WEDNESDAY MAY 26, 2021 VOL. 186 No. 100 AMERICANBANKER.COM Follow us on Twitter @AmerBanker PNC reports brisk 5 B2B enrollment for real-time payments Weather report More than 250 wholesale clients signed up with the Pittsburgh bank in the past year to The Securities and Exchange Commission asked public use real-time payments for payroll, billing companies for feedback on a climate change disclosure and supply chain management. Page 6 framework, specifically whether the agency should: See story on page 2 Cities work to bring 6 fintech to underserved communities Follow existing international climate disclosure standards Business leaders in Atlanta and San Francisco warn that the digital divide will Require data on activities that have direct and widen if Black-owned companies can’t indirect impact on emissions accept online and mobile payments. Page 7 Fulton Bank partners Tailor reporting requirements for companies 7 with Minority Mortgage based on size Bankers on training The programs from the trade group are Establish industry-specific standards aimed at helping the bank improve its employee representation and workplace Phase in requirements over time culture. Page 8 NCUA takes control of Audit climate disclosures for accuracy 8 Empire Financial Federal Credit Union The National Credit Union Administration placed the New Jersey credit union into dailybriefing How East West CEO conservatorship Monday, citing its “unsafe 3 Dominic Ng is fighting and unsound practices.” Page 8 anti-Asian hate Big banks play ball with SEC on In an interview, the Hong Kong native Challenger bank 1 mandatory climate disclosures spoke about the fears of his employees, 74% 9 Aspiration weighs an IPO Despite concerns about the scope of of whom are Asian American, as well as The fintech’s investors include the actors information that companies would have to about his optimism regarding hate crime Leonardo DiCaprio, Orlando Bloom and provide about risks linked to climate change, legislation President Biden signed last Robert Downey Jr. Page 9 some of the largest institutions are seeking to week. East West and several other banks collaborate with the agency as it develops a have donated to groups working to track Fed should get framework for informing investors. and reduce the recent spike in anti-Asian 10 real about its role (See chart above.) Page 2 violence. Page 4 in crypto’s volatility In addressing systemic risks posed by Fed’s focus on racial ‘It’s very scary’: fluctuating cryptocurrency values, the 2 justice is ‘political advocacy,’ 4 Small banks quietly hit and other central banks must GOP senator says by ransomware attacks acknowledge that quantitative easing has Sen. Pat Toomey of Pennsylvania, the top Hackers, including the group behind the driven up the price of digital assets, Thomas Republican on the Banking Committee, told breach at Colonial Pipeline, have posted M. Hoenig writes. Page 9 three Federal Reserve regional presidents convincing evidence that they have broken that a series of events tied to the impact into the servers of community banks in of racism on the job market and housing Florida and California and stolen customers’ systems is not within the scope of the central data. Page 5 bank. Page 4 WEDNESDAY MAY 26, 2021 AMERICANBANKER.COM PAGE 2

involved. They have frequently targeted more about their companies’ climate risks. CORPORATE GOVERNANCE efforts by the Federal Reserve, which has Just this past week, the administration signaled an interest in climate-related stress issued an executive order calling on financial tests. regulatory agencies to recommend policies Big banks But consistent with large banks’ to ensure that climate change does not harm voluntary efforts to disclose climate change- financial stability. play ball related information and other positions, “I think that increasingly investors really the financial sector so far appears to be want ... to see climate risk disclosures. I think welcoming the SEC’s approach. issuers would benefit from such guidance,” with SEC on “The industry is pretty committed to being Gensler said at his March confirmation helpful in fighting climate change generally hearing. (The agency issued the RFI before mandatory and being constructive around questions he started the job.) “So I think through like: What should a disclosure regime good economic analysis, working with the around climate change or climate-related staff, and putting out to the public to get the climate financial risks look like?” said a source close public feedback on this, this is something at to the industry. the commission, if I’m confirmed, I would disclosures Yet the industry source, who asked not work on.” to be identified, cautioned that financial The SEC’s request for information By Neil Haggerty institutions still have plenty of questions comes as international banks are already May 24, 2021 about how the plan will be implemented. complying with disclosure requirements in WASHINGTON — Faced with the “A lot of it’s just a question of how it gets other countries. The industry is pushing to potential requirement that they inform incorporated into a workable framework,” ensure that U.S. requirements are consistent investors about climate change risks, the source said. with global standards. publicly traded banks so far are taking a On March 15, the agency asked for input “This is happening,” said Isaac Boltansky, collaborative approach as the Securities and on the scope of greenhouse emissions data director of policy research at Compass Point Exchange Commission prepares the new that companies should report, what kind Research & Trading. “There is a push for new climate disclosure regime. of industry-specific climate disclosure disclosures. The odds are, we will see a new Some industry representatives