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Regulators Raise the Alarm on a Potential Market Risk

As the regional banking crisis ripples through the financial sector, regulators are sounding the alarm about risks to other corners of the market. Clearinghouses, intermediaries that facilitate transactions and deposit billions of dollars in banks every day.

If a bank failure leaves one of them without access to cash, widespread market instability will ensue. “Why would you take that risk?” Commodity Futures Trading Commission member Summer Mersinger told DealBook.

Clearinghouses exist to mitigate risk, Take collateral and settle transactions between sellers and buyers on all kinds of financial markets. This means that a bank failure could easily lead to clearinghouse losses that “could ripple through the financial system.” Chicago Fed The 2020 report concludes.

Even if a commercial bank doesn’t fail entirely, delayed access to cash could create liquidity problems across markets. “While the Minneapolis Grain Exchange is not systemically important to the U.S. financial system, it may hold billions of dollars in margin, which ultimately has nowhere to secure it. No, ”he said Mersinger. He said. “It has many consequences.”

Regulators say there is an easy fix. Allow more clearing houses to deposit cash with the Fed. Only a few are designated as “system critical”. That is, they are allowed to do so. However, small clearinghouses rely on commercial banks and deposit insurance only covers up to $250,000. If a bank fails, those clearing houses may not be compensated or may have problems accessing cash.

In March, CFTC Chairman Rostin Behnam urged Congress to expand the clearinghouse. Access to central banksbut the 2021 bill that would have done this never got traction.

Former FDIC Chairman Sheila Bair points out the risks involved. There is also a “lack of a proper resolution plan if the clearinghouse fails,” she told DealBook. The Systemic Risk Council of CFA Institute, which she founded, said clearinghouses could rapidly transform “from risk absorbers to systemic risk One of hers.”

Janet Yellen is reportedly lobbying CEOs about the debt ceiling. The finance secretary call corporate leaders To warn them of the “catastrophic” consequences if the United States defaults, according to Reuters. This is President Biden’s latest effort to garner support as he prepares to discuss the debt ceiling with Speaker Kevin McCarthy and other congressional leaders on Tuesday.

Chinese authorities raid the office of another consulting firm. Capvision Partners joined Mintz Group and Bain & Company to interrogate or detain employees. The Chinese government says it is an effort to stop the theft of classified corporate information. Experts say the crackdown has further discouraged foreign companies from doing business in China.

Concerns about money laundering reportedly led to the demise of banking. US regulators have refused to approve Toronto Dominion’s $13.4 billion acquisition of First Horizon. Handling unusual banking transactionsAccording to The Wall Street Journal. The future of mid-sized lender First Horizon is uncertain as the outlook for regional banks remains volatile.

UBS will add the CEO of Credit Suisse to its management team. Ulrich KellnerHe was appointed chief executive officer of Credit Suisse last July. This is the latest move by UBS as it prepares to acquire Credit Suisse as early as this month. Elsewhere, Zoltan Pozart, one of Credit Suisse’s most-watched economists, said: reportedly left the company.

Sam Bankman-Fried’s legal defense is beginning to take shape on charges of masterminding a multi-billion dollar fraud ahead of his trial last October.

Bankman-Fried wants to drop most of the charges against himIn a federal court filing in Manhattan on Monday, the 31-year-old FTX founder’s attorney accused prosecutors of:rush to judgeIt called for the dismissal of 10 of the 13 charges against him.

Bankman-Fried also went after Sullivan & Cromwell. The law firm representing FTX in the bankruptcy proceedings and restructuring expert John Ray, who succeeded him as CEO, worked at FTX before the bankruptcy and now represents the company against him. It has been accused of having a conflict of interest. Bankman-Fried accused Ray and the company of working “as mouthpieces for the government.”

Prosecutors indict Bankman-Fried fraud, money laundering, bribing the Chinese government and campaign finance crime. Although he has pleaded not guilty to all of this, his defense is becoming more difficult as prosecutors pressure Bankman-Fried’s aides to co-operate in the case against him.

Ahead of the Oct. 2 trial, Bankman-Fried’s legal team is trying to overturn the prosecution’s allegations on an indictment-by-indictment basis.

