Category Archives: Banks

(EUobserver) Germany: EU banking union deal possible in December

(EUobserver) German finance minister Olaf Scholz said at a press conference in Berlin that the idea of a banking union is moving forward and that an agreement might be possible in December, Bloomberg reports. “The time of the new presidency and the new commission of the European Union is the time to get all the necessary agreements and to start with the work on that question,” Scholz said.

(ZH) Learn To Code: Traditional Bond Traders Now Being Overrun By Programming Quants

(ZH) Once again, the ability to code is trumping all other skills, again lending credence to the “learn to code” joke that came off as so harsh to the liberal social media elite that it wound up getting people banned from Twitter

But the adage is holding true in the bond market, according to Bloomberg, where quants are now striking it rich with the ability to code. The bond market is getting “wired up by systematic players” and firms are scrambling to scoop up the best talent. 

Hedge funds are stealing each others’ talent and trying to entice employees with robust compensation packages. For instance, credit-quant clients at Selby Jennings in London are offering annual compensation of $400,000 to a Ph.D. graduate with five years’ experience as a desk strategist.

Ex-Citadel head of quantitative research for global credit Frederic Boyer had no issue finding work, either, after being recruited to Chicago-based Jump Trading, as the HFT firm seeks to move into the bond market. (Note: we highlighted Jump Trading’s war over the best real estate for high frequency trading in Chicago in a past piece here). 

AbbVie Looking to Raise $28 Billion in High-Grade Bond Market

And Hugh Willis, co-founder of BlueBay Asset Management, is now starting a systematic debt investment firm in London. More than 70% of the new firm’s staff are able to code. A quant arm of the $113 billion hedge fund called Man Numeric started a corporate debt group last year.

Man Numeric’s Robert Lam, who leads the quantitative credit group with Paul Kamenski, said:

“The pool of candidates is vanishingly small.”

“Building a solid team is a very difficult task. It takes a lot of hard work to get the expertise on the systematic strategies side, as well as be an expert in credit markets,” Kamenski added.

His team members are trained in machine learning, engineering, computer science and econometrics. 

Andrew Das Sarma was recently hired by Jump from Citadel where he focused on convertible arbitrage and systematic credit strategies. He has a master’s degree in Applied Mathematics and a bachelor’s in Physics from Harvard University.

Recruiter Options Group reports that interviews for these types of credit quant positions are up by 25% from a year ago. 

Robeco’s offices in Rotterdam houses PhD graduates from nearby Erasmus University. Portfolio manager Patrick Houweling says: 

“They’re able to take empirical data, program a backtest and analyze the results and make sense of them.”

At the firm, fundamental traders do things like watch Mario Draghi’s press conferences. The quants are nowhere to be found. 

“There’s no Draghi on TV screens where the quant researchers sit,” Houweling says. Instead, “a proprietary software program dubbed COBRA hums along each night, delivering an email to portfolio managers in the morning, recommending allocations.”

“It’s less straightforward than equity research. It requires much more attention to detail,” he says. At the fund, humans only intervene in about 5% of the model’s investment decisions. “You need the quant skills and you need the fixed-income
skills. If you’re not a fixed-income expert, you may miss out on a lot of these bond-specific things which are simply not there in stocks.”

About 70% of institutional and 78% of wholesale investors believe the strategy of factor-based investing can work in fixed income – especially with “factor investing” in equities misfiring of late.

Luke Williams, partner at London-based recruitment firm Lascaux Partners Ltd said: “There’s been an intensification of interest and
willingness to put money on the table in the past 18 months. Credit has emerged as a stand-alone business in the systemic investing world.”

Recall, it was just days ago that we wrote about JP Morgan giving its coders licenses to trade equities. 

The bank got regulatory approvals this month for two of its coders in London and New York to trade cash equities. JP Morgan is targeting eight more licenses for coders, globally, by the end of the year.

(Reuters) Italian court convicts Deutsche Bank, Nomura in Monte Paschi derivative trial

Well done for the Italian Justice System
FCMP




(Reuters) An Italian court has convicted 13 former bankers from Deutsche Bank, Nomura and Monte dei Paschi di Siena over derivative deals that prosecutors say helped the Tuscan bank hide losses in one of the country’s biggest financial scandals.

The verdict, read in court on Friday by lead judge Lorella Trovato, also ordered fines and asset seizures worth a total of 68 million euros from Deutsche Bank AG <DBKGn.DE> and 91.5 million euros from Nomura Holdings Inc <8604.T>.

Monte dei Paschi reached a settlement with the court over the case in 2016 at a cost of 10.6 million euros.

The case centres on two complex derivatives transactions — known as Alexandria and Santorini — that Nomura and Deutsche Bank arranged for Monte dei Paschi in 2009.

Prosecutors said the deals helped Monte dei Paschi, which was founded in 1472 and is Italy’s fourth biggest lender, hide more than 2 billion euros of losses racked up after the costly acquisition of a smaller rival in 2008.

“We are disappointed with the verdict. We will review the rationale for it once it is published,” Deutsche Bank said in a statement.

Nomura also said it was disappointed. “After thoroughly examining the content of the judgment, the company will consider all options, including an appeal,” it said.

The scandal, together with more losses suffered by Monte dei Paschi during the euro zone debt crisis, threatened to destabilise Italy’s financial industry and forced the Siena-based lender to seek an 8 billion euro state bailout in 2017.

In the trial, which started in Milan in December 2016 and took 100 hearings to complete, the three banks and 13 defendants faced allegations of false accounting and market manipulation between 2008 and 2012.

Monte dei Paschi and its former top managers were also accused of misleading regulators.

In recent years, instances of bankers being convicted of fraud have been relatively rare and experts said any conviction in this case would come as a surprise.

While few executives from major global banks have faced criminal charges for their roles in the financial crisis, there have been several convictions of senior bankers at smaller European lenders.

In 2017, four former managers of Spanish savings bank Caja de Ahorros del Mediterraneo, and former International Monetary Fund chief Rodrigo Rato were jailed by Spain’s High Court in similar corruption cases related to the financial crisis. (https://reut.rs/2rmCYKZ)

In the Monte Paschi trial all defendants have always denied wrongdoing and none of them will serve time in jail before the lengthy appeals process is exhausted.

First trial jail sentences in Italy can be significantly reduced or completely overturned in the appeals process. Some of the Monte Paschi former executives convicted on Friday have been acquitted by higher courts in related trials.

Monte dei Paschi’s former chairman Giuseppe Mussari, one of five former executives from the Tuscan bank on trial, was given the heaviest sentence of seven years and six months in jail.

Deutsche Bank and Nomura were both convicted as institutions for failing to prevent wrongdoing by their employees.

All six defendants linked to Deutsche Bank and the two who once worked for Nomura were handed jail terms.

They include sentences of four years and eight months each for Ivor Dunbar, former co-head of Global Capital Markets at the German bank, Michele Faissola, its former head of Global Rates, and Michele Foresti, its former head of Structured Trading.

