Three of America’s biggest banks just watched $84.5 billion worth of deposits disappear in a single quarter. JPMorgan Chase, Wells Fargo and Citi all recorded an outflow of deposits in Q3, according to each bank’s most recent reports. JPMorgan Chase’s new Q3 earnings report details a $31 billion decrease in deposits from $2.387 trillion to […]
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The bank deposit insurer should assess the sufficiency of its risk mitigation measures and then provide them in a more organized manner, the inspector general found.
The Inspector General’s Office (OIG) of the Federal Deposit Insurance Corporation (FDIC), the independent United States government body that provides deposit insurance to commercial and savings banks, has published an evaluation report on the corporation’s crypto asset risk strategy. A redacted version of the report has been released to the public.
The FDIC adopted a “bottom up” approach to crypto risk in early 2022, the OIG said. That approach consists of understanding supervised institutions’ crypto-related activities, providing case-by-case supervisory feedback and “providing broader industry guidance on an interagency basis.”
To understand institutions’ crypto activities, the FDIC issued a letter asking them about it. As of January 2023, 96 institutions had signaled their interest in or provided current activities with crypto assets. The number of institutions that received feedback from the FDIC was blacked out. Some had been advised to pause crypto-related activity until the FDIC had made its assessment, but that number was also covered up.
Related: Signature Bank failed to understand risks associated with crypto — FDIC chair
The OIG found that the FDIC started to develop strategies concerning risks associated with crypto assets, but it was incomplete:
“However, the Agency has not assessed the significance and potential impact of the risks. Specifically, the FDIC has not yet completed a risk assessment to determine whether the Agency can sufficiently address crypto-asset-related risks through actions such as issuing guidance to supervised institutions.”
According to the OIG, the FDIC should document its risk assessments, assess their significance and develop mitigation strategies such as guidance. Moreover, the process for providing feedback in response to its letter was unclear. There is no timeframe for reviews or clear end to the process, the OIG said. The OIG made two recommendations to resolve those situations.
FDIC Strategies Related to Crypto-Asset Risks: FDIC has started to develop & implement strategies to address crypto-asset risks; hasn’t assessed significance & potential impact of risks, and feedback process to supervised banks is unclear. 2 recs. https://t.co/GRce5uG1By pic.twitter.com/7rmRGYJwk3
— FDIC OIG (@FDIC_OIG) October 18, 2023
The OIG classified its recommendations as not significant. It noted that the FDIC had already concurred with the recommendations and planned to complete corrective actions by the end of January 2024.
Inspector generals were introduced at U.S. federal agencies in 1978. They provide independent audits, evaluations and investigations.
Magazine: Cleaning up crypto: How much enforcement is too much?
The proposed regulations are currently open to the public for comments, and if approved, they will come into effect by Jan. 1, 2025.
The Basel Committee on Banking Supervision of the Bank for International Settlements (BIS) released a consultation paper on Oct. 17, proposing to make it compulsory for banks to disclose their crypto exposure.
The Basel Committee comprises central banks and financial authorities from 28 jurisdictions and is a forum for regulatory cooperation on banking supervisory matters. The latest consultation paper is based on the disclosure guidelines in the final prudential standard on how banks should handle their exposure to crypto assets released in December 2022.
The consultation paper aims to set a standardized “disclosure table and set of templates for banks’ crypto-asset exposures,” with a proposed implementation date of Jan. 1, 2025. The Basel Committee has opened the proposal for public comment until Jan. 31, 2024, after which the results will be published on its website.
Under the new proposed regulations, banks would be required to provide quantitative data on exposures to crypto assets and the corresponding capital and liquidity requirements. Banks would also be required to offer qualitative data on their activities linked to cryptocurrencies.
Additionally, banks would be required to offer information on the accounting classifications of their exposure to crypto assets and liabilities. In its proposal, the committee claimed that using a uniform disclosure format will encourage the application of market discipline and lessen information asymmetry between banks and market participants.
