Wells board members quit; BofA quizzing clients on virus

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Wells board members resign

Wells Fargo said its board chairman Elizabeth Duke and another board member, James Quigley, have resigned. The two “were among the Wells Fargo executives scheduled to appear before the House Financial Services Committee this week in Washington.” The head of that committee, Maxine Waters, had earlier called for their resignations.

Wells said Charles Noski, “who joined the board in June 2019, will now serve as chairman.” He is a retired vice chairman and former chief financial officer of Bank of America. Duke had been chairman since January 2018 and was vice chairman from October 2016 through December 2017.
Wall Street Journal, Financial Times, New York Times

Bloomberg News

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Risky business

Faith in banks “has evaporated with the coronavirus-inspired yield collapse.” Bank stocks in the S&P 500 are down nearly 23% in the last month, nearly twice as much as the broader index. “Despite banks’ higher capital levels and efforts to shift into steadier businesses, the lesson appears to be that markets still judge them to be much more at risk than other companies in an economic downturn,” the Wall Street Journal says.

“None of this is to say that banks are necessarily doing a bad job at being banks. The risk of bank failure remains remote, and stronger banks like JPMorgan Chase may have the resources to take advantage of others’ struggles to ride out the storm and grab market share to boost future returns," the paper adds. "But banks are still banks. Despite the many things that have changed about the industry, the fact remains that, over a full cycle, bad times can be especially bad for them.”

The “investor consensus is that there will be very little profit growth, and possibly profit declines, in the industry’s Fed-dominated future,” the Financial Times writes.

Also, the coronavirus is impacting the short-term markets. “Banks and other firms are growing cautious operating in short-term markets, a sign of the financial stress brought on by the coronavirus epidemic," the Journal notes. "Investors and bankers are concerned enough that they are studying options the Fed could take to ease jumpy markets that go beyond rate cuts. Many traders believe such cuts are an inadequate tool to fix a problem rooted in short-term supply chain shocks that could leave companies short of cash to make payments on debt and other obligations.”

Wall Street Journal

Interim bosses

As Jamie Dimon recovers from last week’s emergency heart surgery, JPMorgan Chase will be run by Daniel Pinto and Gordon Smith. “Mr. Smith, who runs JPMorgan’s consumer bank, and Mr. Pinto, the head of its corporate and investment bank, have been at Mr. Dimon’s right hand since January 2018, when he named them co-presidents and laid the foundation for a succession plan that was set in motion Thursday. For now, it is a temporary arrangement. But should his illness cause Mr. Dimon to step down for good, Messrs. Pinto and Smith are at the top of the list to replace him,” the paper says.

“The two men have long been considered potential successors to Mr. Dimon, should he retire in the near term. Mr. Dimon has given no indication he is ready to step down; earlier this year, he said he had about five years left in the job. Yet if Mr. Dimon’s sudden illness accelerates his plans, it could put the co-presidents in contention to take over permanently as co-CEOs.”

Stepping down

Michael McKenna, the National Credit Union Administration’s general counsel and ethics officer, “abruptly retired” last November “when confronted with allegations that he drank and visited strip clubs with his deputy during work hours,” according to a report by the agency’s Office of Inspector General that was released on Friday. “Mr. McKenna and his deputy, Lara Daly-Sims, visited strip clubs seven times between February 2017 and December 2018, including four visits to a club in the District of Columbia. The visits lasted three to four hours, including travel time, and typically involved heavy drinking, the report said. A lawyer for Ms. Daly-Sims, Cathy Harris, said the investigation had been prompted by her client’s complaints that she was sexually harassed by Mr. McKenna.”

“The report represents more unwelcome attention for the NCUA, a little-known agency based in Alexandria, Va., that has been criticized by Republicans and Democrats in Congress for lax oversight of federally insured credit unions.”

Money quarantine

The Federal Reserve’s 12 regional reserve banks have begun holding dollars they receive from Asia for at least seven to 10 days before recirculating them “amid concerns over the spreading coronavirus outbreak. The Fed’s action follows moves by central banks in China and South Korea to quarantine bank notes in domestic circulation,” the paper says.

“In Europe, the heavy use of cash in Italy and other countries exposed to the coronavirus, and the use of a single currency across a region with a population of nearly 350 million people, is raising concerns that euro bank notes could transmit the infection.” But “so far there is no evidence of the coronavirus disease having been spread via euro bank notes,” an ECB spokeswoman said.

Financial Times

Rise and fall

Yes Bank, which was seized by the India's central bank last week, “was the most ambitious and aggressive of all the private banks set up during India’s go-go-years early in the new millennium,” the paper reports. “Yes Bank had a reputation for taking risks spurned by India’s more conservative private lenders. Initially the scale of its ambitions — as embodied by flamboyant managing director Rana Kapoor — made it a darling among foreign investors, who provided Yes with a tide of growth capital as they looked to bet big on India’s economic ascent. But as India’s economy deteriorated in recent years, Yes Bank’s outsized risk appetite proved a major vulnerability,” the paper says.

“Early on Sunday morning, Mr. Kapoor was arrested by agents from the Enforcement Directorate, the government agency responsible for investigating financial crimes such as money-laundering and fraud.”

Is there a better way?

The acquittal of three senior Barclays bankers charged with fraud following a nine-year investigation and prosecution by the U.K.’s Serious Fraud Office “has renewed calls for reform of laws over white-collar crime,” the paper says. “The lack of prosecutions of senior bankers — arising out of events during the financial crisis — has unleashed public anger on both sides of the Atlantic. But the clean sweep of acquittals — which mean that no U.K. bank boss has been convicted or jailed over actions taken in the financial crisis — throws up wider questions about the U.K.’s ability to prosecute allegations of white-collar crime at the highest levels."

Cost cutting

"Citigroup, one of the largest dealers in the $6.6 trillion-a-day foreign exchange market, has confirmed it is severing ties with nearly two-thirds of the trading platforms it uses as part of an effort to cut costs. Citi expects to save millions of dollars as a result. Citi’s move comes after years of shrinking margins and growing complexity in currency trading, with banks spending increasing amounts on linking their own systems to those of third-party platforms.”

Elsewhere

Risk assessment

Bank of America “is asking clients about their coronavirus exposure and preparations as part of its evaluation process of which deals to underwrite,” Reuters reports. “The additional layer of risk assessment is aimed at helping prevent the bank from losses on deals, like bond issuances.”

“Lower interest rates fueled by the Federal Reserve’s emergency rate cut on Tuesday has increased corporate appetite for issuing and refinancing debt. Total debt deals totaled $30 billion in the first week of March compared with roughly $90 billion in all of February.”

Quotable

“As the markets face increasing volatility, a strong Wells Fargo is needed now more than ever. We believe that our decision will facilitate the bank’s and the new CEO’s ability to turn the page and avoid distraction that could impede the bank’s future progress.” — Elizabeth Duke and James Quigley, announcing their resignations from Wells Fargo’s board of directors