To boldly go ... Facebook’s plan to mint its own digital currency called Libra is all about “bringing financial services to the hundreds of millions of people world-wide who don’t use banks or other traditional institutions,” an ambitious goal that “the cryptocurrency sector has for years tried to do the same and failed,” the Wall Street Journal says.
A woman checks the Facebook Inc. site on her smartphone whilst standing against an illuminated wall bearing the Facebook Inc. logo in this arranged photograph in London, U.K., on Wednesday, Dec. 23, 2015. Facebook Inc.s WhatsApp messaging service, with more than 100 million local users, is the most-used app in Brazil, according to an Ibope poll published on Dec. 15. Photographer: Chris Ratcliffe/Bloomberg
Chris Ratcliffe/Bloomberg
“Getting people to use a new monetary standard requires more than just the underlying software,” the paper notes. “It calls for erecting infrastructure that allows people to easily use cryptocurrencies, working with governments and tailoring services to local cultures and customs.” But Libra “will have one big advantage: Facebook is the largest social network with more than 2 billion users, so the proposed cryptocurrency will easily be able to get in front of a huge pool of potential consumers.”
“At least three” of the 28 partners in the Libra project are getting cold feet about participating, the Financial Times reports Friday, ‘spooked” by “a fierce backlash from global watchdogs and politicians, including an official investigation by EU antitrust officials.”
“Two of the project’s founding backers told the FT they were concerned about the regulatory spotlight and were considering cutting ties. Another backer said they were worried about publicly supporting Libra for fear of attracting the attention of agencies who oversee their own businesses.”
Wall Street Journal
Getting political The banking industry plans to be more active in the 2020 elections, with the American Bankers Association expecting to spend more than $10 million “after keeping a relatively low profile in the decade after the financial crisis. The industry’s re-emergence in the political arena comes amid a friendlier tone in Washington during the Trump administration.”
“Our goal is to support candidates who understand and appreciate the critical role banks of all sizes play in the economy,” Rob Nichols, the ABA’s CEO, told the paper. “We plan to expand our efforts in 2020 on a rigorously bipartisan basis.”
What we have here is a failure to communicate A majority of the primary dealer banks that underwrite Treasury debt auctions and make a market in government securities found the Federal Reserve’s communications prior to its July 31 decision to lower its main interest rate to be “ineffective” or close to that level. “Several dealers indicated that they found communication confusing, and several characterized communication from various Fed officials as inconsistent,” according to a survey by the Federal Reserve Bank of New York. A similar survey of money managers found only slightly better results, with 14 of the 28 giving the Fed “low grades for communications effectiveness.”
Thrown for a loss Bank of New York Mellon has lost VanEck Associates, which manages more than $49 billion in assets, as a client of its exchange-traded funds servicing business to rival State Street. “The loss puts a dent in BNY Mellon’s push to become a bigger player in the market for servicing ETFs. As money shifted away from traditional mutual-fund managers and other investment firms, ETF providers emerged as important customers to custody firms like BNY Mellon.”
Financial Times
Did they go too far? The relaxing of the Volcker rule approved this week by two U.S. banking regulatory agencies “opens the door to a rebound in risky behavior on Wall Street, proponents of the initial legislation have warned, even as investors and analysts insist there will be little impact on bank profits. While Wall Street has long lobbied against the legislation, which it sees as imposing an unnecessary compliance burden, supporters of the original rule fear the overhaul is a step in the wrong direction.”
Breathing room European banks will have three years instead of two to set aside funds to cover losses from bad loans “after the European Central Bank bowed to pressure from Brussels lawmakers to water down its plans for a tougher treatment of toxic debts. The move, which follows two years of debate between the central bank and European lawmakers, will be a relief to Italian politicians and banking executives who had protested about the initial proposals from the ECB’s Single Supervisory Mechanism.” Banks will also have nine years instead of seven to fully provision for any bad loans that are secured by property.
Wouldn’t be prudent Barclays CEO Jes Staley is confident that his bank can remain a global force in investment banking as his European rivals have retreated from the business. “The world doesn’t want to see just U.S. investment banks,” the American CEO says. “Being reliant only on the U.S. financial industry is just not prudent.”
Deutsche doings Deutsche Bank has agreed to pay $16.2 million to settle Securities and Exchange Commission charges that it hired the relatives of Russian and Chinese government officials to win business in those countries.
Separately, Deutsche is transferring up to 800 employees to BNP Paribas as part of its retreat from investment banking. “The deal will see the French lender assume control of Deutsche’s prime brokerage unit that services hedge funds, with tens of billions of euros of assets also changing hands.”
Hired UBS has hired Huw van Steenis, a senior adviser to Bank of England Gov. Mark Carney, to head investor relations as well as a “new sustainable finance committee.”
Washington Post
Handle with care Holders of the new Apple Card apparently need a tutorial on how the card should be treated when not in use. “A recently added Apple support page states that if the titanium credit card comes into contact with either leather or denim, the interaction ‘might cause permanent discoloration that will not wash off,’” the paper reports. “It could also be dangerous to store the card near loose change. Or another credit card. Or allow it to touch a magnetic latch on a purse or bag, abrasive objects, household cleaners, compressed air, aerosol sprays, solvents or ammonia.”
“To keep the card white and smooth Apple suggests storing the card in a wallet, pocket or bag made of ‘soft materials.’ If the card comes into contact with a substance that could stain it, the company advises wiping it with a slightly damp microfiber cloth, then with a microfiber cloth moistened with isopropyl alcohol.”
Quotable
“Do not look directly at Apple Card. Do not speak to Apple Card. Do not denigrate Apple Card in Its Holy Presence. When not in use, Apple Card should be returned to a uniformly lit white cube containing only a British man softly repeating al-lu-min-ee-um.” — Alex Stamos, Facebook’s former chief security officer, parodying Apple’s warning on how its new credit card should be stored when not in use
The Cleveland-based bank is projecting steady growth in net interest income even as credit losses remain manageable. But Chairman and CEO Chris Gorman also said that he thinks a recession is likely.
The first-quarter increase involved commercial real estate loans, including some problematic multifamily loans and an office credit, but none of the criticized loans were to consumers, officials at the Dallas company say. Further CRE deterioration is anticipated.
The Detroit-based company is exploring ways to make more consumer auto loans without running afoul of stricter capital standards that are expected from the Federal Reserve. Possible approaches include more securitizations and the use of credit risk transfers.
The House Financial Services Committee also sent to the full House two bipartisan bills, including one that would prevent large banks from opting out of having to recognize Accumulated Other Comprehensive Income in regulatory capital.
Charge-offs and nonperforming loans rose at the Georgia bank in the first quarter. But it blamed the problem on one large client and said the matter has been resolved.
Amid healthy first-quarter loan growth and improving credit quality, Discover Financial Services slashed its profits by $800 million to offset remediation costs from a 16-year period when it overcharged certain merchants.
