Fed, OCC to propose easing Volcker rule; Visa's fintech interest
Receiving Wide Coverage ...
Credit Suisse CEO Tidjane Thiam “used his new Instagram account to deny he sought out negative information about an employee at the bank,” calling Swiss media reports about the affair “entirely false and defamatory,” the Wall Street Journal reports. On Sunday, a Swiss newspaper said Thiam “asked Iqbal Khan, Credit Suisse’s former head of international wealth management, to find damaging information about former Europe private banking head Claudio de Sanctis to suppress Mr. de Sanctis’s rise within the bank. The report, which was also picked up by other Swiss media, said the alleged request led Mr. Khan to resent and feel bullied by Mr. Thiam.”
Khan, who later joined rival UBS, accused Credit Suisse of spying on him when he was preparing to defect. Credit Suisse’s former chief operating officer, Pierre-Olivier Bouée, took the fall for that escapade, which Thiam denies knowing about. Since then, at least one other former Credit Suisse executive says they were spied upon as well.
Meanwhile, “Switzerland’s market supervisor is scrutinizing Credit Suisse’s oversight of Thiam and his top lieutenants as part of a probe into corporate espionage,” Reuters reports. “FINMA is examining whether management control failures led to Switzerland’s second-largest bank snooping on two former executives. Depending on the outcome of the investigation, FINMA could order Credit Suisse to overhaul its leadership, including requesting the resignation of any executive or board member if it concluded they failed to act in a ‘fit and proper’ manner.”
“The stakes are high for both parties. Credit Suisse is battling competitive headwinds and FINMA is tasked with protecting the reputation of Switzerland’s multi-trillion-dollar banking industry, the world’s biggest center for offshore wealth.”
Wall Street Journal
Cutting back on Volcker
The Federal Reserve and the Office of the Comptroller of the Currency “are set to propose removing the 3% limit on the stake banks can own in venture funds they offer to their clients” as part of a plan to ease the Volcker rule. However, “the limit on banks’ stakes in hedge funds and private-equity funds is expected to remain in place,” the paper says.
“The move to exclude venture funds from the ownership cap was a priority of the venture-capital industry as well as some large banks, including Goldman Sachs. Supporters of the change point to statements from former Sen. Christopher Dodd, D-Conn., a namesake of the 2010 Dodd-Frank law, who has said venture-capital funds weren’t intended to be caught up in the Volcker restrictions. Advocates also say banks should be able to invest more of their own money in venture funds since they are already allowed to invest directly in startups.”
Feeling the thorns
Royal Bank of Scotland’s CEO Alison Rose is scheduled to “outline her vision for the bank on February 14” — Valentine’s Day — “but it won’t read like a love letter,” the paper says, noting, “the Sunday papers have primed staff to expect up to 3,700 job cuts, or 6% of the total.”
“Rose — an RBS lifer whose spectacles seem anything but rose-tinted — has already spoken of the bank’s unnecessary complexity and ‘tough choices.’ RBS has plenty of surplus capital to cover the costs of restructuring, which may be to the good for investors in the long term," the paper notes. "However, it will come at the expense of their short-term returns through share buybacks or dividends. Bank investors, including the taxpayers who still own 62% of RBS, should brace themselves for tough love from the unflowery Ms. Rose on February 14.”
Separately, a U.K. property developer who sued RBS after it seized property he put up as collateral for a £75 million loan in 2006 he failed to repay, has lost his case. The developer, Oliver Morley, sued the bank claiming that it put “unlawful and illegitimate pressure” on him to transfer the property — which included “South African mining investments, property, cars, a yacht and a jet” — to the bank when the loan came due in 2009. The High Court judge ruled that RBS “was not at fault and had not intimidated the borrower or subjected him to economic duress.”
The shoemaker's children ...
How’s this for irony? The U.K.’s Financial Conduct Authority, “scourge of wrongdoing in the City of London,” has been fined £2,000 by The Pensions Regulator for failing to provide enough detail on how well its employee pension is governed. “The FCA pension plan did not comply with the law because it did not include all of the information that it should have,” the TPR said. The penalty was the maximum fine allowed.
Missing the mark
“Underlining the continuing fragility of Europe’s banking sector,” the European Central Bank said six eurozone banks “have fallen below capital requirements and been told to take action to fix the shortfalls. The number of banks falling short of their main capital requirements in the eurozone has increased from only one last year, illustrating how the sector remains under pressure from ultra-low interest rates, inefficient cost structures and fines for past misconduct,” the paper reports.
“An assessment of business models showed that most significant institutions’ earnings are below their cost of capital,” the ECB said. “This hampers their capacity to organically generate capital and to issue new equity.”
Eye on fintech
Visa, fresh off its $5.3 billion purchase of Plaid, is investing in another fintech startup. “Currencycloud, which powers cross-border payments for a number of popular finance apps, has raised $80 million in a funding round backed by Visa,” CNBC reported. “Based in the U.K., Currencycloud sells payment software for banks and fintech firms to process their international transactions. Though not as well-known as consumer-focused peers like Monzo and Revolut, the company provides some of the crucial plumbing in the background for such apps to operate.”
“Worries about a worldwide slowdown mean people will buy Treasurys, and when people buy Treasurys, interest rates go down. Lower long-term rates translate to lower earnings for the banks, which is why they’ve been coming down so hard.” — Jim Cramer, host of CNBC’s Mad Money program, on why bank stocks have turned negative in the past week or so after big gains last year