Trump to meet with Wall Street CEOs; Scharf pledges urgent reform

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New direction

Wells Fargo CEO Charles Scharf told the House Financial Services Committee Tuesday the bank “engaged in ‘deeply disturbing conduct’ but is charting a new path to move past its years long sales-practices scandal,” the Wall Street Journal reports.

“We need to run the company fundamentally differently than we have in the past,” said Scharf, who joined the bank in November and has “bluntly and repeatedly criticized the way the bank was run,” the paper says. “Just because the company has not been well run does not mean it can’t be well run.”

“In a hearing that lacked the kind of table-pounding anger from lawmakers that punctuated his predecessors’ appearances, Mr. Scharf said appeasing the bank’s regulators was his top priority,” the New York Times says. “He acknowledged that the bank’s efforts to reform itself had been stumbling and incomplete — and said that was changing.”

“The sense of urgency that people are working with inside the company is very different today than it was four months ago,” he said.

“You must not only rebuild this institution; you must also rebuild America's trust in it, and that begins with your testimony today,” Rep. Maxine Waters, D-Calif., the committee chairman, told Scharf, according to American Banker.

“I wish you luck,” Waters told him, the Washington Post reports. “It is clear to this committee that the bank you inherited is essentially a lawless organization that has caused widespread harm to millions of consumers throughout the nation.”

In addition, in what she called a “potential violation of a federal criminal statute,” Waters “asked the Justice Department to investigate statements former Wells Fargo CEO Tim Sloan made to the committee last year, which the committee called ‘inaccurate and misleading.’”

Coronavirus latest

President Trump “has summoned some of America’s most senior bankers to an emergency coronavirus meeting on Wednesday as global lenders scramble to respond to the threat the outbreak poses to business and the economy,” the Financial Times reports. “The White House would not confirm who was invited, but people familiar with the situation said that Goldman Sachs chief executive David Solomon, Wells Fargo boss Charlie Scharf and Citigroup chief executive Mike Corbat plan to attend. So does Gordon Smith, co-president of JPMorgan Chase, whose chief executive Jamie Dimon is recovering from emergency heart surgery.” Financial Times, New York Times

In the U.K., some of the country’s biggest banks “have introduced measures to provide relief to customers affected by the coronavirus outbreak, ranging from mortgage holidays to fee-free refinancing,” the FT says. For example, Royal Bank of Scotland, which is majority owned by the government, “said it would allow individual borrowers to defer mortgage and loan repayments for up to three months.”

“Other U.K. banks including Lloyds Banking Group, Barclays and TSB announced some measures on Tuesday to help customers who may not be able to keep up with loan repayments if they were to lose pay as a result of the virus.” Lloyds, the U.K.’s largest lender, “said it had set aside up to £2 billion to be used to support smaller British businesses, including offering loan repayment breaks,” the paper says.

Italy, which is under quarantine, “is planning to introduce a large-scale moratorium on debt repayments, including mortgages, to help families and businesses cope with the coronavirus outbreak,” the Journal reports. “All mortgages will be suspended, as well as repayments of small loans and revolving credit lines that companies use to have enough liquidity,” Deputy Economy Minister Laura Castelli said.

“We have pushed the banking system a lot to help as much as they can and we got full collaboration,” she said in a radio interview. “Relieving consumers and business from paying back debt could cushion the economy but complicates how Italy’s fragile banking system copes with the loss of revenue,” the Journal comments.

Treasury Secretary Steven Mnuchin “convened a call of top federal regulators Tuesday to review financial markets’ resilience in the face of potential economic disruptions from the new coronavirus,” the paper says. “Participants on the call included Federal Reserve Chairman Jerome Powell, New York Fed President John Williams and Randal Quarles, the Fed’s vice chairman for regulation. Others included the heads of the Securities and Exchange Commission, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Commodity Futures Trading Commission.”

Wall Street Journal

Evading caps

High-cost lenders are collaborating with banks in so-called “rent-a-bank” partnerships in order to “skirt interest-rate caps in dozens of states.” These “arrangements are the focus of a fierce battle pitting state regulators and consumer advocates against the credit industry.”

“Here’s how they typically work: A lender identifies borrowers to whom it wants to lend at rates above what their states permit. It makes a deal with a bank in another state, where such rates are allowed, to put up the money. Then the bank sells the lion’s share of the loan to the lender or a company connected to the lender.”

Financial Times

Experience

HSBC named Jamie Forese, the former head of Citigroup’s investment bank, as a director, “adding an experienced U.S. banker to its board as it seeks to turn around its struggling North American business.”

“One person briefed on the appointment of Mr. Forese, who will join the board on May 1, said his experience would help HSBC as it attempts to revive its stuttering U.S. business. Until Mr. Forese’s appointment, none of the bank’s directors had significant experience of the U.S. banking industry.”

Fessing up

Swedbank is planning to self-report “586 transactions totaling $4.8 million that could have broken U.S. sanctions, a potential trigger for American fines. More than 500 of the potential breaches related to salary payments and transactions covering the operation of a ship in Crimea — subject to U.S. sanctions — from Swedbank branches in the Baltics, the lender said on Wednesday.”

“This shows that the bank’s process for know-your-customer, transaction monitoring, and internal governance and control have had shortcomings,” said Jens Henriksson, CEO of Sweden’s oldest bank. “At the same time, it is some relief that it regards a relatively low amount and transactions such as salary payments.”

Quotable

“For the life of me, I don’t know why you took this job.” — Rep. Gregory W. Meeks, D-N.Y., a member of the House Financial Services Committee, to Wells Fargo CEO Charles Scharf