Friday, March 20, 2015

This Week in Bank Failures

A loss of deposits from Banco de Madrid put the bank into insolvency on Tuesday, just a week after the bank, the Spanish subsidiary of Andorran bank Banca Privada d’Andorra was put into administration during a money-laundering investigation. This was not a textbook case of a bank run but the result of a small number of big-money depositors taking their money out. Banco de Madrid has filed for bankruptcy protection. Spain’s bank fund says it will not bail out the failed bank, so depositors will get back only the first €100000 of their deposits. The lack of a bailout could be seen as a rarity in the recent history of banks in Europe, a reflection of the bank’s niche status, or part of a transition to a new regime in which failed banks are resolved in an orderly fashion.

BNY Mellon will pay $714 million to settle cases related to its use of currency exchange market timing against its customers. In a longstanding practice, the bank charged some customers a slightly higher price for foreign currencies than the market price at the time of the transaction, by quoting a less favorable exchange rate from a different time of day. About half of the money will go to reimburse customers, including pension funds. Over the years, the extra money added up to billions of dollars. As part of the settlement, the bank will fire several executives who were involved in the scheme to misprice transactions.

TSB, the U.K.’s former Trustee Savings Bank that was bought out by Lloyds 20 years ago, then spun off in a substantially different form when Lloyds had to be bailed out in 2008, will be sold to Spanish bank Sabadell in a deal announced last week and approved today.