CCARs should go smoothly; SEC nomination expected
Receiving Wide Coverage ...
System (not) processing: Consumers in the U.K. and Europe were unable to use their Visa cards a good part of Friday following a hardware “system failure” that was resolved. “The outage was a blow to Visa, the largest network in Europe,” the Wall Street Journal comments.
“The difficulties highlight one of the potential pitfalls of the increasing shift to a ‘cashless’ society,” the Financial Times says.
Closing the book: Commonwealth Bank of Australia said it will pay $529.5 million (A$700 million) to settle government claims that it broke anti-money-laundering and counter-terrorism laws. “The settlement, which remains subject to court approval, should bring to an end a scandal that caused the early retirement of CBA’s former chief executive, Ian Narev, and was the catalyst behind the calling of a wider public inquiry into Australian banks’ misconduct.” Wall Street Journal, Financial Times
“Australia’s banks have long held a reputation for being among the world’s safest for investors. But a series of scandals over the past year has rocked the country’s top financial institutions,” not just CBA.
Wall Street Journal
Smooth sailing: Don’t expect many surprises from the Federal Reserve’s annual Comprehensive Capital Analysis and Reviews, in which it evaluates how banks manage their balance sheets and whether they can pay dividends or share buybacks.
Down, but not out: Deutsche Bank has chronic problems, to be sure, but it “isn’t teetering on the brink of collapse,” the Heard on the Street column says. Despite last week’s downgrade from Standard & Poor’s, Deutsche “doesn’t have a weak balance sheet” and “is stronger and has more stable funding than at any time in the past decade,” it says.
“Its problem is a vicious spiral of deteriorating profitability that makes the bank less attractive in the eyes of staff and investors — and ultimately clients, too. If it can find a radical course of action, such as selling a valuable business, it could halt this slide. But there are no easy options. Otherwise, it must just continue the long, hard slog to cut costs and restore credibility.”
Next?: President Trump is expected to nominate Elad Roisman, the Senate Banking Committee’s chief counsel, to a seat on the Securities and Exchange Commission. If confirmed, he would succeed Michael Piwowar, who is planning to leave this month.
Disruptive: Switzerland is scheduled to vote June 10 on a referendum that has “a chance to blow up one of the foundational features of global finance: the ability of banks to create money with just a few keystrokes.”
“A vote in favor would transform how banks function and likely cut profits on lending,” the paper says. “All money creation there would have to be done directly by the country’s central bank.”
Thomas Jordan, chairman of the Swiss National Bank, said the Sovereign Money Initiative “would be like throwing grit in the gears of our credit system,” limiting bank’s ability to extend credit.
Slow to heal: The “resurrection” of CajaSur Banco, a small bank controlled by the Spanish Catholic Church that was bailed out eight years ago following the financial crisis, “is testament to the slow-motion banking recovery in much of the eurozone.” The recent turmoil in Italy “shows the strength of Europe’s financial system remains open to question.”
Keep out: Paytm, India’s largest mobile payments network, is feeling the heat from prospective Western competitors, including Amazon, Facebook and Google, that want a piece of a marketplace that Morgan Stanley predicts will reach $1 trillion in volume within a decade. Founder Vijay Shekhar Sharma, India’s youngest billionaire, warned recently on Twitter about foreigners “colonizing our internet.”
Welcome to the club: Stifel Financial, the midsize investment bank based in St. Louis, is making inroads in the “clubby world of London small and mid-cap broking” following its purchase four years ago of U.K. stockbroker Oriel Securities. “While other City brokers are now retrenching and weighing up consolidation, the existence of a big, deep-pocketed parent affords Stifel’s U.K. business enviable security in the feast-or-famine broking industry,” the paper says.
Splitting its forces: Wells Fargo is looking at Paris and Dublin as joint post-Brexit headquarters for its European operations. “If it opts against a single alternative base, Wells would adopt a similar approach as several other banks. Goldman Sachs is dividing the Brexit spoils between Paris and Frankfurt while Bank of America Merrill Lynch chose Paris and Dublin. Such moves reinforce the view that financial services previously based in London will fragment across different European cities, rather than transfer to a sole center.”
New York Times
Partners: “A small but growing number of home buyers” are looking into shared equity, in which private financing companies agree to put up part of the borrower’s downpayment “in exchange for a piece of any appreciation in the home’s value when it is sold. If the home sells at a loss, the company absorbs a share of that, too.” San Francisco-based Unison is the largest such firm in this tiny niche.
Don’t toss the baby … : Pointing out some shortcomings of the Volcker Rule and the need to fix it, Charles W. Calomiris, a professor of finance and economics at the Columbia Business School, says in an op-ed, “The reforms are well crafted, but they don’t do enough to promote efficiency in financial markets.” While regulators must “mitigate the risks of proprietary trading,” they must “understand its value.”
“My view now is the same as it was after the financial crisis — unless top executives are held personally accountable, American families are going to continue to get hurt by corporate misconduct.” — Sen. Elizabeth Warren, D-Mass.