Last week, U.S. senators took turns blasting SVB and Signature executives during a hearing that focused largely on compensation and accountability. Sen. Bob Menendez, D-NJ, specifically called out a Bloomberg report that showed SVB, Signature, and First Republic were the three highest-paying banks in the country. Now more details on First Republic's pay practices have come to light. According to a recently published article, the bank was paying dozens of nonexecutive employees more than $10 million annually—including one who earned a whopping $35 million in 2022. Which was even more than Jamie Dimon (now head of what's left of First Republic) earned last year.
The battle over credit card late fees is just beginning, and it could get even nastier, writes American Banker's Kate Berry. CFPB Director Rohit Chopra admonished the Fed for creating a "loophole" that allows credit card issuers to raise fees to keep pace with inflation, and he aims to cut $9 billion per year out of the approximately $12 billion in late fees banks and credit unions currently collect. Trade groups have threatened to sue the bureau if a proposal to reduce late fees to just $8 per month is passed in its current form, calling it "misguided," "upsetting," and "an assault" on community banks and CUs.
The notion that banks can bolster margins and hedge underwater bond and loan portfolios by lagging Fed rate increases has been upended by the recent banking turmoil, The Wall Street Journal recently wrote. It's also raising questions about whether the oft-cited "economic value of equity" is a useful metric for accessing exposure to interest rate risk.
Even if the government manages to resolve the debt-ceiling standoff and avoid a catastrophic default, more cash might flood out of banks and into U.S. Treasury coffers, according to a recent article in The Wall Street Journal. "We still see the potential for downside risks to risk assets and to the ailing banking sector due to a flood of upcoming Treasury issuance after a deal is struck," writes Jefferies U.S. Economist Thomas Simons.
According to a BBC journalist, new evidence shows that central banks around the world engaged in "large-scale" manipulation of the Libor and Euribor rates to restore calm during the financial crisis. And regulators not only knew about it, they covered it up.
As regulators rethink the bank capital framework, they should question if any asset is without risk, writes American Banker Washington Bureau Chief John Heltman. "If you designate almost anything as 'riskless,' before too long market concentration will create risk where there was no risk before," he argues. "It's a kind of Murphy's Law for risk weighting-when you depend on a single thing to bear no risk, eventually it will."
The recent failures of several regional banks are likely to accelerate the closing of local bank branches as industry consolidation gains steam. “Branches will close” according to one senior researcher at the National Community Reinvestment Coalition (NCRC), an amalgamation of grassroots organizations dedicated to creating and extending wealth in underserved neighborhoods. “This could potentially exacerbate it,” he added “especially for those who feel better connected to a smaller bank rather than a much bigger bank.”
It's not doom and gloom for every institution-many small and midsize banks have stable deposit bases and operate in high-growth areas, and they're quite excited about their future prospects, recessionary fears notwithstanding, according to a recent article in American Banker.
Increased labor costs and related challenges such as talent acquisition have affected all industries, including banks. Additionally, banks are facing potential deteriorating credit quality, growth challenges amid tightening credit standards and increased scrutiny from regulators and auditors. With banks facing numerous economic headwinds, one expert suggests better managing credit risk by focusing on key aspects of lending, portfolio management, and credit-quality reviews.