Goldman unbuttons its collar; PACE loan rules coming

Receiving Wide Coverage ...

Kicking off the white shoes
Goldman Sachs said it is relaxing its “stuffy dress code in favor of a ‘flexible’ approach likely to find favor with the millennials the company is trying to hire. Goldman’s new chief executive David Solomon, whose penchant for weekend DJ-ing already stands to put him in good stead with the firm’s younger workforce, announced the move in a memo on Tuesday.”

The move was “once considered unimaginable for the Wall Street firm’s leagues of monk-shoed partners and bankers in bespoke suits. Historically known as a white-shoe investment bank, Goldman Sachs traditionally required formal business attire. But since 2017, the bank began relaxing its dress code for employees in the technology division and other new digital businesses. This created a divide in the workforce as clear as denim versus pinstripes.”

To the rescue
The “American with the toughest job in finance” is Cerberus Capital president Matt Zames, according to the Wall Street Journal. Zames, who “helped steer JPMorgan Chase through the ‘London Whale’ trading debacle and was considered a possible successor to its chief, James Dimon,” “now has another colossal mess to help clean up” — Deutsche Bank, “one of the global banking industry’s biggest basket cases.”

“If Mr. Zames succeeds, he’d not only be helping to rescue Deutsche Bank from a years long slide. He’d also be salvaging a soured bet by Cerberus itself, which in 2017 disclosed a roughly 3% stake in the bank. The investment was then valued at about $1.1 billion. It’s worth about half that now.”

“The momentum towards a merger of Deutsche Bank and domestic German rival Commerzbank looks increasingly unstoppable,” but “given the operational weakness of both banks, and a challenging home market, a deal looks unlikely to be transformative, either for customers or shareholders. Aside from some obvious savings — from closing branches and eliminating jobs — the deal’s protagonists appear motivated by a desire to cut their losses, reputationally or in hard-invested cash.”

Wall Street Journal

Work in progress
Wells Fargo named Maria Teresa Tejada as its chief strategic enterprise risk officer, “the latest move by the embattled lender to revamp its risk management division.” Tejada, who worked at KeyCorp the past five years after 16 years at Goldman Sachs, “will oversee risks to Wells Fargo’s business lines, corporate functions and its strategic priorities. She also will direct enterprise risk programs and risk reporting and oversee strategic risk and reputation risk.”

Change of PACE
“Following a rare collective push from bipartisan lawmakers, banking industry groups and consumer advocates for a new regulation,” the Consumer Financial Protection Bureau is preparing to crack down on lenders who make Property Assessed Clean Energy, or PACE, loans. Under the new rule, which the CFPB is taking public comment on, private lenders in the government-backed program could face the same requirements as mortgage lenders. “PACE loans have grown rapidly in recent years, allowing hundreds of thousands of homeowners to finance energy-saving projects — such as solar panels, window insulation and air-conditioning units — without initial payments. But with their lenders facing few restrictions, the number of buyers facing difficulty making repayments and complaining about misunderstanding loan terms have also multiplied, leading critics to caution the loans could bring another debt crisis.”

Full speed ahead
Switzerland’s central bank “defended its issuance of one-thousand-franc ($999) notes, launching a new series when other countries are scaling back big-value bank notes due to worries that they make life easier for criminals.”

“We have no indications at present that high denomination bank notes, or in particular the thousand franc bill, is more risk prone to use for criminal purposes,” said Fritz Zurbrügg, the Swiss National Bank’s vice chairman.

Back on the agenda
The Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and the Federal Reserve “are discussing reviving a proposal that would require big banks to defer some compensation for executives and to take back more of their bonuses if losses pile up at a firm.” The rules, which are required by Dodd-Frank, were “twice proposed during the Obama administration” but “weren’t completed earlier in part because of industry pushback.”

Financial Times

Now it’s Austria’s turn
The Nordic money-laundering scandal moved south on Tuesday, this time to Austria, “after a prominent Kremlin critic filed a complaint urging Vienna prosecutors to investigate $967 million of suspicious money flows from Danske Bank to Raiffeisen [Bank] and other lenders in the country. Bill Browder, an anti-money-laundering activist and investor, said Austrian banks had for years ignored red flags and enabled Russian criminals to launder funds abroad, according to documents sent to the Vienna Public Prosecutor’s Office and seen by the Financial Times.”

“The entire Nordic-Baltic dirty money scandal … is the perfect illustration for how inadequate the prevailing thinking on money laundering is.” It “demonstrates how these supposedly whiter-than-white countries are an essential part of the alleged corruption. … The money certainly tends to originate in a traditionally corrupt country with all the standard signs of rampant criminality, poor legal systems and dodgy authorities. But, in order to be laundered, the money has to pass through western countries and often many of them before coming out clean.”

"Money launderers are increasingly taking a back door into banking — through social media platforms, online retailers, games, apps and the sharing economy, a former Facebook executive warns," American Banker reports.

Elsewhere

Tightening the loophole
The Federal Reserve is considering tightening “what critics say is a loophole that has allowed overseas lenders to shield assets from the toughest U.S. bank rules. The changes being discussed could be a blow for lenders such as Deutsche Bank, Credit Suisse and UBS, which have for years held billions of dollars in assets, such as corporate loans, at their New York branches.”

Conspiracy alleged
Bank of America and Royal Bank of Scotland are being sued by American investors for allegedly conspiring with six other banks to rig prices in the $9.4 trillion European government bond market. The suit, which was filed in U.S. District Court in New Haven, Connecticut, follows “a January 31 announcement by the European Union's antitrust authority accusing the eight banks of being part of a cartel to distort bond prices from 2007 to 2012.”

It's over
JPMorgan Chase said it will “no longer bank the private prison industry” following protests over Trump administration immigration policies. American Banker reports, "JPMorgan Chase has been criticized for lending to Geo Group Inc. and CoreCivic Inc., which run facilities that have held immigrant families."

Quotable

“Of course, casual dress is not appropriate every day and for every interaction and we trust you will consistently exercise good judgment in this regard. All of us know what is and is not appropriate for the workplace.” — Goldman Sachs announcing its new corporate dress code.