Fed Pushes for Real-Time Payments Monitoring; BNY Mellon Software Glitch

Wall Street Journal

The Federal Reserve wants big banks to monitor payments in real-time and they want it done now. JPMorgan Chase will meet with Fed officials this week to discuss the bank's response to the Fed's demands; CEO Jamie Dimon has said JPMorgan has assigned 400 people to the project, known in banker parlance as "intraday liquidity." Bank of New York Mellon is also at the top of the Fed's to-do list.

Citigroup and Bank of America also received a letter from the Fed asking for more information on what they're doing to improve real-time payments monitoring.

The Fed is worried "an institution's failure to manage intraday liquidity effectively, under normal and stressed conditions, could leave it unable to meet payment and settlement obligations in a timely manner," according to a 2010 Fed report.

The stock market's volatility this week has not caused major problems at banks, unnamed sources said. Still, it's going to take banks several years to improve their systems to be able monitor payments as closely as the Fed demands.

A software glitch at Bank of New York Mellon has caused outages at some mutual funds and exchange-traded funds, to the extent that the money managers are unable to inform investors of the value of their holdings.

BNY Mellon said the system was back up and running by Wednesday afternoon, although it still has a backlog of problems to work through.

The outage made it more expensive to trade funds and more difficult to accurately trade in and out of funds. The glitch wasn't related to Monday's stock-market meltdown, but the timing couldn't have been worse.

BNY Mellon, the world's largest fund custodian, said the problem stems from a SunGard Data Systems software package it uses, and the glitch has affected hundreds of mutual funds and ETFs, including funds operated by Goldman Sachs, Federated Investors, Guggenheim Partners, Prudential Financial and others. Some fund executives have had to manually sort pricing data.

Securities-based loans have been a boon for banks with investment-banking operations. But the bill is about to come due.

Bank of America and other banks have issued margin calls this week on loans backed by investment portfolio, amid the market's volatility. Morgan Stanley and Wells Fargo also have exposure to the loan type.

Regulators are watching the situation. Securities-based loans are included on the Financial Industry Regulatory Authority's watch list.

Washington Post

The paper names five of the top threats to fintech disruptors. One is the danger regulatory burdens that weigh on banks could be used against the disruptors. Airbnb and Uber are discovering their rivals in the hotel and taxi industries are willing to fight back, sometimes by alerting regulators to crack down on the newbies.

Second, the lack of a global standard of financial regulation will give local lenders a leg up on marketplace lenders. That's because they'll have a difficult time navigating the maze of local laws.

Third, regulators sometimes try to apply their century-old books of rules to disruptors, which can force the upstarts out of business.

Virtual currencies like Bitcoin aren't challenging a mere private industry like, say, taxi cabs. They're fighting the biggest, baddest beast of them all: governments that control their own currencies.

Finally, self-regulation may put the disruptors out of business; the author's final argument is somewhat obtuse and probably requires a multiple readings to grasp.

Elsewhere ...

The American Lawyer: Billion-dollar legal settlements aren't just for U.S. banks. Arab Bank, a Jordanian financial institution, agreed to pay "slightly more than $1 billion" to settle claims it provided financial services to Hamas between 2001 and 2005, and for serving as a conduit for "martyr payments" to the families of suicide bombers. The $1 billion settlement would represent about two years of net profit for Arab Bank. A former Treasury Department official told American Lawyer the settlement "will make it harder for terror organizations of any stripe to use banks to move money."

Slate: New RFID-blocking wallets appear to work well. The question is whether they're actually necessary. The threat is identity thieves being able to swipe information from innocent passers-by carrying credit cards, passports and the like which have been embedded with radio-frequency identification chips.

These thieves are supposedly able to steal your personal information from several feet away, by wirelessly scanning and lifting the info right out of your wallet.

The new wallets, designed by Swiss Alpine, Buxton, and others, are supposed to provide a measure of protection from these wireless crooks. The wallets offer a type of insulation from the scanners.

Slate suggests the threat isn't as widespread as some believe.

"The technique appears to be far more popular among security researchers than it is among thieves, and for good reason: There are much easier and more effective ways to steal people's money and data," Slate said.