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Need to compete: Chinese search engine Baidu is set to spin off part of its financial services unit. The company, to be known as Du Xiaoman Financial, is expected to be sold to a group of investors led by private equity giants TPG and Carlyle Group for $1.9 billion. The deal gives the unit “fresh ammunition to compete in China’s increasingly crowded financial-services space,” the Wall Street Journal comments. The company runs a mobile-wallet service and offers consumer loans and wealth management services. Wall Street Journal, Financial Times

American Banker takes an in-depth look at the mobile payments business in China, where the majority of payments are now made on smartphones.

Wall Street Journal


Regulator roundup: Thomas Hoenig is stepping down Monday as vice chairman of the Federal Deposit Insurance Corp. Hoenig’s term had already expired, so his departure was expected. Hoenig, who “has been a critic of big banks and an advocate for strict capital requirements constraining banks’ borrowing,” and FDIC Chairman Martin Gruenberg “are among the last remaining bank regulators appointed in the Obama era,” the Journal notes. President Trump has already nominated Jelena McWilliams to head the FDIC, so Gruenberg will leave when she is confirmed by the Senate, which is expected to happen shortly. On his way out, Hoenig opposed easing bank capital rules.

FDIC Vice Chairman Thomas Hoenig
FDIC Vice Chairman Thomas Hoenig Bloomberg News

The Comptroller of the Currency is looking at ways to encourage banks to lend more to the poor by amending the Community Reinvestment Act. Joseph Otting is exploring getting rid of tying bank lending to “assessment areas” where their branches or other offices are located, a move that is opposed by community groups. “It isn’t clear whether other regulators will go along with the comptroller’s idea or if the agency will formally propose it,” the paper says.

Share shift: Regional banks are rapidly losing share in the market for bank deposits to their largest counterparts. Last year, 10 of the 22 major regional banks added a net $55 billion in deposits, but that figure was dwarfed by the $118 billion that the three largest banks brought in. Nearly half of the big regionals reported a drop in deposits, compared to only two in 2016.

“The declines could mark the start of an important industry shift where deposits become less plentiful and Main Street banks do more to compete for them,” the paper says, noting the regionals “lack the national footprint of JPMorgan Chase, Bank of America and Wells Fargo, which attract consumers through their ubiquitous branch networks and flashy mobile-banking apps.”

Targeted: Banks and credit card issuers are looking at ways to identify gun purchases, including creating a payments code specifically for firearms dealers, “a move that could be a prelude to restricting such transactions. The discussions are preliminary but could be deeply controversial.”

Odd couple: “Button-down” Switzerland has become ground zero for cybercurrencies, the “no-holds-barred corner of the financial markets.” The country, “as closely tied to its ultrasafe Swiss franc as it is to the Alps, is entranced by volatile digital currencies,” launching four of the 10 largest initial coin offerings last year, the paper reports. “Buildings in Zug and in Zurich, Switzerland’s financial center, are blossoming into crypto-finance hubs. The hope is the country’s banking prowess, low taxes, elite universities and the Swiss brand itself will do for Switzerland what Silicon Valley did for the U.S.”

New York Times


Flying higher: Despite what would appear to be a saturated market, co-branded credit cards that reward users with frequent-flier miles are thriving. For example, Delta Air Lines said recently it generated $3 billion from its American Express-branded card last year and expects to reach $4 billion by 2021. And Amex added a fourth Delta card last year. “What accounts for the continued appeal of the airline credit card?” The paper looks into the question.

Quotable


“I’m horrified by the magnitude of it. They have been systematically lying to the regulators for probably decades about how they treat customers and how they take fees illegally, even when they’re dead.” — Peter Swan, an Australian finance professor, about a growing banking scandal in the country that may send some bankers to jail.

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