Top banking news this month: April 2023

April 28, 2023 12:02 PM

In April's roundup of American Banker's favorite stories: Investigations of PPP fraud ramp up, U.S. Bank responds to concerns regarding capital levels, what happened to the trend of bank purchases and more.

Click here to read last month's roundup of banking industry news.

PPP fraud investigations heat up. Who will be hit next?

Article by Jordan Stutts

Two significant questions loom over the Paycheck Protection Program: How much of the program's funds was lost to fraud? And are banks going to get into trouble for approving these bad loans?

PPP was hastily designed at a time when it felt like the world was falling apart. A pandemic had gripped not only the U.S. but the world as well. Amid the volatility, Americans had bills to pay — restaurants had to make rent, store owners had to pay for inventory that was previously ordered but would sit unsold on shelves, and workers needed to buy groceries and other essentials.

To prevent an economic collapse, Congress passed the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, in late March 2020. That $2.2 trillion stimulus package included an initial $349 billion earmarked for the Small Business Administration to provide loans to employers so they could cover expenses, including payroll, until the pandemic subsided enough for the economy to return to some level of normalcy. The hope was that these funds would help prevent mass layoffs. And the loans would be forgivable if the borrowers met certain criteria.

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Former Wells Fargo retail bank chief Carrie Tolstedt.

Carrie Tolstedt, the former head of Wells Fargo's community banking unit, was arraigned in federal district court in Los Angeles and entered a not guilty plea on charges of obstructing a bank examination.

Bloomberg

Ex-Wells Fargo executive Carrie Tolstedt shows up in court

Article by Kate Berry

LOS ANGELES — Carrie Tolstedt, Wells Fargo's former head of its community bank, entered a "not guilty" plea at an arraignment hearing on April 7, kicking off a legal battle that could result in prison time for the defendant.

Tolstedt stood before District Court Judge Josephine L. Staton at the federal courthouse in downtown Los Angeles and entered a plea of "not guilty," to the criminal charge of obstructing a bank examination. If found guilty, Tolstedt would become the highest-ranking executive at Wells Fargo to go to prison for the phony accounts scandal and its ensuing coverup.

Prosecutors said Tolstedt failed to disclose to federal bank examiners the number of Wells Fargo employees who had been fired or resigned for opening millions of bank accounts without customer authorization.

Click here to read the full story.

An Ingenico contactless payment terminal

Bloomberg

Ten payment companies putting point of sale into smartphones

Cardshow by John Adams

The payments industry's maturation from static point-of-sale terminals is giving merchants a greater ability to diversify how they use space and engage with customers.

While firms like Block have long offered hardware attachments to phones to accept credit cards, new options allow the phones to act as point-of-sale devices without an attachment. Called tap to pay or softPOS, this technology minimizes the work required for merchants and, along with other innovations such as checkout-free store design, can push in-store terminals deeper into the past.

"SoftPOS is the next step in the evolution of payment acceptance in the physical world," said Thad Peterson, a strategic advisor at Aite-Novarica. "With no hardware cost, full portability and no need for an extensive POS back end, SoftPOS is ideal for micro merchants who have previously had to use a dongle to enable card payments."

Click here to read the full story.

Bloomberg

U.S. Bank fires back after its capital levels face scrutiny

Article by Allissa Kline

U.S. Bancorp's capital levels are under the microscope in the wake of a research report that claims the Minneapolis-based company isn't holding enough capital for a bank of its size.

The April 17 report from HoldCo Asset Management says U.S. Bancorp's capital ratios "look abysmal" compared with other banks and "fall significantly short" of the company's largest peers. The report calls for U.S. Bancorp to raise capital, in part because its growing asset size means that it is close to moving into a new regulatory category that requires banks to hold more capital.

But U.S. Bancorp executives pushed back on that idea, saying there is no need to raise capital at this point. That's because U.S. Bank's parent company expects to generate capital on its own, in part from earnings that will arise from last year's acquisition of MUFG Union Bank, they said.

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BLOOMBERG

Hall of shame: 10 biggest bank failures

Cardshow by Jackie Stewart

Last month was an extraordinary one for the U.S. financial sector. Two of the country's three largest bank failures occurred and a smaller third institution, Silvergate Bank, voluntarily shut down. How the mini-crisis occurred, the management missteps involved and the regulatory response will surely be picked apart and analyzed for years to come.

