Wirecard files for insolvency, owes €3.5B

US regulators change rules on covered funds, swaps | Wirecard files for insolvency, owes €3.5B | Bank stocks gain as US changes post-crisis rules

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26 June 2020

News on the global financial markets

Editor's Note

US regulators change rules on covered funds, swaps

The US Federal Deposit Insurance Corp., the Federal Reserve and the Office of the Comptroller of the Currency have agreed to end limits on banks' investment in covered funds under the Volcker rule, such as credit funds and venture capital funds. The regulators have also lowered the amount of cash banks must set aside to cover losses on swaps trades.

Full Story: Reuters (25 Jun.), Bloomberg (tiered subscription model) (26 Jun.), The Wall Street Journal (tiered subscription model) (25 Jun.)

Industry News

Wirecard files for insolvency, owes €3.5B

German payment company Wirecard has filed for insolvency, with creditors owed €3.5 billion, after the discovery of what auditor EY calls "elaborate and sophisticated fraud". The collapse comes two years after Wirecard joined Germany's benchmark DAX stock index with a valuation of €25 billion.

Full Story: Reuters (26 Jun.), Financial Times (subscription required) (25 Jun.)

Bank stocks gain as US changes post-crisis rules

An announcement that the US Federal Deposit Insurance Corp. is modifying post-crisis regulation sent leading bank stocks up more than 2% Thursday. The development marks a boost for bank stocks affected by fears of a resurgent coronavirus pandemic and concerns about having to forego dividends.

Full Story: CNBC (25 Jun.)

Systematic internalisers respond to critics

Systematic internalisers have replied to criticism from the European Securities and Markets Authority and France's Autorite des Marches Financiers, saying critics overlook the valuable services they provide traders. These firms say they improve market efficiency by introducing liquidity and by taking on trades that would have been done over the counter.

Full Story: Practice Insight (25 Jun.)

Economists: UK contraction less serious than feared

A Reuters poll of nearly 80 economists predicts the UK economy may contract by less than first feared as a result of the coronavirus pandemic, with activity contracting by a median 8.7% this year with median growth of 5.5% next year. James Smith of ING says he expects "a more pronounced rebound" in Q3 as more and more businesses reopen, but does not expect complete recovery until late 2022 or 2023.

Full Story: Reuters (25 Jun.)

Competition chief encourages cross-border M&A within EU

EU competition chief Margrethe Vestager says that she sees scope for cross-border mergers and acquisitions within the bloc and that consolidation should not be seen as controversial.

Full Story: Financial Times (subscription required) (25 Jun.)

Risk-off mood prompts decline in 10-year Bund yields

Loss of investors' risk appetite has been cited as German 10-year Bund yields fell to a 10-day low of –0.48% while Italian yields rose three basis points to 1.37% in late trading on Thursday. Fears of a second coronavirus wave, a pessimistic outlook from the International Monetary Fund and the threat of US tariffs on some $3.1 billion of European exports helped to drive sentiment down.

Full Story: Reuters (25 Jun.)

Regulatory Roundup

BoE to review risk in nonbank financial sector

The Bank of England Financial Policy Committee will review risk at nonbanks, such as hedge funds and asset managers, Governor Andrew Bailey says in a letter to Chancellor Rishi Sunak. "Where appropriate, the assessment will identify gaps in resilience in the non-bank financial sector and the potential measures that may be taken to increase resilience," the letter states.

Full Story: Reuters (25 Jun.), Financial News (UK) (subscription required) (25 Jun.)

Spotlight on China

US backs EU proposal for talks on China

US Secretary of State Mike Pompeo says the US has accepted a proposal from EU foreign policy chief Josep Borrell Fontelles to create US-EU dialogue on China. "I am excited about a new mechanism for discussing the concerns we have about the threat that China poses to the West and our shared democratic ideals," Pompeo says.

Full Story: Politico (26 Jun.)

Tech Trends

Major US banks invest $25M in NY-based fintech

JPMorgan Chase, Goldman Sachs and Barclays are among the banks who have invested $25 million in New York-based fintech Capital Markets Gateway.The business has developed a platform that digitises capital market fundraising deals.

Full Story: GeekWire (25 Jun.)