MONDAY MAY 24, 2021 VOL. 186 No. 98 AMERICANBANKER.COM Follow us on Twitter @AmerBanker Senate Democrat calls on OCC 5 to halt crypto charter approvals Banking Committee Chair Sherrod Brown Executive comp in a told acting Comptroller of the Currency Michael Hsu that the cryptocurrency firms pandemic year approved to operate national trusts under prior agency leadership “seek access to the CEOs received slightly higher salaries and more long-term benefits of a bank charter” without meeting incentive compensation in 2020, while bonuses fell. The data is certain regulatory standards. Page 6 based on median pay at 60 large and regional See story on page 2 Biden ordering climate risk 6 strategy for financial assets 2019 2020 In an executive order signed Thursday, the $3M president is asking the Financial Stability Oversight Council to create a strategy for $2.5M $2.5M $2.3M quantify the risks global warming pose to $2M financial stability.Page 6 $1.5M Truist, Varo join effort to bolster $1.1M Americans’ emergency savings $1M $963.1K $1.0M $1.0M 7 The two companies are the first banks to sign $500K on to a philanthropic initiative from the asset $0 manager BlackRock. The aim is to test ideas that make it easier for more households to Salary Bonuses Long-term incenǎves establish financial safety nets.Page 7 Source: Compensation Advisory Partners Morgan Stanley 8 CEO shakes up leadership with eyes on a successor dailybriefing Is MoneyLion building Morgan Stanley Chief Executive James 3 the first open U.S. bank? Gorman unveiled his biggest leadership shake- The New York is creating up in more than a decade, positioning a small Why CEO pay climbed in 2020 a marketplace where partners and group of lieutenants — and two in particular — 1 even as bank profits fell competitors can offer banking, insurance as his most likely successors. Page 7 In a pandemic-scarred year, boards and and other financial products, CEO Dee compensation committees at 60 large Choubey says. If the effort lives up to billing, Cambridge Savings and regional banks relied less on the it could come closer to a truly open platform 9 invests in fund to normal performance metrics and more than any other so far. Page 3 support small businesses on qualitative criteria to determine bonus The Massachusetts bank, which traditionally payments. (See chart above.) Page 2 Price volatility limits In contrast to its typical strategy of 4 usefulness of crypto for supporting low-income housing, the JPMorgan launches new payments, Powell says invested $500,000 in CEI Ventures’ Coastal 2 venture to again grapple While cryptocurrencies could have benefits, Ventures V fund to support small businesses with health care they have “not served as a convenient way to in disadvantaged communities. Page 8 The bank is launching a business called make payments, given, among other factors, Morgan Health aimed at improving their swings in value,” said the head of the Banks, crypto exchanges employee benefits and promoting health Federal Reserve. He also detailed imminent 10 would report client equity, first for JPMorgan Chase’s workers Fed research on a digital transactions under tax plan and then for other large companies. Page 3 currency. Page 5 A Biden administration initiative to crack down on wealthy taxpayers hiding pass- through income would require financial institutions to send account flow data to the IRS. Page 9 MONDAY MAY 24, 2021 AMERICANBANKER.COM PAGE 2

this spring, given the fine line that boards of how it would affect the industry meant that by COMPENSATION directors and compensation committees have and large boards and committees “took a wait- had to walk between rewarding CEOs for their and-see approach” regarding decisions about leadership during the pandemic and being incentive plans for 2020, Malafis said. Why CEO pay mindful of the economic turmoil the health That way, they could consider full-year crisis inflicted on individuals and businesses financial performance and take into account climbed in across the country. less easily quantified factors, she said. Banks were hurt financially by the The result: Of the 60 banks analyzed, 60% pandemic. Fearing a wave of losses as reported a year-over-year increase in total 2020 even as the pandemic choked the economy, firms CEO pay, while 38% reported a decrease. Just socked away billions of dollars in reserves to one CEO — Jamie Dimon of JPMorgan Chase bank profits cover potential bad . As a result, full-year — saw his pay package remain unchanged at net income at commercial banks and savings $31.5 million. institutions insured by the Federal Deposit CEO pay at Bank of America, Citigroup fell Insurance Corp. plunged 35.9% compared and Wells Fargo declined from 2019, while at with 2019, while the average return-on-assets least two regional bank chief executives saw By Allissa Kline ratio fell by nearly half, from 1.29% in 2019 to their compensation swell as a result of making May 21, 2021 0.74% last year. their companies larger through acquisitions. Take a look at 2020 pay packages for Bank stock prices also suffered, tanking for The firms that were analyzed ranged in size bank CEOs and a headline theme emerges: three-quarters of the year until they began from the $3.4 trillion-asset JPMorgan to the total compensation rose even as bonuses climbing again in December with the news $13.2 billion-asset Independent Bank Corp. in decreased. that COVID-19 vaccines would become Rockland, Massachusetts. But peel back a layer and you’ll find that in available. The year-over-year increases were largely a year rife with distress and uncertainty, bank For all economic sectors, making decisions a result of upticks in long-term incentive boards and compensation committees relied about CEO pay in such circumstances has awards, the analysis showed. Seventy percent less on numbers and formulas, and more on been “unchartered territory,” said Lisa of the banks boosted long-term incentives, their perceptions of how well CEOs led their Edwards, president and chief operating officer which are granted to executives based on the banks through the pandemic. Doing so helped of Diligent, a governance software firm that future performance of a company. limit the size of bonus cuts. tracks compensation trends for Russell 3000 At