Weekly Global News Wrap: US banks awash with $2t deposits; Wirecard ex-CEO arrested

And Canada’s banking regulator holds big banks’ capital buffers at 1%.

From CNBC

A record US$2t surge in cash hit the deposit accounts of US banks since the coronavirus first struck the country in January, according to the Federal Deposit Insurance Corporation (FDIC).

More than two-thirds of the gains went to the 25 biggest institutions, such as JPMorgan, Bank of America and Citigroup, all of which grew much faster than the rest of the industry in the first quarter.

Several reasons for the surge include large corporations drawing billions of dollars from lines of credit where the money was initially parked at the banks making those loans, and the government’s US$600b Paycheck Protection Program which aims to prop up small businesses.

From CNBC

Former Wirecard CEO Markus Braun has been arrested on charges of inflating the company’s balance sheet, prosecutors in Munich said on 23 June.

Braun resigned on 19 June after the German payment service provider said auditors at EY couldn’t locate US$2.1b (EUR1.9b) of cash on its balance sheet. On 22 June, the company said it was likely that those funds did not exist.

Prosecutors said that Braun turned himself in on the evening of 22 June after a warrant was issued for his arrest. The next day, prosecutors said he would be released from custody as soon as he has posted US$5.6m (EUR5m) in bail. He would have to report to police weekly, they added.

From Reuters

Canada’s banking regulator on Tuesday said the capital buffer of the country’s six biggest lenders must hold at a record low 1% of risk-weighted assets and said it was prepared to lower it further if needed.

The Office of the Superintendent of Financial Institutions (OSFI) noted elevated financial system vulnerabilities and pressure on highly indebted households and businesses due to the coronavirus outbreak, but said the current domestic stability buffer (DSB) level can support the banking system and overall economy.

OSFI made an out-of-schedule 1.25pp reduction to the buffer in March, freeing up more than US$222b (C$300b) of lending capacity as part of a broader push by authorities to limit the pandemic’s economic impact.

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