Google to partner on checking accounts; Wells pushes for rebates

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Google, Citi partnership

Google is planning to offer checking accounts to consumers early next year in partnership with Citigroup and a Stanford University credit union. “Google’s approach seems designed to make allies, rather than enemies,” with financial services companies, whose brands “not Google’s, will be front-and-center on the accounts,” the Wall Street Journal reports. “And Google will leave the financial plumbing and compliance to the banks — activities it couldn’t do without a license anyway.”

“Our approach is going to be to partner deeply with banks and the financial system,” Google executive Caesar Sengupta told the paper. “It may be the slightly longer path, but it’s more sustainable.”

Wall Street Journal

Rate cap sought

Lawmakers in the House and the Senate introduced legislation Tuesday that would cap interest rates on consumer loans at 36%, “a move that worries the payday and online-lending industries. A rate cap of 36% would effectively eliminate traditional payday loans, which often charge interest rates exceeding 300%, as well as many installment loans offered online.” Rep. Glenn Grothman. R-Wis., co-sponsor of the House bill, “said he expects the bill to soon get a vote in the House Financial Services Committee, but it isn’t clear what chances the measure has in clearing Congress.”

“I do worry about this becoming a national rate-setting effort,” said Mary Jackson, CEO of the Online Lenders Alliance, an industry group. “It’s a terrible policy that is not based on research to understand the impact on consumers.”

Chris Peterson, director of financial services at the Consumer Federation of America, said, “A supermajority of both Republican and Democratic voters support reestablishing the traditional interest rate limits that were in effect throughout the vast majority of American history.”

New hire

Alexandra Bouriko has been named senior vice president and head of finance at Sberbank, Russia’s biggest bank, effective January 1. Her appointment “comes as Russian banks are experiencing heightened domestic demand for loans as U.S. sanctions force Western banks to sever ties with some Russian clients.” Bouriko, a former CEO of aluminum maker United Co. Rusal, will succeed Alexander Morozov, who will assume a new role at the bank.

Money for next to nothing

Bank earnings, and their stocks, are holding up well, largely due to the banks’ ability to garner deposits in a low interest rate environment. “Banks now get a historic proportion of their funding from deposits, the cheapest form of liability, versus bonds or short-term borrowing.” Deposits grew by 5.8% year-on-year at the largest banks in the third quarter, the fastest pace since the start of 2017, and “89% of large U.S. banks’ total liabilities are now deposits, the highest proportion since 1979, according to Federal Reserve figures.”

Especially helpful for banks is the increase in deposits in accounts that don't offer interest, "nearly free funding for banks."

Financial Times

Reputation at stake

Rohan Ramchandani, the former head of Citigroup’s European spot foreign exchange trading in London, will get his day in a U.K. court Wednesday, where he is charging the bank unfairly dismissed him in 2014 “without warning or due process in an attempt to curry favor with the watchdogs as they probed rigging of the $5 trillion-a-day market.” The former trader is also suing the bank in New York “for at least $112 million, alleging that the bank framed him to protect itself in the throes of the forex scandal.”

Arbitrage play

Italian banks are “rushing to borrow more” money from banks elsewhere in the eurozone and depositing it with the European Central Bank, “a process that has begun to deliver the banks a profit on the interest rate differential.” The banks “are taking advantage of an arbitrage opportunity offered by a recent change in ECB interest rates.”

Washington Post

Embedded bias

The recent controversy over the Goldman Sachs-managed Apple Card, in which several women received credit lines that were a fraction of what their husbands received, “illustrates how potential biases in credit lending manifest: On the one hand, women have long lacked credit parity with men — women only received legal protection from credit discrimination in the 1970s. But today, with the rise of AI algorithms determining everything from credit lending to hiring to advertising, women face another potential source of discrimination.”

“These algorithms are trained on data that are a reflection of the world we live in or the world we lived in in the past,” Meredith Whittaker, a research scientist at New York University and co-founder of the university’s AI Now Institute,” told The Lily, a Washington Post publication. “This data irreducibly imprints these histories of discrimination, these patterns of bias.”

Elsewhere

Squeeze play?

“At least seven vendors” agreed to “voluntarily” give Wells Fargo “a partial refund for their services after bank executives pressured the contractors to return 2.5% of revenue [they] earned last year,” Reuters reports. “In a bid to cut costs to offset higher regulatory spending, Wells Fargo gathered about 14 of its IT vendors in Charlotte in July and asked for a rebate for 2018. In doing so, the bank claimed the vendors had benefited from increased business from its various scandals. Many vendors felt compelled to pay up out of fear they may lose out on future business from the Wall Street giant.”

“Wells Fargo spokesman Peter Gilchrist said participation in the voluntary rebate would not be considered when awarding future contacts. Still, many vendors feared not fulfilling the refund request would make their firms less competitive as Wells Fargo scales back its use of outside contractors.”

Quotable

“It’s too hard to imagine in any way this business practice should be allowed.” — Rep. Glenn Grothman, R-Wis., co-sponsor of a House bill that would limit interest rates on consumer loans to 36%, effectively banning payday loans and some online loans