the same time, 59% of the banks cut It’s called discretion and it played a big Index companies. annual bonuses, which are awarded for near- role in 2020 pay outcomes, said Kelly Malafis, “There’s certainly been a lot of scrutiny on term performance such as higher earnings founding partner of Compensation Advisory pay given the pandemic and last year’s need and improving stock prices. Thirty-six percent Partners, a consulting firm that reviewed to conserve cash in light of the pandemic,” of the banks that were analyzed increased and analyzed CEO pay trends at 60 large and Edwards said. “We saw a number of companies bonuses, and 5% kept them flat. regional U.S. banks that filed their annual that announced reductions, particularly CEO Of the 39 companies that made changes to proxy statements before April 10. compensation reductions.” their bonus and long-term incentive plans, 26 Some companies that had discretion built At many large and regional banks, the of them, or 67%, applied or added discretion into their bonus plans — meaning they could uncertainty surrounding the pandemic and to determine bonus payments, the analysis take into account harder-to-measure factors such as employee engagement and customer satisfaction — were able to use a more holistic Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 approach to determining CEO bonus pay, Phone 212-803-8200 AmericanBanker.com Malafis said. Others with entirely formulaic methods Editor in Chief Alan Kline 571.403.3846 Copy Editor Neil Cassidy 212.803.8440 looked at measures such as relative Managing Editor Dean Anason 770.621.9935 performance to determine their results and Reporters/Producers in most cases adjusted results upward, thus Executive Editor Bonnie McGeer 212.803.8430 Laura Alix 860.836.5431, Kate Berry 562.434.5432 lifting bonus pay, she said. Washington Bureau Chief Joe Adler 571.403.3832 “So while bonuses were down [overall], they Executive Editor, Technology Miriam Cross 571.403.3834 could have been down more,” Malafis said. Penny Crosman 212.803.8673 Jim Dobbs 605.310.7780 That factor, combined with higher long- BankThink Editor Rachel Witkowski 571.403.3857 term incentive pay, and smaller hikes in John Heltman 571.403.3847, Allissa Kline 716.243.2679 Community Banking Editor Paul Davis 336.852.9496 salaries, resulted in a median increase in total Hannah Lang 571.403.3855 direct CEO compensation of 8.9% from 2019 to Contributing Editor Daniel Wolfe 212.803.8397 John Reosti 571.403.3864, Gary Siegel 212.803.1560 2020, the analysis found. Digital Managing Editor Executive pay garners a lot of attention in a Christopher Wood 212.803.8437 Kevin Wack 626.486.2341 normal year, but interest has been even keener

For up to date and complete coverage go to AmericanBanker.com MONDAY MAY 24, 2021 AMERICANBANKER.COM PAGE 3 showed. In nearly all cases, the discretion led equity, first for JPMorgan’s workers and then was most recently an operating partner at the to upward adjustments in bonuses, according for other large companies. private equity firm Welsh, Carson, Anderson & to Compensation Advisory Partners. With a $250 million investment arm and Stowe. Meanwhile, changes to outstanding long- a remit to accelerate innovation in employer Reporting to Scher, he’ll lead an initial team term incentive plans tied to financial metrics coverage, Morgan Health is a sign that large of about 20 people, based in Washington, and were much less common — occurring at only companies still want to influence a U.S. health collaborate with the JPMorgan’s benefits team 13% of the companies analyzed, Malafis said. care system notorious for high costs and and bankers. “Application of discretion and taking lagging outcomes. JPMorgan said it’s looking to partner with into account all of the factors of 2020 — the Companies have a mixed track record in startups and existing companies, including pandemic, leadership and the ability to pivot trying to tame health care costs and make its insurance carriers, CVS Health’s Aetna and navigate — a lot of banks tried to find that benefits work better for their employees. The unit and Cigna. It will invest in innovative balance, so adjustments to bonuses were fairly announcement follows the wind-down earlier businesses of all sizes, Mendelson said. common,” Malafis said. “It’s balancing overall this year of Haven, JPMorgan’s joint venture performance and retention of key talent with with Amazon.com and Berkshire Hathaway Clinical outcomes the alignment of shareholders, and it was a that sought to reinvent employer-based health Morgan Health will take time to figure delicate balance.” care. Even with their economic might, the out its targets and plans to measure success There could be even more use of discretion three companies were unable to generate against specific clinical outcomes, such as in bonus pay for 2021, as the timing of a full much momentum to reorder health plans. improvements in biomarkers for diabetes or economic recovery remains unclear, making JPMorgan is betting that by trying new ideas cardiovascular health, he said. The venture will it hard to set financially based performance inside the bank, it could find solutions that build on changes that COVID-19 accelerated goals, said Shaun Bisman, principal at might work for others. in how people access health care and the Compensation Advisory Partners. “We have an opportunity here to not only needs the pandemic highlighted. But don’t expect the increased reliance on provide enormous benefit to our firm, our “The pandemic has accelerated focus on discretionary factors to determine CEO pay employees and their families, but ultimately digital care, it has accelerated focus on health to be an enduring result of the pandemic, he create solutions that can be brought to bear equity, it has accelerated focus on really said. throughout the United States,” Peter Scher, repairing the fragmentation of the health care “I would imagine in two or three years the vice chairman of JPMorgan, who will oversee delivery system,” Mendelson said. plans would look very similar to what they the venture, said in an interview. As an example of potential improvements, looked like pre-COVID,” Bisman said. “The Employer plans in the U.S. cover 158 million Mendelson cited advanced primary