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CFTC panel sounds climate warning; JPMorgan fires employees for fraud

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Stark warning

In a “first-of-its-kind report from a Wall Street regulator,” according to the Financial Times, a special climate subcommittee of the Commodity Futures Trading Commission said “climate change threatens not only fires, drought and surging seas but profound risks to the financial system. ” The CFTC panel, which included representatives from banks such as Citigroup and JPMorgan Chase, “reached outside its turf to recommend changes in corporate disclosure, investments and central bank asset purchases, the domain of other federal agencies.”

“The central message of this report is that U.S. financial regulators must recognize that climate change poses serious emerging risks to the U.S. financial system, and they should move urgently and decisively to measure, understand, and address these risks,” the report said.

“The stark warning” in the report calls for “a variety of steps by financial regulators to incorporate climate-related risks into their rules for banks, asset managers and other firms,” the Wall Street Journal said. “The risks identified by the report include ‘disorderly price adjustments in various asset classes, with possible spillovers into different parts of the financial system, as well as potential disruption of the proper functioning of financial markets.’”

Financial Times

Dismissed

JPMorgan Chase “has dismissed several employees who allegedly pocketed bailout funds that were supposed to help businesses dealing with the Covid-19 crisis.” Citing a report on Bloomberg, the FT said the bank “had discovered that some employees improperly applied for and received money under the Economic Injury Disaster Loan (EIDL) program.”

“A person familiar with the situation said the individuals who fraudulently obtained EIDL loans had not been acting in their capacity as JPMorgan employees, but that breaking the law was a violation of the bank’s code of conduct and some people were fired as a result of their improper EIDL applications. The applications were discovered after the SBA instructed banks to investigate any potentially suspicious activity related to the EIDL loan program amid fears of potential fraud.”

Washington Post

Relaxing risk

Members of the Senate Banking Committee are “debating whether or how to change the rules” of the Federal Reserve’s Main Street Lending Program that would allow the Fed “to make more, albeit riskier, loans to struggling businesses.” At a hearing on Wednesday, “policymakers differed over whether the Main Street program can be strengthened with a new structure and relaxed loan terms, or if more direct aid from Congress is needed to help companies fighting for survival during the pandemic.”

“I am still concerned that incorporating widespread restrictions in these facilities could render the facilities ineffective and leave businesses and their employees without critical resources they desperately need,” the committee's chairman, Mike Crapo, R-Idaho, said.

But Democrats on the panel “lamented lawmakers' failure to provide additional direct financial assistance to consumers,” American Banker’s Neil Haggerty reports.

Elsewhere

Delayed launch

“A project involving 13 of the world’s largest banks aimed at launching digital versions of major currencies in 2020 is no longer likely to get going this year,” Reuters reported. While work on the project has progressed, it still needs regulatory approval, which it hopes to get early next year.

“Initially spearheaded by UBS Group, the project has been in the works for more than five years and seeks to create a more efficient way for banks to settle financial transactions. The venture is one of several high-profile efforts by banks and other large financial companies to use blockchain to streamline operations and lower costs. While the sector has spent millions of dollars on experiments and tests, only a few projects have had a significant impact and many are taking longer than expected.”

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