Goldman's small world; Bitcoin’s woes go beyond price

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Deutsche Bank agreed to pay €15 million ($16.6 million) to end an investigation by German prosecutors “into possible money-laundering and tax evasion involving German clients, closing an investigation that featured a high-profile raid of the bank’s Frankfurt headquarters in November 2018.” The settlement “reflects shortcomings in Deutsche Bank’s compliance and filing of suspicious-activity reports involving German clients connected to offshore accounts from 2015 to 2018,” the Wall Street Journal says.

“It is true that the bank had weaknesses in its control environment in the past. We identified these weaknesses and we have addressed them in a disciplined manner,” the bank said.

“The decision puts an end to a high-profile criminal probe that rocked investors’ confidence and undermined the bank’s assurances that it had addressed past misconduct and improved its control functions,” the Financial Times said.

Wall Street Journal

Hitting the wall

Bitcoin’s price isn’t the only thing that has dropped sharply. So has trading activity in the digital currency. Bitcoin now trades at about $7,000, down from its record high of $19,783 nearly two years ago. Few bitcoins have traded hands recently. During the last week of November, “only about 14% of the 18 million bitcoins outstanding were actively traded,” the paper reports. “That is down from more than 50% in October 2018.”

“The energy that drove bitcoin and the cryptocurrency industry through much of the early years has been replaced by the sobering reality that creating new global monetary standards requires more than computer code,” the paper said.

Financial Times

Going really small

Goldman Sachs plans to “offer digital wealth management services to individuals with as little as $5,000 next year, bringing the Wall Street investment bank a step closer to Main Street under the watch of new chief executive David Solomon.” Joe Duran, the founder of United Capital, the wealth management firm Goldman bought in May, said the robo adviser service would allow Goldman to serve clients with as little as “$5,000, $10,000 or $15,000” to invest. “It’s a pipeline for future clients,” he said.

Job losses mount

“Hemmed in by the European Central Bank’s long-term extension of negative rates, slowing economic growth, Brexit and burgeoning regulatory requirements, lenders across Germany, U.K., France, Spain and Switzerland have collectively announced more than 60,000 jobs cuts this year,” the paper reports. The top 10 European banks have shaved headcount by about 20% to 1.1 million employees since 2008; by comparison, the top 10 U.S. banks have reduced staff by 7%.

Many of the cuts “have come from the region’s struggling investment banks, which are suffering from a general decline in the revenue pool as well as continued market share losses to U.S. rivals.”

On Monday one of those banks, HSBC, “announced a reshuffle of its top executives and hired a new chief operating officer, as its interim chief executive Noel Quinn makes his mark on the bank ahead of a big restructuring,” which the paper says could threaten more than 10,000 jobs. HSBC named John Hinshaw, a former executive vice president at Hewlett-Packard, “where he oversaw a radical reduction of costs,” as COO, replacing Andy Maguire.

“The executive reshuffle comes as Mr. Quinn prepares to unveil a big overhaul of the group to slash costs and reduce the size of the balance sheet in Europe and the U.S., where the Asia-focused bank makes subpar returns. The overhaul is likely to result in thousands of redundancies.”

Also to blame

The Bank for International Settlements said “hedge funds exacerbated the recent turmoil in the repo market with their thirst for borrowing cash to juice up returns on their trades.” While the BIS “acknowledged that the pullback by banks was a significant factor in the shake-up, it also said that cash-hungry hedge funds had amplified the dislocation,” which required the Federal Reserve to step in to keep the market functioning smoothly.

“The findings from the BIS — often referred to as the central bank for central banks — highlight the growing clout of hedge funds in the repo market,” the paper says.

Bigger hole

Wirecard, the German payments company being investigated for its accounting practices, “boosted its cash reserves in 2017 by including money held in ‘trust accounts’ used in its payments processing operations, raising fresh questions about the opacity and integrity of financial statements published by the German fintech,” the paper reports. “Wirecard’s substantial net cash balance has also offered reassurance to some this year, in the face of a criminal investigation in Singapore into allegations that members of its finance team based there forged contracts and invoices to fabricate sales and profits.”

New York Times

In limbo

Apple TV Plus has put one of its first films, “The Banker,” “in limbo after the company pulled it from a theatrical run that was scheduled to start Friday.” The film, starring Samuel L. Jackson, “is based on the real-life story of two black entrepreneurs who triumphed over the racist business practices of mid-20th-century America.” But the company pulled the movie from theatrical release “after a daughter of one of the film’s protagonists raised allegations of sexual abuse involving her family.”

Elsewhere

Driving borrowing

More expensive cars pushed the average loan amount on new and used vehicles to record levels in the third quarter, Bloomberg reports. The average size of a new-vehicle loan rose by 5% to $32,480 from a year earlier, while the average used-car loan increased by 3% to $20,466. As a result, the average payment on a new car or truck loan held near a record $550 per month, while the average loan duration rose to 69.28 months for new cars.

At the same time, the amount of total outstanding auto debt has surged to $1.32 trillion, up $50 billion from a year earlier. Loan delinquencies are also up, to 4.71% from 4.27% the previous year.

Quotable

“The prosecutors have not found any instances of criminal misconduct on the part of Deutsche Bank employees following the raid of our Frankfurt office in November 2018.” — A Deutsche spokesman, commenting on the bank’s agreement to pay €15 million to close an investigation by German prosecutors into possible money-laundering and tax evasion at the bank