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Today's Top News1. Bank of America's new ad campaign holds a lofty promise
Bank of America embarked on a major customer service push earlier this year. CEO Brian Moynihan sent a letter to all 270,000 employees informing them that better customer service is now a priority at the bank, and later summoned top managers for a meeting on the issue. The need was seen as acute, as the bank racked up the lowest score among national banks in the most recent American Customer Satisfaction Index. Perhaps befitting its new emphasis on service, the bank has also embarked on a widely anticipated new ad campaign. The theme is humility. "We are a facilitator," one executive told Advertising Age. "It's not about us. We need to focus on customer needs first and we know our place. We know we're not the center of your life, but we will connect you to what it is." As the magazine notes, a "theme of connections," conceived by Interpublilc Group's Hill Holiday, anchors the campaign, which sheds the "Bank of Opportunity" tagline created under BBDO and replaces it with "Life's Better When We're Connected." In global markets, the bank opted for the tag line "The Power of Global Connections." Here's a flavor of the new campaign: In one spot, "we see 1960s and 1970s era families in a variety of situations. There are babies being born, arguing couples, new cars coming home, brushes with the law. All along, photos are being taken of the families throughout the years. The voiceover is done by actor Will Arnett, who drives home the message of Bank of America being in the background, helping people in their day-to-day lives." In another spot, the bank emphasizes its work in helping Volkswagen open a new plant. Taken together, the bank seems to be betting that the internal push for better customer service will eventually synergize with the new more humble branding. In the end, the power to change the bank's reputation will turn on the thousands of interactions between bank representatives and consumer that take place daily. The ad campaign could quickly become a national joke if there is no follow up by the people actually representing the bank to consumers. For more: Related Articles: Read more about: Bank of America, advertising
2. Regulatory capital trades in the spotlight
The very purpose of derivatives is to provide ways by which users can lower their financial risk to essentially provide offsets to expected losses. That implies, of course, that another entity will accept the risk, but not for free. Some sort of speculation will always be necessary. So-called regulatory capital trades, which seem to be getting more popular, highlight these trade-offs. Banks have come up with a way to use credit default swaps to transfer the risks of certain loans to hedge funds. The system provides banks major benefits in terms of staying in compliance with capital ratio requirements, notably those from Basel III. Citigroup, for example, struck a deal with Blackstone not too long ago, calling for the latter to essentially insure about $1.2 billion in Citigroup shipping loans by setting up a separately capitalized vehicle to hold CDSs. By doing so, the vehicle will rake in some massive annual fees as long as the CDSs are valid. DealBook reports that these sorts of deals are all the rage right now, as banks seek to lower the amount they need to hold in reserve against the chances of loans going kaput. This is a win-win situation in many cases. The banks get a certain amount of capital ratio relief, and hedge funds end up with a strong income-producing vehicle. Risk is transferred away from the systemically important banks to much less systemically important hedge funds. Problems would arise, however, if these loans were to tank en masse. At some point, the system would seize. And if hedge funds cannot make their required insurance payments on all the CDSs they hold as required by contract, chaos would ensue. That may seem like a remote likelihood, and some hedge funds might have bought another layer of insurance. Then again, no one thought home loans would implode en masse. For more: Related Articles: Read more about: Regulatory Capital Trades 3. Goldman Sachs deals allow for combination CEO and chairman
While JPMorgan's (NYSE:JPM) board will face a vote on whether to split the chairman and CEO positions soon, Goldman Sachs (NYSE:GS), for the second year in a row, will be spared such drama. If such a resolution were to ever make it to the Goldman Sachs ballot, it would have little chance of winning. But Goldman Sachs understands that there's some risk involved in simply having the issue on the table. If it were to be voted on, it would certainly generate media interest and keep the spotlight bright, validating it as an issue. If the vote were to reach 45 percent, the near-miss would still put pressure on the board for some sort of action. To avoid the vote, Goldman Sachs fell back on what has become a common pre-meeting tactic. It negotiated with shareholders, just as it did on the executive compensation issue. Last year, Goldman Sachs created the role of lead independent director. In its negotiations this year with CtW, which advises union pensions on shareholder issues, the bank agreed to expand the powers of that director. According to Reuters, the new powers include setting board agendas, writing his own annual letter to shareholders and boosting the number of meetings for independent directors. Those meeting will be conducted without the presence of CEO and chairman Lloyd Blankfein, the president and the CFO. CtW is apparently convinced that the lead independent director, James Schiro, will be able to hold his own against management. This is about the most that shareholders could ask for this year. Next year, we'll have to see what management gives up in exchange for CtW agreeing to not sponsor a "split the top jobs" resolution. As for JPMorgan, the directors are reaching out to shareholders, making the case that Jamie Dimon deserves to serve as Chairman, CEO and president. The board would be wise to make some concessions as well, including appointing a formal lead independent director. For more:
