Bank stocks have been closely tied to the fate of oil in recent weeks, with investors worried about the scale of banks’ involvement in the oil industry. Most oil companies are expected to fail if the price of oil does not rise above $50 by the middle of 2017. The current price of oil, though, is $29 and shows little sign of a large-scale near-term recovery. When oil companies go bankrupt, many of their loans will go unpaid, possibly rendering banks insolvent if their exposure is too large.
Deutsche Bank sought to reassure investors of its capital strength after last year’s steep losses. It then announced a €5 billion bond buyback plan to be funded by a small part of the bank’s pending asset sales. The bank will need to reduce its debt load as it scales down.
Morgan Stanley agreed to pay $3.2 billion in penalties and restitution to settle charges of misrepresenting the mortgage loans backing some of the securities it issued around 2008. The bank reduced the quality of the mortgages it included in securities but told buyers it had not done so. The settlement was not unexpected and the bank said it had already set aside the funds involved.
The Financial Conduct Authority (FCA) fined a senior manager at JPMorgan £792,900 for failing to cooperate with regulators. The manager failed to disclose problems with the bank’s synthetic risk derivatives portfolio and told regulators in a March 2012 meeting that the problems were resolved even as the bank’s liabilities had by that time ballooned to $6 billion and the bank was holding daily crisis meetings.
Sources for The Wall Street Journal say U.S. and U.K. authorities are in the late stages of their Libor-rigging investigation and are likely to charge several banks in the two countries. Misconduct in other countries might lead to separate charges.
MetLife is formally challenging its “systemically important” status in court. The insurer is seeking to overturn the part of the Dodd-Frank Act that defines “systemically important” financial institutions. In court it argues that issuing life insurance policies should make it exempt.
The Federal Election Commission wants to know if Citibank and Goldman Sachs were secretly bankrolling the Ted Cruz presidential campaign. Loans totaling $1 million weren’t disclosed in the candidate’s electoral filings. Cruz is one of several presidential candidates with close ties to Wall Street, but apparently the only candidate to receive this kind of secret funding. Besides the loans, Cruz’s wife is an employee of Goldman Sachs.