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Saudia Arabia No Longer Exclusively Selling Oil in US Dollars

Implications of the Expiration of the Petrodollar Agreement

Run on digital assets leads platforms to freeze user accounts, including withdrawals. Bankruptcy looms. 

The Big Chill in Crypto

Bank stocks are often perceived to be a harbinger of broader economic trends so BankerAdvisor wheeled around some of the big banks’ reported second quarter earnings to spot broad movements

Tea Leaves and Emerging Economic Trends

Banks everywhere are ratcheting up their credit card marketing activities greatly increasing marketing expenses. Credit-card issuers are staying aggressive and shrugging off potential liquidity issues from consumers, despite rising interest rates and potential recession.  

Big Banks Keep Pushing Credit Cards to Consumers

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

A Tale of Two Consumers

Futility Index

Rising interest rates should ostensibly benefit all banks taking deposits. But, while large consumer institutions benefit, higher-risk banks have been hammered down

Lending Profits Differ Greatly by Bank

Germany, Europe’s New ‘Problem Child,’ Has a Series of Self-Inflicted Issues

Is German Deindustrialization Underway?

Firm to combine asset, wealth and consumer banking into one unit

Goldman Sachs Reorganization 

A new monster has emerged to compete with inflation: broad banking instability, particularly for smaller and regional banks

Pick Your Poison: More Banks in Peril or Prolonged Inflation

The Reserve Bank of Australia is Australia's central bank based in Sydney and was established in 1960.  The Reserve Bank of Australia's objectives include the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.

Australia

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Despite central bank gold buying slowing moderately in the second quarter, it set a record through the first half of 2024. Central banks globally added a net 483 tons of gold through the first six months of the year,  5 percent above the record of 460 tons in H1 2023.In the second quarter, central bank gold demand totaled 183 tons, according to the latest data compiled by the World Gold Council. That was up 6 percent year-on-year, but about 39 percent lower than the Q1 buying pace.  

Central Bank Gold Buying Through First Half of 2024 Sets Record

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

Credit ratings agency Moody's unexpectedly downgraded France's rating on Friday, adding pressure on the country's new prime minister to corral divided lawmakers into backing his efforts to rein in the strained public finances. The downgrade, which came outside of Moody's regular review schedule for France, brings its rating to "Aa3" from "Aa2" with a stable outlook for future moves and puts it in line with those from rival agencies Standard & Poor's and Fitch. It comes hours after President Emmanuel Macron named on Friday veteran centrist politician and early ally Francois Bayrou as his fourth prime minister this year.


Moody's hands France surprise downgrade over deteriorating finances

Treasury yields moved higher Tuesday following a poor auction on the five-year note and as investors await fresh data releases on inflation. Yields perked up after a $70 billion Treasury Department auction of 5-year notes was met with weak demand. The bid-to-cover ratio, a widely followed demand gauge, came in at 2.3, below a 10-auction average of 2.45. Investors are hungry for more data on the economic and inflationary picture after the minutes from the Federal Reserve’s latest meeting, released last week, showed uncertainty among policymakers about when to ease policy. On Friday, they will parse the April personal income and expenditures report, which includes a measurement of price movements across a range of consumer expenses.

10-year Treasury yield rises above 4.5% following weak auction

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

Klarna, which is known for its popular buy now, pay later business, said Wednesday it has confidentially filed IPO documents with the SEC. Analysts recently valued the company in the $15 billion range. Klarna investors include SoftBank, Sequoia Capital and London-based firm Atomico.

Buy now, pay later provider Klarna says it filed confidentially for U.S. IPO

Launched in July 2023, the Federal Reserve's FedNow service has been a game-changer in the U.S. payments landscape. With over 900 financial institutions onboarded, including major players like Chase and Wells Fargo, FedNow is reshaping the future of payments in the U.S. FedNow represents a significant shift from the traditional Automated Clearing House (ACH) system to real-time payments, ensuring transactions are processed instantly, 24/7/365. ACH, while effective, typically requires one to two business days for transaction completion. In contrast, FedNow processes payments in seconds, offering a faster and more efficient alternative that aligns the U.S. with global payment standards. 

