Fed unveils Volcker 2.0; Santander Consumer may lose a big client

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More troubles: The Federal Reserve and the Federal Deposit Insurance Corp. have added Deutsche Bank's U.S. unit to their list of troubled institutions. The Fed said the unit is in "troubled condition" while the FDIC called it one of its "problem" banks. The Fed's downgrade took place about a year ago but "hasn't been previously made public." Wall Street Journal, Financial Times

Bought: Citizens Financial Group in Providence, R.I., has agreed to buy the assets of Franklin American Mortgage in Franklin, Tenn.

Receiving Wide Coverage ...

New and improved?: The Federal Reserve announced Wednesday what Vice Chair for Supervision Randal Quarles touted as the central bank’s “best first effort at simplifying and tailoring the Volcker rule.” The plan “would loosen compliance requirements for all banks, though it would grant more relief to firms with small trading desks,” the Wall Street Journal says. The proposal “would eliminate a presumption that positions held for fewer than 60 days violate the rule unless bankers prove otherwise — a change that could give traders more freedom.” Other federal bank regulatory agencies are scheduled to announce their own proposals in the coming days.

“One of the most significant changes would hand banks more power by making it easier for them to show they are engaged in trading to help clients, a permitted activity known as market making, rather than doing proprietary trading,” the Financial Times says. “Our goal is to replace overly complex and inefficient requirements with a more streamlined set of requirements,” Fed Chair Jerome H. Powell said.

The New York Times says the proposal grants “a big reprieve” for banks and “opens the door for banks to resume some trading activities restricted as part of the 2010 Dodd-Frank law. The changes would give the largest banks significant freedom to engage in more complicated — and possibly riskier — activities by allowing Wall Street firms to determine which trading they view as permissible under the rule.”

Consumer advocates warned “that even a slight easing of the standards could open the door for the type of risky trading that contributed to the near collapse of the economy a decade ago,” the Washington Post reports.

American Banker offers straight news, key takeaways, and a Bankshot from Editor-in-Chief Rob Blackwell.

Wall Street Journal

King of the hill: Jamie Dimon was once again the top earning American banking executive in 2017, bringing home $28.3 million in 2017. The median pay for 43 CEOs at public financial services companies in the S&P 500 was $12.1 million.

Déjà vu: Italy’s political crisis is forcing European bankers to face “the return of an all too familiar problem: political panic.”

“After years of slowly healing from past crises, European banks have recently had the luxury of turning their focus to boosting profit and shedding bad loans. But the political turmoil in Italy has rekindled fears that the euro’s fragility, and authorities’ failure to unify the region’s disparate banking system, will continue to haunt the industry. If it continues, the uncertainty could delay widely anticipated interest rate rises in Europe, a move that would crimp bank profits,” the paper reports.

Good quarter: Bank of Montreal’s U.S.-based BMO Harris unit reported record revenue and profits for its fiscal second quarter, with earnings rising 46%, helped by lower income tax charges and lower credit loss reserves. The unit accounted for 27% of the bank’s total net income. The performance may whet the bank’s appetite for acquisitions in the U.S.

Going digital: Principal Financial Group said it plans to buy RobustWealth, a New Jersey-based financial technology company that offers automated portfolio rebalancing and other investment options. RobustWealth has about $900 million in customer assets.

Financial Times

We would really miss you: Santander Consumer, the top subprime U.S. auto lender, saw its stock drop by as much as 11% on Wednesday after news reports that Fiat Chrysler, one of its biggest clients, is planning to launch its own captive financing unit. The deal with the automaker “has been critical ballast for Santander Consumer in recent years,” accounting for a third of its loan originations and 30% of its leases last year.

Exodus: At least six employees, including three senior ones, have left Bank of America’s hedge fund services unit “in the wake of a storm over the dismissal” of managing director Omeed Malik, who was fired in January following complaints that he made unwanted advances to female employees. Malik has since filed a $120 million arbitration claim against the bank.


“Cryptocurrency users can get hooked by the volatile fluctuation of prices online which creates a ‘high’ when they buy or trade a winning currency. This can be exciting but also addictive and, like gambling addiction, can be financially disastrous.” — A press release from Castle Craig Hospital in Scotland, which has launched a rehab program to help people addicted to trading digital currencies.

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