Read more about: CEO, chairman 4. Court blasts SEC over Madoff affair
Bernard Madoff was sentenced to 150 years in prison in 2009 for his infamous Ponzi Scheme, and the case has been reverberating ever since. Nearly four years later, a federal appeals court has ruled on the legitimacy of a suit brought by investors against the SEC for its well-documented lapses regarding the scheme. The short story is that the panel ruled that government agencies are in fact shielded from legal action for negligence by statute. So the suit against the SEC was effectively nixed. But the court took another pound of flesh from the hide of the SEC, barely masking its contempt. "Plaintiffs allege in detail approximately eight separate complaints the S.E.C. received regarding Madoff and the S.E.C.'s inadequate and often incompetent response to each," the court wrote, as noted by DealBook. "As a result of the S.E.C.'s repeated failure to alert other branch offices of ongoing investigations, properly review complaints and staff subsequent inquiries, and follow up on disputed facts elicited in interviews, the S.E.C. missed many opportunities to uncover Madoff's multibillion-dollar fraud." The court is hardly alone in its criticism of the SEC. Indeed, the agency has suffered for years for missing the Madoff fraud, despite being tipped off with credible information multiple times. The coming of Mary Jo White, a successful prosecutor for much of her career, as the next chairman was likely intended to underscore the agency's desire to enhance its enforcement efforts and banish the ghost of Madoff. In this regard, she was a strong choice. That said, there are questions as to how she will approach issues outside of her core competency, including Dodd-Frank and the Volcker Rule, the JOBS Act, and of course market structure. Dark pools and high frequency trading especially merit attention at this point. What might happen is that she takes a personal interest in enforcement activity, while delegating top regulatory issues to others. For more: Related Articles: Read more about: Bernard Madoff, Mary Jo White 5. Tax havens brace for more scrutiny
The alternative investment industry would malfunction if it were suddenly forbidden to domicile funds in countries that we think of as tax havens. The tax benefits available to clients and funds are tremendous, and the industry would be hard pressed to do without them. But tax havens have returned to the spotlight. The crackdown on Americans using accounts at Swiss banks to bamboozle the IRS has certainly riveted attention on other tax havens, notable in the Caribbean. Many companies and individuals set up accounts in the likes of the Cayman Islands in ways that are completely legal, to facilitate corporate transfer pricing and other systems related to trade, for example. But regulators may be inclined to take another look soon. The Washington Post has weighed in with a fresh look at tax havens, based on volume of new material. The article makes clear that "havens in the South Pacific and Caribbean in some cases have become sanctuaries for individuals seeking to conceal their activities from investigators and investors. "Among the 4,000 U.S. individuals listed in the records, at least 30 are American citizens accused in lawsuits or criminal cases of fraud, money laundering or other serious financial misconduct. "They include billionaire hedge fund manager Raj Rajaratnam, who was convicted in 2011 in one of the biggest insider trading scandals in U.S. history, and Paul A. Bilzerian, one of the most famed corporate raiders of the 1980s, who was convicted of securities fraud." Tax havens make it very difficult for U.S. investigators to do their jobs, as they tend to ignore U.S subpoenas and other requests for information. But at some point, the effort to change all that may arise in the country. It did in the case of Swiss banks, which were targeted by American prosecutors, and that industry will never be the same. For more: Related Articles: Read more about: alternative investments, IRS Also NotedSPOTLIGHT ON... Bove expects record earnings Richard Bove expects record earnings from banks when they report for the first quarter. In fact, he thinks it will go down as one of the best quarters in the history of American banking. He's looking for profits of $38 billion vs. $35 billion a year ago. JPMorgan Chase and Wells Fargo will be among the leaders, but many banks will set records. There are plenty of bulls right now. We'll know soon if he was right, as the big banks begin reporting. Article Company news:
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Friday, April 12, 2013
| 04.12.13 | Bank of America's new ad campaign holds a lofty promise
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