CrowdStrike outage, the fight against fraud: Top banking news July 2024

July 31, 2024 10:30 AM

Enjoy complimentary access to top ideas and insights — selected by our editors.

In this month's roundup of top banking news, how the widespread CrowdStrike outage affected banks of all sizes, JPMorgan Chase's new tech bet for combating rising fraud, what Project 2025 could mean for bankers and more.

Click here to read last month's roundup of banking news.

<i>Eva Marie Uzcategui, Bloomberg</i>

How Project 2025 would affect bankers

Article by Claire Williams

WASHINGTON — A powerful conservative organization with advisors close to former President Donald Trump is proposing a full-scale overhaul of the federal government, including the role it plays in the banking system, upping the stakes for bankers in the 2024 presidential election.

In 2016, Trump won the presidency as a relative unknown in banking policy circles, said Ed Mills, managing director and Washington policy analyst at Raymond James.

"And the banks woke up the day after the election without knowing virtually anyone in the Trump orbit, and they didn't have a plan about what they wanted to ask for from the Trump administration," he said. "Neither Trump nor the banks are going to make the same mistake this time."

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MARCOS OSORIO/OSORIOartist - stock.adobe.com

Surge in counterfeit checks prompts outcry from small community banks

Article by Kate Berry

Mark Harrell, the president and CEO of CNB Bank in Berkeley Springs, West Virginia, was so alarmed by the number of counterfeit checks the bank had received in the past year that he felt compelled to show the fake checks to the bank's board.

CNB's in-house fraud experts lined up the counterfeit checks — fakes that the bank had taken losses on — with real checks, side-by-side.

"We presented the checks to the board and said, 'Here's a good one, here's a bad one,' to share with them what we're up against," said Harrell, of the nine-branch, $622 million-asset bank. "It certainly served as an education for the board to see that."

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JPMorgan Chase & Co. Ahead Of Earnings Figures

Angus Mordant/Bloomberg

How JPMorgan Chase is fraud-proofing its branches

Article by Carter Pape

The head of identity for consumer and community banking at JPMorgan Chase said in June that the bank is bringing more technology into its branches to ward off fraud and make life easier for tellers tasked with identifying it.

JPMorgan Chase is moving robust identity checks to the start of interactions inside branches by having each customer prove their identity at kiosks that ask for their account password or identification documents, rather than having a teller check the customer's driver's license by hand. That's according to Stefan Schubert, the bank's head of identity for consumer and community banking, who spoke at a roundtable at American Banker's Digital Banking conference in Boca Raton, Florida, in June.

The change is part of the bank's overall strategy of expanding its branch network, which it has done faster than any other large national bank in recent years, and renovating roughly 1,700 branches to establish a new customer experience.

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JHVEPhoto - stock.adobe.com

Discover settles $1.2B loose end ahead of Capital One merger

Article by Polo Rocha

Discover Financial Services expects to pay $1.2 billion to settle a lawsuit from merchants that it overcharged for years, clearing a hurdle ahead of its proposed mega-merger with Capital One Financial.

The credit card company, which disclosed the news in early July, had already set aside the money to cover the refunds it will pay under the agreement.

The settlement clears up one of the legal headaches that Capital One would have to resolve if regulators approve the merger.

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CrowdStrike CEO George Kurtz

David Paul Morris/Bloomberg

Tech issues afflict banks, Microsoft after critical CrowdStrike glitch

Article by Carter Pape and Miriam Cross

Early in the morning on July 19, a buggy software update issued by CrowdStrike began causing some Windows users to boot their computers into the blue screen of death. The problem appeared to also be affecting Microsoft Azure, the company's cloud services offering.

Australian and New Zealand banks reportedly experienced outages to online banking services during the day. Airlines experienced a spike in delays and flight cancellations at the onset of the errors just after midnight East Coast time. NBC News, Sky News and several Australian broadcasters temporarily stopped broadcasting live content.

The problem seems to have had a mixed impact on U.S. banks, but the financial services sector had not suffered any systemic impact, according to the Financial Services Information Sharing and Analysis Center, or FS-ISAC, a consortium of roughly 5,000 financial services companies advancing cybersecurity and resilience. The consortium's members collectively have $100 trillion in assets.

