Staying: The U.K.’s Financial Conduct Authority and Prudential Regulation Authority ruled Barclays CEO Jes Staley didn’t show a “lack of integrity” when he tried to unmask a whistleblower at the bank, so he will get to keep his job. He was fined an undisclosed sum. The decision ends “a year of instability for the CEO and draws a line under a major unknown that has weighed on Barclays as it looks to push on from a major restructuring.” Wall Street Journal, Financial Times, New York Times
Receiving Wide Coverage ...
Is today the day?: The $1 billion Wells Fargo settlement may be announced Friday. The Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency claim the bank improperly charged customers in its mortgage and auto loan businesses. The settlement may include “increased regulatory scrutiny of the bank’s compensation to employees responsible for its sales practices,” the Wall Street Journal says.
“The unusually large penalty shows how the Trump administration is prepared to punish financial companies for misconduct — even as it seeks to loosen financial regulations,” the Financial Times comments.
Indeed, “the consumer bureau is carrying out both agendas,” the New York Times says. The agency’s interim director, Mick Mulvaney, “has pushed aggressively for the penalty against Wells” while “simultaneously working to defang the consumer bureau,” which he has criticized for “wasteful spending and overzealous oversight.”
An admitted “harsh critic” of Wells’ previous management, Times columnist James B. Stewart, wonders, “Has Wells Fargo been punished enough?” “At this point it’s hard to imagine what more Wells Fargo can do (or how much more it can spend) to make amends,” he writes.
But there may be even more penalties to come, American Banker reports.
Regardless of the CFPB’s expected harsh action against Wells, several states are looking to fill what they believe is a void in holding big financial services companies responsible in the event of wrongdoing. “We haven’t got involved in any new investigations by the CFPB, but on the state side we’ve seen an enormous increase,” said Alan Kaplinsky, a partner at Ballard Spahr, which specializes in defending financial institutions.
Wall Street Journal
Inflation?: The six biggest U.S, banks collectively reported strong increases in their return on equity ratios in the first quarter, possibly “a long-awaited sign that they’re finally able to focus on growth again.” But, the paper asks, were those ratios inflated by last year’s tax reform?
“A significant chunk of the strength stemmed not from growth in the banks’ operations, but from the sharply lower tax rates they’re now enjoying,” the paper says. The big six banks had an average ROI of 13% in the first quarter, up from 10.1% a year earlier. “But that 13% would have been 11.8% without the earnings boost” from the $2.8 billion windfall they received from tax reform.
Financial inclusion: More than a billion adults worldwide have gained access to financial services since 2011 “as the internet and mobile phones increasingly connected far-flung communities to the global financial grid,” according to a World Bank report. The percentage of adults with an account at a bank or mobile provider grew to 69% last year, up from 62% in 2014 and 51% in 2011. The largest number of new bank customers came from South Asia.
Schmoozing: Supporters of cryptocurrencies in Silicon Valley are trying to convince the Securities and Exchange Commission to limit its oversight of the fledgling industry. Tech industry officials have “hired top political and legal talent to lobby and sing the praises of voluntary standards that could stave off official regulation, while forming trade groups and playing up blockchain as a transformative technology.”
Oops: Deutsche Bank said an “operational error” caused it to accidentally transfer €28 billion — about €4 billion more than its entire market value — to one of its accounts at a German stock exchange shortly before Easter. The bank said the “error was identified within a matter of minutes, and then rectified. We have rigorously reviewed the reasons why this error occurred and taken steps to prevent its recurrence.”
“While there was no financial loss to the bank as a result of the €28 billion blunder, it does heap further scrutiny on Deutsche’s risk systems which have let the bank down before,” the paper says. This comes the day after chief operating office Kim Hammonds, who was responsible for overhauling “Deutsche’s creaking IT systems,” was said to be leaving the bank.
“Prudence would argue for waiting until we have tested how the new framework performs through a full cycle before we make judgments about its performance.” — Federal Reserve Governor Lael Brainard arguing against rolling back bank liquidity requirements.