Heat's rising on Deutsche Bank; foreign banks get tax relief

Wall Street Journal

More problems
Deutsche Bank, which already has its hands full with scandals in multiple countries, now finds itself in the cross-hairs in the U.S., where two Democrat senators want the Senate Banking Committee to launch a “thorough, detailed bipartisan committee investigation” into the German bank. “The compliance history of this institution raises serious questions about the national security and criminal risks posed by its U.S. operations,” senators Elizabeth Warren of Massachusetts and Chris Van Hollen of Maryland wrote in a letter to Mike Crapo, R-Idaho, the committee’s chairman.

Krisztian Bocsi/Bloomberg

Tax relief for foreign banks
The Treasury Department has proposed rules that would provide relief to foreign banks in dealing with last year’s tax law. “Treasury offered banks relief from the tax on interest payments made to comply with a regulation requiring them to hold long-term debt in reserve. In addition, the tax won’t apply to certain payments foreign banks make from their U.S. subsidiaries to U.S. branches that are technically part of the foreign corporation.”

Giant partnership
BlackRock and Microsoft plan to work together to build technology tools to help workers plan and invest for retirement. The proposed technology platform would “provide digital financial-planning tools and new BlackRock funds offering guaranteed retirement income to employees through their workplace saving plans.” BlackRock, the world’s largest money manager with $6.4 trillion under management, currently has no marketing channel to sell funds directly to retail investors.

Financial Times

No more ‘window dressing’
The Basel Committee wants to make it harder for some international banks to “window-dress” their earnings by “flattering their accounts just before quarterly reporting periods. Supervisors have been concerned for some time that banks can make their balance sheets look better by reporting an overly optimistic leverage ratio … just before quarterly reporting dates,” making them look less risky. The problem is not an issue for American banks, which are required to report daily averages.

Bailing out
Some Wall Street banks are bailing on the leveraged loan market, selling loans “at discounted prices and demanding that borrowers accept less advantageous terms, as they move to protect themselves from rapidly weakening demand in a previously hot corner of the credit market. The development reflects mounting concern from investors about the quality of loans used to finance private equity buyouts, following a series of warnings from central bankers this year.”

New York Times

End of the line?
Does the growing government crackdown on the cybercurrency market “spell the demise of digital currencies and the end of initial coin offerings?” the Times’ White Collar Watch column asks. “For the naysayers of cryptocurrencies and initial coin offerings, this is the anticipated end of a speculative bubble. That does not necessarily mean that this type of investment will disappear, but greater government scrutiny will raise the costs for trading platforms and could effectively eliminate initial coin offerings if they must be registered with the S.E.C.”

Elsewhere

Error reduction
A group of banks, including Goldman Sachs, JPMorgan Chase and Citigroup, have invested $17.5 million in AccessFintech, an Israel-based startup that helps financial firms better deal with business errors. The company’s technology “will help reduce the time and resources needed to resolve these issues by helping financial institutions communicate with each other. It will also reduce the risks associated with the errors.”

Quotable

“What's the point? Just because two lame people get together doesn't make them marathon winners.” — Klaus Nieding from German shareholder lobby group DSW, dismissing the idea of a potential merger between Germany’s two biggest banks, Deutsche Bank and Commerzbank.