JPM wins a place in China; banks again warned about replacing Libor

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Opening China

JPMorgan Chase won approval from the China Securities Regulatory Commission to launch a majority-owned Chinese securities business. “The regulator’s decision makes JPMorgan the first U.S. bank to gain approval for a majority-owned securities joint venture in China,” the Financial Times says. The bank originally applied for permission in May 2018.

The new unit plans to offer services “including securities brokerage, investment advisory and underwriting and sponsorship,” the paper says. The bank did not say who its minority Chinese partner would be.

Michael Nagle/Bloomberg

Meanwhile, back in the U.S., Chase opened its 346th New York City branch, although this one is a little different than the others: It “includes a surprising subtenant: Joe Coffee Company, the New York City mini chain. The bank envisions its financial advisers escorting clients to the cafe area for a cappuccino.”

“Adding a Joe to the Union Square location allows Chase to demonstrate its commitment to New York City’s small businesses,” the Wall Street Journal says. “Chase also sees the cafe as an amenity for locals, despite the fact that there already are three Starbucks on Union Square, including one right next door. Joe Coffee, meanwhile, gets a high-profile location it otherwise couldn’t swing.”

They’re watching

The Financial Stability Board said banks and large asset managers need to make “significant and sustained efforts” to replace Libor as an interest rate benchmark and they should expect “increasing scrutiny” of their efforts in doing so. “The FSB also called on markets authorities to work together to harmonize often-inconsistent standards on prudential regulation, changing contract terms and acceptable standards of conduct. Global watchdogs want to scrap Libor by the end of 2021,” the FT reports.

The FSB also warned “the boom in the market for leveraged loans, a favorite financing source of private-equity-backed companies, has created vulnerabilities in the global financial system,” the Journal says. “A limited number of big banks are most exposed to these markets because they arrange the loans and hold some of them while also offering borrowers revolving credit facilities,” the board said.

Advance warning

The Bank of England and the Financial Conduct Authority are investigating allegations that “an audio feed from [the bank’s] news conferences had been released to some investors before it had been made public, giving them a leg up on the rest of the market.” The BoE said “the audio feed of its news conferences, which is used as a backup in case the video feed fails, had been ‘misused by a third-party supplier to the bank since earlier this year to supply services to other external clients.’ The audio feed provides traders a five- to eight-second advantage over the video feed.” Wall Street Journal, Financial Times, New York Times

Wall Street Journal

Reputation at risk

The most recent alleged spying episode at Credit Suisse — the third to come to light in the past few months — has “cast another shadow over Switzerland’s second-largest lender by assets,” the paper reports. “Revenue at its investment bank plunged this year as corporate deals failed to materialize, forcing the bank to cut its financial targets last week. Credit Suisse’s share price is down by more than half since [Tidjane] Thiam started as CEO in July 2015.”

This week the bank said it was investigating a report that “Peter Goerke, a longtime lieutenant of Thiam, was followed for three days in February, citing documents and photos. Shortly after the alleged spying, Credit Suisse removed Mr. Goerke from the bank’s executive board. He gave up his job as head of human resources and became a senior adviser on bank projects.”

Financial Times

Now that's inflation

Wirecard, the German payments company under investigation for possible accounting irregularities, “is suspected of ‘round-tripping,’ where sales and profits are faked by sending money to a third party, who then uses it to buy goods and services from the sender in a pretense of real commerce,” the paper reports. It says the company “agreed to pay around €300 million for an Indian business only weeks after it changed hands for €37 million,” which may have been “part of a giant fraud to inflate Wirecard’s sales and profits.”

The changes begin

CEO Chris Marks and CFO Richard Place of NatWest Markets, Royal Bank of Scotland’s investment banking division, have quit, “the first significant change announced by new RBS chief Alison Rose, who took charge of the bank last month as the lender prepares to announce a new strategy that is expected to involve further cuts at the once-sprawling unit. The division has already shrunk massively since the financial crisis, when it briefly made RBS the largest bank in the world by assets, and now focuses on providing services for the bank’s core corporate banking clients.”

Washington Post

Sign 'em up

“The federal government should establish a national financial fraud registry to make it easier for prosecutors and investors to identify repeat offenders,” Christy Goldsmith Romero, the special inspector general for the Troubled Asset Relief Program, said Wednesday. Romero’s office, called SIGTARP, which investigates crime at companies that received taxpayer bailouts during the global financial crisis, on Wednesday launched its own financial crimes database, “which includes details of nearly 400 criminal convictions, guilty pleas and fines secured by SIGTARP over the past decade.”

“But that is not enough, Romero said. The details of financial crimes prosecuted by other federal agencies, the Justice Department or states can still be difficult to find, even for prosecutors, she said.”

Quotable

“Given the degree of risk arising from the continued reliance on Libor, regulated firms should expect increasing scrutiny of their transition efforts as the end of 2021 approaches.” — The Financial Stability Board, calling on banks and other financial institutions to make greater efforts to find a replacement for the scandal-plagued interest rate benchmark