Goldman on the hot seat; lending standards flat or easing

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Dealing with it
Goldman Sachs executives continue to “struggle to contain one of the worst scandals in the bank’s history,” the fraud at Malaysia’s state investment fund. “The best-case scenario for Goldman is that prosecutors accept the Wall Street bank’s argument that Tim Leissner, a former partner and one of its most senior dealmakers in Asia, was a rogue banker. At the other end of the scale sits the nuclear option, in which the DoJ would bring criminal charges against the bank while regulators could even revoke its license.” Leissner is one of two Goldman bankers indicted by U.S. authorities.

Jho Low, the “flamboyant deal fixer” at the center of the fraud, told a court that hiding facts from the bank’s compliance and legal staff to prevent them from blocking deals was “very much in line with its culture.”

“If that is true, Goldman has lost its honor,” John Gapper, the Financial Times' chief business commentator, says. “Even if false, it says little for the bank’s vaunted ‘federation’ — its finance, risk management and legal groups — that he fooled them so easily.”

Malaysian Prime Minister Mahathir Mohamad said Goldman “cheated” the country and said the U.S. has promised to help return the fees the bank earned from the fund. “There is evidence that Goldman Sachs has done things that are wrong,” Mahathir said in an interview on CNBC.

Security
JPMorgan Chase has invested in Inpher, a data security and analytics startup that “can analyze an encrypted dataset without revealing its contents, which could be ‘materially useful’ for the company and its clients.”

“This gives us a technological solution to be able to act on a client’s private data … without them having to worry about the security constraints or giving up all their information to us,” said Samik Chandarana, head of data analytics for the bank’s corporate and investment bank division.

Separately, JPM said it will pay its newly hired branch employees in the Washington, D.C., area at least $18 an hour, well above the District’s $13.25 minimum wage. “We think it’s important to pay people fairly, and we think that will allow us to attract top talent and retain top talent,” said Peter Scher, chairman of the bank’s mid-Atlantic region. The bank also said it is committed to promoting at least 40% of its entry-level workers.

Wall Street Journal

Steady as she goes
While most U.S. banks left their business lending standards unchanged during the third quarter, those that did change were more likely to ease them than tighten them, according to the Federal Reserve’s most recent survey of senior loan officers.

More disclosure
The Securities and Exchange Commission is telling companies to increase their disclosure of possible risks from cybersecurity, Brexit and the phase out of the London interbank offered rate. The agency wants companies to align their disclosure policies with the cybersecurity disclosure guidelines it announced earlier this year. “That means including in corporate filings discussions of board risk oversight, disclosure controls and procedures, and insider trading policies as they relate to cybersecurity.”

The right stuff
Wells Fargo’s chief administrative officer Hope Hardison was placed on leave last month following a “rare rebuke” from the Controller of the Currency for oversight failures. Her “swift comedown signals that the gulf between the embattled bank and its government overseers is widening.” The paper adds, "the bank has struggled to convince regulators — the Office of the Comptroller of the Currency and the Federal Reserve, most prominently — that it has the right people in place to clean up the mess."

Financial Times

Getting better
AllianceBernstein said its virtual bond trading assistant “Abbie” can now recommend junk bonds to its fixed-income fund managers. The firm said it hopes Abbie will eventually “be able to scan the entire U.S. bond market for suggestions, and learn from the asset manager’s human traders to gradually improve its suggestions to be more dynamic and fine-tuned.”

Quotable

“It looks like the tip of the iceberg. The problem is far bigger than has been reported ... If this is properly investigated, and the money followed all the way to the end, it all went to large, multinational Western financial institutions and either the U.S. government or other authorities have the ability to track down every transfer and any account.” — Stephen Kohn, the lawyer for Danske Bank whistleblower Howard Wilkinson, on the scope of the money laundering scandal.

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