Experian offers help to borrowers; Goldman scouts Europe

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The opening shot

The proposal by German finance minister Olaf Scholz “to open the door to a common reinsurance scheme for eurozone bank deposits — something that is seen as key to strengthening Europe’s banks and which Germany has long opposed — will inevitably generate further political battles,” the Financial Times reports. “As finance ministers prepared to discuss Mr. Scholz’s reform proposals at meetings in Brussels on Thursday, officials warned that much of his blueprint would prove highly contentious, not just in other capitals but in Berlin as well.”

“The European Central Bank and other European authorities have long called for the creation of an EU scheme to protect savers, which they say would foster confidence and help to reduce the fragmentation of the zone’s banking market," the paper says. "Yet the project has been frustrated by opposition from Germany and other hawkish members of the currency bloc, which are worried that it would place them on the hook for covering the costs of bank failures elsewhere.”

“The Scholz plan is a good starting point,” the paper says in an editorial. “Banking union is not just essential for financial stability but for Europe’s economic sovereignty. He makes a constructive approach. Other capitals should engage with it — and improve it.”

“Supporters of the idea claim it would make the eurozone’s banks and its governments more resilient to economic shocks,” the Wall Street Journal says, but notes that “Scholz, who represents the Social Democratic Party, needs approval from the senior coalition partner, German Chancellor Angela Merkel’s conservatives, to move forward. The conservatives have traditionally been more cautious about pooling risks and liabilities among eurozone member states.” Indeed, “Merkel’s spokesman, Steffen Seibert, appeared to distance himself from Mr. Scholz’s proposal on Wednesday.”

Wall Street Journal

Giving borrowers a Lift

Experian is launching a credit score that will “factor in consumers’ rent payments and professional licenses to help them get approved for loans.” Called Lift, the new score “can give borrowers a boost if they handle payday loans responsibly or are licensed as hairdressers, real-estate professionals or in other jobs. Those data sets aren’t typically factored into traditional credit reports.”

“Experian’s new score is the latest change aimed at helping lenders make more loans to consumers with no or limited borrowing histories. Proponents of the new lending strategy say the changes signal lenders’ confidence in the economy and their belief that many consumers are judged too harshly by the traditional credit reporting and scoring systems. Critics question whether the moves are dressing up risky borrowers to look like safer bets than they actually are and whether this could lead to higher loan losses when unemployment begins to rise.”

Financial Times

Deeper dive

Wirecard, under scrutiny for alleged questionable accounting practices, “revealed on Wednesday that a special audit by KPMG will be wider-ranging than previously announced, examining accusations from short-sellers about the German payment company’s lending activities in Brazil and Turkey. The company, which also faces an ongoing criminal inquiry in Singapore into its accounting at several subsidiaries in Asia and the Pacific, last month said it had hired KPMG to examine questions over its accounting practices that were raised by whistleblowers. The FT has reported suspicions that hundreds of millions of euros in sales and profits at Wirecard businesses in Dubai and Dublin were fraudulent, raising questions about the oversight provided by Wirecard’s longstanding audit firm EY.”

Expanding its base

As it “strains to improve its persistently weak profitability,” Goldman Sachs “is looking beyond its traditional blue-chip customers.” Among its smaller targets: “the 900 or so Mittelstand companies that make up Germany’s corporate heartland [that] used to be too small to interest Goldman’s investment bankers.” Those companies are now mostly clients of Deutsche Bank and Commerzbank.

“Expansion in the U.S., where Goldman has deployed extra bankers in second-tier cities such as Atlanta and Dallas, attracted attention when the drive was announced in April, but the bank has also quietly built up a 40-strong team charged with winning business from middle-market companies on the other side of the Atlantic.”

Elsewhere

Fee woe

Bank of America’s Merrill Lynch unit and Raymond James Financial will pay a combined $12 million in restitution “to customers who incurred excessive fees on investments” in college savings plans. Two units of Raymond James will pay a total just over $8 million, while Merrill will pay about $4 million. The Financial Industry Regulatory Authority said “supervisory failures” at the two firms caused customers, “especially those with young children many years away from college, to incur higher fees than they should have.”

1MDB trial date

Former Goldman Sachs banker Roger Ng will go on trial in Malaysia next April “for allegedly abetting the sale of $6.5 billion in bonds tied to troubled state fund 1Malaysia Development Berhad (1MDB).” Malaysian prosecutors say Goldman Sachs generated about $600 million in fees for its work with 1MDB and that “Ng, along with Tim Leissner, a former partner at Goldman Sachs in Asia, received large bonuses in connection with that revenue.” Ng has pleaded not guilty to the charges in Malaysia as well as to U.S. charges of money laundering and bribing government officials in Malaysia and Abu Dhabi.

Quotable

“They don’t let me have that kind of authority to send money.” — Bank of America CEO Brian Moynihan, demonstrating the bank’s Apple Watch app, which can complete $500 million payments for corporate clients

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Credit scores Crime and misconduct Investment banking Client acquisition Penalties and fines Student loans Goldman Sachs Experian Wirecard
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