Quarles’ regulatory vision; Shakeup at State Street

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A new tone: In his first public remarks since taking office, the Federal Reserve’s new vice chairman for supervision, Randal Quarles, said he wants transparency and simplicity in how the Fed oversees the banking industry. Speaking at a conference hosted by the Clearing House Association, Quarles “also said he believes changing the tone the Fed takes with bankers will be a key part of his impact after taking over from regulators appointed by the Obama administration,” the Wall Street Journal reports. Wall Street Journal, American Banker

Meanwhile, the search committee to find a replacement for New York Fed President William Dudley faces a delicate balancing act, the Journal reports. It must find “a senior executive with a keen knowledge of markets and economics, but who isn’t too close to Wall Street because he or she will be responsible for regulating some of the world’s biggest banks.”

“The new president would take over an institution more intensely scrutinized since the financial crisis, and criticized by some lawmakers and others as a lax supervisor before the turmoil and too slow to get tough afterward,” it added.

Wild times: CME Group, which last week said it will launch futures contracts on bitcoin by the end of the year, plans to impose limits on how much prices can fluctuate within a day. But CME “has never before dealt with something like bitcoin, which is notoriously volatile,” the Journal notes. “It is also unclear how much impact CME’s limits will have on bitcoin, since its futures market has yet to emerge and most trading in the digital currency is on exchanges outside of CME’s control.”

In China, trading in bitcoin and initial coin offerings continues apace, “suggesting authorities in Beijing are struggling to clamp down on cryptocurrencies just weeks after announcing that public exchanges would be shut down,” the Financial Times reports.

Wall Street Journal
It's all his: State Street’s top two executives, CEO Jay Hooley and President Michael Rogers, plan to retire “as part of a leadership shake-up,” the paper reports. Ron O’Hanley, who this week was named president and chief operating officer to replace Rogers, will also take over as CEO by the end of next year.

O’Hanley, who was previously in charge of State’s Street’s asset management business, joined the Boston bank in 2015 from Fidelity, where he was president of asset management and corporate services.

Cooking up crime prevention: The Treasury Department has put out a “recipe book” to provide American banks with a guide on how to prevent North Korea from evading economic sanctions. The guide, which shows how Pyongyang uses front companies, money laundering and other financial crimes to make money, “will make it easier for bank compliance officials to remain vigilant,” the paper says.

Rental worries: The recent steady rise in the homeownership rate is creating “jitters” in the residential rental market, the paper says. While still well below the 69% peak during the housing bubble, the homeownership rate rose to 63.9% in the third quarter, up from 63.7% in the second quarter and 63.5% a year earlier, as millennials have started to buy homes.

“The recent trend is causing analysts and investors to wonder whether the rental market’s good times are coming to an end,” the paper comments. “Investors pumped tens of billions of dollars into the sector during the recovery, building and buying apartment complexes and amassing large portfolios of single-family homes.”

Financial Times
Bad news for employees: Deutsche Bank CEO John Cryan hinted the bank could cut tens of thousands more jobs with technology allowing it to reduces costs. “We employ 97,000 people. Most big peers have more like half that number,” he told the paper.

Lowered guidance: Lending Club’s stock price plummeted more than 20% in after-hours trading on Tuesday after the marketplace lender lowered its revenue and profit guidance for the full year. “The weaker top and bottom lines suggest that the 11-year-old company is still struggling to develop a durable business model, having spent heavily on compliance, risk and technology systems in the wake of a governance scandal last May,” the paper says. On a positive note: loan originations rose.

“Particularly in the early stages and perhaps throughout my entire term, engaging on changing the tenor of supervision will probably actually be the biggest part of what it is that I do.” — Federal Reserve Vice Chairman for Supervision Randal Quarles.

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