Saudia Arabia No Longer Exclusively Selling Oil in US Dollars

Implications of the Expiration of the Petrodollar Agreement

The Impact of Two Consumer Classes and the Fed Funds Rate Outlook 

A Tale of Two Consumers

Futility Index

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SWIFT said it is uniquely positioned to interlink the fragmented digital asset landscape with its forthcoming digital currency trials in 2025. Banks in North America, Europe and Asia are preparing to participate in trials involving digital assets by the Society for Worldwide Interbank Financial Telecommunication (SWIFT).  SWIFT announced on Oct. 3 that it will begin digital asset trials on its network in 2025. The trials will involve experiments with transactions that include multiple digital currencies and assets.

Banks to join SWIFT digital asset trials in 2025

China's central bank said on Thursday it would start accepting applications from financial institutions to join a newly created funding scheme, initially worth 500 billion yuan ($70.62 billion), to aid the capital market. The People's Bank of China (PBOC) said eligible securities firms, fund companies and insurers can apply to join the swap scheme, which gives them easier access to funding to buy stocks.

China kicks off 500 bln yuan swap facility to aid stock market

Companies owned by private equity firms are landing in default more frequently than other speculative-grade borrowers, according to a report from Moody’s Ratings. Private equity-backed companies defaulted at a rate of 17% between January 2022 and August of this year, twice the rate of non-private equity-backed companies, Moody’s said in the report released Thursday. Among the 12 largest private equity sponsors — as ranked by Moody’s — the default rate was slightly lower at around 14%.  Platinum Equity had the highest number and share of defaults, out of Moody’s ranking of the 12 largest sponsors, followed by Apollo Global Management and Clearlake Capital Group. 

PE-Backed Firms Suffering Higher Default Rates, Moody’s Says

Ally Financial's credit challenges have intensified over the current quarter as borrowers struggled with high inflation, the consumer lender's finance chief said on Tuesday. Shares of the company fell as much as 19.3%, set for their worst day since March 2020. Consumers have been cutting back on loans amid high interest rates, with the looming economic uncertainty also upping the chances of more loan defaults. In July and August, delinquencies and net charge-offs - that is, debts unlikely to be recovered - rose about 20 and 10 basis points, respectively, in Ally's retail auto business compared with its expectations, Chief Financial Officer Russell Hutchinson told investors at a financial conference in New York. 

Ally Financial warns of 'intensifying' credit challenges, shares slump

A week’s worth of inflation data showed that price pressures have eased substantially since their meteoric rise in 2021-22. Fed officials head into their two-day policy meeting Tuesday closer to their goal of low inflation, but how much they will ease interest rates remains an open question.  “The federal funds rate has been over 5%, has been there for over a year to fight inflation. That fight is won. They need to start getting out of the way,” economist Claudia Sahm said.

The Fed has the proof it wants that inflation is slowing, but the next move is still up in the air

The US Department of Justice (DOJ) has filed a civil antitrust lawsuit against Visa over allegations of “monopolisation and other unlawful conduct in debit network markets in violation of Sections 1 and 2 of the Sherman Act”. In a press release announcing the lawsuit on 24 September, the DOJ says: “Filed in the US District Court for the Southern District of New York, the complaint alleges that Visa illegally maintains a monopoly over debit network markets by using its dominance to thwart the growth of its existing competitors and prevent others from developing new and innovative alternatives.”

US Department of Justice files civil antitrust lawsuit against Visa

Fitch Ratings cut the United States’ long-term foreign currency issuer default rating to AA+ from AAA. The agency had placed the country’s rating on negative watch in May, citing the debt ceiling fight in Washington. “The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” Fitch said.

Fitch downgrades U.S. long-term rating to AA+ from AAA

Just a day after the Treasury Department released a $1 trillion borrowing estimate for the third quarter, questions are being raised about the extent to which foreign and domestic buyers can continue to keep up their demand for U.S. government debt. Further details about Treasury’s financing need will be released at 8:30 a.m. on Wednesday. For now, the $1 trillion estimate, the largest ever for the July-September period, has analysts concluding that the U.S. is facing a deteriorating fiscal deficit outlook and continuing pressure to borrow.

