Bank layoffs, Navy Federal news: Most-read stories of 2023

December 12, 2023 2:08 PM

In this year's roundup of top banking news for 2023: Navy Federal Credit Union joins The Clearing House's real-time payments network amid ongoing military contract woes, major banks across the U.S. announce staff cuts, regulators shutter Signature Bank and more.

Navy Federal Credit Union received more than $2.7 million in real-time deposits during its first full day on the RTP network earlier this week.

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Navy Federal is now on the RTP network. Will other credit unions follow?

Article by Ken McCarthy

In December, Navy Federal Credit Union joined the RTP network, the instant payments system operated by The Clearing House, making it likely that more credit unions will follow suit.

Out of the nation's nearly 5,000 credit unions, only 111 are now on the RTP network, said Elena Whisler, chief client officer for The Clearing House. The organization's bank ownership could be a stumbling block, as it was years ago for Early Warning Services' Zelle P2P network.

But the presence of the $168 billion-asset Navy Federal, the largest credit union in the world, will help grow the network's volume and reach, Whisler said.

"Navy Federal joining the network highlights the importance that instant payments are playing in digital banking strategies," she said. "And it may put it over the tipping point — if we haven't done so already — when it comes to (credit union) interest in instant payments."

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Charleston, South Carolina, USA - February 28, 2020: One of the Navy Federal bank branch in Charleston, South Carolina, USA, the largest natural member credit union in the United States.

Navy Federal Credit Union won a contract from the Department of Defense to operate the Overseas Military Banking Program. Bank of America had held the contract for 40 years before deciding not to renew it.

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Navy Federal encounters rough seas after winning military contract

Article by Jim Dobbs and Ken McCarthy

U.S. military bases across the globe are about to see a major change on the financial services front.

The Department of Defense has awarded Navy Federal Credit Union a contract to begin operating the Overseas Military Banking Program later this year. The $3.1 trillion-asset Bank of America in Charlotte, North Carolina, has held the contract for the past 40 years.

The program was established after World War II to provide active duty military members with retail, financial and cash services. It provides access to foreign currency, local ATMs, bill pay, savings and checking accounts and other products.

"We're very proud to have been awarded this contract. Supporting active-duty personnel and their families, wherever they are stationed, is at the core of Navy Federal's mission," Mary McDuffie, president and CEO of Navy Federal, said in a press release.

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CBDC projects pick up the pace as 2023 kicks off

Cardshow by John Adams

Progress on central bank digital currencies has been relatively slow. But a flurry of tests near the end of the year suggest CBDC initiatives are improving their pace, as central banks try to determine the impact on traditional banking and payment systems.

About a dozen CBDCs have launched, according to a tracker from the Atlantic Council, which says 17 are in pilot and 72 are in research and development. Eighty percent of central banks are considering a CBDC or have already launched one, according to PwC. There's a mix of motivating factors, such as improving cross-border payments, mitigating financial crimes and improving financial inclusion, reports PwC. Mounting risks from other forms of digital currency, such as volatility in cryptocurrency, are also pushing CBDC projects.

"A well-designed CBDC can help provide a real-time view of risks and currency outflows to help implement specific and targeted measures to prevent financial contagions from spreading further in the event of a crisis," said Gilbert Verdian, founder and CEO of Quant, a London-based blockchain firm.

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Banking on sisterhood: A Black sorority launches a credit union

Article by Frank Gargano

For Members Only Federal Credit Union in Chicago debuted in February as one of the few credit unions sponsored by a fraternity or sorority. Its goal is to foster the development of generational wealth for the Black women connected through Alpha Kappa Alpha.

The sorority itself was founded in January 1908 on the campus of Howard University, a historically Black institution in Washington D.C. Today, AKA has more than 335,000 African American female initiates in 12 counties and boasts notable alumni such as Maya Angelou, Katherine Goble Johnson and Vice President Kamala Harris.

Emma Hayes, who has been an active member of AKA for more than 25 years and is currently chief learning and experience officer for the $51 billion-asset State Employees' Credit Union in Raleigh, North Carolina, explained how the sorority was inspired by its lineage to launch its own financial institution.

"There's a long history of disparity in Black communities [and] this is a way for the sorority to empower people who've been disadvantaged and give them confidence in their financial institution, knowing that it is owned and operated by people who share a common bond, who share common interests and who have a common history," Hayes said. "The credit union philosophy of 'people helping people' is very kindred to the Alpha Kappa Alpha principle of helping each other."

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"We're going to use the same system that enabled prejudice and bias in homeownership to do some good and help people obtain houses," said Democratic Gov. Jay Inslee.

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Washington state will provide mortgage assistance as remedy for historical discrimination

Article by Jordan Stutts

A new state law in Washington will provide homeownership assistance to members of communities harmed by historical policies that restricted fair access to housing.

The law levies a $100 fee on certain documents recorded by county governments to fund a program that will provide qualified applicants with loans to cover down payments and closing costs associated with buying a home.

The program will cover first-time homebuyers who are Black, indigenous, people of color or from other historically marginalized communities.

