Federal Reserve Board Governor Michelle Bowman has emphasized the need for clear and consistent guidelines in bank merger processes, stressing the complexity of decisions banks face when submitting applications. Ahead of proposed reforms by the Federal Deposit Insurance Corp. and other regulators, Bowman called for a balanced approach that maintains the banking sector's dynamism without compromising financial stability or transparency. "I imagine bankers contemplating merger transactions will have little capacity to evaluate whether a merger would raise regulatory issues in advance under this open-ended standard," Bowman said.
Information security, IT disruption and third-party risk were ranked as the top three dangers faced by firms in Risk.net's survey of the top 10 operational risks for financial market infrastructures, investors and banks. Hacks at Ion Group and EquiLend reflect the interconnectedness of the top three risks and are driving the industry to look more closely at assets deployed in these spaces.
Banks are evolving their strategies to service the demanding requirements of multi-manager hedge funds like Citadel and Millennium, focusing on automation and tailored services to maintain profitability amid challenging market conditions. This shift comes as these funds, managing a significant portion of the industry's assets, leverage their in-depth trading expertise to pressure banks for tighter pricing.
The Federal Reserve's Bank Term Funding Program ended in mid-March, but usage surged in the first 24 days of this year as banks took advantage of generous borrowing costs, an analysis from Wrightson ICAP shows. "Banks in many districts found the concessionary terms of the program too good to pass up in early January," Wrightson ICAP economist Lou Crandall says. "One-year loans with general collateral requirements and sub-5% rates were an attractive offering."
Goldman Sachs has acquired over 20% of Kennedy Lewis Investment Management, a private credit firm, through its Petershill Partners unit, valuing the investment company at over $1 billion, sources say. The move aims to bolster Goldman's asset-management division and footprint in the alternative investments sector, particularly in private credit, as part of its broader effort to diversify beyond traditional banking and trading services.
AI and its ability to imitate voices and create images could give financial fraudsters additional tools. Financial-services firms are increasingly adding layers of verification to act on behalf of clients and tapping AI to combat deepfakes. "In many cases, the best defense of this generative AI threat is some form of generative AI on the other side," says Bill Cassidy, chief information officer at New York Life.
The European Central Bank has awarded Tradeweb Markets two framework agreements to supply electronic trading platforms to the bloc's central banks for the next four years. The platforms will cover euro-denominated bonds -- including European government bonds, covered bonds and repo -- as well as US treasuries, Japanese government bonds, US dollar- and euro-denominated supranationals, sovereign and agency bonds. Bloomberg was also awarded three framework agreements covering a similar slate of products plus Japanese interest-rate swaps and yen-denominated futures.
In response to last year's bank failures, former Federal Reserve Governors Daniel Tarullo and Jeremy Stein co-authored a paper advocating for adjusted liquidity requirements for banks. Their proposals aim to lower the threshold for full liquidity coverage ratio application and mandate pre-positioning of collateral for uninsured deposits at the Fed's discount window, strategies intended to enhance bank stability and prevent future crises by ensuring immediate liquidity in times of deposit runs.
The UK Accelerated Settlement Taskforce has issued a recommendation for a two-phased approach to T+1. The process would commence with operational changes in 2025 and fully transition by the end of 2027. The report added that the EU and UK should consider a simultaneous adoption if the EU decides to shift to T+1 within a timeframe that complements the UK's plans.
The UK Financial Conduct Authority and Bank of England will launch a joint Digital Services Sandbox which will enable authorized firms to test the use of emerging technologies in securities issuance, trading and settlement. The program will last for five years and will help regulators establish a permanent technology regime for securities markets.
Banks and regulators need to improve information sharing and management and consider their response to cyber events, the European Systemic Risk Board said in a recent statement. "System-wide contingency options and back-up arrangements need further consideration and a careful evaluation of their benefits and potential implications," the ESRB noted, adding it will establish its own views in an upcoming report.
Less than 30% of global jurisdictions have begun regulating the cryptocurrency sector, a situation that the president of the Financial Action Task Force, T. Raja Kumar, calls a "significant loophole" for criminal and terrorist exploitation. A recent FATF report highlighted the urgent need for worldwide regulatory alignment to address the challenges posed by the rapidly evolving crypto market.
Hong Kong's Securities and Futures Commission wants to ensure intermediaries have adequate risk management measures in place if they are planning to distribute or launch tokenized products, said Elizabeth Wong, the SFC's director of licensing and head of fintech. These risks include those pertaining to technology, cybersecurity, data privacy, outages and recovery. Once the SFC is satisfied, intermediaries can launch products without needing authorization for every product launch.
Under T+1, many securities transactions will settle on the next business day following their trade date. SIFMA invites our members to join us, ICI, DTCC and Deloitte for a webinar about this important transition. On April 8, there will be just 50 days left until the US moves to a T+1 settlement. Find out how this transition affects you and learn what financial-services organizations are focusing on between now and May 28 (US) and May 27 (Canada).
In a recent episode of the Clear Street podcast, Word on the (Clear) Street, SIFMA's Tom Price, managing director, Technology, Operations and Business Continuity, sat down with John Oleon, managing director, Clearing & Settlement Operations at Clear Street, and Clear Street's chief operating officer, Andy Volz, for a conversation on the impact of a shortened settlement cycle. Two months out from T+1, this episode covers best practices, collaboration with vendors and counterparties, international implications, regulatory considerations and more.