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Anshu Jain, co-CEO of Deutsche Bank, will be replaced by John Cryan, a former UBS executive, who has no connections to investment banking. Deutsche Bank's investment banking operations would have to take on more leverage to be competitive with larger investment banks, according to experts. This would put the bank in serious problems with regulators. Another problem evident at the recent shareholders meeting is that the old management is perceived as part of the problem that led to large legal settlements with authorites. Anshu Jain leaves at the end of June, and the other co-CEO Jurgen Fitschen will leave in 2016. This closes a chapter in Deutsche Bank's history in which its image in Germany has suffered badly because of investigations.

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Most of the profitability gains for BBVA bank in 2014 came from having less bad debt, and for Santander from lower bad debt charges. Loan balances for BBVA and Santander fell by 2% in 2014. Bad debts still make up 6 to 7% of total loans for the banks, suggesting further such gains for Spanish banks. The ECB's monetary easing action should slow defaults on loans in Spain even further.

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As U.S. money market funds have reduced lending to French banks, and lending maturities have shortened to seven days, French banks are facing a shortage of dollars. According to the Federal Reserve, foreign banks and their branches provide 25% of the commercial and industrial loans in the U.S. In its response to this BNP expects to reduce dollar denominated loans by $42 billion by the end of 2011 and another $40 billion in 2012, according to BNP officials. Societe Generale CEO, Frederic Oudea, says his bank will pull back on making loans to shipping, aircraft, real-estate and leveraged finance in the U.S. This will reduce credit growth in the U.S. economy.

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Living wills of BNP Paribas SA, HSBC Holdings PLC and Royal Bank of Scotland Group PLC come under increased scrutiny from the U.S. Fed. These banks were added to 11 U.S. banks required to submit new drafts of "living wills" by the end of 2015, which ensure no damage to the U.S. economic system from a bank collapse. Only Wells Fargo & Co.'s "living will" was accepted by regulators as not causing economic damage. In making the decision the Fed and the FDIC agreed that the "living wills" were "not credible."

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Chief Risk Officers join senior management ranks by joining the senior management committee at banks such as Goldman Sachs. The change is part of the effort to make operations safer and simpler and avoid the huge legal settlements banks have faced in 2012-2014.

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To get the agreement of the 27 countries engaged in the talks to set new banking rules, the new Basel III banking rules are being phased in over a protracted period. Some changes go into effect in 2013, but others will be put into effect by 2019. The focus on the new rules is how much capital, or "common equity" banks will be required to hold as a cushion to absorb losses in a crisis like that of 2008. Large banks will be required to hold 7% of their assets in common equity. By 2015, banks will have to begin building a 2.5% buffer of capital, which must be in place fully by 2019. No action was taken on issues such as requirements for banks to have access to ample liquidity, what systemically important banks should hold in capital, and establishing a counter cyclical capital buffer.

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Germany has performed poorly in banking by copying practices of American banks. Deutsche Bank is a notable example. After years of government scrutiny and investigations into faulty practices, efforts to merge it with other German bank by the government, and losses plus penalties, legal liabilities, the bank's management is now retrenching by cutting down the size of the bank. Tens of thousands of jobs will be cut and the bank returning to a more traditional role of what a bank should be before the faulty practices and mismanagement of the bank resulted in this mess. 

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The Bank of Italy, is conducting central bank examinations of Italian banks in July 2013. The loan portfolios of the 8 largest banks are being examined, and on-site inspections are being conducted for 20 other banks. This could lead to Italian banks having to sell assets or take other steps to improve capital positions. During the last central bank examinations in the fall of 2012 Italian banks were required to set aside 3.4 billion euros to protect against bad loan losses. Bad loan losses are increasing at Italian banks as businesses and individuals fall behind on payments with the worsening economy in 2013, and into 2014. Non-performing loans are up to 249 billion euros, or 14.2% of the banking industry's total loans, according to the Bank of Italy. This is up from 157 billion euros, or 8.9% of total loans in 2010.

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David Malpass is the choice of the Trump administration to head the World Bank. He has worked with Latin American countries at the State Department, was the Treasury official responsible for the World Bank in the Reagan administration, and worked on Argentine currency, China trade matters in the Trump administration.

