Addressing the coronavirus; Wells workers to testify

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Virus could chill earnings

The CEO of the U.K.’s Asia-focused Standard Chartered said the coronavirus epidemic “will make it more difficult for us to hit our financial targets,” this year. Wall Street Journal, Financial Times

Financial Times

Quarantine at work

The biggest Wall Street banks are drawing up plans for their Tokyo offices “to split staff into groups and to keep them physically segregated for weeks at a time as the financial sector braces for a major outbreak of the coronavirus in Japan. Although different banks — including Bank of America, Morgan Stanley and Goldman Sachs — are devising slightly different ‘split operation’ strategies, the broad aim is constant: to confine any intra-company epidemic that does strike a department,” the paper says.

“Efforts at JPMorgan involve dividing staff across different parts of the business into an A and B team. One will work from home for two weeks while the other will continue to work in the main Tokyo office during that time. At the end of that period, they will switch but under strict conditions that members of the A and B teams have no physical contact. The two-week period is based on the presumed incubation period of the virus.”

Coronavirus
Commuters wearing protective face masks walk past security cameras in the Lujiazui Financial District in Shanghai, China.

Pushing the move from Libor

The Bank of England is trying to “turbo-charge” banks’ “move away from Libor, by toughening the terms of its lending against the tainted interest rate benchmark.” The BOE said Wednesday it “will apply a discount from October to the value of Libor-linked collateral that commercial banks can post to secure loans. This so-called haircut, the gap between what the central bank accepts as collateral and what it will lend, will be ratcheted up ahead of the deadline to switch away from Libor — the London interbank offered rate — at the end of 2021. The central bank also intends to publish a compounded index — in addition to the overnight rate — for the new benchmark, the sterling overnight index average, or Sonia.”

Almost there

A British jury has begun deliberating the fate of three former senior Barclays executives following “one of the most high-profile criminal trials ever brought by the Serious Fraud Office. It is the first criminal trial in the U.K. to examine steps senior bankers took during the financial crisis and the prosecution centers around whether the three bankers lied to the stock market in official documents over two cash calls in 2008.”

The three bankers, who deny the charges, have been charged with fraud for accepting £11.2 billion from Qatari investors in order to avoid a U.K. government bailout. “During the trial the SFO alleged the men had funneled secret fees of £322 million to Qatar and its powerful prime minister at the time in exchange for the Qatari investment across the two 2008 fundraisings. The trial has lifted the lid on the febrile atmosphere as markets roiled in 2008 and Barclays did everything possible to avoid government control.”

The Yanks are coming

“Despite the unappealing state of U.K. banking, two of Wall Street’s biggest names are planning to attack the market,” the paper reports. “JPMorgan is working on a digital banking offering under its Chase brand, following Goldman Sachs, which is planning to significantly expand the Marcus retail business it opened in the U.K. in 2018.”

“After years of false dawns with efforts to boost banking competition in UK, analysts and investors said the latest trend could be one that finally has a serious impact.”

Conflicted?

JPMorgan Chase “galvanized the world of development finance recently” when it announced “it would become the first commercial bank to establish its own development finance institution” that is expected to finance up to $100 billion of projects a year. While the bank’s “development finance innovation is, in principle, welcome,” an op-ed says, “there is a significant risk of conflict between the DFI’s development and commercial objectives.”

New York Times

One down, two to go ...

Judy Shelton’s nomination to the Federal Reserve “received a lift on Wednesday after a key Republican senator,” Pat Toomey of Pennsylvania, “said he would support her candidacy.” Toomey, who earlier “had expressed serious worries about her nomination,” said Shelton had “assuaged some of his concerns,” according to the paper.

“That leaves two Republicans on the Senate Banking Committee who have expressed doubts about Ms. Shelton — Richard Shelby of Alabama and John Kennedy of Louisiana. Opposition by only one Republican on the panel could potentially dash her chances of moving forward. The committee has 13 Republicans and 12 Democrats, and it is unclear that any of the Democrats would support her bid.”

Elsewhere

Looking to be heard

A group of “aggrieved” Wells Fargo workers, plus consumer advocates and organized labor representatives, are scheduled to testify before the House Financial Services Committee on March 25, “saying they feel brushed aside by management.” The advocacy group, called The Committee for Better Banks, will participate in a hearing titled “Holding Wells Fargo Accountable: Examining the Impact of the Bank’s Toxic Culture on Its Employees,” Reuters reports.

“The scheduled hearing is one of three focused on Wells Fargo, which has been beset by scandal since 2016, when it acknowledged its employees opened potentially millions of phony accounts in order to meet unrealistic sales targets. Since then Wells Fargo has overhauled performance goals, compensation formulas and risk management to avoid such problems in the future. However, the advocacy group says problems still exist, citing layoffs, excessive workloads and a stressful work environment.”

Separately, New York City has become Wells’ center of power under CEO Charles Scharf, American Banker’s Kevin Wack reports.

Jobs lost

Two U.K. banks, Lloyds Banking Group — the country’s biggest domestic bank — and Virgin Money are “pressing ahead with hundreds of job cuts in the face of union opposition, as British banks try to keep up with customers moving online.” Lloyds is planning to cut 780 jobs, while Virgin Money said it would cut 500 jobs and close 52 branches, according to Reuters.

“British banks have shrunk since the financial crisis and have continued to cut staff in recent years in response to squeezed profit margins and growing demand for digital services.”

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