Top banking news this month: June 2022

June 30, 2022 12:00 PM

In this month's roundup of American Banker's favorite stories: Banks address the implications of Roe v. Wade's overturn, Zelle users file class actions against the P2P firm, the Federal Deposit Insurance Corp. announces plans to hike deposit insurance assessment rates next year and more.

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

Supreme Court Overturns Roe v. Wade Abortion-Rights Ruling

Anti-abortion demonstrators gather outside the U.S. Supreme Court in Washington on Friday, the same day a deeply divided Supreme Court overturned the 1973 Roe v. Wade decision and eliminated the constitutional right to abortion.

Valerie Plesch/Bloomberg

Banks weigh in on the overturning of Roe v. Wade

Article by Allissa Kline, Jim Dobbs, Jordan Stutts and Polo Rocha

After the Supreme Court struck down Roe v. Wade on Friday, ending women’s right to abortions nationwide, some banks jumped into a highly charged social policy debate that the industry long sought to avoid.

JPMorgan Chase, Bank of America, Wells Fargo and Goldman Sachs made it known that they are generally following the lead of Citigroup, which recently expanded its health benefits to cover out-of-state abortions. Meanwhile, the CEOs of a number of smaller banks in blue states expressed opposition to the court’s 6-3 ruling, which overturned a 49-year-old precedent.

“I stand in disbelief,” said Laurie Stewart, president and CEO of Sound Community Bank in Seattle. “I’m shocked by this, even though it was predictable given the makeup of the court.”

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Warning signs emerge for neobanks: ‘Doomed to not survive’

Article by Penny Crosman

Ominous signs have been appearing for challenger banks.

A recent study by consulting firm Simon Kucher found that of the 400 neobanks in the world, less than 5% are breaking even. U.S. challenger banks Chime and Varo have hit bumps in the road, Chime because it closed customer accounts due to suspected fraud, Varo because it has suffered steep losses and burned through investors’ cash. The CFPB is examining the bank partnerships, also known as rent-a-bank or rent-a-charter programs, that many challenger banks rely on for legal legitimacy and FDIC insurance.

And challenger banks, like many other types of fintechs, have seen their equity overvalued. All of this is likely to give neobanks’ backers pause as the economy tightens.

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JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon Interview

“Shame on you,” JPMorgan Chase CEO Jamie Dimon told institutional investors on June 1 after they sided with proxy advisory firms that recommended a vote against executive pay packages at the bank. “I mean, seriously, you should be embarrassed, OK? And do your own homework.”

Chris Ratcliffe/Bloomberg

Dimon fires back after shareholders vote down his pay package

Article by Allissa Kline

Jamie Dimon had harsh words on June 1 for institutional investors who vote on corporate matters based on the recommendations of proxy advisory services.

“Shame on you,” the JPMorgan Chase CEO told investors at an industry conference in New York City. “I mean, seriously, you should be embarrassed, OK? And do your own homework.”

Dimon’s comments — which he delivered in response to a question about the board of directors’ strategy for CEO succession planning — came two weeks after the majority of JPMorgan shareholders voted against the bank’s 2021 executive compensation packages for Dimon and other named executive officers.

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San Francisco Workers Slow To Return To Office

A pedestrian speaks on a smartphone on California Street in the financial district of San Francisco in May. From Wall Street to Silicon Valley, companies fearful of losing talent are tweaking or scrapping dictates around how often workers need to be at their desks. Banks have found that lack of flexibility has been one of the biggest barriers to attracting employees.

David Paul Morris/Bloomberg

Why the ‘war for talent’ will last

Article by Jon Prior

Earlier this year, Santa Cruz County Bank decided that its marketing department, which normally would concentrate on attracting new clients, would focus on attracting new employees.

The $1.7 billion-asset bank, nestled along the California central coast, was caught up in the so-called war for talent. It was competing not just with the state’s shifting landscape of larger banking rivals but also nearby technology behemoths.

The issue has become a headache for the banking industry facing demands for higher wages, looser requirements for office hours and a shrinking supply of workers to choose from, according to a recent survey of more than 100 banking professionals, conducted by Arizent and its fleet of publications, including American Banker.

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Adobe Stock

Raising Zelle: Furious P2P users take banks to court

Article by Kate Fitzgerald

Five years after Zelle’s launch, banks are getting hit by a flurry of class actions from consumers who say they aren’t properly protected from scams that make use of the peer-to-peer service.

