Receiving Wide Coverage ...
Run on Deutsche?: Deutsche Bank shares were under pressure again Friday morning as several large, influential hedge funds moved to pull their money out of the bank, creating what some fear is a Lehman Brothers-type run. But CEO John Cryan told staff the bank has "strong foundations" and urged them not to be distracted by "distorted perception from outside." He said there are "currently some forces at play in the market that want to weaken this trust in us." Wall Street Journal, Financial Times, New York Times
Pressure: Wells Fargo CEO John Stumpf had another tough day on Capitol Hill Thursday, this time from the House side. Maxine Waters, D-Calif., the ranking Democrat on the House Financial Services Committee, where Stumpf testified, said she would be working with members of the committee, including Chairman Jeb Hensarling, R-Texas, to break up the bank. "I've come to the conclusion that Wells Fargo should be broken up," Waters said. "It's too big to manage and I'm moving forward to break up the bank." Wall Street Journal, Financial Times, New York Times, Washington Post, American Banker
With the Wells Fargo scandal as a focal point, the Wall Street Journal analyzes the "often-knotty" question of when companies decide that a piece of information is "material" and must be disclosed to investors. "In part, that is because the rules are complex and not always well understood — many observers think materiality can be determined simply by crunching the numbers, but that isn't always the case." In Wells' case, for example, the $185 million fine it agreed to pay federal regulators amounted to less than 1% of last year's earnings, and therefore "not a material event," as Stumpf told a Senate committee last week. But it sure had a much bigger impact on the bank's reputation and shareholder equity, which has lost nearly 10%, or about $23 billion, since the settlement.
Amid all the other bad news stemming from its massive phony accounts scandal, Wells Fargo settled another smaller, if not more embarrassing, case. The bank agreed to pay $24 million to settle charges from the Justice Department and Office of the Comptroller of the Currency that it improperly repossessed cars belonging to members of the U.S. military. Over a seven-year period, the bank allegedly repossessed more than 400 cars belonging to service members without first obtaining a court order.
IBM buys Promontory Group: IBM said it plans to acquire Washington-based Promontory Financial Group as part of a broader effort to use artificial intelligence to analyze regulations and provide advice to financial institutions. Founded by Eugene A. Ludwig, the former Comptroller of the Currency, Promontory has become one of the top financial consulting firms, with more than 600 employees globally, "many of whom are former regulators who provide consulting services to the banks they once regulated," according to the Financial Times. "Through this tie-up IBM hopes to tap into the market for helping banks manage a fast-changing regulatory environment, a niche that it estimates is worth some $270 billion a year," the paper said. IBM said it was launching a new unit, called Watson Financial Services, "that would seek to harness the power of Watson, its artificial intelligence computer system, to advise clients on risk and compliance." Wall Street Journal, Financial Times, New York Times, American Banker
Separately, UBS said it was working with IBM to build a trade finance system powered by blockchain. The Swiss bank said it plans to build a trade finance system that uses distributed ledgers to streamline import-export transactions globally. UBS said a blockchain system cuts transaction processing time from an average seven days to one hour.
Wall Street Journal
Scotus to hear surcharge case: The U.S. Supreme Court agreed to decide whether states can prohibit merchants from imposing a surcharge on customers who use credit cards. The court agreed to consider a case from New York, where the state's law is being challenged by several small businesses. The court agreed to hear an appeal of the verdict rendered last year by the Second U.S. Circuit Court of Appeals that sided with the state. The case will be part of the high court's new term, which begins next week and runs through June 2017.
Giving credit: Green Dot, one of the biggest providers of prepaid debit cards, is moving into the credit card business. The company announced that will begin offering a secured Visa card aimed at customers with no credit history or poor credit scores. The card will have an interest rate of 19.99% and an annual fee of $39, with credit lines between $200 and $1,000, depending on the customer's deposit.
