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Why Are Banks Battening Down the Hatches This Week?

If anything, the next few days will go down in financial history as the week Ben Bernanke stepped down as chairman of the Federal Reserve Bank. By the time you read this, Janet Yellen should have been sworn in as his replacement.

Like last week's Federal Open Market Committee decisions -- most notably the expected reduction of quantitative easing by $10 billion to $65 billion for this month -- the changing of the guard shouldn't rock the world of finance too much. In spite of that, banks are taking measures to either retire lingering issues, or shore up their existing operations.

Meanwhile, they're also keeping their collective eye on a gaggle of macroeconomic numbers coming down the pike this week. The big one is Friday's Employment Situation from the Bureau of Labor Statistics, which, among other data, will reveal the nation's January unemployment rate. That December number was 6.7%.

Bank of America (NYSE: BAC  ) is going to be at least a little distracted, as it has to dip into its vault to come up with payouts to disgruntled investors in a long-brewing $8.5 billion legal settlement almost fully approved by a New York state court. The settlement would retire the grievances of those investors who, in the crisis years, bought securities backed by mortgages from the bank's notorious 2008 purchase, Countrywide Financial. The mortgages defaulted, causing massive losses. Most of the settlement terms were accepted by the court, but the the ruling excluded a number of legal claims. So, despite the lender's best efforts, this story isn't over yet.

With the new month comes adjustments in business practices and/or strategy for some of the financial majors. Swimming against the tide of its recent expense-cutting effortsCitigroup (NYSE: C  ) is apparently boosting its presence in Europe's energy markets, according to a Reuters article citing a company spokesman. The news agency said the bank is adding personnel to its power and gas trading/sales desk in London at a time when rivals are paring down such operations. It's good to see Citi, that wily old investment banker, making a contrarian bet in a part of the world down on its financial luck at the moment. If the gamble pays off, look for the bank to sniff out similarly unfashionable markets in an attempt to make some coin.

Back in the retail segment, Wells Fargo (NYSE: WFC  ) this week will start playing it safe with account advances. Starting this month, it will begin phasing out its direct deposit advance program, which allows qualified account holders to draw loans of $20 to $500. At 7.5% interest, the money's relatively pricey -- one reason such advance loans have attracted the attention of Federal regulators concerned they might violate customer-protection laws. Wells Fargo is smartly heading off any potential controversy by shuttering the program; it can easily find a way to serve that client base through other means.

In the same vein, starting this week,JPMorgan Chase (NYSE: JPM  ) is to begin requiring ID of customers making cash deposits at its branches in order to close a potential back door for money laundering. This will certainly make the Feds happy -- money laundering is a tough activity to fight -- and should help reassure clients and investors that the firm has some grip on the situation.

Bookended by the Yellen swearing-in and the BLS' release of employment numbers, this first week of February will be an eventful one for major financials. They'll spend much of it shoring up their existing operations, so let's not expect much in the way of new initiatives from them between now and Friday.

The bigger concern for long-term investors
Do you hate your bank? If you're like most Americans, chances are good you answered yes to that question. While that's not great news for consumers, it certainly creates opportunity for savvy investors. That's because there's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional brick-and-mortar banking model. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. For the name and details on this company, click here to access our new special free report.

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Eric Volkman

Eric has been writing about stocks and finance since the mid-1990s, when he lived in Prague, Czech Republic. Over the course of a varied career, he has also been a radio newscaster, an investment banker, and a bass player in a selection of rock and roll bands. A native New Yorker, he currently lives in Los Angeles.

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