JPMorgan Chase & Co. (JPM), UBS AG (US listing) (UBS): Federal Regulators and the Banking Sector

The penalties will be forked over to the Treasury Department, while $124 million will be in the form of rebates to injured rate payers in California. It goes without saying that the big bank agreed to the deal without admitting or denying any wrong doing. But this is said to be the largest recapture by FERC since it acquired enforcement powers in the wake of the Enron collapse more than a decade ago.

More than this though is JPMorgan Chase & Co. (NYSE:JPM)’s announcement last week that it is spinning off its commodities business units that buy and sell metals, oil, gas, electric power, and coal. However, it is unclear what pulling out will mean for the company’s bottom line. And the big bank is not alone in dumping some business lines.

Wells Fargo retreats from mortgage joint ventures

Wells Fargo & Co (NYSE:WFC) announced last week that one of its subsidiaries, Wells Fargo Ventures, was pulling out of an array of joint ventures involved in mortgage lending. The bank was said to be taking this action because of enhanced regulatory scrutiny and enforcements by federal regulators. Wells Fargo claims changes in state and federal oversight have made it more difficult for the firm to continue operating these joint ventures. That being said, some observers believe that this move will not have a significant effect on Wells Fargo & Co (NYSE:WFC)’s mortgage production — and the lender is the largest originator still standing in the residential mortgage market.

The bottom line

While this may seem like small potatoes for observers deft at fundamental analysis, the ongoing settlements are “intangibles” for investors in the banking sector to seriously consider. And these are only a few of an array of regulatory actions underway.

Big Banks still have the ongoing Libor manipulation probe to handle while the FHFA settlements will continue to be rolled out. In short, ongoing multi-million dollar payouts will hit the lenders in the wallet and the ongoing regulatory risks are hard to calculate. While banks have been reporting solid results in 2013, investors should remember rule number one: caveat emptor, that is, let the buyer beware.

Kyle Colona has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo & Co (NYSE:WFC). The Motley Fool owns shares of Citigroup Inc. (NYSE:C), JPMorgan Chase & Co (NYSE:JPM)., and Wells Fargo. Kyle is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Federal Regulators and the Banking Sector originally appeared on Fool.com and is written by Kyle Colona.

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