Goldman to curb commodities trading; activist turns up heat on Barclays

Receiving Wide Coverage ...

Ready to rumble
Activist investor Edward Bramson has submitted a resolution to Barclays’ shareholders to give him a seat on the bank’s board, “triggering what is likely to be a proxy fight between Mr. Bramson and Barclays management and board of directors,” which is expected to recommend a "no" vote at its annual meeting in May. “Mr. Bramson wants Barclays to shrink its investment bank, among other measures. That puts him in direct conflict with Barclays Chief Executive Jes Staley, who has sought to make Barclays a smaller but powerful rival to the American investment banks that dominate U.K. and European markets.”

The action by Bramson, “one of Britain’s most successful activist investors,” the Financial Times says, “fires the starting gun on one of the U.K.’s biggest ever proxy battles.”

Wall Street Journal

New rules
The Federal Reserve announced some changes to its bank stress tests. Banks with more than $250 billion in assets will now need to demonstrate they can withstand a jump in the unemployment rate to 10%, plus stress in corporate and commercial real estate lending. Test submissions are due in April, with the results announced by the end of June. The Fed also said it is ready to publish how its models would treat certain loans under stress, “giving banks a better idea of their chances at passing or failing,” as part of its plan to increase transparency. The changes would also exempt most regional banks from the exercise.

Next on the list ...
The Senate Banking Committee is expected to open hearings next week into President Trump’s nominee to head the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac. Mark Calabria, currently chief economist to Vice President Mike Pence, has been a frequent critic of the two mortgage companies. “If confirmed, Mr. Calabria would play a key role in shaping the Trump administration’s efforts to end the decadelong conservatorship of Fannie and Freddie, … Congress’s last major to-do item in the wake of the crisis.”

What have you done for me lately?
Goldman Sachs is planning to reduce its commodities trading business, “once a huge moneymaker and training ground for a generation of executives including former chief Lloyd Blankfein,” but whose “dwindling profits don’t justify its costs. By taking a knife to the business, [CEO David] Solomon is sending a message down the ranks that nothing is sacred. Goldman has been a major player in commodities since its 1981 takeover of J. Aron & Co., a coffee and metals trader. Wildly profitable in the 1990s and early 2000s, J. Aron produced a bloodline of executives who would later run the firm, including Mr. Blankfein and Gary Cohn.”

David Solomon
David Solomon, co-president and co-chief operating officer of Goldman Sachs Group Inc., speaks during a Bloomberg Television interview at the Goldman Sachs Technology and Internet Conference in San Francisco, California, U.S., on Wednesday, Feb. 14, 2018. Solomon discussed M&A activity, tax reform and the recent market volatility. Photographer: David Paul Morris/Bloomberg

Financial Times

Wider at the top
The gender pay gap at U.K. financial services companies is widest at the highest levels. According to research, “the mean gender pay gap at banks and building societies is 35% and 52% for bonuses.” Moreover, the “average gap for the 10% of lowest paid workers in the sector was 14%, but in the top 10 per cent it was 59%.”

Raisin rising
German fintech company Raisin, which counts PayPal as one of its investors, has raised $114 million in its latest investment round, “one of the largest fundraisings to date in Europe’s emerging ‘wealth tech’ space.” Raisin enables customers to move their money to banks in different countries to capitalize on the highest interest rates.

Elsewhere

Just relax
Canada's Office of the Superintendent of Financial Institutions indicated that it may be more flexible in its bank stress tests after coming under “increasing pressure from banks and mortgage industry lobbyists to relax the requirements of the test.” Last year the regulator required banks to test the ability of mortgage borrowers to repay their loans if interest rates rose by 200 basis points above their contracted rate. But since then housing market has cooled.

HSBC layoffs
HSBC is preparing to lay off “dozens” of people in its global banking and markets business, Reuters reports. “The cuts follow several weeks of performance reviews and planning for 2019 by the bank’s senior management team, which was recently joined by former Royal Bank of Scotland executive Ewen Stevenson as its new chief financial officer.”

Quotable

“The hypothetical scenario features the largest unemployment rate change to date. We are confident this scenario will effectively test the resiliency of the nation’s largest banks.” — Randal Quarles, the Fed’s vice chairman for supervision, announcing changes to bank stress tests.

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Stress tests GSEs GSE reform Commodities Goldman Sachs
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