High turnover Before the data breach at Capital One was made public last month, “employees raised concerns within the company about what they saw as high turnover in its cybersecurity unit and a failure to promptly install some software to help spot and defend against hacks, according to people familiar with the matter. The cybersecurity unit — responsible for ensuring Capital One’s firewalls were properly configured and scanning the internet for evidence of a data breach — has cycled through senior leaders and staffers in recent years, according to the people. About a third of its employees left in 2018.”
Financial Times
Stepping it up Monzo, the U.K.-based online bank valued at £2 billion, “has started offering loans to its current account customers, as it steps up efforts to become profitable and challenge high street lenders. The move into customer loans marks a major step in the company’s attempts to increase revenues and move toward sustainability. It had previously dismissed the importance of customer lending, focusing instead on earning fees by recommending products from other providers.” The company is offering loans between £200 and £15,000.
A year ago, the paper suggested, Monzo wasn’t really a bank. “Instead, it seemed to be building a popular current account service which would eventually help it earn commissions through selling financial products from other providers. But now, there’s a serious risk of a bank breaking out.”
Monzo is just one of the many fintechs attempting to eat banks’ lunch. There’s also Apple, N26, Square, Revolut and PayPal.
“The damning thing for traditional banks is not that they can be outgunned by Apple but that — despite all their resources and expertise — they can still be outclassed by a few kids with a nicely designed app. There is little particularly revolutionary in most of the challengers’ technology. But like the analogue film manufacturers who had the ability to switch to digital but failed to invest, the banks seem to be having their Kodak moment.”
But “the battle is far from over. The embarrassing fact for the entire fintech industry is that is has failed to take significant share of core banking activities despite a decade of a benign credit environment with banks hampered by their recovery efforts after the 2008 crisis. Many of the newcomers are plagued by poor customer service and attract the attention of regulators for weak controls. As the cycle finally turns, there will be more serious casualties and perhaps an opportunity for traditional banks to eat up some of the new companies at more appetizing prices.”
On board Deutsche Bank has named Jürg Zeltner, formerly UBS’ head of wealth management, to its supervisory board “as the troubled lender embarks on a radical overhaul to reduce its reliance on trading and boost income from other sources such as private banking.” Zeltner will succeed Richard Meddings, the chairman of U.K. bank TSB, who stepped down last month.
Another one bites the dust The European Central Bank closed down PNB Banka, Latvia’s sixth largest bank, after ruling it insolvent, “dealing another blow to the country’s scandal-hit banking system.” The bank, previously called Norvik Banka, “was a vocal critic of the Baltic country’s financial authorities.” In April, Latvia’s banking regulator asked the ECB to “take over supervision of PNB after the bank launched a legal challenge against the Baltic country’s financial watchdog in an international arbitration court — making domestic supervision of it difficult.”
New York Times
Tracking opioid profits New York State Attorney General Letitia James is issuing subpoenas to 33 financial institutions and investment advisers with ties to the Sackler family, the owners and founders of Purdue Pharma, which is “widely seen as playing a central role in creating the opioid epidemic.” The action by the attorney general is “part of an aggressive effort to track billions of dollars that prosecutors claim the family siphoned out of Purdue Pharma to hide profits gained from the company’s opioid painkillers. The recipients of the subpoenas ranged from major Wall Street firms to obscure offshore holding companies as well as two family investment offices and four individual advisers.”
Letitia James, the New York state attorney general, had sued Citibank in January and argued it should be liable for reimbursing customers whose scams involved wire frauds.
Andrew Harrer/Bloomberg
Quotable
“Safeguarding information is essential to our mission and to our role as a financial institution. We’ve invested heavily in cybersecurity and will continue to do so.” — A Capital One spokeswoman, responding to allegations that the bank was unprepared for last month’s data hack
At a time of mild or nonexistent loan growth, middle-market borrowers in the Lone Star State are providing a boost to Fifth Third Bancorp and Huntington Bancshares.
New details have emerged about the negotiations that culminated in Capital One's blockbuster $35 billion agreement to acquire Discover. At one point last December, the two parties broke off discussions, according to a securities filing.
According to the Federal Reserve Board's latest financial stability report, persistent inflation and policy uncertainty are the primary worries for banks. Survey respondents expressed heightened anxiety over murky policy outlooks due to geopolitical turmoil and rapidly approaching domestic elections.
The Alabama regional lender says it expects expenses to taper off this year and anticipates challenged loans will gradually rise to historically average levels.
Truist Financial's top executive leadership team announces departures; First Horizon's chief credit officer is retiring; Ferry teams with Highnote to roll out a new Visa-branded payroll card; and more in the weekly banking news roundup.
The Dallas-based regional bank tapped a client for its co-pilot capabilities, where employees can message a bot instead of a human to get tech assistance.
