Dec 18, 2019

Six of the biggest U.S. banks have weaknesses in their crisis plans

Illustration: Lazaro Gaimo/Axios Visuals

The Federal Reserve Board and the Federal Deposit Insurance Corporation found shortcomings in the exit strategies — or "living wills" — of six of the eight largest banks in the U.S., it said on Tuesday.

Why it matters: These living wills dictate how big banks handle bankruptcy during financial distress — or a financial crisis. Bank of America and Wells Fargo are among those currently unable to prove that their top decision-makers can confidently act on crisis-level exit strategies.

What the Fed found: The following banks have shortcomings or weaknesses in their ability to reliably produce data needed to execute their living wills in stressed conditions:

  • Bank of America
  • Bank of New York Mellon
  • Citigroup
  • Morgan Stanley
  • State Street
  • Wells Fargo

Yes, but: The Federal Reserve did not find shortcomings in plans from Goldman Sachs and J.P. Morgan Chase. Shortcomings are not as serious as outright "deficiencies," which could result in "more stringent capital and liquidity requirements," the Wall Street Journal reports.

  • "Fed officials have grown increasingly confident that big U.S. banks are safer than they were in 2008, when the financial crisis exposed significant weaknesses in their risk management," per the WSJ.
  • The bank regulators also noted on Tuesday that Morgan Stanley, Bank of America, Wells Fargo, and Goldman Sachs have successfully addressed previous shortcomings outlined in 2017.

What's next: Each of the six banks with shortcomings or weaknesses must submit a plan to address the issues to the Fed and the FDIC by March 31.

Go deeper: Big American banks are doing quite well in 2019

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The Fed opens its doors to fintechs

Photo: Caroline Brehman/CQ Roll Call

The Fed is extending invitations to financial technology companies (and other companies interested in fintech) for face-to-face conversations. The sessions are called "financial innovation office hours,” the central bank announced Tuesday.

Why it matters: This is a first for the Fed board, though the San Francisco regional bank has hosted similar events in the past.

Go deeperArrowDec 18, 2019

Bank of England chief puts finishing touches on climate change legacy

Photo: Kirsty Wigglesworth/WPA Pool via Getty Images

With just a month left before he steps down as head of the Bank of England (BoE), Mark Carney is putting the finishing touches on his legacy at the British central bank.

Driving the news: The BoE laid out how it planned to test the resilience of the U.K.'s largest banks and insurers in increasingly threatening environmental scenarios. It’s a notable step for Carney who's "played a key role in highlighting financial risks from global warming," as Bloomberg notes.

Go deeperArrowDec 19, 2019

European banks could continue to disappoint investors

President of the European Central Bank Christine Lagarde on Dec. 2, 2019. Photo: Thierry Monasse/Getty Images

In contrast to the blowout returns of their U.S. counterparts last year, European banks delivered uninspired returns to investors.

What happened: U.S. banks like Citigroup and JPMorgan drove a 32% return for the S&P financial sector, slightly edging the S&P 500's 31% rise. Europe’s bank stocks index ended 2019 up 8%, but trailed the broader European Stoxx 600, which rose 23%.

Go deeperArrowJan 7, 2020