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Europe’s banks turn to fees to kick customers’ branch habit

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November 15, 2021

By Jesús Aguado and Tom Sims

MADRID/FRANKFURT (Reuters) – At Spain’s Caixabank most customers visiting a branch for a service they could access online will now have to pay two euros for the privilege. The fees are part of a shift by European banks, suffering from years of negative interest rates, to start turning the screws on customers who still rely on dense branch networks. A surge in deposits during the pandemic – which banks then have to pay to park at the central bank – is spurring many European lenders to start squeezing money out of services they used to perform for free. “A main part of our business, taking deposits, is becoming a loss-making activity. What was once part of our core business and profits is now making losses,” said Caixabank’s CEO Gonzalo Gortazar last month. With Gortazar’s bank about to complete the integration of Bankia following its 4.3 billion euro ($4.92 billion) acquisition, it is sending its more than seven million new customers the details of the fee policy – including the branch usage fee which was detailed in a client letter seen by Reuters.

Charges on a debit card for non-loyal customers could rise to 36 euros from 28 euros if former Bankia clients do not use a new credit card issued by Caixabank dubbed ‘My Card’, which brings the bank more profitable lending opportunities. Bankers say it is a necessary move to sustain profitability.

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Spanish banks are struggling to earn money from lending, and their revenues declined 2% in the first half of 2021 compared to the same period in 2020, according to the Bank of Spain. BBVA now charges 2 euros for withdrawing less than 2,000 euros at a branch, while Santander will charge some clients up to 240 euros a year just to maintain a bank account if they don’t meet certain conditions.

“All our competitors are doing similar things. You just can’t give away all services for free,” a deputy retail head of a big Spanish lender said on condition of anonymity.

RISING FEES

In Germany, banks are also introducing new fees.

From Nov. 10 DKB bank has started charging new customers fees on accounts with more than 25,000 euros, while ING clients will start paying 99 cents a month from next March for debit cards, on top of a 4.90 euro charge a month for accounts that was introduced in 2020.

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In Italy, consumer association Altroconsumo said in September that the cost of bank accounts with home banking services had increased by an average of 11-15% in 2021.

The 2021 McKinsey global payments report released in October said the shifts are a response to the billions of dollars of revenue lost in net interest income at European banks during the past decade of low or negative rates.

Commissions at Spanish lenders rose 16% in the second quarter to 4.18 billion euros ($4.83 billion) from a year ago, while mortgage lending grew just 0.54% in the same time.As of end-June, the ratio of Spanish banks’ net fee and commission income to their total net operating income was around 25%, below the 32% average for European banks and well below the almost 40% for Italian banks and 37% for German banks, data from the European Banking Association (EBA) showed.

VULNERABLE CUSTOMERS

Some officials are warning of risks of growing financial exclusion caused by the changes, despite banks’ efforts to provide exemptions for elderly customers.

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“Although the closure of branches in rural areas can be justified by the search for profitability and a decline in demand, this reduction affects the population, especially in relation to access to cash, which cannot be covered, like other banking services, through electronic banking,” the Bank of Spain said in its latest annual report.

Even in cities like Madrid, older clients can feel left behind.

“I received an electronic notification about potential hikes in fees but my PC is not working properly and I struggle to use the app on my mobile,” said 78-year-old Carmen Reyes, who said she has been a Bankia customer for 70 years.

“If they close my branch I would leave.”

($1 = 0.8734 euros)

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(Reporting by Jesús Aguado; additional reporting by Tom Sims in Frankfurt and Valentina Za in Milan; editing by Rachel Armstrong and Gareth Jones)

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Exclusive-KNDS readies 650 million euro binding bid for Leonardo units – sources

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December 2, 2021

By Angelo Amante, Francesca Landini and Elisa Anzolin

ROME (Reuters) – KMW+Nexter Defence Systems (KNDS) is close to making a 650 million euro ($736 million) binding bid for Leonardo’s OTO Melara and Wass units, three sources said on Thursday, in a move that could strengthen its position in the land defence sector.

The Franco-German consortium is conducting due diligence on the two units that Italian defence group Leonardo has put on the block and could submit its offer by the end of the year or early 2022, the sources familiar with the matter said.

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KNDS is pitted against Italian shipbuilder Fincantieri, which expressed an interest in the units but has not started formal due diligence and has put forward a less generous proposal so far, the sources said.

The Italian government, which controls both Leonardo and Fincantieri, is determined to have the final say on the deal.

As Europe pushes for closer cooperation on defence, Rome wants to keep open the door for cooperation between domestic and foreign groups, political sources have said, but also wants to protect jobs and growth at home.

As part of its proposal, KNDS has offered to include Italy in the Main Ground Combat System (MGCS) tank project, an option that would give Leonardo the possibility of offering its sensors and electronics for the new tank.

OTO Melara, which makes naval and terrestrial cannons, would also fit into KNDS’s portfolio and strengthen its hand in a 2.2 billion euro contract that the Italian army is due to launch in the near future.

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OTO Melara is currently a tank supplier to the Italian army together with Iveco Defence Vehicles, while Wass produces torpedoes.

Fincantieri, which started informal talks with Leonardo over OTO Melara and Wass before KNDS’ approach, could decide to join forces with other groups, the sources said.