appear requirements should be implemented, disclosure regime, and therefore, it’s almost to embrace the idea, which was raised in a and how the SEC should enforce the new always better to be in the room discussing it request for information issued by the SEC in standards, among other things. than on the outside opposing it.” March. Despite concerns about the scope of Observers say the industry’s potential Analysts argue that banks need to engage the information that the agency will require support for a new climate disclosure with regulators on a new disclosure regime and community bank objections, analysts framework may reflect the reality of the if they want to ensure that new rules aren’t say large banks may initially back the idea government’s approach. too onerous. Banks may be able to influence because they have the infrastructure in The Biden administration has sent a clear the scope of the data that regulators seek to place to comply. signal that it is looking to combat climate collect from public companies. “If you’re JPMorgan or Citi, you have change and SEC Chairman Gary Gensler “We just need a globally aligned more resources and more people in every has said he believes investors want to know approach that is consistent, harmonious department to deal with this,” said Ian Katz, a director at Capital Alpha Partners. “If you are one of the large banks ... you’re far more Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 likely to have shareholders that are making Phone 212-803-8200 AmericanBanker.com these demands than if you are a Main Street bank in the heartland of the United States.” Editor in Chief Alan Kline 571.403.3846 Copy Editor Neil Cassidy 212.803.8440 The SEC has met with representatives Managing Editor Dean Anason 770.621.9935 from large financial institutions after it Reporters/Producers announced it was seeking public input. The Executive Editor Bonnie McGeer 212.803.8430 Laura Alix 860.836.5431, Kate Berry 562.434.5432 details of a specific proposal are still unclear, Washington Bureau Chief Joe Adler 571.403.3832 but publicly traded companies may face Executive Editor, Technology Miriam Cross 571.403.3834 new requirements to inform investors about Penny Crosman 212.803.8673 Jim Dobbs 605.310.7780 their contributions to and risk exposure BankThink Editor Rachel Witkowski 571.403.3857 from climate change. John Heltman 571.403.3847, Allissa Kline 716.243.2679 Community Banking Editor Paul Davis 336.852.9496 Efforts by the government to assess Hannah Lang 571.403.3855 financial risks from climate change Contributing Editor Daniel Wolfe 212.803.8397 John Reosti 571.403.3864, Gary Siegel 212.803.1560 have recently triggered pushback from Digital Managing Editor congressional Republicans, who say the Christopher Wood 212.803.8437 Kevin Wack 626.486.2341 issue is too political for regulators to get

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY MAY 26, 2021 AMERICANBANKER.COM PAGE 3 and builds on the variety of entities and Stanley have pledged to measure and to put in securities documents information existing frameworks,” said Timothy Adams, disclose the impact their lending decisions where you are relying on unverifiable data president and CEO of the International have on climate change. However, JPMorgan from multiple third parties,’ ” the industry Institute of Finance. “The goal at 100,000 Chase last year resisted calls from activist source said. feet is consistency, harmonization, investors to take stock of how its lending For banks in particular, a climate standardization and avoiding activities impact climate change. disclosure framework could be particularly fragmentation.” Dan Crowley, a partner at K&L Gates, complex given the broad scope of their Meanwhile, community banks remain said a problem with the current climate customer base. skeptical of a new climate disclosure regime. disclosures that are available today is that it “The unique challenge for banks is Larger banks may be more equipped to is hard to compare data between companies. that they are in the business of being handle potential new requirements. “One of the concerns we hear from intermediaries, as opposed to directly Paul Merski, group executive vice institutional investors is that something engaging in a particular activity like other president for congressional relations and like 85% of the S&P 500 are now providing companies,” said the first industry source. strategy and the Independent Community ESG disclosures in accordance with the Despite efforts to ensure that disclosure Bankers of America, said he is concerned TCFD principles,” Crowley said. “It’s a standards are consistent internationally, that the agency would impose a requirement voluntary system and the disclosures are not sources close to the banking industry that would be too difficult for small banks to standardized or comparable, which makes worry that U.S. securities laws pose unique meet. (Many of ICBA’s members are publicly it difficult for investors to discern exactly challenges for banks. traded.) what’s going on. And so there’s a push “The SEC framework comes with its own “The last thing that banks need or want from the institutional investor community legal liability framework,” the first source is additional reporting requirements, broadly to standardize those disclosures on said. “Folks want to want to be mindful of particularly on something as complex and an industry-by-industry basis.” what the securities law implications are if a opaque as climate risk,” Merski said. “It Banks would also like regulators to disclosure framework were to go into place.” would be significant because this is brand recognize that the industry may not be The industry’s work with regulators to new, so you’d have to put in all kinds of new capable of