USA: Will the Banks Collapse? - by Frank Portnoy

After months of living with the coronavirus pandemic, American citizens are well aware of the toll it has taken on the economy: broken supply chains, record unemployment, failing small businesses. All of these factors are serious and could mire the United States in a deep, prolonged recession. But there’s another threat to the economy, too. It lurks on the balance sheets of the big banks, and it could be cataclysmic. Imagine if, in addition to all the uncertainty surrounding the pandemic, you woke up one morning to find that the financial sector had collapsed.

 Read more:
Will the Banks Collapse? - The Atlantic

Denmark-Estonia relations: Danske Bank Money Laundering Probe Expands

The Estonian Prosecutor's Office confirmed on Thursday it expanded the investigation into money laundering through Danske bank’s Estonian branch from two to more than 10 cases that are involving suspicious transactions worth US$ 2 billion.

Prosecutors were previously looking into suspect money flows worth $300 million relating to two separate cases.

After media broke the story about extensive money laundering in the Estonian branch of Denmark’s biggest bank, Danske launched an investigation into 15,000 of its customers and 200 billion euro (US$222 billion) worth of transactions.

In 2018, the bank admitted that it 6,200 customers had hit the most risk indicators and that most of them have been found to be suspicious. Most of the customers were from Russia and other post-Soviet countries.

The bank closed its branches in the Baltics and promised to cooperate with investigators. The scandal also triggered worldwide probes and lawsuits.

Read more: Estonia: Danske Bank Money Laundering Probe Expands

The Netherlands: Dutch Banks feeling pressure

Read more at :

https://www.artfuleconomist.com/2018/04/23/dutch-banks-feel-the-fear-index-pain-clk-2/?net=efx&sxid=375256e1xvuy

The Netherlands: banking industry electronic transactions work against consumers and in favor of banks during Public holidays and weekends - by RM

Banks in the Netherlands and probably also in many other places around the world are saying they can not make automatic electronic transfers during religious and other public holidays.

The question one should immediately pose ,when the banks make that statement is; why? Why should automatic banking transactions done on public holidays be any different from those done during the regular work week?

 For example: if you make an electronic transfer during the 4 day Easter holiday weekend in the Netherlands, say on Good Friday, to another bank account, the transferred money is immediately electronically debited from your own account, but than, the money only re-appears 4 days later on the account to which it was electronically transferred. before you see that transfer on your statement.

Obviously the question it raises is: WHAT DOES THE BANK DO WITH YOUR MONEY during those four days, or any other amount of time they hold it without telling you where it is or what they do with it during that time ?

What is happening to your money while it is hidden those four days of the Easter weekend or less during other regular Public holidays ?

The answer should not be too difficult to figure out . The bank has probably been making millions on interest and other speculative activities with your money.

If you ask the bank, however,  you will certainly get  a rather vague story.

Something definitely needs to be done here, especially given the bad reputation that banks have gained in recent years during and after the financial crises.

Almere-Digest

Ireland: Dublin is streets ahead of EU rivals as City firms plan for Brexit relocation - by Lisa O'Carroll

In boardrooms across London, bank executives are deciding where to move tens of thousands of jobs in the event of a hard Brexit. Rival European financial centres, including Paris, Frankfurt and Luxembourg, are vying for the business – but Dublin is emerging as the most popular destination.

 Hundreds of banks, insurers, fund managers and other major City firms had until Friday to tell the Bank of England how they intend to cope in the event of a hard Brexit.

Accountants at EY last week said 59 out of the 222 biggest financial services companies in the UK have made public statements about moving staff from Britain to the EU because of Brexit. Dublin, which is still scarred by Ireland’s financial crisis, is the top destination with 19 firms mentioning a possible move to the Irish capital.

Jes Staley, the chief executive of Barclays, which already has significant operations in Ireland, flew there last week to meet taoiseach Leo Varadkar and discuss further expansion across the Irish Sea. “Barclays Bank Ireland, which has a banking licence and which we have operated for almost 40 years, provides a natural base and we are engaging with our regulators in discussions to extend its activities,” the bank said.

Read more: Dublin is streets ahead of EU rivals as City firms plan for Brexit relocation | Business | The Guardian

Banking Industry EU: JPMorgan to Move Hundreds of Staff from London to Three EU Offices following Brexit

JPMorgan Chase & Co. plans to move hundreds of London-based bankers to expanded offices in Dublin, Frankfurt and Luxembourg as it prepares for the U.K. to lose easy access to the European Union’s single market after Brexit, the firm’s head of investment banking said.

