Christopher Waller, the research director at the Federal Reserve Bank of St. Louis, was confirmed by the Senate as a member of the Federal Reserve’s board of governors “in a vote that reflected increased partisan tensions over issues related to the looming change in presidential administrations,” the Wall Street Journal reported. Waller was confirmed by a 48-47 mostly party-line vote, with one Republican, Sen. Rand Paul of Kentucky, joining Democrats in voting against him. Waller’s term runs through January 2030.
“The confirmation marked the first time the Senate had seated a governor in a lame-duck period that follows the November election before the president’s term ends in January.”
“Mr. Waller’s selection means that [President-elect Joe] Biden will take office with a Fed stocked with picks from [President] Trump, who has now chosen five of the central bank’s six sitting officials, including appointing Jerome H. Powell as its chair,” the New York Times said. “The board will have one remaining open slot if [Judy] Shelton is not confirmed.”
However, Shelton’s prospects “have dimmed,” the Washington Post said. “While Waller is seen by economists to be fairly mainstream, Democrats have staunchly opposed Trump’s more controversial nominees, including Shelton.”
We’ll think about it
Andrea Enria, president of the European Central Bank’s supervisory board, is warning the region’s biggest banks that they must do more to prepare for a likely increase in bad loans if they want to be able to resume dividend payments to shareholders. The ECB is expected to release Friday what Enria called “a ‘Dear CEO’ letter to the banks under our supervision in which we will highlight some issues we want them to address in terms of their approach to credit risk.”
Enria said “there is genuinely an intensive debate” at the ECB “over whether to allow some banks to resume payouts to shareholders. He said the macroeconomic outlook would also be a factor in its decision, which is due to be announced after the ECB publishes its new 2023 forecasts on December 10.”
Regulators at the ECB and the Bank of England “need to let at least the fittest lenders resume investor payouts,” a Bloomberg analysis says. “Failing to do so would undermine confidence in the supervisors as much as in the firms they oversee. Despite the uncertainty that still lingers on the strength of the economic rebound, tarring all lenders with the same brush only holds back the stronger ones. The longer that continues, the greater the damage will be on the entire sector.”
But “investors shouldn’t take a resumption of generous payouts as a sure sign of relative strength,” the Journal says. “Generous shareholder payouts next year could leave some lenders susceptible. Officials will look at capital adequacy, profitability and risk, but will also consider factors beyond banks: their regulatory risk appetite, the importance of dividends to local investors, the range of banks in their jurisdiction and the signal the policy will send.”
Wall Street Journal
Teaming up
Payments processor Stripe “is teaming up with banks including Goldman Sachs and Citigroup to offer checking accounts and other business-banking services, the startup’s latest attempt to become the internet economy’s financial supermarket. Stripe, which processes payments for millions of online businesses and e-commerce platforms, will soon give its customers the option of offering insured, interest-bearing bank accounts, debit cards and other cash-management services.”
Stripe headquarters in San Francisco on Dec. 3, 2020.
Bloomberg
However, the products “aren’t meant for consumers. Rather, they are designed for the merchants and vendors that do business with Stripe’s customers.”
Capital One CFO R. Scott Blackley “is leaving the bank to take over the finance department at Oscar Health Insurance, an insurance startup. He will be succeeded by Andrew Young, a company veteran who serves as Capital One’s senior vice president and CFO of the company’s business segments” on March 1, when Blackley leaves.
“In his new role, Mr. Young is expected to help boost the company’s profitability, which has lagged behind amid the pandemic.”
Help for all
Canadian banks are “among the biggest beneficiaries” of the government’s fiscal stimulus program, which has enabled the banks to “avoid major loan losses and boost deposits. The biggest Canadian banks, Royal Bank of Canada and TD Bank Group, reported earnings growth during their fiscal fourth quarter ended Oct. 31, boosted by lower provisions for loan losses.”
“Bolstered by those supports, Canadians have continued making loan and credit-card payments they may have otherwise missed. The relief has been coupled with bank-led deferral programs that let homeowners delay mortgage payments, and the net effect has allowed banks to avoid writing off big chunks of their lending books.”
Financial Times
Reprieve
This week’s “surprise reprieve from regulators” to “publish daily rates for the most widely used dollar [Libor] benchmarks until the end of June 2023 — 18 months later than originally planned … has spread relief around banks, asset managers and borrowers that were struggling to figure out how to wean themselves off the tainted and outdated U.S. dollar Libor benchmark.”
“I was very surprised by it. I think everybody was. They had been adamant about 2021 being the actual end date,” said Dan Krieter, an analyst at BMO Capital Markets.
Quotable
“If you are a Goldman Sachs or a Citi or one of these firms, you are watching the fact that new businesses live their lives online. For the partner banks we’re working with, our intent for it is to be a shockingly effective customer-acquisition channel for them where they end up with many, many more customers.” — John Collison, Stripe’s co-founder and president, discussing its partnership with the two banks to offer bank accounts to its customers.
Hedge fund manager Scott Bessent had been the betting favorite to take the reins at Treasury. Scott Turner, a former congressman and NFL player, will lead the housing agency.
While the risks, benefits and magnitude of artificial intelligence's impact on financial services remain unclear, agencies should keep an open mind toward the technology and avoid reflexive risk aversion in bank supervision, Federal Reserve Gov. Michelle Bowman said.
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In its latest financial stability report, the Federal Reserve warned high equity valuations and low levels of liquidity could leave the financial system vulnerable to shocks.
The Columbus, Ohio-based regional launched Lift Local Business in October 2020 with a $25 million ceiling. Four years and $133 million later, the program is still going strong.
The bank and payment company are using the technology that underpins digital assets to improve interoperability for international transactions, a major point of friction in trade finance.
