FICO gets tougher on credit scores; Goldman pushes diversity

Receiving Wide Coverage ...

OCC lowers the boom

The Office of the Comptroller of the Currency barred former Wells Fargo CEO John Stumpf “from the banking industry over the firm’s fake-account scandal, an extraordinary sanction for a top executive at a large bank,” the Wall Street Journal says. Stumpf consented to the ban and also agreed to pay $17.5 million. “The firm’s former chief administrative officer and chief risk officer settled similar charges — they paid a combined $3.5 million — and five other former executives, including the former consumer-bank chief, were also charged.”

“The OCC’s actions also show a flexing of regulatory muscle at an agency that hasn’t always been known for throwing its weight around," the paper added. "Since the scandal, though, the regulator has turned up the pressure on Wells Fargo.”

“Carrie Tolstedt, who previously headed the community bank at Wells, was one of five former executives who were charged civilly by the OCC,” the Financial Times says. “The regulator said it was seeking a $25 million civil penalty from Ms. Tolstedt.”

“The settlements were a rare instance of personal consequences for those at the highest echelons of the banking industry,” the New York Times comments. “Even though the biggest American banks paid billions of dollars to settle civil cases stemming from their mortgage activities in the lead-up to the 2008 financial crisis, their chief executives have not given up a penny to federal bank regulators.”

“The regulators continue to pursue civil charges, fines and prohibitions against five other executives for an array of oversight failures and deceptive methods at the bank,” the Washington Post says.

“The OCC alleges that Tolstedt and the four other individuals who face civil charges failed to adequately perform their duties, which contributed to sales misconduct dating back all the way to 2002,” American Banker reports.

Additionally, AB's Kevin Wack delves into "a 100-page notice of charges that alleges a high-level whitewash of widespread misconduct."

About-face

Fair Isaac is making changes to the way it calculates its FICO consumer credit scores that “will likely make it harder for many Americans to get loans,” the Journal reports. The company “will soon start scoring consumers with rising debt levels and those who fall behind on loan payments more harshly. It will also flag certain consumers who sign up for personal loans, a category of unsecured debt that has surged in recent years. The changes will create a bigger gap between consumers deemed to be good and bad credit risks, the company says.”

“The changes are an about-face from recent years, when FICO and credit-reporting companies made changes that helped increase scores for some consumers, such as removing some negative information, including civil judgments, from credit reports,” the paper says.

“Consumers that have been managing their credit well … paying bills on time, keeping their balances in check are likely going to see a gain in score,” David Shellenberger, vice president of product management scores, said, according to the Washington Post.

Diversity requirements

Goldman Sachs “has become the first Wall Street bank to declare it will not take companies public in the U.S. and Europe unless they have at least one ‘diverse’ candidate on their board,” the FT reports. “Starting on July 1 in the U.S. and Europe, we’re not going to take a company public unless there’s at least one diverse board candidate, with a focus on women,” he told CNBC. “And we’re going to move towards 2021 requesting two.”

“Goldman’s move comes amid increased investor scrutiny of board membership, with a particular focus on gender, from shareholder activists and institutional investors adding rules to their voting guidelines,” WaPo adds. “BlackRock has said it expects to see at least two female directors on the companies in its portfolio, while State Street has said it plans to vote against nominating committee members on all-male boards.” Financial Times, New York Times, Washington Post

Top of the heap

JPMorgan Chase CEO Jamie Dimon was paid $31.5 million last year, up 1.6% from a year earlier, “putting him on course to be Wall Street’s best paid bank boss for the fifth year in a row.” According to a bank regulatory filing, Dimon was paid a salary of $1.5 million plus a $5 million cash bonus and “performance share units” valued at around $25 million. “Dimon’s 2019 pay is 236 times the average $133,000 compensation across the company’s almost 257,000 employees.” Wall Street Journal, Financial Times

Wall Street Journal

Dialing up digital

One in 10 central banks, covering about 20% of the world’s population, said they “are likely to offer digital currencies within the next three years,” according to a survey by the Bank for International Settlements. “A year earlier, only one in 20 monetary authorities were considering rolling out digital money in the short term.”

“The rising popularity of electronic payments, and the boom in private cryptocurrencies like bitcoin, has prompted authorities to pay more attention to digital currencies. The new tools could offer faster settlements of payments and the potential to allow people to bank directly with a central bank. They may even offer monetary-policy benefits, if central banks could set rates on accounts that directly affect households, rather than using financial markets to transmit changes to borrowing costs for consumer and corporate loans.”

Financial Times

Squeeze play

Investment bankers at Barclays “are bracing for a double-digit fall in their 2019 bonus pool, as chief executive Jes Staley squeezes pay to ensure the U.K. lender hits its profitability targets amid criticism by an activist investor. While Barclays has been the best-performing investment bank in Europe recently, its highly paid dealmakers and traders are under pressure from Edward Bramson, who has called for swaths of the previously struggling unit to be closed.”

Party hearty

In contrast to their European counterparts, who kept a low profile or skipped the event altogether, “this year was America’s Davos. JPMorgan’s Jamie Dimon, Citibank’s Mike Corbat and Goldman Sachs’s David Solomon were fixtures on the party circuit.”

Quotable

“This was inexcusable. Our customers and you all deserved more from the leadership of this company. We are reviewing today’s filings and will determine what, if any, further action by the company is appropriate.” — Wells Fargo CEO Charles W. Scharf, in a memo to employees on the OCC’s actions against the bank’s former CEO and other former executives, adding that Wells would stop any pending payments to those executives