Bloomberg News

Swaps Registry, Prepaid Cards, Goldman Stock: Compliance

January 03, 2013

Units of JPMorgan Chase & Co., Goldman Sachs Group Inc. (GS:US) and Barclays Plc (BARC) are among banks that registered as swap dealers under the Dodd-Frank Act that requires higher capital, collateral and trading standards.

The list of firms referred to as “provisionally registered” included Societe Generale SA (GLE), Macquarie Bank Ltd., Newedge USA LLC, Morgan Stanley (MS:US) and Standard Chartered Bank (STAN), according to the website of the National Futures Association. No firms were listed as major swap participants, a lower threshold under Dodd Frank for activity that may capture energy companies or hedge funds.

The rules, more than two years in the making, will improve oversight of a market that for three decades has largely escaped federal regulation, Commodity Futures Trading Commission Chairman Gary Gensler said Oct. 10.

The financial firms that dominate swap dealing generate more than $30 billion in annual profit, according to an estimate from consulting firm Oliver Wyman, a unit of Marsh & McLennan Cos. (MMC:US) Companies with $8 billion or more in dealing business must register with the CFTC.

The biggest swaps dealer in the U.S. is JPMorgan, followed by Bank of America Corp. (BAC:US)

Compliance Policy

‘Too Big to Fail’ Benefits Face Congressional Watchdog Scrutiny

U.S. banks’ benefits from being “too big to fail” will be examined by congressional watchdogs in response to a bipartisan request from senators who say the government hasn’t done enough to prevent future bailouts.

The Government Accountability Office said yesterday that it plans to study the “economic benefit” banks such as JPMorgan Chase & Co., Bank of America (BAC:US) Corp. and Citigroup Inc. (C:US) in response to a request from Senators David Vitter, a Louisiana Republican, and Sherrod Brown, an Ohio Democrat.

Vitter and Brown made the request that the GAO look at bank holding companies with assets more than $500 billion after leaders in the Republican-controlled House refused to take up their Senate bill, which passed unanimously.

Lawmakers and regulators have said that Dodd-Frank, the 2010 measure enacted in response to the worst financial crisis since the Great Depression, ended too-big-to-fail by creating ways to unwind complex banks without taxpayer assistance.

The study sought by Vitter and Brown would look at whether the pricing of the banks’ assets relative to their risk profile results in a perception that they would get bailouts if needed, whether they get favorable funding as a result of increased credit ratings based on the view that they are too big to fail and how they benefit from access to the Federal Reserve’s discount window.

Nine systemically important banks got a total of $125 billion in taxpayer aid from the Troubled Asset Relief Program after a credit freeze following the September 2008 collapse of Lehman Brothers Holdings Inc.

Egypt Religious Scholars to Review Draft Sukuk Law, MENA Says

Egypt’s Grand Sheikh of Al-Azhar, Ahmed el-Tayeb, asked a panel of senior religious scholars to issue its opinion about a new draft law for sukuk, the state-run Middle East News Agency reported. President Mohamed Mursi has referred the draft to el- Tayeb to determine how compliant it is with Islamic law, MENA said.

The Finance Ministry has asked for the quick implementation of the law after it’s approved, according to MENA.

Compliance Action

LSE’s Regulatory News Service Resumes Operation Following Glitch

London Stock Exchange Group Plc’s Regulatory News Service resumed operation after a technical issue that disrupted dissemination of company information to investors and traders.

Mark Wisken, an RNS executive at LSE, described it “connectivity issue.” RNS didn’t publish any release between 5 a.m. and 8:36 a.m. in London yesterday, the first trading day of 2013, according to data compiled by Bloomberg.

The service carries almost 175,000 statements each year via data vendors such as Thomson Reuters Corp. and Bloomberg LP, the parent of Bloomberg News. LSE says it features more than 70 percent of price-sensitive U.K. announcements. Companies and public-relations agencies pay to publish releases.

The disruption yesterday came as LSE was considering charging banks and brokers for the service. Data providers already pay to redistribute it. As part of a consultation last year on the workings of RNS, LSE asked to be provided with users’ details, sparking concern it will start charging them because it’s unlikely to need the data for any other purpose.