One Year Since the FedNow Launch: What You Should Know

Authorised Push Payment (APP) fraud continues to be one of the most pressing concerns for financial services, the payment industry, law enforcement and the general public – and new developments in cross-border payments may be making it easier. A new study by The Payments Association, the UK’s community and advocate for the payments industry, highlight how the speed and anonymity of cross-border payments, and the global patchwork of different regulatory regimes, is being exploited by criminals. APP fraud is easy to understand and, unfortunately, equally easy to carry out. Essentially, APP fraud is any type of fraud that uses an Authorised Push Payment – whenever a person is tricked into voluntarily sending a payment to another person. 

Cross-Border Payments Could Further Enable APP Fraud, Says Payments Association Study

The European Central Bank on Thursday cut its key interest rate to 3.25%, in its third quarter-percentage-point reduction of the year. The move had been fully priced by markets after policymakers flagged reduced inflation risks and a weakening growth outlook.  It is the first time the ECB has reduced rates at consecutive meetings since December 2011.

European Central Bank lowers key rate to 3.25% in third cut this year: Live updates

Interest rates are coming down, but only after one of the most brutal monetary tightening periods in modern history. And they’re probably coming down too late, too little and too slowly for a lot of smaller companies and the investment funds that chucked money at them over the past few years. Private credit — basically, bilateral corporate loans made by specialist investment funds rather than banks — has been one of the hottest asset classes over the past decade. Possibly the hottest. Depending on who you believe, there’s somewhere between $2tn and $3tn of money in private credit funds.


How is private credit weathering its first big rate hiking cycle?

A Bitcoin-related bill is gaining support in the United States, signaling a potential boost for the cryptocurrency’s value, which could hit $1 million. Former President Donald Trump’s victory in the 2024 presidential election on Nov. 5 has sparked optimism for more crypto-friendly policies.
One of the most anticipated bills is the Bitcoin Act, championed by Wyoming Republican Senator Cynthia Lummis, which proposes the creation of a strategic Bitcoin BTC tickers down $98,418 reserve for the US, making it the first nation to use it as a “savings technology.”

US Bitcoin reserve during Trump presidency could pump BTC to $1M

In a significant move to counteract international sanctions and reduce dependency on the global financial system Swift, Russia has called on BRICS nations to establish a new cross-border payments network, reported Bloomberg. This initiative is aimed at facilitating transactions in local currencies and strengthening economic ties within the bloc. The proposed network would involve a consortium of commercial banks capable of executing transactions in the respective local currencies of BRICS countries. It also suggests the establishment of direct connections between central banks to further insulate the group from external financial systems.

Russia proposes Swift alternative for cross-border payments

Mastercard introduced a new solution that will enable banks to facilitate commercial cross-border payments that are near real-time, predictable and transparent. The new Mastercard Move Commercial Payments is designed to simplify operations, optimize liquidity, reduce counterparty risk and provide end-to-end visibility for banks and their customers, the company said in a Monday (Oct. 21) press release.

Mastercard Introduces New Commercial Cross-Border Payment Solution for Banks

Stripe, the FinTech giant, is reportedly in talks to acquire crypto startup Bridge for $1 billion, according to sources familiar with the discussions. This potential acquisition would be the largest to date for Stripe, which was recently valued at $70 billion. However, the deal is still under discussion and subject to regulatory considerations and compensation for employees. 
Bridge, a provider of infrastructure for crypto stablecoins, has previously raised $58 million in funding and has a strong customer base that includes government departments and companies like SpaceX and Coinbase. The startup offers software that enables businesses to accept cross-border payments made with stablecoins. 

Stripe Aims for Largest Acquisition Yet with $1 Billion Deal for Bridge

Growth in the payments industry, which was once characterized by rapid expansion, is now slowing as the shift from cash to digital payments has reached its peak, according to BCG research. The BCG Global Payments Report 2024 found that revenue growth is expected to halve by 2028, with global revenues set to rise at a compound annual growth rate of just 5% to $2.3 trillion. This marks a sharp decline from the 9% growth recorded in the previous five years, which saw revenues to $1.8 trillion in 2023.

