank VTB Group and BNP Paribas (OTCQX:BNPQY) sold the bonds to investors for a Mozambican state-owned company that said it needed money for tuna fishing, but months later, the government announced that the funds had also been used to buy military equipment.
In what could only be described as certain to happen once the Panama Papers leak hit, the New York Department of Financial Services has asked Goldman Sachs (NYSE:GS), along with BNP Paribas (OTCQX:BNPQY), CIBC (NYSE:CM), and Standard Chartered (OTCPK:SCBFF) about their possible involvement with shell companies, according to CNBC.
The NYDFS also requested information from 13 other lenders over the matter last month.
The issue for banks are new regulatory and capital rules which make it harder to hold big inventories are paper investors want to trade. Meanwhile, the ease of moving in and out of vehicles like BlackRock's $25B IG bond fund (NYSEARCA:LQD) or its $16B junk-bond fund (NYSEARCA:HYG) have led to surging volumes, even as the individual securities underlying those ETFs are more difficult to trade.
Banks are responding with the total-return swap in which an investor pays a fee to a counterparty who promises delivery of the total gain on a basket of certain debt. These instruments are not only quickly traded without having to deal with the underlying securities, but are pegged to some of the same indexes as the biggest credit ETFs. Citigroup (NYSE:C) just became the eight dealer in these derivatives (joining GS, BAC, JPM, MS, CS, DB and OTCQX:BNPQY), which are being pitched by banks as an alternative to ETFs.
European banks are set to cut back equities trading and research teams in Asia, as global cost-cutting reaches a region where a drop in Chinese trading volumes and local competition have hit profits.
Bankers and headhunters told Reuters that BNP Paribas (OTCQX:BNPQF), Deutsche Bank (NYSE:DB) and Barclays (NYSE:BCS) are among lenders likely to slash their workforce, setting the tone for a tough 2016.
Ten of Europe's largest banks already announced 130K job cuts since last June.
The Financial Stability Board has published new rules that aim to stop banks from becoming "too big to fail," confirming its final proposals for Total Loss Absorbing Capacity, or TLAC.
Under the plan, large lenders will have by January 2019 to hold a financial cushion of at least 16% of their risk-weighted assets in equity and debt that can be written off. That requirement will gradually increase, reaching 18% of assets weighted by risk by January 2022.
The FSB will put the rules, which will apply to the world's top 30 banks, to the G20 later this month.
The Street has priced in earnings declines for pretty much every sector, but Q3 and Q4 estimates for the financials have barely budged, and consensus sees Q3 results 10% above that of a year ago.
Morgan Stanley's Huw van Steenis, however, sees FICC revenue declines of 10-25% - far more than the 5% or so that's been talked about by bank managements at recent investor conferences - as the commodity price crash combines with collapsing fixed-income trading, and the lack of volatility in forex action.
With just $20B in FICC revenues, says van Steenis, Q3 is shaping up to be the second worst quarter for banks in the last two years. Leaving his own bank (NYSE:MS) out of the analysis, he sees FICC revenue declines of 17% at JPMorgan (NYSE:JPM), 9% at Goldman (NYSE:GS), and 6% at BofA (NYSE:BAC) and Citi (NYSE:C).
Bottom line: "On EPS, we are 4% below consensus on average across our coverage for 2015, and 5% below for 2016. The biggest delta is for Barclays (NYSE:BCS), BNP Paribas (OTCQX:BNPQY), and Goldman in 2015, and SocGen (OTCPK:SCGLY), HSBC, and BNP in 2016."
The record $9B fine levied against BNP Paribas (OTCPK:BNPQF) is presenting U.S. authorities with novel legal questions, after morphing into a fight over whether terrorism victims should get any of the money.
BNP pleaded guilty to violating sanctions in June 2014 by funneling billions of dollars through the U.S. financial system for clients in Sudan, Iran and Cuba.
Now, a group of terrorism victims is asking the DOJ to compensate them with funds from the BNP settlement, attempting to draw a connection between the French bank's misconduct and terrorist acts overseas.
Welcome back my friends to the show that never ends ...The New York Department of Financial Services is probing more abuse of forex markets by the banks - this time by the use of automated trades driven by computer algorithms, reports the FT.
Findings could indicate more widespread abuse than what U.S. and U.K. authorities disclosed on Wednesday (along with nearly $6B in fines and a number of guilty pleas). Sources remind that this week's charges related to manipulation performed by bank employees, but this probe covers electronic trading, which accounts for the majority of forex transactions.
Trading platforms under the scope include those from Barclays (NYSE:BCS) and Deutsche Bank (NYSE:DB), and information has been subpoenaed from BNP Paribas (OTCPK:BNPQF), Credit Suisse (NYSE:CS), Goldman Sachs (NYSE:GS), and SocGen (OTCPK:SCGLY).
The investigation into Barclays is the most advanced, but DFS has initially reached similar nefarious conclusions about the goings-on at Deutsche too. The probes of the other lenders are at even earlier stages.
The Federal Reserve and FDIC have vetoed the "living wills" of the U.S. units of BNP Paribas (OTCPK:BNPQF), HSBC (NYSE:HSBC) and Royal Bank of Scotland (NYSE:RBS), stating that they could face sanctions by the end of the year if the issues are not fixed.
Living wills, which are a requirement under Dodd-Frank, spell out how a firm would wind down its operations under U.S. bankruptcy code if it got into trouble.
The NY Department of Financial Services has sent subpoenas to Goldman Sachs (NYSE:GS), Credit Suisse (NYSE:CS), BNP Paribas (BNZPY) and Societe General (OTCPK:SCGLY), Reuters reports, expanding its probe of whether banks' electronic trading platforms allow them to front-run clients in the forex market.
At issue is a latency period between the time an offer is floated and accepted.
The department is already probing Barclays (NYSE:BCS) and Deutsche Bank (NYSE:DB) over similar concerns and installed monitors at those banks in recent months.
More than half of the €7.5B in newly issued Santander (NYSE:SAN) stock was purchased by U.S. investors, reports the FT, with about 25% bought by U.K. owners.
The bank issued 1.214B shares at £6.18 each as new executive chairman Ana Botin quickly broke ranks with her late father's strategy just four months after replacing him atop the company.
The ADRs are lower by 4.5% premarket after yesterday's 7% decline.
Now that Santander has joined Deutsche Bank in raising capital, analysts turn their attention to the next dominoes. High on the list: BNP Paribas (OTCQX:BNPQY), Societe General (OTCPK:SCGLY), Credit Suisse (NYSE:CS), Commerzbank (OTCPK:CRZBY), and Credit Agricole (OTCPK:CRARY).