Quarles stresses vigilance; Morgan Stanley to buy stock plan business

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Wall Street Journal

Remain vigilant
Randal Quarles, the Federal Reserve’s vice chair for supervision and the chairman of the Financial Stability Board, said global bank regulators must be on the lookout for new threats to the financial system “now that more than a decade has passed since the financial crisis and nearly all of the board’s post-crisis reform agenda is complete.” In prepared remarks for a conference in Hong Kong, Quarles said the FSB would review its policies “to ensure that we are at the cutting edge of financial stability vulnerability assessment.”

Look to the future
Morgan Stanley is expected to announce Monday it will acquire Solium Capital, which manages the stock that corporate employees get as part of their compensation, for $900 million. The deal is the bank’s “largest acquisition since the financial crisis” and is “a play for the thousands of employees in the startup economy who might one day be millionaires.”

“Most people’s money is coming through their workplace, so it’s an obvious place for us to be,” Morgan Stanley CEO James Gorman told the paper.

James Gorman, chief executive officer of Morgan Stanley. Bloomberg News

More questions
Last week’s system outage at Wells Fargo was its second this month and “is likely to raise additional questions about the bank’s oversight of its technology.” Wall Street Journal, American Banker

Merger, continued
BB&T CEO Kelly King will need to rely on “the power of hard work and optimism” as he leads the bank’s acquisition of “fellow regional giant SunTrust Banks in the biggest U.S. bank merger in more than a decade,” the paper says. The merger could also benefit other banks, American Banker notes.

Separately, AB Washington Bureau Chief Joe Adler writes that the window of opportunity for mergers could be limited.

Elizabeth Warren “is claiming that the proposed marriage of BB&T and SunTrust vindicates her warnings that bank deregulation will create more too-big-to-fail banks.” Rather, the Journal argues, “Ms. Warren should learn the lesson that more regulation almost always rewards the biggest firms. The merger provides more evidence of how Dodd-Frank’s too-big-to-fail architecture, which Sen. Warren favors, has driven big banks to get bigger and why we need high capital firewalls,” it says. “The real worry is that bank consolidation will make the financial system less resilient during a panic. But this is all the more reason that banks should be required to maintain a generous capital cushion during good times to prepare for the bad.” The senator also wrote to Federal Reserve Board Chair Jerome Powell voicing her concerns the regulator will rubber stamp approval of the deal.

On Saturday, the Massachusetts senator officially kicked off her campaign for the Democratic nomination for president.

Financial Times

Well paid
Bank of America rewarded CEO Brian Moynihan with a 15% pay raise last year, “a significantly bigger boost than other big-bank CEOs.” Moynihan received $26.5 million in compensation, up from $23 million in 2017. “This places his compensation behind that of Jamie Dimon of JPMorgan Chase, at $31 million, and James Gorman of Morgan Stanley, at $29 million, but those sums represented increases of 5% and 7%, respectively.

More to the story
Banco Santander’s last-minute decision to withdraw its offer to hire Andrea Orcel to be its next CEO was about more than just money, the paper says. The Spanish bank didn’t want to pay Orcel $50 million in deferred salary he had coming to him from his former employer, UBS. But Santander was also concerned about “the star banker’s public profile.” For example, Santander was worried he would upstage Executive Chairman Ana Botín at the World Economic Forum in Davos, where Orcel had been a regular. “The way that Mr. Orcel behaved during the two disputes fueled concerns that his ambition would make it difficult for him to serve as Ms. Botín’s de facto number two.”

Fixed bonuses
UBS has revamped how some employees will receive annual bonuses in order to “reduce uncertainty about bonuses and cut how much time managers spend on allocating them.” Going forward, about 10,000 employees who work in the bank’s “corporate center” — including human resources, marketing and communications — “will receive fixed annual bonuses that equate to roughly half their monthly salary.”

Bigger risk
Deutsche Bank has had to pay “significantly higher risk premiums than almost all other large European banks” in the euro bond market this year, “a further sign of the German lender’s uphill struggle to reduce its funding costs.”

Quotable

“We cannot be complacent and assume that we are safe from all shocks.” — Federal Reserve Vice Chair for Supervision Randal Quarles.


This post was originally published here
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