Daley reunites with Scharf at Wells; Capital One demotes cybersecurity chief

Wall Street Journal

Not so secure

Capital One is moving Michael Johnson, its chief information security officer (CISO) since 2017, “out of the role in the wake of the bank’s massive data breach. The bank informed employees on Thursday that [Johnson] will become an adviser and that the bank will begin an external search for a replacement.” Mike Eason, the chief information officer of Capital One’s commercial bank, was named interim CISO.

Since Capital One disclosed the breach last July, “at least a dozen experienced cybersecurity employees have left the bank. Many of them were frustrated at flagging security lapses to Mr. Johnson and other executives that they believed hadn’t been fully addressed.” Johnson also “clashed with employees soon after taking over as CISO at the bank. Some employees questioned his knowledge of security issues and grew concerned at the amount of time it took to address them.”

Doubts

“Banks harbored significant doubts about WeWork even as they pitched its stock to investors,” the Wall Street Journal reports. “JPMorgan Chase, Goldman Sachs and other banks arranged giant fees and strict protections that reflected their concerns about WeWork’s unproven business model and [founder Adam] Neumann’s unpredictable behavior. Wells Fargo only started lending to WeWork after an executive at the bank promised to keep an eye on Mr. Neumann.”

Empty spaces

Banks are wrestling over “what to do with the insides of their bricks-and-mortar storefronts. Banks have closed thousands of branches in recent years and poured billions of dollars into the smartphone apps that customers increasingly use for many of their daily banking needs. But customers still want the option of a physical branch, especially when they have problems that are tough to solve over a web chat. How to best do that remains an open question. Banks are still trying to figure out exactly how to balance spending on branch upgrades and digital offerings to maximize deposit growth.”

Climate warnings

The executive vice president at the New York Fed responsible for regulating banks said “financial firms need to take seriously the danger of climate change in their risk-management decisions.” In prepared remarks for a speech at the GARP Global Risk Forum in New York on Thursday, Kevin Stiroh said, “Climate change has significant consequences for the U.S. economy and financial sector through slowing productivity growth, asset revaluations and sectoral reallocations of business activity.”

On Friday, the San Francisco Fed is holding a conference on climate change and economic risks, “a first for any part of the central bank. Bank President Mary Daly told reporters on Monday that the central bank needs to understand how climate-change disruptions will affect the economy, payment system and banks, adding ‘I don’t see that as anything outside of our mission. In fact, I think it’s squarely in our mission and important for us to do that.’”

Financial Times

Reunited

Bill Daley, the former head of government affairs and communications at Bank of New York Mellon, is joining his old boss at Wells Fargo. Daley left BNY Mellon last month after CEO Charles Scharf left to take the top job at Wells, where Daley will become vice chairman of public affairs starting next Wednesday. “Daley’s role is newly created and encompasses everything from media relations to corporate social responsibility.” He will also be a member of the bank’s operating committee and report directly to Scharf.

Chris Goodney/Bloomberg

Scharf called Daley, who was President Obama’s chief of staff, “a strong voice who brings perspectives from the public sector that we in business do not generally have but are critical for us as we make decisions. The addition of Bill and this role to our Operating Committee is an important statement that we want different perspectives on our senior-most management committee and that we will think more broadly about our stakeholders as we move forward.”

Instant opposition

German finance minister Olaf Scholz’s plan to institute a common bank deposit insurance system throughout the European Union has run into immediate opposition from Italy, whose finance minister said the proposal “would harm the competitiveness of the bloc’s banks, in comments heralding complex negotiations over Europe’s most ambitious integration project since the creation of the single currency.” Speaking at a meeting of eurozone finance ministers in Brussels, Roberto Gualtieri said “the German proposals to remove regulatory incentives for banks to buy their governments’ debt would create a global ‘unlevel playing field’ by disadvantaging European banks.”

“The remarks highlight the divisions over Olaf Scholz’s grand bargain to complete the banking union, a project devised during the sovereign debt crisis of the euro area to boost financial stability by centralizing supervision and crisis management of banks.”

Elsewhere

Super app

Brazil’s Banco Inter Thursday launched a smartphone app “offering clients direct access to more than 60 stores selling products from appliances to sneakers to beauty products. The launch marks Banco Inter’s latest move beyond its existing free checking accounts to lure more clients and increase profitability by becoming a one-stop shop for everything. Chief Executive Joao Vitor Menin told Reuters that he expects the so-called super app to help the bank attract new clients, either at a faster pace or at a lower cost.”

Quotable

“Customers want the physical and the digital. And you have to deliver both.” — Tom Brown, founder and CEO of Second Curve Capital, a hedge fund that focuses on the banking industry, explaining the dilemma banks have in what to do with their physical branches even as more customers migrate to online and mobile banking.