‘Eye-popping’ $1 trillion third-quarter borrowing need from U.S. Treasury raises risk of buyers’ fatigue 

Minneapolis Federal Reserve President Neel Kashkari favors getting tougher on regional banks, following a crisis earlier this year that he said may not be over. Asked during a town hall whether he agrees with proposals setting higher capital requirements for banks with more than $100 billion in assets, the central bank official said, “My own personal opinion is it doesn’t go far enough. I think it’s a step in the right direction, but I would like to go significantly further.”

Regional banks slide after Fed’s Kashkari advocates ‘significantly further’ capital regulation

Moody’s Investors Services may downgrade its credit ratings on six major U.S. banks, including U.S. Bancorp, State Street Corp., and Bank of New York Mellon Corp., and has downgraded its debt ratings on several small and mid-sized banks as part of the credit ratings agency’s rash of rating actions on U.S. banks late Monday.

Moody’s places credit ratings of 6 major U.S. banks on review for downgrade 

A Fitch Ratings analyst warned that the U.S. banking industry has inched closer to another source of turbulence — the risk of sweeping rating downgrades on dozens of U.S. banks that could even include the likes of JPMorgan Chase. The ratings agency cut its assessment of the industry’s health in June, a move that analyst Chris Wolfe said went largely unnoticed because it didn’t trigger downgrades on banks. But another one-notch downgrade of the industry’s score, to A+ from AA-, would force Fitch to reevaluate ratings on each of the more than 70 U.S. banks it covers, Wolfe told CNBC in an exclusive interview at the firm’s New York headquarters.

Fitch warns it may be forced to downgrade dozens of banks, including JPMorgan Chase

U.S. banking regulators on Tuesday unveiled plans to force regional banks to issue debt to protect depositors in the event of more failures. All American banks with at least $100 billion in assets would be subject to the new requirement, which makes them hold a layer of long-term debt to absorb losses in the event of a government seizure, according to a joint notice from the Treasury, Office of the Comptroller of the Currency, Federal Reserve and Federal Deposit Insurance Corporation.

Regulators unveil plans to force regional banks to raise debt in case of failure

The Bank of England’s losses on bonds bought to shore up the U.K. economy will be “materially higher than projected,” according to Deutsche Bank. In late July, the Bank of England estimated that it would require the U.K. Treasury to backstop £150 billion ($189 billion) of losses on its asset purchase facility.

The Bank of England is facing major losses on its bond purchases — and it’s set to get much worse

Subprime consumers are falling behind on their credit-card bills. From Generation Z and millennials to Generation X and baby boomers, credit-card delinquency rates have been trending upwards for four generations of borrowers since January 2020, reaching a new high in August, according to new data from VantageScore. Borrowers with a VantageScore between 300 and 600 across these four cohorts experienced an 8.9% delinquency rate — of 30 to 59 days — in July 2023, up from 7.49% a year earlier. Credit-card delinquency rates at smaller banks hit a record high of 7.51% in the second quarter of 2023, up from 6.01% at the same time last year, according to the Federal Reserve Bank. 

Is there a subprime credit-card crisis on the horizon? 

The collapse of Silicon Valley Bank and the US regional banking crisis that followed earlier this year had major economic and regulatory repercussions for lenders across the globe, some of which may be felt for years to come. But now that the more immediate threat of the crisis has dissipated, some clear winners have emerged. Shares of UBS (UBS) are up about 20% since it rescued Credit Suisse from collapse, and just last week the bank reported a $29 billion quarterly profit. The huge figure was almost entirely due to the discrepancy between Credit Suisse’s balance sheet value and the $3.8 billion that UBS paid to acquire the bank. JPMorgan Chase (JPM) shares, meanwhile, have gained more than 6% since it purchased First Republic Bank. 

