TUESDAY DECEMBER 15, 2020 VOL. 185 No. 240 AMERICANBANKER.COM Follow us on Twitter @AmerBanker Mastercard suffers legal 5 setback in European Too big a burden? interchange battle The U.K. Supreme Court has rejected Some Democrats want the Biden administration to forgive Mastercard’s attempt to force individual most outstanding student loans. Total student debt hit lawsuits over claims the card brand $1 trillion in 2013 and has climbed by an average of overcharged consumers and negatively 5.3% a year since. impacted competition for more than a decade. Page 5 See story on page 3 Fed’s exam ratings system $1.6T 6 needs upgrade, Quarles says $1.4T The central is exploring how to improve the consistency and transparency of safety $1.2T and soundness scores used to grade $1T and their holding companies, the agency’s Page 6 $800B vice chairman of supervision said. $600B Senate sends veto-proof $400B 7 AML reforms to White House The defense spending bill includes language $200B requiring businesses to report their owners $0 to Fincen. Page 6 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* , Source: Federal Reserve Bank of New York; Equifax 8 banker with $85 billion empire, dies at 82 His family got its start in banking by financing camel-caravan traders in the dailybriefing What Biden’s pledge Ottoman Empire and eventually expanded 3 to forgive student loans its reach into the U.S., Europe and Latin means for consumer lenders America. Page 7 Huntington agrees to buy The president-elect’s plan to eliminate 1 TCF Financial for $6 billion $10,000 of debt would help borrowers meet State Street to explore options The deal would create a $168 billion banking other loan obligations, reducing their risk of 9 for arm company in the Midwest and be the latest in a default. Yet the banking industry seems wary The Boston-based firm has been informally string of regional bank combinations. Page 2 of the precedent it could set. working with an adviser to review strategic (See chart above.) Page 3 alternatives for State Street Global Advisors, FDIC board to consider including a merger with a competitor, people 2 brokered deposit, ILC How an app is helping familiar with the matter said. Page 8 rules at public meeting 4 Eastern Bank bond The agency’s principals are scheduled to with small businesses 2020 was a horrible guest, meet Dec. 15 to vote on a new definition The Boston community bank and a fintech 10 but an excellent teacher for brokered deposits and on regulatory called Monit have developed an app that The events of this year transformed banking, standards for industrial bank helps small-business owners forecast their for better or worse. Smart bankers will build parents. Page 3 cash flow and how certain events could on the ways they learned to do their jobs affect them. Page 4 better, Dave Martin writes. Page 8 TUESDAY DECEMBER 15, 2020 AMERICANBANKER.COM PAGE 2

acquisition would provide it with an entrée in October with the unexpected retirement M&A into Minnesota, Colorado, Wisconsin and of Craig Dahl. South Dakota and expand its market share Provost sold Talmer Bancorp to Chemical in Chicago. Financial in 2016. He became Chemical’s Huntington The merger is expected to close in the CEO in late 2018 after his predecessor’s second quarter. sudden departure, then announced a agrees to buy TCF, in an explainer of the deal on its merger with TCF in January 2019. website, said its branches would continue TCF had spent the last two months to operate under the TCF brand until a reviewing ways to add revenue, including TCF Financial systems integration occurs later in 2021. an expansion of commercial lending Gary Torgow, TCF’s chairman, would around Minneapolis and Chicago, and cut for $6 billion have the same title at Huntington Bank. costs. Executives had also been reviewing “We will be a top regional bank, with the the branch network, which includes more By Paul Davis and Dean Anason scale to compete and the passion to serve,” than 500 locations. December 14, 2020 Torgow said in the release. TCF’s assets fell by 2.1% between March Huntington Bancshares in Columbus, Columbus would serve as the 31 and Sept. 30, to $45.8 billion. The third- Ohio, has agreed to buy TCF Financial in headquarters for Huntington and the quarter amount included $1.8 billion Detroit in a move that would accelerate the consumer banking unit, while the in loans originated under the Paycheck pace of regional bank consolidation. commercial bank would be based in Protection Program. Deposits rose by 9% to The Midwestern companies unveiled Detroit. $39.2 billion. the $6 billion all-stock deal, which would Huntington said it expects the merger Goldman Sachs and Wachtell, Lipton, create a company with a market value of will be 18% accretive to its 2022 earnings Rosen & Katz advised Huntington. Keefe, $22 billion, late Sunday after The Wall Street per share. It is expected to take about Bruyette & Woods and Simpson, Thacher & Journal and other news outlets reported an three years for Huntington to earn back an Bartlett advised TCF. announcement was imminent. expected 7% dilution to its tangible book “This merger combines the best of both value. companies and provides the scale and The company plans to cut $490 million resources to drive increased long-term in annual expenses, or roughly 37% of shareholder value,” Stephen Steinour, TCF’s operating costs. About a quarter of who will remain Huntington’s chairman the expected cost savings would come from and CEO when the deal closes, said in a closing overlapping branches. Huntington press release. “Huntington is focused on would reinvest about $150 million into accelerating digital investments to further technology improvements over the next enhance our … customer experience.” three to four years. The combined company would have Huntington also expects to incur $880 $168 billion in assets, putting it in the million in merger-related expenses. neighborhood of big regionals like KeyCorp TCF’s sale continues a recurring narrative in Cleveland and Citizens Financial Group for David Provost, who became TCF’s CEO in Providence, R.I. Huntington has $120 billion of assets. The deal, which is the biggest announced Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 among banks in 2020, priced TCF at 150% Phone 212-803-8200 AmericanBanker.com of its tangible book value. The year’s other large deals include Editor in Chief Alan Kline 571.403.3846 Copy Editor Neil Cassidy 212.803.8440 South State’s merger with CenterState Managing Editor Dean Anason 770.621.9935 Bank, First Citizens BancShares’ proposed Reporters/Producers purchase of CIT Group, and PNC Financial Executive Editor Bonnie McGeer 212.803.8430 Laura Alix 860.836.5431, Kate Berry 562.434.5432 Services Group’s deal to acquire BBVA Washington Bureau Chief Joe Adler 571.403.3832 Compass Bancshares. Executive Editor, Technology Miriam Cross 571.403.3834 Huntington, which would retain its Penny Crosman 212.803.8673 Jim Dobbs 605.310.7780 name, would have $134 billion in deposits BankThink Editor Rachel Witkowski 571.403.3857 after the deal closes. The companies have John Heltman 571.403.3847, Allissa Kline 716.243.2679 Community Banking Editor Paul Davis 336.852.9496 a total of 1,312 branches, with the biggest Hannah Lang 571.403.3855 overlap in Michigan. Huntington said it Contributing Editor Daniel Wolfe 212.803.8397 John Reosti 571.403.3864, Gary Siegel 212.803.1560 expects to divest about $450 million in Digital Managing Editor deposits. Christopher Wood 212.803.8437 Jackie Stewart 571.403.3852, Kevin Wack 626.486.2341 Huntington said in the release that the

