The financial crisis a decade ago exposed the considerable challenges of resolving large, globally active banks. In the United States, the Federal Deposit Insurance Corporation – which has insured deposits and resolved failed banks since the Great Depression era – is one of the agencies leading the resolution planning effort. The chairman of the FDIC discusses the Corporation’s current bank resolution tactics in a global environment.
In March, the US Senate reformed the 2010 Dodd-Frank Act by loosening its tight regulations on smaller financial organizations, welcome relief for those firms that have been struggling for eight long years with requirements targeted for larger, systemically important institutions during the aftermath of the 2008 financial crisis. Most are upbeat about the Senate bill, but how will it fare in the House of Representatives?
U.S. banks are highly profitable and supporting of economic activity, as they were prior to the 2008-09 financial crisis. It is important to remember how quickly conditions can change. As a result of post-crisis prudential reforms, banks have bolstered their capital and liquidity. It is essential to preserve these hard-won improvements. It would be a mistake to assume that a severe downturn or crisis cannot happen again.
Often ambitious fintechs are viewed as competitors to traditional banks rather than potential partners. It is true that these agile newcomers can do what banks can do better in some specific areas, but incumbents still have many advantages over these disruptors, and what often works best is when the two work together.