Virtually all pre-1980 large banks have arcane and convoluted ways of keeping financial records, presenting the possibility that a bank could fail and the FDIC might not be able to determine who the depositors were or how much they were owed. It’s a situation that the FDIC faces about every five years in a small bank failure, but it presents a systemic risk should it occur on a large scale. For the first time, the FDIC has adopted a time-based recordkeeping rule for banks. The new rule says that a bank’s records must be sufficiently clear and timely to allow the bank to determine owners and balances of deposit accounts within 24 hours after the bank fails. The rules are obviously very vague and are arguably unenforceable, and they only apply to the largest banks, those with at least 2 million deposit accounts. These are generally banks with well over $1 billion in deposits. Still, the new rules represent a step forward, as previously there were no rules at all on this matter. I have argued that the banking system would be safer if essential deposit account information were required to be copied to a standardized XML data format at the end of every banking day so that the FDIC was not so dependent on each failed bank’s proprietary technology, but such a requirement would be well beyond the current information technology of the Wall Street banks.
Citigroup reportedly plans to shut down its retail banking operations in Argentina and Brazil. Some sort of move in Argentina has long been expected since that country accused the bank of breaking national laws by processing some transactions, but the withdrawal from Brazil seems to be purely a reaction to that country’s uncertain economic future.
All small and medium-sized banks with strong balance sheets will be eligible for a reduced schedule of regulatory review under interim rules from U.S. regulators.
Five directors of China state-owned bank ICBC were arrested in a money-laundering probe in Spain.
With a long-running dispute over nuclear power resolved, Iranian banks are plugged into the global banking network again.
After a board-level review HSBC has decided to keep its headquarters in London. Not all board members and executives were happy with the decision, with some eagerly anticipating a move to Hong Kong, and the bank will have to go to some trouble in the coming weeks to keep key staffers on board.