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Goldman’s Goings On: Goldman Sachs has opened an online bank offering high-yield savings accounts (1.05%, 100 time more than at any Big Four bank) and certificates of deposit (1% on one-year CDs; 2% on five-years) for the average Joe, begging the question from industry observers: why is Goldman so hungry for retail deposits? First, financial regulation. Consumer deposits are a steadier and lower-cost source of funding than short-term loans from other financial firms. Regulators have encouraged banks to rely less on those. New regulations actually penalize banks for relying on them, and most of that funding dried up anyway during the financial crisis almost 10 years ago. But Goldman doesn’t have an established retail network like other Wall Street giants, the Journal says, so it’s cannonballing into consumer banking. Bloomberg says that will help the bank comply with the net stable funding ratio proposal, a long-term liquidity rule outlined by regulators in 2014 of which the FDIC will release details Tuesday.

The FT says Goldman wants to replicate Discover, from which it hired Harit Talwar, then president of Discover's U.S. credit-card business. Talwar joined the historically monoline investment banking giant last summer to lead a push into online lending. “If Goldman can borrow money at less than 2% and lend it at up to 25%, as Discover does, the appeal is obvious.” Discover’s ROE in the first quarter was 21% (Goldman’s was 6.4%). Goldman’s risks are large. “Universal banks” and their regulators have been closely examining whether they should serve their retail and investment banking businesses under a single roof. Goldman’s also now decidedly moving into areas of banking faster in pace and crowded with fintech competitors. A separate piece in the Journal points out GSBank.com has many user interface and customer experience issues to work out. “A savings account at Goldman Sachs Group Inc. is an old-fashioned thing. It is just a place where you deposit money that you intend to save and don’t plan on withdrawing frequently or quickly. Goldman’s website is easy enough to use, until it isn’t.”

Wall Street Journal

Regulators have been crafting a rule that would require large banks to show they have sufficient, stable funding to carry them through the next 12 months. The FDIC, which has been working on the rule with the Federal Reserve and the Office of the Comptroller of the Currency, will release details of the net stable funding ratio (NSFR) proposal at its board meeting Tuesday. The rule is meant to encourage banks to rely more on long-term funding like core deposits instead of short-term wholesale funding, like repurchase agreements. This should ostensibly lower banks’ chances of falling into a funding crunch like the ones that led to the demise of Bear Stearns and Lehman Brothers. However, it could also hurt their profits, driving them to put resources into low-return investments or higher-cost sources of cash; and disrupt markets when they have to curb certain loans or trading in certain instruments.

Financial Times

A new phenomenon is emerging on Wall Street: the analyst-activist – the banking analysts who go beyond buy or sell recommendations and are urging investors to get behind a particular cause. Mike Mayo, a veteran banking analyst at CLSA, for example, is at the head of a group of Comerica investors urging their 14-year chairman and chief executive Ralph Babb to consider radical measures to boost returns, like doing merger deals in the U.S. with Tokyo-based Mitsubishi UFJ Financial Group. The phenomenon is driven by the increasingly concentrated ownership of big listed companies, growth of exchange traded funds and consistently sluggish returns financial institutions have been reporting – just in time for U.S. banks’ meeting season, which begins Tuesday.

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