Corbat urges caution; Goldman donates masks

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Wall Street Journal

Green light

Banking regulators led by the Federal Deposit Insurance Corp. want banks to “re-enter the business of offering short-term, small-dollar loans to cash strapped-customers in light of the outbreak of the coronavirus," the paper says. "The move marks an effort to revive a riskier lending sector that dried up in the years after the 2008 financial crisis. In encouraging financial firms to move back into this market, regulators say they hope to steer consumers away from more-predatory, payday forms of lending.”

American Banker reports, "The document is short on specific details but does spell out which kinds of products are attractive."

Extra time

U.K. regulators, including the Financial Conduct Authority, which regulates banks, “are giving listed companies and their auditors a bit of relief against the backdrop of the coronavirus, including an extra two months to publish audited annual financial reports and guidance for auditors grappling with new uncertainties,” the paper reports.

“The coronavirus pandemic is causing companies of all types to significantly adjust their business and operations,” the FCA said. “Companies and auditors should be granted time.”

Looking to help

Treasury Secretary Steven Mnuchin has put together a task force to recommend ways to help mortgage servicers who are “bracing for a wave of missed payments starting April 1 as borrowers lose their jobs as a result of the coronavirus epidemic," the paper says. "If homeowners miss payments, the mortgage companies are contractually obligated to continue sending money to investors who buy mortgage bonds as well as tax authorities and insurers.”

“Mr. Mnuchin, speaking during a telephone meeting Thursday of the Financial Stability Oversight Council, said he had asked the task force to offer recommendations by March 30. Mr. Mnuchin chairs the panel, which also includes the heads of the Federal Reserve and Securities and Exchange Commission.”

Financial Times

Tread carefully

Citigroup CEO Michael Corbat said banks need to walk a “fine line” between supporting customers and burdening them with debt they cannot pay, which could endanger lenders and the banking system. “The last thing that we all want to see is  ... our consumers, our small businesses and our big businesses come out of this  ... (with a) precariously bigger or larger position of indebtedness,” Corbat told the paper. “So it’s really  ...  walking that fine line of being as supportive as we can be. But at the same time, not in any way, calling into question the safety and soundness of our institution or of the system.”

Citigroup CEO Michael Corbat
Citigroup CEO Michael Corbat

Stop it

The European Banking Federation, the euro zone’s main industry trade association, in a letter is calling on its members to “stop hoarding capital for dividend payouts and refrain from share buybacks this year so they can lend more to companies and consumers hit by coronavirus.” The letter to Andrea Enria, who chairs the European Central Bank’s supervisory agency, is “likely to result in many of the region’s largest banks either cancelling or delaying plans to return billions of euros of excess capital to investors,” the paper said.

“The move comes after the ECB earlier this month said it would allow banks to operate with lower levels of capital in order to keep credit flowing to the economy during the coronavirus outbreak.”

Housing suspension

In the U.K., the government suspended sales in the country’s housing market after banks expressed concern about the impact of the pandemic on valuations and “concerns about granting credit when the economy is in freefall.”

New York Times

Valuable donation

Goldman Sachs said it has donated 600,000 N95 masks that it “procured in the wake of previous epidemics,” with 400,000 going to hospitals in New York and New Jersey. The bank “is also donating 50,000 of the masks to Britain’s National Health Service.” Leslie Shribman, a spokeswoman for Goldman, “declined to say where the masks were stored and how many masks in total the company had in its stockpile.” The paper says, “for some multinational companies, the masks were part of a preparedness strategy for a variety of disasters.”

Elsewhere

Reprieve

Several large global banks — including Morgan Stanley, Goldman Sachs, Deutsche Bank, HSBC and Citigroup — “are postponing decisions about staff cuts as the coronavirus hits their businesses hard, with executives saying they are unsure how long the outbreak will hurt the economy and worried about being unprepared if business suddenly snaps back,” Reuters reports. “Banks are hesitant to make changes because the future is so uncertain.”

At the same time, Deutsche Bank is “for the first time considering asking its German staff to cut their hours and take government money instead as it tries to navigate the coronavirus crisis," according to the news service. "Short-time work is a form of state aid that allows employers to switch employees to shorter working hours during an economic downturn to keep them on the payroll. It has been widely used by industry, including Germany’s car sector, but not by banks.”

“If Deutsche Bank employs the scheme it would be likely to largely affect those of its staff who work in branches that are temporarily closed, perhaps only several hundred of the bank’s 40,000-strong workforce in Germany.”

Quotable

“Banks will use the capital flexibility recently announced to increase their lending capacities.” — A letter from European banks to the ECB pledging to suspend dividend payouts and share buybacks in order to lend more to companies and consumers

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