care overall structure won’t change dramatically.” people, half of all Americans. About a third of models that have been tested in Medicare. health consumption spending flows through Those consist of “integrated teams that have private health insurance paid for by employers nurses and pharmacists and other health HEALTH CARE INDUSTRY and households. care professionals working with the physician to deliver the best care for the individual,” High premiums he said. “We want that kind of model for our JPMorgan Typical premiums for a family health plan employees.” now exceed $21,000 annually, close to one- The project is picking up where Haven left launches new third of the median household income in the off, Scher said. “I don’t think there would be U.S. Morgan Health without Haven,” he said. Despite their role in financing so much venture to of health care, big U.S. companies have had limited influence in shaping what they’re CHALLENGER BANK again grapple ultimately paying for. Innovations in care delivery and linking payments to health outcomes in the past decade have largely Is MoneyLion with health been in response to policy changes from Washington, not private markets. building the care “We’re looking to drive meaningful innovation in quality, and in health equity, By Bloomberg News and in keeping costs under control,” Dan first open U.S. May 20, 2021 Mendelson, who joined the bank recently to JPMorgan Chase is taking another shot at lead Morgan Health as chief executive officer, bank? trying to make health care less expensive for said in an interview. companies and better for workers in the U.S. Mendelson is a health care veteran. He By Penny Crosman The largest U.S. bank is launching a business worked in the Office of Management and May 19, 2021 called Morgan Health aimed at improving Budget during the Clinton administration, Though many banks and fintechs use the employee benefits and promoting health founded the consultancy Avalere Health and term “open banking,” few have anything that

For up to date and complete coverage go to AmericanBanker.com MONDAY MAY 24, 2021 AMERICANBANKER.COM PAGE 4 remotely resembles it. renters and auto insurance inside of the A hundred percent. This is not exclusive. The challenger bank MoneyLion — which MoneyLion experience. Our business model is similar to Costco already offers , investing To the consumer, it will feel as if they are and Amazon. We’ll have a version of and loans — has begun developing a interacting with a native MoneyLion product. [Costco’s] Kirkland brand, whether it’s our marketplace that, if all goes according to But in reality, we’re able to help consumers own financial product or that of a preferred plan, will come closer to true open banking optimize exactly how much insurance they vendor. There’s an entire marketplace than any other single U.S. need. Are they overpaying or underpaying? construct. So you can think of MoneyLion as firm has to date. Do they have enough coverage? We will pioneering open lending, open insurance, New York-based MoneyLion will invite use some of our advisory capabilities and open investing. And then we give lots of partners and competitors to offer products then partner with Nationwide to fulfill the degrees of freedom to the consumer. If on its marketplace, starting with a recent insurance product. The consumer will be MoneyLion’s own proprietary banking, partnership forged with Nationwide able to see that they have a policy with investing or credit products make sense, the Insurance. These products will be offered Nationwide that gives them X dollars of consumer can engage with them. If not, we alongside MoneyLion’s own products, coverage, and they can also then track and have a whole marketplace. And with that, the way, say, a Costco offers its store- manage inside of MoneyLion the insurance we’ll be able to offer the advice technology brand products next to rival name brands. payments that they’re making on a monthly to many more users that don’t necessarily Meanwhile, the MoneyLion checking basis. even have to be a Moneyline financial account, which is called RoarMoney, is account user. offered through MetaBank, a $9.8 billion- You talked about helping consumers asset in Sioux Falls, South figure out how much insurance they Will you allow competitors on this Dakota. need and what kind of insurance. And marketplace? With 7.5 million customers, MoneyLion I know you have artificial intelligence Yes, we already do. In financial services, is growing in several interesting directions, that tries to help analyze customers’ everyone is either a partner or a competitor. including developing this marketplace finances and make recommendations So for student loans, there are other folks and using artificial intelligence to advise to them. Have you already built out that would be perceived competitors that customers on the right products for them. the ability to look at a person’s finan- are already in our ecosystem of partners. On It’s also going public through a merger cial picture and decide they’re paying the lending side, there are already folks that with Fusion Acquisition, a special purpose too much for car insurance and that could be seen as competitors. We believe acquisition company, also in New York. kind of thing? that over time, that’s going to be the more Dee Choubey, MoneyLion’s CEO, detailed When we started MoneyLion, it was a enduring business model, because you’ve the neobank’s strategy in a recent interview, personal financial management application. gained the trust of the consumer. They may which is edited for length and clarity below. Since inception, we’ve had more than not take today’s lending products from you, 14 million third-party bank accounts but they sure as heck will have trust in you With this partnership with Nation- connected to MoneyLion’s personal to come back to you in maybe six or nine wide, are you going to try to integrate financial management ecosystem. And with months when they have another financial insurance with the other products that, we’re able to construct pretty granular question. you offer, or is this more of a referral views of consumers and give them a glimpse process where you’re going to refer at how others are tackling similar financial What do you get out