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MetLife’s Floodgates: The day after a federal judge sided with MetLife in its case against federal regulators regarding their designating the insurer as systemically important, another non-bank has filed to end regulatory oversight. General Electric wants to do away with Federal Reserve oversight, arguing it has scaled down its financial-services arm to the point where it no longer could pose a threat to the overall financial system. If GE’s request is approved, it will be the first time an institution convinced a regulator to remove the systemically important financial institution (SIFI) designation. The filing made to the Financial Stability Oversight Council noted that since 2012 GE has slashed its financing division’s total assets by more than half, from $549 billion to $265 billion, which involved eliminating most of its U.S. operations. The filings caps off a process that began last April, when GE Capital expressed an interest in getting rid of the SIFI designation that the FSOC put in place three years ago. In that time, GE has spun off its consumer finance arm, which is now called Synchrony Financial. It also recently got approval to sell its U.S. deposit division to Goldman Sachs. Meanwhile, the Federal Reserve Bank of New York has already pulled its overseers from MetLife offices, in response to U.S. District Court Judge Rosemary Collyer’s decision. Those supervisors will now work from the New York Fed’s offices. And on CNBC, AIG chief Peter Hancock said he’d work with regulators, much like GE, to remove the SIFI tag. Nevertheless, he noted if MetLife’s case stands up on appeal, AIG would explore its options.
Wall Street Journal
As he attempts to turn the tide for Deutsche Bank, chief executive John Cryan has earned the monikers “Mr. Grumpy” and the “Bernie Sanders of investment banking” from colleagues and staff for his grim demeanor, the paper says. But it’s hard to blame the man, as he’s had few options in seeing the German lender through what observers have called a delayed reaction to the global financial crisis. Cryan came to the bank after investors lost faith in former co-CEOs Anshu Jain and Jurgen Fitschen. While those men bolstered the bank’s capital in light of the European financial crisis, they didn’t do enough to appease investors. And fellow boardroom members grew concerned with Jain’s propensity for focusing on positive news while playing down the headwinds the bank faced. Since Cryan stepped up to the helm, he’s ushered in new deputies and pushed out Jain’s confidantes, but Deutsche has nonetheless struggled. It suffered its first annual loss since 2008 last year, and in February was a prime victim of the selloff in financial services. And Cryan still laments some of the bank’s more costly ways, which reportedly includes its persistent use of chauffeurs. But for all his dourness, Cryan’s approach is achieving results for the company, leaving some to wonder whether he will brighten up his demeanor.
Regulators have begun to research the risks posed by continued climate change or a collapse in the value of fossil fuels to the financial system. In particular, the Bank of England, the Financial Stability Board and the European Systemic Risk Board have begun to assess how banks, insurers and other financial services firms would respond to policies that aim to reduce carbon-dioxide emissions. The regulators have started including climate scenarios in stress tests and are considering new rules or capital buffers to disclose fossil fuel exposures. The concern is that if governments transition to cleaner energy in the wrong way, it could cause selloffs of stocks and bonds tied to fossil fuels that could cause major headaches for the financial services industry. Regulators, in particular, will look to get a sense of firms’ exposure to fossil fuel assets, since as of now such a figure does not exist at the global level.
The head of Japan’s pre-eminent banking association has decried a Basel Committee proposal for a more stringent and uniform method of assessing risk, saying the move would limit lending capacity and make it harder for central banks to jumpstart growth. The Basel Committee on Banking Supervision has put forth a plan that disallows banks from using internal credit-risk models in favor of a standardized method set by the global regulator. Japanese Bankers Association chairman and president of Sumitomo Mitsui Banking Corp. Takeshi Kunibe said such a plan could create “excessive capital requirements” depending on how it was finalized. It’s not surprising to hear that sentiment coming out of Japan, where banks’ lending margins are already tight due to the Bank of Japan’s implementation of negative interest rates this year.
Brazilian authorities have filed charges against the man once called the world’s richest banker by Fortune magazine for an alleged scheme to bribe tax auditors. Joseph Safra allegedly knew about a plan devised by executives at his banking group to pay more than $4 million in bribes to reduce tax debts. The case throws the prominent Safra family into the spotlight – although the family has led high-profile acquisitions including the takeover of banana company Chiquita and orange juice company Cutrale, they remain very shy about publicity. The case against 77-year-old Joseph, who is Brazil’s second richest man with $18.6 billion in wealth, could expand, the paper notes, perhaps to a level that rivals the ongoing Petrobras scandal. The Safra Group meanwhile has called the allegations “unfounded.”
Bitcoin’s mysterious creator is reportedly set to reveal himself. In December, separate reports in Wired and Gizmodo identified Craig Steven Wright, a self-designated cyber security expert, as the man behind the pseudonym Satoshi Nakamoto. The publications used leaked emails and documents to support the claims that Wright, along with deceased colleague Dave Kleinman, together created the cryptocurrency. Wright has not made any appearances or statements since the articles came out, but now he is reportedly lining up backing to support his claim to the title ahead of an announcement. Among those who appear to have been lined up to give support is Bitcoin Foundation founding director Jon Matonis. The announcement, which is being hawked to news outlets, will reportedly come sometime between April 7 and April 14. During the announcement, Wright will perform “a cryptographic miracle” to prove his claim and put to rest sentiment within the bitcoin community that the Wired and Gizmodo accounts were simply a hoax.