Global Banking Update: 8th Nov 2024

The banking industry has experienced several significant developments over the past week, highlighting the dynamic nature of the global financial landscape. This update provides an overview of key events and trends that are shaping the sector.

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1. Regulatory Changes and Legal Rulings

Motor Finance Scandal and Potential Credit Rating Implications

A recent Court of Appeal ruling has determined that car dealers must disclose commissions received from lenders, emphasising the need for "informed consent" from consumers. This decision has significant implications for banks, potentially leading to substantial liabilities. Fitch has placed some lenders on "rating watch negative," indicating a potential downgrade.

Australian Competition and Consumer Commission Calls for Banking Competition Reform

Gina Cass-Gottlieb, chair of the Australian Competition & Consumer Commission (ACCC), has called for reforms to enhance competition in the banking sector. She highlighted challenges faced by consumers in retail banking, particularly in switching home loans and comparing deposit products. The ACCC is collaborating with the Council of Financial Regulators to review competition in the small to medium-sized banking market.

2. Financial Performance of Major Banks

UniCredit and Commerzbank Report Diverging Earnings

UniCredit reported a net profit of €2.51 billion, an 8% increase year-on-year, and raised its full-year profit forecast to over €9 billion. Conversely, Commerzbank reported a 6.2% decline in quarterly net profit to €642 million, hit by falling interest income and increased provisions for bad loans, although it maintained its full-year profit outlook of €2.4 billion.

HSBC's Investment Bank Profit Jumps 47%

HSBC's global banking and markets unit saw a 47% profit increase in the third quarter, resulting in a pre-tax profit of $1.8 billion. This comes amidst a major restructuring, where the bank plans to merge its commercial and investment banking arms. Overall, HSBC reported pre-tax profits of $8.5 billion, surpassing analyst expectations of $7.6 billion.

3. Legal Actions and Fraud Cases

JPMorgan Chase Pursues Legal Action Over 'Money Glitch' Exploitation

JPMorgan Chase is pursuing legal action against customers accused of exploiting a technical "glitch" that went viral on TikTok, enabling them to commit check fraud and steal over $660,000. The bank alleges that customers deposited counterfeit checks and subsequently withdrew substantial amounts of money.

FBI Recovers Funds for Victims of Embezzlement Scheme

In Wichita, Kansas, a federal courtroom saw emotional scenes as victims of a bank embezzlement scheme learned they would recover their stolen funds, thanks to efforts by the FBI. Former Kansas bank CEO Shan Hanes was sentenced to 24 years in prison for embezzling $47 million from customer accounts. The embezzled funds were recovered from a cryptocurrency account held by Tether Ltd. in the Cayman Islands.

4. Technological Advancements and Industry Trends

Open Banking Set to Transform Mortgages

Open banking is poised to transform the mortgage industry by giving consumers greater control over their financial data. This shift is expected to lead to more competitive lending practices and improved customer experiences. However, the industry is not yet fully prepared for this change.

References

- Banks warned that motor finance scandal could hit credit ratings. (2024, November 5). The Times. Retrieved from https://www.thetimes.co.uk/article/bank-credit-ratings-could-be-hit-by-motor-finance-scandal-ngm56mvbk

- ACCC chair calls for banking competition reform. (2024, November 3). The Australian. Retrieved from https://www.theaustralian.com.au/business/financial-services/accc-chair-gina-cassgottlieb-calls-for-banking-competition-reform/news-story/4c0e2cb108be5a20106aaaf5b35d54f9

- UniCredit and Commerzbank report diverging earnings. (2024, November 6). Financial Times. Retrieved from https://www.ft.com/content/c1b36004-6012-4c0b-b916-69b08c50d39b

- HSBC's investment bank profit jumps 47% as trading fees rise. (2024, November 5). Financial News London. Retrieved from https://www.fnlondon.com/articles/hsbcs-investment-bank-profit-jumps-47-as-trading-fees-rise-d0babccf

- Chase Customers, Including 'Masked Man,' Accused of Using Viral 'Money Glitch' to Steal $660K: Suits. (2024, November 2). People. Retrieved from https://people.com/chase-customers-including-masked-man-accused-of-using-viral-money-glitch-to-steal-usd660k-suits-8736838

- A courtroom of relief: FBI recovers funds for victims of scammed banker. (2024, November 5). Associated Press. Retrieved from https://apnews.com/article/d19d3b5603a1c9e4cc83e31b24d26fcb

- Open banking is on the verge of transforming mortgages. Most are unaware of it. (2024, November 3). HousingWire. Retrieved from https://www.housingwire.com/articles/open-banking-is-on-the-verge-of-transforming-mortgages-most-are-unaware-of-it/