of it when your people to Nationwide and it’s going to situations. With that connected data, we’re customers buy from a competitor or refer people back to you? able to play back again anonymously partner? DEE CHOUBEY: Our thesis has always that people like you tend to do A, B or C There’s a merchant-funded component been, and it’s been a little bit of a contrarian in a similar situation. And we find that where we get a commission from the partner, one, that we’re building the entire platform there’s significant engagement when we’re and we may choose to keep all of it or some for the consumer. Usually in American able to uncover those types of insights to of it. And then if we’re not keeping it, we’re financial services, consumers are not our customers. They’re not getting that giving a rebate back to the consumer by way allowed to switch their swim lanes. So there’s anywhere else. And human beings like to get of points or other rewards. That’s a value the banking swim lane, the investment swim validation that other people are also making proposition that we have a lever to control lane, the insurance swim lane, the credit similar good decisions. As they interact over time. borrowing swim lane. with that type of insight, their trust level What we have been up to over the last many with MoneyLion goes up and they’re really I’d like to better understand the ad- months is using our technology advantage listening to us and to some of the partners vice you’re providing. A lot of com- to bring down each one of those swim lanes that we’re bringing into the ecosystem. panies try to watch their customers’ and allow our customers to think holistically transactions and activity and provide about financial success. So insurance is just What if your partner, say Nationwide, advice. But it seems to me this is in the another vertical. Instead of becoming our doesn’t have the best rates or a product early days, and very few have perfect- own insurance broker or insurance provider, that’s the best fit for the customer. Will ed this. How long have you been doing with Nationwide we’re able to digitally bind you be able to bring others in as well? this? And can you say anything about

For up to date and complete coverage go to AmericanBanker.com MONDAY MAY 24, 2021 AMERICANBANKER.COM PAGE 5 the types of advice that you can give one with Nationwide. For that type of brand, added that regardless of the Fed’s decision and the accuracy and effectiveness of having an intimate integration with us was to develop a digital dollar, the Fed would that advice? probably helped by the prospect of working “expect to play a leading role in developing Just about a month ago, we announced an with a potential public company. We’re still international standards for CBDC.” acquisition we made in 2020 of a company targeting late June, early July to close the At the same time, Powell took a swipe at called Wealth Technologies. They created a deal. cryptocurrencies, arguing that while they really advanced financial planning engine. could have benefits, they have “not served as Now we can tell the middle-income Do employees have a stake? a convenient way to make payments, given, American household just based on inputs Very much so. We have an owner-operator among other factors, their swings in value.” of where they’re working, how much they’re mentality. We make sure that just about “As stablecoins’ use increases, so must earning, how quickly their paycheck is every employee in MoneyLion globally, not our attention to the appropriate regulatory decaying, what their goals are, when they only here in New York or San Francisco, and oversight framework,” Powell said. “This want to send their kids to college, when they but even in our Kuala Lumpur office and includes paying attention to private-sector want to travel the world, when they want in Malaysia, own equity in the business. It payments innovators who are currently to buy a car, how much they want to leave is an employee-owned business, and we’re not within the traditional regulatory their kids at the end of their life. We’re giving very proud of that. Everyone aligns and arrangements applied to banks, investment everyone now a pretty robust planning coalesces around one single mission here. firms, and other financial intermediaries.” tool. At the end of the day, the advice on it For engineers and some of our younger Powell’s comments follow a move from is as good as the inputs that it receives, but employees, this is an opportunity for them China earlier in the week to bar banks assuming that the consumer is interacting to learn a lot about how to take a company and payments companies from providing with it and giving truthful inputs, and this public, how to be in a little bit more of a services related to cryptocurrency is usually just the linking of bank accounts transparent limelight. We’re still a very small transactions, which accompanied a warning or investment accounts, we’re able to give a company, just about 300 people globally. to investors against speculative trading. As pretty insightful view into the accumulation So they’re able to learn that their work on a a result, many digital currencies plunged in part of that household’s life: their working daily basis impacts millions of people. value on Wednesday. years or thirties, forties and fifties. And Still, Powell said Thursday that the same we’re also then able to help them with a technological advances that gave rise to decumulation plan. DIGITAL CURRENCIES cryptocurrencies could enable the Fed to It’s all goals-based. So if one goal is met, issue a digital dollar, an area the central bank then the advice becomes about how to has been studying in collaboration with the optimize the other goals. This works hand Price volatility Massachusetts Institute of Technology. in hand with our wealth business. We’re not He added that following the release of just a robo advisor. We’re actually able to limits the Fed’s discussion paper exploring CBDC, give advice on a very goals-based basis. Now it plans to solicit public feedback on data there’s a whole other element of nonfinancial privacy, financial inclusion and information advice. Should I buy that television? Should I usefulness security, in the hopes of “stimulat[ing] broad buy