Related: Ripple joins BIS cross-border payments task force
The committee also reviewed crypto assets and bank exposure in June. At the time, the committee didn’t delve deeply into the topic, mentioning only that it was focusing on permissionless blockchains and the eligibility criteria for “Group 1” stablecoins.
The BIS has been actively involved in crypto consultations and examining the regulatory aspect of decentralized technology. Recently, the BIS and a handful of European central banks published details of a concept to develop a system to track international flows of cryptocurrencies.
Magazine: Blockchain detectives: Mt. Gox collapse saw birth of Chainalysis
Chinese authorities are moving to prevent further financial contagion as a bank run unfolds in one of its provinces. Thousands of customers lined up to withdraw their money amid worries the Bank of Cangzhou is at risk of going under, CNN reports, citing state-run Chinese media. The regional bank lent hundreds of millions of dollars […]
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To date, Irish authorities managed to recover approximately 4 million euros of the 20 million euros lost in banking scams since January 2023.
Fraudsters in Ireland prefer targeting traditional banking customers instead of cryptocurrency investors amid a two-year-long bear market.
The frequency of cryptocurrency scams is often directly proportional to the hype and profits around the ecosystem at a given time. It appears that the ongoing crypto bear market has helped eradicate at least some of the bad actors, including scams and businesses, while it has largely retained serious investors who believe in due diligence.
The resultant difficulty in targeting crypto investors has led scammers in Ireland to focus on banking customers. According to the Irish Independent, in 2023, Irish people lost nearly 20 million euros ($21.8 million) to scammers posing as banking officials. A source revealed:
“In the last few months, what has become more and more common is that victims have been contacted often by phone or by email by fraudsters who are saying they work for legitimate, high-profile British banks or trading houses.”
Fraudsters mimicking traditional banks approach unwary customers through phone calls and emails. The Irish police are currently investigating numerous frauds of a similar nature and have been successful in retrieving 2 million euros ($2.1 million) from one of the scammers.
Irish authorities have recovered approximately 4 million euros of the 20 million euros lost to banking scams since January 2023. Detectives confirmed with the Irish Independent that crypto scams are no longer the dominant form of investment scams despite accounting for 95% of scams at its peak.
Instead of plotting complex crypto scams, fraudsters mimic banking websites and brochures to convince victims to part with their savings. Detectives have identified well over 20 bank accounts in the United Kingdom being used by the fraudsters but are yet to dismantle the operation.
The Bank of Ireland warned customers to be suspicious of banking employees pressurizing them into acting quickly and without thinking — a technique commonly used by scammers to dupe investors.
Related: Binance users in Hong Kong lose $450K in wave of fraud texts: HK police
While Ireland investigates the rising scams against banking customers, an Australian bank recently claimed that 40% of scams “touch” crypto.
During a panel at the Australian Blockchain Week on June 26, Sophie Gilder, managing director of blockchain and digital assets at Commonwealth Bank, said:
“One in three of the dollars that are scammed from Australians touch crypto, one in three. So it’s the single largest lever that we have to reduce this impact on our customers.”
Nigel Dobson, banking services portfolio lead at ANZ, referred to data from the Australian Financial Crimes Exchange suggesting that the figure may be even higher, at 40%.
Magazine: Beyond crypto: Zero-knowledge proofs show potential from voting to finance
Engineers are investigating a banking glitch that triggered a total shutdown of billions upon billions of dollars in bank transfers in Japan. The glitch began on Tuesday, leaving more than one million customers unable to move their money and affecting banking giants including JPMorgan Chase, MUFG and Mitsubishi Trust. The system breakdown halted a staggering […]
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Wells Fargo says it did nothing wrong when freezing $204,000 in a customer’s account – even though it’s partially relenting to lawyers who claim otherwise. The banking giant was hit with a lawsuit after a North Carolina-based client named Ethan Parker alleged he was denied access to his money with “little to no explanation.” Despite […]
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Billionaire investor Paul Tudor Jones says he is bearish on U.S. stocks, and bullish on Bitcoin and gold.
