Credit Suisse CEO leaves; Fannie, Freddie to buy SOFR mortgages

Receiving Wide Coverage ...

Thiam resigns

Despite the backing of several large investors, Credit Suisse CEO Tidjane Thiam lost the boardroom battle with chairman Urs Rohner, tendering his resignation on Friday. Thiam “succumbed to months of pressure over a spying scandal that has engulfed the Swiss lender in recent months,” the Wall Street Journal says. He will be relpaced by veteran Swiss banker Thomas Gottstein, “a decision that indicates the sprawling manager of rich people’s wealth is returning to its less flashy roots.” Wall Street Journal, Financial Times, New York Times

Earlier, a prominent Swiss investment adviser, Ethos Foundation, joined three large investors in Credit Suisse in calling for Rohner “to take responsibility for the management dispute engulfing the bank and step down immediately. The intervention by Ethos Foundation, which controls over 3% of Credit Suisse shares and advises institutional investors on corporate governance, comes as the lender’s board was meeting on Thursday to discuss chief executive Tidjane Thiam’s position. Credit Suisse’s 60-year old chairman has fallen out dramatically with Mr. Thiam in the wake of a corporate espionage scandal last year,” the Financial Times reports.

“For some years we believe Mr. Rohner has been taking a lot of decisions which have been detrimental to the bank,” Ethos CEO Vincent Kaufmann told the paper. “The board is responsible to supervise management. We need someone to challenge the whole governance framework of the bank.”

Wall Street Journal

Turning the page

Fannie Mae and Freddie Mac said they will “soon” accept adjustable-rate mortgages tied to the secured overnight financing rate, or SOFR, and stop accepting mortgages tied to the London interbank offered rate by the end of this year, “a boost for the Federal Reserve’s preferred replacement to the troubled short-term interest benchmark.”

"The push to bring the new mortgages to market could force other participants — from mortgage brokers to banks and servicing companies — to prepare for the expected end of a benchmark that has been built into the financial system for decades. The announcement underscores recent progress in efforts by Wall Street and regulators to move away from Libor, which was scheduled for replacement after a manipulation scandal.”

Buffett lunch

Chinese cryptocurrency entrepreneur Justin Sun, who paid $4.6 million in a charity auction last year to have lunch with Warren Buffett, finally broke bread with the billionaire, “six months later than originally planned.” Sun was scheduled to have lunch with Buffett last year in San Francisco but called it off just 24 hours before it was supposed to happen.

“The 29-year-old Mr. Sun said the postponement was necessary because he was suffering from kidney stones. But he also apologized for what he had described as ‘excessive self-promotion,’ claiming it hurt relations with regulators and the public.”

Compliance warning

The Office of the Comptroller of the Currency is warning that some banks have failed to put in place policies that put them in compliance with due-diligence rules requiring them identify the owners of corporate accounts. “Some banks haven’t included in their corporate policies a time frame for validating customer identities, or spelled out how they plan to validate the information they collect,” Grovetta Gardineer, the OCC’s senior deputy comptroller for bank supervision policy, said, noting “national bank examiners have recently observed weaknesses in compliance.”

Financial Times

The cost of convenience

U.K. consumers paid £104 million in ATM fees last year “following the closure of thousands of free-to-use cash machines.” At the same time, “a widespread reduction of cash points across Britain has saved banks £120 million since January 2018.”

“More than 8,700 free ATMs have closed since the beginning of 2018 following a cut in the fees paid by banks to third-party cash machine operators, which left many ATMs no longer economically viable. At the same time there has also been a rise in bank branch closures. Banks have argued that interchange fees cost hundreds of millions of pounds each year and that much of the ATM network is inefficient, with many machines clustered in the same areas.”

Washington Post

Unconventional beliefs

“There are a lot of questions about" Judy Shelton, one of President Trump’s nominees for the Federal Reserve Board. Even Republicans are expected to grill her at next week's hearing. Sen. Richard Shelby, R-Ala., a senior member of the Banking Committee, which will conduct the vetting, told the paper, “I have a few [questions], but I’m not the only one.”

“While much of the media attention has focused on Shelton’s views about gold, the banking community is more alarmed by her desire to end federal deposit insurance. An outspoken Fed critic, Shelton is best known for her controversial views on monetary policy: She has suggested the United States doesn’t need a fully independent central bank and has advocated strongly for the nation to return to something akin to the gold standard.”

Elsewhere

New hires

Goldman Sachs plans to add 65 people to its Marcus retail operation in the U.K. this year, “taking the unit’s total headcount to over 300,” Reuters reports. Marcus will also be adding “a mobile app and more savings products, as part of the group’s global shift towards consumer banking.”

Since launching in the U.K. in 2018, the bank has taken in “some 13 billion pounds ($16.8 billion) in savings from competitors.” Des McDaid, Marcus UK’s head, said the bank “will launch joint accounts this week, easy access Individual Savings Accounts in the second quarter and its Marcus app by the end of the year.” He also told the paper “Germany would be the next logical market for Marcus to enter, but that there are no immediate plans to make that move.”

Quotable

“This is the first major announcement of a consumer-loan product based on SOFR and will help lenders transition a trillion-dollar market away from Libor.” — Tom Wipf, a Morgan Stanley banker and head of the Alternative Reference Rates Committee, on the decision by Fannie Mae and Freddie Mac to soon stop accepting mortgages tied to Libor in favor of the secured overnight financing rate