Libra members ready to bail?; report predicts big job cuts at banks

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Sorting it out

Credit Suisse said it cleared CEO Tidjane Thiam of involvement in the bank’s bizarre spying scandal, but COO Pierre-Olivier Bouée, who “ordered the surveillance of the bank’s former wealth-management chief, Iqbal Khan, without discussing it with Mr. Thiam or other senior bank officials,” was forced to resign, the Wall Street Journal reports. The bank “also said it found no evidence Mr. Khan made any attempt to poach employees or clients, contrary to suspicions that people close to the bank had described as underpinning the surveillance. He started work at rival UBS Group on Tuesday.”

“It was wrong to order the surveillance,” Urs Rohner, Credit Suisse’s chairman, said at a “hastily arranged” press conference. “The measures taken did not represent our standards.” Wall Street Journal, Financial Times, New York Times

Wall Street Journal

Getting cold feet?

Visa, Mastercard and other key financial partners that signed up to build and maintain Facebook’s cryptocurrency-based Libra payments network “are reconsidering their involvement following backlash from U.S. and European government officials. Wary of attracting regulatory scrutiny, executives of some of Libra’s backers have declined Facebook’s requests to publicly support the project. Their reluctance has Facebook scrambling to keep Libra on track,” the paper says. Members of the group, called the Libra Association, “have been summoned to a meeting in Washington, D.C., on Thursday.”

“Major defections could imperil Libra, Facebook’s audacious attempt to convince consumers to swap their national currencies for a digital coin that could be used to pay for goods and services on the internet. Without a network of financial partners that could help transfer currencies into Libra and global retailers to accept it as a form of payment, Libra’s reach would be limited.”

Chris Ratcliffe/Bloomberg

Running longer

“A lending machine has revved up in response” to consumer demand for seven-year car loans, “making it possible for more Americans to procure a vehicle by spreading the debt over longer periods. Wall Street investors snap up these loans, which are bundled into bonds. Dealers now make more money on the loans their customers take than on the cars they sell.” About a third of loans for new cars in the first half had terms longer than six years, up from less than 10% 10 years ago.

Cleaning house

Swedbank, as part of its effort to clean up alleged money laundering in its Estonian division, said it fired the former CEO and CFO of the unit, who were suspended in June, as well as the head of its private customer division. “The moves were a result of shortcomings that Swedbank identified as part of its ongoing probe into allegations that dirty money, much of it from Russia, flowed through its Estonian division. Swedbank said no criminal activities have been identified as part of the probe.”

His time is done

Paul Donovan, the UBS economist who “sparked a furor in the Chinese securities industry” in June when he referenced a “Chinese pig” in a comment about rising inflation was scheduled to return to work Wednesday following a four-month suspension.

Financial Times

Robot revolution

In the “greatest transfer from labor to capital” the banking industry has ever seen, U.S. banks “will cut more than 200,000 jobs in the next decade as robots and other technology” reduce the need for human workers, according to a 225-page report from Wells Fargo. The job cuts, which “would represent more than 10% of total bank jobs, would be felt most heavily in back offices, branches and call centers, where staff numbers could fall by between 20 and 30%. The job cuts would reverse a largely-unbroken trend of net job creation in the U.S. banking industry.”

But the job reductions will lead to a “golden age of banking efficiency,” according to Michael Mayo, a senior analyst at Wells Fargo Securities.

Window dressing

Bank investment in fintech startups after the financial crisis may have all been a sham, the paper writes. The banks “claimed they were ready to disrupt and encourage innovation. But the reality looked more like a shameless public relations exercise. Nobody seemed to question whether the interests of banks were really aligned with those of start-ups. Or the degree to which the set-up allowed banks to discretely pluck the good ideas and people from the bad without any investment at all. Real innovation in the fintech space is about disruption, and that is rarely aligned with bankers’ agendas.”

Separately, Federal Deposit Insurance Corp. Chairman Jelena McWilliams said “regulators should create a climate for banks and fintech service providers to team up in meeting customers' digital banking demands,” American Banker reports.

Outta there

Vernon Hill is expected to sever ties with Metro Bank, the U.K. challenger bank he founded more than eight years ago, at the end of the year. In July Metro said Hill “would step down as chairman following months of pressure from investors and regulators, but he had been expected to stay on as a non-executive director and president.” But the bank said Wednesday “that if a new chair cannot be found by the end of the year then the bank will appoint an independent non-executive director in an interim capacity.”

Working together

Marcus, Goldman Sachs’ consumer bank, has launched two savings accounts in partnership with Saga, the U.K. firm that caters to selling products to people over 50. In June the two companies agreed to become “long-term savings partners,” with Goldman “keen to expand its retail offering as part of a revenue raising strategy and Saga seeking to increase the competitiveness of its savings products. The partnership will see Marcus take responsibility for customer deposits, while Saga will focus on customer services.”

Elsewhere

Another clue

Changes in the way JPMorgan Chase manages its massive $2.7 trillion balance sheet may have played a role in last month’s turmoil in the short-term repo market, which prompted the Federal Reserve to promise to lend at least $75 billion each day until October 10. “Publicly-filed data shows JPMorgan reduced the cash it has on deposit at the Fed, from which it might have lent, by $158 billion in the year through June, a 57% decline.”

“Although JPMorgan’s moves appear to have been logical responses to interest rate trends and post-crisis banking regulations, which have limited it more than other banks, the data shows its switch accounted for about a third of the drop in all banking reserves at the Fed during the period.”

Quotable

“The banking industry is a slower growing industry than it’s been in the past. Half of the banks’ costs are compensation, there aren’t many other levers to use.” — Michael Mayo, banking analyst at Wells Fargo, predicting that banks will cut 200,000 jobs over the next decade in favor of robots and other technology