How big banks won the banking crisis

U.S. banks collectively held more than $1.2 trillion in brokered deposits in the second quarter, according to a Wall Street Journal analysis of data from the Federal Deposit Insurance Corp. The total marked an 86% increase from a year earlier. Brokered deposits are what they sound like: A bank can go to a third-party broker such as Morgan Stanley or Fidelity to find customers to invest in the bank’s high-yielding certificates of deposit. That allows the bank to get big influxes of money at once, rather than customer by customer. Lots of banks are loading up on them—a sign of the distress that continues to afflict many lenders who now must compete for customer funds they long took for granted.  

Banks Load Up on $1.2 Trillion in Risky ‘Hot’ Deposits

Close to a third of all publicly-held, outstanding U.S. government debt is set to mature in the next 12 months, raising questions about where Treasury might go from there to finance the government’s borrowing needs. A total of $7.6 trillion will mature in the next year, approaching the level seen in early 2021. Concerns about Treasury’s increased issuance of T-bills and the potential for volatility or market disruptions emerged following the debt-ceiling fight in May, when angst over the government’s ability to pay all its bills pushed yields above 7% on debt maturing in early June. 

$7.6 trillion of publicly held U.S. government debt matures in next 12 months. What does the Treasury do next? 

The U.S. Federal Reserve launched FedNow in July, the first government real-time payment system in the U.S. The service allows banks and credit unions to transfer money for their customers instantly. Working alongside existing systems like Fedwire and FedACH, FedNow aims to improve the U.S.'s inter-bank and retail transaction infrastructure.

FedNow Has Launched As Blockchain Innovation Delivers Next-Gen Instant Payments

Even as the economy has surprised forecasters with its resilience, lenders have cut headcount or announced plans to do so, with the key exception being JPMorgan Chase. The next five largest U.S. banks cut a combined 20,000 positions so far this year, according to company filings. A key factor driving the cuts is that job-hopping in finance slowed drastically from earlier years, leaving banks with more people than they expected.

Big banks are quietly cutting thousands of employees, and more layoffs are coming

The U.S. financial services division of Chinese bank ICBC was hit by a cyberattack that reportedly affected the trade of U.S. Treasurys. ICBC, the world’s largest lender by assets, said Thursday its financial services arm experienced a ransomware attack “that resulted in disruption to certain” systems. Security expert have said ransomware from the hacking group LockBit was used to carry out the cyberattack on ICBC. 

China’s ICBC, the world’s biggest bank, hit by cyberattack that reportedly disrupted Treasury markets

Back in November, UBS chair Colm Kelleher predicted that the next financial crisis would happen in shadow banking — delightfully infuriating Apollo’s Marc Rowan, speaking at the same conference later that day. So, the Chairman of UBS was asked at the tail end of his presentation, what is the single biggest risk to financial markets? And Colm said, a blow-up in the shadow banking industry. And with that, he got off the stage.


Is private credit a systemic risk?

Federal Reserve Chair Jerome Powell joined a chorus of US officials who have argued that mounting bad commercial real estate loans will likely cause some bank failures, but don’t pose a risk to the overall system.  The central bank chief told lawmakers on the Senate Banking Committee on Thursday that the Fed is talking with lenders to make sure they are on top of potential losses. His comments repeated the assessment of Treasury Secretary Janet Yellen, who last month said there will likely be some failures, but the situation will be “manageable.”

Powell warns commercial real estate woes will lead to bank failures: ‘This is a problem that we’ll be working on for years’

Goldman Sachs Asset Management is reportedly planning a major expansion of its private credit portfolio. The Wall Street giant aims to grow that portfolio to $300 billion in five years, up from $130 billion, a senior executive told Reuters Tuesday (March 12). “It’s a huge opportunity,” said Marc Nachmann, Goldman Sachs’ global head of asset and wealth management. According to the report, Goldman has loftier goals than other banking titans. For example, Morgan Stanley is planning to double its private credit portfolio to $50 billion, while JPMorgan Chase has set aside at least $10 billion for private credit. 