For up to date and complete coverage go to AmericanBanker.com TUESDAY DECEMBER 15, 2020 AMERICANBANKER.COM PAGE 3

for ILC parents, including special capital fundamentally, forgiving loans — even REGULATORY RELIEF and liquidity requirements. The ILC charter those made by the federal government — is has sparked controversy for years and not an idea with intuitive appeal to private- opposition from traditional banks in part sector lenders. FDIC board because nontraditional bank owners such As of the third quarter, Americans owed as fintech firms and retailers can legally own $1.55 trillion in student debt, with federal to consider industrial banks. loans comprising more than 90% of the total. The day after the rule was proposed, the Biden is pitching debt forgiveness as FDIC announced it had approved a pair of a way to offer consumers relief from the brokered industrial bank applications for the first COVID-19 crisis, but the effects of his time in over a decade: one for Square, the plan would be long-lasting, since federal deposit, ILC small-business payments company, and the student loans typically have 10-year terms. other to Nelnet, a servicer of student loans. Unlike one-time government checks, which provide short-term relief, debt forgiveness rules at public would erase or reduce monthly payments STUDENT LOANS over a period of years. meeting Forgiveness of federal student debt would function somewhat like an extension of By Brendan Pedersen What Biden’s the short-term forbearance offer that has December 11, 2020 been available since the passage of the WASHINGTON — The Federal Deposit pledge to Coronavirus Aid, Relief and Economic Corp.’s board will meet Tuesday Security Act last spring. According to one to consider two final rules in the closing analysis, only 11% of borrowers with federal weeks of the Trump administration: one forgive student loans were making their monthly overhauling brokered deposit regulations payments in the fall. and another on standards for industrial student loans The payment pause on federal student bank parents. loans, recently extended through the end While the agency’s brokered deposit of January, has helped private-sector rule has broadly been characterized as means for consumer lenders to weather the storm regulatory relief, some bankers fear the of 2020. Some 29% of federal borrowers FDIC’s willingness to grant more industrial consumer have been using their savings to pay down bank charters could spell trouble for the other debts, according to a recent survey industry. that The Harris Poll conducted on behalf of Banks and many third-party deposit- lenders NerdWallet. gathering services have urged the FDIC for In October, Sallie Mae CEO Jonathan years to update its definition of brokered By Kevin Wack Witter noted that the eventual end of the deposits, which has largely been unchanged December 11, 2020 federal government’s forbearance offer will for decades. Under current law, banks failing If President-elect Joe Biden delivers on his have negative economic consequences. to meet the “well capitalized” benchmark plan to grant blanket forgiveness of federal “This added payment burden may drive are restricted from accepting brokered student loan debt, banks, credit unions and some level of increased financial distress,” deposits. other consumer lenders stand to benefit. he said during the private student lender’s The FDIC’s proposed framework, released Almost certainly, U.S. consumers saddled most recent earnings call. in December 2019, would narrow the with federal education debt would have Witter estimated that Sallie Mae’s average definition of “deposit brokers” and introduce more money left to make payments to credit borrower owes $400 per month on federal an application process for some businesses card, auto and private student lenders, all of student loans. That sum is more than to receive exemptions under the statue’s which are bracing for a rise in defaults as the enough, given the ongoing payment holiday, “primary purpose clause.” The FDIC is also pandemic recession drags on. Americans to cover the $277 that the average borrower expected to clarify its stance on decades of whose student debts are even partially owes each month to Sallie on private student informal guidance that have explained the forgiven would also have more capacity to loans. agency’s opinion about specific deposit- borrow anew, potentially juicing demand A recent poll of more than 58,000 student gathering businesses. for car loans and mortgages. loan borrowers lends credence to the idea Meanwhile, the FDIC released a proposed “In effect, it is a way to provide stimulus,” that if Americans resume paying off their rulemaking in March to update, clarify and said Mike Taiano, an analyst at Fitch Ratings. federal student loans, they are likely to start codify the agency’s process for considering Yet the banking industry is not backing missing more payments to private-sector applications for industrial banks, also the idea. One industry group notes that lenders. known as industrial loan companies. The the Biden plan would do nothing to Some 77% of the poll’s respondents said proposed rule introduced a set of conditions address the runaway cost of college. More that they do not feel financially secure

