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Barclays Reports Loss; Will Sell Africa Unit: Barclays shares fell more than 9% Tuesday morning after it announced restructuring plans that include a gradual sell down of its 62.3% interest in its Africa unit and slashing its dividend payouts in half in 2016 and 2017. By cutting dividends the bank aims to build reserves so it can absorb losses as it sells off "non-core" assets, which now include Egyptian, Zimbabwean and Asian wealth businesses. Barclays, one of the most weakly capitalized in Europe, said both moves could help it boost its Tier 1 capital ratio at least a percentage point. As expected, CEO Jes Staley also announced plans to begin splitting its consumer and investment banks, which it is required to do by 2019.
Staley has emphasized the need to restore Barclays' reputation as a major banking institution, following the Libor rigging scandal and other regulatory investigations, by improving its overall conduct. He attacked former banker pay practice at the company – particularly bonuses "based on profits they expected to earn in the future and then it all came tumbling down" and implied they "lost their moral compass in the 1990s because of their single minded pursuit of their personal wealth." Staley plans to further cut the bank's bonus pool for senior executives (Barclays has already cut the bonus pool in half over four years), but said it remains important that employees be paid "competitively." Wall Street Journal, New York Times, Financial Times, Bloomberg, The Guardian, BBC
Citi to Sell China Guangfa Stake: Citibank is exiting its 20% stake in China Guangfa Bank to continue building its branch network in China, which employs 8,000 people across 13 cities. Citi will also focus on other partnerships, like its Shanghai-based investment banking venture and its partnership selling insurance products. Citi agreed to sell its interest for 19.68 billion yuan ($3 billion) to China Life Insurance Co., the country's largest life-insurance company by premiums. The sale, which has been in talks since October, is expected to close in the second half of 2016. Citi doesn't anticipate it will have material impact on its next earnings report, coming in April. Citigroup doesn't release its earnings in China, but a spokesman said its $1 billion-plus revenue in the country in 2015 was a double-digit percentage increase from 2014. Revenue is up from around $100 million 10 years ago. Wall Street Journal, Financial Times
Wall Street Journal
As banks anticipate judgments in the coming weeks from the Federal Reserve and Federal Deposit Insurance Corp. on their so-called "living wills," the question of credibility is keeping banks on their toes. The living wills are game plans for how banking institutions would adjust operations when faced with failure and without taxpayer bailouts. Whether a plan is deemed credible is still a regulatory gray area, as the Fed and FDIC haven't yet agreed what credibility means in this context. Internally, running the business can seem at odds with preparing for failure. Interconnectivity across a financial firm can make it more efficient, but that becomes a more complex problem if the firm needs to sell a business to raise cash.
New York Times
A nonprofit watchdog is calling for an investigation of Mortgage Bankers Association CEO David H. Stevens for a breach of ethics laws concerning his former position as Federal Housing Administration commissioner. Before leaving the FHA to lead the MBA, Stevens reportedly participated in deliberations over the status of Fannie and Freddie. The watchdog holds that Stevens lobbied on some of the same issues as MBA chief as when he was on the other side of the so-called revolving door at the FHA and is seeking an examination of Stevens' activities at each. He left the Department of Housing and Urban Development, which houses the FHA, in 2011 to move into his current role. The MBA is one of the most powerful lobbying organizations on the Hill.
Small British banks will continue to be exempt from banker bonus caps, British financial regulators said, but large and systemically important institutions must still comply. The rule caps bonuses at twice an employee's salary and other non-performance-based compensation. The bonus cap took effect in 2014 as a way to reduce financial incentive for risky behavior.