Nomura’s former chief executive officer for the EMEA region, Sadeq Sayeed, was also given a sentence of four years and eight months while Raffaele Ricci, the former head of the bank’s EMEA Sales, was handed a sentence of three years and 5 months.

Lawyers for the defendants said they expected to appeal the verdict once the full ruling is released.

(BBG) Banks Must Act Now or Risk Becoming a ‘Footnote’: McKinsey

(BBG)

  •  Half of firms are ill-prepared for a downturn, report finds
  •  Upstarts spend more on innovation and target lucrative markets

More than half of the world’s banks are already in a weak position before any downturn that may be coming, according to a report from consultancy McKinsey & Co.

A majority of banks globally may not be economically viable because their returns on equity aren’t keeping pace with costs, McKinsey said in its annual review of the industry released Monday. It urged firms to take steps such as developing technology, farming out operations and bulking up through mergers ahead of a potential economic slowdown.

“We believe we’re in the late economic cycle and banks need to make bold moves now because they are not in great shape,” Kausik Rajgopal, a senior partner at McKinsey, said in an interview. “In the late cycle, nobody can afford to rest on their laurels.”

The decade since the global financial crisis has seen a wave of innovation in financial services, bringing new competitors from fintech startups to giants like Apple Inc. and Alphabet Inc.’s Google. Banks have pondered whether to compete with, partner with or acquire some of these newcomers. Some established firms have sought to rebrand as technology companies, in part to attract hard-to-get talent.

McKinsey, whose clients are some of the biggest corporations in the world, consults on topics ranging from strategy and technology to mergers and acquisitions, outsourcing and stock offerings. In its report, the firm said banks risk “becoming footnotes to history” as new entrants change consumer behavior. Most recent attempts by banks to boost efficiency have been “business-as-usual,” it said.

Banks allocate just 35% of their information-technology budgets to innovation, while fintechs spend more than 70%, McKinsey said. Combined with regulatory factors lowering the barrier to entry — like open banking and looser requirements for startups — the environment is increasingly conducive for newer firms to take share from banks.

The report points to Amazon.com Inc. in the U.S. and Ping An in China as examples of technology firms that are capturing financial-services customers. To make matters worse for the old guard, the new players tend to go after the business areas that create the highest returns at banks — credit cards, for example.

Investors have taken notice. Globally, banks’ valuations have fallen 15% to 20% since the start of last year, McKinsey said, adding that “the drop in valuation suggests that investors anticipate a sharp deceleration in earnings growth.”

Lenders can cut costs and find funds for technology by outsourcing what McKinsey calls “non-differentiating activities,” including some trading and compliance functions. Banks “need to get much more comfortable with external partnerships and being able to leverage talent externally,” Rajgopal said.

Read more: BofA’s cloud expansion could ‘save a ton of money’

Another way to free up money: get bigger. BB&T Corp. and SunTrust Banks Inc. said as much when they announced their decision to combine earlier this year — the biggest U.S. bank merger since the financial crisis. Rajgopal said he expects M&A to continue in the late cycle.

“Going forward, scale will likely matter even more as banks head into an arms race on technology,” the report says.

(ECB) Euro area banks have overall comfortable liquidity positions, but some vulnerabilities require further attention, ECB finds

(ECB)

  • Banks showed adequate liquidity reserves to withstand stress
  • Exercise assessed banks’ ability to handle hypothetical liquidity shocks lasting six months
  • Detected vulnerabilities requiring supervisory follow up relate in particular to foreign currencies, data quality and collateral management
  • Findings to enter annual supervisory review

The vast majority of banks directly supervised by the European Central Bank (ECB) have overall comfortable liquidity positions despite some vulnerabilities requiring further attention, according to the results of the 2019 supervisory stress test.

The shocks simulated in the exercise were calibrated on the basis of supervisory experience gained in recent crisis episodes, without any reference to monetary policy decisions. The sensitivity analysis focussed solely on the potential impact of idiosyncratic liquidity shocks on individual banks. It did not assess the potential causes of these shocks or the impact of wider market turbulence.

The results of the exercise are broadly positive: about half of the 103 banks that took part in the exercise reported a “survival period” of more than six months under an adverse shock and more than four months under an extreme shock. The “survival period” is defined as the number of days a bank can continue to operate using available cash and collateral without access to funding markets.

The six-month time horizon exceeds the period covered by the liquidity coverage ratio, which requires banks to hold a sufficient reserve of high-quality liquid assets to allow them to survive a period of significant liquidity stress lasting 30 calendar days. Long survival periods under the severe shocks envisaged by the exercise would leave banks significant time to deploy their contingency funding plans.

Euro area subsidiaries of significant institutions as well as banks undergoing mergers or restructuring were excluded from the sample.

Universal banks and global systemically important banks would generally be affected more severely than others by idiosyncratic liquidity shocks as they typically rely on less stable funding sources – such as wholesale and corporate deposits, which were subject to higher outflow rates in the exercise. Retail banks would be affected less strongly, given their more stable deposit base.

Based on the findings of the exercise, the ECB will require banks to follow up mainly in the following areas where vulnerabilities were identified:

  • Survival periods calculated on the basis of cash flows in foreign currencies are often shorter than those reported at the consolidated level. Several banks make recourse to short term wholesale funding denominated in such currencies and some of them may be overly reliant on the continued functioning of the foreign exchange swap market.
  • When considered on a stand-alone basis, subsidiaries of euro area banks domiciled outside the euro area typically display shorter survival periods than those within. While it is common for subsidiaries to rely on intragroup funding and/or funding from the parent, this may expose some banks to ring-fencing risk in foreign jurisdictions.
  • Certain regulatory “optimisation strategies” revealed in the exercise will be discussed with the banks in the context of the supervisory dialogue.
  • Many banks would be able to mobilise collateral in addition to readily available liquidity buffers to secure extra funding in times of need. However, collateral management practices – which are critical in the event of a liquidity crisis – would benefit from further improvement in some banks.
  • Banks may underestimate the negative impact on liquidity that could result from a credit rating downgrade. Banks with recent experience of managing liquidity under stressed conditions were able to provide higher-quality data in this context.

Most banks delivered the requested information in a timely manner. At the same time, the test helped uncover data quality issues related to the liquidity reporting of a number of banks. The findings will help to improve the quality of supervisory information in the future.

Supervisors will discuss the conclusions individually with the banks as part of the annual supervisory review and evaluation process. The results will not directly affect supervisory capital requirements. They will, however, inform the assessment of banks’ governance and liquidity risk management.

(BBG) Fidelity Joins Price War With Zero Commissions on Online Trades

(BBG)

  •  Firm says it offers an edge with trade execution, cash yields
  •  Move is latest in series of fee cuts by Boston-based company

Fidelity Investments is crashing the free-trading party, challenging rivals in a gambit to lure assets by ending commissions.