"We are going to use the three banks we already have in Europe as the anchors for our operations," Daniel Pinto said in an interview Tuesday in Riyadh, referring to the New York-based firm’s local entities. "We will have to move hundreds of people in the short term to be ready for day one, when negotiations finish, and then we will look at the longer-term numbers."

Global banks are preparing to move some London-based operations into new or expanded bases inside the EU after British Prime Minister Theresa May triggered the formal mechanism for quitting the 28-nation bloc. Before the June referendum, JPMorgan Chief Executive Officer Jamie Dimon told U.K. employees that as many as 4,000 could be relocated in the event of Brexit. In January, he said that number could be higher -- or lower -- depending on how the government’s negotiations played out.

"We have to plan for a scenario where there is no U.K.-EU passporting deal, and we have to move a substantial portion of our business to continue serving our European clients," Pinto said. "We’ll have to wait to see what kind of deal can be achieved and see what we need to do from there."

Read more: JPMorgan to Move Hundreds of Staff to Three EU Offices on Brexit - Bloomberg

EU: Spain MPs to probe €60bn bank bailouts- by Sarah Morris

Spanish MPs have voted unanimously to set up a commission to examine mistakes that led to a €60 billion bank bailout in 2012.

In a rare display of unity in Spain's fragmented parliament, all parties signed up to a deal on Wednesday (22 February) to “create a commission to investigate the financial and banking crisis, the listing of savings bank Bankia and its later rescue, the action taken by regulators and the weaknesses, needs and challenges of the financial system”.

In 2012, a government led by current centre-right prime minister Mariano Rajoy sought a bailout from the EU and International Monetary Fund (IMF) after Bankia requested €22.5 billion in aid just a year after its flotation under the previous Socialist government. Dozens of other savings banks also needed state cash.

The cross-party deal this week came after the opposition Socialists, anti-austerity group Unidos Podemos and Catalan party Republican Left all lodged separate petitions for commissions.

Expected to hear evidence from April for about six months, the parliamentary commission will in particular look at the controversial listing of Bankia, the largest bank bailout still in public control.

In recent years, Spain's courts have looked into hundreds of corruption allegations linked to the property boom. Between July 2015 and September 2016, 399 people were convicted of corruption-related offences like embezzling public money, the General Board of Judicial Power (CGPJ), which oversees Spain’s judiciary, said in a report last month.

The creation of the parliamentary commission comes after the high court said last week it would question the former governor of the Bank of Spain, Miguel Angel Fernandez Ordonez, over Bankia's regulation.

Five other officials at the central bank and two former senior managers of stock market regulator, the CNMV, will also be questioned.

Read more: Spain MPs to probe €60bn bank bailouts

The Netherlands - banking industry: ABN Amro to slash below board level management from 100 to 40

ABN Amro is planning to reduce the number of senior managers from around 100 to just 40 and is shaking up its executive board to make the bank ‘more client-focused, agile and efficient’.

Among those leaving is Chris Vogelzang, who had been tipped to take over when Gerrit Zalm stood down as chief executive. The managerial jobs to go will run across the level below the executive committee.

The 40 jobs remaining ‘will have a stronger involvement in the strategic direction and the leadership of the bank than before,’ the bank said in a statement. The composition of the ‘top 40’ will be reviewed every year.

‘Over the past few years, the number of bank staff has been reduced considerably but there has been no change in the number of senior managers,’ chief executive Kees van Dijkhuizen said. T

he bank will also have a slimmed down executive board made up of CEO Van Dijkhuizen, chief risk officer Wietze Reehoorn and a new financial boss who has yet to be appointed.

Read more: ABN Amro to slash below board level management from 100 to 40 - DutchNews.nl

Banking Industry: still free wheeling

The book:The U.S." Government and the Major Banks:Justice for Sale at the Bazaar-By Frank Vogl "

notes:

"To date, not a single top banker has been put on trial, let alone sent to prison, for the frauds perpetrated by the institutions they lead".

Obviously the question is Who is kidding whom ?-  

Bottom-Line: Hanky - Panky Capitalism still alive and well.

