Banks wrestle with coronavirus challenges; Swedbank’s AML fine

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Dealing with pandemic issues

"The coronavirus pandemic is forcing U.S. banks to begin closing branches indefinitely, an unprecedented measure that could curb the virus’s spread but rattle customers who expect instant access to their money,” the Wall Street Journal reports. Several banks, like JPMorgan Chase and Capital One, have closed some of their branches while others “are restricting branch access to drive-through lanes and appointments.”

“Banks occupy a unique position,” the paper notes. “They are among the few businesses deemed essential and not subject to government-ordered shutdowns. Yet banks that choose to close must strike a delicate balance — taking measures to keep employees safe while assuring customers they can access their money through a full slate of digital services or at a nearby branch. The greatest risk for banks is how the closures are perceived, industry analysts said.”

"Truist, Key, Fifth Third and PNC became the latest banks to restrict branch access to the drive-through window or appointment only," American Banker reports.

Meanwhile, “the increase in remote working has strained technology resources at the some of the largest banks,” Reuters reports. “Citigroup asked its non-essential workers across North America to hold off on logging into its remote access system until 1 p.m. on Thursday, as it braced for many employees to begin working from home. The move is meant to minimize the time that Europe- and U.S.-based employees are logged in at the same time to prevent the system from being overwhelmed.”

“At Wells Fargo, teams have been asked to start conference calls at odd times like 2:20 p.m. rather than the hour or half hour to avoid clogging its teleconferencing system. The bank’s technology team has also been rushing to secure more laptops and increase its network bandwidth to accommodate more employees working from home.”

Credit card lenders are being hit particularly hard by “fears that the coronavirus will lead to widespread unemployment and a spike in consumer defaults,” the Financial Times says. The stock market's decline has “wiped more than two-thirds from the value of U.S. credit card lenders and left executives contemplating cutting credit limits for some customers. Shares in specialty card lenders Synchrony Financial, Discover Financial and Alliance Data Systems are down 57%, 64% and 74%, respectively, in the last month.”

Several employees at Goldman Sachs’ New York headquarters “are believed to have contracted the novel coronavirus, making it the latest Wall Street bank whose staff have been affected by the pandemic,” Reuters says, noting the bank has not yet confirmed the cases publicly. However, Goldman did announce “that an employee in its investment banking division in Hong Kong was suspected to have the virus and has been in self-isolation since Tuesday.”

Separately, Federal Deposit Insurance Corp. Chairman Jelena McWilliams is urging the Financial Accounting Standards Board to “make delays or exceptions” to its Current Expected Credit Losses, or CECL, rules “to help financial institutions tackle the fallout from the coronavirus pandemic,” the Journal says.

“The economic uncertainty of the pandemic may cause banks to face higher-than-anticipated increases in credit-loss allowances at a time when they should be focused on lending to businesses and consumers, Ms. McWilliams said,” according to the paper.

McWilliams also asked FASB for a "moratorium on the effective date for banks and credit unions that are otherwise required to convert to the standard in January 2023," American Banker reports.

Meanwhile, "The Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency expanded activities eligible for Community Reinvestment Act credit to include actions that support communities affected by the pandemic," American Banker says.

And, the Bank of England has canceled its annual bank stress tests “and put much of its routine supervisory work on hold to allow lenders to focus on the challenges of the coronavirus outbreak," the FT says. The BoE is "responding to a lobbying campaign from the country’s largest banks, which had raised concerns that new accounting rules could result in a huge rise in losses on their loan books as companies and consumers were left unable to repay their debts. The BoE said it was inclined to 'look through' a temporary rise in their losses on loans."

Deutsche Bank said Friday that its ability to meet its financial targets “may be materially adversely affected” by the coronavirus outbreak, Reuters reports. “The warning is the first time that Germany’s largest lender has sounded the alarm on the outbreak, which has upended the bank’s operations by causing it to split teams globally and cancel major events. Deutsche’s shares have fallen to a record low amid a broad market rout.”

AML fine

Swedbank was fined a record SKr4 billion ($400 million) by Sweden’s Financial Supervisory Authority “for serious deficiencies in its anti-money laundering controls and for withholding documents from Swedish and Estonian regulators,” according to the FT. “Our investigation shows that the Swedish management did not efficiently address the risk of money laundering in the Baltics,” the agency’s director general said.

“The record fine and stern words raise the pressure on Sweden’s oldest bank and increase the prospects of large fines from the U.S., where it is also under investigation,” the paper says. Earlier this month Swedbank self-reported that “it had potentially broken U.S. sanctions through 586 transactions totaling $4.8 million.” The bank’s own internal report is due next week.

“Swedbank has failed to uphold the trust of customers, owners and society,” Jens Henriksson, the bank’s president and CEO, said, according to the Journal. “This is troublesome and very serious.”

Elsewhere

Return date

JPMorgan Chase CEO Jamie Dimon’s “recovery from recent heart surgery is going well and the face of the U.S. banking industry could be back to work as soon as mid-April,” Reuters reports. “Dimon has been closely involved in many of the bank’s high-profile decisions during the past few weeks as the coronavirus pandemic roiled global markets, said a source, who requested anonymity because Dimon’s plans have not been formalized.”

Quotable

“We were having several dozen people in our branch lobbies, and we couldn’t control it. We had customers say they didn’t feel safe with that kind of crowd.” — Huntington Bank CEO Stephen Steinour, about the bank’s decision to limit branch office visits by customers

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Branch management Jamie Dimon AML CECL Stress tests Jelena McWilliams
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