Four counts, including foreign bribery charges, campaign finance charges and bank fraud charges, violated elements of extradition proceedings between the United States and the Bahamas, where Bankman-Fried was arrested, according to the complaint. In extradition cases, prosecutors are usually restricted from indicting new charges after the defendant has been transferred. Defense attorneys argued that another six of her charges should be dismissed because they were too vague or had other legal flaws. They said prosecutors showed they were “enthusiastic about prosecuting Mr. Bankman-Fried.”

Prosecutors must respond to defense submissions by May 29and U.S. District Court Judge Louis Kaplan in Manhattan are scheduled to hear the argument next month.


Goldman Sachs said Monday it would settle a lawsuit that accused banks of systematically discriminating thousands of female employees. Under the terms of the agreement, Goldman will pay the plaintiffs he will pay $215 million and make some changes to its practices.

The payment amount itself is less than the amount originally listed, after deducting attorneys’ fees, it comes to about $47,000 per plaintiff. Still, the settlement is the latest effort to force Wall Street to sue women over years of allegations of unequal and unfair treatment of female workers.

Lawsuit accused Goldman of stifling career advancement for women I am paid less than my male colleagues. They specifically took aim at the company’s performance review process, which it said favored male employees. Set them up for promotions and high salaries.

The lawsuit, filed in 2010 by three former employees, was granted class action status in 2018 and holds associate or vice president positions in Goldman’s investment banking, investment management, and securities divisions. About 2,800 women who were A trial was scheduled for June.

Shana Orrich, one of the original plaintiffs in the lawsuit, said in a statement, “I am proud to have supported this lawsuit without hesitation for nearly 13 years, and this settlement will allow me to do so.” I believe it will help the women who were thinking when I woke up.”

Jacqueline Arthur, Goldman’s head of human capital management, said the company “is proud of its long track record of promoting and advancing women, and is committed to ensuring a diverse and inclusive workplace for all employees.” We are still working on it,” he said.

Wall Street has attempted to address gender inequality and discrimination in recent years. After facing a long list of claims. For example, Solomon Smith Barney paid $150 million In 1998, the company settled a lawsuit alleging it tolerated a hostile work environment, including derogatory language towards women and wage discrepancies.

Since taking over as Goldman’s CEO, David Solomon has spoken out about the company’s efforts to increase diversity. aim setting How many of the new recruits should be women? Last year, the bank advertised that women make up 29% of its new partner managing directors, its highest rank.

How Much Will Goldman Change? In addition to payments, the settlement will also require Goldman to hire independent experts to study the performance review process, conduct a three-year pay equity study, and change the way career progression cases are presented to vice presidents. is stipulated.

That said, Goldman has done such reviews before. Increased public scrutiny may be the biggest test of how the company is keeping its promises.


Scott Kleinman, Co-President of Apollo Global Management. Concerns are growing that the turmoil in the banking sector, rising interest rates and office vacancies will pose problems for the $5.6 trillion commercial real estate market.


The stock market may have rebounded in 2023, but the outlook for bankers’ bonuses looks weak, according to the latest data from Johnson Associates, a Wall Street compensation consultancy.

Here are its predictions:

Banking crisis affects payments. Global bank bonuses will increase by 10% to 20%, while regional bank bonuses will decrease by the same amount. Both moves can be attributed to disruptions in the regional banking sector. Major U.S. banks have benefited from deposit inflows, while smaller banks have been hit by customer outflows.

It’s a complicated situation for investment banks. Johnson Associates expects advisory work in banks to continue to be soft, reflecting the weakness in the M.&A market after a terrifying year in 2022. Underwriting, mainly led by debt underwriting, will increase by 5-10%, improving the bonus pool.In terms of stocks, the IPO market is some rebound signsDealBook has heard that IPO activity could improve in the second half of 2023, but many big listing candidates are waiting until next year.

Hedge funds may see little or no growthJohnson expects macro funds to drop slightly from 2022 bonus levels. The outlook is only marginally better for equity-focused funds.

Private equity firms will look much the same as they did a year ago. Rising interest rates and a continued lack of trading were the main culprits, a fact that Carlyle’s disappointing results last weekThe company, like many in the industry, has now turned its funding focus to credit.

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