More Wells Fargo clawbacks; blockchain hype tempered
Receiving Wide Coverage ...
The Claw returns: Wells Fargo's board said it clawed back an additional $75 million of compensation from former CEO John Stumpf and former retail bank chief Carrie Tolstedt and released a scathing report on the bank's phony accounts scandal. The 113-page report, which was compiled by the law firm Shearman & Sterling, included interviews with 100 current and former employees and reviewed 35 million documents. The board said it held back the additional money from Stumpf and Tolstedt because it felt it had been misled about how long the sales abuses were going on and didn't know that 5,300 employees had been fired over a five-year period until the news became public knowledge, when the bank was fined $185 million for the abuses.
"The board's results cap a six-month independent investigation that has not only rocked the country's third largest bank by assets but also the broader banking industry, with dozens of firms examining their own sales practices at the behest of regulators," the Wall Street Journal commented. Wall Street Journal; Financial Times here, here and here; New York Times here and here; Washington Post; American Banker here and here.
Among the revelations disclosed in the report was this one from Page 39: One "branch manager had a teenage daughter with 24 accounts, an adult daughter with 18 accounts, a husband with 21 accounts, a brother with 14 accounts and a father with 4 accounts."
Wall Street Journal
Lending volume down: Commercial real estate mortgage volume fell 3% last year to $491 billion, according to the Mortgage Bankers Association. Most of the drop happened in the fourth quarter, when volume fell 7% compared to the year earlier period.
Overall loan growth has slowed. Total loans and leases extended by commercial banks rose 3.8% compared to a year earlier as of March 29, compared to 6.4% growth in all of 2016 and the 7.6% pace in late October, according to the Federal Reserve.
Cash is still king: With more people using credit and debit cards and digital payment systems to pay for things, you would think that there would be fewer bills and coins in circulation. Not so. In fact, hard currency as a percentage of U.S. GDP is now at 8.6%, the highest level since the early 1950s. Similar trends are going on in other developed countries.
"The most likely reason for the cash paradox, analysts say: a thriving global underground economy of tax evasion, organized crime and terrorism financing," the Journal reports. "Digital payments may be faster and more efficient, but cash cloaks transactions in privacy."
Moving abroad: Backed by the government, big Chinese banks are lending record volumes around the world just as growth at home is declining. "For the first time, three of the country's four largest lenders last year posted larger increases in overseas lending than in domestic corporate loans," the Journal reports. The expansion "comes as Chinese banks try to carve out a bigger presence in some of the world's priciest business districts, financially as well as physically."
At the same time, however, the China Banking Regulatory Commission is warning the country's banks against engaging in speculative activity.
Same M.O.: The same group of cyber thieves who stole $81 million from Bangladesh's central bank several years ago may have been behind last July's unsuccessful attempt to steal $170 million from an Indian bank. "The similarities between the Indian and Bangladeshi hacks underscore concerns about a rash of cyberattacks in recent months on financial institutions around the world, including banks in the U.S., Mexico, Poland and the U.K.," the Journal reported. "Some of these hacks have been linked to groups affiliated with North Korea." In the Indian case, the thieves were thwarted when bankers saw something amiss and prevented the money from being released.
Smart move: The FT likes the Trump administration's recent tilt in favor of reviving the Glass-Steagall Act. "Politically, this could be a great cause for Mr Trump to get behind," the paper says. "It would prove he is serious about building bridges between his government and the Democrats to 'get stuff done,' and he would look tough on the Wall Street giants that he criticized during his campaign. The likes of JPMorgan, Bank of America and Citigroup could be ripped apart by such a law — a risk that the stock market has barely registered."
Lowering expectations: The head of innovation at UBS says it will take at least 10 years for blockchain technology to transform financial services. "There has been some hype in the market and some people have the expectation about a very fast materialization of benefit," Veronica Lange said. "The true benefit and what we are all kind of fantasizing about… that will require a much more solid and robust market fabric to deploy on." (Financial News)
"I wish we would've taken more action and done things more quickly." — Wells Fargo CEO Timothy Sloan.