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Old Glory Bank - board members Larry Elder, Mary Fallin, Ben Carson

Bloomberg

'Anti-woke' bank hit with FDIC consent order as losses mount

Article by Catherine Leffert

A small bank that touts patriotism and its "anti-woke" services was hit by a federal regulator with a consent order after posting losses during its first year of operation.

The Federal Deposit Insurance Corp. announced in late June that it entered the enforcement action with Old Glory Bank on May 1, calling for the Oklahoma bank to increase its capital, update its business strategy projections and implement technology audit policies.

Mike Ring, the bank's president and CEO, said that Old Glory is in "a very good spot" on making progress to address the regulator's concerns.

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Inside Vornado's Penn District Development Project

Stephanie Keith/Bloomberg

Banks may see higher office loan losses than they expect: Moody's

Article by Catherine Leffert

While banks' solid underwriting of office loans is largely keeping credit issues in check for now, some lenders may need to ramp up their reserves to cover the possibility of loans flopping, according to a recent analysis by Moody's Ratings.

The loan-by-loan analysis of 41 anonymous banks' commercial real estate portfolios outlines the spectrum of pain that institutions are facing. Even though Moody's found that banks' underwriting was more conservative than the ratings firm had anticipated, the higher-for-longer interest rate environment is increasing the need for banks to shore up their capital, said Stephen Lynch, vice president and senior credit officer at Moody's.

"If that continues to stay elevated, it's going to put pressure on all asset classes, Lynch said. "It made us re-assess the risk levels of these banks with higher CRE concentrations. Even if underwriting for a particular institution was good, how do you compensate for that higher asset risk?"

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Outages Roil Banks, Airlines, Crowdstrike Shares Plunge

Andrey Rudakov/Bloomberg

CrowdStrike hints at root cause of sweeping IT outage

Article by Carter Pape

During a widespread IT outage that started on July 19 because of an issue with CrowdStrike's cybersecurity software Falcon Sensor, the company acknowledged a "content update" lay at the heart of the fiasco. The following day, the company offered a few additional details and promised more information to come.

The July 20 blog post discloses that a "logic error" in an updated file led to the blue screen of death on Windows systems, but details on how this logic error occurred remain unclear. The company is conducting a root cause analysis, the blog post reads. It has not provided a timeline for publishing this analysis.

The error prevented numerous Windows users from logging into their computers, including at Fifth Third Bank. At TD Bank, digital systems were disrupted. Synovus Financial had to implement "contingency plans" to minimize disruptions to clients. All branches and bank offices of Canandaigua National Bank, a $5 billion institution in Canandaigua, New York, were affected.

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Senator Richard Blumenthal

Graeme Sloan/Bloomberg

Lawmakers say banks aren't doing enough for Zelle fraud victims

Article by Claire Williams

WASHINGTON — Sen. Richard Blumenthal, D-Conn., the chairman of the Senate Permanent Subcommittee on Investigations, said banks should fully reimburse victims of fraud on Zelle, at the culmination of a monthslong investigation into the payment app.

Senate Democrats, in a report led by Blumenthal and in an accompanying hearing late in the afternoon on July 23, argued that banks who own and operate peer-to-peer payment network Zelle should do more to help fraud and scam victims.

"While this problem affects all peer-to-peer apps, nowhere is it more problematic than on Zelle, which is the largest of them," Blumenthal said. "Sending a payment on Zelle is fast, easy and irreversible. Zelle and the big banks who own it know that its speed and convenience makes it a target, and they're well aware that every day some of their customers will be hurt."

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Anna Rose Layden/Bloomberg

What banks should know about SCOTUS' 'swipe fee' ruling

Article by John Adams

The Corner Post is a relatively remote gas station in Waterford City, a town of about 6,000 people in western North Dakota. But it's become the center of the universe for how businesses in financial services, payments and dozens of other industries can challenge regulations.

The Supreme Court ruled 6-3 on July 1 that The Corner Post can sue over a 2011 Federal Reserve rule that governs "swipe fees," or the funds that businesses pay banks for debit card payments. An appeals court in St. Louis had earlier ruled The Corner Post could not sue the Fed because it missed a six-year statute of limitations. The gas station began accepting debit cards when it opened in 2018, or seven years after the 2011 rule. The ruling in effect rejected the statute of limitations.

As a result of the ruling, timing will not necessarily hinder firms that are filing a grievance, suit or some other form of legal protest against a regulation.

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