Feds probe commercial mortgage fraud; Banks rail against Volcker 2.0

Wall Street Journal

Not good enough: The government’s proposal to ease the Volcker rule on banks “has instead drawn the industry’s ire.” The revamp “seeks to make it easier for banks to conduct allowable trades.” But lawyers representing 10 of the largest banks complained to the Federal Reserve last week the proposal “could complicate compliance and hamper trading in asset classes not currently covered by the rule.”

BankThink columnist Mayra Rodríguez Valladares says Volcker doesn't make the banking system safer.

Under investigation: The FBI, the Justice Department and the Federal Housing Finance Agency’s Inspector General are working on “one of the largest mortgage-fraud investigations since the financial crisis.” The probe, which is still in the early stages, “focuses on whether income from commercial properties was falsified, a move that would enable owners to get larger mortgages and take out cash or expand their businesses faster.”

Peeling the onion: The Financial Accounting Standards Board announced a new set of standards intended to help investors “see clearer and more up-to-date numbers about the financial health of U.S. life insurers. The changes, which take effect in 2021, will affect the way companies value their long-term insurance contracts like life insurance, long-term care policies and annuities.”

Financial Times

All the details: The U.S. Justice Department has released a “damning report” against Royal Bank of Scotland that shows “the extent of wrongdoing at the bank” that resulted in the nearly $5 billion settlement for selling toxic subprime mortgage-backed securities before the financial crisis. “There is no place for the sort of unacceptable behavior alleged by the DOJ at the bank we are building today,” said CEO Ross McEwan.

It ain’t over: Wells Fargo’s attempts to bury its past scandals have largely fallen on deaf ears — largely because they never seem to end, teh paper says. “There is a message in here for any big company trying to shrug off a hit to its reputation: However much you may think you are done with the past, the past is not done with you.”

“Saying sorry is one thing. But scandals are only over when customers say they are over,” says Ian Byrne, a social media analyst.

German engineering: Deposit Solutions, a German fintech startup that operates software that helps banks connect with retail clients, has raised $100 million in a financing round that values the company at more than $500 million, “highlighting investor confidence in Germany’s flourishing fintech scene.”

“German fintechs are coming of age and increasingly attracting international investors looking for growth stories,” said Christopher Schmitz, an analyst with EY. Deutsche Bank is one of the company’s customers.

Quotable

“I can’t imagine this aspect of the proposal being preferable to the original and current Volcker 1.0 regime.” — Gregg Rozansky, a senior vice president at the Bank Policy Institute, about the government’s proposal to revise the Volcker rule.