%1

Hurricane Sandy caused massive disruptions to U.S. businesses and threatened billions of dollars in damage to a region packed with corporate headquarters, retail stores and transportation hubs, the Wall Street Journal reported today. Estimates for the financial consequences of the storm in the U.S. run to the billions of dollars. Disaster-modeling company Eqecat said the storm could cost the insurers between $5 billion and $10 billion. The Global Business Travel Association last year estimated that a large hurricane costs airlines, Amtrak, rental car companies and hotels nearly $700 million in lost or deferred business-travel spending. The broader impacts on the U.S. economy should be "noticeable but temporary," said economists at Moody's Analytics.

Societe Generale SA, Royal Bank of Canada, and Bank of America Corp. are among nine additional banks that were subpoenaed in New York and Connecticut’s probe of alleged manipulation of the London interbank offered rate (Libor), Bloomberg News reported yesterday. The subpoenas, issued by New York Attorney General Eric Schneiderman starting in August, bring to 16 the total number of banks that have been subpoenaed in the states’ investigation. Schneiderman and Connecticut Attorney General George Jepsen are jointly investigating claims that banks rigged the Libor, a worldwide benchmark for borrowing. Florida Attorney General Pam Bondi has also issued subpoenas to more than a dozen financial institutions, including UBS AG, Deutsche Bank AG and HSBC Holdings Plc.

Democratic lawmakers yesterday criticized regulators for taking too long to finalize the Volcker Rule, a controversial provision passed in 2010 aimed at restricting banks from making risky investments with their own money, the Washington Post reported today. Democratic Sens. Carl Levin (Mich.) and Jeff Merkley (Ore.) said that the uncertainty surrounding the Volcker Rule jeopardizes the health of the economy. During the legislative debate on the Dodd-Frank Act in 2010, Merkley and Levin spearheaded the amendment banning banks from using their own capital to make trades, a practice known as proprietary trading. The provision called for stricter prohibitions than what was initially proposed by former Fed chairman Paul Volcker. But critics of the legislation argue that the rule unnecessarily limits some safe forms of trading and will severely affect profit at some of the nation’s largest banks. Ratings agency Standard & Poor’s issued a report this week the Volcker rule could reduce pre-tax earnings for the eight largest banks by up to $10 billion a year. Investment banks Morgan Stanley and Goldman Sachs stand to lose the most because a hefty percentage of their revenue is derived from trading.

Nearly a year after MF Global raided customer accounts in a failed bid to survive, regulators moved this week to tighten restrictions for brokerage firms and adopt new safeguards for client money, the New York Times DealBook blog reported yesterday. The Commodity Futures Trading Commission voted unanimously to propose new customer protections aimed at closing loopholes, bolstering internal controls and forcing firms to provide more disclosures to their clients. The proposal, which may be changed over the next several months, comes as the futures industry suffers a crisis of confidence in the wake of the MF Global debacle.

ABI's Commission to Study the Reform of Chapter 11, whose 22 members constitute a venerable bankruptcy industry Hall of Fame, held a hearing yesterday to gather feedback on what is right and wrong with the statutory scheme that has governed chapter 11 bankruptcy since 1978, Reuters reported. The commission's charge includes "literally considering starting from scratch and re-inventing the statute," said Robert Keach, attorney and commission co-chairman. The commission plans to eventually submit a report to Congress, targeted for April, 2014, that could serve as "part blueprint, part outline" for new legislation, Keach said. The commission will study 13 areas of bankruptcy law, including labor & benefits issues, financing rules and government supervision. It is collecting feedback from several groups through a series of hearings, with upcoming dates at the National Conference of Bankruptcy Judges in San Diego on Oct. 26, and a convention of trade group the Turnaround Management Association in Boston on Nov. 3. Read more:
http://www.reuters.com/article/2012/10/18/bankruptcy-reform-idUSL1E8LHP…

To obtain the prepared witness testimony from yesterday's hearing, view background information on the Commission members or to see upcoming dates of activity, please click here: http://commission.abi.org/

Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La.) sent a letter today to regulators arguing for tougher rules on bank capital reserves, the New York Times DealBook blog reported today. "With financial regulators considering a host of new domestic and international capital requirements, we write today to urge your agencies to simplify and enhance the capital rules that will apply to U.S. banks," according to the lawmakers' letter. The two men, who sit on the Senate Banking Committee, addressed the letter to three prominent regulators: Ben S. Bernanke, the Federal Reserve chairman, Martin J. Gruenberg, acting chairman of the Federal Deposit Insurance Corp., and Thomas J. Curry, head of the Office of the Comptroller of the Currency. Brown and Vitter took up the issue in August in a letter to Bernanke, responding to the Fed's decision to support capital rules drafted by an international group of officials known as the Basel Committee on Banking Supervision. Those rules, called Basel III, would require banks to hold the equivalent of at least 7 percent of their assets in so-called Tier 1 common capital. Banks considered "systemically important" - those whose failure could threaten the financial system - would be required to hold capital above that amount.

Citigroup Inc. has arranged more than $7 billion of collateralized loan obligations in the U.S. this year through September, three times as much as the same period last year and more than any other lender, according to data compiled yesterday by Bloomberg and Morgan Stanley. It also caters to money-market funds, manages share sales in mortgage real estate investment trusts and runs a stable of internal credit funds. All are part of a shadow-banking system that offers complex forms of credit and that led to billions of dollars in losses during the financial crisis. While regulators across the glob say that they are scrutinizing this lending to prevent another calamity, banks including Citigroup, Goldman Sachs Group Inc. and JPMorgan Chase & Co. are among its biggest enablers.

A judge on Tuesday gave Bahrain investment firm Arcapita Bank until Dec. 14 to file a reorganization plan without the threat of rival proposals, with the understanding that the company won't seek further extensions after that date, NASDAQ reported yesterday. Hon. Sean H. Lane of the U.S. Bankruptcy Court for the Southern District of New York approved the extension after an Arcapita lawyer said that an objection from Arcapita's official committee of unsecured creditors had been satisfied. Without the extension, Arcapita's exclusive right to file a plan would have expired next Wednesday. The three hedge funds that hold or manage $195 million of $1.1 billion in Shariah-compliant financing issued in 2007 had objected to the extension on several grounds, including calling the search for new capital a "fool's errand." Arcapita sought chapter 11 protection on March 19. At the time, it had $7 billion in assets under management.

Goldman Sachs Group Inc. is lobbying regulators to exempt investment vehicles known as credit funds from the "Volcker rule" in a bid to preserve the firm's lucrative merchant-banking unit, the Wall Street Journal reported today. Goldman does have a backup plan if its lobbying plan fails as executives at the New York-based company believe they have found a way to extricate the credit funds from proposed limits on how much can be invested in hedge funds and private-equity funds. The Volcker rule, created by the Dodd-Frank Act caps a bank's total investments in hedge funds and private-equity funds at 3 percent of its so-called Tier-1 capital. It also prevents any single bank from accounting for more than 3 percent of a fund's investments. Since Congress passed Dodd-Frank, the financial-services industry has spent more than $330 million on lobbying, according to a Wall Street Journal analysis of expense filings that cite Dodd-Frank as an issue lobbied.

The U.S. Securities and Exchange Commission, stung by criticism that it lacks the knowledge to analyze the computerized trading that has come to dominate American stock markets, plans to increase the breadth of data received from exchanges and to record orders from origination to execution, Bloomberg News reported today. Gregg Berman, who holds a doctorate in physics from Princeton University, will head the commission’s planned office of analytics and research. Berman’s team will assess how market behavior has been altered after 15 years of regulatory reform and advances in technology that have left trading fragmented across 13 competing exchanges, 10 options markets and dozens of venues operated privately by brokerages. SEC Chairman Mary Schapiro, spurred into action by the stock rout of May 6, 2010, has made improving data collection a priority.