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Daily Briefing - 8 February 2017

Brexit may result in 30,000 jobs and 17 percent or $1.9 trillion of British banking assets moving to other EU countries, according to a new study from Brussels think tank Bruegel. "At a minimum, it is expected that the new EU27-based entities will need to have autonomous boards, full senior management teams, senior account managers and traders, even though much of the back-office might stay in London or elsewhere in the world," researchers led by Andre Sapir said in the report. The Bruegel analysis is considered conservative in its estimates. Ironically, Brussels is now coming under consideration as a new hub for banks fleeing London, as it offers a relatively low cost of living, and locals and expats alike agree that the city has become more cosmopolitan, despite its image as a place where bureaucrats go to ease towards retirement.

Senior bankers gathering in Miami Beach yesterday appeared confident that American bank coffers are now overflowing with excess capital, with most major banks settling in with aggregate capital ratios of 12 percent, up from 5.5 percent during the global financial crisis. Goldman's Lloyd Blankfein and Morgan Stanley's CFO Jonathan Pruzan told a conference that they were inclined to start returning excess capital to shareholders. "But many banks are now operating with capital well in excess of the minimums laid down by global regulators and the Fed. Citigroup has the most, at $29.1bn, while Bank of America and JPMorgan Chase have $21.2bn and $19.7bn, respectively, according to analysts at Morgan Stanley," writes the Financial Times. "All told, the 18 biggest banks have $127.3bn between them." There's a sense now that banks are seeing an opportunity to push back against what they regard as unduly harsh stress-tests, with former Goldman executive Gary Cohn leading the charge. Mr Trump did after all promise to reform Wall Street. It's now looking increasingly like Wall Street that's writing the rules.

"No customer is too small, no transaction too insignificant, and no deposit too little." That's the motto of India Post Payments Bank, which started business on 30 January 2017 after following Airtel Payments Bank to become the second payments bank to open its doors. The payments bank initiative is a major plank of India's push towards financial inclusion, with customers of payment banks limited to deposits of around $1,500. India Post runs a network of 155,000 branches, with about 90 percent of those branches located in rural areas — opening up a network that banks could not even contemplate. Along with the branch network, the bank plans to issue postmen with digital devices, thus creating a giant roving mobile bank network.

Also opening new outlets is Bank of America: "Like many US banks in recent years, Bank of America has been reducing its overall branch count to cut costs even as it opens new branches in select markets," writes Dan Freed at Reuters. "New branches are typically smaller, employ more technology, and are aimed at selling mortgages, credit cards and auto loans rather than simple transactions such as cashing checks." But BofA is now going a step further and opening unstaffed branches, with fully automated branches opening in Minneapolis and Denver, both "relatively new markets" for the bank's consumer business. Welcome to the future!

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