The New York attorney general filed a securities fraud lawsuit against British bank Barclays, accusing the firm of giving an unfair advantage to high-frequency traders in the U.S., while claiming to protect other clients from the HFTs. It’s the highest profile case we’ve seen yet, according to Reuters, as a result of authorities’ attempts to make sure dealers aren’t ripping off investors in today’s largely automated stock markets.
At the same time, regulators are reporting concerns that banks are taking on more risk to pursue profit. A major bank regulator warned Wednesday that competition along with low interest rates and a slowly-growing economy is fueling riskier bank lending.
The Office of the Comptroller of the Currency highlighted two areas specifically: Leveraged loans (described by the Wall Street Journal as high-yielding loans issued to more speculative borrowers) and indirect auto loans (where banks buy loans originated by car dealers). The report calls out “erosion” and “loosening” in underwriting standards, including an easing of lending standards in commercial loans.