Halister News

(Bloomberg) -- Most analysts see OCC’s plans to start accepting applications from fintech cos. for special charter as positive for established cos. like LendingClub, On Deck, though details still unclear.

• Charter would subject fintechs to federal banking rules, including anti-money laundering controls, consumer protections
• See OCC Comptroller Thomas Curry’s announcement

FBR (Edward Mills)

• Sees charter as next step in industry’s "maturation"; shows further regulatory "acceptance"; may end regulatory arbitrage, remove some threat of CFPB action, help fintech cos. build relationships with other banks
• Removes risk of CFPB being primary regulator; insulates chartered firms from Madden/Midland (case on usury caps)
• Sees charter as positive for LC, ONDK as larger marketplace lenders are "strongly positioned," given greater scale/compliance investments relative to smaller competitors, though "devil" is in details as it’s unclear what standards fintech firms will be held to; notes OCC asks for public comment

CRAIG-HALLUM (Brad Berning)

• Likely positive for LC (buy) as co. wouldn’t have to pay WebBank to originate loans, which could free up ~$10m-$20m of Ebitda per year
• Also potential positive for PYPL (buy) as co. could offer FDIC insured deposits, allowing it to capture all customer transactions instead of just a few per month; may be good for millennials who want to shift to "greater universal digital wallet functionality"

COMPASS POINT (Isaac Boltansky)

• “Notable questions" include: Whether OCC will maintain course under Trump Administration, especially given Curry’s expected departure in 1H; whether opposition from state regulators (like N.Y. DFS) will shift federal response; how comments will influence 
• While effort is "positive step" toward federal clarity, sees established cos. with existing state licenses, bank partnerships as unlikely to pursue charter
• OCC’s accepting comments until Jan. 15 suggests licensure may not begin until 2H

CAPITAL ALPHA (Ian Katz)

• While there’s been "some debate" about whether fintech cos. would even want charter, Capital Alpha views larger cos. as eventually seeking to deal with only one regulator, even if it’s "a tough one," vs working through all the different states
• Cites fintech exec remark post-Curry’ speech that the word "preemption" describes why fintech co. would seek national charter
• Notes Independent Community Bankers of America (ICBA) said it’s "deeply concerned" non-bank online lenders’ lack of oversight has provided them with regulatory "advantages" vs community banks, while putting consumers/financial system at risk; Curry’s term expires in April, with no guarantee about successor

RELATED

• Earlier, A Look Inside Wall Street’s Innovation Labs
• Peeks into finthech at cos. including JPMorgan, BNY Mellon, Goldman 
• Dec. 2, States Should Regulate Fintechs, Not the OCC, Says N.Y. DFS
• Dec. 2, Marketplace Lenders May Not Seek Fintech Charters: Compass Point

To contact the reporters on this story: Felice Maranz in New York at fmaranz@bloomberg.net; Lily Katz in New York at lkatz31@bloomberg.net To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net Steven Fromm

(Bloomberg) -- Italy-Germany 10-year yield spread at risk of fading all of today’s widening, with charts pointing to potential compression toward 151-153bps Fibonacci support in days ahead, Bloomberg technical analyst Sejul Gokal writes.

• See chart; spread now +6bps at 169bps; orderly moves noted with initial widening contained inside last week’s range
• BTP-bund formed a bearish key week reversal last week against Brexit vote-day wide, which alleviates near-term widening risks
• Friday’s low may initially come into focus at 160bps
• Daily MACD stays bearish; retains its bearish crossover, arguing for tightening bias in BTP-bund spread
• 151-153bps represents the 55-DMA and 61.8% Fibonacci of Oct. 25-Nov. 28 widening phase
• Spread resistance from 180bps (today’s high 179bps), 61.8% Fibonacci of Nov. 28-Dec. 2 tightening move and Nov. 29 marabuzo line
• NOTE: Dec. 2, ECB-Inspired Bund Selloff Lacks Endorsement in Momentum

• NOTE: Sejul Gokal is a technical strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.

(Bloomberg) -- Negative central bank rates still pose a challenge for Denmark’s banks, Tonny Thierry Andersen, chair of Danish Bankers Association, says in speech.