Applicants must be state residents or the descendants of residents who were excluded from homeownership "by a racially restrictive real estate covenant," according to the law's text.

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FDIC order against Cross River Bank is a warning on fintech alliances

Article by Penny Crosman

The FDIC has slapped Cross River Bank in Teaneck, New Jersey, with a consent order saying it engaged in unsafe or unsound banking practices related to fair lending regulations. The order was issued in March but made public on April 28.

Cross River is a banking-as-a-service provider that makes loans through fintech lenders such as Affirm, Upstart, Rocket Loans and the former Kabbage.

The bank did not admit or deny any charges of unsafe or unsound banking practices or violations of law or regulation.

"The consent order signed by Cross River is narrow and is limited to correcting Cross River's fair lending program in the state that existed in early 2021," a bank spokeswoman said on Friday. "We are dedicated to partnering with the fintech community as part of our mission to reach long underserved communities and give all Americans access to the modern financial services they need and deserve. We have always and will continue to serve as a model for transparent, compliant, fair and responsible lending."

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JPMorgan Chase handles at least twenty-two percent of Zelle transactions, according to Crone Consulting LLC, which estimates that the bank processes over $2 billion in roughly 27 million transactions between as many as 54 million unique users per day.

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Zelle outage at JPMorgan Chase is red flag for banks

Article by Charles Gorrivan

An outage at JPMorgan Chase disrupted Zelle transactions on July 25, inciting user complaints that spilled over into the following day. The fallout for Zelle and its banks could last much longer.

It was the second Zelle glitch in six months that involved a bank tied to Early Warning Services, the P2P app's owner. The JPMorgan Chase interruption follows an outage at Bank of America that disrupted Zelle payments in January. Both banks are among the seven co-owners of Early Warning.

Glitches often occur when digital payments flow through older core banking platforms. That problem could grow as more transactions occur on networks integrated with The Clearing House's RTP network and the Federal Reserve's real-time-payment processing system FedNow.

"Instant is great when it works. But when it's broken, we find out about it right away," said Peter Tapling, a payments consultant and former Early Warning executive. "That intersection of brand-new modern systems, and clunky old bank systems is going to become more evident."

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BMO recently informed California officials about plans for 248 layoffs; USAA told Texas officials in July of plans for 235 layoffs; and Wells Fargo notified Florida officials in July and August of its intention to lay off 105 workers in Orlando.

BMO, Wells Fargo and USAA are latest banks to report layoffs

Article by Kevin Wack

BMO Financial Group, Wells Fargo and USAA have reported hundreds of layoffs to state officials earlier this year as the U.S. banking industry continues to downsize.

The job cuts come as banking executives express caution about the industry's growth prospects in the second half of the year, and as some banks divest certain parts of their businesses.

Between April 2021 and July 2023, total employment in credit intermediation jobs, which include loan officers and tellers at depository institutions, fell by 45,000 to 2.67 million, according to census data.

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Greg Carmichael, who retired as CEO of Fifth Third Bancorp in July, will lead the bridge bank formed after the failure of Signature Bank, the FDIC says.

Regulators shut Signature Bank, pick industry veteran to run bridge bank

Article by Allissa Kline

Regulators shut down Signature Bank in New York on March 12 amid fears of an industry liquidity crisis and tapped a veteran regional bank executive to run the bridge bank that will take its place.

The shutdown of Signature by its state-chartering authority marks the second U.S. bank in three days to be closed by regulators, following the abrupt closure on March 10 of Silicon Valley Bank in Santa Clara, California. The $110.4 billion-asset Signature is the third-largest bank failure by assets ever in the United States, according to Federal Deposit Insurance Corp. data.

The New York State Department of Financial Services took possession of Signature "in order to protect depositors," the department said in a press release the evening of March 12. The FDIC, which was appointed receiver of the bank, said that it has transferred all of Signature's deposits and "substantially all" of its assets to Signature Bridge Bank, which will be operated by the FDIC as a full-service bank while the regulator attempts to "market the institution" to potential buyers.

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How interest rate risk sneaked up on dozens of community banks

Article by Polo Rocha

Silicon Valley Bank was not the only institution that loaded up on bonds at precisely the wrong time.

Dozens of other banks — most of them quite small — are deeply underwater on their bond investments and could hit trouble if they were unexpectedly forced to liquidate the investments. That's according to an American Banker analysis of regulatory filings by the country's more than 4,700 banks.

Many experts say there is very little risk that those unrealized losses could ever turn into a problem, given the many options available to banks and regulators' focus on avoiding that type of scenario. The losses, a result of banks' bonds losing their value when interest rates rose, remain "unrealized" and only theoretical. They would only cause trouble if a bank needed cash and was forced to sell the bonds early for less than it bought them, thus making the losses real.

Several bankers contacted for this story pushed back on any concern that they'd ever need to get rid of the bonds to raise cash. Those bankers said they have plenty of cash available, and that if they ever need more, they could easily borrow from the Federal Reserve and elsewhere. The Fed launched a new program this month aimed specifically at helping banks with underwater bonds.

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