Pushing states to police student loans; Banks happy with Powell

Breaking News

Raided
About 170 prosecutors, police officers and tax inspectors raided Deutsche Bank’s Frankfurt offices Thursday morning seeking evidence of alleged money laundering.

“The investigation centers on two unidentified Deutsche Bank employees aged 50 and 46 and other unidentified employees suspected of helping clients create offshore entities in tax havens, the city’s prosecutor’s office said.” The bank said “the investigation has to do with the Panama Papers case.” Wall Street Journal, Financial Times, New York Times

Receiving Wide Coverage ...

Protecting student borrowers
Three former officials of the Consumer Financial Protection Bureau have formed a nonprofit group that “aims to expand borrower protections and oversight of the $1.5 trillion student loan market.” The Washington-based Student Borrower Protection Center is being led by Seth Frotman, who quit the CFPB in August after claiming “the Trump administration was siding with predatory lenders over consumers.” The group “plans to encourage states and cities to step up enforcement actions against loan-servicing companies, debt collectors, for-profit schools and private student lenders.” New York Times, Washington Post

Brexit, no problem
The Bank of England said the country’s banking system “is strong enough to ride out the shock of a disruptive Brexit,” as all seven major banks stress-tested under such a worst-case scenario passed without having to strengthen their capital levels. The results “clear the way for bigger payouts to shareholders in the coming months,” the Wall Street Journal says.

“The test shows the U.K. banking system is resilient to deep simultaneous recessions in the U.K. and global economies that are more severe overall than the global financial crisis,” the BoE said.

Wall Street Journal

Easier wills
Federal Deposit Insurance Corp. Chair Jelena McWilliams said federal banking regulators are reviewing ways to make it less burdensome for the nation’s largest banks and regionals to submit “living will” plans in the event of a winding down of their operations in a crisis, “the latest step to soften post-crisis rules on the banking industry.”

Fun while it lasts
While President Trump says he’s “not even a little bit happy” with Federal Reserve Board Chair Jerome Powell, bankers are quite satisfied with the Fed's rate hikes. It’s not clear how much longer the Fed will continue to raise interest rates, but, so far banks are earning more profits thanks to monetary tightening. “This doesn’t necessarily mean the coast is clear for bank stocks. There are other reasons for investors to be concerned, including a possible turn in the business cycle that would pressure lending growth and spur defaults. But all signs indicate that one or two more increases would still be positive for U.S. lenders.”

David Paul Morris/Bloomberg

Unintended consequences
A rule change that banks argued would spur commercial real-estate lending has so far failed to do that, but “it is mostly helping the banks.” Enacted last May, the change narrows the definition of which construction and development loans banks must hold extra capital against. “The change hasn’t increased lending broadly thus far. Still, banks already are reaping the benefits: easier compliance, a boost to capital ratios, better returns on existing loans.”

Digital equivalence
The Treasury Department issued guidance Wednesday that for the first time includes digital currency identifiers to flag targets on its sanctions blacklist. “Regardless of whether a transaction is denominated in a digital currency or traditional fiat currency, compliance obligations are the same,” Treasury said.

Financial Times

Meet the new boss
BBVA has appointed Onur Genç, the head of its U.S. operation, as its global CEO. He takes the reins at the end of December. He succeeds Carlos Torres Vila, who was named to replace Francisco González as executive chairman in September.

Now it’s criminal
Denmark’s public prosecutor for serious economic and international crime filed four preliminary charges against Danske Bank, the first criminal charges to be filed against the bank over its €200 billion money-laundering scandal. The bank was accused of “failing to investigate and report suspicious transactions and having inadequate controls and checks on customers.” Danish officials are also looking into whether criminal charges can be brought against Danske managers.

Quotable

“The core of the U.K. financial system is ready for Brexit whatever form it takes.” — Bank of England Gov. Mark Carney