U.S. Federal Judge Denise Cote has ruled that investors may press claims against 12 major banks for violating antitrust law by limiting competition and fixing prices in the $21T CDS market, even though improved liquidity should have driven costs down.
The defendants include BofA (NYSE:BAC), Barclays (NYSE:BCS), BNP Paribas (OTC:BNPZY), Citigroup (NYSE:C), Credit Suisse (NYSE:CS), Deutsche Bank (NYSE:DB), Goldman Sachs (NYSE:GS), HSBC (NYSE:HSBC), JPMorgan (NYSE:JPM), Morgan Stanley (NYSE:MS), RBS (NYSE:RBS) and UBS (NYSE:UBS).
It's another round of fee cuts from Vanguard on a range of its European mutual funds and ETFs, as well as the company's entire suite of LifeStrategy funds. Annual management charges on Vanguard's index mutual funds will now range from 8 to 38 basis points, and fees on four ETFs have been cut by 7 to 29 bps, effective Monday.
Vanguard came onto the fund scene in Europe five years ago and doubled mutual fund sales in 2013 to €8.6B, making it the 4th best-selling manager (from 20th in 2012). ETF flows look good as well, with $4.3B of inflows this year already surpassing $3.6B for all of 2013.
Watching the competition are BlackRock (BLK -1.5%) and Deutsche Asset & Wealth Management (DB -2.1%).
Deutsche Bank (NYSE:DB) has hired two technology execs as an effort to step up its regulatory lapses identified by the New York Fed.
"Over the next year, our local management team will be very focused on building our capabilities across all critical infrastructure areas to best support our growing U.S. franchise,” says CEO of North America Jacques Brand.
The New York Fed warned Deutsche Bank over its shoddy financial reporting and weak technology systems last December, and it is now concerned that the bank will get its records in order by next year. In 2015, all large foreign lenders located in the U.S. will have to present how they comply with new strict foreign bank rules.
The Federal Reserve and the FDIC say the bankruptcy plans submitted by 11 of the largest banks make "unrealistic or inadequately supported" assumptions and "fail to make, or even to identify, the kinds of changes in firm structure and practices that would be necessary to enhance the prospects for" an orderly failure. Ouch!
To review: Dodd-Frank requires banks annually submit a "living will" detailing their operations and exposures and how they could be dismantled without the need of a bailout in the event they near failure. Pleasing the regulators is a must as they have the power to force tougher capital rules or restrictions on growth, or even mandate a breakup of the lenders. As for the current failures, the banks have about a year to address D.C.'s concerns.
"Despite the thousands of pages of material these firms submitted, the plans provide no credible or clear path through bankruptcy that doesn't require unrealistic assumptions and direct or indirect public support," says the FDIC's #2 official, Thomas Hoenig.
Goldman Sachs Asset Management (GS -1.3%) and DB Private Equity (DB -2.9%) are in talks to pay about $500M for NBGI Private Equity - the buyout arm of National Bank of Greece (NBG -2.7%), reports Bloomberg. That would be about one third less than the Greek lender originally invested in the business.
The P-E arm has underperformed competitors, according to data seen by Bloomberg, with 10 of its 11 funds projected to lose about 25 cents for every dollar invested. Its high-living CEO Pavlos Stellakis, along with the rest of the management team, is in negotiations to remain with the firm after the deal has been completed.
Wall Street firms led by Goldman Sachs (NYSE:GS) are closing in on a deal to purchase a stake in chat and instant messaging start-up Perzo as an alternative to Bloomberg's similar application, Reuters reports.
Bloomberg has dominated Wall Street for years, but banks have been looking for a substitute as sluggish trading volumes and higher regulations weigh on revenues. Bloomberg's trading and news terminal costs about $20,000 a year, while Perzo's applications are open-source and free. Bloomberg customers must also buy an entire terminal, and cannot just buy the messaging system and adapt it.
Several other banks and asset managers have received term sheets for the Perzo deal and have recently signed non-disclosure agreements including Morgan Stanley (NYSE:MS), JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), Deutsche Bank (NYSE:DB), HSBC (NYSE:HSBC), and BlackRock (NYSE:BLK).
Goldman has been looking at alternatives to Bloomberg's messaging program for years, and launched a project internally called "Babel" in early 2013 to develop a competitor.
The New York Department of Financial Services wants government monitors placed in the U.S. offices of Deutsche Bank (NYSE:DB) and Barclays (NYSE:BCS) as part of its investigation into the foreign-exchange market.
The two banks have been chosen to host monitors because data collected over the course of the probe pointed to them for having the greatest amount of potential problems.
Deutsche's (DB -0.5%) long-term debt and deposit ratings DB)+to+A2%3B+Profitability+Dragged+Down+by+Litigation,+Legacy+Costs/9696756.html" target="_blank">are cut to A3 from A2, with Moody's noting the bank's "modest" profitability as being dragged down by litigation and restructuring costs and legacy losses, not to mention the bank's high dependence on capital markets earnings. The outlook remains negative.
Disclosed alongside Q2 results, both UBS and Deutsche Bank (NYSE:DB) say they are cooperating with regulators looking into high frequency trading and their dark pools.
It was last month NY GA Eric Schneiderman sued Barclays for favoring HFT traders in its dark pool. Since the lawsuit was filed, the number of trades in Barclays LX has about halved, according to Finra, as several major clients have exited.
Among those investigating UBS (the largest dark pool operator), says the bank, are the NY AG's office, the SEC, and Finra.
Following the New York Fed's examination of reporting and regulatory practices at Deutsche Bank (NYSE:DB), CFO Stefan Krause now says the bank will hire 500 employees in the U.S. to make sure its regulatory reporting complies with demands of local authorities.
A letter sent from the New York Fed to DB was publicized last week stating that the bank's suffered from several serious problems, including shoddy financial reporting and inadequate auditing.
Deutsche Bank (DB -3.1%) drops sharply after WSJ reports an examination by the New York Fed found the bank's U.S. operations suffer from several serious problems, including shoddy financial reporting, inadequate auditing and oversight and weak technology systems.
In a letter to DB last December, a senior NY Fed official reportedly wrote that financial reports produced by some of the bank's U.S. operations "are of low quality, inaccurate and unreliable" to the extent that DB's "entire U.S. regulatory reporting structure requires wide-ranging remedial action."
The letter was said to have ordered senior DB execs to ensure steps were taken to fix the problems, and that the bank might have to restate some of the financial data it has submitted to regulators.
Prior to its takeover of European bank supervision on November 4, the ECB will release collections of data on the euro zone's 128 most important lenders to insure the banks can withstand future crises.
The published review in the second half of October will outline leverage measures, standardized ratios of non-performing loans and other statistics, giving the banks only two weeks to come up with plans to deal with capital shortfalls.
When the going gets tough, the tough suspend trading. Portugal has halted trade in Banco Espirito Santo with the stock off 17.2% on the session and 54% over the last month. At issue are financial troubles for the bank's privately-owned holding company, Espirito Santo International. Its accounts are currently under review by an external auditor who has identified irregularities and concluded the company "is in serious financial condition."
Santander (SAN -5.8%), UBS (UBS -1.8%), Deutsche Bank (DB -3.1%), Bank of Ireland (IRE -5.6%), Credit Suisse (CS -2.8%), ING (ING -3.2%), BBVA (BBVA -3.1%). U.K. banks: Barclays (BCS -3.8%), RBS (RBS -1.9%), HSBC (HSBC -1.9%), Lloyds (LYG -2%).