Payments Industry Growth Slows as Cash-to-Digital Shift Reaches Peak

From the Fed: Minutes of the Federal Open Market Committee, November 6–7, 2024. In their discussion of financial stability, participants who commented noted vulnerabilities to the financial system that they assessed warranted monitoring, including continued risks associated with unrealized losses on bank assets and vulnerabilities associated with CRE exposures, focusing on risks in the office sector. In discussing the outlook for monetary policy, participants anticipated that if the data came in about as expected, with inflation continuing to move down sustainably to 2 percent and the economy remaining near maximum employment, it would likely be appropriate to move gradually toward a more neutral stance of policy over time.

FOMC Minutes: "appropriate to move gradually toward a more neutral stance"

 Inflation in the euro area rose from 1.7% to 2% in October, flash figures showed Thursday, coming in slightly higher than the 1.9% forecast. Core inflation and services inflation were both unchanged on the previous month. Markets currently expect the European Central Bank to cut interest rates by another 25 basis points in December, with one analyst saying the latest data would end debate over whether a larger 50-basis-point cut is warranted.

Euro zone inflation rises to higher-than-expected 2%, weakening case for jumbo rate cut

The Bank of England aims to develop the ability to lend to non-bank financial institutions (NBFIs). It is doing so to address potential liquidity challenges in core financial markets that could threaten the United Kingdom’s financial stability, the bank said in a final report on its system-wide exploratory scenario exercise. This exercise explored how the U.K. financial system — including banks, insurers, pension plans, hedge funds, asset managers and central counterparties — would respond to a market shock, it said in the report. It found that while NBFIs have become more resilient in recent years, that could change over time, and those changes could be amplified by the financial system as a whole, according to the report. 

Bank of England Seeks Ability to Lend to Non-Bank Financial Institutions

India’s central bank expectedly kept the benchmark interest rate unchanged at 6.50% on Friday as it struggles to contain rising inflation without hurting growth in Asia’s third-largest economy.
The central bank also announced a cut to banks’ cash reserve ratio by 50 basis points to 4.0% to bolster liquidity in the economy. Reserve Bank of India Governor Shaktikanta Das said the central bank had revised India’s GDP growth outlook for fiscal year 2025 down to 6.6% — RBI had forecast 7.2% growth in October.

Asia Economy India’s central bank revises down economic growth forecast for 2025, keeps interest rate steady

The U.S. government is on track to spend more than $1 trillion on interest payments this year, surpassing military spending for the first time in history. Interest payments on the national debt (held by the public in the form of Treasury securities) will cost the government $1.2 trillion in the government's fiscal year ending in October, the Treasury Department said in a monthly report on the budget. Interest payments are driven by a combination of deficit spending, especially during the pandemic, and the Federal Reserve's campaign of anti-inflation interest rate hikes.



A Record $1.2 Trillion Interest Payments Are Blowing Up The Federal Budget

Melio, an accounts payable and receivable platform for small and medium businesses, has hit a $2 billion valuation in a $150 million strategic funding round led by Fiserv. Shopify Ventures, Capital One Ventures, Accel, Bessemer, Coatue, Frontline Ventures, General Catalyst, Latitude and Thrive Capital joined the Series E for New York-based Melio. The funding follows a ten-fold increase in revenue since the last $110 million round three years ago. Melio’s platform integrates cash flow management, accounts receivable and accounts payable solutions to help SMBs - and their accountants - maximise cash flow and save time managing their payment operations.

Fiserv leads $150m funding round for Melio

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

Transak has received its second Money Transmitter License (MTL) from the US state of Delaware, while also gaining registration with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). The MTL will allow Delaware residents and businesses to use the cryptocurrency platform. Transaks first MTL came from the Alabama Securities commission and the company stated they intend to continue to expand across the US. 