($1 = 0.8836 euros)

(Additional reporting by Christina Amann in Berlin Writing by Francesca Landini; Editing by Mark Potter)

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Fed’s Quarles says regulatory overkill could stifle stablecoin innovation

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December 2, 2021

By Pete Schroeder

WASHINGTON (Reuters) -Randal Quarles, the former regulatory chief of the Federal Reserve, said on Thursday that U.S. regulators may “unnecessarily” hamper innovation around so-called stablecoins if they pursue recent recommendations put forward by a Biden administration working group.

Quarles, who will leave the Fed’s Board of Governors at the end of the month, said regulators must show “reasoned constraint” on monitoring stablecoins, which are digital currencies whose value are pegged to traditional assets like the dollar. He added that banks should be allowed to engage with them once certain concerns around transparency, stability and consumer protection are met.

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“It is clear that there is a strong demand for these assets among bank customers, and well-regulated banks should be allowed to engage in activities regarding these assets,” he said in a virtual appearance at an American Enterprise Institute event in Washington.

Quarles specifically cited a recommendation that any stablecoin issuers or “wallet providers” have limited access to other commercial entities, calling it needlessly stricter than rules for nondigital assets.

The President’s Working Group on Financial Markets published a report in November calling on Congress to pass a new law to apply bank-like scrutiny to stablecoin providers.

In his final speech at the Fed, Quarles laid out a series of recommendations for the central bank following his exit. President Joe Biden has yet to nominate his replacement.

For example, Quarles also said the Fed should consider easing its “globally systemic” capital surcharge for the nation’s largest banks, particularly as regulators move to finalize added global capital restrictions known as “Basel III.”

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He said the Fed’s plan to finalize those new rules would come after his exit from the U.S. central bank, and said there will be “little justification” for keeping the G-SIB surcharge at its current high level once it’s done.

He also argued the Fed should consider averaging the results of its annual stress test of bank finances over several years to result in a more consistent capital level, and that the central bank needs to address “perverse implications” of current leverage requirements that could discourage banks from holding safe assets in times of stress.

(Reporting by Pete SchroederEditing by Paul Simao)

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S&P 500, Dow climb on boost from financials, Boeing

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December 2, 2021

By Devik Jain and Anisha Sircar

(Reuters) – The Dow and the S&P 500 rebounded on Thursday, boosted by financials shares and Boeing as rising cases of the new Omicron variant globally continued to drive volatility across markets.

Boeing Co jumped 3.5% after China’s aviation authority issued an airworthiness directive on the 737 MAX jets that will help pave the way for the model’s return to service in China.

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Kroger Co surged 9.9% to top the S&P 500 after the retailer raised full-year sales and profit forecasts, boosted by sustained demand for groceries.

Travel and leisure stocks bounced back, with S&P 1500 Airlines and the S&P 1500 Hotels, Restaurant and Leisure indexes rising 4.5% and 2.8%, respectively.

All of the 11 major S&P sectors advanced in early trading, with eight of them surging more than 1% each. Financials led the pack, up 2.3%.

Wall Street’s main indexes closed below key technical levels on Wednesday, with the Dow breaching its 200-day moving average for the first time since July 2020 on growing angst about the latest coronavirus variant and the Federal Reserve’s hawkish comments.

“It is a bit of a ‘buy the dip’ environment … uncertainty will persist over the next week or so as scientists do more studies over the new variant,” said Sam Stovall, chief investment strategist at CFRA Research in New York.

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“I still think investors want to focus on equities, they just need to be given a reason to do so.”

Wall Street whipsawed this week as investors scrambled for bargains after every drawdown. Still, the three indexes are tracking sharp weekly losses, with the Dow on pace for its fourth straight fall.

The United States and Germany joined countries around the globe planning stricter COVID-19 restrictions as the Omicron variant rattled markets, fearful it could choke a tentative economic recovery from the pandemic.

The CBOE volatility index, also known as Wall Street’s fear gauge, was last trading at 28.6 points, a day after hitting its highest level since February.

At 10:27 a.m. ET, the Dow Jones Industrial Average was up 462.69 points, or 1.36%, at 34,484.73 and the S&P 500 was up 43.36 points, or 0.96%, at 4,556.40.

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The Nasdaq Composite was up 31.90 points, or 0.21%, at 15,285.96, supported by shares of Amazon.com, Tesla Inc, Microsoft Corp and Nvidia Corp.

Apple Inc fell 2.7% after Bloomberg reported about slowing demand for Apple’s iPhone 13.

Meanwhile, lawmakers reached an agreement to fund the U.S. government until Feb. 18 as they scramble to avoid a partial government shutdown this weekend.

Stellar earnings reports and strong economic growth have powered U.S. stocks to a series of record highs in November, with the S&P 500 climbing 20.1% so far this year.

A Reuters poll of equity analysts said a correction was likely in the next six months, with the benchmark expected to gain 7.5% between now and end-2022 to finish at 4,910.

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Advancing issues outnumbered decliners by a 2.63-to-1 ratio on the NYSE and a 1.43-to-1 ratio on the Nasdaq.

The S&P index recorded three new 52-week highs and nine new lows, while the Nasdaq recorded seven new highs and 393 new lows.

(Reporting by Devik Jain and Anisha Sircar in Bengaluru; Editing by Maju Samuel)

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