Breaking News This Morning ...

KeyCorp to Buy First Niagara: KeyCorp announced early Friday that it plans to acquire First Niagara Financial Group for roughly $4.1 billion. The announcement, which was quickly heralded one of the biggest bank mergers of the year, added further fuel to claims that 2015 has been the biggest year for banks since the crisis, the Wall Street Journal writes. The deal capped off a busy week for bank mergers, after New York Community Bancorp unveiled plans to buy Astoria Financial Corp, as reported by American Banker. The move boosts Key's branch count in New York and should calm the woes First Niagara has faced in the wake of its own troubled acquisitions. The deal also bolsters the argument for mergers as a way for mid-size banks to boost business, since lower interest rates and rocky fee revenue have taken a bite out of profits for many, according to the New York Times. Be sure to stay tuned to American Banker for more on the big mergers this week.

Receiving Wide Coverage ...

RushCard to Refund: UniRush announced Thursday it will give refunds to RushCard customers who were adversely impacted by the recent botched processor shift. While the company and regulators are hashing out exact details, UniRush plans to pay out between $2 million and $3 million, according to the New York Times. The money will go into a fund the company is setting up, RushCard founder and hip-hop icon Russell Simmons said. Besides RushCard, MasterCard and MetaBank — the card's processor and custodian bank respectively — will also contribute, the Washington Post reports. Simmons said he refunded customers out of his own pocket during the ordeal. The music mogul was at the forefront of the company's response to the fiasco, opening up his Twitter account to direct messages to customers who could not get through to customer service. For a refresher about what happened at RushCard and how it affected customers, be sure to check out American Banker's coverage of the incident.

Decoding Deutsche's Big Announcement: The Monday-morning quarterbacking of the announcement of big cuts at Deutsche Bank has begun. The move to exit markets and drop 35,000 jobs clearly indicated a lack of faith in the German bank's strategy, the Wall Street Journal writes. With these changes, the paper argues Deutsche has abandoned its ambitions of being a global universal bank; instead, it will return to its roots as a big player in Germany and Europe at large.

But will the plan be enough to return Deutsche to its former glory? The Financial Times is saying maybe not. The paper notes the bank's shares fell 7% on Thursday, a sign investors might not be on board with management's plan for a turnaround. While the plan may sound drastic on the surface, some argue, it might in reality be a bit modest given Deutsche's high expenses. Of course, others wonder if the major cuts will become a damper on revenue increases.

But Deutsche's journey from working to become a global bank to scaling back its operations can also serve as a lens for the banking industry in Europe at large, the New York Times writes. European banks' reliance on loans has become apparent recently as stress tests revealed trillions of dollars in nonperforming loans. The continent's banks have, in many ways, been able to put off major changes in the wake of the financial crisis – Deutsche may be the best example of that – but now that their wounds are showing, they're beginning their own turnarounds. And Europe's fate in many ways depends on their success.

In the midst of the bank's big news, another move at Deutsche fell a bit below the radar. The bank promoted Sylvie Matherat to the post of chief regulatory officer, the Financial Times reports. The move could be a boon to Deutsche – Matherat previously worked for the Bank of France alongside Anne Lecuyer, the European Central Bank official in charge of supervising the German bank.

RBS Reports Third Quarter Profit: The Royal Bank of Scotland's choice to sell its stake in Citizens Financial Group paid off. The profits from the sale helped to push the bank toward a rise in its third-quarter earnings and mitigated a major loss in its investment banking division, the Wall Street Journal notes. The Citizens sale is part of a larger restructuring at RBS that looks to be a bit of a bumpy ride. The company's new chairman, Sir Howard Davies, previewed the troubles by saying there were "still quite a few obstacles to overcome," the Financial Times writes. In particular, the bank faces multiple misconduct investigations, including one in the U.S. regarding mortgage-backed securities.

Wall Street Journal

New rules proposed by the Federal Reserve have become a burden on Wells Fargo, the paper reports. The rules relate to "total loss-absorbing capital," which the central bank thinks will help prevent another 2008-style crisis. TLAC requires big banks to hold debt roughly equal to shareholder's equity, so if they lose all their capital debt-holders would bear the burden of future losses rather than the government. But for Wells Fargo, which has fared better than its competitors, the implementation of this new metric means it has to raise roughly $26 billion in new long-term debt, which would represent a significant change to its balance sheet.

A look into the third quarter earnings of Chinese banks shows they have turned to shadow banking and gray markets as sources of revenue. The move is certainly a risky one, as the products they have sold and the bad loans they have taken on could become anathema if market conditions turn sour, the paper notes. Nonetheless, the shadow banking industry has become a big competitor to many Chinese banks, which have struggled under the weight of six interest-rate cuts since last November.

Financial Times

Have you ever wondered where all that money the New York Department of Financial Services makes in settlements with banks goes? Public works projects, it turns out. The paper points out the NYDFS has become a reliable source of funds to fill holes in the state budget – from repairs to roads and bridges to support for a chemical dependence program through the Office of Alcoholism and Substance Abuse. This underscores the headache New York Gov. Andrew Cuomo now faces as he looks to replace the department's superintendent after Anthony Albanese chose to resign reportedly out of frustration with Cuomo.

European banks are complaining after the European Union legislators decided to take up a proposal that would give regulators more power to break up big institutions. The proposal could impact 30 banks, including Deutsche Bank and BNP Paribas, if passed. In particular, the legislation bans proprietary trading and requires banks to prove investment banking activities won't harm financial stability.

Elsewhere ...

The Economist: Another voice has come out to support wider use of the blockchain technology that underpins bitcoin. The magazine writes blockchain offers a way for people who don't trust each other to create a record that will preserve what has happened in an irrefutable way. Consequently, politicians from Honduras to Greece have begun to look into its applications beyond financial services. Head over to the American Banker website to read up more on why bitcoin and its game changing technology matter.

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