Friday, May 30, 2014

This Week in Bank Failures

Ratings: Moody’s changed its outlook to negative for 82 European banks because of new euro zone bank resolution rules that prohibit bailouts for bank bondholders. In the same announcement it upgraded one bank.

Cuts: RBS is reducing its U.S. mortgage business by two thirds, resulting in hundreds of job losses. The move is partly to reduce its risks in the U.S. real estate market and partly to reduce its U.S. footprint below $50 billion in assets, a level that would subject it to closer Fed scrutiny.

Seeking capital: Bank of America is selling 13 Tennessee branches to First Tennessee Bank. Bank of America is in the middle of a multi-year process of closing hundreds of branches in order to cut its operating costs. Citigroup says it expects to sell the OneMain personal loan business this year, probably in a private sale. It has been trying to unload the high-risk operation for years, but previously there was little interest from buyers.

Investigations: The U.S. Justice Department is investigating France’s BNP Paribas for running money for Iran. Reportedly the bank could face a fine near $10 billion or the loss of its U.S. banking license. The Justice Department is investigating at least 10 banks along with other companies for participating in transaction fraud. In particular, banks are believed to have processed hundreds of millions of dollars in fraudulent charges for black-market gun dealers that were essentially blackmailing their customers. The city of Los Angeles is accusing JPMorgan and Wells Fargo of discriminatory and predatory lending practices. Providence, Rhode Island, is pursuing a similar case against Santander.

Bank failures this year have disproportionately come on the last Friday of the month, and that pattern continues tonight. In Maryland, the O.C.C. closed Slavie Federal Savings Bank, which had $111 million in deposits at two branches in Bel Air and Baltimore. Bay Bank is paying a 0.2 percent premium for the deposits and is also purchasing 93 percent of the assets. The failed bank was originally created to serve immigrants from Bohemia. The O.C.C. had ordered it in 2012 to improve its operations.