disclosing the entire scope of address climate-related risks could put systems or accounting or hire people with activities that potentially contribute to banks at odds with Republicans in Congress. expertise in this area.” climate change. Pat Toomey, R-Pa., the ranking member of While major banking trade groups have The TCFD recommends that banks the Senate Banking Committee, has argued yet to submit letters in response to the SEC’s disclose direct greenhouse emissions that that financial regulators are not suited to request for information, the agency has met occur from sources that are controlled or police climate-related activities. with representatives from JPMorgan Chase, owned by an organization, known as “Scope Sen. Kevin Cramer, R-N.D., has State Street Global Advisors and the Bank 1” emissions, as well as indirect emissions introduced legislation prohibiting banks Policy Institute, according to documents associated with the purchase of energy, from discriminating against legal industries made public by the SEC. known as “Scope 2” emissions. that are politically disfavored. Cramer has Another source close to the industry said The task force says “if appropriate,” banks also met with the CEOs of JPMorgan Chase, banks want to be engaged in the process of should also disclose “Scope 3” emissions. Goldman Sachs, and , constructing the SEC disclosure framework Those are the result of activities from assets urging them to continue to serve the fossil even though it would apply to all public not owned or controlled by firms, but are fuel industry. companies. activities that companies indirectly impact. Despite potential blowback from “Across the banking sector, they really Briget Polichene, CEO of the Institute of Republicans, Boltansky said banks are want to help, they want to do the right thing,” International Bankers, added that regulators putting themselves in a more favorable the source said. should recognize that it will take time for position if they work with regulators on European regulators are ahead of the U.S. banks to be able to comply with a broad developing a workable climate disclosure in devising a climate disclosure regime. The climate disclosure framework. framework. European Commission in 2019 published “With metrics, like Scope 1, Scope 2, “At the moment, [Republicans] don’t have guidelines on reporting climate-related Scope 3, as you go down the line, it gets more the gavel in either chamber, so expect a lot information. and more complicated. So I think there’s of letters, a lot of strong comments during And the Financial Stability Board’s concern that … this is going to be very much hearings, but this is happening,” Boltansky task force on climate-related financial evolving,” Polichene said. “How do you set said. “When I think about ... what Gary disclosures, known as TCFD, has its own up a disclosure framework that takes that Gensler would want his legacy at the SEC voluntary recommendations for how into account?” to be, I truly believe it is the imposition of banks should disclose their climate-related The second industry source said that a more robust disclosure regime relating activities. a Scope 3 reporting requirement could to climate, ESG and diversity. And he’s not Some of the larger banks have already be particularly challenging because it going to leave until that’s done.” been reporting information related to potentially relies on third-party data. activities that contribute to climate change. “I don’t think there is a situation in the Citigroup, Bank of American and Morgan past where the SEC has said, … ‘We want you

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY MAY 26, 2021 AMERICANBANKER.COM PAGE 4

important, nonpartisan mission.” enable police to make more arrests. DIVERSITY AND EQUALITY In a statement, a spokesperson from the The $56.9 billion-asset East West is one Atlanta Fed confirmed that it had received of several banks that have made financial the letter from Toomey. commitments in recent months to groups Fed’s focus on “We look forward to discussing with him that work to track and reduce violence how better understanding racial inequality against members of the Asian American and racial justice helps the Federal Reserve reach its mandate Pacific Islander community. One such group, of maximum employment and ensure Stop AAPI Hate, reported 6,603 incidents economic gains are widely experienced across the country between March 19, 2020, is ‘political across the population, regardless of race,” the and March 31, 2021. spokesperson said. “East West Bank will be very, very actively advocacy,’ The Minneapolis Fed also confirmed that engaging with any other organizations that it had received the letter from Toomey, while will join us to speak out against these types the Boston Fed said it would carefully review of anti-Asian crimes, and hopefully we GOP senator the correspondence. will collectively help to move the country Toomey’s letters to the Atlanta, Boston forward,” Ng said in an interview. says and Minneapolis banks follow a separate The wave of anti-Asian hate incidents has letter he sent in March to the San Francisco sparked particular concern at banks like East By Hannah Lang Fed, accusing the regional bank of “mission West that focus on serving Asian American May 24, 2021 creep” for its research reports on issues communities and have predominantly Asian WASHINGTON — The top Republican on such as environmental, social and corporate workforces. In early January, an elderly the Senate Banking Committee is slamming governance policies. Asian woman who had been assaulted less three Federal Reserve banks for their work “This approach has inserted the Federal than a mile from the bank’s headquarters in to examine the role racism plays in the Reserve into the