More turmoil Deutsche Bank may be considering another high-level shake-up, “a sign of continuing unrest at Germany’s biggest bank.” Among the executives who may be asked to leave include those “central to its relationships with key regulators in the U.S. and Europe, such as Sylvie Matherat, the bank’s chief regulatory officer and a member of its management board, and Tom Patrick, CEO of the Americas region, the paper suggests. “The bank is trying to regain its footing after years of restructuring, legal fines and executive turnover. Successive CEOs have pledged to make the bank more efficient and stable, but its shares have continued to fall, dropping more than 40% this year and recently hitting historic lows.”
Good to go “Truth is, most banks are ready for whatever happens next” as “Brexit has entered its endgame,” the Heard on the Street column says. “The big problems are more likely to hit local lenders with little stake in cross-border finance.”
Volatility rocks Wall Street banks’ equity derivatives desks, boosted by market volatility, “are expected to take home some of biggest paychecks” this year, reflecting the “continued shift toward trading based on math savvy and deep dives into data, rather than guts or Rolodexes.” At the dozen largest global investment banks, equity derivatives revenue jumped 84% in the first half of this year compared to the same period last year.
New York Times
Diplomacy needed Randal Quarles, the Federal Reserve’s vice chair for supervision and incoming chair of the Financial Stability Board, “is a strong choice to lead the organization” but “faces many challenges: A divided U.S. Congress is fighting about whether to be tough or soft on Wall Street; Brexit and other forces will also test cross-border unity. Mr. Quarles’s diplomatic skills — which he sharpened as the U.S. Treasury’s assistant secretary for international affairs between 2002 and 2005 — will be just as important as his experience of financial regulation.”
Elsewhere
Unknown risks Raphael Bostic, the president of the Federal Reserve Bank of Atlanta, warned that nonbank mobile payments providers “such as Apple Pay could run into reimbursement problems in some instances, and fintech firms in general must be more sensitive to risks.” When a credit card customer is defrauded, he is generally refunded by the bank that issued the card. But “if there is a problem with Apple Pay it is not clear under some arrangements what's going to happen there,” said Bostic, who said he doesn’t use Apple Pay. “With all these innovations, consumers have no idea what risks they are exposed to.”
Raphael Bostic, president and chief executive officer of the Federal Reserve Bank of Atlanta, reacts during a panel discussion at the Association for Public Policy Analysis & Management (APPAM) Fall Research conference in Chicago, Illinois, U.S., on Thursday, Nov. 2, 2017. The conference focuses on the importance of data and measurement, and celebrates the government staff who work to improve the measures we use every day. Photographer: Christopher Dilts/Bloomberg
Christopher Dilts/Bloomberg
Quotable
“So far, I’m not even a little bit happy with my selection of Jay. Not even a little bit. And I’m not blaming anybody, but I’m just telling you I think that the Fed is way off-base with what they’re doing.” — President Trump, in his latest criticism of Federal Reserve Chair Jerome Powell.
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.