Goldman Sachs Aims for $300 Billion Private Credit Portfolio

New York Community Bancorp Inc.’s stock lost more than a third of its value Wednesday in its steepest one-day drop ever, after it posted a surprise loss, built up its reserves and signaled challenges in the office-space sector with one of two troubled loans. The bank also said it would cut its dividend by more than two-thirds to build up capital to meet regulatory requirements as a larger Category IV bank with assets of $100 billion to $250 billion.  The Hicksville, N.Y.-based bank missed Wall Street’s revenue and net-interest-income estimates and reported an increase in net charge-offs.

New York Community Bancorp’s stock crushed on surprise loss, dividend cut and cost of two loans

Temenos shares were down over 6% on Friday after closing over 28% lower on Thursday.
The Swiss software company said its board of directors “fundamentally refutes” a report by short-seller Hindenburg Research. Short-seller Hindenburg Research made headlines after accusing Indian conglomerate Adani of stock manipulation and accounting fraud in early 2023.

Hindenburg’s latest short target Temenos rejects allegations as share price tumbles

The $1 billion-plus injection that New York Community Bank announced Wednesday is the latest example of private equity players coming to the need of a wounded American lender. Key to these deals is speed and discretion, according to advisors to several recent transactions and external experts. Steven Mnuchin reached out to NYCB directly to offer support amid headlines about the duress it was under, according to a person with knowledge of the matter.

Why private equity has been involved in every recent bank deal

The six largest U.S. banks saw delinquent commercial property loans nearly triple to $9.3 billion in 2023 amid high vacancy rates and increasing borrowing costs. Today, the sector is facing greater scrutiny from regulators amid growing risks to bank stability. In fact, for almost half of all U.S. banks, commercial real estate debt is the largest loan category overall. While commercial loans are more heavily concentrated in small U.S. banks, several major financial institutions have amassed significant commercial loan portfolios.

Visualizing Major U.S. Banks by Commercial Real Estate Exposure

Banks have now regained all deposits they lost following the collapse of Silicon Valley Bank. But that doesn't solve many of the problems still faced by regional lenders. The amount of deposits held by all US banks hit $17.56 trillion during the week ending March 20, according to the latest Federal Reserve data, exceeding pre-SVB levels for the first time since the California regional lender was seized on March 10, 2023.

Bank deposits are back above pre-SVB levels. Regional lenders still have problems.

In the six months following its groundbreaking launch in July 2023, FedNow has emerged as a transformative force in real-time payments, marking a significant departure from the traditional Automated Clearing House (ACH) system.  This shift signifies a pivotal moment in banking innovation, offering instantaneous transaction processing that aligns with the modern financial transaction demands.

How FedNow is Shaping Payments Since its Groundbreaking Launch

The Federal Reserve is stressing the importance of fintechs and core providers for the future expansion of its new instant payments system FedNow. The Federal Reserve won’t provide fintechs with direct access to its new instant payments system FedNow, but it’s still courting their participation in the new real-time ecosystem. 

Fintechs can help the Fed see what’s on the horizon for the new faster payment system and allow the new real-time payments services to be easier to use, said Mollie Markham, a Federal Reserve Bank of Chicago industry specialist who works with nonbanks. Fintechs can also assist the Fed in providing services that make the most of FedNow’s data-rich capabilities, she said during a conference this month.

Fed courts nonbanks for FedNow growth

The first bank failure of 2024 punctuates the discord that has brewed at Republic First for more than two years. Fulton, meanwhile, will double its Philadelphia presence through the deal. Lancaster, Pennsylvania-based Fulton Bank agreed to purchase substantially all of the assets of beleaguered Philadelphia lender Republic First Bank and assume substantially all of its deposits, the Federal Deposit Insurance Corp. said Friday. The Pennsylvania Department of Banking and Securities closed Republic First earlier in the day and appointed the FDIC as receiver.

