Fed toughens bank stress tests; CFPB shuffles fair lending unit

Breaking News
Losses: Deutsche Bank said it lost €2.2 billion ($2.7 billion) in the fourth quarter and posted its third consecutive full-year loss. The figure included a €1.4 billion tax-reform-related charge. But the bank also reported sharp revenue declines and higher-than-expected expenses. Wall Street Journal, Financial Times

The bank was also fined $70 million by the Commodity Futures Trading Commission for manipulating of interest-rate benchmarks. Wall Street Journal, Financial Times

Receiving Wide Coverage
Meet the new boss: The Consumer Financial Protection Bureau’s Office of Fair Lending and Equal Opportunity is being shifted and will be under the direct control of acting Director Mick Mulvaney, “the latest step in a broad review of the bureau’s activities under its new director,” the Wall Street Journal says. “The office, which handled some of the agency’s highest-profile cases, was previously part of the bureau’s division that examines banks and brings enforcement cases.” A CFPB spokesman said the agency will “naturally continue to pursue fair lending enforcement and supervision cases,” and downplayed the change as an “org chart shuffle.” Wall Street Journal, Washington Post, American Banker

The world of payments: The two biggest U.S. payments companies reported earnings on Thursday. Visa beat profit and revenue forecasts. Mastercard also beat revenue expectations with a 20% increase but profit fell after charges for tax reform.

On the flip side, PayPal’s loss of eBay’s business “makes it all the more important that PayPal shows real progress on its future growth drivers,” the Heard on the Street column says. “In particular, investors are excited for the company to start monetizing its Venmo platform by charging merchants when they accept it. If Venmo fails to catch on for actual purchases and remains mainly a consumer-to-consumer platform, shareholder despair will get much more dramatic.”

Adyen, the Dutch payments company that stole the eBay business away from PayPal, is profiled by the Financial Times. The company, which was founded in 2006, is looking to go public later this year. “We are all very clear that this team wants to expand the business,” said founder Pieter van der Does.

China’s Alibaba is taking a direct equity stake in Ant Financial, its payments affiliate. Alibaba will swap its intellectual property rights related to Ant and forgo royalty payments it receives from Ant in exchange for a 33% stake in the payments company. Financial Times, New York Times

Wall Street Journal
Start cramming: The Federal Reserve said big banks will have to show they can survive a “severely adverse” economic downturn in this year’s stress tests, including 10% unemployment, stress in corporate and real-estate lending, and difficult economic conditions in developing Asian countries and Japan. Banks must submit their tests in April, with the results to be announced by the end of June. Several firms are taking the full version of the tests for the first time, including the American units of Barclays, Credit Suisse and UBS.

Financial Times
Bumpy ride: Two of the biggest American subprime auto lenders reported larger-than-expected provisions for loan losses in the fourth quarter. Credit Acceptance more than doubled provisions compared to the year-earlier period, while Santander Consumer’s bad-loan provision was almost 15% higher than some analysts expected.

“The updates, which follow a jump in credit card losses at big banks, raise concerns that some consumers are taking on bigger debt burdens than they can handle in spite of low borrowing costs and unemployment levels,” the paper says. “They also bring to the fore investor anxiety about underwriting standards and competition in the car loans business.”

New York Times
Silver lining: The $47 million penalty meted out earlier this week by the Commodity Futures Trading Commission against Deutsche Bank, HSBC and UBS for “spoofing” could actually “pay big dividends for the banking industry.” That’s because the settlement included an automatic waiver from the Dodd-Frank Act’s “bad actor rule.” While not everyone thinks that’s a good thing, “the change is expected to benefit Wall Street,” the paper says.

“Industry observers said the automatic waiver is one of the latest efforts by the Trump administration to soften regulation of Wall Street, which Republicans and some Democrats believe has gone too far,” the paper says.

Quotable
“It’s very positive for the banks.” — Therese Doherty, an attorney at Mintz Levin, on the recent settlement between three foreign banks and the CFTC on charges of “spoofing.”