Transak gains Delaware Money Transmitter License and FINTRAC registration

South Korea’s central bank lowered its key policy rate for a second straight month and said the country’s economy will grow at a slower pace than it initially anticipated. Following a policy meeting, the Bank of Korea cut its benchmark interest rate by a quarter percentage point to 3%. The bank lowered its outlook for the country’s economic growth to 2.2% from 2.4% for this year and to 1.9% from 2.1% for 2025. The bank is taking steps to lower borrowing costs despite the lingering effects of high inflation and alarming levels of household debt, as the economy falters.

South Korea’s central bank cuts key interest rate to nurse a slower economy

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

The National Center for Public Policy Research — a Washington DC-based think tank championing free markets — submitted a shareholder proposal to Amazon saying that a Bitcoin corporate treasury strategy should be considered at the April 2025 shareholder meeting.
According to the proposal, the Consumer Price Index (CPI) used to measure inflation, which currently puts inflation at 4.95%, is a “remarkably poor measure” of true currency debasement. The authors suggested the true inflation rate may be double the reported CPI figure. This greatly erodes Amazon’s $88 billion in cash and short-term cash equivalents, the letter said, and to protect shareholder value, Bitcoin should be used to hedge against this risk. 

National Center for Public Policy Research proposes BTC treasury to Amazon

Wholesale prices rose more than expected in November, adding to a string of sticky inflation prints. Thursday's report from the Bureau of Labor Statistics showed that its producer price index (PPI) — which tracks the price changes companies see — rose 3% from the year prior, up from the 2.4% in October and above the 2.6% increase economists had projected. This marked the highest year-over-year increase since February 2023. On a monthly basis, prices increased 0.4%, compared to the 0.2% seen in October. 

PPI shows wholesale inflation jumped more than expected amid 'extended and bumpy journey' to Fed's target

PayPal Holdings, Inc. (NASDAQ: PYPL) announced it is enabling its U.S. merchants to buy, hold and sell cryptocurrency directly from their PayPal business account.  At launch, this functionality for Business Accounts will not be available in New York State. Today's announcement is PayPal's latest step to increase cryptocurrency's utility by making increased functionality available to millions of merchants in the U.S. 

PayPal lets US business accounts buy and sell crypto

Collectively, Americans now owe a record $1.17 trillion on their credit cards, according to a new report on household debt from the Federal Reserve Bank of New York. Credit card balances rose by $24 billion in the third quarter of 2024 and are 8.1% higher than a year ago.Despite that increase, credit card delinquency rates improved — with 8.8% of balances transitioning to delinquency over the last year, compared with 9.1% in the previous quarter, the New York Fed found. That change could “suggest that rising debt burdens remain manageable,” the New York Fed researchers said on a press call Wednesday.

Credit card debt hits record $1.17 trillion, New York Fed research shows

The U.S. budget deficit swelled in November, putting fiscal 2025 already at a much faster pace than a year ago when the shortfall topped $1.8 trillion, the Treasury Department reported Wednesday. For the month, the deficit totaled $366.8 billion, 17% higher than November 2023 and taking the total for the first two months of the fiscal year more than 64% higher than the same period a year ago on an unadjusted basis. The increase came despite receipts that totaled $301.8 billion, about $27 billion more than last November. Outlays totaled $668.5 billion, or nearly $80 billion more from a year ago. The increase in red ink brought the national debt to $36.1 trillion as the month drew to a close.

Budget deficit swells in November, pushing fiscal 2025 shortfall 64% higher than a year ago

Federal Reserve Chair Jerome Powell finds himself in a difficult place that no central banker wants to be: working to avert a credit crunch, which calls for looser monetary policy, while fighting high inflation, which demands the opposite. Strains in the banking industry, which followed the collapse of three midsize lenders this spring, help explain why some central bank officials are leaning toward holding interest rates steady at their meeting this week—even though the economy and inflation haven’t slowed as much as they expected.
But current and former central bankers say if stresses worsen, the Fed will face a more difficult trade off. Powell and his colleagues would have to choose between focusing on failing banks or high inflation.

