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Home » Daily Briefing » Morning briefing - 21 September

Morning briefing - 21 September

Stumpfed

The big news in banking yesterday was the appearance of Wells Fargo CEO John Stumpf before the Senate Banking, Housing, and Urban Affairs committee for "An Examination of Wells Fargo's Unauthorized Accounts and the Regulatory Response." Although Mr Stumpf kept his cool, he irritated a gung-ho panel of senators who seemed unusually united in their condemnation of Wells Fargo's sales culture. Elizabeth Warren repeatedly referred to the practice of unauthorised account opening as a "scam" and called for Mr Stumpf to be criminally investigated. Several of the senators criticised Mr Stumpf for blaming frontline staff for wrongdoing, and Stumpf himself acknowledged that the culture of the bank came from the top. Mr Stumpf's appearance is now available on the senate website. A Lafferty client advisory report on culture in banking to be published early next week examines the Wells Fargo story in depth and advises how to avoid the Wells fate.

Interbank transfer service SWIFT is launching a new tool for banks which should enable them to spot fraud. "The Daily Validation Reports, to be offered to clients from December, will be based on Swift's records of customers' messages," writes Finextra, "providing an independent means of verifying messaging activity and spotting unusual patterns and fraud attempts and boosting the chances of cancelling bad transfers." The move comes in the wake of the high-profile heist of $81 million from a Bangladeshi bank, and subsequent news of other thefts or attempted thefts that had been enabled by thieves getting access to SWIFT codes.

Shares in troubled Italian lender Monte dei Paschi dropped below two cents as bankers hunt for €5 billion to recapitalise the bank. According to the FT, "senior bankers who are part of the JPMorgan-led consortium providing a soft underwriting for the mooted deal admit it is tough to find €5bn in new capital for a bank which emerged the worst loser from July's European bank stress tests." Failure to recapitalise the bank would have broader implications as Italy faces into a referendum and the populist Five Star Movement waits in the wings for a chance to unseat Prime Minister Matteo Renzi. Senior bankers are privately saying that Monte's woes and the referendum have entered a self-reinforcing doom loop.

Will Tanzania emerge as a champion of the cashless economy? The Better Than Cash alliance is claiming that Tanzania could increase its tax take by $500 million if it switches to digital payments of VAT. "Tanzania's results in driving the shift from cash to digital payments are very impressive. The country has developed significant experience that has led it to achieve gains in revenue at double digit rates while also delivering social benefits for its citizens," said Dr. Ruth Goodwin-Groen, managing director of the Better Than Cash Alliance (BTCA).

Digital lender OakNorth, which focuses on lending into the SME sector, has broken even in its first year of operations. It joins other niche UK challenger banks such as Aldermore and Shawbrook that have performed well due to a focus on funding to small businesses. Rishi Khosla, co-founder and chief executive of OakNorth, said: "We have a fundamentally different approach to the other challenger banks — we are a bank for entrepreneurs," the FT reports. "We've taken a disciplined frugal approach to building the organisation while not compromising on technology, people, and processes. If you look at the technology we have built, it's more flexible and scalable than other challengers who have used much older technology." Meanwhile, RBS is finding it difficult to divest itself of Williams & Glyn, which it originally hoped to spin off as a standalone lender. The process appears to be mired in problems, including a long-running issue of how to underpin the bank's IT systems. The FT reports that Santander has now abandoned its attempts to buy the bank. There is reported interest from Clydesdale and Yorkshire.

American Express to take on Square & Ondeck Lending
USAA, banking on a digital future?
Financial fraud rises more than 50 percent in the UK in first half of 2016

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