Ahead of the Fed's reg plan vote; Capital One's tech turn
Wall Street Journal
The Federal Reserve is scheduled to vote Wednesday on new criteria for regulating banks. "The proposal, which hasn't been made public, would create new regulatory categories of banks based on size as well as other risk factors, such as international activity, off-balance-sheet exposures, and reliance on volatile forms of short-term funding. The expected plan may lower regulatory costs for regional U.S. lenders under the $700 billion asset line" but "appears to be less beneficial to the very largest U.S. banks considered 'systemically important' to the global financial system."
American Banker takes a deeper dive on some of the questions on bankers' minds ahead of the Fed's proposal.
Big European banks like Credit Suisse, Barclays and Deutsche Bank face the biggest risks in the leveraged loan market, bigger than their American counterparts. "These banks might ultimately thank the Fed, or another regulator, that acted to cool the market. Foregone revenue notwithstanding, it could save them from a bigger accident to come.
Capital One's chief information officer Rob Alexander talks about the bank's transformation into a technology company as well as a bank. Since 2011, the bank has expanded its technology staff to 9,000 from 2,500, "hiring hundreds of software engineers, developers and artificial-intelligence experts to develop products such as a recently launched digital chatbot."
More volatility on deck
New rules that require American banks to estimate losses on loans as soon as they are originated may "create wild swings in profits depending on executives' economic outlooks." Based on recent results at banks in the U.K., where the regulations have already gone into effect, "the rules are making results more volatile. Executives have to take account of an array of economic scenarios and many rely on external forecasts, but their assessment of these is subjective." The rules are scheduled to take effect in the U.S. in 2020, although banks are working hard to get them watered down.
Enjoy it while it lasts
HSBC's better-than-expected third quarter earnings report Monday was largely due to higher interest rates, but that boost may be short-lived. "Revenue growth could be harder to find once interest rates level out or competition forces banks to pay more to keep deposit customers happy," the Journal reports. "The bank faces much tougher lending markets. Boosting profits from loans remains its biggest challenge."
Take it easy
Goldman Sachs and JPMorgan Chase will be less aggressive in offering summer internships to college students, reverting to recruiting juniors rather than sophomores. "It is a nod to a softer Wall Street, eager to cast off its sweatbox image to compete with perk-happy Silicon Valley. It is also an acknowledgment that a push in recent years to move up application deadlines isn't bringing in the kinds of candidates banks need as they try to diversify their overwhelmingly white and male ranks."
More trouble for Wells
Wells Fargo faces another proposed class action lawsuit, this time for allegedly making tens of thousands of robocalls to consumers' cell phones without their permission and then refusing to stop. The suit, which was filed in San Francisco late last week, seeks triple damages under the U.S. Telephone Consumer Protection Act, or up to $1,500 for each call.
Separately, the bank said it won't be able to finish paying back about 600,000 loan customers it wrongly charged for auto insurance until at least 2020. "We will be contacting customers and providing them with compensation in multiple stages throughout 2019, with the final stage scheduled for January 2020," the bank said in a letter to the Senate Banking Committee's ranking members.
"We have released the person in question of all contractual duties of confidentiality in relation to Danske Bank." — A statement from the Danish bank freeing whistleblower Howard Wilkinson of confidentiality obligations as he prepares to testify in public next month about the bank's massive money laundering scandal.