Here's a look at the top 10 bank failures by asset size, according to data from the Federal Deposit Insurance Corp.

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A ransomware attack against one of NCR's data centers has disrupted back-office functions for many restaurants across the country. The strain of ransomware behind the attack appears to be Alphv.

Adobe Stock

NCR was hit with a ransomware attack. Here's what bankers need to know.

Article by Carter Pape

A subset of NCR's 100,000 restaurant customers remain without access to back-office payments tools and gift card functions after a major point-of-sale and digital banking software maker suffered a ransomware attack against one of its data centers earlier in April.

While NCR has not specified the strain of ransomware that infiltrated the data center, ransomware development group Alphv briefly claimed responsibility for the attack in a post to its blog, according to cybersecurity researcher Dominic Alvieri. The group has since removed the post without explanation.

On April 17, NCR confirmed that it suffered a data center outage starting April 13 that affected some of its commerce customers, and that the outage was caused by a ransomware incident. In a statement, the company said it "immediately started contacting customers, enacted its cybersecurity protocol and engaged outside experts to contain the incident and begin the recovery process" and that an investigation is ongoing.

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DFCU Financial President and CEO Ryan Goldberg said the "laborious" regulatory approval process is one factor holding up CU-bank deals.

Why is no one buying banks?

Article by Ken McCarthy and Jim Dobbs

Increased regulatory scrutiny and fears of a recession are among the factors hampering bank acquisitions, whether the buyer is a credit union or another bank.

Banks contend that with all else being equal, credit unions should have an advantage in mergers and acquisitions because their tax-exempt status gives them more cash to make deals. But with economic and regulatory pressures hitting banks and credit unions alike, this advantage isn't enough to get credit unions back in the game.

"It doesn't seem to be a seller's market right now," said Rodney Showmar, CEO of Arkansas Federal Credit Union in Jacksonville, Arkansas. "Lower [net interest margins] are hurting profit, and investment portfolios may be so far underwater that it deteriorates values."

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First Republic said that it's looking to slash its workforce by as much as 25%, and that its efforts to cut costs also include reducing executive pay, shedding office space and eliminating non-essential projects.

Eric Thayer/Photographer: Eric Thayer/Bloomb

'Few options left': Why First Republic is backed into a corner after Q1

Article by Polo Rocha

First Republic Bank said that it's slashing staff by as much as 25% and weighing "strategic options" weeks after its customers pulled $100 billion of deposits.

The San Francisco bank, which has teetered after the failures of Silicon Valley Bank and Signature Bank last month, reported its highly anticipated quarterly results. Observers who wanted substantial detail on the bank's condition were disappointed, since executives did not take questions from analysts.

The quarter was "worse than I thought," with deposit outflows coming in much higher than expected, said Tim Coffey, an analyst at Janney Montgomery Scott. Skipping the usual question-and-answer session with analysts is a sign that the bank "feels that it has few options left," he said.

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The Federal Reserve's overnight repo facility has been utilized by money market funds to a large extent, and may be contributing to dramatic outflows of deposits from banks since the failure of Silicon Valley Bank and Signature Bank last month.

Bloomberg News

Bank crisis puts money market funds back in the spotlight

Article by Kyle Campbell

Deposit flows after a pair of high-profile bank failures last month have renewed a debate about the Federal Reserve's support of money market funds and whether that support harms banks.

Between March 8 and March 22, total commercial bank deposits declined by $300 billion, according to Fed data. During that same period, money market funds ticked up $238 billion.

It is unclear how many of those deposits went directly from banks to money market funds, but some in and around the banking sector worry that the Fed's Overnight Reverse Repurchase Program has made it easier for funds to move in that direction.

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Adobe Stock

FedNow's rollout might get complicated by misinformation

BankThink article by John Heltman

A curious thing happened earlier this month: FedNow was trending on Twitter, and for all the wrong reasons.

I don't want to be too specific in outlining the accusations and aspersions about FedNow that were floating around out there. Part of that is because wrong information doesn't need to be amplified, and part of it is because dunking on Twitter eggs is no fun. But suffice it to say that there was a great deal of confusion and conflation between the imminent debut of the Fed's faster payments network and its mulling the creation of a central bank digital currency.

As dedicated readers of American Banker will know, the Federal Reserve announced several years ago that it would be launching a faster payments settlement network called FedNow, and that network is slated to go live this July, according to the Fed.

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