Breaking bread Federal Reserve Chairman Jerome Powell had dinner at the White House with President Trump Monday night. Treasury Secretary Steven Mnuchin and Fed Vice Chairman Richard Clarida also attended. According to the Fed, Powell’s “comments in this setting were consistent with his remarks at his press conference of last week. He did not discuss his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming economic information and what that means for the outlook.”
"One Trump administration official who was briefed on the dinner said it was 'cordial and collegial' — more informal than if they had met in the Oval Office," according to the Wall Street Journal. “Each side had a chance to explain their position in a low-key way.” Wall Street Journal, Financial Times, New York Times, Washington Post
Jerome Powell, governor of the U.S. Federal Reserve and President Donald Trump's nominee as chairman of the Federal Reserve, speaks as Trump, left, listens during a nomination announcement in the Rose Garden of the White House in Washington, D.C., U.S., on Thursday, Nov. 2, 2017. If approved by the Senate, the 64-year-old former Carlyle Group LP managing director and ex-Treasury undersecretary would succeed Fed Chair Janet Yellen. Photographer: Andrew Harrer/Bloomberg
Andrew Harrer/Bloomberg
Bashing banks A royal commission appointed by the Australian government released a damning report Monday “that detailed how banks and other financial services companies charged fees for no service — in some instances to dead customers — lied to regulators and cost customers hundreds of millions of dollars through poor advice. The report makes 24 referrals of financial institutions and individuals to Australian regulators for consideration of further action, including potential criminal or civil prosecution,” the Financial Times reports.
The New York Times reports: “Loan officers, mortgage brokers and many others acted to line their own pockets rather than helping customers, said the report, which urged the government to rein in an industry that it said too often operated with a cavalier disregard for the welfare of the Australian people.”
But “there’s more pain to come” for the stocks of Australian banks, the Journal says. “The country’s lenders face another problem still harder to control: a crumbling housing market. An economic slowdown in China, by far Australia’s largest trading partner, will also inevitably ripple Down Under.”
But on Tuesday all four of Australia’s big banks jumped 5% in a “relief rally” as investors judged that the report’s recommendations “would not fundamentally alter the industry structure over the long term.”
Owning up Wirecard, the German fintech payments company, said an external law firm has been investigating alleged accounting manipulations in its Singapore operations since last May. Last week the company dismissed as “inaccurate, misleading and defamatory” reports in the FT that “a senior Wirecard executive in 2018 was suspected of using forged and backdated contracts in a string of suspicious transactions that raised questions about the integrity of the accounting at the fintech group.”
“Until the lawyers are finished and Wirecard’s regulators and the police have reviewed it all, it is impossible to be sure this will go away,” the Journal comments.
Wall Street Journal
Bad moon rising “A growing minority of banks” tightened their lending standards in the fourth quarter and “expect loan demand and performance to weaken,” according to the Federal Reserve. “The Fed’s January survey of senior loan officers showed an increasing number of institutions bracing for a lending slowdown” while anticipating “that loan performance will deteriorate.”
Cyber heist suit Bangladesh’s central bank has filed a federal lawsuit against a Filipino bank, accusing its top executives of participating in the theft of $81 million from its account at the Federal Reserve Bank of New York. The 2016 theft, in which hackers penetrated Bangladesh Bank’s computer systems, is “believed to have been the largest successful cyber theft at a financial institution at that time.” The hackers tried to steal as much as $1 billion but got slightly more than $81 million.
Financial Times
More trouble in Denmark Deminor Recovery Services, a Belgium-based shareholder rights group, is calling for an independent investigation into the €200 billion money-laundering scandal at Danske Bank, opening “a new front in Danske’s woes.” Denmark’s largest bank is already facing criminal investigations in at least three countries, including the U.S., plus several class-action shareholder lawsuits.
Elsewhere
This one’s for Bud Goldman Sachs is joining a $20 million fundraising round for Bud, a British fintech startup. Bud, which is already backed by HSBC, “is one of a number of upstart firms taking advantage of Britain’s new Open Banking rules to try and help users manage their finances better by combining data from multiple banks and service providers. Recognizing the threat posed by nimbler fintechs, big banks are investing in such companies in an effort to pair their respective strengths.”
More to do Standard & Poor’s left its ratings on Deutsche Bank’s long-term bonds unchanged at BBB-plus but said the bank needs to “improve profitability and bolster the bank’s customer franchise. The ongoing drip of cases and adverse news flow continues to undermine management’s efforts to improve stability.”
Quotable
“The damage done by that conduct to individuals and to the overall health and reputation of the financial services industry has been large. Saying sorry and promising not to do it again has not prevented recurrence. The time has come to decide what is to be done in response to what has happened.” — Kenneth Hayne, head of the Australian government commission that detailed widespread misconduct in the country’s financial sector.
The Jackson, Mississippi, company will use proceeds from the sale of its Fisher Brown Bottrell Insurance unit to restructure its investment portfolio, moving $1.6 billion of low-yield securities off the balance sheet.
The store-branded card issuer is raising annual percentage rates and adding fees for paper statements to compensate for lost revenue. The Consumer Financial Protection Bureau's new regulation is scheduled to take effect on May 14.
At the banks' annual meetings, shareholders at both companies struck down proposals that would have split the board chair and CEO roles. Two other proposals also failed to win shareholder support, one concerning energy financing and another on pay gap analysis.
Congressional Review Act resolutions are ramping up ahead of the 2024 election cycle. Experts say that, although none are likely to become law, the resolutions are still powerful messaging and political tools.
The ABA is testing an information-exchange network to allow banks to share their fraud data with each other. Companies including Baselayer are also building solutions.
Republicans on the House and Senate Small Business committees are accusing the SBA of being irresponsible in granting Funding Circle permission to participate in its flagship loan-guarantee program.
