Banking

Soccer fans diss JPMorgan Chase; another Libor alternative ramps up

Receiving Wide Coverage …

The heads keep rolling

Credit Suisse “said two executives in charge of its prime brokerage unit will leave in the wake of its $4.7 billion loss from the collapse of hedge fund Archegos Capital Management,” the Wall Street Journal reported. “Their departures come after Credit Suisse pushed out its top risk officer and the head of its investment bank this month. Several other employees working in equities and risk management also left.”

“They are the latest in growing list of senior and mid-level executive departures as the bank reels from twin crises involving Archegos Capital and supply-chain finance company Greensill Capital,” the Financial Times said.

“The succession of crises have left investors and stafffurious and demanding answers,” the FT says. “How did executives become so enthusiastic about a small group of dubious clients? And why were those raising red flags ignored or marginalized?

Wall Street Journal

Libor man

Financial industry pioneer Richard Sandor, “who helped create interest-rate futures in the 1970s and launched his own replacement for the London interbank offered rate in 2019, is ramping up his efforts to compete in the race to replace the scandal-marred short-term interest-rate benchmark. Mr. Sandor is expanding offerings to include one-month and three-month borrowing rates. Ameribor is set on the American Financial Exchange, which was founded by Mr. Sandor and is where banks lend to each other through mutual lines of credit. Some small and medium-size lenders favor Ameribor because it changes with their funding costs.”

“The benchmark poses a challenge to the Secured Overnight Financing Rate, the Libor alternative preferred by many Wall Street banks and regulators and which currently only offers an overnight rate. Major U.S. corporations and regional banks have been clamoring for longer-term rates before they choose a new benchmark.”

Climate czar

The Treasury Department named John E. Morton to “lead a newly formed climate hub. He will report directly to Treasury Secretary Janet Yellen and focus on financing for investments needed to reduce carbon emissions. The move is part of the Biden administration’s effort to address climate change and its impact on various industries. The Treasury Department and Federal Reserve have said they want to better understand risks to financial stability and the economy emanating from climate change.”

Facilitator

Brian Brooks, the former acting head of the Office of the Comptroller of the Currency under President Trump, isset to become CEO of Binance, “one of the world’s biggest bitcoin exchanges, in the latest move by a cryptocurrency company to deepen its ties to Washington.”

“During his time at the OCC, Mr. Brooks was dubbed the “CryptoComptroller” on social media for his friendly attitude toward digital currencies. Under his watch, the OCC released guidance clarifying that banks could provide cryptocurrency custody services and use stablecoins to facilitate payment activities, moves that helped make it easier for traditional financial institutions to get into crypto.”

Financial Times

On second thought

Barclays “has pulled out of underwriting an $840 million debt deal by CoreCivic to fund the building of two prisons in Alabama, after the bank came under scrutiny for its involvement. Barclays said in a statement on Monday it had advised clients that it would no longer underwrite the transaction. The bond sale was originally slated to price on April 15, before investment banks working on the deal postponed it until Monday after criticism by some investors.”

“While our objective was to enable the state to improve its facilities, we recognize that this is a complex and important issue,” the bank said. “In light of the feedback that we have heard, we will continue to review our policies.”

Digital investment

Goldman Sachs “has invested £50 million in U.K. digital bank Starling, as the start-up looks to ramp up growth and bring in significant investors ahead of an eventual initial public offering. The investment by the Wall Street bank — which has been working on its own digital retail offering — follows speculation last year that Starling could be a takeover target and had attracted interest from rivals such as JPMorgan Chase. However, Starling’s chief executive Anne Boden has repeatedly said that she intended to take the bank public,” possibly in late 2022 or early 2023.

Boden predicts “cash will disappear” over the next dozen years, its demise accelerated by the pandemic, Boden told the FT.

Capital inflation

The European Central Bank says “the biggest eurozone banks have repeatedly been too optimistic in their risk-modelling,” which “has wiped out a chunk of their capital ratios. The findings of the review appear to confirm longstanding suspicions among regulators and analysts that larger banks have often artificially inflated the strength of their balance sheets by underestimating the riskiness of their assets, giving them a short-term advantage over more cautious rivals.”

“The central bank, which supervises the largest 115 eurozone banks, discovered more than 5,800 deficiencies in how 65 of the biggest lenders used internal models to calculate their capital requirements.”

Charged

Germany’s financial watchdog BaFin “has filed a criminal complaint against Deutsche Bank supervisory board member Alexander Schütz over alleged insider trading of Wirecard shares. Schütz, a close confidant of former Wirecard chief executive Markus Braun, has already announced that he will step down from Deutsche’s board next month. BaFin suspects he used inside information on several occasions in 2019 and 2020 when trading Wirecard shares, according to people with first-hand knowledge of the matter.”

New York Times

Yankee go home

European soccer fans, “known for their intense passion for the sport, are aiming their ire at JPMorgan Chase for backing the so-called Super League” comprised of a dozen top clubs from England, Italy and Spain. “The notion of a closed continental competition featuring a set group of teams has been explored before, but the seriousness of this proposal was underlined by more than $4 billion in financing from JPMorgan.”

“A theme of the ire from fans in Britain, in particular, was that the move represented another step in the foreign takeover of the game, especially by American interests. The Wall Street bank will lend to clubs controlled by American owners, like Arsenal, Liverpool and Manchester United — three of the six English clubs that are founding members of the proposed league.”

Quotable

“If your bank is @jpmorgan you simply have to move your money elsewhere. Say NO to the #SuperLeague.” — A soccer fan urging others to withdraw their money from JPMorgan Chase, which is putting up $4 billion to finance a European “Super League,” which many fans oppose.



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