emotionally-charged Pasadena, California, died from her injuries. economy. political arena — a place where the Federal Roughly 74% of East West’s workforce is In letters to the Fed regional bank presidents Reserve seldom has ventured, and for good Asian American, and Ng said that he worries in Atlanta, Boston and Minneapolis, Sen. Pat reason,” he wrote in the March letter to San about his employees’ safety. He praised them Toomey, R-Pa., argued that a focus on racial Francisco Fed President Mary Daly. for going “above and beyond,” even as they justice is outside of the Fed’s scope. He took commute to work during a pandemic and particular issue with a series of events hosted harbor fears of being attacked. by the regional banks to discuss, among other RACISM “It’s amazing,” Ng said, “that they were issues, how discrimination and racial bias able to overcome their fear and continue to persist in the job market, housing system and provide services to our customers.” the economics field. How East Ng is a Hong Kong native who got an “I recognize the interest in studying accounting degree from the University of economic disparities along demographic West CEO Houston in 1980. He has previously spoken lines, such as race and gender,” Toomey out about discrimination against Asian said in a May 23 letter to Minneapolis Fed Americans, once recalling that when he first President . “However, this Dominic Ng is came to Los Angeles, real estate brokers subject matter is fraught with ideological were paying appraisers to inflate the price of assumptions and interpretations, and the fighting anti- homes sold to Chinese immigrants. work and analysis of the Minneapolis Fed “I’ve seen it all,” he said in a 2017 interview. seems heavily laden with political and value “It’s so ugly.” judgments.” (He sent similar letters to Atlanta Asian hate The recent attacks on Asians in the U.S. Fed President and Boston Fed has unfolded against the backdrop of the President Eric Rosengren.) By Polo Rocha coronavirus pandemic, which originated Toomey also requested that the regional May 25, 2021 in China. Former President Trump used banks provide records related to the planning Dominic Ng, the president, CEO and derogatory terms such as “China virus” that of the 11-part “Racism and the Economy” chairman of East West Bank, is hopeful critics argue have contributed to anti-Asian web series, as well as any memos or emails that a new federal hate crime law will help violence. that “describe or refer to the impetus” behind stem the pandemic-era spike in anti-Asian Ng credited Biden for tackling the violence, each of the regional banks’ focus on racial xenophobia and violence. contrasting his record to the prior four years justice issues. Ng, whose bank has branches in both of anti-Asian rhetoric that he says “woke up “It is not the proper role of the Federal China and the U.S., expressed optimism that the racists” and treated Asian Americans as Reserve to be engaging in political advocacy,” the measure, signed into law last week by “collateral damage.” Toomey said in the letters. “As the nation’s President Biden, will encourage more Asian “Finally, we have a president that is , the Federal Reserve has an Americans to report hate crimes, and also willing to speak up for the Asian American

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY MAY 26, 2021 AMERICANBANKER.COM PAGE 5 community,” he said. David Pollino, data security consultant and Ng’s bank, a unit of East West Bancorp, CYBERSECURITY former data security leader at PNC Financial was among the companies that announced Services Group and at Bank of the West, donations this spring in an effort to combat who reviewed the documents on the Ragnar hate. In March, shootings at three Atlanta- ‘It’s very Locker site. area spas that killed eight people, including The evidence the hackers provided is six women of Asian descent. Prosecutors scary’: “pretty compelling,” but it needs to be in Fulton County, Georgia, allege that 22- verified by the target companies, he said. year old Robert Aaron Long, who is white, “Documents can be forged or compromised targeted some of the victims because they Small banks by a third party.” were of Asian descent. If the hackers present data that only Cathay Bank, which, like East West, quietly hit by includes credit card numbers, account was founded in Los Angeles’ Chinatown, numbers, names, and addresses, for instance, announced a $1 million donation shortly it’s possible the criminals combined data after the shootings. ransomware sets stolen from previous data breaches “While we all believe in the importance with commonly known information, such of the fight against anti-Asian sentiment and attacks as routing numbers, and grouped them by violence, actions speak louder than words,” institution, Pollino said. This would be a way Dunson Cheng, executive chairman of the By Penny Crosman to monetize old data from earlier breaches. $19 billion-asset bank, said in a press release May 24, 2021 Bank security people hit with ransom at the time. “Cathay Bank wants to show our In recent days, two ransomware groups, demands would do well to cross-reference support by providing funds to organizations DarkSide and Ragnar Locker, have posted the hackers’ data and see if there are many that serve the Asian American communities evidence that they have successfully broken sequential account numbers, or if there’s an and provide invaluable education to the into three small banks’ servers, stolen data internal pneumonic for customers used to community at large.” and demanded ransom. If the ransom isn’t determine if there truly was a fresh attack. Larger banks, including JPMorgan Chase, paid, they say, they will expose more of the They should also validate that information and U.S. Bancorp, have