EU-DIGEST

Global Economy: US losing its grip on Europe: Why Wall Street fought so hard against Brexit - by Renae Merle

For decades, Wall Street has considered London a beacon through which it could reach the rest of Europe. Large U.S. banks moved thousands of employees there to trade currencies and complex financial products. A couple of years ago, Goldman Sachs began building a massive new headquarters to house its 6,000 employees in the city.

But Britain’s stunning vote on Friday to divorce itself from the European Union has thrown London’s status as Europe’s financial center into question -- and with it, the city’s relationship with New York bankers.

From London, Wall Street has been able to sell its services across 28 nations without the headache of having to get regulatory approval from each individual country. The prospect of a more complex, and potentially costly, regulatory structure has some banking officials worried, analysts said. U.S. banks could move more than 10,000 employees out of London after Britain completes its exit from the European Union, according to Keefe, Bruyette & Woods, a boutique investment bank.

"U.S. banks have used London as a primary center for activity, not only to operate in the U.K., but to provide services across Europe," said James Chessen, chief economist for the American Bankers Association.

The shock of the British vote tanked U.S. markets Friday with the financial sector taking among the toughest hits. Goldman Sachs and JPMorgan Chase were both down 7 percent. Morgan Stanley tumbled 9 percent.

Britain's exit is also expected to impact other U.S. industries. Technology firms have jousted before with European regulators, but that process could become more complicated as  populist leaders call for referendums in France and the Netherlands to leave the EU, as well.

On Friday, shares of Apple fell 2.5 percent. Alphabet, Google’s holding company, lost 3.5 percent and Yahoo and Microsoft were each down about 4 percent.

In energy stocks, BP was trading down 5 percent, and Shell, domiciled in both Britain and the Netherlands, was down 6 percent after news of the “Leave” vote. American crude oil prices dropped $2.54 a barrel, or 5 percent.

Oil prices stiffened in the weeks leading up to the vote, as the “Remain” camp surged in polls. The Brexit caught investors by surprise. They rushed to sock assets away in non-eurocentric currencies and products, opting for American investments instead, or staying out of the market completely.

But the impact on U.S. banks is expected to be among the most severe, and the industry was both vocal -- and aggressive -- in its opposition to Britain leaving the EU.

Goldman Sachs and JP Morgan Chase, the country’s largest bank by assets, contributed 500,000 pounds, then about $720,000, each to the campaign to keep the status quo in the European Union, according to people familiar with the matter. Citigroup and Morgan Stanley donated 250,000 pounds each, according to the Sunlight Foundation.

On Friday, U.S. banks quickly began to draw up plans to deal with the fallout.

Citigroup created a "group of senior leaders from across our businesses and functions to ensure we were prepared for this possible outcome," Mike Corbat, the bank's chief executive, and Jim Cowles, its chief executive in Europe, Middle East and Africa, said in a letter to employees. "While the result of the vote is not what we would have preferred, our diligent work over the past six months means we can be confident that Citi is well positioned to serve our clients."

Britain's finalization of its exit from the E.U. is expected to take at least two years, and banking industry officials say they will carefully watch the process for clues into how vast the fallout will be. Britain, for example, may be able to establish a financial regulatory framework that is harmonious with the rest of Europe. That would minimize the potential impact, analysts said. But if that is not possible, banks may be forced to move jobs to Frankfurt or Dublin, they said.

"Likely London will lose some influence," Erik M. Oja, equity analyst for S&P Global Market Intelligence. But it depends on the negotiations that will occur over the new few years, he said:   "These banks have invested a lot into the London hub, it’s not like they will move overnight."

On Friday, JPMorgan Chase CEO Jamie Dimon told employees in a memo  that the bank will maintain a large presence throughout Britain. "In the months ahead, however, we may need to make changes to our European legal entity structure and the location of some roles," Dimon said. "While these changes are not certain, we have to be prepared to comply with new laws as we serve our clients around the world."

Read more: Why Wall Street fought so hard against Brexit - The Washington Post

US Market Place; Bank Of America: What To Expect - by Oguz Erkol

Bank of America (NYSE:BAC) has been heavily penalized year to date primarily due to the reduced expectations about Fed rate actions with weaker economic outlook and perceived risks to the energy industry.