The firm will offer not only zero commissions for online buying and selling of U.S. stocks, exchange-traded funds and options, but also provide higher yields for cash balances and better trade execution, according to an announcement Thursday.You’ve reached your free article limit.Get unlimited access for $1.99/mo.View Offers

(BBG) Deutsche Bank Plans About Half of 18,000 Job Cuts in Germany

(BBG)

  •  Germany will see ‘a good share’ of cuts, CEO Sewing has said
  •  London said to be hit disproportionately hard, U.S. less so

Deutsche Bank AG intends to make about half its planned 18,000 job cuts in Germany as it relies on savings at the retail units to lower costs, according to people familiar with the matter.

The lender employed about 41,700 people in its home market at the end of last year, out of a total of 91,700. Outside Germany, London will also be hit especially hard, partly because of Brexit, while the U.S. may see a lower share of front-office cuts once the bank has exited its equities trading business, the people said, asking not to be identified because talks are ongoing.

Chief Executive Officer Christian Sewing in early July unveiled Deutsche Bank’s most radical restructuring in recent history, with job reductions a key piece of the plan. The scale of the planned reductions in Germany may surprise analysts after the CEO had previously indicated that the country would see its “fair” share of cuts. It also comes as an economic slowdown takes hold of Europe’s largest economy and the risk of a recession increases.

While Deutsche Bank has yet to detail the cuts to its retail bank — now its largest division by revenue — it’s increasingly clear they will be big, too. Frank Strauss, the head of the business, left when the restructuring was announced in the summer because he didn’t support the plans.

“We do not communicate details of the planned job cuts on a regional or divisional level,” the bank said by email. “We are communicating directly with our works council and our employees regarding their jobs and options available to them.”

The new head of the German retail unit, Manfred Knof, is currently scouring the business for cost savings. He’s considering turning the unit’s second headquarters in Bonn into an outpost, and he may dissolve the retail unit’s separate legal structure, people familiar with the matter have said. That could save Deutsche Bank hundreds of millions of euros in compensation and regulatory expense, other people said.

Retail Cuts

A decision will happen before the bank’s investor day in December, the people said. The change would need approval from financial regulators, who have so far indicated they take a positive view, one person said. They may not give their final verdict before next year, the person said.

Deutsche Bank is just one of many large lenders that have recently announced staff reductions, though its effort is the biggest by far. HSBC Holdings Plc is seeking to shed as many as 10,000 roles, largely by selling its retail operations in France, a person familiar with the matter said on Monday. Taken together, European lenders have officially announced plans for more than 50,000 job cuts year to date, according to data compiled by Bloomberg.

Past headcount reductions at Deutsche Bank have frequently included selling entire units, as the bank did with its retail operations in Poland and Portugal. But the latest plan doesn’t take into account any unannounced sales, a person familiar with the matter said.

CEO Sewing had previously said that most of Deutsche Bank’s planned cuts will happen by the end of 2021. While they will affect all regions where the bank operates, Germany will see “a fair share and a good share,” he said. The measures may take longer there than in other countries because of labor laws.

Deutsche Bank shares fell 3% as of 12:16 p.m. in Frankfurt and have declined almost 10% so far this year.

The German job cut figure includes staff being made redundant through the merger of Postbank with Deutsche Bank’s retail business, which was announced in 2017. In July, Sewing replaced Strauss with management board member Karl von Rohr. Strauss, who used to run the Postbank subsidiary when Deutsche Bank was still planning to list it on a stock exchange, was reluctant to cut costs as quickly as Sewing thought necessary, people familiar with the matter said. Strauss couldn’t be immediately reached for comment.

Retail Savings

Deutsche Bank has said the retail bank will contribute 60% of the 2.3 billion euros in cost savings it’s seeking to wring from its core businesses by the end of 2022. The division’s expenses are expected to fall by an average of 6% per year — far more than at any of the other divisions.

Deutsche Bank has indicated that most cuts will affect support roles and back office staff, rather than client-facing employees, as it seeks to automate workflows. It doesn’t break down where those jobs are located, but it has large back-office hubs in Germany as well as in places as far apart as Florida, the Philippines and India.

The decision to pull out of equities trading will also contribute toward the job reduction goal. Deutsche Bank recently sealed an agreement with BNP Paribas SA to transfer the part of the business that serves hedge funds, including about 1,000 staff who will move to the French bank, people familiar with the matter have said.

(EUobserver) HSBC to cut up to 10,000 jobs

(EUobserver) The interim chief of HSBC bank, Noel Quinn, is drafting a plan to cut 10,000 jobs for immediate savings from across the banking group, according to the Financial Times. The plan would mainly target European employees, the most expensive. The reorganisation comes on top of a recently-announced plan to cut 4,700 jobs. HSBC has a total of 238,000 employees worldwide. Deutsche Bank announced in August a cut of 18,000 jobs.

(ECO) Haitong acaba com research sobre cotadas portuguesas. Vende ações asiáticas aos clientes ibéricos

(ECO) Antigo BESI já contactou os clientes, a quem quer agora apresentar produtos financeiros asiáticos. Filipe Rosa, que desempenhava funções como head of iberian equity research, saiu do banco.

OHaitong já não faz análise financeira de ações portuguesas e espanholas para os seus clientes. O antigo Banco Espírito Santo Investimento (BESI) anunciou a decisão esta segunda-feira aos clientes da banca de investimento, limitando ainda mais o número de analistas financeiros que cobrem títulos da bolsa de Lisboa.

“Devido a um realinhamento do modelo de negócio, o Haitong Bank está a terminar a cobertura de research ibérico“, pode ler-se na nota que foi enviada aos clientes da banca de investimento.

Questionado pelo ECO, o banco de investimento clarificou as razões: além da evolução do posicionamento estratégico das atividades de corretagem próprias, apontou ainda para “mudanças estruturais” no setor na Europa, concentração na cobertura de research na região Ásia-Pacífico e ainda uma parceria estratégica com a Haitong International para um cenário pós-Brexit.

As cotadas portuguesas que eram alvo de análise pelo banco de investimento eram:

  • Mota-Engil;
  • Altri;
  • Navigator;
  • Semapa;
  • NOS;
  • Sonaecom;
  • Corticeira Amorim;
  • CTT;
  • Ibersol.

A estas, que deixam agora de ser acompanhadas pela divisão de research, juntam-se ainda as espanholas:

  • Euskaltel;
  • Cellnex;
  • Mas Movil;
  • Telefonica;
  • Antena 3;
  • Mediaset España;
  • Indra (IDR SM);
  • Ebro Foods;
  • Logista;
  • Tecnicas Reunidas;
  • Vidrala;
  • Viscofan.

A análise financeira do banco tem sido reduzida, sendo que nos últimos dois anos saíram cerca de dez pessoas da equipa em Portugal. Mais recentemente, Filipe Rosa, que estava no banco há dez anos e desempenhava funções de head of iberian equity research, saiu também do Haitong. O analista está, desde julho, a trabalhar na gestora de ativos Azvalor Asset Management, em Madrid.