banks’ data. such as card expiration dates and card also announced financial commitments. The evidence, posted on the hacker numbers are accurate. Comerica, the Dallas-based regional bank, groups’ dark web sites, includes screenshots ”Any institution that’s potentially started an Asian Senior Citizens Anti- of customer databases the hackers say they impacted should do its due diligence on the Violence Initiative whose work includes exfiltrated from the banks. This is typical information that’s being published out there distributing personal safety alarms. of ransomware tactics, in which attackers to figure out whether or not that it’s credible,” The hate crimes law, which was sponsored publish some stolen data on their sites to Pollino said. by Rep. Grace Meng, D-N.Y., and Sen. Mazie prove they were successful and to induce the Some security researchers say it would Hirono, D-Hawaii, will add a new position to company to pay the requested ransom. be a waste of the hackers’ time to post false the Department of Justice to help expedite Two of the alleged victim banks in these threats. hate crime reviews. It also aims to encourage cases, which are in California and Florida, “I would be extremely surprised if the more reporting of incidents and seeks to did not respond to multiple requests for banks had not been compromised,” said Brett make it easier to report in multiple languages. comment. The CEO of the third bank, who Callow, threat analyst at Emsisoft, an anti- Biden said last week that too many Asian asked not to have his bank named, said the malware software company based in Nelson, Americans have woken up “each morning bank is investigating the incident and does New Zealand. this past year, genuinely, genuinely fearing not have anything to report yet. Still, hackers do sometimes exaggerate the for their safety.” “It’s scary,” he said. “To be honest with you, amount of data they were able to obtain in an That fear is present for Asian Americans it’s very, very scary. It’s something we can’t attack. during everyday errands, Ng said. He noted control.” “They do that because [ransomware that members of the Asian community now victim] companies are often in a state of worry about how far away they should park Doing it for the money dazed confusion in the early stages of an from their destination, or think about buying The ransomware groups’ postings highlight attack, all their systems are scrambled and it’s fewer groceries at once in order to spend less the fact that banks, even the smallest ones, are really hard for them to work out what data the time outside of the store unloading them, for popular targets of ransomware attacks, which criminals actually obtained,” Callow said. “So fear of being attacked. have become more frequent. According the criminals attempt to use that confusion “That’s very, very saddening, that after to Verizon’s 2021 Data Breach Incident to their advantage and overstate their hand all these years, that with the contributions Report, 10% of all data breaches now involve sometimes. But I’ve never heard of that being Asian Americans have made to American ransomware. a complete bluff.” society, that we end up in this kind of fear and The evidence the hackers posted does Ransomware groups, like most hackers anxiety,” he said. not necessarily prove that these community that try break into bank servers, do it for banks suffered data breaches, according to the money: Verizon’s report found that 96%

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY MAY 26, 2021 AMERICANBANKER.COM PAGE 6 of data breaches at banks and insurance bitcoin, but it adds an extra 20% fee on top of Countries would need to enact laws making companies are financially motivated.the ransom demands to do so. such payments illegal. Community banks may be a special target Colonial, which brought in help from the “These attacks happen because they for ransomware hackers because they tend security firm Mandiant, paid its $4.4 million are profitable,” he said. “If you make them to have smaller security teams and limited ransom in bitcoin, which means the company unprofitable, they will very quickly stop. resources to cope with such attacks. paid about $500,000 more than it needed to, That’s an extreme solution, but there would “Like legitimate enterprises, ransomware Callow said. be long-term benefits. And the alternative gangs will continue to use strategies that After the payment was made, DarkSide’s is, public and private sectors continue to have proven to be successful,” Callow said. “If website came down and the money that be attacked by ransomware criminals who attacks on a particular sector have proven to was put in DarkSide’s wallet was redirected are getting bolder, more brazen and more have a better-than-average conversion rate elsewhere. accomplished in their attacks with each or return on investment, they’ll attack that passing day.” sector again and again and again and again. Will the government help? The groups are driven by economics, and that The government tends to take punitive makes them somewhat predictable.” action around data breaches on banks, REAL-TIME PAYMENTS including levying large fines. For instance, Incident response suffered a data breach in When banks determine they have been July 2019 in which data on 100 million PNC reports breached, they are required under most customers was compromised. More than states’ laws to notify every customer whose a year later, the Office of the Comptroller brisk B2B personally identifiable information may have of the ordered the company to been compromised. (Personally identifiable pay an $80 million fine, citing its “failure to information describes combinations of data establish effective risk assessment processes enrollment elements that could identify a consumer, prior