For up to date and complete coverage go to AmericanBanker.com TUESDAY DECEMBER 15, 2020 AMERICANBANKER.COM PAGE 4 enough to start making their federal student forgiveness. Between 2005 and 2014, more loan payments until at least June, according than 400,000 young Americans did not buy SMALL BUSINESS to the survey by Savi, a startup that helps homes because they were burdened with borrowers reduce their education debt student debt, according to Federal Reserve payments, and the advocacy group Student research published last year. How an app Debt Crisis. Still, banking industry groups do not “I still think there’s a lot of anxiety about support proposals to forgive federal student is helping the payments resuming,” said Aaron Smith, debt. When Warren and Rep. James Clyburn, a Savi co-founder. D-S.C., unveiled debt-forgiveness legislation The economic benefits of Biden’s debt- before the pandemic, the Consumer Bankers Eastern forgiveness plan would depend on its size. Association blasted the plan as shortsighted The former vice president has endorsed and bad for taxpayers. Bank bond forgiving $10,000 for all federal student loan The CBA noted that debt forgiveness borrowers, which would eventually result would do nothing to reduce the spiraling in total consumer savings of approximately cost of college, which has contributed to with small $370 billion. That approach would help what recent data from the Federal Reserve many Americans who attended college Bank of New York shows to be a roughly businesses but did not finish, and therefore have not 100% increase in student debt outstanding enjoyed the salary boost that typically comes over the last decade. By Miriam Cross with a degree. There is also the possibility that December 11, 2020 Borrowers who didn’t finish their forgiveness of federal student loans could Apps that focus on budgeting and cash education face a predicament similar to pave the way for similar treatment of flow abound for consumers, but the pickings folks who take out a car loan, only to see privately backed education debt. In addition are slimmer for small-business owners. the vehicle stolen, said Chris Keveaney, to Sallie Mae, banks in the private student Eastern Bank in Boston has set out to offer a former JPMorgan Chase executive who loan market include Discover Financial entrepreneurs tools to help them manage is now the CEO of the education lending Services, Citizens Financial Group and PNC their money and anticipate problems before startup Meritize. Group. they occur. “You don’t have the car, which was In a letter to Biden last week, Waters “A lot of big businesses have tools that security against the loan, and you still have endorsed large-scale forgiveness of federal are commercial grade,” said Ashley Nagle to pay on it. It becomes a very untenable loans before adding: “I will work with your Eknaian, chief digital strategist at the $15.5 situation,” Keveaney said. “That’s where I Administration to secure similar relief for billion-asset bank and head of its incubator, think the focus should be.” private student loan borrowers as well.” Eastern Labs. “Consumers have fancy apps. But some Democrats in Congress want to The National Association of Federally- But smaller and midsize businesses are this forgive much larger sums of debt. Student Insured Credit Unions has not taken a niche we wanted to develop more tools for.” loan forgiveness has become a hot topic position on the forgiveness of federal In January 2019, the bank plumbed its in progressive circles because it is a form student loans, but a spokesman said that the small-business customer base with surveys of economic stimulus that could arguably group would oppose an extension of Biden’s and interviews to figure out what their needs be accomplished by the executive branch plans to cover private student loans. were and how Eastern could help solve alone, without the approval of Senate Critics of the Democrats’ proposals point them. This research took six months and Republicans. out that numerous other forms of stimulus, incorporated conversations with bankers, Sen. Elizabeth Warren, D-Mass., House including cash payments to individuals, attorneys and certified public accountants. Financial Services Committee Chairwoman would have a bigger short-term impact than These conversations shaped the idea for Maxine Waters, D-Calif., and other student debt forgiveness. Taiano noted that Monit, a fintech with an app of the same prominent Democrats want the president- the monthly payment on a $10,000 loan with name. Monit is meant to be deployed by elect to forgive up to $50,000 per borrower. a 10-year term and a 4% interest rate is only regional and community banks to their That plan would blast a bigger hole in the around $100. small-business customers. Although Eastern federal budget, and its benefits would The plan’s opponents also argue that Labs helped shape the new company and its skew more toward wealthier people. But it forgiving debt would create a so-called app, Monit is independent of the incubator. would also have a larger stimulative effect moral hazard, encouraging Americans to “The Eastern small-business customers than forgiving no more than $10,000 per take out more loans under the assumption we developed Monit around wanted a guide borrower. that future debts will also be forgiven. “It is to the most important things to focus on in “Canceling student loan debt would help a problem that people will expect they won’t their business from a financial perspective,” boost our struggling economy and close the have to pay their loans,” said Adam Looney, Sean Collins, a Monit co-founder and its racial wealth gap that has persisted for far an economist at the Brookings Institution. head of development, said in an interview too long,” Warren said earlier this fall. this fall. That includes the ability to The mortgage industry in particular forecast cash flow, rather than only looking could benefit from large-scale student debt backwards at business performance, and