Malpass negotiated a $13 billion replenishment for the World Bank in 2017, with U.S. share of $1.2 billion. This capped the bank's lending at $25 billion.

Last year the World Bank provided China with $60.5 billion in loans for 400 projects, which this WSJ editorial says is loans China does not need with its $3.07 trillion in foreign reserves. This editorial is critical of the current World Bank head Dr. Kim for taking a job with a World Bank partner the private equity fund GIP.

The World Bank has played a significant role in development for South Asia and China in the early years after World War II.

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WSJ Quiz on data centers- test your knowledge. Does China have the most data centers? No the US with 4000, followed by Britain with 515 and Germany with 500 showing that China is not in the AI craze the way the US is even though the idea of the US falling behind in AI is used to get trillions of dollars in AI funding. This only means infrastructure that is dilapidated and broken in the US will not be replaced, and that the US plan to reindustrialize to get jobs will lack funding as dollars are diverted from these essential and vital needs to AI. Eventually Asian countries with new infrastructure will find ways to get that US technology without having to pay for it. The American public will be paying for this AI craze. We at Lyrarc.com checked how many data centers China has built? The number is 250 data centers are operational and note this in the MIT Technology Review it says 80% of these data centers are not being used, there is 80% overcapacity in China. Because China's AI such as Deep Seek is designed so that it uses less computing power. What this means is that only the US will put over 3 times the combined data centers put in by China, UK and Germany for AI and US will put in 16 times the data centers China has put in. As China only needs or is using 20% of its 250 operational data centers or 50 data centers the US is putting in 80 times the data center capacity China is using in 2026. Why 80 times? Because China has a Plan and it can manage the supply to the need or demand. In the US each company is trying to put so many in so it can get the leadership position in the market. For example Amazon puts in $200 billion instead of the $100 billion it can afford simply to be in the leadership ranks. There is much wasteful spending in the US market system than China's coordinated effort in a new technology even though ideologues like to say the US system is superior, and a plan by the state is frowned upon in the US, costing the US dearly when it lost its entire manufacturing base to China while economists said everything was OK. Even the WSJ Quiz fails to ask the question we asked about China and how many data centers China has actually made operational, how much is overcapacity- 250 datacenters and 80% overcapacity. Showing how little the public knows and even WSJ has looked into, giving a few companies such as Google, Amazon, Apple, Microsoft and others the freedom to spend in a reckless way so that future infrastructure investments and reindustrialization investments will be crowded out in the US economy. And economists as usual will say its OK. ...

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Davies points out the dire situation of Greece's banks as the negotiations are called off and Greece calls for a referendum on July 5, 2015. In the week before the referendum if Greeks take out the 60 euros a day that they are permitted to withdraw from banks, the banks may have barely enough cash for the 3.5 billion dollars needed to do this. Only the emergency funding line from the ECB stands between Greece and the collapse of its financial system, says Davies. He says full banking union with depositors insurance, resolution authority, and other changes are needed to protect weaker banks in the eurozone. Contagion effects could affect Portugal's Banco Commercial Portugues, Italy's Monte de Paschi, and Austria's Raiffieisen bank, says Davies.

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Warren Stephens, head of Stephens Inc, in Little Rock, Arkansas, says repeal of the Glass-Steagall Act was a mistake. U.S. banks should have a 5% cap on holdings of total deposits in the U.S., and no "grandfathering" of banks over the 5% limit. Five institutions controlling 50% of the deposits in the U.S. creates too much systemic risk in another financial crisis. Banks should be expected to be one or the other, commercial banks or investment banks, not both. These recommendations are not new. Bank of England Governor, Mervyn King, called for breaking up the largest banks or shrinking the size of the largest banks during the global financial crisis in 2008. This position for banks that are smaller in size is supported by veteran bankers Paul Volcker, Thomas Hoenig and other experts.

