Weakest link Barclays came in last among a group of 48 European banks stress-tested by the European Banking Authority. The bank’s common equity tier 1 ratio fell as low as 6% during the 2018-20 period covered by the test, “dropping close to what investors consider the bare minimum needed to withstand a hypothetical economic crash.” Another British bank, Lloyds Banking Group, also did poorly, as its ratio fell as low as 6.78%. Analysts want ratios no lower than 5.5%.
“The results will amplify investor attention on another round of tests by the Bank of England in December and come as British and European banks attempt to plan for the potential impact of Brexit even as the terms of Britain’s separation from the European Union remain unclear,” the Wall Street Journal says. Wall Street Journal, Financial Times
Nigel Higgins, Barclays’ chairman-in-waiting, “will be taking over a bank that has been wrestling with its soul for over 30 years. If approved by the regulators, Mr. Higgins will need to decide whether, as current management believes, Barclays can, as a broadly-based bank, deliver over time and, if so, whether investors will give the bank sufficient credit for so doing and reflect this in the share price.”
Cutting back Goldman Sachs’ first group of partners under CEO David Solomon is expected to be the smallest class in 20 years. Less than 65 people are expected to get that brass ring, the smallest number since 1998 and down nearly 20 from two years ago. Solomon “aims to keep Goldman’s upper ranks exclusive and compensate for a recent influx of outside hires.”
Separately, it was reported that more than 30 Goldman executives, including Solomon and his predecessor, Lloyd Blankfein, vetted the Malaysian debt deals that led to criminal charges brought against two of its former bankers by the U.S. Justice Department last week.
Wall Street Journal
Bottom fishing Hudson Executive Capital, the hedge fund headed by former JPMorgan Chase CFO Douglas Braunstein bought a 3.1% stake in Deutsche Bank, betting “the German bank’s fortunes likely won’t get worse.” But Deutsche “isn’t getting new money and the bank’s problems are chronic rather than acute and short-lived,” the paper notes.
Cross-sell push Brokers at Merrill Lynch are expected to take a 3% pay cut on average next year, but sales people who cross-sell products from parent Bank of America will be shielded from the cuts. “Sales of Bank of America products such as mortgages, money-market funds and margin loans won’t be affected by the change. That means brokers will continue to get a full cut of the revenue produced by selling bank products to wealth-management clients,” although Merrill said that the money advisers make on bank products is “relatively low.” Retirement accounts are also exempted from the changes.
Washington Post
The future of money? So-called “stablecoins” — a cryptocurrency pegged to the dollar — are being touted by some in the cryptocurrency community as “a big opportunity that could fulfill much of bitcoin’s original promise as a medium of exchange” and “represent a crucial steppingstone to the future of money.”
Elsewhere
Coming to Paris JPMorgan Chase said it will invest $30 million over the next five years in job training and small business expansion in some of Paris’ poorest areas, the first foreign commitment in the bank’s “Advancing Cities” program. The bank has already announced investments of $150 million in Detroit and $40 million in Chicago.
James "Jamie" Dimon, chief executive officer of JPMorgan Chase & Co., listens during a forum session on the opening day of the World Economic Forum (WEF) in Davos, Switzerland, on Wednesday, Jan. 23, 2013. World leaders, Influential executives, bankers and policy makers attend the 43rd annual meeting of the World Economic Forum in Davos, the five day event runs from Jan. 23-27. Photographer: Chris Ratcliffe/Bloomberg *** Local Caption *** Jamie Dimon
Chris Ratcliffe/Bloomberg
Quotable
“Business, government and community leaders have a responsibility to help those left behind. Going it alone is not a good business strategy or public policy. Public-private partnerships work and we must find more ways to combine resources. When we do, our most vulnerable citizens will benefit most.” — JPMorgan Chase CEO Jamie Dimon
The Federal Reserve authorized a bid by Morgan Stanley to incorporate its German investment bank under its U.S. bank subsidiary. Three Biden nominees on the Fed board dissented, citing concerns that the move could heighten risks for the U.S.-based investment banking giant.
In three separate appearances Thursday, Fed Gov. Lisa Cook, Gov. Michael Barr and Vice Chair Philip Jefferson said they are worried that U.S. involvement in the war with Iran could drive up inflation, leading them to conclude that interest rates should remain steady in the near term.
Federal Reserve Gov. Stephen Miran on Thursday detailed a plan to reduce the central bank's balance sheet, saying a smaller footprint would reinforce policy boundaries but could also bring more market volatility.
The Canadian bank laid out its rationale Thursday for opening new branches in California. The objective is to increase density in the Golden State, and subsequently achieve greater market share and higher returns.
The legislation would grant the Consumer Financial Protection Bureau, among other agencies, more oversight of airline-branded credit cards and rewards schemes.
PayPal, Stripe, Visa and Mastercard must be vigilant against offboarding clients for political or religious reasons, the Federal Trade Commission warned Thursday.