For up to date and complete coverage go to AmericanBanker.com TUESDAY DECEMBER 15, 2020 AMERICANBANKER.COM PAGE 5 to review key performance indicators in may generate a notification from the bank one place — especially with plain English that advises these owners to speak with INTERCHANGE FEES explanations of terms like “gross margin.” their bankers now about getting a loan or “Some of the megabanks are starting to line of credit. The business owner can click create their own proprietary products that do a button in the app to connect with their Mastercard similar things, so this becomes an existential banker and share their financials; otherwise, threat for some of these community banks,” the details of this offer and their financials suffers legal Steve Dow, Monit’s CEO and another remain private to the business owner. co-founder, said in an interview this fall. “It brings that conversation to the Most recently, Dow helped run Webster forefront,” Eknaian said. “We heard from setback in Financial’s business-banking practice. “This clients and bankers that access to credit is a democratizes the playing field.” big deal, and so is timing. We’re giving them European For instance, U.S. Bancorp in Minneapolis more time to rectify a cash crunch if that will lets small-business owners apply for loans happen.” through its app. Bank of America has Monit also provides banks with interchange enhanced the tools it offers small businesses. anonymized, aggregated information that A number of fintechs aimed at small can help them make targeted promotions battle businesses combine checking accounts with through Monit. For example, the bank can cash-flow analysis and other tools. send a high-yield bonus offer to businesses By Michael Moeser Eastern in August became the first bank with high cash balances at other banks. December 11, 2020 to roll out Monit to its customers. The goal In the months since Eastern introduced The U.K. Supreme Court has rejected is to strengthen relationships between Monit to its customers, customers have Mastercard’s attempt to force individual Eastern’s existing clients and their bankers voiced appreciation that the service is lawsuits over claims the card brand by supplying an intuitive tool that simplifies mobile, that their data is cleanly and overcharged consumers and harmed their finances, as well as by making conveniently displayed, and that it’s competition for more than a decade. recommendations based on data from easily navigable. One user recently told The 3-2 ruling grants class action status Monit about overall balance sheet trends the bank that Monit took the best of their on a £14 billion (about $18.5 billion) and credit and deposit activity. business metrics and laid the data out into interchange lawsuit that could include Business owners can link Monit to their a dashboard. more than 46 million consumers. The suit accounting software and scroll through their “You might see a number in your covers a 16-year period from May 1992 to key numbers, such as revenue and expenses; accounting software, but it’s not telling you December 2007, the date of the European view historical cash flow and cash-flow what to do with that information,” Eknaian Commission’s finding that Mastercard projections; receive alerts and notifications said. “This is giving you next steps.” intra-European merchant interchange fee about potential issues ahead that necessitate Eventually, Eastern hopes this tool can restricted competition. The lawsuit does not action now; and test how different scenarios, attract new customers as well. include business or corporate cards. such as splurging on a piece of equipment Digital channels are an increasingly Walter Hugh Merricks, who served as or hiring a new employee, will affect the important part of small-business customer an ombudsman for U.K. financial services, business. satisfaction, according to a 2020 study on originally filed the lawsuit in September In November, Monit announced small-business banking by J.D. Power. In 2016. The U.K.’s Competition Appeal features for banks that give them a holistic 2020, 45% of small-business customers Tribunal refused class action status and did view of their portfolio of customers with defined themselves as digital-centric, not certify a collective proceedings order aggregated, anonymized data, such as meaning they use mobile or online banking that would have allowed the claimants to the average number of credit and deposit and have visited a branch no more than demand compensation. The Court of Appeal relationships customers have with other once in the past three months. In 2019, 33% later ruled in favor of Merricks, finding banks and their top competitors. Banks of customers defined themselves this way. the tribunal had made five errors of law. can use this information to direct certain Mastercard appealed to the U.K.’s top court, offers to customers based on their chosen and lost that appeal this week. criteria and send proactive alerts, such as The Supreme Court reiterated the encouraging business owners to discuss European Commission’s findings of 2007 looming problems or a special money that consumers are likely to bear some part market rate with their bankers. of Mastercard’s interchange regardless of Eknaian has noticed that Monit’s features the form of payment, including other cards lead to more meaningful conversations or cash. That means consumers do not have between banker and client. By collecting to be Mastercard cardholders to be part of data into a dashboard view, business the class action. owners can see if they are about to hit an In an earlier case, Mastercard uncharacteristic dip in cash flow. Monit unsuccessfully challenged the European