O Haitong rejeita que tenha havido saídas de trabalhadores devido às mudanças. “Não haverá qualquer despedimento do departamento de research em Portugal. Haverá uma realocação dessas posições para outras áreas do banco”, explicou fonte oficial, em declarações ao ECO.

Esta decisão acontece num contexto de reestruturação do Haitong. Esta segunda-feira, o banco de investimento fez outro anúncio sobre esse processo: vendeu a subsidiária Haitong Investment Ireland à casa-mãe, a Haitong Securities, por 12 milhões de euros (numa operação que não terá impacto nas contas, mas irá reduzir o rácio de malparado).

Após quatro anos de prejuízos, o Haitong conseguiu chegar a resultados líquidos positivos em 2018. No primeiro semestre deste ano, alcançou mesmo lucros recorde de 11 milhões de euros. A área de mercado de capitais foi a que mais contribuiu para o volume de negócios na primeira metade do ano, tendo gerado um produto bancário de 32,8 milhões de euros.

Ações nacionais? Banco quer vender produtos asiáticos

Apesar de o research em Portugal já não acompanhar títulos ibéricos, o Haitong Bank — que é detido pelo Haitong Securities, uma entidade de direito da República Popular da China — quer manter a relação com os investidores nas duas geografias. Quer apresentar-lhes agora produtos financeiros asiáticos.

“Em nome da divisão de research ibérica, o banco gostaria de agradecer aos clientes pela sua lealdade e negócio ao longo dos anos. O banco e o Haitong Group continuam comprometidos com os seus clientes, bem como as equipas de vendas da Península Ibérica, estando os traders ansiosos por poderem dar a conhecer aos investidores os produtos asiáticos do grupo“, refere a mesma nota.

Acrescenta que mantém o research dos ativos da Europa Central e de Leste, bem como as divisões de vendas destas geografias, sendo que, no continente europeu, o Haitong tem escritórios em Varsóvia, Londres, Dublin, além de Lisboa e Madrid. Fora da Europa, está ainda em São Paulo, em Xangai e Hong Kong.

Fonte oficial do banco sublinhou ainda, ao ECO, que “o Haitong Bank não tem qualquer intenção de desinvestir” em Portugal. Acrescentou que está “fortemente preparado para continuar a servir os seus clientes nas suas regiões core, incluindo Portugal, assim como continuar a desenvolver o seu modelo de negócio cross-border com um ângulo chinês”.

Há cada vez menos research na bolsa de Lisboa

O Haitong juntou-se, assim, à já longa lista de bancos de investimento de deixaram de olhar para a bolsa de Lisboa. A análise financeira de ações portuguesas tem diminuído nos últimos anos, especialmente com a tendência de saída de empresas portuguesas cotadas, mas também com a entrada em vigor da DMIF II, que obriga a que o research seja pago pelos clientes (e não distribuído gratuitamente ou incluído em pacotes de serviços).

Estamos profundamente preocupados que um player importante e de longo prazo a nível Ibérico, e em especial em Portugal, tal como o Haitong Bank, tenha decidido pôr fim à cobertura das ações ibéricas que precisam de mercados de capitais eficientes para serem competitivos no contexto dos mercados de capitais europeus”, escreveu Manuel Puerta da Costa, presidente da Associação Portuguesa de Analistas Financeiros (APAF), no LinkendIn.

Atualmente, o número de bancos de investimento em Portugal com departamento de research limita-se ao Caixa Banco de Investimento (Caixa BI), BPI, BiG – Banco de Investimento Global e Bankinter.

Na APAF, consideramos que uma cobertura de research inferior e menor das ações cotadas não promove a sustentabilidade da cultura acionista entre os participantes do mercado“, acrescentou Puerta da Costa.

(GUA) Senior Credit Suisse executive sacked over ‘extraordinary’ spying scandal

(GUA) Bank rules surveillance of outgoing head of wealth management Iqbal Khan was ‘wrong and disproportionate’

The Credit Suisse logo on a bank in Geneva
 Credit Suisse’s directors ruled that the spying operation resulted in severe reputational damage to the bank. Photograph: Denis Balibouse/Reuters

Credit Suisse has sacked its chief operating officer over an “extraordinary” James Bond-style corporate espionage scandal in which the bank hired private detectives to tail a senior executive and his wife through the streets of Zurich following a row with his boss at a cocktail party.

Switzerland’s second-biggest bank said on Tuesday that Pierre-Olivier Bouée had left with immediate effect after the board of directors ruled that the seven-day spying operation was “wrong and disproportionate and has resulted in severe reputational damage to the bank”.

The bank also announced that a private security consultant who had helped Bouée organise the spying had apparently killed himself. Swiss financial blog Inside Paradeplatz first reported the man’s death, identifying him only as T. The man took his own life last Tuesday, according to Thomas Fingerhuth, a lawyer for the private investigative firm Investigo.

At a hastily organised press conference in Zurich, the Credit Suisse chairman, Urs Rohner, said he was “greatly saddened” by Bouée’s “extraordinary” decision to hire detectives to track the movements of Iqbal Khan, its outgoing head of wealth management.

Credit Suisse chairman Urs Rohner at a press conference
 Credit Suisse chairman Urs Rohner at a press conference on the spying scandal on Tuesday. Photograph: Ennio Leanza/EPA

“This behaviour we do not tolerate it, [it was] extraordinary,” Rohner said. “It was wrong, and it’s not how we want to do business.” He also expressed his deepest condolences to the family of the dead security consultant.

It was at the junction of Fraumünsterstrasse and Börsenstrasse near the Limmat river in the centre of Zurich on 18 September that Khan decided to find out why he kept seeing the same car following him around town.Advertisement

The star banker had noticed the car earlier as he and his wife dropped off their six-year-old child at football practice. Khan had attempted to lose the tail by driving fast and erratically through the streets of Zurich’s financial capital.

As he turned into Börsenstrasse, he leaped out of the car shouting “police, police” and whipped out his phone to take photos of the car number plate and three occupants, who were later revealed to be detectives from Investigo. Swiss police confirmed they had opened “a criminal investigation into coercion/threat”.

Iqbal Khan
 Iqbal Khan, former head of wealth management at Credit Suisse, was tailed by private investigators. Photograph: Arnd Wiegmann/Reuters

The private detectives had also followed Khan on foot, and used the encrypted messenger service Threema, which made it impossible for Homburger, the law firm that investigated the spying scandal on behalf of Credit Suisse, to discover the full extent of the covert surveillance.

Credit Suisse’s board found that Bouée had ordered the detectives to follow Khan under the misguided notion that the executive might be trying to poach clients to UBS, Credit Suisse’s arch-rival, which he was joining. The bank has said there is no evidence to suggest Khan was seeking to poach clients. Khan’s first day at UBS following garden leaving is Tuesday.