that car? Or should I take that vacation? conversation.” All of them consume the savings that of crypto for “We are committed at the Federal Reserve you’ve set up. And we’re now able to give to hearing a wide range of voices on this mathematical- and computational-based important issue before making any decision insights to consumers that yes, you can take payments, on whether and how to move forward with that traveling-the-world-vacation, but the a U.S. CBDC, taking account of the broader trade-off is that now you may have to retire Powell says risks and opportunities it could offer,” Powell one year later. said. “The paper represents the beginning of By Hannah Lang what will be a thoughtful and deliberative You’re in the process of going public May 20, 2021 process.” through a SPAC. How is that going? WASHINGTON — The Federal Reserve Powell has maintained that if the U.S. Going public is an incredible milestone signaled Thursday that it is looking to chose to create a digital dollar, it would not in our journey. The SPAC ended up being expand its oversight of stablecoins, just one replace cash, and would instead serve as a an efficient way for us to capitalize on the day after China issued a warning about the complement to existing payments. business the right way so we can go and financial stability risks of cryptocurrencies “Our key focus is on whether and how increase awareness. Ultimately it all comes like Bitcoin and Ethereum. a CBDC could improve on an already back to our mission. Going public allows In a video message, Fed Chair Jerome safe, effective, dynamic and efficient us to extend financial access to more Powell also said the central bank would U.S. domestic payments system,” he said Americans in a faster way, rather than being publish a discussion paper this summer Thursday. a private company. detailing its current thinking on central bank The Fed is also working on rolling out a It also helps us with partnerships like the digital currency and digital payments. He real-time payments system, called FedNow,

For up to date and complete coverage go to AmericanBanker.com MONDAY MAY 24, 2021 AMERICANBANKER.COM PAGE 6 sometime in 2023. When FedNow is resulting in a smaller regulatory burden. available, any with an In the letter, Brown said the OCC’s CLIMATE CHANGE account at one of the Fed’s regional banks regulatory approvals were cause for concern, will be able to use the service to process particularly because such firms point to their payments 24 hours a day year round. federal oversight to suggest “their business Biden model is as safe, stable and dependable for customers as a local community bank.” ordering DIGITAL BANKING Paxos, for instance, claims to have “cutting- edge technology with bank-level oversight,” the letter said. climate risk Senate “The fact is, given the many uncertainties present in the digital asset landscape strategy for Democrat as identified by other regulators, the volatility of digital asset valuations, and the disproportionate influence individuals can financial calls on have on entire cryptocurrency markets, the OCC is not in a position to regulate these assets OCC to halt entities comparably to traditional banks,” Brown wrote. By Bloomberg News Hsu, who started at the agency just last May 20, 2021 crypto charter week, had already suggested on Wednesday President Joe Biden is ordering his that he intends to scrutinize a number of administration to create a strategy to quantify approvals actions taken by the OCC under the Trump the risks climate change poses to both public administration, particularly fintech policy and private financial assets. By Brendan Pedersen decisions. In a four-page executive order that he May 20, 2021 “At the OCC, the focus has been on signed Thursday, the president is asking WASHINGTON — Senate Banking encouraging responsible innovation. For Treasury Secretary Janet Yellen, in her role Committee Chair Sherrod Brown, D-Ohio, instance, we created an Office of Innovation, as head of the Financial Stability Oversight called on the Office of the Comptroller of updated the framework for chartering Council, to recommend steps to reduce the Currency to “reassess” the agency’s national banks and trust companies, and climate risks to financial stability, according conditional charter approvals for interpreted crypto custody services as part to the administration. That assessment, cryptocurrency firms and halt any future of the business of banking,” Hsu said in which would be provided within six months, approvals. congressional testimony earlier this week. “I would also detail plans financial regulators In a letter addressed to acting Comptroller have asked staff to review these actions.” have for bolstering disclosures. Michael Hsu, Brown argued that the crypto Rebecca McClain, a spokesperson for A separate government-wide strategy for firms conditionally approved by the OCC in Paxos, said in a statement, “The future identifying and disclosing climate risk to recent months “seek access to the benefits of of finance rests on the ability of crypto government programs, assets and liabilities a bank charter” without meeting “the same and blockchain infrastructure to replace is set to be developed within 120 days. It will set of regulatory and consumer protection antiquated banking systems for faster and be drafted by National Economic Council standards that banks are required to meet.” safer transactions.” Director Brian Deese and National Climate “A firm that cannot meet the rigorous “We welcome scrutiny because building Adviser Gina McCarthy in coordination requirements applicable to other banks trust in this industry is essential to building with Yellen and the Office of Management should not be allowed to present itself an open, digital economy. Paxos is one of the and Budget. The Labor Department will be to the public as a bank,” Brown wrote in most regulated operators in the industry and directed to analyze how to protect pensions the letter, dated May 19 and first reported meets the requirements of all New York State from climate change risk. by Politico. Brown also wrote that it was chartered banks and, we believe, federally “Our modern financial system was built “unclear whether the OCC engaged in the chartered non-depositories,” McClain