Friday, May 29, 2015

This Week in Bank Failures

Outflows have picked up again at most banks in Greece as depositors withdraw more money than they deposit. Net outflows were estimated at €5.6 billion in April. Outflows then nearly stopped, but picked up again in the second half of May. Depositors worry about whether the European Central Bank can go any farther to maintain liquidity in Greece. Outflows for May could reach €3 billion. Total deposits have retreated to the levels of 2004. Banks will need to find ways to sell some assets.

Dozens of banks must have handled money transfers of a million dollars and up to deliver the bribes that influenced decisions at international football association FIFA. Law enforcement officials are looking at the conduct of banks in New York and Qatar especially. So far there is no indication that banks understood the purpose of the transactions involved. A bank could have committed a crime if employees knew of improper payments and the bank failed to report the transactions to regulators. Bank employees might be criminals themselves if they advised or participated in the process of disguising criminal transactions. It is a safe guess that at least 20 banks are conducting quiet internal investigations into these questions. New York became the main focus of the investigation after investigators in other countries uncovered evidence of FIFA corruption that pointed to meetings and payoffs conducted in the United States.

Regulators in Turkey took charge of Bank Asya tonight. It is a politically charged move in a country that has been cracking down on political and social reformers, but the bank has been in perilous financial condition since last year. Customers withdrew 20 percent of deposits last year and the bank posted a loss of $300 million. It reduced its staffing by a third and reported a first quarter profit, but was withholding documents from bank regulators and was facing a stock delisting warning. The bank will continue to operate and will be managed temporarily by the national deposit insurance fund.

Bank of America will pay a $30 million fine for preying on active duty military families in violation of federal consumer protections for military personnel. The bank will overhaul its debt collection processes and pay restitution to an estimated 73,000 customers. The settlement with the O.C.C. does not cover the bank’s mortgage business, which exhibited a similar pattern of misconduct.