OCC urges small-ticket lending; Deutsche to downsize

Receiving Wide Coverage ...

It's on: Comptroller of the Currency Joseph Otting urged banks to offer small, short-term consumer loans so borrowers can avoid high-rate payday lenders, which themselves are under government pressure to lower their rates. Otting said he wants banks to make loans of $300 to $5,000 to borrowers with FICO scores of 680 or below. “The move, outlined in an OCC bulletin, marks a reversal from the Obama era, when regulators discouraged banks from making such loans, which are riskier than other types of lending,” the Wall Street Journal says. Wall Street Journal, Financial Times, American Banker

Otting’s encouragement of small-ticket loans by banks is “a rare moment of common ground with consumer groups that oppose payday lending.”

Bipartisan effort: Passage of bank regulatory reform by the House “showed that the parties and chambers can work together by passing a bipartisan Senate banking reform,” the Wall Street Journal writes in an editorial. “Notwithstanding its shortcomings, the bill is an important step away from excessive government controls.”

Three of the four biggest recipients of campaign donations from banks this election cycle are Democrats on the Senate Banking Committee who helped achieve the compromise that led to the measure’s passage. The three — Joe Donnelly of Indiana, Heidi Heitkamp of North Dakota and Jon Tester of Montana — are all facing tough reelection contests this year. Each of them received twice as much as Sen. Sherrod Brown, D-Ohio, the ranking Democrat on the committee, and twice as much as they received in the previous cycle.

“At a minimum, the lopsided giving points to a schism in the party over how to approach the industry,” the Washington Post says. “Supporters from both parties frame the measure as a set of tweaks to free up lending by regional and community banks. Liberal Democrats called it a reckless giveaway to some of the same firms that precipitated an economic crisis less than a decade ago.”

While the reform measure helps mostly small and midsize banks, the very largest institutions are lobbying for some relief of their own. Specifically, the giants want Congress to lift rules that require them to post collateral on swap transactions between different units of the same bank. Such a change could potentially save them hundreds of millions of dollars in compliance costs. The House passed such a bill but it died in the Senate.

Getting smaller: Deutsche Bank said it plans to cut its workforce by more than 7,000 employees. CEO Christian Sewing said the bank’s headcount would fall “well below” 90,000 by the end of next year, down from 97,000 currently. Earlier reports had said the cuts might be as deep as 10,000. Wall Street Journal, Financial Times, New York Times

Alex Kraus/Bloomberg

Wall Street Journal

It's not happening: The trial balloon floated in the Financial Times about a potential Barclays-Standard Chartered merger was shot down by the Heard on the Street column. “The fact that these banks don’t overlap very much suggests they could fit together: but they don’t overlap precisely because each has bailed out of areas where the other is more focused,” the column said. “Even as a distraction in the conversation between Barclays and its investors it is hard to see this idea having any legs at all.”

Financial Times

Play fair: European banks want regulators to force technology companies to adhere to the same rules as banks if they offer similar financial services products, such as mobile wallets, which the banks argue are little different than deposits. “When a third party gets involved in the payments system, it is hard not to see a deposit-taking activity,” Jean Lemierre, chairman of France’s BNP Paribas, said at an Institute of International Finance conference. “The magic word here is ‘wallet’. For me ‘wallet’ is close to deposit, so [regulators] have to take a view on this.”

Elsewhere

Nice day's pay: Goldman Sachs made a $200 million profit in one day back in February by betting on a rise in the CBOE Volatility Index. The VIX jumped 116% on Feb. 5, its biggest one-day move on record, as stock prices plunged, according to CNBC.

Quotable

“Consumers should have more choices that are safe and affordable and banks should be part of the solution.” — Comptroller of the Currency Joseph Otting.