For up to date and complete coverage go to AmericanBanker.com TUESDAY DECEMBER 15, 2020 AMERICANBANKER.COM PAGE 6

Commission’s 2007 findings on interchange, Fed uses a confidential ratings system known tool, as well as those [efforts] that make our then switched legal strategy to withhold as Camels to assign a combined safety and supervision processes have more repeatable class action status, potentially reducing the soundness score to a bank as well as ratings outcomes,” he said. scale of legal action since claimants would for five performance areas: capital adequacy, Federal Deposit Insurance Corp. Chair have to file separate lawsuits. After this assets, management capability, earnings, Jelena McWilliams spoke at the same event week’s ruling, consumers may still opt out liquidity and sensitivity to market risk. Friday, and described her agency’s approach of the class action suit and sue Mastercard The Fed scores most bank holding to supervision as a “collaboration.” separately. companies through its so-called RFI system, “Simply put, institutions should not be The U.K. Supreme Court issued a which stands for risk management, financial surprised by findings in examination reports, similar judgment in June when merchants condition and impact, but larger bank parents because open communication over time with prevailed in a legal battle with Visa and are subject to the “large financial institution” their supervisory agency should notify them Mastercard over whether interchange fees ratings system introduced in 2018. of potential issues in advance,” she said. were anticompetitive. In that case, the court Quarles said that the Fed could do more McWilliams also noted that the FDIC has rejected appeals by Visa and Mastercard, to make its ratings frameworks “reliably continued to explore ways to modernize unanimously ruling that multilateral consistent and predictable for all banks.” its supervision, and is looking to leverage interchange fees the card networks charged “Banks could benefit because they would technology to shorten the amount of time in the U.K. restricted competition. This be better positioned to anticipate supervisory examiners spend on-site at banks and speed decision cleared the path for merchants feedback and understand what steps they up examination turnarounds. to attempt to obtain some or all of the need to take to improve their ratings,” he said. “Obviously, we’re not going to interchange fees paid, which could be “Supervisors can benefit by being grounded fundamentally transform the industry and as much as an estimated £19 billion ($25 in more predictable criteria.” the FDIC during the remainder of my tenure billion). Quarles said he has specifically directed as chairman, but we’re going to tackle these Fed staff to look into the qualitative elements challenges with urgency, and we’re going to of the Fed’s ratings frameworks, whether the lay the foundation for the future of banking,” REGULATORY ACTIONS AND Fed could be more clear about how it weights she said. PROGRAMS the qualitative and quantitative factors in its ratings, and the overall effectiveness of the Fed’s new LFI ratings. MONEY LAUNDERING Fed’s exam “Even if we were to make no changes to our ratings frameworks, going through ratings the process of assessing this calibration Senate sends will surely provide a valuable learning experience,” Quarles said. “It would also veto-proof system needs increase our conviction in the legitimacy of our ratings frameworks and our confidence upgrade, as a prudential supervisor.” AML reforms Quarles also said he wants to do a deep dive into how bank ratings vary by examiner. to White Quarles says He suggested that ratings could be affected by the specific point time that an exam has been By Hannah Lang conducted, and that a better approach may House December 11, 2020 be to apply “the scrutiny of multiple parties WASHINGTON — Federal Reserve Vice with a range of perspectives and experiences” By Neil Haggerty Chairman for Supervision Randal Quarles instead of a single examiner. December 11, 2020 on Friday called for an overhaul of bank He also proposed that the Fed look into WASHINGTON — The Senate voted supervisory ratings, arguing that more whether examiners should have to review overwhelmingly Friday in favor of reforms transparency about the process of scoring banks’ compliance with certain regulations, to the nation’s anti-money-laundering an institutions safety and soundness would like the Fed’s liquidity risk management framework, sending the industry-backed make the Fed’s oversight more effective. standards, and factor such evaluations into a measure to President Trump’s desk with a “There is broad agreement that ratings are rating. veto-proof majority. a beneficial, even necessary, part of bank The Fed should also urge examiners and The Senate voted 84-13 to approve the supervision,” he said at a virtual event held economists to conduct more empirical National Defense Authorization Act, which jointly by the Fed, Harvard University and the analysis around supervisory ratings, Quarles includes an amendment that would require University of Pennsylvania. “Yet we have very said. businesses to report their true owners to the few studies or other empirical support for this “As supervisors, we should be extremely Financial Crimes Enforcement Network at conclusion.” supportive of efforts to better understand the point of incorporation. The legislation Like the other federal bank regulators, the ratings as an assessment and communication would spare banks the burden of reporting