Credit Suisse cleared its chief executive, Tidjane Thiam, of ordering Bouée to organise the spying, despite a long history of personal animosity between Thiam and Khan.

“The chief operating officer assumed responsibility for this matter and submitted his resignation to the board of directors, which has been accepted with immediate effect,” the bank said. “The Homburger investigation did not identify any indication that the chief executive had approved the observation of Iqbal Khan nor that he was aware of it prior to 18 September 2019, after the observation had been aborted.”

Khan, 43, was born in Pakistan and moved to Switzerland aged 12. He had long wanted to rise further up the ranks at Credit Suisse but had been frustrated by Thiam, 57.

Personal relations between Thiam, the former head of British insurer Prudential, soured further when Khan bought the house next door to his boss in the village of Herrliberg on the so-called “gold coast” of Lake Zurich. Khan had the house levelled to the ground, and rebuilt over two years with contractors often working early mornings and at weekends, leading Thiam to complain to the bank’s chairman.

In an attempt at a rapprochement, in January Thiam invited Khan and his wife to a cocktail party for top colleagues and friends in the ultra-wealthy neighbourhood. But the pair had a heated argument about a row of trees Thiam had planted on his property that partially blocked Khan’s view of the lake. Khan’s wife had to stand between the two men to stop the dispute escalating further, according to a report by Swiss newspaper Tages-Anzeiger.

(Mish) Danish and Swiss Banks to Charge Customers 0.75% Interest on Large Deposits

(Mish)

Last week, Denmark’s central bank cut its deposit rate to -0.75%. Banks will pass this on to large customers.

Please consider Denmark’s Jyske Bank Lowers its Negative Rates on Deposits.

Jyske Bank said on Friday people with more than $111,100 in their bank accounts will be charged more for their deposits as it seeks to pass on some of the costs of recent rate cuts by the European and Danish central bank.

Jyske Bank, Denmark’s second-largest bank, said it would introduce a negative interest rate of 0.75% for all corporate deposits and for private clients depositing more than 750,000 Danish crowns ($111,100) from Dec 1.

Last week, Denmark’s central bank cut its key deposit rate to minus 0.75%, a record low among developed economies. “It is a lot of money and we have to pass on part of this bill to our customers,” he said. “I don’t hope that we will have to go lower but I don’t dare to promise it.”.

Denmark’s largest bank, Danske Bank has said it has no plans to introduce negative interest rates on deposits. Switzerland’s UBS has said it will impose a negative rate of 0.75% on clients who deposit more than 2 million Swiss francs ($2 million). ($1 = 6.7559 Danish crowns)

Simple Question

If you live in Denmark and have a bank account in excess of $100,000 or so, why would you have it at Jyske Bank which charges 0.75% while Danske Bank, the country’s largest bank doesn’t?

Possibilities

  1. There is something seriously wrong at Danske Bank and people don’t trust it.
  2. Danske Bank welcomes deposits and can do something with the money. But if so, at what risk?

Any Danish readers care to answer?

Perhaps we have an answer from Bloomberg in the following discussion.

Jyske Shares Jump on Interest Rate Charge

Bloomberg reports Negative Rates Just Got Real for a Record Group of Bank Clients

Shares in Jyske closed more than 5% higher marking their best performance since December 2017, as investors calculated the impact that the new policy will have on the bank’s net interest income.

Jyske has “set the ball rolling,” said Per Hansen, an investment economist at broker Nordnet.

Other Bank Comments

  • A Danske Bank spokesman said, “We cannot comment on competitors’ prices and have nothing new to add on the matter.” The bank has previously promised to protect retail depositors from negative rates.
  • Nordea Bank Abp spokeswoman Tenna Schoer said the Danish unit is “monitoring the situation closely.” The bank’s CEO Frank Vang-Jensen has previously said Nordea can’t rule out imposing negative rates on retail depositors.
  • Sydbank, which has already said it will impose negative rates on retail depositors with over 7.5 million kroner, is monitoring the situation. “We have taken note of developments in the market and have seen that interest rates have fallen further,” said Jan Svarre, deputy CEO at the bank. “We’ll investigate our options and where the limit should be, and then we will return and notify our customers directly.”

Per Hansen commented “imposing such a policy is politically difficult for Danske, given its recent history of financial scandals. The bank is being investigated for a $220 billion money-laundering affair, and has been reported to the police for a separate case in which it overcharged retail investors.”

Bonus Questions

  1. What happens to Danske if all the Danish money flees to Danske?
  2. What happens if everybody takes their money and runs?

Regardless of the answers, I expect to see an increased demand for gold, the US dollar, US treasuries, and safes as these pass-through policies escalate.

Please recall what happened in Japan on far less negative rates: Safes Sold Out in Japan: Customers Hoard Cash in Response to Negative Rates

A week ago I commented on the ECB’s Counterproductive QE: Whatever It Takes Morphs Into “As Long As It Takes”

European banks are getting killed on these policies.

Ball is Rolling

Jyske has “set the ball rolling,” said Per Hansen.

Yes, and if Central Banks stick with their “as long as it takes” approach, the results are likely to be disastrous.

Mike “Mish” Shedlock

(OBS) Banif vende banco no Brasil por cerca de 20 cêntimos

(OBS) Comissão liquidatária do banco madeirense chegou a acordo com sociedade de advogados para a opção de compra do Banif Brasil, que vai sair da esfera do Banif até janeiro de 2021.

ANTONIO COTRIM/LUSA

O Banif vai libertar-se do Banif Brasil até janeiro de 2021. A comissão liquidatária do Banif chegou a acordo com a Siqueira Castro, uma sociedade de advogados especializada na aquisição de ativos de alto risco, que ficou com a opção de compra do Banif Brasil por um real (cerca de 20 cêntimos), durante dois anos, segundo o Jornal de Negócios. Após esse período, o banco madeirense pode vender o banco a esta sociedade, se a compra não tiver sido realizada entretanto. Em ambos os casos, o banco brasileiro sai da esfera do Banif.

Desde 2016 que o Banif tenta vender o Banif Brasil, que detém a 100%. Nesse ano foram detetadas graves dificuldades financeiras no banco brasileiro, tendo sido tomada a decisão de liquidar ou vender a instituição.

Em 2017, dos 60 investidores contactados, só dois mostraram interesse, acabando por desistir. O Banif pediu, por isso, ao Banco Central do Brasil para avançar com a liquidação ordinária do Banif Brasil. Em 2018, a Siqueira Castro pagou ao Banif três milhões de reais (655 mil euros) pelos créditos do banco brasileiro que o Santander não quis comprar. O Banif reinvestiu o montante na compra dos créditos no Brasil à Oitante — que ficou com os ativos do Banif.

Segundo o Negócios, esta operação aconteceu porque a sociedade de advogados exigiu que, para ficar com o Banif Brasil, o banco madeirense tinha de recuperar todos os créditos. O acordo entre o Banif e a Siqueira Castro foi celebrado a 25 de janeiro deste ano. A opção de compra mantém-se pelo prazo de dois anos.

