Two U.S. banks were forced to step in to support some of their money market funds late last week “amid sharp outflows from parts of the sector.” According to the Financial Times, BNY Mellon bought $1.2 billion of its Dreyfus Cash Management fund’s assets “to help cover redemptions” after investors withdrew $6 billion from the fund last week.
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“BNY Mellon’s move to take $1.2 billion of short-term debt held by the Dreyfus fund on to its own balance sheet came after outflows dragged the fund’s assets close to an important liquidity threshold,” the paper says. The fund invests mainly in short-term corporate debt, but amid the coronavirus investors have “shifted instead to the safety of money market funds that invest only in short-term government debt.”
Goldman Sachs poured more than $1 billion into two of its prime money market funds, Reuters reports. “The bank repurchased securities from its two funds on Thursday after investors withdrew a net $8.1 billion from them during a four-day stretch,” according to a regulatory disclosure by the bank on Friday.
Separately, Goldman said CEO David Solomon got a 19% raise in 2019, “a message likely to resonate poorly among traders and bankers who saw their own bonuses cut and who are facing a long period of economic uncertainty,” the FT says. Solomon earned $24.7 million last year, including a $7.7 million cash bonus and almost $15 million in stock. That was up from $20.7 million in 2018, “most of which he spent as CEO-in-waiting.”
Financial Times
Cap relief?
Wells Fargo has asked the Federal Reserve to temporarily or permanently remove the $1.9 trillion cap on its assets imposed as punishment for its phony accounts scandal, “saying it would allow the bank to extend support to businesses and customers hit by the economic fallout of the coronavirus pandemic. Removing the cap has been a priority for CEO Charles Scharf, and the issue has become acute as the Fed tries to encourage banks to extend credit to customers who have seen their revenues and incomes plummet this month.”
Wells Fargo CEO Charles Scharf
Bloomberg News
Similarly, U.S. banks “are seeking assurances from the Fed that they will not be penalized if they temporarily breach liquidity rules because of emergency lending to clients stricken by the coronavirus crisis. Lenders are pressing the central bank to flesh out its promise not to sanction those who run down their liquidity buffers to aid the economy, and are also exploring other ways the Fed and banks can work together to boost lending without banks taking on too much risk,” the FT says.
“The news follows statements from the Fed designed to get banks lending, including publicly encouraging them to reduce their capital and liquidity buffers to minimum levels and take funding from the discount window,” the paper reports.
Meanwhile, on Sunday, five federal banking agencies and a trade group for state banking regulators issued guidance encouraging banks to make loan modifications for borrowers affected by the coronavirus, according to American Banker.
Standing strong
The U.K.’s biggest banks “are confident that their balance sheets are strong enough to withstand the hit of coronavirus after a decade of rising capital requirements and supporting measures introduced by the Bank of England over the past two weeks. Instead, their main concern has been grappling with the practical challenges of maintaining service and preparing for a potentially massive influx of demand from customers in financial difficulty.”
Risky business
Swedbank “carried out €37 billion of transactions with a high risk for money laundering over a five-year period, according to a damning report that shows the Swedish bank actively targeted high-risk individuals in the Baltic region and points to failings from both top management and the board. The report published on Monday by Clifford Chance, the U.K. law firm hired by Swedbank, lays bare how the biggest bank in the Baltics lacked proper systems and controls to combat money laundering, and how about $4.8 million of transactions could have broken U.S. sanctions.”
Both sides now
Technology has helped banks save billions while also allowing them “to grow by serving people far outside their physical networks and using big data to understand how they can lend to non-traditional borrowers.” But the technology, including cloud computing, “brings its own dangers” by making them more vulnerable to cyberattacks.
Elsewhere
Rewards
Two big U.S. banks said they are paying their front-line workers special bonuses as they cope with the pandemic, Reuters reports. Bank of America “said it would be paying an additional $200 per pay period to front-line workers in branches, call centers and operation centers effective immediately and enhanced overtime pay.” It also said its consumer division “has hired 1,700 people in critical support roles so far this month as the industry faces a surge in customer service demand due to concerns about the coronavirus outbreak.”
JPMorgan Chase, which last week said it was closing 1,000 of its roughly 5,000 branches, is giving one-time $1,000 bonuses to employees in branches and call centers. The bank said “full- and part-time staff who have to do their jobs from an office or branch, and who make less than $60,000 a year or are based at a consumer banking branch, are eligible to receive the payments." It also said it was “giving all employees up to five new paid days away from work” and relaxing the dress code for non-branch employees.
Those two banks aren’t the only ones rewarding their employees with extra pay and benefits during the crisis, American Banker reports.
Lake Shore Bancorp in Western New York has reached a "standstill agreement" with the Stilwell Group, which has promised not to force a merger or sale in the next three years.
Swiss banking giant UBS Group received federal approval from the Office of the Comptroller of the Currency to convert its $1.6 trillion-asset UBS Bank USA from a Utah-chartered industrial bank to a national charter.
Early industry reaction to the Federal Reserve's Basel III proposals points to potential capital relief for banks, though stakeholders say the complexity of the changes makes their overall impact unclear.
Financial institutions that delay or fail to take this leap risk losing customers and revenue, said speakers at the inaugural On-Chain Executive Summit.
CISA and Microsoft urge organizations to secure endpoint management systems as threat actors increasingly seek to disrupt operations with wiper malware.
Piermont Bank hired Dennis Day for a new executive role focused on payments; the American Bankers Association announced the global expansion of its widely used Fraud Contact Directory; MC Bankshares moved one step closer to finalizing its sale to an investor group; and more in this week's banking news roundup.
