Deutsche, UBS discussed alliance; battle over regulation continues
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Any port in a storm
Deutsche Bank and UBS held talks “as recently as mid-June to form an unusual alliance of investment-banking operations,” the Wall Street Journal reports. For Deutsche Bank, “a tie-up was seen as a way to save Germany’s biggest bank from the painful cuts now in motion,” while “UBS has suffered from volatile performance in its investment bank.”
“The talks between Germany and Switzerland’s biggest lenders show how far European lenders are willing to go to address a punishing banking environment,” the paper said. “Hammered by negative interest rates and slowing economic growth, European banks are struggling to compete globally and fend off encroachments from bigger U.S. rivals on their home turf.”
Yet, the next round may go to European banks, the Financial Times says. While Wall Street banks have “enjoyed years of outperformance and near-record share prices … Europe’s globally active banks have faced an unpleasant environment for some time.” But that “will not make U.S. banks more immune to a downturn.”
“Europe’s banks could now be better placed than their U.S rivals for the next downturn,” the paper’s editors say. “Years of unfavorable conditions have arm-twisted most to become more efficient. U.S. banks have, by contrast, enjoyed a more benign domestic market and thrived internationally. Should global activity slump there is a danger that they are more exposed, growing most aggressively at a time of risky lending terms. Europe’s banks have got used to being unloved. Wall Street’s have far further to fall.”
Deutsche Bank CEO, James von Moltke, responding to a BankThink in American Banker, says the bank is “taking our responsibilities seriously as we restore Deutsche Bank to profitability, far from privatizing gains and socializing losses.”
Separately, a federal appeals court panel hearing arguments over Congressional subpoenas issued to Deutsche Bank and Capital One seeking President Trump’s family and business records said the demands “did not necessarily have to be all or nothing.”
“We hear lots of appeals where one side says, ‘We want it all,’ and the other side says, ‘You don’t get any of it,’ but we’re not necessarily limited to those two options,” said Judge Jon O. Newman, one of the three judges on the U.S. Court of Appeals panel.
Also at the hearing, attorneys for the two banks “repeatedly refused” to tell the court whether they have Trump’s tax returns, citing “contractual obligations.”
Wall Street Journal
Man versus machine
“By increasing from $250,000 to $400,000 the value of homes exempt from a human evaluation, federal regulators are moving to allow a majority of U.S. homes to be bought and sold without the involvement of licensed appraisers,” the paper reports. “In doing so, they are opening the door to more appraisal work being performed from afar and by computer models.”
“Proponents of the change, primarily financial institutions and state banking regulators, say that by not having to hire a licensed appraiser, lenders and home buyers will save money and real-estate deals can be completed faster. Appraisers and consumer-advocacy groups that have opposed the change argue that it introduces new risks to the $10.9 trillion market for home loans and that computer models and other technology can’t replicate a trained appraiser’s judgment, human senses and experience.”
The next battle
Bankers may see last week’s victory in easing the Volcker rule “as the first battle in a larger war. Now the fight moves on to capital rules, liquidity requirements, stress tests and the rest. Each round may look like a squabble over details. But that should not obscure how much is at stake.”
American Banker reports, "[T]he agencies aren’t finished revamping the Dodd-Frank Act restrictions on bank trading."
Revolut, the U.K.-based digital bank, has hired three senior executives from Deutsche Bank, ClearBank and rival N26 “in an effort to strengthen its senior team as it attempts to switch from a start-up focused on travel money to a global bank.” The company “named a new treasurer, deputy chief financial officer and director of financial crime risk, the latest in a wave of senior executive appointments … focused on bringing in staff with more experience in traditional banking after critics suggested it was struggling to cope with its rapid growth.”
ING, the largest bank in the Netherlands, “is adding record numbers of customers in Australia after an expansion of its digital-only products and a bruising misconduct inquiry that has tarnished the reputation of local rivals. A growing number of foreign banks are targeting Australia’s A$4.7 trillion (US $3.1 trillion) banking sector, which is dominated by the four big domestic lenders that control about 80% per cent of the market.”
German banks are pushing back against a proposal that would prevent them from passing along negative interest rates to retail deposit customers, charging them for holding their money at the bank. “Legal prohibitions are alien to the system, do not help the customer any further and can ultimately lead to dangerous instability on the financial markets,” the Federal Association of German Banks said.
Can’t get no release
A federal magistrate judge in Seattle ruled that Paige A. Thompson, the woman accused of hacking into Capital One’s customer data, must remain in jail pending her trial. “I have severe concerns that if you are released, you will not appear at your next court hearing,” Judge Michelle L. Peterson said, citing Thompson’s “erratic and bizarre behavior, suicide ideation,” and social media posts threatening to kill herself. Thompson faces more than 10 years in prison if convicted.
“Software is eating real estate. You’re seeing the beginnings of the machines outperforming humans in terms of accuracy.” — Jeremy Sicklick, CEO of HouseCanary, about the use of computers, photos and drones to replace human real estate appraisers