Preparing banks for climate change; Swaps rules ease considered

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Text, don’t call
The Consumer Financial Protection Bureau proposed an update to its rules that “is expected to spur a shift in how the debt-collection industry operates,” the Wall Street Journal says. “The proposed rule would prohibit debt collectors from making more than seven attempts to collect a specific debt by telephone a week,” then wait a week to call again if a conversation takes place. “The limit doesn’t apply to email or text messages, but consumers could opt out of any of the communication methods.”

“Bothering consumers with phone calls is going to get a lot more difficult,” said Ohad Samet, a third-party debt collector. “It is going to drive significant technology investments.”

“This digital-first approach has alarmed consumer advocates who worry that the CFPB could give an industry known for high pressure tactics a new way to violate consumers’ privacy,” the Washington Post comments. “While many Americans understand how to deal with a pesky creditor calling their landline, their texts, emails and social media are new and more personal territory.” Wall Street Journal, New York Times, Washington Post, American Banker

Crypto heist
Binance, a large cryptocurrency exchanges, said hackers stole 7,000 bitcoins worth more than $40 million from its platform, about 2% of its bitcoin holdings. “The theft offers another example of the vulnerability facing cryptocurrencies and the venues where investors trade them,” the Wall Street Journal says. Wall Street Journal, Financial Times

Wall Street Journal

Eye on the weather
The Federal Reserve will “use its authorities and tools to prepare financial institutions for severe weather events” tied to climate change, Fed Chair Jerome Powell said. Powell was responding to a letter from Sen. Brian Schatz, D-Hawaii, who had urged the Fed “to manage climate-change risks to the financial system and to prepare the banks it supervises for similar contingencies.”

Lower exposure
Bank regulators are considering easing rules that would free up about $40 billion of collateral banks must set aside against certain derivatives trades going bad. “At issue is how much collateral, or margin, one unit of a bank must collect at the start of a swap transaction with another affiliate of the same firm. Banks have long sought to exempt trades with their own affiliates from having to comply with the collateral requirements. They argue transactions between different parts of the same institution are designed to centralize risk internally without increasing a firm’s overall exposure to risk.”

Financial Times

They're back
Interest-only mortgages are surging in popularity with commercial landlords across the U.S., fueling fears of a return to crisis-era loose lending and a spike in defaults if the economy takes a dip,” the paper reports. Interest-only mortgages accounted for 77% of commercial mortgage-backed securities sold in the first quarter, up from 68% in the year earlier period. “Combined with partial interest-only loans, which allow borrowers to pay just the interest for an initial period, the total reached 89% of loans backing new CMBS in the first quarter, the highest level since 2009.”

“The growth of interest-only mortgages is a sign of more intense levels of competition within the industry, said analysts, where regional banks are battling with private equity firms and insurance companies to build market share.” Regional banks now account for 17% of all new commercial mortgages, up from 11% six years ago.

It’s a deal
Federated Investors has agreed to pay $52 million for $14 billion in investment funds from PNC Financial. “The modest deal price reflects the fact that $9 billion of the assets sit in three PNC government and treasury money market funds which generate low revenues.”

Vote no
A second proxy advisor is urging Deutsche Bank’s shareholders to vote against the bank’s management and supervisory boards to hold them “accountable for many years of substantial monetary and representational costs.” ISS joined fellow shareholder advisor Glass Lewis in urging investors to vote against the boards at the bank’s annual meeting on May 23.

Danske Bank’s former CEO Thomas Borgen has been charged by Danish economic crime prosecutors, “the first senior manager of Danske to be charged in one of the largest money-laundering scandals ever seen.” Borgen, whose house was raided on March 12, has been indicted and “a person familiar with the investigation confirmed to the Financial Times that Mr. Borgen had been charged with failure to prevent certain transactions.” Borgen resigned last September and has yet to be replaced.

London calling
Facebook’s effort to add a payments function to its WhatsApp messaging service will be centered in London, the company said, “boosting the city’s hopes of becoming a global fintech hub.”


“The interest-only phenomenon is a late-cycle indicator and definitely a red flag. When you are just rolling your debt and not paying principal, you are on the road to perdition.” — Christopher Whalen, chairman of Whalen Global Advisors, on the recent trend of interest-only commercial mortgages.

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