For up to date and complete coverage go to AmericanBanker.com TUESDAY DECEMBER 15, 2020 AMERICANBANKER.COM PAGE 7 their customers’ owners to Fincen. who sold Republic National Bank of New York “The global law enforcement and national PRIVATE BANKS to HSBC Holdings for $10 billion in 1999, died security community will reap enormous that year in Monaco, the victim of arson; his benefits from anti-money-laundering nurse, former Green Beret Ted Maher, later policy that stops bad actors from using Joseph Safra, confessed to setting the fire. shell companies to shepherd crime across Moise sold his stake in Grupo Safra to international borders,” Greg Baer, president banker with Joseph for an undisclosed amount in 2006 and CEO of the Bank Policy Institute, said in and died eight years later from complications a press release. linked to Parkinson’s disease. The brothers The Senate vote comes after the House $85 billion had split years earlier, with Joseph leaving to passed the defense spending bill 335-78. create his own bank that was later folded in Trump has threatened to veto the legislation empire, dies the family’s empire. over its lack of restrictions for social media Safra’s legacy as a towering force in companies, but it garnered more than the banking was complemented by his charitable two-thirds majority needed in each chamber at 82 giving. In Sao Paulo, the Albert Einstein and for an override. Sirio-Libanes hospitals counted Safra as a “These anti-money-laundering andBy Bloomberg News key donor. He built synagogues, contributed corporate transparency reforms were long December 11, 2020 to Jewish causes through the Joseph Safra overdue,” said Sen. Sherrod Brown of, the top Joseph Safra, one of the world’s richest Foundation, and donated Auguste Rodin Democrat on the Senate banking Committee. bankers who built an empire spanning sculptures to a Brazilian museum. “I hope my Republican colleagues who voted continents with over $85 billion in banking The Safra family and its businesses were for this bill stand up to President Trump’s assets, has died. He was 82. known for caution, with Jacob famously threatened veto and vote to override it if Safra died of natural causes on Wednesday saying: “If you choose to sail upon the seas of necessary so that our federal, state and local in Sao Paulo, said in a statement. banking, build your bank as you would your officials will finally have the modern tools Safra, whose family dynasty began its boat, with the strength to sail safely through they need to protect our communities and global banking influence by financing camel- any storm.” bring these criminals to justice.” caravan traders in the Ottoman Empire, Safra branched out slowly, but the caution The inclusion of the beneficial ownership expanded its reach into New York and Europe didn’t always prevent failure. In 1998, he amendment in the bill was in large part a though Safra National Bank of New York, founded an unsuccessful mobile phone push by Rep. Carolyn Maloney, D-N.Y., to Bank J Safra Sarasin, and the family flagship, company, BCP. crack down on anonymous shell companies Sao Paulo-based Banco Safra. His $2.3 billion Safra’s empire was also rocked in 2009 after the 9/11 attacks in 2001. real estate empire includes 660 Madison after the group was linked to a feeder fund While the banking industry supported Avenue and The Gherkin in London. for Bernie Madoff, who was sentenced in the the reforms the AML reporting regime, the Famously media-shy, Safra discreetly U.S. to 150 years in prison for orchestrating a National Federation of Independent Business built the multinational banking juggernaut $17.5 billion Ponzi scheme. lobbied heavily against the legislation, saying by serving rich clients and big companies, today includes Banco Safra it would put unnecessary burdens on small orchestrating crucial acquisitions and in Brazil and Safra National Bank of New businesses. navigating crises both within his family and York. In 2011, Safra paid about $2.1 billion “This legislation would burden small his home nation of Brazil. Safra’s fortune to add Sarasin, a private Swiss bank, to his businesses with 12.2 million new initial is valued at $17.6 billion, according to the collection. paperwork hours at a cost of $531 million, Bloomberg Billionaires Index, making him The acquisition allowed him to expand the something small business employers simply the Latin American country’s second-richest group’s asset management business, adding cannot afford as they deal with the ongoing man. to 1 trillion reais ($196 billion) in money COVID-19 pandemic,” Kevin Kuhlman, vice Joseph Yacoub Safra was born in 1938, managed worldwide, according to its website. president of federal government relations at in , , to a Jewish banking “Every bank is like a child — you have to the federation, said in a press release. clan with roots in , . He was the nurture it so it is able to grow and thrive,“ youngest of nine children to , a Joseph Safra said in a Safra Sarasin earnings banker, and his wife Esther. report released in 2020. Safra’s great-uncle, Ezra, started the Safra had been battling with illness for family business, and Jacob Safra expanded some time and his three sons, Jacob, David to Lebanon, before the family moved to and Alberto, were gradually taking on larger Brazil after World War II. Banco Safra was roles in his businesses. In 2019, Alberto established in 1957. decided to split from the lender to launch Joseph took over running Banco Safra his own venture, ASA Investments. Now, together with his younger brother, Moise, Jacob, the oldest, runs the international side after older brother Edmond left to build of the operations, while David oversees the banks in Europe and New York. Edmond, Brazilian firm.

