Wall Street Journal
So what if banks are too big to fail? Deposits at the big four commercial banks grew 2.1% to $.2 trillion in the first quarter – welcome news for banks despite a year-over-year decrease. Though their gains in deposits aren’t quite enough to counter some of the more grim details of their first-quarter earnings, they show that the very least, depositors aren’t fed up with the too-big-to-fail institutions.
The Clearing House Association recently hired two former Fed economists to demonstrate the impact of industry regulation on banks. As the banking industry trade group explores regulatory relief proposals for the next presidential administration, it’s focusing less on banks’ safety and soundness and more on economic growth and financial stability, according to Greg Baer, its president. “Halting the march towards ever-higher capital requirements, which is where we are now,” he said, but achieving its goal of lowering capital requirements “in some areas,” will require more convincing of the public that large banks aren’t too big to fail anymore. That’s where the in-house economists come in. “There has been a sea change…where more and more regulation is done by economists in Washington or Basel or Brussels,” he said. “They do that based on their understanding of markets and economics, and we need to have people who can talk to them about those subjects.”
A fintech startup in California is looking to make it big on Wall Street with its micro-investing platform. Noah Kerner, the chief executive of the company, Acorns Grow, is a former New York DJ turned marketing master new to the wealth management business. Acorns Grow makes regular, automated investments of “spare change” from users’ bank accounts in a basket of exchange-traded funds. The platform rounds up purchases to the nearest dollar and deposits the difference. Last week the company closed a $30 million funding round from PayPal Holdings and Rakuten FinTech Fund, among others, bringing its total funding to date to $62 million.
New York Times
SWIFT is set to release a software update Monday to thwart malware discovered after an unprecedented attempt by cyberthieves in February to transfer $951 million from the Bangladesh central bank's account at the Federal Reserve Bank of New York to the Philippines. British defense contractor BAE Systems said in a Monday blog post that the attacker, still unidentified, “gained access to the Bangladesh Bank’s SWIFT payment system,” the secure messaging platform that connects financial services worldwide, “and reportedly instructed an American bank to transfer money” from its account to accounts in the Philippines. “This malware appears to be just part of a wider attack toolkit… and given the correct access could feasibly be used for similar attacks in the future,” BAE said in the post.
Financial Times
Goldman Sachs now offers online savings accounts with as little as $1 on deposit, after posting its lowest quarterly return on equity of the past four years. Goldman is under pressure to develop new streams of funding. GSBank.com offers interest rates of 1.05% on a savings and has about 145,000 retail depositors, which it inherited in an acquisition of a $16 billion book of deposits from GE Capital, which closed last week. Moving into mass-market banking may not completely make up for lost trading revenue, but it’s still worth exploring, said a Sandler O’Neill analyst. Whether rate-hunters will be drawn to GSBank from the likes of Ally or Discover remains to be seen, said another analyst from NerdWallet, adding the Goldman Sachs brand is probably enough to muster up interest. “It’s synonymous with the dream of wealth in America,” he said.
Now might be a good time for banks to cut down on disclosure, one consultant says in an op-ed. For example, Deutsche Bank’s annual report was under 100 pages 25 years ago, but last year exceeded 600 pages. One might say banks are bigger and more complicated now so their reports must also be, which would be fair, but this op-ed argues regulations and fear of lawsuits give shareholders enough excuses to not invest in banks. “If attending a speed reading course and acquiring a degree in acronyms are also required to understand what they report, then many investors may conclude that their time is better spent assessing companies in more comprehensible industries,” he says. “That makes it harder and more expensive for banks to raise capital.”
Elsewhere…
Bloomberg: Proposed bank pay rules intended to curb excessive risk-taking in the U.S. could mean bigger salaries and smaller bonuses for some senior officials, dealmakers and traders. Under the proposals 60% of senior executives’ bonuses based on performance would have to be held for four years after the performance period concludes. With that rule in place, banks might not be able to raise salaries enough to continue to attract talent, analysts say, and younger talent could exits for other fields.
