That is why the Consumer Bankers Association and its member institutions have been growing increasingly concerned as new nonbank financial institutions enter the deposit space. It is not out of a fear of competition — after all there are more than 5,000 banks across the country, so competition is something banks are well prepared for and accustomed to. What is a concern, however, is the differences in protections these accounts offer consumers. We are concerned promoting “insured” accounts by nonbanks and FinTechs' could leave consumers with the false impression these accounts are just as safe as those in the well-regulated, FDIC-insured banking industry. Just last week, Robinhood Financial, a large non-bank financial service company, introduced its take on the traditional bank account. The new offering, Robinhood Checking & Savings, promised a 3% interest rate. Robinhood pitched the service to its roughly six million customers as being akin to a traditional checking or savings account with debit cards and ATM access. The marketing material used by Robinhood described the product as a traditional banking product.
FDIC Board Member Martin Gruenberg this week made clear that relief language in S. 2155 regarding the Volcker rule is intended for community banks – not all banks regardless of asset size as some have argued. Gruenberg's conclusion on the intent of the language supports NAFCU's view, which was shared with the FDIC and other bank regulators earlier this month. "There has been some discussion that the new statute can be read in a way that would allow any bank, regardless of asset size, to be exempt from the Volcker Rule if its trading assets and liabilities are five percent or less of its total consolidated assets … This was not the intent of the new statute as I understand it … I believe it is clear that this statutory exemption … appl[ies] only to banking organizations with $10 billion or less in total consolidated assets and that the limitation on trading assets and liabilities is an additional limitation placed on this defined group of banking organizations," Gruenberg said.
House lawmakers concerned about the possibility of self-dealing and other hidden conflicts of interest in Puerto Rico’s $123 billion bankruptcy introduced a measure yesterday intended to strengthen reporting requirements, after one of the case’s most influential consultants was shown to have an undisclosed stake in Puerto Rico’s debt, the New York Times reported. Representatives put the bipartisan measure forward after the Times reported that the consultant, McKinsey & Company, had bought millions of dollars’ worth of Puerto Rican bonds at a deep discount and had not disclosed that investment. That puts the consulting firm, which is advising a federal oversight board as it leads the island through fiscal reforms and a debt restructuring, in a position to profit from the plans that it is helping to design. “The people of Puerto Rico can’t have faith that this oversight board is putting their interests first if consultants helping implement the restructuring could profit from how much debt service is available under the very fiscal plans they design,” said Representative Nydia M. Velázquez (D-N.Y.), who is the lead sponsor of the bill…
CHARLOTTE, N.C., December 19, 2018 - LendingTree®, the nation’s leading online loan marketplace, today released its survey on how Americans would pay for an emergency expense and how they’ve paid for them in the past. The survey found that more than half of Americans can’t cover a $1,000 emergency with savings. When faced with an emergency expense, tapping savings to pay for it in cash is the most popular strategy. Even so, less than half (48 percent) of Americans would be able to cover an emergency of $1,000 or more out of savings. Older respondents could more easily afford to pay for an emergency expense out of pocket. While just 40 percent of millennials and 42 percent of Gen Xers can handle a $1,000 emergency by tapping their savings, 60 percent of Boomers could do so.
The U.S. and China are planning to hold meetings in January to negotiate a broader truce in their trade wars but are unlikely to have any face-to-face contact before then, according to Treasury Secretary Steven Mnuchin, Bloomberg News reported. Mnuchin said that the two sides had held several phone conversations in recent weeks and were still in the process of planning further formal discussions. “We’re in the process of confirming the logistics of several meetings and we’re determined to make sure that we use the time wisely, to try to resolve this,” Mnuchin said. Both sides are now focused on trying “to document an agreement” by a March 1 deadline for their current tariffs truce to run out. “We expect there will be meetings in January,” he said. Previously the administration hadn’t been specific on the timing of talks.