Publicly listed companies in the U.K. must disseminate statements through one of the seven approved Regulated Information Services, or RISs, to ensure that investors receive market-moving news at the same instant.

The RNS had a monopoly for regulatory statements until 2002, when the U.K.’s Financial Services Authority introduced competition. At that point, LSE started to charge companies to publish announcements, having previously provided the service for free.

Niche Players and Big Banks Vie for Prepaid Debit Card Market

The allure of the fast-growing U.S. market for prepaid debit cards is pitting niche players against financial giants including JPMorgan Chase & Co. (JPM:US) and American Express Co. (AXP:US)

Both factions want to sell more of the cards, a part of the financial services business that holds as much as $1.7 billion in potential fees for banks seeking new revenue streams as they face growing competition and regulation. The Consumer Financial Protection Bureau may write new rules for the cards. It sought public input about the prepaid market in May.

Myriad players, including a firm catering to recovering drug addicts and alcoholics, are stepping up with their own products on the theory that some consumers may pay a slight premium for a card with novel functions, such as pictures of celebrity investors.

Players also face more regulation and small firms will encounter pressure to consolidate as competition squeezes fees, Madeline Aufseeser, senior analyst with the Boston-based Aite Group, said in an e-mail.

JPMorgan and American Express are testing whether their sheer size and efficiency can bring greater market share by offering lower fees. Smaller players hope to fill smaller market niches and leave the nuts and bolts of the cards to others.

Prepaid cards can take different forms, though they share the quality that consumers usually can’t spend more than has been deposited onto the cards. One type of prepaid card mimics a checking account, allowing consumers to load and reload funds, have paychecks deposited directly, make purchases and withdraw money from ATMs. Employees can also get paid on a separate employer-issued card.

Americans are projected to increase purchases made with prepaid cards by 5.3 percent annually to $139.4 billion in 2017, according to Beth Robertson, director of payments research at Pleasanton, California-based Javelin Strategy & Research Inc. Aufseeser of Aite said the market, including general purpose and payroll cards, could reach $168 billion by 2016, with about 1 percent of that going to fees.

For more, click here.

OFI AM Fined by AMF For ‘Madoff Risk,’ CityWire Global Says

OFI Asset Management was fined EU300,000 by Autorite des Marches Financieres, the French market regulator, for “failings in its due diligence” leading it to hold funds linked to convicted con artist Bernard Madoff, CityWire Global reported.

AMF began an investigation in mid-2009 and found that at the time the Madoff Ponzi scheme had been discovered in 2008, “four funds from OFI’s alternative multimanagement division were invested in Madoff vehicles,” the newspaper said.

The regulator determined that AMF showed a “lack of professionalism and diligence” in monitoring the funds, according to CityWire. The AMF also fined two directors at the time of the events, the paper reported.

Comings and Goings/Executive Pay

Goldman Sachs Sped Up $65 Million in Stock Awards to Dec. 31

Goldman Sachs Group Inc. accelerated delivery of $65 million in stock awards to 10 executives, including Chief Executive Officer Lloyd C. Blankfein, helping them avoid higher tax rates that take effect this year.

The awards are of restricted stock granted for years prior to 2012, according to 10 separate filings made public at about 8 p.m. New York time on Dec. 31. Each executive sold between 45 percent and 50 percent of their stock in order to pay taxes, according to the filings.

Goldman Sachs, the fifth-biggest U.S. bank by assets, typically delivers executives’ restricted stock during the month of January. The decision to speed up this year’s awards came as the U.S. Congress debated and ultimately passed a bill that would increase tax rates on capital gains and on individuals who make taxable income of $400,000 or more.

“The December delivery of shares went to a wider group of employees than the named executive officers” who were included in the filings, Michael DuVally, a spokesman for the New York- based firm, said. He declined to comment on the reason for the accelerated delivery.

The filing included a table showing the stock delivered to each of the executives and the amount sold for withholding purposes, according to company filings.

For more, click here.

To contact the reporter on this story: Carla Main in New Jersey at cmain2@bloomberg.net.

To contact the editor responsible for this report: Michael Hytha at mhytha@bloomberg.net.


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Companies Mentioned

  • GS
    (Goldman Sachs Group Inc/The)
    • $177.9 USD
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  • MS
    (Morgan Stanley)
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