Receiving Wide Coverage ...
CEO Slashes Bonus: Credit Suisse chief executive Tidjane Thiam has asked his company's board to cut his bonus. His request comes just days after the bank reported a loss of roughly $5.88 billion in the fourth quarter, which led to a 12% drop in price in the company's stock on the Zurich exchange Thursday. The larger-than-expected quarterly loss resulted from a write-down following a reassessment of the value of Credit Suisse's investment bank. Thiam was hired in July to lead the bank's major restructuring. He has previously called for an 11% reduction in the company's bonus pool. Thiam has gone on record arguing that bonuses become a "battle ground." Thiam won't be alone in receiving a smaller bonus: Deutsche Bank's supervisory board decided to deny 2015 bonuses to its management board, including co-CEO John Cryan, following its own fourth-quarter loss.
Jobs Report Complicates Fed's Decision: Friday's jobs report presented something of a mixed bag. The overall number of jobs created – 151,000 – did not meet expectations, still, the figure was far from horrible – in fact, it was good enough to get unemployment down to 4.9%, its lowest level since February 2008. Wages also showed signs of improvement. Following the report, the dollar rallied, and overall sentiment seemed to support the Federal Reserve's stated goals of gradual rate hikes this year. But the global turmoil that has foiled the Fed before continues to put a strain on the U.S. economy, particularly on tourism and manufacturing, leaving the central bank in a lurch. Fed governors have so far expressed skepticism the fundamentals will be in place for a March rate hike, but mixed signals like those received Friday, could change such predictions.
Woe Canada: One of Canada's largest commercial banks is taking a hit after German authorities essentially closed one of its foreign investments, the Wall Street Journal reported. German regulatory watchdog BaFin closed the German unit of Maple Financial Group, in which Montreal-based National Bank of Canada holds a 24.9% stake. Maple Bank was placed under investigation for potential tax irregularities from 2006 to 2010. The order basically closed the bank to customer transactions, forcing National Bank to set aside cash to cover its equity investment. The move will also hit the bank's CET 1 capital ratio.
Wall Street Journal
Lehman Brothers is still with us in spirit – but not in the way you might think. A British entrepreneur has created a new line of liquor that features the failed bank's logo. The line's premier Scotch whiskey is named "Ashes of Disaster," promising to let drinkers "taste the ups and downs of the economic devastation of 2008." The line of spirits will be available online, with bars in the U.K. and the U.S. already clamoring to get a taste. The brand points to the pop cultural value of the Lehman Brothers name: A "Lehman moment" is now a term to suggest failure. The brand may encounter some pushback though. Barclays, which bought parts of the company including the trademark on the name, is seeking to block its use for the spirits line.
The head of the world's largest sovereign wealth fund said it's time for U.S. banks to split the roles of chairman and chief executive. Yngve Slyngstad, head of the $810 billion Norwegian oil fund said the 2008 crisis makes the combination of the roles "untenable," though he recognizes the process to separate them could take as long as a generation. The fund last year used its 0.8% stakes in JPMorgan Chase and Bank of America to vote against Jamie Dimon and Brian Moynihan's combined roles. It has done similarly with Goldman Sachs, Morgan Stanley and Wells Fargo. The oil fund also aim to improve proxy access in the U.S.
Five British fund houses have teamed up to test blockchain's applications for trading purposes. The group includes two of Europe's largest listed fund houses, Schroders and Aberdeen Asset Management, as well as Columbia Threadneedle Investments, Aviva Investors and Henderson Global Investors. The secret project represents the first time asset managers have teamed up to test blockchain, even though such tests have been occurring at banks for some time. Their goal is to see whether the bitcoin-inspired technology can reduce trading costs by cutting out bank intermediaries and downsizing staffing needs. The bitcoin link has alarmed some in the asset management community because of the digital currency's unstable value and association with crime.
A former bank executive is calling for the elimination of high-value bank notes. Former Standard Chartered chief executive Peter Sands has published a paper on the subject, stating that big notes, like the €500 note, the $100 bill and the £50 note, facilitate crime. These high value notes are commonplace in drug trafficking and terrorism and serve little use to companies or average consumers given the digitization of money these days, he notes. Plus, the process of eliminating the notes is easy – and proven. Canada and Singapore have both ditched high-value bills in recent years, with little trouble. Sands said he hopes to have the subject put on the agenda of the next G20 summit.
New York Times
Corporate culture at major banks has left shareholders footing the bill for their misdeeds, according to columnist Gretchen Morgenson. The columnist sets her sights on the recent regulatory fines against Barclays and Credit Suisse – the two banks agreed to pay $154.3 million for issues regarding high frequency trading on their platforms. The issue, in her opinion: While the banks agreed to pay the fine no bank employees were held responsible, meaning that shareholders are the ones feeling the sting. Morgenson argues a cultural shift is needed at banks, and regulators need to push harder for it. One solution she suggests, based on scholarly research, is the concept of "covenant banking," wherein executives are personally liable for fines and fraud-based judgements. Such a model makes executives more cautious, since their own money is on the line, she says.
Breaking up the banks should be the least of our worries, since it's unrelated to today's biggest economic problem, according to an op-ed. The opinion piece argues the problem plaguing the economy is not unruly banks but income inequality and slow personal income growth for most people. The op-ed's author, investment firm Neuberger Berman managing director Steve Eisman, doesn't shy away from banks' crimes – he holds accountable both them and regulators alike. But he argues the system, as a whole, is far less risky than in the 2000s. And while banks might be too big for some people's political tastes, the big banks don't present the risk to the country's stability they once did. More importantly though, he argues income inequality is not a problem solved by changing the banking landscape, making arguments in favor bank breakups something of a red herring.
Bankers have come to face a pop culture world in which art is imitating their lives. A number of recent projects, ranging from the Academy Award-nominated film version of "The Big Short" to the TV miniseries "Madoff," have put the spotlight back on the financial services industry. And that's not a coincidence. With politicians on both sides of the aisle discussing banking reform, financial services has become water-cooler conversation once again – and the entertainment industry has come to capitalize on that. But to film historians that's no surprise – the same thing happened after the Great Depression and the post-Vietnam War slump. And this time, bankers themselves are getting in on the action: former Lehman Brothers partner Michael M. Thomas presents the events leading to the crisis in a fictionalized manner in his latest novel, "Fixers."