Banks received a reprieve yesterday from a new accounting rule that requires them to book losses on soured loans more quickly, the Wall Street Journal reported. The Federal Deposit Insurance Corp. approved a measure, proposed in April, that will allow banks to take three years to phase in the impact of the new accounting rule on their regulatory capital. The rule, which publicly traded banks must adopt by 2020, will require lenders to book all expected losses from their loans as soon as the loans are issued, and that could require some banks to significantly boost their loan-loss reserves, which would reduce regulatory capital. The FDIC’s move is separate from a continuing push by some banks for a delay and softening of the rule. In that effort, banks are arguing the need to book loan losses up front will exacerbate any future recession or economic downturn.
As U.S. bank stocks tanked this month over fears of an impending recession, industry executives downplayed concerns to colleagues, analysts and journalists, arguing that the economy is in great shape, Reuters reported. But looking behind headline numbers showing healthy loan books, problems appear to be cropping up in areas such as home-equity lines of credit, commercial real estate and credit cards, according to federal data reviewed by Reuters. Lenders are also starting to cut relationships with customers who seem too risky. All of that suggests U.S. lenders will feel the pain of a recession soon, even if losses are not cropping up quite yet. “We are in somewhat of a goldilocks period of banking,” Andy Schornack, chief executive officer of Flagship Bank Minnesota, told Reuters. “Interest rates are high enough that you can make good money and credit quality is at high enough levels where it’s pretty hard to lose money.” Bank executives acknowledge that the U.S. economy is probably in the final stages of a long recovery from the 2007-09 global financial crisis. But they say that until credit metrics start to deteriorate meaningfully, there is no reason to boost reserves or slash customer financing.
The Federal Housing Administration announced its new loan limits for 2019, and it looks like most of the country will see an increase, HousingWire.com reported. In high-cost areas, the new FHA loan limit ceiling increased to $726,525, up from $679,650 in 2018. The FHA will also increase its floor to $314,827, up from 2018’s $294,515. These new loan limits will be effective for FHA loans assigned on or after January 1, 2019. FHA is required by the National Housing Act, as amended by the Housing and Economic Recovery Act of 2008, to set single-family forward loan limits at 115 percent of median house prices, subject to a floor and a ceiling on the limits. FHA calculates forward mortgage limits by Metropolitan Statistical Area and county.
Almost half of U.S. chief financial officers believe a recession will strike the U.S. economy by the end of 2019, with the tight labor market and growing trade tensions driving economic jitters among corporate America, the Wall Street Journal reported. Additionally, more than 80 percent of U.S. CFOs think a recession will strike by the end of 2020, according to the Duke University/CFO Global Business Outlook survey released Wednesday. “All of the ingredients are in place: a waning expansion that began in June 2009 — almost a decade ago — heightened market volatility, the impact of growth-reducing protectionism, and the ominous flattening of the yield curve which has predicted recessions accurately over the past 50 years,” said Campbell Harvey, a director of the survey. Trouble finding and keeping qualified employees was the executives’ most-cited concern.
The Trump administration’s U.S. Justice Department wants to challenge the power of the Consumer Financial Protection Bureau, but is urging the U.S. Supreme Court to wait to take a case that would not require recently confirmed Justice Brett Kavanaugh to recuse, the National Law Journal reported. In State National Bank of Big Spring v. Mnuchin, the Justice Department said this week that it agrees with the bank’s argument that the restriction on the president’s power to remove the bureau’s director violates the Constitution’s separation of powers. But the issue should be decided by the full court, and that is unlikely in the State National Bank case, the Justice Department told the court. Kavanaugh would have to recuse based on his earlier participation in the case in the U.S. Court of Appeals for the D.C. Circuit, where he wrote a panel opinion reviving the bank’s challenge to the consumer bureau. Kavanaugh, as a D.C. Circuit judge, had long criticized the power of the Obama-era agency, and the Justice Department would likely count on his favorable vote in any case that confronted the independence of the agency’s single-director structure. In the 2016 case PHH v. Consumer Financial Protection Bureau, Kavanaugh, writing for the panel majority, assailed “the concentration of massive, unchecked power in a single director.”