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The Fed and FDIC issue a report on the failure to regulate SVB and Signature bank. It says the failure to regulate stems from the law passed by Congress leaving a gap for regulation of mid sized banks, and the appointment of Randall Quarles to the Fed supervisory position by then president Trump in 2019. The result was a 40% decline in hours spent by supervisory regulators on the SVB bank even as its assets grew rapidly. Overall the supervisory hours for the Federal Reserve system as a whole declined. This led to cultural issues under Mr. Trump where less regulation the better was the prevailing attitude. Fed report in Fedspeak says- "Staff felt a shift in culture and expectations from internal discussions and observed behaviour that changed how regulation was executed." It would take a special effort by the Biden administration to bring the situation under control to keep the nation's banking system healthy and strong to support the investments the economy needs. After the 2009 crisis and the decade lost to the US economy and the American people from losses in unemployment and savings as a result of deregulated banks, another crisis was prevented. This time the Fed, FDIC, General Accountability Office are all clear about the value and role of regulation in a properly functioning economy, instead of the pushback after the 2009 crisis to regulation. Once again president Biden has shown the way.   ...

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The Bank of England has left interest rates unchanged at 0.1% and left its quantitative easing program unchanged at 895 billion pounds. Recent reports show central banks are likely to leave rates at almost zero for 3 years.

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The questions about LIBOR rate manipulation were first raised in front page articles in the Wall Street Journal in spring 2008. In 2013 Deutsche Bank's U.S. financial systems were strongly criticized by the U.S. Federal Reserve. In April 2015 Deutsche Bank made a $2.5 billion legal settlement with the U.S. and British regulators for LIBOR rate rigging and admitted wrongdoing. It took BaFin the German regulator a long time to flag these irregularities in a strong manner, in its letter to Deutsche Bank. The comments in the Senior Management Review section of its report for the first time expressed in this level of detail the problems at Deutsche Bank, including problems with 11 current or former executives of Deutsche Bank. The letter and report were sent to the bank's management board May 11, 2015. A month later co-CEO's Anshu Jain and Jurgen Fritschen resigned. Ba Fin's top supervisor of large banks, Frauke Menke sent the letter. By the time BaFin acted many other regulators had already flagged the problems at the bank, and the media including the WSJ had already covered the problems in great detail. Between the first report in the WSJ on Libor rate irregularities and the May 11, 2015 report was a period of 7 years. ...

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The U.S. Federal Reserve issued the results of the third round of stress tests since 2009. It said 18 0f 19 financial firms had enough capital buffers to continue lending in a sharp decline in the economy with a fall in housing prices and the stock market and unemployment rising to 13%. Ally Financial failed the test. Citigroup, MetLife and SunTrust Banks were asked to resubmit their capital plans to the Fed. Citigroup's dividend plan was rejected. No banks were asked to raise capital. J.P. Morgan and other banks were allowed to issue dividends and buyback shares. J.P. Morgan plans to repurchase $15 billion in stocks in the next 12 months. Wells Fargo and U.S. Bancorp also plan to issue dividends and buyback shares. Analyst estimates are for $32 billion in added dividend increases and share buybacks in in the next 12 months. The results are a boost for bank stocks.

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Five rules the editors of the WSJ say should be followed when working on cleaning up the banking system. A clear no, as Krugman and other experts point out is for the government to make the rather imprudent move to take on all the debts of the banks as in Ireland. A second rule is not to underestimate the size of the problem and delay action till the problem gets much worse, when its harder to deal with. ECB president, Mario Draghi, pointed out the problem at Spain's handling of Bankia bank as a clear example, telling the European parliament recently: "There is a first assessment, then a second, a third, a fourth. This is the worst possible wayof doing things. Everyone ends up doing the right thing, but at the highest cost." A third rule is to set clear rules about banks, who gets rescued and who gets closed and why- so that its not left upto the discretion of officials. On this rule Spain's outgoing Zapatero administration gets good marks from WSJ for settting clear rules to the cajas svings banks. A fourth rule applicable to Europe is to first setup the expertise and conditions for a European banking regulator before setting up a banking union and direct injection of funds by the EFSF into banks of individual countries. A fifth rule is to avoid creating even larger mega banks by consolidating failing banks with large banks, and continuing the government's implicit guarantee of the bank because it is "too big to fail" and creates systemic risk- this is the situation after action by the U.S. Federal Reserve, regulators and the U.S. Treasury....

