Receiving Wide Coverage ...
All Eyes on Captain Staley: Investors' eyes are on Jes Staley, the 59-year-old Barclays CEO of three months, as the bank prepares to release its year-long earnings report Tuesday and Staley's plans to weather a bad storm. Barclays, whose stock has fallen 40% in the last year, has struggled to improve shareholder gains for the last three annual earnings periods and analysts estimate a lower capital ratio. The bank needs to split its U.S. and U.K. entities by 2019 and is coming under pressure from U.S. regulators to move American operations into a holding company, which could require a $6 billion capital injection, the source of which remains to be seen, the Journal reports. The FT says it may try to implement a "mother-daughter" structure instead of a "sibling" structure. The capital boost could possibly come from the sale of the bank's African unit, which has been hit badly by falling commodity prices. It has already made a staff cut of about 1,200, closing smaller operations in Asia, Brazil, Europe and Russia, and exited precious metals trading. Wall Street Journal, Financial Times
Another Fintech Startup, Another Ex-Bank Exec: Lending startup Social Finance, or SoFi, has named former Deutsche Bank AG co-CEO Anshu Jain to its board of directors. The startup, which markets itself as a leader in the earliest days of what will be a bankless world, appointed the ex-bank executive at a time when its online lending peers are reacting to reactive credit markets, raising their rates for borrowers and seeking to lend more to small retail investors. SoFi has relied on the securitization market, institutions that buy loans, and credit lines from banks to fund the loans it has originated. It began selling student loans and has since also moved into mortgages, personal loans and wealth management. Anshu follows the likes of former bank executives Vikram Pandit of Citigroup and John Mack of Morgan Stanley, both prominent investors in fintech companies. He will join the SoFi board in an advisory role before filling his board seat a few months.Wall Street Journal, Financial Times
Wall Street Journal
The rise of robo-advising is hardly the first instance of technology "disrupting" financial services and like others before it, there are arguments to be made for and against automation and the "human touch," both in terms of service and performance. Some robo-advisers come as a fully automated service, some also come with a human adviser. Supporters of the innovation say robo-advising offers more passive investments than a human might, though at significantly lower fees and can perform better with less error, while skeptics say that may just be a good complement to the traditional advisor, but is unable to replace face-to-face interactions. The Journal compares the views of a supporter and skeptic side-by-side.
Financial Times
JPMorgan Chase dismissed its head of U.S. Treasury trading, Andrew Lombara, and junior Treasury trader Chi Lee for violating compliance procedures after a trade valuation disagreement. Lombara and Lee wanted to increase the amount of reserves the bank took for certain "strips" – separate trading of registered interest and principal of securities – and apparently sidestepped the valuation committee in order to do so. The company "determined that the employee did not adhere to certain control processes," it wrote in Financial Industry Regulatory Authority filings on each employee. Banks create strips from existing Treasuries to let investors trade interest payments from Treasury securities separately from the principal. The strips market totals $217 billion, but as disclosure of strips holdings aren't required by banks, JPM's position is unclear. Lombara and Lee left JPM in early January, though at the time no reason was given.
New York Times
Despite regulatory nudges for more transparency, overdraft practices are a bad habit banks still haven't kicked. Overdrafts accounted for about $11 billion, or 8%, of profits at the big banks last year. Even though banks are required to allow the customer to choose whether to incur the small lines of credit or decline transactions when an account has insufficient funds, customers feel tricked and trapped into opting in, since that detail is weaved into agreements that don't require separate signature approval. Banks paid more than $1.1 billion in settlements tied to reordering – the practice by which banks rearrange customer transactions to settle in order of highest value first instead of chronologically. That was in 2009, but TD Bank, among others, continues the practice today, though TD has said it plans to end it around April. The industry is awaiting new rules by the Consumer Financial Protection Bureau this year that could limit reordering practices, but it's likely they won't address the exorbitant fees on the credit lines.
Elsewhere ...
Tampa Bay Times: The paper profiles Ron Klein, who back in the 1960s patented the magnetic stripe on the back of your credit and debit cards. Despite the tantalizing headline, the article only briefly touches on his qualms about those newfangled EMV chips, but it's still an interesting read.
International Business Times: Citigroup is the first bank being investigated for its part in the bribery, corruption and money laundering scandal at FIFA, the international soccer governing organization. Last summer 14 FIFA officials were indicted on corruption charges that "relied heavily on the U.S. financial system in connection with their activities," according to the criminal complaint, which also makes references to JPMorgan Chase, Wells Fargo, Bank of America and HSBC. At least the former two have said they have not received subpoenas.
And, Lastly ...
Bitcoin Uncensored: Don't be scared off by the name of this podcast, hosted by a duo of tech-savvy provocateurs (including occasional BankThink contributor Chris DeRose). The latest episode features a fascinating, high-level conversation with Izabella Kaminska of the Financial Times. It covers everything from the regulatory arbitrage behind much of fintech to the apparent paradox of private blockchains to the dangers of a cashless society to the merits and drawbacks of real-time gross settlement versus netting. The episode's over an hour long, but we feel smarter having listened to it (the opposite effect of the presidential debates).
