Friday, February 26, 2016

This Week in Bank Failures

The CEO of the failed Georgia bank Tifton Banking Company, Gary Patton Hall Jr., was sentenced to 7 years and ordered to pay $4 million in restitution for his role in fraudulent loans and records. Hall covered up problems with nonperforming loans and improperly approved a loan for the buyer of real estate he was personally selling. The bank obtained $3.8 million in TARP funds in 2009 based on its falsified records, then failed in 2010.

An expected U.K. referendum vote to leave the European Union on June 23 may have sped up a merger deal between Deutsche Boerse and the London Stock Exchange. While publicly the two parties are reviewing the U.K. referendum as a possible obstacle to the merger, the timing of the tentative agreement on the merger suggests that the deal is designed mainly to protect the London Stock Exchange in the event that the United Kingdom withdraws from the EU. The ruling Conservative party is narrowly split on the referendum question and has officially not taken a position. Exiting the EU would require two years of adjustments in London but it would end up in a stronger position for the future. The financial sector there would be able to stay out of trouble, gain advantage, and provide a platform of stability the next time turbulence and recession arise in the euro zone.

Bank of England says it is able to reduce interest rates to zero when needed, but probably not below. The bank cautions about the consequences of pushing money out of a country through the use of negative interest rates, its governor saying monetary policy “cannot rely on simply moving scarce demand from one country to another.”

The high-risk business strategies of the past seven years have led Standard Chartered Bank to its first yearly loss in 27 years. Besides the loss from operations, the bank’s outsized exposure to the economy of China puts it in a precarious position going forward.

Royal Bank of Scotland lost £2 billion for the year and says it is not likely to resume paying a dividend in 2017 as previous planned. Securities litigation and several outstanding investigations have to be resolved first, the bank said.

Belgium has filed tax evasion and money laundering charges against Swiss bank UBS. Prosecutors say the new charges are based on bank documents originally obtained by investigators in France and are not closely related to charges the bank already faces in Belgium.

According to published reports, Barclays has decided to get out of Africa and has appointed a committee to look for potential buyers for its interests there. More details may come forward at the earnings report next week.

The NCUA liquidated Mildred Mitchell-Bateman Hospital Federal Credit Union in Huntington, West Virginia. It had 57 members, who were hospital staffers.