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Citi's board fails to appease ISS; Dimon says lower liquidity is here to stay

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Banking Essentials Newsletter - February Edition, Part 2

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Citi's board fails to appease ISS; Dimon says lower liquidity is here to stay

Jamie Dimon's April 5 post in The Wall StreetJournal was an excerpt from his annual letter to shareholders. The restof it included his thoughts on China ("many bumps in the road"), lowerliquidity and higher volatility ("here to stay"), and why banks cannotbe utilities. Regarding the bank's reserves, he wrote: "JPMorgan Chase alone has enough loss absorbing resourcesto bear all the losses, assumed by CCAR, of the 31 largest banks in the United States."Dimon added. "And even if any one bank might fail, in my opinion, there isvirtually no chance of a domino effect."

It would, in fact,be a tempest ina teapot, Zero Hedge tweets.

Shareholder concernsabout executive compensation prompted CitigroupInc.'s board to tweakits new performance share unit program. Now the ability to earn more than the units'original value depends not only on outperforming peers, but on the amount of shareholderreturns as well. ISS and Glass Lewis were unappeased. "Citigroup's currentpay structure has generated considerablewealth for the CEO but notyet for investors," the Journalquotes ISS. Citi Chairman Michael O'Neill argued: "Citi made important progressin 2015 … We believed that it was important to reward the team based on the progressmade, knowing that the team has morework to do," the Financial Timeswrites.

The fallout fromthe Panama Papers continues: The U.S.Treasury Department says it will "soon"submit its proposedrulerequiring financial institutions to know who the beneficial owners are of theirlegal entity customers, Reuters reports.

And 's shareholdersvoiced their unhappiness over the bank's connection to the scandal. One investor called it "catastrophic,"Reuters reports, and CEO Dave McKay later told reporters the company was reviewingits records to determine the relationships in question. Meanwhile, Chief Risk OfficerMark Hughes disclosed RBC is halfway done with its energy loan evaluations, withsome 15%to 20% reductions in borrowing bases so far, the Journal reports.

Incidentally, theFinancial Post reports the Financial Transactionsand Reports Analysis Centre hit a Canadian bank with a C$1.1million fine for allegedly failing to report a suspicious transaction. The regulatorrefused to identify the bank. McKay said it wasn't RBC.

In other banking news, sources for the Journal say the Fed askedGoldman Sachs Group Inc.about those 1MDB bonddeals as early as 2014and warned the firm of the possible reputational risk.

Montana's mergerscene will see First Interstate Bank($8.70 billion) buy Flathead Bankof Bigfork Montana ($231.6 million) for $34.2 millionin cash.

And offered 775 employeesearlyretirement packages back in January, with many who availed themselves of theoption out by March 31, according to the CincinnatiBusiness Courier.

A group of online lenders, including , LendingClub Corp. and Prosper Marketplace Inc. have banded together to form the Marketplace Lending Association.Sam Hodges, U.S. managing director of U.K.-based Funding Circle, told the FT "it is really important to be inactivedialogue with regulators" and that "specific regulation [for the industry]could be a healthy thing."

Sources for the Financial Post sayKatie Daniels has gone through the revolvingdoor, leaving her post as the Ontario Securities Commission's corporate financedeputy director to become Canada PensionPlan Investment Board's headof compliance.

On the Senate Banking Committee's plate today:the nominations of LisaFairfax and Hester Peirce as SEC commissioners and RichardCordray's semi-annual CFPB report.

And Larry Summers, former Treasury Secretary and one-time candidate forthe post of Fed Chair, described Minneapolis Fed President Neel Kashkari's recent"too big to fail"speech as "blatantlypolitical" and not "the kind of thing one could expect from the Fed."

In other parts of the world

The BaselCommittee on Banking Supervision launched a consultation on proposedrevisions to the Basel III leverage ratio framework. The committee said a higher leverage ratio forglobal systemically important banks may be necessary to maintain the relative rolesof the risk-based ratio and the leverage ratio in the regulatory capital framework.Reutersnotes that the proposed changes include softer capital requirements for banks withlarge derivatives portfolios.

The day ahead

Early morningfutures indicators pointed to a lower opening for the U.S. market.

In Asia, the HangSeng rose 0.29% to 20,266.05, while the Nikkei 225 was up 0.22% to 15,749.84.

In Europe, as ofmidday, the FTSE 100 was down 0.09% to 6,156.10, and the Euronext 100 fell 0.13%to 844.11.

On the macro front

The jobless claims report,the EIA natural gas report, the consumer credit report, the Treasury STRIPS report,the Fed balance sheet and the money supply report are due out today.

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