Trump tweets Fed nominee names; Deutsche in selling mode

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Receiving Wide Coverage ...

Another try
President Trump said he will nominate economists Judy Shelton and Christopher Waller to the Federal Reserve Board of Governors. Shelton, U.S. executive director at the European Bank for Reconstruction and Development, was an economic adviser on Trump’s transition team and worked for the Atlas Network, “a think tank that has been critical of the Fed’s monetary policy and that has advocated for a return to the gold standard. Ms. Shelton has also advocated for a return to the gold standard, in which the dollar was pegged to the price of gold.” Waller is director of research at the Federal Reserve Bank of St. Louis. Shelton recently stated a desire for lower interest rates, while Waller's boss, St. Louis Fed President James Bullard, was the lone dissenter at the last Fed meeting, where he said a rate cut was warranted. Wall Street Journal, Financial Times, New York Times, Washington Post

Here’s a selection of Shelton’s writings on monetary policy, the gold standard and the dollar.

Here’s a selection of Waller’s writings.

Andrew Harrer/Bloomberg

No shortcuts
The U.K.’s Financial Conduct Authority warned Facebook and other issuers of digital currencies that they must “get it right the first time round.” Christopher Woolard, a senior regulator at the FCA, said the agency “would not tolerate cutting corners when bringing innovations to the market, or tech companies trying to test a product ‘in beta for a few million people and see what happens.’”

Separately, four House Democrats led by Maxine Waters, the chairman of the House Financial Services Committee, have called on Facebook to “immediately agree to a moratorium on any movement forward” on Libra, its proposed cryptocurrency, until Congress and regulators examine the potential risks to consumers and financial stability.

Meanwhile, this year’s big rally in bitcoin prices has fueled a market for derivatives linked to the price of the cryptocurrency, “with complex formulas determining how much they pay out. It is still a small market, but the trend is raising red flags among some market veterans.”

“There are all kinds of problems associated with any structured product tied to bitcoin,” said Craig McCann, a former Securities and Exchange Commission economist. “It doesn’t belong in anybody’s portfolio.”

The U.K.’s Financial Conduct Authority Wednesday proposed banning trading platforms from “selling, marketing or distributing all derivatives linked to ‘unregulated transferable cryptoassets’” to retail customers.

Wall Street Journal

Fire sale?
Deutsche Bank has held discussions with Citigroup, BNP Paribas and other banks about “selling or transferring parts of its once-prized equities business. The moves portend a dramatic reshaping of Deutsche’s U.S. investment bank. Without a muscular equities trading operation, Deutsche Bank will occupy a much smaller footprint when competing with healthier U.S. rivals that have come to dominate their European counterparts in the post-crisis era.”

“The talks are happening as the once-formidable German bank prepares a major reorganization aimed at shedding thousands of jobs and downsizing or abandoning whole business lines. Its equities business, in which its prime brokerage sits, was once a key revenue driver within the investment bank. It is now among those on the chopping block as the bank ends long-frustrated efforts to compete in an area dominated by stronger rivals.”

Financial Times

Big shortfall
Europe’s largest banks face a total capital shortfall of €135 billion after the European Banking Authority “substantially jacked up its estimate of how much more capital banks in the bloc will need to comply with new global rules, a fresh blow to a sector already struggling with various headwinds. The EBA’s official forecast is bad news for banks including Deutsche Bank, which have relied heavily on their own internal risk models to calculate how much capital they should hold, and are already struggling with stagnant profitability.” The rules will start to be phased in after 2022 and fully in force by 2027.

Spy times
BBVA’s former chief operating officer and seven other current and former bank executives have been named as “persons of interest” in an investigation into corporate spying at the Spanish bank and have been ordered to testify later this week “about accusations of bribery and the disclosure of confidential information. The court is investigating whether BBVA hired a company to spy on a would-be buyer and members of the government of the former Socialist prime minister José Luis Rodríguez Zapatero more than a decade ago.”

Maturing
Revolut, one of the U.K.’s fastest growing fintech firms, has named banking veteran Richard Davies as its chief operating officer. “The appointment of Mr. Davies, who has previously held senior positions at TSB and HSBC, will be seen by some as part of the challenger’s efforts to show it is 'growing up.’” The company has recently faced criticism from the U.K.’s Financial Conduct Authority and Advertising Standards Authority. “In response, Revolut has pledged to improve its internal culture and governance.”

Unsettled
Andrea Orcel, the former head of UBS’s investment bank who was offered the CEO job at Santander before the offer was pulled at the last minute in January, is planning to sue the Spanish bank for €100 million. Santander rescinded the offer after it found out it would have had to pay Orcel €50 million to get him to leave UBS.

Quotable

“We need to ensure that innovation works in the interests of consumers. We need to consider whether consumers understand and actively consent to the trade-offs inherent in those business models. And we need to consider the wider impact on market integrity and stability. We need to bring new technology, jargon and marketing back to first principles before we can answer tricky policy questions on topics such as consumer protection, market integrity or competition.” — Christopher Woolard, a senior regulator at the U.K.’s Financial Conduct Authority, warning Facebook and others against taking shortcuts when bringing financial services products to market