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John Tyson
CFO/SVP
Altamaha Bank & Trust Company
Vidalia, GA
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Original Message:
Sent: 06-10-2021 14:52
From: Barb Rehm
Subject: Weekly News Roundup
Did you see the "ring of fire" eclipse? Did you know the world got a fifth ocean this week? Keep reading for news more directly related to banking! I'm trying something a little different today, digging deeper into a few topics as well as providing links at the end to stories I think you'll find interesting. Please let me know if you like this format or would prefer we stick with the wider-and-shorter formula. Thanks for reading, and please check out the new Peer Intelligence homepage!
We're going to start where Tuesday Topic left off, talking about central bank digital currencies (CBDC). Senate Banking's economic policy subcommittee held a hearing on Wednesday to explore the pros and cons of the government creating a digital dollar. Subcommittee Chair Sen. Elizabeth Warren (Mass.) favored a CBDC as a solution to the "substantial problems with the current payments system," mainly revolving around efficiency and access. But the subcommittee's ranking Republican, Sen. John Kennedy (La.) was less convinced, asking whether "the juice is worth the squeeze" in terms of cost, security, and impact on our current payments system. A CBDC could drain deposits from commercial banks and "fundamentally change our current banking system," Sen. Kennedy said.
The ABA joined the debate this week by issuing a 14-page statement in conjunction with the hearing. It is excellent – detailed, thoughtful, and frankly darn convincing that policymakers need to proceed carefully. "The reality is that the dollar is largely digital today," the ABA said. "The proposed benefits of CBDCs to international competitiveness and financial inclusion are theoretical, difficult to measure, and may be elusive, while the negative consequences for monetary policy, financial stability, financial intermediation, the payments system, and the customers and communities that banks serve could be severe." The ABA Banking Journal did a story on the statement and concludes "it does not appear that a CBDC is well-positioned to enhance underlying financial capabilities or extend the reach of financial services in well-developed markets."
The Bank Policy Institute issued a research paper on CBDC back in April that goes even deeper, exploring the costs and benefits of adoption – and grave implications for our current payments systems. I recommend the BPI paper for anyone who wants to better understand the various approaches and designs of the CBDCs under consideration as well as the motivations behind adoption. "Issuance of a CBDC in the United States would be a larger policy change for our society than practically any legislation in living memory," BPI concludes. "Its merits therefore should be evaluated with commensurate scrutiny by serious people." I admire the work ABA and BPI are doing, but it does appear that problems with private digital currencies like bitcoin and international competition, especially from China, will push U.S. policymakers to get our government involved.
Two related links:
"Pipeline Investigation Upends Idea That Bitcoin Is Untraceable"
This week's revelation that federal officials recovered most of the Bitcoin ransom paid in the recent Colonial Pipeline attack exposed a misconception: cryptocurrencies are not as hard to track as cybercriminals think, The New York Times reports.
"U.S. IRS Chief Asks Congress for Authority to Collect Cryptocurrency Transfer Data"
Because the $2 trillion private digital currency market is hard to track, the IRS is asking Congress for the right to require reporting of transactions above $10,000, Reuters reports.
Our second topic is returning employees to your offices. Bloomberg reports on Accenture research showing 80% of North American financial services executives want their workers back in the office for 4-5 days a week as soon as possible to preserve company culture and smooth onboarding for new workers. But many employees, especially female employees, want to retain at least some of the flexibility of working from home. How is your institution approaching the return to office work? Are you taking the soft approach – come back when you're ready – or setting a date like Goldman Sachs who expects folks back in the office by June 14? Or maybe your bank is trying something in between? Regardless, reading this Harvard Business Review piece should help you approach your workforce with some empathy for those who may be reluctant to return to the office. The story is aimed at workers, but you can easily adapt it for use as a manager talking with direct reports. It suggests four questions to probe and guides you through the various factors to consider with each.
Next, I want to take a look at cybercrime. Fox Business reports on a TransUnion study showing the financial services industry is seeing WAY more than its fair share of cyber fraud. Interestingly one of the faster growing sources of fraud against banks is customers refusing to pay debts by falsely alleging they are a victim of identity theft. It's no surprise then that a related story in American Banker notes that globally the cost of complying with anti-financial crime rules soared 18% more last year, to $214 billion. Most of the added expense went to staffing and training.
Finally, let's talk about liquidity. The news is full of stories about how much cash is sloshing around including this one in Reuters, "Analysis: A 'Tsunami' of Cash is Driving Rates Ever Lower. What Will the Fed Do?", that speculates the Fed may need to lift rates. Or this one in The Wall Street Journal, "Banks to Companies: No More Deposits, Please", about banks encouraging corporate clients to spend excess cash or move it elsewhere. And finally this one, also from Reuters, "U.S. Fed's Reverse Repo Volume Surges to Record Half a Trillion Dollars," tracking continued reverse repo momentum.
Two more headlines you might enjoy:
"Maryland's Banks: Unsung Heroes?"
In the Baltimore Sun op-ed, Anirban Basu, the chief economist of the Maryland Banker's Association, recounts all the ways Maryland banks helped their customers and communities through the pandemic. It's a brilliant idea to counter negative stories about the industry and one that banks in every state could take.
"Walking with Herb"
New Mexican community banker Joe Bullock wrote a book that's been turned into a movie, "Walking with Herb." I haven't watched it yet, but the trailer gave me goose bumps. It's a story about loss, golf, and faith.
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Barb Rehm
Senior Managing Director
IntraFi Network
Arlington VA
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