Capital Requirements, EU Fines, Bankruptcies, and More!
Editor’s Note: Happy Wednesday!
Let’s get to it!
Regulators to Lower Proposed Capital Requirements for Big Banks
Wall Street was a big winner yesterday after the Federal Reserve rolled out changes to a proposed set of regulations for U.S. banks.
Apparently, now the largest banks will need to hold only half of the originally proposed capital required.
According to Fed Vice Chair for Supervision Michael Barr, the central bank, along with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. (FDIC), will require only a 9% increase to big banks’ capital.
The regulators intend for banks to use the extra capital as a cushion against any potential losses.
However, critics of the plan say that it would make loans more costly and difficult to obtain. The banks argued that the plan would ultimately lead to consumers preferring non-bank financial tech (fintech) services for loans.
“This process has led us to conclude that broad and material changes to the [original] proposals are warranted,” Barr said in remarks made at an event at the Brookings Institution.
“There are benefits and costs to increasing capital requirements. The changes we intend to make will bring these two important objectives into better balance.”
In addition, the regulators are letting regional banks that have between $100 billion and $250 billion in assets off the hook from the requirement. However, they will be required to list their unrealized gains and losses on securities as part of their regulatory capital.
“The journey to improve capital requirements since the Global Financial Crisis [of 2008] has been a long one, and [the capital requirement plan] is an important element of this effort,” Barr said.
“The broad and material changes to both proposals that I’ve outlined today would better balance the benefits and costs of capital in light of comments received and result in a capital framework that appropriately reflects the risks of bank activities.”
Big Fines for Apple and Google
Apple (NSDQ: AAPL) stock experienced some temporary market jitters yesterday after the European Union’s top court ruled against it in a battle over back taxes.
According to the European Commission, the Cupertino Giant owes Ireland $14.4 billion in unpaid taxes.
According to a statement from the Irish government, the Apple affair “involved an issue that is now of historical relevance only,” adding that it “does not give preferential tax treatment to any companies or taxpayers.
In a filing, Apple noted that it would incur a one-time tax charge of around $10 billion in its fiscal fourth quarter due to the fine.
“This case has never been about how much tax we pay, but which government we are required to pay it to,” an Apple spokesperson said. “We always pay all the taxes we owe wherever we operate, and there has never been a special deal.
“The European Commission is trying to retroactively change the rules and ignore that, as required by international tax law, our income was already subject to taxes in the U.S.”
The European Commission has been investigating Apple’s tax obligations to Ireland since 2014. The Big Tech firm located its EU headquarters in the Irish city of Cork.
But according to the EU, Apple enjoyed “illegal” tax benefits during the last 20 years. Apple was taking advantage of the infamous “Double Irish”tax scheme in which multinational companies could funnel untaxed money into Irish subsidiaries, The subsidiaries would then send the funds on to another company registered in Ireland but with tax status elsewhere.
Ireland closed the “Double Irish” loophole in 2014.
In a separate decision yesterday, the European Court of Justice also upheld a $2.6 billion fine that had been levied against Alphabet’s (NSDQ: GOOGL) Google in 2017.
The court found that Google abused its domination of the search engine market in Europe to promote its own shopping service at the expense of competitors.
EU antitrust chief Margrethe Vestager said at the time of the original ruling that Google’s practices “denied European consumers a genuine choice of services and the full benefits of innovation.”
In a statement yesterday, she noted that “even the most powerful tech companies could be held accountable.”
Bye-Bye, Big Lots
Yesterday, Big Lots (NYSE: BIG) announced that it will sell its business to a private equity firm, Nexus Capital, as part of its Chapter 11 bankruptcy proceedings.
According to a bankruptcy court filing, the discount retailer has assets and liabilities in a range of between $1 billion and $10 billion. It also has 5,001 to 10,000 creditors.
Over the past few quarters, Big Lots has struggled to attract shoppers who are tightening their purse strings against unnecessary purchases. It certainly doesn’t help that the company’s price tags tend to run higher than what you can find at Target (NYSE: TGT) and Walmart (NYSE: WMT).
Its turnaround efforts haven’t shown much success; for the first quarter of 2024, the company reported a whopping $205 million loss.
Earlier this year, CEO Bruce Thorn expressed optimism that the retailer’s turnaround plans would start having a positive effect on the business in the second half of the year.
“While we made substantial progress on improving our business operations in [the first quarter] we missed our sales goals due largely to a continued pullback in consumer spending by our core customers, particularly in high-ticket discretionary items.
“We remain focused on managing through the current economic cycle by controlling the controllables.”
Well, it looks like Big Lots lost control even of the “controllables.”
According to GlobalData Retailer’s Neil Saunders, “The financials are going in the wrong direction. This is a business that has suffered sales declines for a reasonable period of time, and what you come to expect is that, as you go forward, those declines start to moderate a bit and then you start to go back into growth, but Big Lots shows no signs of that happening.”
According to the company, Nexus is planning to scoop up the Big Lots chain of stores in a court-supervised auction.
Roughly Half of Americans Don’t Read
Shocking statistics shows that nearly half of all U.S. adults didn’t read a book last year.
According to a YouGov survey, only 46% of respondents said they neither read a book nor listened to an audiobook.
At the same time, 27% of respondents said that they read between one and five books last year, while 9% said that they read six to 10 books.
And 11% of respondents reported reading 20 or more books for the same time frame.
Take a look:
You will find more infographics at Statista
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