New York Federal Reserve comments   The Federal Reserve is responsible for the prudential supervision of bank holding companies (BHCs) on a consolidated basis, as well as of certain other financial institutions operating in the United States. Prudential supervision involves monitoring and oversight of these firms to assess whether they are in compliance with law and regulation and whether they are engaged in unsafe or unsound practices, as well as ensuring that firms are taking corrective actions to address such practices

Prudential supervision is inter-linked with, but distinct from, regulation of these firms, which involves the development and promulgation of the rules under which BHCs and other regulated financial intermediaries operate. The distinction between supervision and regulation is sometimes blurred in the discussion by academics, researchers and analysts who write about the banking industry, and the terms “supervision” and “regulation” are often used somewhat interchangeably. Moreover, while prudential supervision is a central responsibility of the Federal Reserve and consequently accounts for substantial resources, the responsibilities, powers and day-to-day activities of Federal Reserve supervision staff are often not very transparent to those outside of the supervision areas of the Federeal Reserve System.

The primary focus of this discussion is on the supervision of large, complex bank holding companies and of the largest foreign banking organizations (FBOs) and non-bank financial companies designated by the Financial Stability Oversight Council (FSOC) for supervision by the Federal Reserve. The paper focuses on oversight of these firms because they are the most systemically important banking and financial companies and thus prudential supervision of them is especially consequential. Given their size and complexity, the approach to supervision of these companies also differs from that taken for smaller and less complex firms. It is important to note that supervision of these large, complex firms is conducted through a comprehensive System-wide program governing supervisory policies, activities and outcomes.The discussion in this paper focuses solely on supervisory staff located at the Federal Reserve Bank of New York, whose activities are carried out as part of this broader program.  Supervising Too Big to Fail

Reuters reports: The Swiss Sunday newspaper “Sonntagszeitung” said the alpine nation was flooded with formal tracing requests from foreign tax authorities. In response, Switzerland had resorted to listing names, birthdates and nationalities in its federal gazette, where official texts are published.

The official justification was that the publication gave those identified the chance to hire a lawyer and seek legal recourse, said the “Sonntagszeitung”, referring to recent roll-backs of Swiss bank secrecy, especially under US pressure.
Formal requests from abroad

The newspaper quoted Swiss federal tax authority official Alexandre Dumas as saying that banks had little interest in seeking customers who no longer kept their accounts in Switzerland.

Instead, foreign countries were sending formal judicial assistance requests, asking for help to trace their missing taxpayers via Switzerland’s federal tax administration in Berne.
In turn, Switzerland was demanding that such countries, when sent Swiss documentation on such suspects, keep their further details confidential.
Further ‘taboo break’

It amounted, however, to a further “taboo break” by Swiss authorities, “Sonntagszeitung” said, while also quoting a Swiss lawyer, Andreas Rüd, who said many suspects did not realize that they could seek Swiss legal recourse.

The Swiss federal gazette’s weekly editions in May contained several dozen decrees, naming citizens of Spain, India, the Netherlands, Germany, Britain, the USA and South Korea and companies registered in Panama, the Bahamas and Spain.
In the case of India and Germany, Dumas denied that their formal requests stemmed from tax authorities recent acquisitions of stolen data listing suspected tax evaders.

Last year in Germany, suspected tax evaders filed a record 40,000 self-disclosure notices on funds they had secreted abroad, prompted by a new law that allows backdated payment of overdue tax coupled with penalties.

In February, the International Consortium of Investigative Journalists (ICIJ) made public data files leaked to French authorities in the so-called SwissLeaks case. The London-based HSBC bank was accused of helping suspects in some 200 countries.
HSBC apologized and its Swiss branch said it had been “cooperately continuously” with Swiss authorities since it became aware of the data theft in 2008.
That followed agreements by Swiss giants UBS and Credit Suisse to pay fines in the US on allegations of helping Americans to evade taxes.

In March, Switzerland signed an accord to automatically share tax information with Australia. Similar accords are planned with the US and EU.

The ever clever Matt Levine suggests that the more banks you charge with crime, the less damaging the charge is.  In Texas, the state employees’ pension fund stopped doing business with Credit Suisse last year because it had “a policy against hiring firms convicted of felonies,” but now that basically all the big banks have been convicted of felonies, it has tossed that policy. Welcome back Credit Suisse! We’ve talked before about how charging all the banks with crimes de-stigmatizes those crimes, and I won’t belabor the point.

