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Washington Wrap: The DOJ's year-end flurry

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Trump Transition

Rumors surfaced this week of CEO and President of BankUnited Inc. John Kanas possibly joining President-elect Donald Trump's administration. The Wall Street Journal reported Dec. 27 that Kanas, who said in August that he would leave the company Jan. 1, has had a number of informal conversations with the transition team. Kanas holds ties with Trump's nominee for Secretary of Commerce, Wilbur Ross, who helped recapitalize BankUnited in 2009.


One week after tackling investigations into Deutsche Bank AG and Credit Suisse Group AG, the Department of Justice continued its push to wrap up a number of investigations before 2017.

Swiss bank Vontobel Holding AG said Dec. 22 it concluded discussions with the Justice Department over potential violations of U.S. tax law without having to pay any financial penalty. The bank clarified Dec. 27 that it has neither sought nor received a nonprosecution agreement or a nontarget letter.

On Dec. 29 the Justice Department announced it had finalized a program set up to deal with legacy claims of helping clients evade U.S. taxes. The so-called Swiss bank program offered banks the opportunity to resolve potential criminal liabilities.

Two Ohio-based banks reached settlements Dec. 28 with the Department of Justice over allegations of discriminatory lending against African-American borrowers. Under the settlement, Cincinnati-based Union Savings Bank and West Chester-based Guardian Savings Bank FSB will make at least a $9 million investment into majority African-American neighborhoods in the Cincinnati, Columbus, Dayton and Indianapolis metropolitan areas. Union Savings will also have to open two full-service branches, while Guardian Savings will have to open one loan production office to serve African-American neighborhoods. The settlement is part of a consent order subject to court approval.

The Justice Department announced Dec. 28 that United Shore Financial Services LLC will pay $48 million to settle allegations of originating and underwriting mortgage loans insured by the Federal Housing Administration that did not meet applicable requirements. The case alleged that United Shore failed to comply with FHA origination, underwriting and quality control requirements between Jan. 1, 2006, and Dec. 31, 2011.

The FBI is investigating an FDIC security breach that senior FDIC officials believe was sponsored by China's military, Reuters reported Dec. 23. The breach, which began in 2010, was the subject of a congressional committee probe in November. It is unknown if the FBI probe of the hack could result in action against China.

Federal bank regulators adjusted Dec. 29 the asset-size thresholds used to define a small bank, small savings association, intermediate small bank and intermediate small savings association under the Community Reinvestment Act. The annual adjustment was released jointly by the Federal Reserve Board, FDIC and OCC and raises the threshold year over year for the asset-size minimums and maximums needed to meet the above mentioned classifications.

On Dec. 28 the OCC issued a final rule, effective April 1, 2017, barring national banks and federal savings associations from dealing or investing in industrial or commercial metals. The OCC gives covered institutions five years to divest from industrial and commercial metal acquired through dealing or investing activities.


Following news that it had reached a $7.2 billion settlement with the Justice Department, Deutsche Bank AG told its employees it would not need a government bailout to pay the penalty, Reuters reported Dec. 23. Citing a "person familiar with the memo," the report added that the bank also would not rely on a capital increase to cover the settlement.

The Federal Reserve released a working paper on the Volcker rule, which is a Dodd-Frank provision banning proprietary trading by commercial banks and their affiliates. The paper concludes that the rule actually creates a less liquid corporate bond market since dealers affected by the rule end up less motivated to make trades or commit capital.

Democrats on the Senate Banking Committee wrote to Wells Fargo & Co. on Dec. 22 asking the company to answer more questions about its fake accounts scandal. The letter claims Wells Fargo failed to adequately answer the committee's questions from its Sept. 28 inquiry, noting that while the company responded Nov. 15, the committee felt its responses were "slow and incomplete." The letter asks a set of follow-up questions with a new deadline of Jan. 6, 2017.

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