• Banks needs to work harder to close confidence gap, as negative rates, Panama papers, money laundering cases continue to raise doubts about industry
• Warns that regulation should be risk-based, however, as banks need to focus on customers whose activities pose the greatest risks
• Urges regulators negotiating Basel 4 to be “pragmatic” when deciding how capital requirements should be allocated so risk-based approach is retained

(Bloomberg) -- Most analysts hold a bear-steepening bias on core European rates into ECB meeting, given expected technical QE changes, views on program extension.

• Citi (strategists including Harvinder Sian)
  • Expect ECB to extend QE by 6 months while tapering volume of purchases to EU60b per month from EU80b currently; also should drop depo yield floor as a hard reference for bond buying
    • May also increase issue limits above 33%, as this seems least problematic on legal and consensus grounds
  • There’s little consensus on most ECB matters except no hard QE stop; don’t expect hawks to leave empty handed, which should mean a bear steepener; 10y bund target still +0.5%, see a minimum of 10bps steepening from a drop in average maturity of purchases, target German 10s30s at 80bps
  • See selloff as being ultimately short-circuited by periphery widening and given HICP is unlikely to validate ECB projections

• BofAML (strategists including Ralf Preusser)
  • Central scenario for ECB is a 6-month extension of QE at EU80b per month via minor tweaks in the capital key; should be bullish for both bunds and peripherals; expect ECB to raise non-CAC limit to 50% and use EU supra substitutes
  • Remain constructive on European rates, in particular vs the U.S.
  • Still like 30s50s BTP flatteners and the Mar17 FRA-OIS widener as tail-risk hedges in Italy
  • Believe repo issues will be addressed, which suggests being short schatz vs bunds (all vs OIS); remain unconvinced of the participation of EUR breakevens in the global reflation party

• Barclays (strategists including Giuseppe Maraffino)
  • Expect ECB to extend QE beyond March 2017, change technical parameters and possibly add some measures on the securities lending program to ease repo pressures
    • Most likely changes are a substitution option for Germany, removal of depo yield floor, relaxation of the issue share for non-CAC bonds
    • These changes would likely be perceived as bullish for bonds, while the substitution option could be bearish for the ultra long-end
  • Core collateral squeeze will lead ECB to announce some measures to alleviate pressure in repo market, expect conditions of securities lending program to be eased
    • That wouldn’t address the issue of the sharp drop in core collateral availability; expect richening pressure to continue
  • Maintain 10s30s Ireland steepener, long March bund ASW vs Eonia, long 5y5y forward Italy versus Spain, and long 5s10s15s Italy and France

• Deutsche Bank (strategists including Francis Yared)
  • Expect ECB to maintain the current pace of QE, extend by 6 months (with flexibility provided by the reference to a “sustained” improvement in inflation)
  • ECB will partially remove the depo-floor constraint, could also possibly increase issue limit or be more generous in its provision of repo operations; policy package will result in a “soft taper” for core rates
  • Maintain a strategic bearish bias; enter the ECB meeting with long-end core steepeners and Buxl spread tighteners
    • Rotate the France 10s30s steepener into a Germany 10s30s steepener as France spreads have tightened back

• BNP (strategists including Patrick Jacq)
  • Recent rally has been accompanied by a sharp decline in real yields; lower supply by the end of the year remains a supportive factor for bond markets
    • The risk of a selloff by the end of the year has increased after the recent rally; this should be accompanied by steepening pressure on curves; hold paid position in 10y swap, keep German 10s30s bund steepener
  • Expect the ECB to extend its quantitative easing from March 2017 for six to nine months, with a cut in monthly purchases from EUR80b to EUR60b and a removal of the deposit-rate constraint; this outcome would result in a selloff led by real yields

(Bloomberg) -- Senate’s banks and justice committees seek to approve expansion of Philippines’ anti-money laundering law to cover gaming companies, internet and ship-based casinos, as well as junket operators, according to a committee report.

• Senate bill also includes real estate, developers, brokers and sales agents, dealers of high-value items like precious stones and art, trust entities and money transfer companies as covered institutions
• Under the bill, cash threshold for covered transactions is at 500,000 pesos and an item is considered high-value if it’s worth over 1m pesos
• Bill also expands powers of Anti-Money Laundering Council by allowing it to subpoena persons and to investigate cases without court order
• NOTE: Philippines Asks Bangladesh for Probe Results on Stolen Millions Link
• NOTE: Philippines Seeks Tighter Scrutiny, Stiffer Penalty After Heist Link