Fidelity wins crypto custody charter; HSBC plans restructuring

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Crypto breakthrough

The New York Department of Financial Services has granted Fidelity Investments’ digital-currency business a trust company charter allowing it to provide custody and trading services to institutional and individual investors. The move is “expected to help the financial firm recruit new clients to its fledgling platform for storing and trading bitcoin.”

“The firm’s move into bitcoin custody was seen by digital-currency observers as an important milestone that might persuade more large, professional investment-management firms to participate in a market known for its volatility,” the Wall Street Journal says. The DFS also approved charters or licenses for 23 virtual-currency companies, including Coinbase and Bakkt.

“Safekeeping of crypto assets has been a concern for institutional investors because exchanges have been plagued by outages and hacks,” the Financial Times notes. “Prolific market manipulation and scams in the loosely regulated space have been a deterrent.”

“The custody and trade execution services that we provide are essential building blocks for institutional investors’ continued adoption of digital assets,” said Michael O’Reilly, COO of Fidelity Digital Assets.

Serious failures

The Australia Transaction Reports and Analysis Centre, the country’s financial crime fighting agency, has accused Westpac, Australia’s second largest bank, “of breaching anti-money laundering laws on more than 23 million occasions and failing to adequately monitor suspicious transactions related to potential child exploitation in southeast Asia.” The agency said the bank “failed to report international fund transactions worth more than A$11 billion between 2013 and 2019 in a timely fashion to the regulator, as required by law.”

The charge suggests the “biggest breach of the country’s money laundering and terrorism financing laws in history,” the Wall Street Journal says, adding that “each individual breach could attract a fine of up to $21 million Australian dollars (US$15.7 million).”

Wall Street Journal

Billions and billions

The Federal Housing Finance Agency said Fannie Mae and Freddie Mac will likely need more than the $180 billion in capital to go public estimated by the agency last year. “Fannie currently holds $6.4 billion in capital and Freddie holds $4.8 billion, according to the FHFA, far less than what they will need to eventually exit government control.”

“Tuesday’s move effectively restarts the process for setting heightened capital levels — cash to absorb possible losses — at the companies, with likely timing for a final rule in late 2020 or 2021.”

The FHFA is re-proposing “the entire post-conservatorship capital framework originally put forward in June 2018 under former agency director Mel Watt, and expects to release a revamped plan sometime next year,” American Banker reports.

“A lot still needs to happen” before Fannie and Freddie can return to the private sector, the Journal says. “Keep in mind, these would be very big offerings: likely tens of billions of dollars across the two entities. That is a lot of paper to move, and it will require the buy-in of many big investors.”

Improving compliance

BNP Paribas, which in 2014 agreed to pay a record $9 billion to federal and state authorities in the U.S. for sanctions violations, “has made structural changes to its compliance division — an effort to strengthen the independence of the bank’s compliance function and improve ethical culture. The efforts have included setting compliance as an independent function that reports directly to the chief executive, as well as moving part of the bank’s head office for sanctions compliance — the unit that sets the global sanctions compliance standards for the bank — to New York from Paris.”

“Other banks are looking at our model because they see benefits,” said Eric Young, the chief compliance officer for BNP Paribas Americas.

Financial Times

Everybody hurts

Volksbank Fürstenfeldbruck, a small co-operative bank with €1.8 billion in assets, has become the first German bank to “pass on the cost of negative interest rates to new retail customers with small deposits, in the latest sign of how the European Central Bank’s policy is upending the country’s banking sector.” The bank is imposing a “depositary charge” of 0.5% on instant access savings accounts with deposits of €1 or more. “Although over a fifth of German banks are already passing on the cost of negative interest rates to new retail customers, the pain has so far been confined to those with very large deposits and the first €100,000 has typically been spared.”

“Negative interest rates have now reached the average saver,” said Oliver Maier, the head of an online portal that tracks the terms on instant access savings accounts at German banks.

HSBC restructuring

HSBC is planning to replace Samir Assaf, its long-time head of global banking and markets, as part of a “big restructuring that will result in large-scale job losses at the unit he has led for almost a decade.” He is “is expected to be moved to a non-executive role at the division as part of a series of changes to the group’s management team as interim chief executive Noel Quinn makes his mark on the bank. The executive changes could be announced later this year or in early 2020, before Mr. Quinn unveils a new strategic plan in February to try to revive the bank following years of disappointing returns.”

An eye on Yes

India’s Yes Bank underreported bad loans in its most recent financial year by $457 million, according to the Reserve Bank of India, the country’s central bank, “renewing scrutiny of the lender’s finances as it seeks to raise capital from global investors.”

Where does money come from?

Do banks really create money? The paper explores the question.

Quotable

“I’m used to Wall Street getting pelted. But going after specific individuals ... is that really good? I’m not so sure.” — Former Goldman Sachs CEO Lloyd Blankfein, responding to Sen. Elizabeth Warren’s criticism of him and other prominent billionaires, adding that targeting individuals makes him worry about the “political process in the United States”

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Cryptocurrencies AML GSE reform Compliance Negative rates Layoffs HSBC BNP Paribas
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