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Greg Ip says in WSJ that China turned to lender after 2010 and financed loans for development, for roads, highways and infrastructure in Asia and Africa. Between 1970 and 1990 the World Bank was extensively involved in infrastructure projects, by 1990 it retreated from this role and China after 2010 was lending at double the rate of the World Bank for it Belt and Road Initiative programs. At G20 New Delhi, India, Biden and Modi, leaders of Brazil, and South Africa, agreed on advancing the World Bank's loan capacity by $100 billion for next decade under leadership of Ajay Banga. Thjis is happening at the meeting of finance leaders in Marrakech, Morrocco in 2023. The IMF and the World Bank were set up after World War II under the agreements signed at Bretton Woods, New Hampshire, as postwar finance system. The IMF was to serve as lender to countries facing short term finance crises, and the World Bank to finance development in poor countries such as India, Indonesia and after 1990 China. The largest borrowers from the World Bank were India, China and Indonesia. India is at $37 billion loans outstanding in 2021, China at about $21 billion after repaying much of its loans. By 2010 Brazil, Mexico, China and India had shifted to international capital markets for development support. Total outstanding debt of World Bank is $460 billion in 2021. ...

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Banks like the staus quo, streamlining regulation will be hard for the new DJT American administration, says Sheila Bair, former head of the US FDIC, Federal Deposit Insurance Corporation. Deposit insurance is important for peace of mind of bank customers and the proper functioning of the banking system, particularly in a crisis. The recent Silicon Valley banking crisis required deposit insurance for the stability of the banking system. Bair who acted to protect the banking system in the 2009 financial crisis in the US, says banks prefer having multiple agencies so that they can choose which one works best for them.  Bair said recently- “Banks may complain, but at the end of the day, they like to have their own regulator they have a relationship with,” Bair said. “They like the status quo.” The Consumer Financial Protection Bureau is one of the agencies that DJT administration and Republicans oppose. With only 2-3 vote margin for its majority in the House it will be difficult to get Congress to agree on changes to the staus quo. ...

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Glen Hubbard, who was Chairman of the Council of Economic Advisors under President George W. Bush and is now Dean of Columbia University Business School, Hal Scott professor of International Fiancial Systems at Harvard Law School, and Luigi Zingales professor of finance at the University of Chicago Booth School of Business, say a different plan of action is needed from what the Obama administration is doing to tackle the banking crisis. They are really skeptical about the the Public Private Investment Program and other plans put forth upto now for several reasons. First, in every case they say there is a lot of carrot but very little stick, and this won't work. TARP program was mostly carrot, with Treasury getting back securities worth $78 billion less than the $254 billion invested, as pointed out by the Congressional Oversight Panel.The FDIC's guarantee of short term debt was worth $100 billion just for the original nine TARP participating banks, and the mortgage related asset guarantees offered Citibank and Bank of America were worth tens of billions. They see anew round of TARP injections with the conversion of the government's preferred stock into equity after release of the stress test results. Then there is PPIP the Public Private Investment Program, and its plans to subsidize the purchase of bank's"toxic assets" by hedge funds and other investors. They estimate the government will spend $2 for every $1 the private sector puts up. And even with this subsidy their thinking is that the probability of succes is low for the same reason that has prevailed since the earlier efforts by Treasury Secretary Paulson- there is just too big a gap between the bid and ask prices on the toxic assets, and add to that the reluctance of investors to partner with the government. Its time for more stick say these experts as the problem of toxic assets, and of credit and lending in the economy, will hang like a large shadow over the economy, as long as these tough problems are not wrestled with. This is the Hubbard-Scott-Luigi Plan: 1) The FDIC should announce that its guarantees of short term debt set to expire in October will not be renewed. Insolvent banks, defined not by stress tests but as those that cannot fund themselves in the private market, will be taken over by the FDIC under aclear and credible action plan. 2) The FDIC lacks the resources to run several large and complex banks which may become insolvent. And waving the idea of nationalization the creditors may try to get the government to bail them out. The authors of this plan say the FDIC should solit each bank into a "bad bank" and a "good bank." The "bad bank" would carry all the residential and commercial real estate loans and securitized mortgages as assets, and all the long term debt as liabilities. THe "bad bank" would obtain along term laon from the good bank to fund the assets of the bad bank. Al the remaining assets including the derivative contracts and the loan to the bad bank would be assets of the good bank. It would also have all the insured deposits and the FDIC guaranteed short term debt as liabilities. With the split accomplished the good bank can be released from FDIC receivership. 3) The long term debt holders would be compensated by receiving all the equity of the good bank. The old shareholders would get the equity in the bad bank. And in any restructuring bondholders should do better than equity holders. If banks are not really insolvent as some say and just facing temporary dislocations, then the bad bank will eventually surge in value, and the equity holders will do alright, and if not they will receive nothing as they should. 4) For this to work legislation needs to take effect before October for FDIC procedures for handling failed banks to be also applicable to bank holding companies. And this new legislation puts no new cost on the taxpayer....

