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Home » Daily Briefing » 08 July 2019

08 July 2019

In a final effort to kill its zombie investment bank, Deutsche is announcing huge layoffs of up to 18,000 people over the next three years, and there's no talk about replacing them with robots either. Instead Deutsche will completely exit the equities business, and head of the investment bank Garth Richie agreed to step down last Friday. London is Deutsche's biggest centre of trading. Deutsche Bank shares momentarily perked up though Deutsche Bank expects a loss this year, on top of three out of four previous years of losses. "This is a restart for Deutsche Bank... In refocusing the bank around our clients, we are returning to our roots and to what once made us one of the leading banks in the world," said chief executive Christian Sewing. "Deutsche Bank has been through a difficult period over the past decade, but with this new strategy in place we now have every reason to look forward with confidence and optimism," said chairman Paul Achleitner. One of Deutsche's problem over several years is its limited grasp of what strategy means. Less than three months ago, Mr Achleitner said that the problem was not strategy but execution. Perhaps Mr Sewing's promise to focus on clients is real. But is that Deutsche's new strategy?

In Germany's strangely sclerotic banking system, people love cash, an issue that also plays out in Japan. Companies such as ecommerce giant Rakuten are nudging customers away from cash, which still makes up 80 percent of transactions, in favour of QR codes, which were actually a Japanese invention back in the 1990s. Rakuten's trial of QR code payments at sports games have been a success, and Japanese people are getting used to QR code payments via Chinese tourism, but not everyone is convinced it will work or make shoppers spend more. "People say shoppers spend more when they use QR codes, but I don't think this will happen in my shop," Tomoko Yokoyama, 50, who runs a Tokyo tennis shop, said as she re-strung a racket. "I have to pay fees on every purchase, so it is the same as selling goods at a discount," she added. "That would be a disaster."

Reading between the lines of the FT's coverage of Libra, we note that not a single banker will publicly comment on the project. An ING executive said the bank had been approached by Facebook and gave a 'polite but firm no', and most bank executives pointed to regulatory obstacles to the Libra project. "A senior executive at a third large US bank said he did not believe banks would have to lobby very hard to ensure that Libra attracts the same know-your-customer and anti-money laundering scrutiny as traditional payments networks, which will heap costs on the project. 'If this thing has the scale of 2bn people who can move money around outside of the financial system (without AML/KYC), it makes a mockery of the system,' he said. 'We won't have to persuade them in Washington. Regulators are at it, they'll make them lift to the same standards as everyone else'." But banks don't seem to understand that Facebook's KYC is on a level that would scare the living daylights out of its users if they knew how much Facebook knows about them. Readers should recall that the current global AML systems were put in place in the wake of the 2001 attacks on the White House and World Trade Centre, as a rapid response to the outcry for anti-terrorist legislation and are hardly worth the paper they are written on.

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