Marcus Goldman Sachs Ceasing Business Due to Overreach

Marcus Goldman Sachs, a 150-year-old financial institution, has announced it's ceasing business operations. The company has been struggling with regulatory issues and declining profits.

The firm's overreach into new markets and products has led to a decline in its traditional business. This shift has resulted in significant financial losses.

Marcus Goldman Sachs has been fined millions of dollars for violating securities laws. The company's failure to comply with regulations has further strained its relationships with investors and clients.

The company's decision to cease business operations is a significant blow to the financial industry.

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Goldman Sachs has closed its Marcus account to new UK savers due to a deluge of deposits during the coronavirus pandemic.

Over 500,000 people have opened accounts with Marcus since its launch in 2018, lured by table-topping interest rates.

The account has seen billions of pounds pour in from households that have slashed their spending during the pandemic, pushing total deposits up to £21bn.

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Goldman Sachs is concerned that if deposits reach £25bn, the Bank of England will require Marcus to become a separate legal entity with its own board and keep the money separate from Goldman Sachs' investment banking arm.

This would add to costs and make it less likely that the bank could offer attractive rates.

Marcus' interest rates were already low, at 1.05% on its online savings account at the point of closure and down from 1.5% at launch in 2018.

The average UK easy account now pays only 0.3% interest, making Marcus' rates seem attractive by comparison.

The volume of cash gushing into Marcus' UK operation made it larger, relative to population size, than even Marcus' homeland US unit, where it has taken $50bn (£39bn) in deposits.

Existing Marcus customers will still be able to manage their accounts and withdraw money as usual.

Goldman Sachs has taken the move to "temporarily" halt new deposits to manage its rate of deposit growth and continue providing great value to its existing customers.

The bank remains committed to expanding its UK retail business in future.

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Marcus, the online savings account from Goldman Sachs, has closed to new business due to a massive influx of deposits from British households during the pandemic. This deluge of cash has pushed total deposits at Marcus up to £21bn, leaving it close to busting regulatory limits.

The Bank of England demands that Marcus hold £25bn in a ringfenced separate financial institution, which would add to costs and make it less likely to offer attractive rates. This would require Marcus to become a separate legal entity with its own board and keep the money separate from Goldman Sachs' investment banking arm.

Goldman Sachs has taken the move to "temporarily" halt new deposits to avoid hitting the £25bn level.

Marcus, the online consumer lending venture launched by Goldman Sachs in 2016, ceased its lending business due to trying to do too much too quickly. This decision was made official by Goldman CEO David Solomon.

The lending business was affected by Goldman's execution, with Solomon conceding that they didn't have the necessary talent to execute their strategy. This lack of execution power led to the decision to wind down the lending business.

Goldman Sachs' original motivation for entering the lending market was to compete with LendingClub, a peer-to-peer lending platform that had shown significant growth. However, this competition ultimately led to Goldman's decision to cease lending.

The Federal Reserve is now investigating Goldman Sachs' use of appropriate safeguards in its Marcus lending division. This investigation adds to the challenges faced by Goldman Sachs in the lending market.

Goldman's decision to cease lending is a sign of the changing landscape of the lending market. The company's inability to execute its strategy effectively led to this decision.

Marcus' lending business was likely affected by the company's expansion into other areas, such as its online savings account. This expansion led to a significant increase in deposits, which may have diverted resources away from the lending business.

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Citi is not a benchmark to follow, as the bank has exited all of its global retail businesses.

Jane Fraser's focus on wealth management at Citi is a notable example of how others have failed in the retail banking space. This is also the case with HSBC, BBVA, and BNP Paribas, which have all exited U.S. consumer businesses.

Disparities in regulation and cultural differences made it harder for these banks to sustain a retail banking business. This is a crucial lesson for anyone considering entering the retail banking space.

Goldman Sachs has also faced challenges in its digital banking division, Marcus. The bank has lost more than $3 billion on the venture.

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Goldman Sachs has sold $1 billion of personal loans from Marcus to Varde Partners, leaving $3.5 billion in the loan portfolio.

The sale of personal loans and fintechs suggests that Goldman Sachs is reorganizing its balance sheet to calm shareholders.

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Goldman Sachs bought fintech GreenSky for $2.2 billion in 2021, which is now up for sale.

To avoid repeating dramatic activities in 2023, Goldman Sachs needs to show that it's sorting out its balance sheet.

President John Waldron warned that equities and fixed-income trading is on track to be down 25% year on year.

Goldman Sachs is expected to take "impairments" on loans made in commercial real estate, as mentioned by Solomon in June.