Jerome Powell’s Big Problem Just Got Even More Complicated

Investing.com -- The Federal Reserve may need to implement more aggressive rate cuts as recent data reveals a concerning trend in the labor market, according to Citi analysts in a note Wednesday. The bank said the percentage of individuals finding "jobs hard to get" is increasing, signaling that the rise in unemployment is not merely a sign of a growing labor supply but an indication of weak hiring conditions.  Citi notes that this trend, observed in the Conference Board survey, is reminiscent of the conditions in September 2001, a period when the U.S. economy was already in recession. This situation suggests that a “hard landing” could be imminent, making further aggressive rate cuts from the Fed more likely, says the bank.

Fed may have to cut aggressively as individuals finding jobs hard to get is rising

Banking giant JPMorgan Chase and 40 other US banks are testing the Federal Reserve’s new instant payment infrastructure called FedNow. According to a new Federal Reserve press release, 41 banks and 15 service providers are wrapping up FedNow test trials ahead of an official launch of the service, which is scheduled for late July. According to the Federal Reserve, the FedNow Service aims to enable businesses and individuals to send and receive instant payments anytime.

JPMorgan Chase and 40 Other US Banks Conducting FedNow Trial Runs Ahead of the Instant Payment Service’s Launch

India’s largest private lender HDFC Bank has completed its merger with Housing Development Finance Corporation, the country’s biggest mortgage lender. The merged entity will be the world’s fourth largest bank, behind JPMogran Chase, Industrial and Commercial Bank of China and Bank of America, according to Soumya Rajan, CEO and founder of Mumbai-based Waterfield Advisors.  HDFC Bank announced in April last year that it will be acquiring its parent company Housing Development Finance Corporation, the largest home financing lender in India, in a $40 billion all-stock deal. 

India’s HDFC Bank completes $40 billion takeover of the country’s largest mortgage lender. Here’s what it means

Rising interest rates, losses on commercial real estate and heightened regulatory scrutiny will pressure regional and midsized banks, leading to a wave of mergers, sources told CNBC. Some of those pressures will be visible as regional banks disclose second-quarter results this month. Firms including Zions and KeyCorp already have warned of sinking revenues. Half the country’s banks will likely be swallowed by competitors in the next decade, according to Fitch analyst Chris Wolfe. “Some of these banks will survive by being the buyer rather than the target,” said incoming Lazard CEO Peter Orszag. “We could see over time fewer, larger regionals.”

The American banking landscape is on the cusp of a seismic shift. Expect more pain to come

A recent article was quoted as saying "that Wall Street is coming for crypto, whether early believers like it or not." Something has changed, and maybe the biggest change is that treasury managers want to use cryptocurrencies. If the customer wants it, then the big banks have to service it and there’s the rub. The big banks have stirred and incorporated digital assets, and specifically cryptocurrencies, into their remit. And then you know that cryptocurrencies are going mainstream when Standard and Poor’s (S&P) start to rate them. They don’t do that today, but they are moving that way. 

The moment you realise crypto has gone mainstream

SVB Financial Group has sued the US Federal Deposit Insurance Corporation in a bid to recover $1.9bn in cash that the regulator has kept since it took over the group’s banking subsidiary in March. SVB Financial Group, a parent holding company, filed for bankruptcy in March after Silicon Valley Bank became the ward of the FDIC following a $42bn bank run. SVB Financial said retention of the cash by the FDIC violated US bankruptcy law.


SVB Financial sues US banking regulator to recover $1.9bn

JPMorgan Chase executives warned that tougher regulations in the wake of bank failures this year would raise costs for consumers and businesses.  JPMorgan CEO Jamie Dimon said that other financial players could end up winners. “This is great news for hedge funds, private equity, private credit, Apollo, Blackstone,” Dimon said, naming two of the largest private equity players. “They’re dancing in the streets.”

Dimon says private equity giants are ‘dancing in the streets’ over tougher bank rules

A TD Cowen analyst views MicroStrategy as “an attractive vehicle for investors looking to gain bitcoin exposure." TD Cowen analyst Lance Vitanza, who initiated coverage on the Michael Saylor-led firm last Wednesday with an outperform rating, praised the company for its “hybrid corporate strategy.” MicroStrategy is known for converting all of its earnings from its core software intelligence business into bitcoin. This approach represents a “paradigm shift,” he wrote in a note to investors.