The lawsuits, which involve a growing number of institutions from Bank of America to Navy Federal Credit Union, underscore the rising popularity of Zelle — which saw a strong increase in adoption during the pandemic — and its use by scammers who target consumers unaware of its risks.

Zelle is advertised as a speedy P2P service for friends and family, and is primarily accessed through a bank or credit union's website or mobile app. Typical Zelle P2P payments are treated like cash — once the money's gone, it's gone, and it's up to the consumer to make sure the funds went to the right place.

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Stefani Reynolds/Bloomberg

What the end of ‘Chevron deference’ could mean for banks

Article by Brendan Pedersen

WASHINGTON — The culmination of a yearslong push from conservative lawyers to undercut the broadest powers of federal agencies could unsettle decades of American banking law and fundamentally reshape the industry’s relationship to its regulators, scholars say.

Much of American administrative law has rested upon a legal principle known as “Chevron deference,” a doctrine borne of a 1984 U.S. Supreme Court case that granted federal agencies a wide berth in interpreting ambiguous congressional statutes. But Chevron deference has come under significant scrutiny in the decades since, and several conservative justices on the Supreme Court today have expressed skepticism for the doctrine.

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Adobe Stock

What’s in a name? A credit union's LGBTQ program finds a wider audience

Article by Frank Gargano

Credit unions that tailor services for members of the LGBTQ community may find an unmet need among other demographics as well.

Michigan State University Federal Credit Union in East Lansing, Michigan, is nearing the finish line on development of a feature within its digital banking platforms and card offerings that will allow members to set a preferred name and set of pronouns. The program, which is expected to go live before the end of the third quarter, is like many others that allow credit card users, for example, to put their preferred name on the card.

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“Better to take prudent but modest action earlier in the statutory eight–year period to reach the minimum reserve ratio of the Deposit Insurance Fund than to delay and potentially have to consider a larger increase in assessments at a later time when banking and economic conditions may be less favorable,” acting FDIC Chairman Martin Gruenberg says.

Drew Angerer/Bloomberg

FDIC plans to raise assessments in face of deposit glut

Article by Claire Williams

The Federal Deposit Insurance Corp. plans to hike deposit insurance assessment rates next year — a move that would increase costs for banks as they continue to see high deposit growth more than a year after the last round of pandemic stimulus.

At a board meeting Tuesday, the FDIC voted to issue a notice of proposed rulemaking that would raise deposit insurance assessment rates by 2 basis points for all insured depository institutions.

Assessments vary based on a bank’s size, condition and other factors. The proposal would have only a “modest” impact on the industry’s profits, about an average estimated annual reduction of less than 2%, FDIC acting Chairman Martin Gruenberg said at the meeting.

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As regulatory and economic troubles build for BNPL lenders, Citizens is focusing on traditional installment lending items like home improvement and electronics.

Bloomberg

Citizens says buy now/pay later lending is best when it stays in its lane

Article by John Adams

When the news started tickling out that buy now/pay later lending was being used at gas stations and supermarkets, it was a signal for Citizens Financial Group to go on offense by espousing its more traditional view of BNPL.

"We've logically stayed away from some of those categories. It's a risk for consumers," said Eric Schuppenhauer, head of consumer lending and national banking for Citizens. "If BNPL goes to where it's just a bunch of layered purchases on top of each other, it's looking like the types of debt that people were using BNPL to avoid in the first place."

Fintech-led BNPL is suffering from both regulatory pressure from a Consumer Financial Protection Bureau investigation and economic heat from falling valuations over concerns that an economic slowdown could cause more people to default on BNPL loans. Regulated banks that have experience in BNPL lending, like Citizens, and firms that work with banks to power BNPL, like Splitit and equipifi, see a chance to draw a distinction.

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Samuel Corum/Bloomberg

Will regulators’ warnings chill lenders’ use of AI?

Article by Penny Crosman

The Consumer Financial Protection Bureau recently issued a fresh warning to lenders that use artificial intelligence in lending decisions, saying they must be able to explain how their models decide which borrowers to approve and provide clear reasons to consumers who are declined.

None of this is new: Fair-lending laws and credit reporting laws have been on the books for 50 years, and there was no reason to think they wouldn’t apply to newer lending software. But in the way that the CFPB and all the national bank regulators have been repeatedly issuing such warnings, they seem to be signaling closer scrutiny of the way banks and fintechs use such software.

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