Our associate Andres Frank testifified before the US Department of Labor on January 15, 2015 on the Credit Suisse exemption.  Credit Suisse had pled guilty to a criminal charge of aiding and abetting tex evasion by US citizens.  Credit Suisse was granted a temporary exemption, but Maxine Waters, Congresswoman from Callifornia, insisted that a permanent exemption be preceded by hearings.

Perhaps to make it seem that the ‘culture of corruption’ apparent in Credit Suisse could be cured, the CEO stepped down after this hearing.  No final decision has yet been rendered.

Matt Levine, the ex-Goldman partner who knows whereof he speaks, writes for Bloomberg:  In London, Tom Hayes’s Libor manipulation trial started yesterday and this isn’t exactly legal advice but probably don’t say stuff like this in recorded interviews with criminal investigators?

“I mean I probably deserve to be sitting here because, you know, I made concerted efforts to influence Libor,” Hayes said in a Feb. 1, 2013, interview.

Or:

“The point is you’re greedy,” Hayes said in a 2013 interview with U.K. investigators that Chawla played for the jury. “You want every little bit of money you can get because” that’s your performance metric, he said.

One of my strong beliefs about financial crime is that the words “greed” and “greedy” have no analytical value. In a fraud case — where the accusation is that someone made money — saying that he wanted to make money is just a superfluous appeal to jurors’ emotions, a way to deny the humanity of the bankster whose fate they’re deciding. “His motive was a simple one: greed,” said the prosecutor, annoyingly. But Hayes agreed, and on tape! Not helpful.

Matt Levine at Bloomberg is not hopeful about the banks changing their ways after guilty pleas in the United States this week.   Here is the notice JP Morgan Chase sent its clients:  JP Morgan Chase DIsclosure Notice  

The JP Morgan Cover Letter with Disclosers sent with the disclosure begins: The purpose of this letter is to clarify the nature of the trading relationship between you and the Corporate & Investment Bank at JPMorgan Chase & Co. and its affiliates (together, “JPMorgan” or the “Firm”) and to disclose relevant practices of JPMorgan when acting as a dealer, on a principal basis, in the wholesale spot foreign exchange (“FX”) markets.  We want to ensure that there are no ambiguities or misunderstandings regarding those practices.

Mea culpa?  Guilt?  JP Morgan Chase CEO Jamie DImon does nothing but whine about regulations.  Is it time to hold banks to a reasonable standard?  Is it time to jail some of the big players?  Do we have to rethink banking?  Maybe.

Nomi Prins writes:  When Hillary Clinton video-announced her bid for the Oval Office, she claimed she wanted to be a “champion” for the American people. Since then, she has attempted to recast herself as a populist and distance herself from some of the policies of her husband. But Bill Clinton did not become president without sharing the friendships, associations, and ideologies of the elite banking sect, nor will Hillary Clinton. Such relationships run too deep and are too longstanding.

To grasp the dangers that the Big Six banks (JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, Goldman Sachs, and Morgan Stanley) presently pose to the financial stability of our nation and the world, you need to understand their history in Washington, starting with the Clinton years of the 1990s. Alliances established then (not exclusively with Democrats, since bankers are bipartisan by nature) enabled these firms to become as politically powerful as they are today and to exert that power over an unprecedented amount of capital. Rest assured of one thing: their past and present CEOs will prove as critical in backing a Hillary Clinton presidency as they were in enabling her husband’s years in office.

In return, today’s titans of finance and their hordes of lobbyists, more than half of whom held prior positions in the government, exact certain requirements from Washington. They need to know that a safety net or bailout will always be available in times of emergency and that the regulatory road will be open to whatever practices they deem most profitable.

Whatever her populist pitch may be in the 2016 campaign — and she will have one — note that, in all these years, Hillary Clinton has not publicly condemned Wall Street or any individual Wall Street leader.

Hillary Clinton’s access to her husband’s past banker alliances, amplified by the ones that she has formed herself, makes her more of a friend than an adversary to the banking industry. In her brief 2008 candidacy, all four of the New York-based Big Six banks ranked among her top 10 corporate donors. They have also contributed to the Clinton Foundation. She needs them to win, just as both Barack Obama and Bill Clinton did.

No matter what spin is used for campaigning purposes, the idea that a critical distance can be maintained between the White House and Wall Street is naïve given the multiple channels of money and favors that flow between the two. It is even more improbable, given the history of connections that Hillary Clinton has established through her associations with key bank leaders in the early 1990s, during her time as a senator from New York, and given their contributions to the Clinton foundation while she was secretary of state. At some level, the situation couldn’t be less complicated: her path aligns with that of the country’s most powerful bankers. If she becomes president, that will remain the case.  The Clintons and the Banks