Investing legend Paul Tudor Jones has revealed that he’s bearish on stocks and bullish on gold and Bitcoin (BTC).
The two main reasons he cites are the potential for an escalation of the conflict between Israel and Hamas, and subpar fiscal conditions in the United States. While an inverted yield curve wasn’t included in Tudor’s comments, it’s yet another important factor for investors to consider.
In a recent interview with CNBC, Jones mentioned the factors he’s keeping an eye on with regard to the Israel-Palestine conflict before deciding that market uncertainty has been reduced. His general thesis is that if things escalate further, a risk-off sentiment could prevail in financial markets.
Despite the potential for geopolitical tensions escalating in the near-term, the major U.S. indexes have all posted gains for the first two trading days of this week. If Jones is right, this rally will likely be short-lived.
One of the greatest predictors of recession historically has been the yield curve. Every recession since 1955 has been preceded by an inversion of the curve between the yields of the 2-year and 10-year Treasury Bonds.
In July, the 2s/10s yield curve for US Treasuries hit a low of 109.5 basis points (BPS). This level had not been seen since 1981. While this inversion has since steepened, things still look bad from the perspective of shorter duration Treasuries.
The 1-month and 3-month US T-bills are currently yielding close to 5.5%, while the 2-year note is yielding close to 4.96%. The 10-year is yielding 4.65%, meaning the 2s/10s curve is inverted by 31 BPS.
A flatter yield curve compresses margins for banks because it limits their ability to borrow cash at lower rates while lending at higher rates, which can lead to restricted lending activity and a resulting economic slowdown. It also means that investors are less optimistic about the near-term future of the economy, as they sell shorter duration debt, causing yields to rise.
See related: Binance Freezes Hamas Linked Accounts at Israeli Request
The Federal Reserve's attempt to fight inflation by raising rates at the fastest pace in modern history has also played a role. Higher rates create additional stress on the banking system, which has seen 3 of the 4 largest collapses in U.S. history this year alone with the failures of Signature Bank, First Republic Bank, and Silicon Valley Bank.
Some market observers speculate that the Fed will have to begin lowering rates as soon as early 2024 to prevent further economic fallout, even if inflation has not come down to the Fed’s desired level.
Easier monetary policy and its corresponding liquidity boost tends to be bullish for crypto markets. If rates do fall going into the 2024 Bitcoin halving cycle, the stage could be set for significant market moves.
Amidst all this chaos, gold and BTC have remained resilient.
BTC has fallen 2% in the last two trading days, being flat over the last 5 days, while gold is up 2% during the same time.
Paul Tudor Jones summarized his position on gold and BTC, saying:
“I can’t love stocks,” he said, “but I love bitcoin and gold.”
The billionaire has said on the record that he maintains a 5% allocation to BTC and he sees gold and BTC as being safe haven bids during uncertain times. Tudor first announced that he made a 1% allocation to BTC in May of 2020 during the COVID pandemic lockdowns.
All things considered, Paul Tudor Jones could be right. Time will tell if his bearish call for equities plays out, or if risk-on sentiment somehow prevails in spite of recent events.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
A business owner in Southwest Florida is searching for answers after hundreds of thousands of dollars vanished from her bank account. Tiffany Allen says $270,000 was initially stolen from her family’s Truist Bank business account in five separate unauthorized transfers, reports the CBS-affiliated news station WINK. More than six months later, however, the bank has […]
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A Tennessean woman says her bank has abruptly frozen tens of thousands of dollars in her account – even after she took additional steps to prove her identity and verify the source of her funds. Torrie Jackson says she and her husband received more than $68,000 in back taxes from the IRS earlier this year, […]
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