to migrating significant information such as name plus Social Security number, technology operations to the public cloud for real-time or account number plus credit card number.) environment and the bank’s failure to correct In addition to disclosing a breach to the deficiencies in a timely manner.” affected customers and regulators, a victim Pollino is hopeful that an executive order payments bank’s security department has to take many signed by President Biden on May 12 will other steps. end up helping banks hit with ransomware By John Adams “Remediating the incident is a complex, and other data-breach attacks. It will set May 25, 2021 multiweek or multimonth process,” Callow up a national Cyber Safety Review Board The past year has seen the emergence of said. “It’s a matter of identifying how the that will review and assess threat activity, what PNC Financial Services Group’s Chris attackers got in, closing that door, restoring vulnerabilities, mitigation activities, and Ward calls the “immediate economy,” and the systems. That’s not easy.” agency responses to cyber attacks. that has made all the difference for the bank’s Callow spoke last week with someone “That will give us not only better tools to real-time payment program. at a U.S. school district that suffered a completely understand breaches, but also be More than 250 of the bank’s wholesale ransomware attack in October. able to effectively respond to them with more clients are now regularly using PNC’s “They’ve still got some systems that they resources, especially if you’re talking about connection to The ’s RTP haven’t been able to fully restore,” Callow smaller institutions or smaller companies network, which is up from just a handful a said. “It’s a nightmare. Lots and lots of that don’t have the forensics and response year ago. companies underestimate just how difficult resources that larger companies have,” he “As so much more gets digitized, there’s recovery is going to be.” said. “I’m cautiously optimistic that the more of a need to have funds immediately,” And someone in the company has to make recent presidential executive order will be said Ward, who is the executive vice president the difficult decision of whether to pay the positive for the cybersecurity community and and head of product for treasury management ransom the hackers demand. hopefully lead to some more investments in at PNC, which is connected to both TCH’s The CEO of Colonial Pipeline opted to pay. security.” RTP network and the bank-backed Zelle He told The Journal he authorized A common view is that the only way to peer-to-peer transfer app. a $4.4 million ransom payment “because stop the spread of ransomware is to prevent The quick uptake stems from a wish to executives were unsure how badly the cyber victims from paying the ransom. While that improve liquidity for supply chains, and to attack breached its systems and how long it could cause some short-term pain for the support alternative payrolls as firms add early would take to bring the pipeline back.” company under attack, the thinking is that wage access and hire more contract workers, But according to Callow, the surrounding if firms stop paying, hackers would have no breaking away from the traditional two- circumstances were unusual. Most financial incentive to commit breaches and week wage cycle. The bank is also building ransomware payments to DarkSide are made demand ransom. a bill-pay feature that supports real-time in the cryptocurrency XMR, which is hard “I think the only solution is to prohibit payments, enabling a request for payment, to trace. The group does accept payments in the payment of ransomware,” Callow said. disbursement and account availability

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY MAY 26, 2021 AMERICANBANKER.COM PAGE 7 almost simultaneously. initiatives globally. But there’s still debate could exclude underbanked consumers. The “The benefits you get for having a fast over a direct revenue benefit for real-time other side of this issue is that small businesses confirmation versus a wire, where there can payments via fees, or an indirect incentive could themselves be left behind as their more be delayed settlement, are immense,” Ward through a value-added service that draws deep-pocketed rivals cater to consumers’ said. “That has really contributed to a different more revenue. new digital habits. way of thinking about execution. We’re really At a recent European Central Bank forum, Digital payment technologies “are some just touching the tip of the iceberg with real- Fabio Panetta, a member of ECB’s board, of the most timely, most relevant solutions time bill pay.” railed against the potential of bank fees to in business history,” said Melvin Coleman, The past year’s economic crisis and mass curtail demand for real-time payments. executive director of the Atlanta Black digitization of business have required firms That would hinder ECB’s efforts to produce Chambers. “They allowed us to continue to to move funds faster and with better visibility, a payment network to rival the American transact business and operate safely during and once real-time payment is seen as a payment companies that do business in a pandemic. Now that these enhanced problem solver, it’s easier to deploy. Europe. processes exist, many consumers expect to “In a large number of cases, the person who In the U.S. TCH has a flat fee structure utilize them going forward. It’s a whole new is sending or receiving doesn’t even know for all financial institutions on the network, world now.” the RTP network exists,” said Steve Ledford, regardless of volume or size; the fee for an Atlanta Black Chambers is a nonprofit senior vice president of products and strategy institution that sends one real-time payment group