For up to date and complete coverage go to AmericanBanker.com TUESDAY DECEMBER 15, 2020 AMERICANBANKER.COM PAGE 8

At the time of his death, the billionaire’s Index investing extensive holdings included a stake in banana State Street Global Advisors, which has BANKTHINK company Chiquita Brands International, more than $3 trillion under management, the Gherkin, a Norman Foster-designed runs dozens of mutual funds and was a skyscraper in central London and a 130-room pioneer in index investing. Its SPDR S&P 500 2020 was mansion in Sao Paulo. ETF Trust became the first U.S. exchange- Safra is survived by his wife, Vicky, their traded fund in 1993 and is now the world’s a horrible four children and 14 grandsons. largest ETF, with about $320 billion in assets. The business, which competes with BlackRock’s iShares unit, has lost some guest, but M&A ground over the past decade. Its U.S. ETF market share fell to about 16% this year, an excellent from 25% in 2010, according to Bloomberg State Street Intelligence data. Vanguard Group vaulted past State Street in 2015 to become the teacher to explore country’s second-biggest ETF issuer, the data show. By Dave Martin Consolidation is ramping up among asset December 11, 2020 options managers, which require scale to compete as Had anyone read a manuscript at the start the industry’s fees increasingly come under of the year about the events that unfolded in for asset pressure. Bank of Montreal is exploring 2020, they would have likely assumed they options for its fund business, while Wells were reading wild fiction. Fargo and Societe Generale have also been It’s still difficult to imagine that so many management considering selling their asset management people have experienced such significant units, Bloomberg News has reported. changes and challenges in their personal and arm professional lives. Yet, they have, and they Activist stake are. It has been a year of constant adjusting. By Bloomberg News Invesco has been in the spotlight since Not all adjustments have worked December 11, 2020 October when Trian Fund Management LP seamlessly, nor would you expect them to. State Street is exploring options for its asset disclosed a 9.9% stake in the Atlanta-based Not every change has been well received, nor management business, including a merger money manager. Led by the billionaire should it be expected to considering the tidal with a competitor, as it seeks to gain scale, activist investor Nelson Peltz, Trian has been wave of events this year. people familiar with the matter said. zeroing in on money managers for more I recently heard a banker explain in a The Boston-based firm has been informally than a decade and orchestrating mergers as team meeting that while their current state working with an adviser to review strategic seismic changes reshape the industry. He has of socially distanced operations was the “now alternatives for the unit, known as State Street said that successful companies need to add normal,” it was not the “new normal.” He Global Advisors, according to the people. It enough scale to compete with BlackRock. assured them that the present was not going has evaluated potential combinations with UBS has been scouting for an asset to be the permanent. the asset management operations of rivals management deal for some time. Talks That reassurance is needed, as many folks including Invesco and UBS Group, the people on combining its business with Deutsche would agree this year alone has felt more like said, asking not to be identified because the Bank AG’s DWS unit to create a European a decade. Case in point: I recently asked a information is private. powerhouse stalled in 2019, Bloomberg News group on a Zoom meeting to reflect on their While those discussions didn’t lead previously reported. social media photos and postings of personal to an agreement, State Street continues State Street’s biggest division is its and business events from one year ago. to study potential deals, the people said. investment servicing business, which offers Understandably, those events from last Such combinations often stumble over the custody and fund administration to other year felt like ages ago considering the events, ownership split and valuation differences. asset managers. The company also provides surprises and difficulties packed into 2020. Shares of State Street rose as much as 4.7% data and technology platforms to institutional Yet, I noted how this year also showed Friday, reversing earlier losses. They were up investors. how adaptive and resilient they can be when 3.8% at 2:33 p.m. in New York trading, giving called upon. No, that doesn’t mean they’ll the company a market value of $26.3 billion. be thrilled about the new challenges that a No final decisions have been made, nationwide business disruption brings. and there’s no certainty the deliberations It should, however, give some level of will lead to a transaction, the people said. confidence to bankers in their ability to Representatives for State Street, Invesco and handle whatever comes their way. Resilience UBS declined to comment. is as much a developed skill as an inherent trait.

For up to date and complete coverage go to AmericanBanker.com TUESDAY DECEMBER 15, 2020 AMERICANBANKER.COM PAGE 9