Republic First is seized, assets sold to Fulton Bank

Private equity firms including Apollo Global, KKR, Blackstone and Brookfield are accelerating efforts to make low-risk loans, encroaching on territory dominated by banks and public debt markets. New York-based group Apollo on Thursday increased its long-term forecasts for its lending business, telling shareholders it expected to be able to originate more than $200bn a year in new loans, up from $150bn previously. This compares with $97bn issued last year including to investment grades European group Vonovia and Air France-KLM. Volumes reached a record $40bn in the first quarter of 2024, it said.


Private equity firms step up plans to edge banks out of low-risk lending

The failures of Silicon Valley Bank and First Republic Bank in 2023 caused plenty of finger-pointing at bank regulators. Many US financial institutions including SVB and First Republic were covering large portions of their liabilities with assets such as government bonds that stood to lose value if interest rates rose significantly—which is exactly what happened. As the Federal Reserve hiked interest rates, rumors swirled that the two banks might not have sufficient assets to cover all their deposits. Customers yanked their money out, causing runs at both.

US Bank Regulators Could Have Averted $9 Billion in Losses

The Consumer Financial Protection Bureau declared on Wednesday that customers of the burgeoning buy now, pay later industry have the same federal protections as users of credit cards. The agency unveiled what it called an “interpretive rule” that deemed BNPL lenders essentially the same as traditional credit card providers under the decades-old Truth in Lending Act. The BNPL market is dominated by fintech firms like Affirm, Klarna and PayPal.

CFPB says buy now, pay later firms must comply with U.S. credit card laws

“Participants observed that while inflation had eased over the past year, in recent months there had been a lack of further progress toward the Committee’s 2 percent objective,” the summary stated. The minutes also showed “various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.” The meeting followed a slew of readings that showed inflation was more stubborn than officials had expected to start 2024.

Federal Reserve minutes indicate worries over lack of progress on inflation

JPMorgan Chase CEO Jamie Dimon said private credit could spark turmoil if the opaque sector of financial markets weakens. "There could be hell to pay," he said at a conference on Wednesday. "I've seen a couple of these deals that were rated by a rating agency and, I have to confess, it shocked me what they got rated. So, it reminds me a little bit of mortgages."

Jamie Dimon says there could be 'hell to pay' if the swelling private-credit market starts showing cracks

After months of business leaders and economists urging action, the People’s Bank of China (PBoC)—the central bank of the world’s second biggest economy—finally acquiesced, unleashing a triptych stimulus package aimed at spurring consumer spending to counter persistent deflation. Yet analysts doubt even this “policy bazooka” will have much of an effect. 
On Tuesday, the PBoC unveiled a policy interest rate cut of 0.2 percentage points, combined with a lowering of banks’ reserve requirements and the cutting of existing mortgage interest rates, both by 0.5 percentage points. For the PBoC to unveil three rate cuts at once is itself unprecedented. 

China’s Bold Stimulus Measures Won’t Save Its Flagging Economy

Monetary policy in advanced countries is diverging in a manner that was thought highly unlikely just a few months ago.  A major question facing many central banks around the world is no longer whether interest rate policies in advanced countries will decouple in a manner that was thought highly unlikely just a few months ago. They already have and will do so even more.  The question is the scope and size of the potential divergence, and the implications for reconciling domestic economic priorities with the avoidance of harmful exchange rate volatility.


Europe May Soon Discover the Limits of Decoupling on Rates

The Bank of Canada cut on Wednesday its main interest rate by a quarter-percentage point, becoming the first Group of Seven central bank to provide rate relief after a rapid and aggressive increase in borrowing costs to tame inflation. Canada's central bank said a cut was warranted because of increased confidence that inflation is moving closer to its 2% target. Bank of Canada Gov. Tiff Macklem said more rate cuts could be in the offing should inflation show further signs of slowing. The Bank of Canada lowered its target for the overnight rate to 4.75% from 5%, where it sat for 11 months. 