The stock has fallen by 23% since the beginning of this year while the financial sector ETF (NYSEARCA:XLF) has been only down by 7%, indicating that it has been a high beta stock with a negative return. The question is now whether we will be able see similar action from BofA when the market bounces back.

Despite the current pessimism, I still believe that there is significant upside potential for BofA and it could emerge as an outperformer in the mid-term.

Summary

I believe that macro level concerns over the banking stocks have been overplayed.

Bank of America has some features which distinguish from other banks such as the plenty of room for efficiency improvement.

After a long period of underperformance BofA is an attractive investment with relatively cheap multiple

Central Banks: Timid central bankers have failed to convince sceptical audience

The job of central bankers more like that of technicians, carefully turning knobs as they fine-tune the economy, or magicians, manipulating the audience into the suspension of disbelief? Most of the time it is the former. Monetary maestros nudge interest rates up and down with meticulous precision.

Yet in extreme cases—such as when economies become trapped in a low-growth rut—central bankers must try to conjure up a change in the public’s economic outlook. Just as uncertain magicians often fail to pull off their tricks, so central banks are finding their audiences in an ever-more sceptical mood.

Economists have long acknowledged the role of mass psychology in business cycles. In 1936 John Maynard Keynes described the “animal spirits” that could drive swings in spending or investment.

The power of an abrupt change in market beliefs came sharply into focus in the early 1980s, when many economies were struggling to clamp down on stubbornly high inflation. Economists at the time worried that using interest rates to rein in inflation would be enormously costly.

Because the public had come to expect high inflation, they reckoned, growth-crushing rate rises would be needed to force down prices and create new consumer expectations. A common estimate at the time had it that reducing America’s inflation rate by just one percentage point would cause economic damage of nearly 10% of GDP.

In this fraught world, central bankers risk falling into what Mr Krugman has called a timidity trap. The longer that knob-turning fails to get an economy out of the zero-rate rut, the less credible markets are likely to find subsequent attempts at regime change. Recent efforts to push interest rates into negative territory seem to have unnerved markets rather than sparked confidence.

Perhaps more importantly, central bankers tend not to adopt major shifts in mandates and targets unless urged to do so by popularly elected governments. It is difficult to muster Rooseveltian resolve without a Roosevelt. Expect growing scepticism about the power of knob-turning until voters choose politicians confident enough to wave a magic wand.
Read more: Slight of hand | The Economist

Wall Street: Dow closes at lowest level in 2 years amid global rout - by William Watts

It’s been a brutal morning for stocks. China and Japan were closed, but the rest of Asia saw plenty of carnage which then translated into big falls for Europe.

U.S. stock index futures are pointing to a particularly ugly open that could take major indexes toward two-year lows. S&P 500 futures are down more than 31 points, or 1.7%, while Dow futures are off around 270 points.

Treasury bond prices are jumping, sending yields down hard. The 10-year yield has come off lows burt remains down more than 8 basis points at 1.5928%–not so far away from all-time lows in the mid 1.40s set back in mid-2012.

The yen soared and gold is up more than 3.6%, or $42 dollars, as the scramble for safety continues.

There seems to be no single catalayst. Some commentators are pinning the blame on Janet Yellen’s Wednesday testimony in which she didn’t pour much cold water on prospects for further rate hikes.

But that seems a stretch given that stocks took the testimony relatively well in stride during the testimony. Yellen, will be testifying again Thursday.

Meanwhile, this graphic tweeted out by Rareview Capital does a great job illustrating the vicious circle that seems to be driving market action these days:

Read more: Stock market live blog recap: Dow closes at lowest level in 2 years amid global rout - The Tell - MarketWatch

Banking shares plummet on economic slowdown fears

Shares of large banks and other financial stocks were pummelled on Wall Street Monday as fears of a US economic slowdown heightened worries over deteriorating credit quality.

US banks were broadly lower, but the hardest-hit included Bank of America, Citigroup, Goldman Sachs
and Morgan Stanley, all down 6.0 percent or more in afternoon trade.

But the sector selloff extended to Europe as well, with German giant Deutsche Bank plunging 9.5 percent and France's Societe Generale dropping 6.1 percent, respectively.

A slowing economy translates into higher loan defaults, weaker credit quality and lower interest rates, all of which are bad for bank profits, said Jim Sinegal, an analyst of banks and payment companies at Morningstar.

