Happy Sunday,

Rising Treasury yields may mean Fed doesn’t need to raise rates. FDIC proposes governance guidelines for banks over $10Bn. CFPB warns of payment market consolidation and continues war on “junk fees.” Credit unions see delinquencies, charge-offs rise. Synapse’s mass layoffs. Braid calls it quits. JPMC’s Tokenized Collateral Network.

New here? Subscribe here to get our newsletter each Sunday. For even more updates, follow us on Linkedin (PeerIQ, a Cross River Company).

To Hike or Not to Hike?

Fed officials are warming to the idea another rate hike may not be necessary, thanks to the recent spike in Treasury yields. Vice Chair Philip Jefferson spoke at a conference last week, acknowledging the Fed would take into account “tightening in financial conditions through higher bond yields” when considering future interest rate policy decisions.

Still, that view is not unanimous. While Atlanta Fed President Bostic has said that he believes current rates are sufficient to get inflation back to its 2% target, others disagree. Fed Governor Michelle Bowman has argued rates need to go higher to get inflation under control. Bowman has pointed to high energy prices as a risk to reversing some of the progress made on inflation in recent months.

Image: Bloomberg

FDIC Proposed Governance Guidelines for Larger Regionals

Last week, the FDIC proposed guidelines that would require larger banks under its supervision, those with over $10Bn in assets, to develop and implement risk management strategies to ensure compliance with consumer protection regulations and banking safety and soundness principles. The proposal would require a risk management framework consistent with a bank’s size and complexity. It also would direct institutions to implement a “three line of defense” approach, which consists of business unit-level controls, an independent risk management program that reports into a chief risk officer, and an internal audit function.

Of the guidelines, FDIC Chair Martin Gruenberg said, “The proposed guidelines would clarify the FDIC’s expectation that corporate governance and risk management frameworks need to evolve along with growth, complexity and changing business models and risk profiles of larger IDIs.” Not all FDIC board members agreed with Gruenberg’s view. The vote on the proposal split 3-2 along party lines.

CFPB Warns of Consolidation in U.S. Payments Market, Continues War on “Junk Fees”

CFPB Director Chopra recently warned in a speech at the Brookings Institution that he viewed payments in the U.S. as “lurching toward a consolidated market structure like the one that has emerged in China that blurs the lines between payments and commerce and creates the incentives for excessive surveillance and even financial censorship.” It’s the latest sign that Chopra and the Bureau have “Big Tech” firms that operate in the payments space, like Apple and Google, in their sights. The CFPB is preparing to issue additional orders to “certain larger technology firms” to gather more information on their business practices. The consumer protection regulator is also exploring how regulations like the Electronic Funds Transfer Act (EFTA) could apply to virtual currencies and private “digital dollars.”

In other Bureau-related news, last week, the CFPB continued its war against “junk fees.” This time, it’s excessive” fees for accessing basic account information. The Bureau pointed to a requirement of Dodd-Frank that requires banks and credit unions with over $10Bn in assets to provide users with account information when they request it. The CFPB clarified that it does not expect to seek monetary relief related to the requirement before February 2024.

Credit Unions See Delinquencies, Charge-offs Rise

Credit unions are seeing an increase in delinquencies and charge-offs, as borrowers struggle with household budgets stretched by rising costs. The delinquency rate at federally-insured credit unions stood at 63 bps in the second quarter, up 15 bps compared to the same point in 2022. Auto and unsecured consumer credit have been the hardest hit. Credit card delinquencies jumped to 154 bps from 107 bps the year prior. Delinquencies on vehicle loans rose to 67 bps from 45 bps at the same point in 2022. Charge-offs are also up. Industrywide, the net charge-off ratio rose 24 bps to 53 bps in 2Q23.

Synapse Lays Off 40% Of Staff as it Loses Mercury to Evolve

The banking-as-a-service space is seeing fresh drama, with middleware platform Synapse confirming it has laid off 40% of its workforce, in addition to an 18% cut earlier this year. The layoffs may have stemmed from business banking startup Mercury moving to cut ties with Synapse and work directly with bank partner Evolve.

But the layoffs may be the least of the worries for Synapse and Evolve. Jason Mikula at Fintech Business Weekly reported last week that the partners were blaming each other for challenges in reconciling accounts that appear to have driven a shortfall of some $13Mn in FBO funds. Amid the dispute, Evolve is withholding an approximately $13Mn payment to Synapse and demanded the company fund a $50Mn reserve account.

Shared Banking Account Startup Braid Calls It Quits

Braid, a fintech that aimed to simplify using and managing a multi-user bank account, has shut down. While joint spending accounts are common, the company aimed to solve the challenge of shared accountants for use cases like clubs, sports teams, and housemates/roommates, for example. Founded in the heady fintech days of 2019, Braid raises a total of $10Mn from VCs like Accel and Index Ventures. But, in a widely shared blog post, Braid cofounder Amanda Peyton pointed to various challenges that contributed to the company’s failure, including the difficulty managing key vendor risks in fintech, specifically, sponsor banks.

JPMC Pushes Ahead with Tokenized Collateral Network

JPMorgan Chase is forging ahead with a plan to operationalize its blockchain-based Tokenized Collateral Network. The platform was recently used to execute a transfer between BlackRock and Barclays within a matter of minutes. The Tokenized Collateral Network has the potential to reduce operational friction and provide near-instant settlement, which would reduce the likelihood of settlement failures. JPMC’s TCN is live in production and has a pipeline of additional potential clients and transactions in the works.

In the News:

Americans Have Saved Hundreds of Billions More Than Previously Thought (Bloomberg, 10/10/2023) Revised government data suggests consumers have billions more in savings than previously thought.

Fed’s Barr frames capital reform as final chapter of Dodd-Frank (American Banker, 10/9/2023) Vice Chair for Supervision Barr says Basel “endgame” finishes the job Dodd-Frank started.

Revolut announces major overhaul of primary app account (IBS Intelligence, 10/10/2023) Revolut launched “Revolut 10,” a major update and overhaul of its banking app.

Payments 3.0: Stripe And Adyen Vs. The Others (Forbes, 10/9/2023) How does privately-held Stripe compare to publicly-traded Adyen?

SumUp’s valuation falls as low as $4.1B, as Groupon and others sell off their stakes (Techcrunch, 10/11/2023) Privately-held payments startup SumUp sees valuation fall as investors sell of shares.

Embracing fintech led to trouble for one small bank. So did the aftermath. (American Banker, 10/10/2023) Blue Ridge Bank has seen its shares get hammered as it navigates the fallout from a consent order.

Four new clients set to go live on Mbanq’s BaaS platform in Q4 as company reports strong growth (FintechFutures, 10/11/2023) BaaS provider Mbanq ready to go live with four additional clients, revenue doubled vs. 2021.

Lighter Fare:

The most popular Halloween costumes in 2023, according to Spirit Halloween (LocalSYR.com, 10/10/2023) It wouldn’t be October in New York without Spirit Halloween; see this year’s most popular costumes.