Bank of Canada Cuts Policy Rate to 4.75%, Signals More Easing Possible

The European Central Bank cut its policy rates by 25 basis points, as expected, on Thursday, its first cut in almost five years amid signs that price pressures have weakened. "Based on an updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady," the ECB's Governing Council said in a statement. The ECB is the third major central bank to lower its key policy rates, following the Swiss National Bank's move last month and the Bank of Canada's cut on Wednesday.

ECB cuts key interest rates by 25 bps even as outlook on inflation revised up

China’s central bank took new steps to shore up the country’s sputtering economy, highlighting officials’ growing anxiety about growth only days after leader Xi Jinping set out his long-term vision to transform China into a technological powerhouse to rival the U.S. The People’s Bank of China said Thursday that it cut a key interest rate and pumped the equivalent of more than $25 billion into China’s banking system. The move caught investors by surprise, as it occurred outside the usual sequence for policy shifts in the PBOC’s complex collection of interest rates and other tools.

As Growth Sputters, Beijing Tries Again to Jolt China’s Economy

Moody’s Ratings has placed the long-term debt ratings of Old National Bancorp. and several other U.S. regional banks on review for downgrade amid concerns over commercial real-estate exposure.  Peapack-Gladstone Financial. FNB, Old National Bancorp, First Merchants  and Fulton Financial. The rationale for the downgrade warning by Moody’s analysts was the same for all those lenders: “as a regional bank with a substantial concentration in commercial real estate (CRE) loans, it faces ongoing asset quality and profitability pressures as higher-for-longer interest rates heighten the longstanding risks of CRE for banks’ creditworthiness especially during cycle downturns,” said Moody’s.

Moody’s puts several U.S. regional banks on downgrade review over commercial real-estate concerns

The IMF’s second-in-command has urged the US to shrink its mounting fiscal burden, saying strong growth in the world’s largest economy gave it “ample” room to rein in spending and raise taxes. Gita Gopinath, the fund’s first deputy managing director, said it was time for advanced economies to “invest in fiscal consolidation” and address how they plan to bring debt burdens back down to pre-pandemic levels. “For the US, we see ample ground for them to reduce the size of their fiscal deficits, also given the strength of the US economy,” she told the Financial Times in an interview. The warnings come as economists and investors fear that years of fiscal profligacy by both Democrats and Republicans are storing up trouble for the US economy.


IMF warns US on ballooning fiscal burden

Regional banks around the U.S. are striking complex and costly bargains with hedge funds, hoping to insulate themselves from a replay of the turmoil that followed Silicon Valley Bank’s failure last year. Wall Street smells a payday. Ohio-based Huntington Bancshares recently entered into an arrangement to sell investors some of the risk that its borrowers won’t repay their loans. That helps the bank meet new proposed standards meant to make lenders look healthy to regulators.  The deal is known on Wall Street as a synthetic risk transfer, and it offers cash-flush, private-debt fund managers—such as Ares Management and Blackstone—an attractive investment. 

Regional Banks Want to Slim Down. Hedge Funds Smell a Bargain.

China's yuan is in the midst of a steep decline as holders of the currency eye the risk of US sanctions. The value of the yuan slumped against Russia's ruble for the fifth day in a row on Wednesday, falling to a level of 11.51 rubles. That's the cheapest the yuan has been in about a year.  Central banks, meanwhile, are looking to dump the yuan while raising their holdings of the US dollar. Nearly 20% of central bank reserve managers said they planned on raising dollar holdings over the next one to two years, while 12% said they planned on reducing yuan holdings, according to a survey from the Official Monetary and Financial Institutions Forum.

China's yuan is tumbling amid US sanctions and as central banks boost dollar holdings

Norinchukin Bank will consider investing in a range of assets as it braces for massive losses on the sale of roughly 10 trillion yen ($63 billion) in US and European sovereign bonds. Japan’s biggest agricultural bank will dispose of the foreign bonds gradually during the fiscal year ending March, a company spokesman said in an email. It expects a net loss of 1.5 trillion yen for the year, triple the previous estimate of 500 billion yen. 

https://finance.yahoo.com/news/norinchukin-eyes-assets-including-clos-014942422.html

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