In the famous words of Mike Tyson, and operating procedures, they’ll do it with a the river in the Manhattan U.S. Attorney’s “Everyone has a plan until they get punched clearer understanding of why. The same will office, but the Brooklyn office has increased in the mouth.” Similarly, almost everyone be true for “temporary changes” that become its profile in major financial-crimes cases took unforeseen hits in 2020. They didn’t like permanent. in recent years, winning the convictions it, but they’re now more resilient for it. There is much of 2020 that bankers want in 2017 of two former officials of FIFA, The ability to outwardly display good to leave behind. The lessons learned and international soccer’s governing body, who humor during trying times is also a powerful leadership skills honed, however, will not be. accepted millions of dollars in bribes from skill to develop. People are naturally drawn sports-marketing companies and laundered to others who remain positive and upbeat in Dave Martin is a consultant specializing the money through U.S. banks and financial difficult situations. in retail banking strategies, including in-store institutions. Leaders across the country have been branches. He is the founder of the retail bank “As you know, the office has long reminded this year of the tremendous impact performance company bankmechanics. successfully investigated and prosecuted the their tone and demeanor have on the teams most sought-after money launderers in the they lead. Humor during challenging times world, and the individuals and companies does not imply a leader doesn’t know how CRIME AND MISCONDUCT behind the largest and most sophisticated to be serious. A balance of humor more so corporate fraud schemes ever uncovered,” signals calm, confidence and competence. It DuCharme said in the Nov. 19 memo. “In is also contagious. Brooklyn addition, our asset forfeiture recoveries The ability to look outside of oneself have consistently ranked among the nation’s and show empathy to others is an equally federal highest.” valuable skill. In stressful times, people naturally gravitate to people who show they Increased activity care about their well-being. financial- A recent proposal that would require This is as true with the teams managers investment advisers, including hedge funds lead as the customers they serve. crime unit and private equity firms, to adopt effective Asking personal questions and allowing anti-money-laundering policies under the others to share their stories, thoughts and U.S. Bank Secrecy Act may create more concerns strengthens both personal and steps on work for the task force, DuCharme said. professional relationships. There are large He also noted that banks’ expansion into parts of 2020 most would like to leave behind, Manhattan cryptocurrency could lead to increased but there are also powerful leadership money-laundering activity. qualities developed and honed under The task force will be led by veteran pressure that should stay with us. turf prosecutor David Pitluck and will also work in From a business model standpoint, tandem with the Justice Department’s Money we were forced to change things quickly. By Bloomberg News Laundering and Asset Recovery Section, its With that, however, we were given many December 08, 2020 Office of International Affairs and the Federal opportunities to evaluate best practices. Brooklyn-based federal prosecutors will Bureau of Investigation, DuCharme said. From staffing levels to office arrangements, staff a new task force to investigate and It’s unclear how long DuCharme, who to hours of operation and more, there were charge corporations and individuals who use recently completed a stint in Washington as business model experiments many leaders the U.S. banking system to launder money, principal associate deputy attorney general had long been considering. setting up a bigger role in white-collar cases under Attorney General William Barr, will Many of those experiments suddenly that have historically been dominated by continue to oversee the Brooklyn office. became not just rational, but necessary. their Manhattan counterparts. U.S. attorneys are political appointees, Necessity was the mother of invention (or Acting Brooklyn U.S. Attorney Seth and President-elect Joe Biden is likely to adaptation), time and again.Banks that DuCharme announced the Bank Integrity nominate his own candidate for the office had only discussed what a digital-first Task Force in an internal memo sent last in due course. President Donald Trump’s model would look like found themselves month to staffers in the Eastern District administration fired U.S. attorneys en masse implementing one (almost) on the fly. There of New York. DuCharme said recent shortly after he took his office. have been both pleasant and unpleasant investigations show that criminals around results. the world are using U.S. banks to launder The experiences, however, have been trillions of dollars, including those tied to informative and useful in planning the future. narcotics trafficking or terrorist financing. There are aspects of legacy business He vowed the new unit would seize or force models that are now sorely missed. And there the forfeiture of bank accounts, property and are other models that are being revealed as other assets derived from wrongdoing. obsolete. Such prosecutions have historically been When banks return to certain practices the purview of federal prosecutors across

For up to date and complete coverage go to AmericanBanker.com TUESDAY DECEMBER 15, 2020 AMERICANBANKER.COM PAGE 10

federal and state governments enacted CORONAVIRUS unprecedented emergency stimulus programs, about three-fourths of vendors were excluded from disaster relief or NYC’s unemployment insurance, often because of their immigration status or the informal coffee-cart nature of their work. “These are people who we know and we see every single day — woes spur people who are just trying to forge a way for both themselves and for their children,” $2 million said Wes Moore, Robin Hood’s CEO. Vendors have resorted to borrowing money, drawing down savings, seeking Morgan help from friends and family or pawning belongings to cover expenses including Stanley grant permits and garage rentals. And almost one in four vendors reported having household By Bloomberg News members with COVID-19 or symptoms of the December 09, 2020 virus, Morgan Stanley and Robin Hood said. As Morgan Stanley’s bankers scattered “Vendors come from communities that from Manhattan’s Times Square to their have been disproportionately impacted by home offices during the pandemic, some the COVID-19 pandemic,” Mohamed Attia, asked, How are the coffee-cart vendors director of the Street Vendor Project, who doing? sold food and drinks as a vendor for almost The answer: terribly. Earnings for New a decade, said in the statement. “They have York’s iconic street vendors have plunged lost the majority of their income during the as much as 90% during the coronavirus pandemic, and despite their critical role in outbreak. So the bank is giving $2 million to our city’s culture and economy, every level of 2,000 vendors in coordination with the Robin government has left them out in the cold.” q Hood foundation, which is contributing $375,000 more and will work with the Street © 2020 Arizent and American Banker. Vendor Project of the Urban Justice Center to All rights reserved. distribute the cash. The funds are aimed at helping the largely minority- and immigrant-run businesses that have been left out of government stimulus programs because they don’t qualify for employee or small-business relief. There are about 20,000 vendors selling food and merchandise on sidewalks throughout New York who embody the city’s image in films and on television. “It wasn’t just our coffee-cart people — it was the vendors all across the city” facing hardship, Joan Steinberg, president of the Morgan Stanley Foundation, said in an interview. She’s calling on other corporations and individuals to follow suit and help the city’s quintessential businesses. “When I was little, I used to beg my parents to buy me a hot dog or one of those giant pretzels. It’s just very classic New York.” The thousands of street vendors contribute an estimated $293 million annually to the city’s economy, according to a statement from Morgan Stanley and Robin Hood. As

For up to date and complete coverage go to AmericanBanker.com