of business, community and at The Clearing House. “They just know the is the same as one that sends 100,000. There is government leaders that advocates for funds can be sent immediately.” no fee to receive a real-time payment, and the sustainable Black-owned organizations, The Clearing House introduced its RTP fee to send a transaction is 4.5 cents. including education and training programs. system in 2017, and has acted as the primary The RTP also does not have operator fees to ABC helps businesses deploy new technology, rail for real-time payments in the U.S. The receive payments, and it includes incentives which during the pandemic often meant Federal Reserve’s real-time rail, FedNow, is for retail banks that respond to requests for bringing digital ordering, payments and not expected to launch until 2023 or 2024. payments, or RfP. Since most institutions business management to traditionally brick- The RTP network has 123 members, and are currently in receive-only mode, there are and-mortar operations. recently partnered with Early Warning’s Zelle generally no fees for real-time payments. This work is being done against a backdrop to allow banks to speed settling for real-time The Clearing House does not comment of a racial gap in access to technology and P2P payments. PNC and Bank of America on or attempt to influence the ways financial a disproportionate impact of the economic were among the earliest banks to use the institutions charge for any of its services, downturn. The number of working business Zelle/RTP combo. Ledford said. Real-time payments have owners fell from 15 million to 12 million “What deals like this do is demonstrate the produced fee revenue at PNC, Ward said, but in the spring of 2020, the largest drop on benefits of real-time payments,” Ledford said, he did not offer additional detail. record, according to the National Bureau adding the RTP network is adding several new of Economic Research, which found Black banks each week. “When we launched there business owners experienced the largest loss, was a lot of promise but many could not see FINANCIAL INCLUSION with a 41% drop in active business owners. the value. But a lot of use cases have emerged, Latinx business owners fell by 32% and including things we haven’t thought about.” women business owners fell by 25%. As an example, Ledford mentioned The Cities work There’s also a general technology gap Clearing House’s recent partnership with that impacts consumers, small business Mazooma, a Toronto-based online gaming to bring entrepreneurs who often rely on their own firm, to allow gambling winnings to be personal technology and the ability of those instantly deposited into the recipient’s bank owners to hire staff. account. fintech to Research from Securities The Clearing House is focused on finding found 76% of Black people could get shut out new ways to use the real-time rail. A future underserved of 86% of jobs in the next 25 years because deployment will allow Zelle identifiers to of a lack of access to technology. The U.S.’s support bill payments. There are additional five largest technology firms could address use cases emerging, such as insurance communities that by investing $15 billion in education disbursements, payments for mortgage and projects to ensure wider access to closings and alternative payroll practices. By John Adams technology. That’s less than 1% of the largest “The more institutions can see how May 24, 2021 five technology companies’ market cap other banks or fintechs are using real-time As digital commerce expands, cities must expansion of $2 trillion during the pandemic, payments, the more it draws attention to how be mindful that the tech that kept businesses according to Deutsche Bank Securities. the rail can be used,” Ledford said. operational during the pandemic is available “The digital divide is still a real thing. Linking financial services directly to real- to underserved communities. The gap is being closed in business and time payments is a longstanding goal of There’s long been a concern that digitally- entrepreneurship by innovative solutions that ventures such as Zelle and faster-payment focused developments such as cashless retail are available at everyone’s fingertips primarily

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY MAY 26, 2021 AMERICANBANKER.COM PAGE 8 due to smartphones,” Coleman said, adding countries, and the best action we can take as the partnership develops, a company he’s “all for” the Atlanta Federal Reserve as a community is to ensure we involve spokesperson said. The partnership is set to Bank’s Special Committee on Payments vulnerable communities in this transition,” run through the end of 2022. Inclusion which will research ways in which Fong said. The commitment dovetails with the bank’s the technology that has accompanied the The cost of business is higher in San Fulton Forward program, founded in 2019 mass move online may inadvertently exclude Francisco than most other cities. This poses to promote racial equity and economic partes of the population. an added challenge in reaching underserved empowerment through financial education. The Atlanta Fed’s committee, which communities, according to Fong. The bank also launched the Fulton Forward includes companies from across retail, “This is preventing our small business Foundation in July 2020, which provides government, financial services andentrepreneurs from getting off the ground,” donations of $20,000 or more to organizations academia, will examine how to bring digital said Fong, adding initiatives such as San advancing equality in homeownership. commerce to businesses and consumers Francisco’s Small Business Recovery Act “This initiative will build on programs who are reliant on cash — focusing more are vital. The