Fed may change stress test grading; Amex wins

Receiving Wide Coverage ...

Amex prevails: By a 5-4 vote, the Supreme Court upheld American Express’ policy of preventing retailers from offering consumers incentives to pay with cheaper cards, “a major victory for the company that puts its business model on solid legal ground.” The decision “handed a loss to a group of more than a dozen states and the Justice Department, which brought an antitrust challenge” against the credit card company, the Wall Street Journal says.

“The ruling removes a major threat to AmEx after nearly a decade of litigation,” the paper adds. “The ruling is also a setback for the merchants’ broader ambitions to [lower] credit card swipe-fees.” Wall Street Journal, Financial Times, New York Times, American Banker

While the decision at first glance appears to be a victory for Amex over Visa and Mastercard, it could help all three networks “by supporting their relatively high fees in the U.S.” and “further entrench all three in the U.S. payments market,” the Heard on the Street column says. “The losers will be upstarts trying to create new payment systems that don’t use the credit card networks.”

Former Amex CEO Kenneth Chenault and his board get kudos from the Journal “for seeing the case through to victory.” But it had nothing but scorn for the Justice Department’s antitrust division, which received a “sharp rebuke” and an “embarrassing lesson” from the court for bringing a “dubious” antitrust case against the company.

The decision could have wider implications, especially in the tech industry, the Washington Post observes. “Similar to Amex, companies such as Amazon, Facebook and Google operate in two-sided markets: All serve average Internet users on the one hand, while doing business with third-party companies, including independent retailers and advertisers. The Court’s ruling could shield tech platforms from litigation if plaintiffs cannot prove that both sides of a two-sided market are being harmed by the platform’s practices.”

But Big Tech could face antitrust concerns on other fronts, namely the ban by Google, Facebook, Amazon and Microsoft on cryptocurrency ads, which “threaten the fledgling industry’s existence,” Mark Epstein, an antitrust attorney, writes in a Journal op-ed. All four companies offer online or peer-to-peer payment services, which compete against digital exchanges such as Coinbase and Binance. “In effect, four of the eight largest companies in the world control an online-advertising oligopoly and are denying competitors access to these services,” Epstein says.

Big money: Speaking of cryptocurrency, Andreessen Horowitz, the Silicon Valley venture capital firm, said it has raised $300 million to back blockchain and cryptocurrency-related ideas, including investing in digital currencies directly. The firm named Katie Haun, a former DOJ prosecutor, to help manage the fund, becoming the firm’s first female general partner. She said she would help the company “foster responsible innovation and strike the right balance between innovation and regulation.” Wall Street Journal, Financial Times, New York Times

Wall Street Journal

Failure is not an option: The Federal Reserve is moving toward getting rid of pass-or-fail grades on bank stress tests and replacing them with a public capital ratio that the bank must meet. The new grading system, which may go into effect as soon as next year, “reflects the Fed’s uneasiness with surprising bankers and financial markets with bad news” and “demonstrates how Fed officials have grown more comfortable with big banks’ risk-management chops.”

David takes on Goliath: “A handful of upstart advisers are challenging investment banks on turf once thought impenetrable: the $7 billion-a-year business of handling complex stock-related transactions,” the paper reports. “Without underwriting or trading arms, these advisers say they can give unbiased judgment and help clients wrangle a horde of hungry bankers. Their pitch is resonating, especially in Silicon Valley, where finance departments tend to be less robust and more suspicious of Wall Street.”

Financial Times

Welcome aboard: HSBC has hired Ewen Stevenson away from Royal Bank of Scotland to be its chief financial officer, the “first significant management appointment under the bank’s new leadership team.” He will succeed Iain Mackay, who is retiring after eight years on the job. The paper says HSBC paid up to £10.6 million to buy out Stevenson’s unvested bonuses at RBS.

Quotable

“The Supreme Court’s decision is a major victory for consumers and for American Express. It will help to promote competition and innovation in the payments industry.” — An Amex spokesman.