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Daily briefing - 7 October 2019

HSBC's interim chief executive Noel Quinn is pushing through plans to radically cut the bank's workforce, according to reports in the Financial Times. Irish-born Mr Quinn was brought into replace John Flint, after the HSBC board decided that Mr Flint's 'work-life balance' was causing the bank to lose its focus. Now Mr Quinn is wielding the axe, and unnamed insiders are being sent out to smooth the way and let workers know that highly-paid banking jobs in Europe are about to disappear. "We've known for years that we need to do something about our cost base, the largest component of which is people -- now we are finally grasping the nettle," said one of the people. "There's some very hard modelling going on. We are asking why we have so many people in Europe when we've got double-digit returns in parts of Asia." The fact that HSBC banks around 80 percent of its profits from Asia might explain some of this, though Hong Kong is looking increasingly dicey and China is unlikely to back off completely in the face of umbrella-wielding protesters. Reports of money leaving Hong Kong by the boatload may prove to be exaggerated.

Revolut and Visa have announced a deal to work together, which will result in the neobank hiring several thousand extra staff as it seeks to expand globally. Revolut has grown its customer numbers to around 8 million, tangling with regulators over compliance as it looks to build to a $20 billion valuation before an initial public offering. Revolut founder and chief executive Nikolay Storonsky told Reuters that Revolut's average customer "holds around 1,000 euros in their account, giving a total deposit balance of around 8 billion euros ($8.74 billion) currently". That makes it, in Reuters' eyes, "a minnow compared to global banking giants like HSBC and JPMorgan with trillion-dollar-plus deposit totals." But, along with its peers, Reuters reports, Revolut has shocked incumbent banks into upping their digital game, as customers flock to Fintechs with their slicker apps, money management tools and attractive offers on foreign exchange. We have observed at Lafferty Group that getting deals from Mastercard and Visa is critical for neobanks that have no branches. Do Mastercard and Visa know exactly what they are doing? We are not yet convinced.

Moving fast and breaking things was an early mantra at Facebook and it's still part of the company DNA. Facebook's headlong rush into banking without talking to regulators has alarmed central banks and private partners alike, and on Friday PayPal announced that it was putting participation in Libra on the long finger. David Marcus, who is in charge of the Libra project, is former president of PayPal, but this setback won't stop Libra for long. The first board meeting is due to take place in Geneva in the middle of this month, and the thirty or so initial partners are expected to put their money on the table, stumping up ten million dollars apiece to be part of the first rollout of the project. "Brussels wants Facebook to explain how the Libra project will handle money laundering and counter-terrorist financing rules and to ensure it minimises the risks of customers using the digital currency for tax evasion." ECB bankers are filling up financial pages simpering about Libra's threat to the integrity of Europe's anti-money laundering and anti-terrorist financing laws, while the major European banks continue to burn through funds as they pay out enormous fines for money laundering. There's no other way to say this: Libra and the ECB deserve one another.

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