Banking

Visa, Mastercard postpone fee hikes; House extends PPP

Receiving Wide Coverage …

Get ready for the Fed

The Federal Reserve “will likely note an improving economic outlook” following the end of its two-day monetary policy meeting on Wednesday “while also stressing that it is too early to change its plans for interest rates and bond purchases, ” the Wall Street Journal reported. “The updated economic projections Fed officials will release should show they expect the labor market and inflation to rebound faster than they anticipated in December.”

“No policy alterations are expected on Wednesday but the question is whether the Fed has changed its tune to reflect the better outlook, and if chairman Jay Powell takes a more upbeat tone at his press conference,” the Financial Times said, which offers five things to watch for.

An embarrassing first

The U.K.’s Financial Conduct Authority “has filed criminal charges against National Westminster Bank … for allegedly failing to prevent money laundering,” the Journal reported. “The proceeding announced Tuesday is the first criminal prosecution brought by the U.K. financial regulator based on a 2007 money-laundering rule, and is the first prosecution against a bank under that regulation, the agency said.”

“The country’s money-laundering rules require some companies, including those regulated by the FCA, to conduct and demonstrate risk-based due diligence and ongoing monitoring of their relationships with customers. NatWest’s systems failed to monitor and scrutinize that customer’s activity adequately, FCA said.”

“NatWest faces a potentially unlimited fine after the FCA alleged it had failed to properly monitor the actions of a gold dealer,” the FT said. “Criminal money laundering cases carry an unlimited fine that the court can impose.”

Wall Street Journal

Backing off

Visa and Mastercard “are postponing planned credit-card fee increases that were set to kick in this year after the plans drew criticism from lawmakers. Citing the continuing effects of the coronavirus pandemic on businesses, Visa and Mastercard said they will hold off on increasing interchange fees for merchants until next April.”

“Visa and Mastercard plans included raising interchange fees for many online purchases by around 0.05 to 0.10 of a percentage point. Those changes would have resulted in hundreds of millions of dollars in additional interchange fee charges for merchants within the span of a year. The planned fee increases prompted Sen. Richard Durbin and Rep. Peter Welch to send a letter this month to the chief executive officers of Visa and Mastercard calling on the companies to refrain from moving forward with the increases.”

PPP extension

The House Tuesday “passed a bill extending the deadline for applying for a Paycheck Protection Program loan to May 31, sending the legislation to the Senate as the current March 31 deadline looms. Under the bill, which passed by a vote of 415-3, firms have until May 31 to apply for a loan and the Small Business Administration faces a June 30 deadline to process them. Small business advocates had called for an extension of the March 31 deadline to give lenders more time to implement a series of changes the Biden administration made to the program.”

Financial Times

Don’t delay

Europe’s top banking supervisor “said lenders could be given more time to benefit from capital relief if they speed up their recognition of loans that are likely to turn sour. Andrea Enria, chair of the European Central Bank’s supervisory board, made the comment as he called on eurozone lenders to be bolder in booking provisions for an expected rush of bad loans caused by the fallout from the coronavirus pandemic. Enria compared the rapid speed at which U.S. banks increased their loan loss provisions with the slower pace in Europe.”

“It is crucial that banks recognize credit impairments without delay,” he said.

Independence

Investors have pushed up Lending Club’s stock price by “more than 60% to nearly $18, adding some $600 million to its market capitalization,” following its “acquisition of Boston-based digital bank Radius,” which has enabled it to “move away from its dependence on partner banks that financed its loans until they could be sold to investors.”

“We don’t need to pay somebody else to issue our loans,” CEO Scott Sanborn told the FT. “We don’t need to pay somebody else [to] warehouse our loans. Over the past two years on average we paid issuing banks alone $20 million a year. Now we can recapture that.”

New York Times

Back to the office

JPMorgan Chase “is currently planning for summer interns in New York and London to come to the office this year as big financial firms anticipate a return to something approaching normality and the pandemic starts to loosen its hold on the workplace. Big banks, more than many other industries, have been eager to re-establish some level of in-office working, but are wrestling with when and how to do it. Leaders like Jamie Dimon, JPMorgan’s chief executive, and David Solomon, his counterpart at Goldman Sachs, have expressed worries that prolonged remote working could hurt businesses like trading and fray corporate cultures.”

“JPMorgan usually hires hundreds of summer interns each year, and last year’s class, as at most Wall Street firms, was virtual. In London, the bank plans to let its teams start bringing in employees on March 29, when the British government will end ‘stay at home’ rules imposed in December. But in-person staffing will not surpass 50% of a building’s capacity, and teams are likely to rely on scheduled rotations of employees.”



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