A bad economy also depresses capital markets activity, which is especially important to the earnings
Goldman Sachs and Morgan Stanley, he said.

Insure-Digest

Banking Industry: Is there a banking crisis in the United States?- by Bob Pisani

For the past three days, I've been trying to get my hands around this supposed "banking crisis," particularly in Europe.

I get why there is concern in Europe, but I don't at all get the selloff in U.S. banks.

You didn't know there was a banking crisis? Everyone seems to think there is some kind of crisis because the stocks—particularly the European bank stocks—seem to be telling us something is wrong:

European banks YTD

Deutsche Bank down 34.6%

Societe General down 25.8%

BNP Paribas down 24.3%

Banco Santander down 24.0%

UBS down 20.9%

Yikes! This is after one month. The concerns about Europe fall into several buckets:

1) ongoing restructuring and litigation charges.

2) Flattening yield curve/negative rates.

3) slower European growth.

4) Asset management slowdown. Asset management has suffered because wealthier clients aren't investing.

5) Book value issues: European banks did not take the big writedowns that U.S. banks took; there's concern there may be more asset writedowns that would cause book values to decline.

6) Capital positions. While the U.S. banks were out raising capital and selling new shares in 2008-2009, the European banks didn't. The result: U.S. banks don't need to raise capital, but European banks probably do.

I get this. What I don't get is what's going on with U.S. banks:

U.S. banks YTD

Fifth Third down 24.8%

Bank of America down 24.3%

Zions down 21.9%

Key down 19.7%

JP Morgan down 14.8%

Yikes again! Even the regionals are getting hi

Read more: Is there a banking crisis in the United States?

City of London-Banking Industry: How the banks ignored the lessons of the crash - by Joris Luyendijk

Ask veteran at a small credit rating agency who spent his whole career in the City of London told me with genuine emotion: “It was terrifying. Absolutely terrifying. We came so close to a global meltdown.” He had been on holiday in the week Lehman went bust. “I remember opening up the paper every day and going: ‘Oh my God.’

 I was on my BlackBerry following events. Confusion, embarrassment, incredulity ... I went through the whole gamut of human emotions. At some point my wife threatened to throw my BlackBerry in the lake if I didn’t stop reading on my phone. I couldn’t stop.”

Other financial workers in the City, who were at their desks after Lehman defaulted, described colleagues sitting frozen before their screens, paralysed – unable to act even when there was easy money to be made.

Things were looking so bad, they said, that some got on the phone to their families: “Get as much money from the ATM as you can.” “Rush to the supermarket to hoard food.” “Buy gold.”

“Get everything ready to evacuate the kids to the country.” As they recalled those days, there was often a note of shame in their voices, as if they felt humiliated by the memory of their vulnerability. Even some of the most macho traders became visibly uncomfortable. One said to me in a grim voice: “That was scary, mate. I mean, not film scary. Really scary.”

Read more: How the banks ignored the lessons of the crash | Joris Luyendijk | Business | The Guardian

Banking Industry: Nine of the World’s Biggest Banks Form Blockchain Partnership

Nine of the world’s biggest banks, including Goldman Sachs and Barclays, have joined forces with New York-based financial tech firm R3 to create a framework for using blockchain technology in the markets, the firm said on Tuesday.

It is the first time banks have come together to work on a shared way in which the technology that underpins bitcoin — a controversial, Web-based “cryptocurrency” — can be used in finance.

Over the past year, interest in blockchain technology has grown rapidly. It has already attracted significant investment from many major banks, which reckon it could save them money by making their operations faster, more efficient and more transparent.

Read more: Nine of the World’s Biggest Banks Form Blockchain Partnership | Re/code

Banking Industry: Nine of the World’s Biggest Banks Form Blockchain Partnership

Nine of the world’s biggest banks, including Goldman Sachs and Barclays, have joined forces with New York-based financial tech firm R3 to create a framework for using blockchain technology in the markets, the firm said on Tuesday.

It is the first time banks have come together to work on a shared way in which the technology that underpins bitcoin — a controversial, Web-based “cryptocurrency” — can be used in finance.

Over the past year, interest in blockchain technology has grown rapidly. It has already attracted significant investment from many major banks, which reckon it could save them money by making their operations faster, more efficient and more transparent.

Read more: Nine of the World’s Biggest Banks Form Blockchain Partnership | Re/code