German bank merger no sure thing; U.K. banks open shared hub

Receiving Wide Coverage ...

On the hot seat
Wells Fargo CEO Timothy Sloan is scheduled to testify Tuesday before the House Financial Services Committee “newly dominated by Democrats with a decidedly populist tilt," the Wall Street Journal reports. "In the background, nearly every one of the bank’s business lines is under investigation by a government agency, including the Justice Department and the Securities and Exchange Commission. Among the most serious, officials at the Office of the Comptroller of the Currency, one of the bank’s chief regulators, are debating a rare step: whether to force out additional top executives or directors. The OCC has spent so much time dealing with Wells Fargo that it is even considering charging it a special fee.”

“Sloan will tout the scandal-plagued bank’s progress in repaying wrongly charged customers and highlight changes to its risk management,” as well as other steps “the bank has taken to improve its culture and interactions with customers.” And, he will state the bank's commitment "to preventing new problems from arising, despite reports suggesting otherwise."

Sloan's success "will hinge largely on his ability to stay on message in the face of what is expected to be sharp criticism from Democratic lawmakers," American Banker BankThink Editor Victoria Finkle says in this Bankshot.

Wells was one of about 80 investment firms that agreed to refund more than $125 million to clients “who were steered into higher-cost mutual funds without being clearly told about cheaper versions.” Wells agreed to pay back about $17.4 million, “the highest of any company that settled.” By agreeing to pay back clients, “the firms that settled avoided a penalty, marking the biggest example so far of the Securities and Exchange Commission waiving penalties over misconduct.”

ECB gets the assist
“The final straw” that pushed Deutsche Bank and Commerzbank into merger talks “was likely the European Central Bank’s decision last week to quash any hope of imminent rate rises. Anything that could help Deutsche rebuild revenue is turning soft.”

Krisztian Bocsi/Photographer: Krisztian Bocsi/Bl

But a merger between Germany’s two biggest — but wounded — banks is hardly a foregone conclusion, despite support from the government and some large shareholders. Two other big investors are still skeptical, “doubting that such a combination would guarantee higher returns.”

The deal would also need to be approved from the banks’ regulators — including the European Central Bank, the Bundesbank and Germany’s banking supervisor BaFin — and that’s not a given. One bank supervisor told the Financial Times that its biggest concern “is whether a failed integration would leave them with an even bigger problem to sort out.”

Wall Street Journal

The damage has been done
The U.K. Parliament is scheduled to vote Tuesday “on a last-ditch effort to strike a deal on the country’s exit from the European Union.” But regardless of how the vote goes, “London’s pre-eminent role in global finance has been diminished. Some of London’s financiers have already voted, spending billions of dollars shifting staff and assets to outposts across Europe.”

Financial Times

Working together
Lloyds Banking Group, Royal Bank of Scotland and Barclays launched a jointly owned and run “business banking hub” in Birmingham Monday, the first of several expected to be opened in other British cities. The facilities, “which will have longer opening hours than traditional branches, will allow businesses to pay in money and checks and exchange cash.” The mini-branches are sprouting “amid rising concerns that branch closures and rising costs could make it too expensive for small companies to process cash.”

Reinforcements
Financial regulators in northern Europe are calling for “a pan-European law enforcement authority to combat money laundering as they confront a spiraling scandal that has rocked the region’s banks. The main financial regulators in Estonia, Latvia, Lithuania and Sweden told the Financial Times they had been singled out for criticism over the €200 billion dirty money scandal at Danske Bank and smaller controversies at Swedbank and Nordea. But they insisted responsibility did not lie with them alone.”

Falling short
The report that senior female bankers at UBS have had their bonuses reduced after maternity leave “amounts to dismal public relations for a global bank,” the paper’s editorial board intones. “While it appears to affect women employed only in Switzerland, it can only be demoralizing for women employed by UBS throughout the world to know that its home base operates in such a fashion. It is also a reminder of how much further the financial services industry needs to go to achieve genuine equality.”

Elsewhere

Whatever it takes
Banks in Scandinavia are using unusual tactics, including fashion shows with “tattooed models in mustard robes,” to attract young prospective employees. “As financial services have moved online, banks have to battle with tech giants like Google and Amazon, which boast offices with features like massage rooms, to sign up tech-savvy millennials skilled in areas like artificial intelligence and programming.”

“Banks today are not really banks like they were years ago,” said Christian Ronn Osteraas, head of real estate at Danske Bank. “Banks are more and more IT companies, so the fact that we compete for the same talents also means that we have to offer the same or better physical benefits and services.”

Quotable

“Wells Fargo is a better bank than it was three years ago, and we are working every day to become even better.” — CEO Timothy Sloan, in prepared remarks he is expected to deliver Tuesday to the House Financial Services Committee.