Bullish MicroStrategy Analysts Raise Price Targets Ahead of Q2 Earnings

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

The biggest fintech news of the week centered around Better.com’s no good, very bad public market debut. Or as my friend and colleague Alex Wilhelm described it, Better.com had a Miserable.com week. To sum it up, digital mortgage lender Better.com made its public debut on August 24. To no one’s surprise, the stock wasn’t exactly a hit with public investors. In fact, it was a resounding bomb. As of Friday, August 25, the stock had closed a mere $1.19. Shares of SPAC partner, Aurora, were trading at $17.45 on Wednesday, before Better.com officially went public. This is a company that two years ago had planned to go public at a $7.7 billion valuation.

Better.com’s public market debut was Miserable.com

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

Moody's on Friday lowered its outlook on the U.S. credit rating to "negative" from "stable" citing large fiscal deficits and a decline in debt affordability, a move that drew immediate criticism from President Joe Biden's administration. The move follows a rating downgrade of the sovereign by another ratings agency, Fitch, this year, which came after months of political brinkmanship around the U.S. debt ceiling.

Moody's turns negative on US credit rating, draws Washington ire

Norway's central bank surprised markets by raising its key policy rate Thursday, saying that a final hike in the current cycle was needed to ensure that inflation doesn't remain too high for an extended period. Norges Bank increased its key policy rate by 25 basis points to 4.50%, versus a Dow Jones poll before the decision that had pointed to an unchanged rate of 4.25%.

Norway Central Bank Surprises With Quarter-Percentage Point Rate Hike to 4.5%

Europe’s central bankers may be privately cursing Federal Reserve Chair Jerome Powell for the dovish press conference he delivered on Wednesday. “Who wants to hang on for too long,” asked an ailing European Central Bank President Christine Lagarde at the central bank’s post-decision press conference on Thursday, in response to the third question she received about Powell’s tone. But Lagarde said over and over that the ECB wasn’t about to “lower our guard” and claimed the governing council did not even discuss rate cuts.

ECB’s Lagarde, Bank of England’s Bailey fight back against rate-cut talk

Corporate spend management giant Brex has laid off 282 people (20% of its workforce) and revealed that its COO and CTO are leaving their roles.In a message to employees, shared on the company's blog, co-CEO Pedro Franceschi says the job cuts as part of a restructuring to become a "high-velocity company". Franceschi says the axe is being wielded following a hard look at the company's structure that will result in fewer management layers.

Brex axes 20% of staff

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

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 federal IOU is now at $34.5 trillion, or about $11 trillion higher than where it stood in March 2020. Chatter has spilled into government and finance heavyweights, and has one prominent Wall Street firm wondering if costs associated with the debt pose a risk to the stock market rally. The CBO estimates that debt held by the public compared to GDP will rise to “an amount greater than at any point in the nation’s history.” Fed Chair Jerome Powell said recently that “this is something that elected people need to get their arms around sooner rather than later.”

Soaring debt and deficits causing worry about threats to the economy and markets

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

“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

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

FTX has reportedly sued former Trump administration official Anthony Scaramucci to recover creditor funds. The suit was one of several filed by the bankrupt cryptocurrency company in its efforts to claw back money owed to its creditors, TechCrunch reported Saturday (Nov. 9). In addition to Scaramucci’s SkyBridge Capital, other defendants include Crypto.com and Fwd.us, a lobbying group backed by Mark Zuckerberg. According to the report, FTX says it is seeking to recoup money that was part of “a campaign of influence-buying” by founder and CEO Sam Bankman-Fried, carried out as the company was struggling to cover its cash flow needs. 

FTX Sues Anthony Scaramucci to Recover Creditor Funds

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

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

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

The Bank of England joined the growing list of policymakers and market participants concerned about the booming $1.6-trillion private credit market. The central bank’s Financial Policy Committee on Wednesday highlighted riskier types of corporate borrowing such as private credit and leveraged lending as particularly vulnerable to “sharp revaluations” in credit markets, as higher interest rates could make it harder for companies to refinance debt.

Bank of England Issues Warning on Private Debt, Leveraged Loans

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