Will Q3 profits kill reg relief?; Protecting elderly depositors
Editor's note: Morning Scan will publish next on Nov. 26. Happy Thanksgiving from all of us at American Banker and SourceMedia.
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Let the good times roll
The banking industry earned a collective $62 billion in the third quarter, up 29% from the same period last year, the “latest indication that a decade after a global financial crisis that wiped out trillions in wealth, the country’s 5,400 banks have not just recovered but are even stronger.” Nevertheless, “the industry’s growing profits could complicate its efforts to secure more regulatory relief from lawmakers and regulators during the second half of President Trump’s term,” the Washington Post reports.
That said, on Tuesday, the Federal Deposit Insurance Corp. proposed a single 9% leverage ratio for banks with less than $10 billion in assets, “replacing a more complex set of requirements that applies to larger banks.” The FDIC also proposed raising the threshold for full appraisals in residential home deals to $400,000 from $250,000, “potentially easing a hurdle for getting home mortgages across much of the country.”
Rep. Maxine Waters, D-Calif., who is expected to chair the House Financial Services Committee in the next Congress will play a big role in determining how much regulatory relief banks get. “The primary approach she brings” to the role — "as a partisan or deal maker — will help determine the future of policies affecting the housing market, credit reporting, financial technology and more,” according to the Wall Street Journal.
Bring on the lawyers
An “international coalition of prominent class-action law firms” is preparing a lawsuit against Danske Bank to recover what it says are billions of dollars in investor losses stemming from the bank’s €200 billion money laundering scandal. “The move is the most serious civil case for damages so far against Danske and comes after shares in Denmark’s biggest bank have fallen by almost 50% this year as the scandal has intensified.”
An internal review at Deutsche Bank “suggests” the German bank handled about $150 billion of the suspicious transactions that ran through Danske. The findings, which “aren’t final and haven’t been made public,” are in line with figures mentioned by Danske Bank whistleblower Howard Wilkinson in parliamentary testimony in Denmark on Monday.
Wilkinson said the U.K. was the “worst of all” in fighting financial corruption. “The role of the UK is an absolute disgrace,” said Wilkinson, who is British. “Limited liability partnerships and Scottish liability partnerships have been abused for absolutely years.”
Meanwhile, federal prosecutors are looking into transactions at Mitsubishi UFJ Financial Group, Japan’s largest bank, for possible money laundering involving North Korea.
Wall Street Journal
Financial institutions are starting to monitor their older customers for mental capacity problems, which could make them susceptible to fraud. Which raises the question: “Once a financial institution suspects that a customer is becoming cognitively impaired or increasingly at risk of fraud, what does it do with this information?”
“A new breed of risk-takers” is looking to make money on mortgage loans that defaulted following the housing bust. Although lenders wrote off many of the loans, the borrowers’ obligations to pay remain, so “a rag-tag group of individual investors … is buying these old loans and trying to tease value out of them.”
“You can do incredible returns in this business,” said one investor, “and you can lose your shirt, pants and everything else if you do it wrong.”
Going, going …
Prices of digital currencies continued to plunge on Tuesday, with bitcoin falling to as low as $4,077, down nearly 80% from its all-time high of about $19,800 last December. On Monday, bitcoin fell below $5,000 for the first time since October 2017.
New York Times
On second thought …
Sweden’s move to a cashless society is proceeding so fast that financial authorities are worrying about possible consequences. “Cash is being squeezed out so quickly — with half the nation’s retailers predicting they will stop accepting bills before 2025 — that the government is recalculating the societal costs of a cash-free future. The financial authorities, who once embraced the trend, are asking banks to keep peddling notes and coins until the government can figure out what going cash-free means for young and old consumers. The central bank, which predicts cash may fade from Sweden, is testing a digital currency — an e-krona — to keep firm control of the money supply.”
“In consumer banking, you have what is one of the largest industries in the United States, in terms of profits, and at the same time one of the least disrupted industries, and the most unpopular with consumers. Those three things create a perfect storm for disruption.” — Andrei Cherny, the founder of challenger bank Aspiration.