said. on the assumption that the climate was appropriate due diligence to stand behind “We believe all companies in this industry stable, and that assumption has largely this ‘seal of approval’ before granting these must be regulated and subject to the dominated existing financial models, and it’s charters.” same safety and soundness protections as underpinned the way that we invest capital, Under the two acting comptrollers other banks and trust companies. We look the way that we have built society, and the preceding Hsu, Brian Brooks and Blake forward to working with Chairman Brown way that we have forecasted for the long Paulson, the OCC issued conditional to strengthen the banking system with our term,” Director of the National Economic approvals for national trust charters for proven technology.” Council Brian Deese said in a call with three crypto firms: Paxos, Anchorage and reporters Thursday. “Today it’s clear that we Protego. National trust charters do not no longer live in such a world.” carry the requirement of deposit insurance, Governments, regulators and business

For up to date and complete coverage go to AmericanBanker.com MONDAY MAY 24, 2021 AMERICANBANKER.COM PAGE 7 leaders on Wall Street have been debating new and easier-to-use tools that will allow that works with BlackRock on its savings how the financial industry should brace more people to establish financial safety nets. initiative. Those challenges are particularly for environmental threats and whether “This is a structural and a systemic issue,” evident in communities of color, which is companies should provide more information said Deborah Winshel, BlackRock’s global something that banks can consider as they to investors about those risks. head of social impact and president of the look for ways to address racial inequities, “The intensifying impacts of climate BlackRock Foundation. “This is not an issue Flacke said. change present physical risk to assets, publicly of getting people to want to save. It’s making “Everybody should have the ability to build traded securities, private investments, and savings easy, accessible, cost-effective and up a modest reserve of savings, and to access companies,” Biden said in the order. “At behaviorally compelling.” it when they need it and to use that as a first the same time, this global shift presents The initiative seeks to address the oft- line of defense,” Flacke said, adding that he generational opportunities to enhance U.S. cited finding that more than one-third of U.S. has seen “enormously important progress” competitiveness and economic growth, while adults would have trouble easily paying for a since last year in elevating the concept of also creating well-paying job opportunities $400 emergency. emergency savings. for workers.” In the Federal Reserve’s November 2020 BlackRock is talking to other banks The executive order represents an early household survey, 64% of adults said they about their ideas for bolstering customers’ step in the new administration’s efforts to would cover a $400 emergency expense with emergency savings, according to Winshel, reduce the risks to financial stability posed cash, savings or a paid off in their who said that the goal of the philanthropic by climate change, and to meet its longer- next statement. Most other respondents said initiative is to test ideas and then share the term goal of reducing U.S. greenhouse gas they would finance the charge, borrow from findings with as many organizations as emissions. a friend or relative, sell something, or would possible. Under Biden’s order, the OMB director, in not be able to pay the bill. Other companies that are participating consultation with other agencies, will identify Charlotte, North Carolina-based Truist include MasterCard, UPS, Best Buy and the the primary drivers of federal climate-risk plans to launch a pilot program this summer, employer partners Voya Financial and ADP. exposure and develop ways to quantify the details of which are still being determined, climate risk for the president’s long-term that will explore new incentives to promote budget projections. OMB and the Council savings habits. SUCCESSION PLANNING of Economic Advisers will also develop and “Rather than pay a promotion for just publish an assessment of the government’s opening a , we are exploring climate risk exposure. the effectiveness of matching incentives to Morgan the right savings behavior” and giving people more chances to save repeatedly, Arijit Stanley CEO SAVINGS ACCOUNTS Roy, the head of strategy at Truist’s retail community bank, said in an email. Truist plans to roll out those tools more shakes up Truist, Varo broadly based on what it learns from the pilot program. leadership join effort Varo has “lots of potential ideas” that the digital-only bank will consider and evaluate as it works with the BlackRock initiative and with eyes on a to bolster its partner organizations, according to Varo spokesman Alexander Woie, successor Americans’ Varo’s work will build on savings tools that it already offers, including a Save Your By Bloomberg News Change tool and a Save Your Pay function May 20, 2021 emergency that automatically deposits part of a person’s Morgan Stanley Chief Executive James paycheck into their Varo savings accounts, Gorman unveiled his biggest leadership savings Woie said. This year, Varo conducted a shake-up in more than a decade, positioning $100,000 giveaway where it gave winners a small group of lieutenants — and two in By Polo Rocha $500 to build their emergency savings. particular — as his most likely successors. May 20, 2021 “Even modest savings can make all the Ted Pick, the architect of Morgan Stanley’s Truist Financial and the digital-only bank difference when faced with unexpected trading revival, and Andy Saperstein, who Varo have joined a philanthropic initiative expenses,” Woie said in an email. built the company into a from the asset management giant BlackRock The pandemic’s economic disruptions powerhouse, were tapped as co-presidents aimed at helping Americans build more made everyone “much more aware of and given expanded roles atop the Wall Street emergency savings. how close to the edge” many people live bank that’s been gaining ground on rivals. The two companies are the first banks to financially, said Timothy Flacke, executive Among a slate of others changes: sign onto the effort, which is working to build director of Commonwealth, one of the groups Investment management chief Dan

