BB&T, SunTrust to merge; ECB plans new bank stress test

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Major merger
BB&T said it is buying SunTrust Banks in a deal that it said would create the sixth-largest bank, with about $442 billion in assets. “The deal would also be one of the sector’s largest in recent years.” Wall Street Journal, Financial Times, New York Times, American Banker

Receiving Wide Coverage ...

Payday lenders get reprieve
The Consumer Financial Protection Bureau proposed rescinding an Obama-era regulation that would have required customers of payday lenders to prove they can pay back their loans. The rule, which was scheduled to go into effect in August, will now be postponed until November 2020, as the CFPB proposal goes through a new administrative process.

“The announcement follows years of lobbying by payday and auto-title lenders to block the Obama payday-lending rule,” the Wall Street Journal says. “The industries have said the regulation would wipe out their business by imposing onerous requirements to determine up front the likelihood customers can repay the loan.” But “consumer advocates have said they likely will seek legal action to block the changes.”

“The move is a big win for payday lenders,” according to the Washington Post. “The industry feared the new regulations would force many of them to close their doors.” Wall Street Journal, New York Times, Washington Post, American Banker

Lost in cyberspace?
QuadrigaCX, a Canadian cryptocurrency exchange, “says about $136 million worth of customers’ holdings are stuck in an electronic vault because the company’s founder, and sole employee, died without sharing the password. But two independent researchers say publicly available transaction records suggest the money may be gone, not trapped. They say it appears Quadriga transferred customer funds to other cryptocurrency exchanges, although it isn’t clear what might have happened to the money from there.”

“While other crypto-exchanges have lost their clients’ money, this appears to be the first one that has said it actually lost the keys to its accounts,” the New York Times reports.

Safe at home
Investors in Australian banks believe this week’s Royal Commission report on financial sector misconduct “poses no threat” to the country’s big banks. On Tuesday the combined value of the Big Four banks jumped nearly A$20 billion, “a record single-day increase in the market capitalization of institutions that control three quarters of the banking market. The euphoric reaction from investors and concerns expressed by experts about the conservatism of the report’s recommendations is prompting a debate over whether the inquiry is a missed opportunity for reform.”

Nevertheless, the report has claimed its first two scalps. The CEO and chairman of National Australia Bank, the nation’s largest, announced their resignations Thursday. Financial Times, New York Times

Wall Street Journal

Recast revival
With interest rates moving higher, lenders are seeing more requests for mortgage recasts, a little known process in which “a borrower who makes an additional principal payment asks the bank to re-amortize the loan at the existing interest rate. The result is that while the loan term remains the same, monthly payments are reduced.” Most banks, which make little or no money by recasting, tend to be discreet about it. “Unlike mortgage refinancing, there’s no credit check and the paperwork and fees are nominal.”

Financial Times

Doomsday scenario
The European Central Bank’s financial supervisor plans to launch a “sensitivity analysis” to test how many days banks in the euro zone could last without a fresh injection of liquidity in a crisis. The test, which is scheduled to be completed by June, “would assess how long a bank could continue to last using its available cash and collateral but with no access to funding markets. While rules introduced since the financial crisis require banks to have bigger capital buffers and higher levels of liquid assets, supervisors are concerned that a liquidity drought caused by a market shock could still lead to difficulties in some lenders.”

Quotable

“This proposal essentially sends a message to predatory payday lenders that they may continue to harm vulnerable communities without penalty=. I urge Director Kraninger to rescind this proposal.” — Rep. Maxine Waters, D-Calif., chair of the House Financial Services Committee, on the CFPB’s decision to revisit its payday lending rule.

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