(JN) Deutsche Bank transfere negócio de corretagem para o BNP Paribas

(JN) De acordo com a Bloomberg, cerca de mil funcionários do banco alemão serão transferidos para o BNP Paribas durante os próximos dois anos.

Deutsche Bank transfere negócio de corretagem para o BNP Paribas

O alemão Deutsche Bank fechou esta segunda-feira um acordo com o BNP Paribas para transferir o seu negócio de corretagem para o banco francês. A medida, que se enquadra no seu plano de reestruturação, deverá estar concluída até ao final de 2021.

De acordo com a Bloomberg, cerca de mil funcionários do banco alemão serão transferidos para o BNP Paribas durante os próximos dois anos, no âmbito desta medida que, segundo fontes citadas pela agência noticiosa, deverá traduzir-se numa recuperação do saldo dos clientes que, no banco alemão, caíram para metade, para cerca de 80 mil milhões de dólares.

“Agora que o acordo foi assinado, acreditamos que temos as bases para recuperar e expandir os negócios”, disse o diretor de operações do Deutsche Bank, Frank Kuhnke, em entrevista por telefone à Bloomberg. O acordo “fornece benefícios reais tangíveis para os nossos clientes e oferece à nossa equipa um caminho a seguir”.

As duas empresas chegaram a um acordo de princípio no início de julho, quando o CEO do Deutsche Bank, Christian Sewing, decidiu sair da área de negociação de ações. No entanto, a finalização do acordo foi dificultada por uma enxurrada de deserções de clientes.

Para o CEO do BNP Paribas, Jean-Laurent Bonnafe, o acordo fechado entre as partes pode gerar a escala necessária para competir com os grandes players.

Na verdade, segundo a Blomberg, o acordo pode colocar o BNP Paribas entre as quatro maiores corretoras do mundo nos próximos 12 meses, com 250 a 300 mil milhões de dólares em saldos de clientes.

Contudo, até que os clientes sejam efetivamente transferidos para o BNP Paribas, o Deutsche Bank continuará a gerir a plataforma, como esclareceram os dois bancos esta segunda-feira.

(Reuters) Exclusive: Deutsche Bank has discussed adding assets to bad bank if sales go well – sources

(Reuters)

NEW YORK (Reuters) – Some senior Deutsche Bank AG (DBKGn.DE) officials have discussed the possibility of putting additional problematic assets worth billions of euros into a unit it created earlier this year, if the bank is able to sell assets already held within that “bad bank,” according to three bank sources.FILE PHOTO: A man walks past an office of Deutsche Bank in Hanau, Germany, April 27, 2015. REUTERS/Kai Pfaffenbach

The discussions in recent weeks, which have not been previously reported, are preliminary, the sources said, adding that there is nothing imminent. A Deutsche Bank spokesman said the bank has no plans to add additional assets into the so-called capital release unit, or bad bank.

Nevertheless, it is one of the options that has come up for discussion at the highest levels at the bank, as executives grapple with the problem of having to turn around the bank on a tight budget, according to the three people familiar with the talks.

Deutsche Bank needs more capital to be able to absorb the losses that will likely come from shedding problematic assets, such as long-dated derivatives, that are still on its books, the people said.

But, after raising 29.3 billion euros ($32.3 billion) in capital over the past nine years, it does not have room to ask investors for more, the sources added.

For investors, still nursing a 75% fall in the bank’s share price over the past four-and-a-half years, it means that the road to recovery for the bank will most likely be long.

Christian Sewing, who took over from John Cryan in April last year, is looking to reshape Deutsche Bank after a multi-year bet on building a global investment banking business unraveled.

In July, he set up the bad bank, called a capital release unit (CRU), to house 74 billion euros of risk-weighted assets the bank had identified for wind-down or sale, part of a broader restructuring that will see 18,000 jobs go as it exits unprofitable businesses. Deutsche Bank set aside a 7.4 billion euro budget to fund the restructuring.

Some analysts have been skeptical whether the plan fully recognizes the extent of the problem assets still sitting on Deutsche Bank’s balance sheet. They remain particularly concerned about its exposure to Level 3 assets, which are the most illiquid and hard-to-value.

“It’s a partial clean-up,” said David Hendler, an independent analyst at New York-based Viola Risk Advisors. Hendler added that Deutsche Bank has 18 billion euros in hard-to-value assets on its balance sheet, which he estimated will take years to offload.

“They’re trying to paint a picture of progress but there’s still a lot of sludge in there,” he said.

Level 3 assets, which can include distressed debt and derivatives, are not necessarily loss making.

Deutsche Bank has said that the CRU’s focus is on releasing capital rather than ring-fencing toxic assets. In a memo to staff on July 8, Sewing described the assets within it as “high quality” and said most were of a short duration.

Only 30% of Deutsche Bank’s 25 billion euros worth of Level 3 assets have so far been placed within the capital release unit, according to a presentation the bank gave alongside its quarterly results in July.

The bank has tried to shed some of those assets, which include longer-dated derivatives, over the past three years. But it had little success because it was not prepared to take the writedowns the sales would have required, the sources said.

A sale of a financial asset can lead to a capital hit if the price is below what the bank values it at on its books, leading to a loss.

Deutsche Bank must stay within the budget it has set for its restructuring to avoid having to raise funds from investors, the sources said.

It set up the capital release unit with a view to shedding assets it could realistically find buyers for or wind-down in the next two to three years, the sources said. That, in turn, would free up capital to fund the sale of longer-term assets that will require bigger writedowns, the sources said.

Of the assets currently in the unit, Deutsche Bank plans to run a formal auction of its equity derivatives book as soon as this month, several sources familiar with the sale process have told Reuters. If those sales are successful, the bank could move more assets into the restructuring unit, the three sources close to the bank said.

(ZH) DOJ Accuses JPMorgan’s Precious Metals Trading Desk Of Being A Criminal Enterprise

(ZH)

Who would have thought that JPMorgan’s precious metals trading desk is the functional equivalent of the mafia, and that its one-time leader, Blythe Masters, was the mafia’s don? 

Well, almost everyone who didn’t mind being designated a conspiracy theorist for years. And now comes vindication, because this has just been confirmed by the DOJ, which accused the PM trading desks at JPMorgan of being deeply involved in what prosecutors described as a “massive, multiyear scheme to manipulate the market for precious metals futures contracts and defraud market participants.”

In an indictment unsealed on Monday morning, the DoJ charged Michael Nowak, a JPMorgan veteran and former head of its precious metals trading desk and Gregg Smith, another trader on JPM’s metals desk, in the probe. (Blythe Masters was somehow omitted).

“Based on the fact that it was conduct that was widespread on the desk, it was engaged in in thousands of episodes over an eight-year period — that it is precisely the kind of conduct that the RICO statute is meant to punish,” Assistant Attorney General Brian Benczkowski told reporters.

