During a recent Senate Banking Committee hearing, Sen. Elizabeth Warren, (D-MA) doubled down on her criticisms of acting Comptroller of the Currency, Michael Hsu, and the Biden administration over the JPMorgan-First Republic deal. She vowed to reintroduce legislation that would make it harder for large banks to merge. The hearing came only a couple of days after Hsu suggested he was open to "healthy" bank M&A.
Crypto has been on the defensive for most of 2023, but the industry scored a victory of sorts recently when a U.S. District Judge agreed with Ripple Labs' argument that half of its sales of its XRP cryptocurrency did not constitute an illegal security offering. This decision could enable other crypto firms to make similar arguments to the SEC. The judge did not hand Ripple a complete victory, however, saying the other half of Ripple's offerings, valued at approximately $728 million, did constitute an illegal sale of securities. But it's far from over and part of the case is still headed to trial.
Bank of America opened accounts without customers' knowledge or authorization, engaged in a "double-dipping scheme" to extract higher overdraft fees from customers, and withheld perks from customers of credit cards, according to the OCC and CFPB, which levied $150 million in fines against the bank. Additionally, the CFPB is forcing BofA to repay customers more than $100 million for what it says are "repeat offenses." The practices were discovered in 2022 following an industrywide investigation into so-called "junk fees" ordered by the Biden Administration.
Fed Vice Chair Michael Barr recently outlined steps to bolster banks' capital buffers he said would boost the resilience of the banking system. They include lowering the asset threshold for capital rules, stress testing, and debt requirements from $700 billion banks to $100 billion banks. (Read key nine takeaways from Barr's proposed changes here.) The federal banking regulators are behind Barr's proposals, but they lack champions in Congress, Banker reported.
Earnings season is underway, and while concerns about failures have faded for the time being, higher funding costs are expected to weigh on banks' bottom lines. Banks are also expected to report on how higher interest rates are affecting borrowers. Analysts also project the six largest U.S. banks to have put aside some $7.6 billion for bad loans, double the amount from the same quarter last year.
Forty-seven percent of all new checking accounts opened so far in 2023 were opened at digital banks or fintechs according to Cornerstone Advisors. This represents an 11% increase from 2020. New checking accounts opened at community banks were flat over the same period, while the share of checking accounts opened at big banks and regional banks declined.
FedNow, the Federal Reserve’s new system that aims to enable 24/7, real-time payments in the banking system, is predicted to be boon to consumers and many businesses, but some analysts warn it could rattle banks’ reliance on customer cash, fanning the flames of deposit flight that became the bane of several regional banks this spring.
Deteriorating credit quality due to worsening economic conditions and declining profits may be contributing to insomnia for some community bank execs, per American Banker. This is according to the Conference of State Bank Supervisors' most recent sentiment index for community banks, which fell 10 points quarter over quarter. Lenders and investors had warned of this one-two punch to the gut ahead of the second-quarter earnings season that gets underway this month.
To avoid rapid outflows during periods of turmoil, the SEC changed the rules for money market funds recently for the third time in 15 years. Certain funds used by institutional investors will now be required to impose fees on daily net redemptions of more than 5% of net assets. Not included as part of the final rule was a swing-pricing proposal focused on preventing dilution during periods of turmoil, which the industry had opposed.