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Wells CEO regrets 'insensitive comments'; JPMorgan nears deal to pay $1B fine

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Mea culpa

Wells Fargo CEO Charlie Scharf apologized to employees for saying in a June 16 memo that “the unfortunate reality is that there is a very limited pool of Black talent to recruit from with this specific experience.” Those comments drew a backlash from some bank employees and others in the industry.

“I apologize for making an insensitive comment reflecting my own unconscious bias,” Scharf said Wednesday. “There are many talented diverse individuals working at Wells Fargo and throughout the financial services industry and I never meant to imply otherwise. It’s clear to me that, across the industry, we have not done enough to improve diversity, especially at senior leadership levels. And there is no question Wells Fargo has to make meaningful progress to increase diverse representation.” Wall Street Journal, Washinton Post

Wells Fargo has taken a series of steps to increase workforce diversity, but blowback over Scharf’s initial comments “has raised questions about whether those initiatives have been dealt a serious blow,” American Banker’s Allissa Kline reports.

Separately, Citigroup said it plans to “set aside more than $1 billion to support initiatives that help close the racial wealth gap and increase economic mobility for people of color,” Reuters reported. “The Wall Street bank said the three-year initiative will include programs that would provide greater access to banking and credit in communities of color, increase investment in Black-owned businesses and expand homeownership among Black Americans.”

Close to a deal

JPMorgan Chase is close to reaching an agreement with federal prosecutors and regulators to pay a $1 billion fine “to settle civil and criminal charges that its traders rigged futures and securities markets,” the Wall Street Journal reported.

“A year ago, three men who had worked for the bank’s metals unit were arrested and charged in the probe. The indictment charged all three with crimes including racketeering, a claim that is more typically found in cases against organized-crime entities. Prosecutors later charged a fourth JPMorgan employee who worked with the bank’s hedge-fund clients.”

“The proposed settlement would allow the bank to avoid prosecution over the alleged activities and end investigations by the Department of Justice, the Securities and Exchange Commission and the Commodity Futures Trading Commission into the bank’s culpability for spoofing by its traders in gold, silver, other metals and U.S. government bonds,” the Financial Times said. “Two people familiar with the situation said that the settlement would not result in any restrictions on JPMorgan’s trading or operations. One of the people said the bank was negotiating a deferred prosecution agreement, which allows banks to continue with their activities as long as they fulfil certain conditions.”

Wall Street Journal

Digital focus

The Federal Reserve and its regional banks “are researching how the central bank could offer its own full electronic currency, and that these efforts have come under greater focus due to the pandemic and its big impact on how consumers and businesses pay for goods and services during the crisis,” Cleveland Fed President Loretta Mester said.

“The demand for and use of such instruments need further consideration in order to evaluate whether such a central bank digital currency would allow for quicker and more ubiquitous payments in times of emergency and more generally,” Ms. Mester said. “A range of potential risks and policy issues surrounding central bank digital currency need to be better understood, and the costs and benefits evaluated.”

Where is the love?

The third quarter wasn’t as bad as many bank executives had feared, especially in investment banking and trading. “Clients remained active through the normally dull July and August, and September delivered a fresh bout of market volatility.” But they’re still not getting any love from the stock market.

Financial Times

Goldmine

Global banks “are set to report bumper profits from gold and silver trading this year following a record-breaking price rally and the disruption to global supply chains triggered by coronavirus. Precious metals revenues at the world’s 50 largest investment banks are set to double this year to a nine-year high of $2.5 billion, concentrated among a handful of banks.”

“Analysts say the surge in revenue stems from a sharp rise in interest among investors for exposure to gold — either as a hedge or as a bet on rising prices — and rare anomalies thrown up by disruptions to global gold deliveries.”

Record AML fine

Westpac, Australia’s second-largest bank by market capitalization, “has agreed to pay the largest fine in Australian corporate history to settle a case linked to money laundering, in which it emerged the bank may have facilitated child exploitation by pedophiles.” The bank said “it had reached a deal with regulators to pay a civil penalty worth A$1.3 billion ($920 million) to settle a legal action over its failure to properly report millions of transactions. Westpac admitted that it had not carried out customer due diligence in relation to suspicious transactions with ties to possible child exploitation, according to a statement by Austrac, the financial crimes regulator.”

Elsewhere

No deal

The chairmen of UBS and Credit Suisse “supported a merger of equals between Switzerland’s two largest banks during discussions earlier this year,” although talks between the two have since “stagnated,” a Swiss magazine said.

“The details reported by finance periodical Bilanz suggest that a merger between Credit Suisse and UBS had been more seriously considered than previously known, receiving backing from both parties,” Reuters said. “However, discussions had dropped off since the summer holidays amid a drop in Credit Suisse’s share price placing the banks’ respective valuations beyond the merger of equals threshold.”

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