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Simkowitz will gain clout as co-head of over Morgan Stanley’s investment bank — The $5.2 billion-asset mutual announced strategy alongside Pick, and Chief Financial including both trading and dealmaking. the investment in CEI Ventures’ Coastal Officer Jon Pruzan will become chief While Pick will continue to run the Ventures V fund on Wednesday as part of an operating officer. institutional securities business, he will also effort to diversify its community development The shuffle thrusts the quartet into a public be in charge of international operations. investments. The bank previously had bake-off to succeed Gorman, whose 11-year Saperstein, 54, led the bank’s charge in focused on low-income-tax-credit and other tenure makes him one of the longest-serving wealth management, building a reliable affordable housing projects, Chief Lending heads of any major U.S. bank. Behind the revenue generator that’s become the envy of Officer Michael Lindgren said in an interview. scenes, the boss has told the board he plans many rivals. Gorman himself had made his Cambridge Savings was introduced to CEI to stay on at least three more years, according name in that business at Merrill Lynch, where Ventures, a subsidiary of Coastal Ventures to a person familiar with the matter. he worked with Saperstein, and together — a Brunswick, Maine-based community “I am highly confident one of them will be the pair made it the centerpiece of Morgan development financial institution and the the CEO in the future,” Gorman, 62, said of Stanley’s pivot after the financial crisis. state’s oldest CDFI — this year after CEI his leadership team in an interview. “It feels Along the way, Morgan Stanley took over Ventures invested in one of its clients, a like the right time to more formally set up a Smith Barney from Citigroup and last year Naugatuck, Connecticut, food producer. transition over the next few years.” scooped up E-Trade Financial — assembling “We did some research and found [CEI The shake-up happens to come just two a franchise that contributes almost as much Ventures’] mission and business plan very days after JPMorgan Chase’s Jamie Dimon to the top line as the investment bank. compelling,” Lindgren said. — the only head of a giant U.S. bank with a The sedate handoff Gorman is setting up Cambridge Savings’ initial plan was to tenure longer than Gorman’s — reconfigured is quite a change from when he assumed invest $250,000. Its executive committee his own leadership team, promoting two the top perch in 2010. At the time, the firm doubled the commitment “once we were fully women who could someday assume his post. was staggering away from an era of vicious aware of what this fund does,” Lindgren said. Morgan Stanley’s CFO role will pass to infighting in its senior ranks and the global The investment in CEI Ventures tracks with investor relations head Sharon Yeshaya, financial crisis. Soon after the Melbourne- the growth of its commercial-and-industrial giving her a more prominent voice among born banker took over, he confronted the portfolio over the past few years. As of March investors and analysts. grim possibility of a catastrophic downgrade 31, commercial-and-industrial loans made up The spot as Gorman’s top deputy had been by one of the premier credit-rating firms. 17% of Cambridge Savings’ $4.2 billion loan vacant for two years since the exit of the firm’s “Back then, we were reeling from the portfolio, up from 11% two years earlier. colorful President Colm Kelleher, who was financial crisis, we had a number of problems “CSB’s interest in this investment older than the CEO. That departure set off we needed to resolve,” Gorman said. “This is opportunity was enhanced by the fund’s focus a race for the next generation of executives, different. You make these changes when you on small-business community lending, which and Gorman gave them some time to prove can and from a position of strength.” has clearly been CSB’s approach over many themselves. years,” Lindgren said. He ultimately landed on two who were key Through its funds, CEI Ventures invests to Morgan Stanley’s comeback from the 2008 COMMUNITY BANKS in small businesses across a wide range financial crisis, helping to strengthen its Wall of industries to create and support jobs Street operations and building up a franchise with higher compensation and more tending to customers’ money. Morgan Stanley Cambridge comprehensive benefits. Many of the has turned out the best stock performance businesses it supports operate in rural and among top rivals in the last five years, making Savings underserved communities plagued by managers hopeful that it’s forever buried the joblessness. pejorative that long dogged the company: the “What we heard from investors, especially littlest big bank. invests given the events of the past year, is a desire to At one point early last year, senior grow good quality jobs in regions that typically executives gloated over printouts about the in fund to draw little or no equity capital and where bank’s soaring shares relative to archrival many jobs may have been lost permanently Goldman Sachs Group. More recently, due to the pandemic,” CEI Ventures CEO Betsy Morgan Stanley even overtook the market support small Biemann said in a press release. value of Citigroup, which commands twice Since organizing its first fund in 1996, the assets. businesses CEI Ventures said it has invested in 64 With Pick, 52, Gorman is promoting small businesses, helping create 2,700 jobs. a turnaround artist. He’s credited with By John Reosti Banks rank among CEI Ventures’ strongest rebuilding the firm’s equities business after May 20, 2021 supporters. The Coastal Ventures V fund the financial crisis, honing it into Wall Street’s Cambridge in Massachusetts has 17 banks, including Cambridge Savings, dominant player. He then followed up by has invested $500,000 in a venture capital among its investors. overhauling a fixed-income division that fund that backs small businesses that produce “We are delighted to add Cambridge had been flagging. That won him oversight higher-quality jobs. Savings Bank as a partner,” Nat Henshaw,

