Receiving Wide Coverage ...
Brazilian Bank CEO Jailed: The chief executive of Brazil's largest independent investment bank has resigned after being arrested last week. Andre Esteves left his post at the helm of BTG Pactual, the Wall Street Journal reports. Esteves is the bank's controlling shareholder and also served as chairman. The Brazilian banker has found himself caught up in investigations regarding corruption at the state-controlled oil company Petroleo Brasileiro (Petrobras). His resignation follows a decision by Brazil's Supreme Court to make his arrest preventive, a win for prosecutors, meaning he can be held in jail indefinitely.
In the wake of Esteves' departure, the company has named Roberto Sallouti and Marcelo Kalim as co-CEOs, the Financial Times writes. Sallouti previously ran BTG Pactual's asset management arm, and Kalim was its chief financial officer. Nonetheless, the bank has scrambled to steady itself. The Financial Times also reports BTG Pactual has stopped making new loans in a bid to conserve its liquidity. The bank is also working to affirm its strength and prominence without its emblematic face, as Esteves had come to define the bank's public persona, the New York Times notes. On the bright side though, it appears for now the turbulence won't affect Brazil's banking industry at large — while the largest investment bank in terms of deals, BTG Pactual is only the country's seventh largest bank in terms of assets.
Wall Street Journal
Could the jig be up for Wells Fargo? The company's aggressive attempts at cross-selling products have come under regulatory scrutiny, the paper reports. The Office of the Comptroller of the Currency and the Federal reserve Bank of San Francisco are investigating whether Wells' assertive sales culture has meant the bank pushed employees too hard. The investigations come on the heels of a lawsuit in May that alleges Wells Fargo strong-armed retail employees into committing fraudulent acts such as charging for products without customer permission. The probes stand to tarnish Wells Fargo's largely spotless reputation as being the largest bank to escape financial crisis settlements.
Inconsistencies in payment acceptance across the retail industry could prove a major nuisance during the holiday shopping season. Though it's been nearly two months since the EMV shift, many retailers have been slow to move to accept chip cards. As a result, consumers face frustration at the cash register – rarely knowing whether to dip or swipe their cards, not even considering the plethora of contactless payment options now at their fingertips. The new card systems have also created delays at the checkout line, as customers fumble with new payment methods, some retailers note.
While many have considered the impact on the housing industry of a Fed interest rate hike, it's the auto industry that should be worried. A study by the New York Fed found interest rate fluctuations hurt auto sales and a rate hike could end the recent car sales surge. Because their term is shorter than a mortgage, a 1 percentage point increase in interest rate could raise the cost of a four-year $25,000 auto loan by as much as $528 over its lifetime. And, according to the New York Fed, that amount, although seemingly nominal, could be enough to reduce demand for new vehicles and send auto sales plummeting until car dealers slash prices.
Deutsche Bank has reportedly shopped complex international tax avoidance strategies to some of its major corporate clients. The bank reportedly devised the strategy for clients with offices in Brazil, including AB InBev and Cargill, according to documents the paper analyzed and reports from anonymous sources. The strategy involves profit-participating instruments, also known as PPI trades. These clients would co-invest with Deutsche's Austria unit through a new Austrian entity that would then take the funds and lend them to the client in a more favorable country based on tax rules. The money would also be paid out in dividends to gain further tax exemptions. While the proposals are not illegal, they come at a time when the G20 and the OECD have been working to close such tax loopholes.
Bankers still earn too much, according to Deutsche Bank's new co-CEO John Cryan. While pay has come down following the financial crisis, Cryan said banks still have room to be thriftier when it comes to salaries. He also thinks bonuses need to be reconsidered. Based on the total compensation ratio, which is the proportion of returns paid out to employees, large banks in Europe, North America and Australia spend 60% of their money on salaries and bonuses. That's a staggering amount when considering shareholders' falling returns, according to the paper.
New York Times
While its Spanish peers have struggled recently, BBVA has remained in the black. BBVA, Spain's second largest bank, has managed to avoid any exposure to Abengoa, an engineering company that has sought protection from creditors and weighed on Spain's banking industry in the process. Santander alone has a roughly $1.7 billion exposure to the company. BBVA also avoided investing in Bankia's IPO, which preceded a bailout, and in Sareb, Spain's toxic real estate management bank, which may need more capital. Sure, BBVA was burned by the 2008-2009 real estate crisis, but the bank's conservative streak since has meant fewer poor investments.