Bank officials, trade groups and lawmakers are quietly pressing the Federal Reserve for a delay of up to seven years regarding the rule that limits their investments in private-equity and venture-capital funds
The "Volcker rule," part of the Dodd-Frank legislation, restricts banks' ownership stake in hedge funds and private equity funds, and prohibits banks from making speculative bets with their own money.
Regulators finalized the rule in December but agreed not to enforce it until 2015.
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.
State Street (STT +0.4%) will pay $60M to settle a shareholder lawsuit stemming from 2009 charges that the custodial bank overcharged clients for foreign exchange transactions. Shareholders weren't wronged by the forex markups, but claimed damages thanks to the decline in State Street's stock amid the 2009 suit.
BlackRock's (BLK +1.4%) iShares lineup took in an estimated $21.4B in net deposits in Q2, beating Vanguard's $18.2B, according to Bloomberg. IShares funds focusing on emerging markets brought home $8B, including $5.9B for the MSCI Emerging Markets ETF (EEM).
Before Q2, BlackRock - the ETF industry's largest ETF provider - had lost share to Vanguard for four of the previous five quarters.
State Street (STT +0.9%) had seen net redemptions in Q1, but was able to bring in $8.3B in Q2. The company is especially sensitive to flows in and out of the giant SPDR S&P 500 ETF Trust (SPY), which accounts for 40% of its U.S. ETF assets.
Invesco's PowerShares QQQ Trust (QQQ) saw heavy redemptions of $2.9B even as it returned 7.2%.
Having exited his holdings in State Street (STT +0.2%) late last year, Nelson Peltz has set his sights on Bank of New York Mellon (BK +3.8%), with his Trian Fund Management disclosing a 9.33M share stake in the company.
Partly in response to pressure from Peltz, State Street is perceived to have been more aggressive than Mellon Bank in cutting costs, selling off non-core units, and in prioritizing capital returns over acquisitions. The stocks of the two companies, however, are each up about the same amount since Peltz began pushing for change at State Street in late 2011.
With more than $998B in its iShares business, BlackRock (BLK) is on target to topple its upcoming $1T mark, although the company still faces market competition from rivals Vanguard and State Street (STT). The two offer investor-friendly and low-cost investing, attracting a large part of the market segment.
Vanguard secured 43% of the new money in the ETF market this year, pulling in $30.3B, compared to Blackrock's 35% share, which received $24.7B.
Blackrock is still highly unlikely to be surpassed anytime soon due to its sheer size, although new market share percentage is beginning to favor rivals. The asset manager tripled the size of its iShares business in the last five years, after purchasing it from Barclay's.
After eight months on the market, Fidelity's ten sector ETFs have crossed over $1B in AUM, with the MSCI Information Technology ETF (FTEC) and the MSCI Energy Index ETF (FENY) seeing especially strong interest.
All ten charge annual expenses of just 0.12% - lower than the competition from the likes of Vanguard, BlackRock (BLK), and State Street (STT) - but higher trading volumes from those three's offerings make for lower trading costs.
Like Vanguard's VDE, the Fidelity offerings hold many more companies than those from BlackRock and State Street. The FENY, for example, has 166 stocks vs. the IYE with 84, and 44 for the XLE.
Bank of New York (BK +2.1%), State Street (STT +2.4%), and Northern Trust (NTRS +2.7%) are all moving sharply higher in lockstep as the Fed begins its 2-day policy meeting.
Earnings at all three have been weighed down by ZIRP, and with new "dots" (representing the timing of rate hikes) coming from the FOMC tomorrow, perhaps the trio are anticipating a more hawkish view. Following a fast CPI report earlier today, the 10-year Treasury yield is higher by four basis points to 2.64% and the first Fed rate hike is priced in for Spring 2015.
The actively managed SPDR DoubleLine Total Return Tactical ETF is looking like a direct competitor to Bill Gross' Total Return ETF (BOND), the largest actively managed ETF (which has gone from $0 to $3.4B in AUM in two years).
It's not State Street's (STT) first foray into actively managed funds. Earlier this year, SSgA teamed with MFS Investment Management for three others.
State Street (STT -0.6%) expects pre-tax incremental savings of $130M in FY14 and savings of $575M - $625M in FY15 thanks to its Business Operations and IT transformation program, says CEO Joseph Hooley, presenting at the Deutsche conference.
Global ETP flows in April rose to a six-month high of $33.5B, according to BlackRock's (BLK) latest ETP Landscape, with emerging market ETPs leading both equity and fixed income flows during the month.
Broad emerging market equity flow of $5.9B was the first positive month since October, and $1.3B into EM bond funds was the best month since October 2012.
U.S. equity flows of $11B were led by the energy sector, which added $1.9B of funds.
BlackRock's iShares has $952.5B in ETP assets after adding $31.8B YTD. It's the number one ETP player by assets, but has lost 20 basis point of market share this year to 38.2%. State Street (STT) is number two with $408.9B in assets, down $4.8B YTD, and losing 90 basis points of market share to 16.4%.
State Street Corp provides a range of investment management strategies, investment management advisory services and other financial services for corporations, public funds and other sophisticated investors.