Wells Fargo issues new mea culpa; savings account skinflints?
Receiving wide coverage ...
Wells Fargo apologized again for its past failures and detailed the steps it has taken to address its problems in a new 100-plus page report. “While we have made strong progress in our efforts to rebuild trust, our work to improve Wells Fargo will never be done,” the bank said. The report “addressed problems and resulting changes to the bank’s culture, employee structure, risk management and board oversight.” Wall Street Journal, Charlotte Observer, American Banker
Goldman’s new suit
Goldman Sachs, which is already in hot water for its alleged role in the 1MDB scandal in Malaysia, is being sued by a former corporate customer for putting its own interests ahead of the client’s. United Natural Foods claims Goldman “improperly extracted more than $200 million” from it when the bank advised it during its $3 billion acquisition of the Supervalu grocery chain. United alleges that Goldman arranged a $2 billion financing in a way that hurt the company but benefited Goldman and its hedge fund clients who “had placed bets in the credit-default swap market against Supervalu. The company also accuses Goldman of taking advantage of the deal’s provisions to extract more money from United Natural.” Wall Street Journal, Financial Times
Wall Street Journal
Let’s get social
New York Financial Services Superintendent Maria T. Vullo said she will allow life insurers that do business in the state “to use data from social media and other nontraditional sources when setting premium rates, though the insurers will have to prove the information doesn’t unfairly discriminate against certain customers.” New York would be the first state “to set specific guidance governing how life insurers use algorithms to comb through everything from homeownership records to credit scores and internet use in an effort to size up an applicant’s risk. The regulator’s goal is to establish ground rules before the use of this information becomes more widespread.”
Off to a strong start
Visa reported adjusted net income of $2.98 billion for its fiscal first quarter ended December 31, up from $2.52 billion a year earlier, “driven by ongoing growth in payments volume as more consumers shift to cards from cash for making purchases.” Net revenue rose 13% to $5.5 billion.
The German government has unofficially endorsed plans to merge Deutsche Bank and Commerzbank “to create a national banking giant,” as have some big investors. “This growing acceptance within the political establishment and among some investors of a merger means the country’s two biggest banks may not fully control their own fates much longer.”
Rush to judgement
Banco Santander executive chairman Ana Botín said the bank rushed into offering its CEO job to former UBS banker Andrea Orcel before the financial details were “completely set,” only to later renege on the offer when it found out it would have to pay tens of millions of deferred compensation to Orcel. “Because of the level of the hire, there was a need to announce it early and at the time we didn’t have all the details ironed out,” Botín said at a press conference announcing the bank’s 2018 earnings. “When we saw the final figure — which at the time was not totally set — it was a figure that, given our values and the responsibility we have to employees and shareholders and society, was not one we could bear.” Orcel is now reportedly looking to sue the Spanish bank.
Barclays has won approval from London’s High Court to move €190 billion of assets to its Irish subsidiary because of “continuing uncertainty over . . . a ‘no deal’ Brexit,” paving the way for a “huge” transfer of assets to Barclays Bank Ireland. “The move by Barclays, which has been planned since 2017, means the bank can transfer ownership of its branches in European cities such as Frankfurt, Paris and Milan from the U.K. to Barclays Bank Ireland. It is the latest instance of a bank moving business out of the U.K. to prepare for a no-deal Brexit.”
A British payments company is suing Royal Bank of Scotland for freezing its accounts after the bank raised concerns to U.K. authorities about possible fraudulent activity by the company’s clients. “Banks are required to file suspicious activity reports, or SARs, to the National Crime Agency if they suspect a person or organization is involved in money laundering, terrorist finance or other suspicious activity.” The payments company, whose name is being withheld, said RBS breached its “fundamental obligations” to the client and failed to honor its banking mandate. RBS denies the claims.
Where’s the beef?
Even though the Federal Reserve has lifted interest rates to a range of 2.25% to 2.5%, the highest level in more than a decade, “America’s biggest banks are still paying savers almost nothing in interest.” For example, JPMorgan Chase is paying 0.01% on a basic saving account, “the equivalent of a dime a year for someone holding $1,000 at the bank.” Wells Fargo is also paying 0.01% while Bank of America is offering 0.03%.
“We acknowledge that we have not always met the expectations of some of our regulators in recent years and are working hard to address regulatory matters and rebuild trust.” — Wells Fargo.