Here’s where it gets extra interesting: according to Bloomberg, the unusually aggressive language language embraced by prosecutors reminds legal experts of indictments utilizing the RICO Act – a law allowing prosecutors to take down ‘criminal enterprises’ like the mafia by charging all members of the organization for any crimes committed by an individual on behalf of the organization.

Prosecutors charged the head of JP Morgan’s global metals trading operation and two other traders with “conspiracy to conduct the affairs of an enterprise involved in interstate or foreign commerce through a pattern of racketeering activity” – language that is typically used to describe a RICO charge.

This hints at the possibility of a deeper prosecution for JP Morgan. Already, 12 people have been charged in the precious metals market-rigging conspiracy.

“We’re going to follow the facts wherever they lead, whether it’s across desks here or at any other bank or upwards into the financial institution,” Benczkowski said.

It’s unclear what the DoJ is planning, but they’re clearly keeping their options open.

Circling back to the indictment, both Smith and Nowak were put on leave over the summer as the DoJ’s investigation neared its conclusion.

A third trader named in the indictment, Christopher Jordan, traded precious metals at JPM until he left in December 2009. He later traded precious metals at two other banks, Credit Suisse and First New York.

In a press release accompanying the indictment, Assistant Attorney General accused all three men of scheming to manipulate the precious metals market while potentially harming their bank’s clients.

“The defendants and others allegedly engaged in a massive, multiyear scheme to manipulate the market for precious metals futures contracts and defraud market participants,” said Assistant Attorney General Brian A. Benczkowski. “These charges should leave no doubt that the Department is committed to prosecuting those who undermine the investing public’s trust in the integrity of our commodities markets.”

William Sweeney, the Assistant Director in Charge of the FBI’s New York Field Office, added that this manipulation likely impacted “correlated markets and the clients of the bank they represented.” 

“Smith, Nowak, Jordan, and their co-conspirators allegedly engaged in a complex scheme to trade precious metals in a way that negatively affected the natural balance of supply-and-demand,” said FBI Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office. “Not only did their alleged behavior affect the markets for precious metals, but also correlated markets and the clients of the bank they represented. For as long as we continue to see this type of illegal activity in the marketplace, we’ll remain dedicated to investigating and bringing to justice those who perpetrate these crimes.”

According to Bloomberg, three other banks – Deutsche Bank, HSBC and UBS – agreed to pay $50 million (in total) to settle civil claims by the CFTC. Two former JPM employees who pleaded guilty and contributed evidence against their former colleagues that was used in the indictment.

“While at JPMorgan I was instructed by supervisors and more senior traders to trade in a certain fashion, namely to place orders that I intended to cancel before execution,” said one former trader John Edmonds during an October 2018 hearing after pleading guilty to commodities fraud and conspiracy, BBG reports.

The behavior dates back more than 10 years to 2009, according to chat logs that were shown in the indictment. The conversations exposed in the chat logs show just how blatant the manipulation was, and how little the traders did to conceal it.

One of the traders who participated in the chat shown above was Christian Trunz, who traded precious metals at Bearn Stearns before joining JP Morgan after the crisis. He told a federal judge last month that this type of behavior was openly encouraged on JPM’s trading desks for roughly a decade, and that other traders taught him how to do it. He pleaded guilty to federal fraud charges on Aug. 20, BBG reports.

Another trader said during a plea hearing that he was instructed to bid up the price of futures contracts by placing, then cancelling, bid orders (the literal definition of spoofing) that he never intended to fill.

“I was instructed that if a client wished to sell futures I should simultaneously place both bids and offers with the intent of canceling the bids prior to execution,” Edmonds said during his plea hearing.

Edmonds said the purpose was to falsely transmit liquidity and price information in order to deceive other market participants about the supply and demand so they would trade against the orders that JPMorgan wanted to execute.

“We created market activity which artificially drove the sale price up and induced other market participants to purchase at an inflated price,” he said. Edmonds entered into a cooperation agreement with the CFTC in July.

Since the crisis, regulators around the world have cracked down on manipulation in rates, forex and government bond markets, so it’s not exactly a surprise that this type of behavior was also happening in precious metals. But the brazenness with which traders engaged in such manipulation suggests that they didn’t know what they were doing was illegal or wrong, which, in at least some cases, is probably true.

The aggressiveness of this manipulation probe is notable given that the government has lost the last two manipulation cases in court. The DoJ is trying to show that it is “undeterred and are becoming more, not less, aggressive” in cracking down on market manipulation.”

Read the full indictment below:

u.s. v. Smith – Indictment by Zerohedge on Scribd

(ZH) Since 2014, European Banks Have Paid €23 Billion To The ECB… And Now Face Disaster

(ZH) Earlier this morning, there was an added wobble in European bond prices after an unconfirmed MNI report said the ECB could delay the launch of QE on Thursday and make it data dependent. While skeptics quickly slammed the story, saying it was just a clickbait by MarketNews…

About this MNI story on a possible delay in ECB QE announcement:
1) No substance, including from the ECB “sources”
2) Let’s hope the story is as accurate as the previous ones163:51 PM – Sep 10, 2019Twitter Ads info and privacySee Frederik Ducrozet’s other Tweets

… it does highlight just how sensitive the bond market is to an announcement of aggressive easing by the ECB when it meets on Thursday, Sept 12, where consensus generally expects a significant easing package, including a -20bp rate cut (followed by -10bp cut later on), coupled with roughly €30 billion in sovereign debt QE for 9-12 months, coupled with enhanced forward guidance.

The three package expectations (small, medium, large) by Goldman analysts are laid out below:

There is just one problem: while it is unclear if any further easing by the ECB will do anything to stimulate the Eurozone economy, one thing is certain – further easing will only cripple Europe’s banks. In fact, as Goldman writes in its ECB preview, “further rate cuts are a very uncomfortable prospect for the [banking] sector” and estimates that a -20bp cut could lead to an aggregate €5.6bn (-6%) profit cut for 32 €-banks under the bank’s coverage; worse, a further -10bp cut, as per GS macro forecasts, increases the hit to -10% (-€8.3 bn). Overall, 19 banks in Goldman’s coverage face a >10% EPS cut, and 8 banks face as much as a 20% EPS hit.

Then there is Europe’s head on collision with a recession: the weakening rate outlook has been accompanied by >20% fall in €-bank shares (SX7E) since 2H18 and -4% cuts to their consensus Net Interest Incomes (for 2020E). According to Goldman, so far ~40% of the share price decline could be explained by NII cuts; the rest falls into the ‘other’ domain, “where political risk features notably.”

Here is the problem in one sentence, and chart: since negative rates were intorduced in 2014, European Banks have paid €23BN to the ECB!

So to avoid a further banking sector, deterioration Goldman warns that “it’s critical that tiering accompanies further rate cuts if a large profit hit for the sector is to be avoided. A -20bp cut could lower €-banks EPS by ~6%. A tiering with efficiency on par with SNB scheme could offset ~30% of the hit.”

