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Morning Coffee: Banking regulator scrutinizes WhatsApp and iPhone messages. The new fintech M&A team that’s hiring.

Last year’s Credit Suisse spying scandal just won’t seem to go away.  The Swiss financial regulator Finma has now launched its own investigation into the affair, overlapping with the ongoing case at the Zurich prosecutor’s office. 

It’s not obvious that there will be any particularly severe consequences, since Finma doesn’t have the power to levy fines and the individuals involved have all long since left the bank. (In many ways, the most hurtful aspect for Credit Suisse may be to see itself referred to as “Switzerland’s Number 2 bank” in all of the news coverage).  But nonetheless, smart people in the industry will be paying attention to what happens, because this is likely to be the first time that a major financial regulator takes a really serious look at the question of messaging apps.

The Bloomberg story quotes CEO Thomas Gottstein explaining that the investigation will cover “how we communicate in the bank” and specifically refers to iPhone and WhatsApp messaging.  But it was established last year by Credit Suisse’s own internal inquiry that a lot of messages might have been exchanged over “Threema”, a Swiss startup app which was apparently impossible to decrypt.  Earlier in the year, it seemed that Finma was asking for Threema messages and the bank had to make a statement that its chairman “has never used Threema in a business context”.  People at the bank who don’t have that app installed on their phone might be breathing a little bit easier than people who do.

But in a wider context, as Mr Gottstein says, the probe could set a standard for an industry which seems to have finally got to grips with the fact that Bloomberg chat isn’t confidential and consequently moved on to newer information channels.  As and when Finma reports, it is quite likely to make some general points about issues of relevance, as well as specific findings about individual behaviour.  And that might end up creating, de facto and by precedent, a new understanding about where the line is drawn on messaging apps.  Up until now, supervisors have been obviously uncomfortable (for many of the same reasons as bank managements) but have tended to step back and make general statements about principles and governance rather than declaring specific apps out of bounds for bankers, or demanding access to decrypted backups or anything that would be difficult to provide or tread on the toes of the data privacy lobby.

That’s led to an uncomfortably ambiguous position, in which hardly anything is specifically banned and so enforcement of policies is difficult.  It’s also meant that messaging apps have got further into the normal life of banking than might be comfortable – WhatsApp and WeChat are both integrated into the Symphony messaging platform, for example.  If there ends up being a global regulatory standard, then it’s quite likely that a lot of current practice could end up falling on the wrong side of it, leaving banks and bankers scrambling to get themselves back into compliance.  It’s hard to shake the feelings that the long term consequences of an argument over pine trees might not be finished yet.

Elsewhere, if you’re an ambitious young FIG banker getting bored of hanging around waiting for deal flow to pick up again, why not apply for a job where you can make your own luck?  It’s been expected for a while that the fintech payments sector is ripe for consolidation, as bigger and more successful players provide a graceful exit for the backers of the also-rans, while building up their own market share.  Now it appears that Revolut wants to hire up to four bankers for an internal M&A team, rather than paying out multiple rounds of transaction fees to the Street as it begins to roll up the European sector.  It’s highly likely that similar opportunities will spring up in the US and Asia too, as the fintech industry is at a similar state of maturity and ripeness.

As a career move, it’s going to appeal to risk takers.  The people who get these jobs will have a concentrated round of deals, with a unique client-side perspective and more hands-on action than anyone at a similar level of seniority is likely to be given at an investment bank.  On the other hand, it doesn’t feel like a job for life – it’s just about possible that Revolut will still have a big internal M&A team in 2030, but more likely that once the consolidation is complete, the team will be looking to move back to banking or on to private equity.

Meanwhile …

Other 2019 scandals that haven’t stopped giving – a Florida wealth manager and private equity exec has become the 57th person to be charged in the “Varsity Blues” college admissions bribery investigation. (WSJ)

Between 250 and 300 bankers are going to leave Credit Suisse’s London office in the fullness of time, some of them moving to the new banking hub in Madrid. (Bloomberg)

“Uncertainty is the enemy of the IPO and the friend of a $5bn SPAC”, according to Bill Ackman, who remains undaunted despite having been turned down by AirBNB after talks on a possible acquisition ended. (FT)

Disagreeing with practically every smallcap brokerage and investor in the world, the European Securities and Markets Authority has decided that MiFID research unbundling has been a success, and that the overall quality of equity research in Europe is improving. (Bloomberg Law)

Latest casualty of the cost-cutting drive at Wells Fargo are the museums of its stagecoach history, complete with Wild West memorabilia, golden nuggets and Native American artefacts. (WSJ)

What’s worse than making a fat finger error? Making one when you’re managing the account of the chairman of company whose stock you accidentally sold.  There’s a trader at a brokerage in Guangdong writing a long apology letter right now. (Bloomberg)

Even if you’re wearing a mask, human beings are very good at reading emotions from tiny flickering eye movements; possible relevance to the corporate access profession as management meetings might still be useful. (The Conversation)

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Photo by Gilles Lambert on Unsplash

AUTHORDaniel Davies Insider Comment

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