Casualties of Derisking: "When banks refuse to serve entire business lines, the result is stunted job creation and innovation, not to mention customers who are denied services they often rely upon," writes Bitcoin Foundation global policy counsel Jim Harper in an article about the dangers of risk aversion. Harper recommends that regulators and policymakers reexamine whether the security benefits of their approach to financial surveillance outweigh the drawbacks. One reader commented that the regulatory crackdown on anti-money laundering and anti-terrorist financing compliance is necessary. "Were banks and payment systems compliant with their fiduciaries responsibilities, perhaps there would not be a need for [the Financial Crimes Enforcement Network]," this person writes, pointing out that recent enforcement actions against banks like HSBC and Bank of Tokyo-Mitsubishi demonstrate that financial institutions "misbehave and violate anti-terrorism statutes in our domicile." Harper responds that a cost-benefit analysis is nonetheless necessary: "Nobody not even folks at FinCEN would want to expend, say, $100 million of society's resources each year to produce $70 million in benefits." Reader "grenblackall" says regulators, legislators and the American public all need to be more realistic about the nature of risk: these parties "want nothing less than this perfect but impossible world where businesses take risks and earn a nice premium for their risky efforts, but nothing ever goes wrong."
Bits and Bytes Vs. Flesh and Blood: The growth of digital banking threatens to stamp out individualized customer service, according to consultant Mikkel B. Rasmussen. "Digital customer experiences are based on rules and algorithms rather than human behavior," he writes. "But human behavior does not always adhere to statistical models especially in situations with high uncertainty like changing your job, experiencing a death in the family, buying a new house or retiring." He recommends that bankers think carefully about which services should be digital and which ones are better suited to in-person conversations. On the other hand, Charles Smith of Pegasus Intellectual Capital Solutions argues that technology has the potential to create more personal customer experiences: Artificial intelligence "will cater digital communications to the individual far better than the mass communications from banks have delivered in the past," he writes.
Also on the blog: The work of financial reform is not yet done, according to Marshall Lux and Robert Greene of the Mossavar-Rahmani Center for Business and Government at Harvard University's John F. Kennedy School of Government. They recommend that policymakers focus on simplifying and streamlining rules to more effectively balance the safety of the financial system with banks' ability to operate efficiently.
Banks that hire risk managers from outside the financial industry may need to rethink their strategy, according to former Bank of America executive Richard J. Parsons. The best ones have the accounting and finance background necessary to scan banks' balance sheets and income statements and "spot growth that is too good to be true."
The proposed merger between CIT Group and OneWest Bank is being supported by government funds, write community advocates Kevin Stein and Daniel Rodriguez. They argue that a 2009 shared-loss agreement between the Federal Deposit Insurance Corp. and OneWest constitutes a troubling subsidization of the deal, which would be the first since the financial crisis to cross the $50-billion asset threshold for systemically important financial institutions.
Bitcoin expert Hayden Gill describes the potential for partnerships between banks and Bitcoin firms to facilitate cross-border payment transfers. Mayra Rodriguez Valladares examines the Volcker Rule's complicating effect on the market for collateralized loan obligations. The Mercatus Center's Stephen Matteo Miller argues that the Federal Reserve's quantitative easing program was effectively a wash and warns that rising Treasury debt poses a much greater inflationary danger. Risk management authority Susan Palm faults bank leaders for failing to emphasize a strong compliance culture. And former BB&T chief John Allison explains how his bank fended off unwanted acquisition advances from Bank of America and First Union in an excerpt from his new book, The Leadership Crisis and the Free Market Cure: Why the Future of Business Depends on the Return of Life, Liberty and the Pursuit of Happiness.
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