So the big question for Thursday is whether the ECB will also introduce rate tiering at the same time as it eases more.

On this topic, Goldman economists note that the implementation of the ECB’s new scheme is likely to be structured based on a multiple of minimum reserves held by individual banks (SNB model) or on a fraction of their actual excess reserve holdings (BOJ). Their baseline assumption is a two-tiered system, with one tier remunerated at the MRO (currently 0%), similar to minimum reserves, and a second tier charged at the prevailing DFR. They expect c. 50% of excess reserves to be priced at the DFR level.

In Goldman’s view, tiering is a critical part of any incremental easing package. As we have argued before, without it, an extremely challenging operating environment becomes worse, and may push an increased number of banks towards breakeven, or even loss-making territory. However, not all tiering is the same, and the schemes currently in use vary greatly in the extent of the offset/relief they provide to banks.

Key questions for bank investors ahead of the ECB meeting revolve around these following issues:

1. Could ECB’s tiering efficiency be on par with the Swiss or Japanese approach? The Swiss-like approach to tiering is Goldman’s baseline scenario (where c. 60% of deposit balances are exempt from negative rate), but it offers less relief for banks compared to the Japanese approach (>90%).

2. Would tiering be applied to the incremental cut (-20bp) only, or the full -60bp? In other words, would the tiered rate be set at the level of the MRO (0%) or lower. In our view, an offset for the entire -60bp is key. Goldman estimates that a scheme with efficiency on par with a ‘Swiss model’ with a relief applied retrospectively to a full negative rate (-60bps) has scope to shield ~⅓ of a fully-loaded impact of a 20bp rate cut for the Euro area banks under our coverage.

If rates on aggregate fall by -30bp, we calculate that the ‘tiering shield’ would be closer to 25-30% of the aggregate hit. It’s also important to note that even with tiering a 20-30bp rate cut is ultimately profit negative – when fully loaded. The  relief it brings, however, is front-loaded leading to a near-term neutral impact for the aggregate.

In short: with the sellside analysts more focused on what the ECB will do to offset the adverse impact of its additional easing – as Europe inevitably careens to the reversal rate of roughly -1%, beyond which it’s game over for central banks – one wonders: just why is the ECB doing anything at all, if the biggest consideration is what it will do to offset the damage it creates by “fixing” things?

(ZH) EU Bank Bosses Warn Of “Grave Consequences” If ECB Keeps Cutting Rates

(ZH)

The ECB’s imposition of negative interest rates have created an “absurd situation” in which banks don’t want to hold deposits, rages UBS CEO Sergio Ermotti, arguing that this policy is hurting social systems and savings rates.

Ermotti is not alone. As European bank bosses cast their eyes at their share prices, they are fighting back, some have said – biting the hand that feeds, in their attack on ECB policies, warning of severe consequences to asset prices and the broader economy.

As Bloomberg reports, Deutsche Bank CEO Christian Sewing warned that more monetary easing by the ECB, as widely expected next week, will have “grave side effects” for a region that has already lived with negative interest rates for half a decade.

“In the long run, negative rates ruin the financial system,” Sewing said at the event, organized by the Handelsblatt newspaper.

Another cut “may make refinancing cheaper for states, but has grave side effects.”

While incoming ECB head Christine Lagarde has claimed that the benefits of deeply negative rates outweigh the costs (stating just this week that “a highly accommodative policy is warranted for a prolonged period of time;” few economists believe another cut at this level would actually help the economy. According to Sewing, all it would achieve is to further divide society by lifting asset prices while punishing Europe’s savers who are already paying 160 billion euros ($176 billion) a year because of negative interest rates.

“What’s really worrisome: central banks have hardly any tools left to effectively mitigate a real economic crisis,” Sewing said.

“They have already cranked open the money tap – most of all the European Central Bank.”

Who can blame Sewing, as the EU yield curve has collapsed, so has his share price…

Source: Bloomberg

“Banks’ interest margins are under pressure in this environment and that’s not going to change,” Commerzbank CEO Martin Zielke said at the same conference.

I don’t think it is a particularly sustainable or responsible policy. But we have to recognize the facts and the facts are that winning clients in this environment helps work against that pressure.

Bloomberg also notes that Yngve Slyngstad, the chief executive officer of Norges Bank Investment Management, Norway’s $1 trillion wealth fund, has separately said that negative rates are the main worry at the world’s largest wealth fund right now.

So, with Draghi facing push back from an increasingly hawkish group of ECB members, the question is, will he just push off the decision? Starting October 31, how the Eurozone will be destroyed – whether with hyperinflation fire and deflationary ice – will no longer be Draghi’s decision, but instead the final destruction of the Eurozone will be delegated to arguably the most clueless person (see Argentina) in the room.

(IrishTimes) Deutsche Bank benefit cuts anger overseas staff

(IrishTimes) New rules over holiday entitlements and end to service awards for staff outside Germany

Deutsche Bank office in Venice

Deutsche Bank office in Venice

Deutsche Bank has angered an already nervous overseas workforce by tightening holiday rules and ending long-service awards for its 50,000 staff outside Germany.

A ban on carrying forward unused annual leave at the end of the year has been imposed with immediate effect, leaving workers little time to rearrange their holiday plans, while 10, 25 and 40-year service awards will be ditched from October.

“While these changes may be disappointing, we can assure you that we remain committed to offering competitive benefits and effective initiatives that support your health and wellbeing, enabling you to be the best you can in your professional lives,” Deutsche’s UK chief executive Tiina Lee and UK head of human resources Rachel Blanshard wrote in an email to staff.

According to its website, Deutsche Bank employs more than 650 people in Dublin.

The policy shift comes at a fraught time for employees of Germany’s largest lender, with 18,000 jobs set to disappear under one of the most radical investment bank restructurings since the global financial crisis.

It rankles particularly because it does not apply to Deutsche’s 41,000 employees in its home market, who can carry forward up to 10 days of holiday into the first three months of the subsequent year and will still receive service awards.

“There’s no loyalty at Deutsche any more,” said one senior overseas manager. “The cash awards are not massive but are nice to have. Between that and cutting back on carrying over holidays it really hasn’t helped the mood.”

Cost catalyst

The benefit changes are part of Deutsche’s “cost catalyst” initiative, according to the email, as reported by the Financial Times, and will help the bank reduce expenses as accounting rules force companies to build provisions for holiday entitlements that are carried forward from one fiscal year to the next.

One person familiar with the lender’s internal discussions said German employment law made it harder to change employee entitlements in the country retrospectively.

Deutsche’s sweeping shake-up announced just over a month ago is well under way. By the end of July, about 900 staff had been fired or given notice. One person briefed on the bank’s next steps said it was planning to step up job cuts significantly by the end of September.

Senior staff expect the axe to fall first on jobs in the UK and the US, where flexible employment protection laws and weak unions make it cheaper and easier to fire employees.