Lenders call for halt on disparate impact; Epstein's Deutsche bankers unmasked

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Earnings

JPMorgan Chase said its second quarter profit fell 51% to $4.69 billion from $9.65 billion a year earlier as it set aside an additional $10.47 billion for loan losses, but per share earnings easily beat analysts’ estimates. Revenue rose 15% to $33 billion.

Wells Fargo: The San Francisco bank swings to first loss in more than a decade.

Citigroup: Profit falls 73% as bank girds for coronavirus economy.

Receiving Wide Coverage ...

Talking digital payments

Bank of England Gov. Andrew Bailey said the bank “is reviewing whether it should create a central bank-backed digital currency. ” Said Bailey at a Monday webinar: “It does have huge implications on the nature of payments and society. I think in a few years’ time, we will be heading toward some sort of digital currency.”

“The BOE is part of a group of major central banks teaming up to assess potentially developing their own digital currencies, acknowledging their role is being challenged by new technologies and private sector initiatives such as Facebook’s Libra,” the Bloomberg article said.

Also on Monday, the Committee on Payments and Market Infrastructures of the Bank for International Settlements released a report on ways to enhance the international payments system, which an op-ed in the Financial Times said “can still take as long as 10 days to transfer money to different jurisdictions. And that transaction can cost up to 10% of the value of the transfer. Cross-border payment systems still use message formats developed 100 years ago for the telex machine.”

“The CPMI report identifies five key areas in which we need to act, including a commitment to a joint public and private sector vision; better global co-ordination of regulation, supervision and oversight arrangements; and much needed improvements to existing payment systems. If endorsed by the G20 finance ministers and governors at their meeting later this week, it offers a real opportunity for cheaper, faster, more reliable and more inclusive cross-border transactions — and the economic and social benefits that will bring around the world.”

Wall Street Journal

Let’s wait

Banks and mortgage lenders, including Bank of America and Quicken Loans, “are urging the Trump administration to scrap a plan to water down an Obama-era regulation aimed at combating discrimination in housing, saying it is inappropriate amid the national reckoning on race.” The so-called disparate impact rule “would make it harder to pursue housing-discrimination cases by raising the burden of proof needed to bring a claim. Lenders were generally supportive of the changes when they were floated last year.”

“ ’Given the recent protests and events, and the recognition of where we are as a country, we would respectfully offer that the time is not right to issue a new rule,’ ” Bank of America Vice Chairman Anne Finucane wrote in a June 29 letter seen by The Wall Street Journal and not previously reported.”

New job

Matthew Larson, Barclays chief financial officer for its Americas and Global Markets businesses, has been named CFO of the investment bank Jefferies Group. He will succeed interim CFO Teresa Gendron, who assumed the position followed the death of former CFO Peg Broadbent, who died of COVID-19 in late March. Larson will join Jeffries on August 24.

SOFR, so good

The Federal Reserve Bank of New York’s preferred replacement for the scandal-plagued Libor interest rate benchmark “has fared well amid the stresses seen in the financial system during the coronavirus pandemic,” New York Fed President John Williams said Monday. “If the pandemic has confirmed one thing about financial benchmarks, it’s the resilience of robust reference rates,” including new ones like the Secured Overnight Financing Rate, or SOFR, Williams said.

Williams “said progress is being made to move away from Libor, adding that it’s time for firms to stop using Libor.” “Let’s not make the existing hole we’re trying to climb out of even deeper,” he said.

Making amends

The Black Lives Matter movement “is reinvigorating a years-long campaign to push some of London’s oldest financial institutions to pay reparations to the descendants of slaves.” The Bank of England, Barclays and Lloyd’s of London insurance market and others “have apologized for or acknowledged links to slavery since the May killing of George Floyd,” but his death “has sparked renewed calls from Caribbean governments and from Black British campaigners descended from slaves for British companies to pay reparations.”

“They say apologizing isn’t enough and are calling for more discussion about reparations. Companies are so far resisting those calls, choosing to focus on improving workplace diversity.”

Financial Times

Questions

Investors thinking of buying into Quicken Loans’ IPO have some serious questions to ask themselves. “How much are you willing to pay to own part of an industry that, when the trouble starts, leans heavily on government support?” the FT asks. “The question is all the more pressing at a moment of considerable political tension and upheaval in the U.S., and with a presidential election that could have implications for monetary policy and lending regulations.”

New York Times

Naming names

When the New York State Department of Financial Services fined Deutsche Bank $150 million last week for its work with the late notorious financier Jeffrey Epstein, “the so-called consent order with the New York agency included no names of the bankers or executives who were implicated; instead, the document is littered with references like RELATIONSHIP MANAGER-1 and EXECUTIVE-2. Yet Deutsche Bank declined to publicly identify any individuals involved — and the authorities didn’t demand it.”

However, “based on descriptions of the employees in the consent order and interviews with current and former Deutsche Bank officials, The New York Times was able to identify nearly every person anonymously described in the order. At least one high-ranking executive remains in her position: Jan Ford, the bank’s head of compliance in the Americas.”

Elsewhere

Bigger buffer

Barclays “told investors on Monday that recent regulatory changes had boosted its core capital, giving the British bank a bigger buffer to absorb any further loan losses during the coronavirus crisis,” Bloomberg reported. “The bank said it expected to report a CET1 capital ratio of 14% in half-year results later this month, up from 13.1% at the end of March and ahead of market expectations. Barclays also said it expected risk-weighted assets to be lower than previously anticipated.”

“The bank said its half-year results would reflect challenging income and impairments in its consumer and corporate business, but strength in its markets income.”

Quotable

“There is broad consensus across the country that now is not the time to issue a regulation that could hinder further progress toward addressing ongoing systemic racism.” — Vince Malta, president of the National Association of Realtors, in a letter to HUD Secretary Ben Carson, urging him to scrap plans to water down the so-called disparate impact rule, which would make it harder to prove housing discrimination.

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