8 of the biggest issues facing the banking industry today

November 5, 2024 4:15 PM

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It's been an eventful year in the banking industry so far, ranging from a $35.3 billion deal between Capital One and Discover to TD Bank Group's anti-money-laundering troubles and everywhere in between. But the year isn't over yet.

Last month, TD was hit with a $3 billion fine and asset cap by the Office of the Comptroller of the Currency for the Canadian bank's U.S.-based retail operations after pleading guilty to felony money laundering charges — becoming one of the first institutions to do so. As per the settlement with regulators, the bank's businesses in the U.S. cannot have assets in excess of $434 billion.

To comply with the new limitations, TD executives have planned strategic cuts and withdrawals from specific lines of business. Fixing the issues in its AML provisions, however, come first.

"With the asset cap, we want to be much more deliberate," Leo Salom, CEO of TD's U.S. subsidiary, told analysts in October. "Getting this remediation done and getting it done completely and comprehensively is my first priority. ... Nothing else matters if we can't do that."

TD is the second bank in history to receive an asset cap, the first being Wells Fargo and its $1.9 trillion cap from the OCC that has been in place since 2018.

USAA is another organization that has faced legal troubles this year.

The San Antonio-based bank agreed to pay out roughly $64.2 million to settle allegations of overcharging service members in conflict with the Servicemembers Civil Relief Act and other relevant laws.

Roughly 210,000 consumers who had interest rate protections are eligible to receive disbursement under the settlement, in which the bank denies any wrongdoing.

"USAA strongly disagrees with the lawsuit allegations, but this settlement is in the best interest of our membership and allows USAA to avoid lengthy and expensive litigation so we can focus on providing exceptional service," the bank said.

This marks the latest episode in the saga of the bank's interest rate struggles with regulators, which include a $85 million fine in 2020 for numerous violations of the Servicemembers Civil Relief Act uncovered in an exam the year prior.

Catch up on our recent coverage of these and the other issues that banks are watching in 2024.

TD to exit certain U.S. businesses following groundbreaking asset cap

If TD Bank Group has its way, the handcuffs that bank regulators placed on its U.S. retail operations in October won't be a major drag on its overall business.

Overhauling its controls to prevent money laundering across its stateside operations will be costly. TD will also be shackled indefinitely by an asset cap that regulators have only ever used on Wells Fargo, which has been bound to stagnant asset growth for nearly seven years.

But TD executives say the Canadian banking giant can tap its unfettered Wall Street operations and businesses north of the border, even as its U.S. retail lines go through what they called "a transition year."

The Toronto-based bank was slapped on Oct. 10 with a $3 billion fine and the asset cap, which applies to its U.S. retail operations, as part of settlements with U.S. law enforcement and regulators. TD also pleaded guilty to criminal charges after failing to maintain adequate controls for money laundering.

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TD to exit certain U.S. businesses after being hit with asset cap

Check fraud against Chase goes viral on TikTok

A form of check fraud known as check-kiting went viral on TikTok in early September, with JPMorgan Chase customers recording themselves writing a bad check, depositing it at an ATM, then withdrawing cash before the bank could bounce the check.

The scheme was portrayed as a glitch rather than a crime, creating the misunderstanding through seconds-long video clips that customers engaging in the practice would get to keep the money. Other videos showed lines at Chase ATMs of people supposedly looking to try the viral trend themselves.

"Let's go to the ATM, let's go to the ATM, let's go to the ATM," one person said to his friend in a TikTok video reacting to the trend.

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Check fraud against Chase goes viral on TikTok

USAA's $64 million settlement in overcharging court case

USAA has agreed to pay $64.2 million to settle a class action lawsuit that alleged it overcharged thousands of military members who were subject to interest rate protections.

The proposed settlement, outlined in a federal court filing in early August, would resolve allegations that USAA violated the Servicemembers Civil Relief Act and other laws protecting those in the military.