For up to date and complete coverage go to AmericanBanker.com MONDAY MAY 24, 2021 AMERICANBANKER.COM PAGE 9 managing director at CEI, said in a press The enforcement plan is a central would go into effect in 2023 to give financial release. “Having a strong bank partner in the component of President Joe Biden’s quest institutions time to prepare for the new Boston market is very beneficial to us and our to fund his roughly $4 trillion in long-term requirements. The Treasury estimates that the portfolio companies.” economic proposals. The administration increased visibility into taxpayers’ accounts, Coastal Ventures is also involved in called for banks and cryptocurrency exchanges on its own, would net the IRS $460 billion of organizing opportunity zone funds for bank to report transactions to the Internal Revenue the $700 billion over a decade. investors. Service, which would also get new auditors More money would be raised from Lindgren said he expects the Coastal and an upgraded information-technology increased auditing. Biden is proposing an Ventures V fund to begin generating returns system. infusion of $80 billion into the IRS to hire new for investors after a few years. “The IRS will be able to deploy this new specialized audit staff and improve technology “Given the nature of these businesses, and information to better target enforcement systems. That funding is expected to raise of the investment as equity, it takes more time activities, increasing scrutiny of wealthy nearly $320 billion in revenue, or $240 billion for these types of investments to mature,” he evaders and decreasing the likelihood that fully in net money after subtracting the initial said. compliant taxpayers will be subject to costly investment, Treasury officials said during a The fund’s projected yields are lower than audits,” the Treasury said of the proposed call with reporters. other potential investments, but its social reporting requirements. The additional funding would allow the benefits align well with Cambridge Savings’ Income earned from small businesses, IRS to add about 87,000 employees by 2031, community development goals, Lindgren rental properties and other so-called pass- roughly doubling the agency’s workforce, said. through entities is increasingly becoming a according to the report. “We looked at this opportunity as being well target for the Biden team as it looks for ways The Treasury estimates its proposals would worth the cost of a lower yield,” Lindgren said. to close the tax gap -- the difference between raise $700 billion this decade and $1.6 trillion taxes owed and those paid, which is projected in the following 10 years. Outside scorekeepers to reach $7 trillion in the next decade. have projected lower returns. The Penn ENFORCEMENT While both Democrats and Republicans Wharton Budget Model, for example, has have backed stronger enforcement as a estimated $480 billion over a decade. means of paying for long-term economic Banks, crypto development programs, challenges have 1960s System emerged. GOP lawmakers have warned It’s unclear if the full $700 billion will count exchanges against government overreach -- especially under congressional scorekeeping rules to with regard to account-flow reporting -- and offset the cost of the Biden plan. Treasury congressional rules could limit the ability of officials said on the call that the money raised would Democrats to apply the Treasury’s estimate to from the plan would yield real dollars and that funding for Biden’s spending plans. lawmakers in Congress should review their report client The Treasury’s plan includes requiring processes so that these dollars can count. banks and financial institutions to report But the Treasury said its estimates account flows -- information that the IRS are “conservative.” Some dynamics, like transactions currently doesn’t have. The idea is to make overhauling the IT systems and greater pass-through income more like wages, which voluntary compliance due to higher audit under tax plan employers must report to the agency. likelihoods, are not factored into the total, the Taxpayers report only 45% of their income report said. By Bloomberg News when the IRS doesn’t have visibility into The Treasury made a detailed argument for May 20, 2021 their earnings, the Treasury estimated. That overhauling the IRS’s outdated technology. The U.S. Treasury Department estimated compares with a 99% compliance rate for The core tax-return processing system, which that wealthy taxpayers as a group are hiding wages where employers are required to report handles more than 150 million individual more than half their income outside of wages to the IRS, the Treasury said. returns each year, was first designed in 1962 and salaries, a conclusion that aims to bolster “The annual return would report gross -- making it “one of the highest-risk systems in the Biden administration’s call for Congress inflows and outflows on all business and the federal government,” the Treasury said. to approve expanded IRS funding and personal accounts from financial institutions, “The result today is decades of tax law broad new financial-transaction reporting including bank, loan and investment accounts,” written in a programming language that requirements. the report said. “The reporting regime would is no longer taught, a data platform that is The department detailed in a report Thursday also cover foreign financial institutions and highly complex to maintain, and an outdated the administration’s proposed measures to crypto asset exchanges and custodians.” system with a limited number of employees raise $700 billion in additional revenue over supporting it -- about half of whom are eligible a decade through Internal Revenue Service Starting 2023 to retire,” the report said. q enforcement. The release follows criticism Cryptocurrency transfers worth $10,000 or from Republican lawmakers and tax analysts more would be reported to the IRS. © 2021 Arizent and American Banker. that the estimate is unrealistically high. The Treasury said the new reporting regime All rights reserved.

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