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China's shadow banking system of trust companies and insurance companies with trust company units and other informal lenders are the fastest growing part of its banking system. Between 2010 and 2012 trust companies and other shadow banks doubled outstanding loans to 36 trillon yuan ($5.8 trillion) or about 69% of China's GDP, according to J.P. Morgan Chase & Co. Hidden debt that is likely to default in this poorly regulated sector is seen as a large risk in the banking system by the central bank and China's government planners. Tightening of credit by the central bank, the People's Bank of China, sent interbank lending rates from 3% to as high as 25% in late June 2013, finally settling on June 24 at 6.64%. China's state owned banks lend to trust companies in this market. Trust companies get additional financing by selling wealth management products promising investors returns of 8-10%. Even with China's high savings rate and large government reserves, the hidden debt and large unknowns about the loans in default, are seen by the central bank as posing risks to the target rate of economic growth of 7.5% if the government has to bailout a significant number of troubled banks. Much of the money funnelled through the trust companies since 2008 has been poorly invested. The trust companies such as Citic and Ping An Trust channel lending to borrowers for projects ranging from steel mills to infrastructure projects, such as highways and property developments that cannot obtain the financing through the large state owned banks. Fitch Ratings estimate is that since the financial crisis of 2009 these loans generated only one third of the economic growth per yuan as they did before 2009. ...

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China Investment Corporation, China's sovereign wealth fund is expected to issue upto 28 billion in bonds to help recapitalize China's state owned banks. These banks face the prospect of increasing bad loans as a result of the hectic pace of bank lending in 2009-2010. Loans guaranteed by muncipal governments are estimated at 7.7 trillion yuan, or 17% of overall lending, about 50% of these loans face uncertainty in the event of falling housing prices, and 25% are bad loans. The recent IPO of Agricultural Bank of China raised funds, but the environment for raising money in this way does not look good, as information is spreading that these banks face large loan losses. The bonds from CIC would be picked up by state controlled companies. Yet these state controlled companies are engaging in the real estate speculation, as reported by David Barboza of the New York Times and Peter Coy of Business Week. In a down cycle things could get much worse as a state sovereign fund is selling bonds, state controlled companies would buy these bonds, and state controlled banks are expected to be recapitalized making a complete circle....

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The European Banking Authority has lost credibility after two rounds of stress tests by the EBA failed to turn up the problems at Spanish banks that required a $125 billion recapitalization by the EU rescue fund. Now EU officials are turning to the European Central Bank as the eurozone's main banking regulator. The U.S. Federal Reserve is performing this role after the 2008 financial crisis, with the FDIC in charge of bank closures and resolution. ECB president Mari Draghi says, letting the ECB perform supervisory tasks, a decision made at the June 28 EU summit talks, is fully in line with the bank's mandate. Separate decisions will be needed for a bank resolution authority like the FDIC. The ECB will then have to hire hundreds of banking experts to make on site visits to eurozone banks and check their loan books and make independent assessments of bad loans, bank risks, and capital requirements. The important thing is an agency which is free of local and political interference to make the correct evaluations....

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Mervyn King, a member of the Bank of England's Financial Policy committee, and former Governor of the Bank of England, says the British banks will need to raise 25 billion pounds in 2013. This is needed to meet potential losses in UK real estate and in loans to Ireland and Spain. The deputy governor of the Bank of England, Andrew Bailey, says the British banks have half of this in their plans for 2013, and Mervyn King says the problem is very manageable.