The San Antonio-based bank, which caters to military members and veterans, has denied wrongdoing under the agreement. Some 210,000 people could qualify for the payments if the federal judge in North Carolina approves the settlement.

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USAA agrees to $64M settlement in class action overcharging case

Oklahoma bank fails amid claims of 'false and deceptive bank records'

WASHINGTON — The First National Bank of Lindsay in Lindsay, Okla., was shuttered by the Office of the Comptroller of the Currency and taken over by the Federal Deposit Insurance Corp. on Oct. 18.

First Bank & Trust Co. in Duncan, Okla., assumed the First National Bank of Lindsay's insured deposits. The only office of the First National Bank of Lindsay resumed normal business hours as a branch of First Bank & Trust Co. on Oct. 21.

The OCC closed the bank "after identifying false and deceptive bank records and other information suggesting fraud that revealed depletion of the bank's capital," the agency said in a press release.

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Oklahoma bank fails amid claims of 'false and deceptive bank records'

Capital One acknowledges Discover merger won't close this year

Capital One Financial acknowledged on Oct. 24 that its proposed $35 billion acquisition of rival Discover Financial Services — a deal that faces new antitrust scrutiny from New York state officials — won't be finalized this year.

Richard Fairbank, Capital One's longtime CEO, said he anticipates the Discover transaction will close in early 2025, subject to the approval of shareholders and regulators.

When the Discover acquisition was announced in February, Capital One said the deal was expected to close in either late 2024 or early 2025. It stuck with that timeline until Oct. 24.

"We're working closely with the regulators as our applications continue to work their way through the regulatory approval process," Fairbank said during Capital One's quarterly earnings call. "We remain well positioned to get shareholder and regulatory approvals."

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Capital One acknowledges Discover merger won't close this year

Wells Fargo gets hit with new AML enforcement action

For the second time in recent years, Wells Fargo is in hot water over its efforts to prevent money laundering, with its main federal regulator imposing the latest penalty on Sept. 12.

The Office of the Comptroller of the Currency flagged "deficiencies" at the megabank in an enforcement action released on Sept. 12. The action is a major setback for Wells, which was freed from a separate anti-money-laundering order with the OCC in 2021.

The bank's stock plunged by about 4% later that day after the news. Investors have been hoping that Wells CEO Charlie Scharf, who joined the bank in late 2019, will finally be able to rid the San Francisco company of its numerous regulatory troubles.

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Wells Fargo gets hit with new AML enforcement action

What bankers need to know about Trump's World Liberty Financial

In a video posted on X in September, former President Donald Trump said he will be announcing a new crypto company he's launching with his sons, Eric Trump and Donald Trump Jr., later that month. Eighteen-year-old Barron Trump is reportedly the project's "DeFi visionary."

"We're embracing the future with crypto and leaving the slow and outdated big banks behind," Trump said in the short video about the company, World Liberty Financial.

Trump has pledged during his presidential campaign to turn the U.S. into the "crypto capital of the planet," as he put it in an August video about World Liberty Financial. In combination with the imminent launch of his own crypto venture, the comments raise concerns that, if elected, he might use the federal government to help support a business tied to himself and his family.

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What bankers need to know about Trump's World Liberty Financial

Fed's half-point rate cut: What bankers should know

WASHINGTON — The Federal Reserve lowered its benchmark interest rate in September, officially ending its post-pandemic policy tightening cycle.

The Federal Open Market Committee reduced the federal funds rate by 50 basis points, bringing its target range to between 4.75% and 5%. The policy adjustment was backed by a vote of 11 to 1, with Gov. Michelle Bowman voting against. She preferred a 25-basis-point reduction.

The group also projected that it would ease monetary policy further before the end of the year but with split views about whether one or two cuts would be necessary. There are only two meetings left in 2024, one in early November and another in mid-December.

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Fed's half-point rate cut: What bankers should know