Facebook faces blowback; Big changes expected at Deutsche Bank

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Fallout
The Group of Seven nations said they will “set up a high-level forum” to examine the possible risks to the financial system from Facebook’s plan to issue its own digital currency. “The G7 working group will also consider how to ensure proper controls against money-laundering. Central banks and the International Monetary Fund will also participate.”

Bank of England Governor Mark Carney said he has an “open mind” to Libra, Facebook’s planned currency, but said it would have to meet the “highest standards of regulation.”

“Facebook’s first big foray into the financial world raised an immediate question: how deeply will its new digital currency shake up traditional financial services?” the Financial Times asks. “Facebook’s vision promises a world where banks and other payment providers are disintermediated by Libra, which would allow instant, near-free international money transfers. If its currency is widely adopted by Facebook’s 2.4 billion users, it could hold considerable sway, even affecting the role of central banks. With the ink barely dry on Facebook’s proposals, bankers, regulators, payments executives, investors and industry experts all said they were busy evaluating the impact, but suggested that there would be many hurdles in Libra’s path.”

Members of the House Financial Services Committee expressed skepticism about Facebook’s plans and want company officials to testify. Committee Chairwoman Maxine Waters urged the company halt its plans until Congress learns more about it. “Given the company’s troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a cryptocurrency until Congress and regulators have the opportunity to examine these issues and take action," she said.

But so far investors in traditional payments companies, such as Visa and Mastercard, aren’t worried that Libra could displace them. “Some analysts said major credit-card companies haven’t seen a dent in their share prices because they could also gain from Libra’s success. Companies such as Visa and Mastercard will likely be involved in influencing the design system. Also, analysts don’t anticipate that cryptocurrencies will materially threaten the existing payment infrastructure that is going to drive growth at credit-card companies.”

“While it’s true that many people still distrust traditional financial institutions following the financial crisis, faith in Facebook is equally challenged, making it an unlikely savior of the unbanked,” writes American Banker technology editor Suleman Din.

“We don't know what Facebook's new Libra currency will actually be used for in the end,” the FT comments. “We do know that, just like the cryptocurrency that it in fact isn't, it's being sold as a way to help the unbanked. And we also know that Libra will not solve the problem of the unbanked.”

Double secret probation?
The White House last February looked into whether President Trump could demote Federal Reserve Chair Jerome Powell, shortly after the president talked about firing him, Bloomberg reported. “Trump’s team conducted the legal analysis and came to a conclusion that has remained closely held within the White House,” the Wall Street Journal says. “It isn’t clear whether Trump directed the legal review,” or what the outcome was. Asked by reporters on Tuesday whether he wants to replace Powell, Trump said, “Well, let’s see what he does.”

Wall Street Journal

Restitution demand
Louisiana’s two senators want Toronto-Dominion Bank to compensate victims of R. Allen Stanford’s 2009 Ponzi scheme, accusing the bank of “aiding and abetting” the $5 billion fraud. “We demand that TD Bank stop its obstructionist conduct, engage in a meaningful effort to put an end to this decade-long debacle and provide restitution to the Stanford victims without further delay,” Republican Sens. John Kennedy and Bill Cassidy said in their letter to TD Bank CEO Greg Braca. “Regulatory intervention should not be necessary for Stanford’s victims to receive the justice they deserve.”

Exodus continues
Two of Deutsche Bank's top New York-based dealmakers, Mark Hantho and John Eydenberg, are in “advanced negotiations” to join Citigroup. “They would be the most prominent departures from the German lender’s U.S. investment-banking operations this year.” On Monday, the FT reported Edward Sankey, Deutsche Bank’s co-head of European equity capital markets and global head of equity syndicate, plans to leave.

Even more senior people may be leaving soon. CEO Christian Sewing “is planning sweeping changes to his top management, considering replacing finance chief James von Moltke and investment banking head Garth Ritchie, as he purges executives who rose under his predecessor.”

Financial Times

More than a Ripple
Shares in MoneyGram more than doubled on Tuesday following news that cryptocurrency and blockchain start-up Ripple agreed to invest up to $50 million in the payments company. “As the payments industry evolves, we are focused on continuing to improve our platform and utilizing the best technology as part of our overall settlement process,” said Alex Holmes, MoneyGram’s chairman and CEO.

Other pursuits
JPMorgan Chase said asset management chief Chris Willcox is retiring and will be replaced by senior executive George Gatch.

Washington Post

Naming names
Transgender and nonbinary MasterCard customers will soon be able to “swap out credit, debit or prepaid cards with their ‘dead name’ with new ones featuring the names they actually use.” Experts say the company’s True Name program is “a first for the financial services industry.” A “dead name” is the birth name of a transgender person that “conflicts with their gender identity.”

Records ruling appealed
President Trump’s attorneys filed a 54-page appeal of U.S. District Judge Edgardo Ramos’ decision last month that cleared the way for Deutsche Bank and Capital One to release his financial records to Congress.

Quotable

“So far, the scale of cryptocurrency hasn’t been big enough to alarm central banks. The size of the user base of Facebook and the sheer size of the company itself is, of course, something we haven’t seen before.” — An official at a eurozone central bank, who added that his bank is “keeping a close eye on” Facebook’s plan to issue its own cryptocurrency

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