Living wills approved for four foreign banks; Wells looks overseas

Editor's note: Morning Scan will publish next on Jan. 2, 2019. Happy New Year from all of us at American Banker and SourceMedia.

Receiving Wide Coverage ...

Collusion
The European Commission said four major international banks — believed to be Deutsche Bank, Credit Suisse, Crédit Agricole and one other — colluded to manipulate dollar-denominated supra-sovereign, sovereign and agency bonds, known as SSA, which are issued by the World Bank and European government agencies. If found guilty, the banks could face a fine of up to 10% of their annual global revenue. The investigation, which began nearly three years ago, “exposed a culture of back scratching and crude banter between traders carrying out customer orders and stained the reputations of some of the world’s largest banks,” the Wall Street Journal says. Wall Street Journal, Financial Times

Interestingly, two of those banks — Deutsche Bank and Credit Suisse — had their “living wills” approved by the Federal Reserve and Federal Deposit Insurance Corp. Barclays and UBS also earned approval. However, the regulators said the banks’ plans all “had shortcomings,” which they have until July 1, 2020, to address. “Thursday’s move marks the latest regulatory hurdle for Deutsche Bank, which has faced a string of allegations and costly legal settlements tied to failures to prevent money laundering and other banking violations. The firm, in a written statement, said it was pleased U.S. regulators found no deficiencies with its plan and said it would address the feedback it received from the agencies,” the Journal says.

Wall Street Journal

Cut off
HSBC and Standard Chartered said they won't do new business with Huawei Technologies, the controversial Chinese company that has been accused of breaking international sanctions by dealing with Iran and other rogue countries. Meanwhile, Citigroup continues to provide Huawei with day-to-day banking services and is monitoring developments. The moves by the banks limits the company's access to the global financial system.

Financial Times

How we did it
One of the 10 former Danske Bank employees arrested by Estonian prosecutors this week co-authored an internal bank memo that “provides one of the clearest descriptions of the scale and tactics behind the €200 billion of money from Russia that flowed through Danske’s Estonian branch between 2007 and 2015.” Juri Kidjajev, one of the authors, the former head of international and private banking at Danske’s Estonian branch, “was detained on suspicion of having knowingly enabled money laundering and is the highest-ranking employee among the ten.” The other co-author of the memo was Howard Wilkinson, the whistleblower who exposed the scandal.

Danske Bank “capped a miserable 2018” Thursday by issuing its second profit warning since September. "Denmark’s biggest bank said late on Thursday that it now expected net profit to be about DKr15bn ($2.3bn) this year, down from its previous forecast of DKr16bn-DKr17bn," the paper reports.

Not nearly enough
Malaysia’s finance minister wants Goldman Sachs to pay $7.5 billion in reparations for its role in the 1MDB fund scandal. “The sum of $7.5 billion is the highest reparations target so far demanded by Malaysia” and well above the $1.8 billion the bank had earlier set aside to cover any potential charges.

Elsewhere

Switcheroo
The U.S. Department of Labor said Wells Fargo & Co. has been hiring workers overseas after laying off thousands of American workers. The bank, the largest bank employer in the U.S. with about 262,000 workers, said in September that it plans to reduced its total headcount by up to 10%, or 26,000 workers

Patrick T. Fallon/Bloomberg

Quotable

“Their figure is $1.8 billion. Ours is $7.5 billion.” — Malaysian finance minister Lim Guan Eng on what he wants Goldman Sachs to pay for its role in the 1MDB fund scandal, compared to what the bank has set aside to cover it.