mayor’s program reduces we offer across the spectrum of mortgage on expanding fintech than increasing bank bureaucracy and streamlines permits and lending, including those focused on accounts. Both solutions are necessary, access to financing with a focus on micro underserved communities and first-time according to Coleman. merchants and communities that have had homebuyers,” Jeff Scheuren, president of “Given the phrase ‘cash-reliant difficulty accessing resources in the past. Fulton Mortgage Co., said in a press release individuals,’ I believe I am speaking about “If we do not do this, the digital device Monday. “It also aligns with key pillars of the same people when I reference the phrase will only continue to grow,” Fong said. “San our Fulton Forward initiative to enhance our ‘the unbanked’ in the Black community and Francisco is a city of innovation, and as we communities through affordable housing society in general,” Coleman said. Because look to new futures of payments, we must do and homeownership.” this community is not participating in the so with intention and inclusion.” The bank has about $12 billion in assets financial system, driven by the technology under management and over 200 locations being deployed in the financial and retail serving Delaware, Maryland, New Jersey, markets, some goods and services may not UNDERSERVED Pennsylvania, Virginia, and Washington D.C. be available to them or definitely could cost POPULATIONS Founded in 2016, the National Association more, according to Coleman. “There is also a of Minority Mortgage Bankers of America factor in the racial wealth gap,” he said. is a trade association headquartered in Coleman and ABC are stressing access Fulton Bank Atlanta that works to create sustainable to critical resources, such as training, homeownership by supporting women and relationships and financing, making new partners minorities in real estate finance. It estimated businesses aware of the online payment minority borrowers accounted for 24.2% technology that is available, along with other of purchase volume in 2020, a share that merchant innovations. with Minority projects will only increase over time. “Opportunities exist, but access is denied due to poor preparation. I’m talking about Mortgage books and records, required certifications, ENFORCEMENT ACTIONS etc.,” he said. “This is why training and relationships and mentorship is critical.” Bankers on In San Francisco, the impact of the NCUA takes pandemic on small businesses has been training stark, with 50% of small businesses in the San control Francisco Chamber of Commerce’s footprint By Paul Centopani closed at the low point in 2020, said Rodney May 24, 2021 Fong, president and CEO of the San Francisco Fulton Bank in Lancaster, Pennsylvania, of Empire Chamber of Commerce. has started a partnership with the National There is some recovery, as there has been Association of Minority Mortgage Bankers of Financial an increase in job postings in the restaurant America to increase its diversity and internal sector as restrictions have loosened. Similar training programs. to cities such as New York, there is actually a The bank said it aims to help traditionally Federal Credit staff shortage for restaurants. underserved communities with better Advancements such as mobile ordering representation in its mortgage division and Union and payments can help businesses will work to reduce biases with focused recover, and encourage access to a broader employee and leadership trainings. How By Ken McCarthy community, according to Fong. much the bank intends to expand its hiring May 24, 2021 “Digital payment is the future. We see within minority groups and what the training The National Credit Union Administration this economy growing in other cities and programs will entail will be determined on Monday placed Empire Financial Federal

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Credit Union in Jackson, New Jersey, into The company, led by Andrei Cherny, is national are also faith-based. conservatorship. seeking to capitalize on a booming market Their values depend on the public’s faith It is the fourth credit union to be put for environmental, social and governance in sovereign authority and their central in conservatorship in 2021. One of those, investing. The fintech promises that deposits banks’ commitment to preserve their value. Indianapolis’ Newspapers Federal Credit “will never go towards funding fossil-fuel However, most major central banks have Union, was later liquidated making it the first projects, firearms or political campaigns,” pursued monetary policies that over time credit union to be closed by the regulator this according to its website. The firm’s customers have undermined that goal. year. have doubled to more than 4 million in the In the United States, the Federal Reserve’s The regulator cited “unsafe and unsound past year, the person said. goal has been to maintain an annual inflation practices” at Empire Financial but did not Aspiration has a savings account with an rate of 2% or higher. More important, it specify what the issues were in the press annual percentage yield of as much as 1%, embarked on a quantitative easing program release. and as much as $2.5 million per depositor in 2008 to significantly increase its liabilities The credit union serves 343 members and is insured by the Federal Deposit Insurance — composed primarily of cash and bank has assets of slightly more than $3 million, Corp., according to the website. reserves — from less than $1 trillion to nearly according to its most recent call report. Aspiration also is announcing on Monday $8 trillion. This is a phenomenal increase in Empire Financial serves multiple faith, that it’s enacting a $25-an-hour minimum money-creating capacity. occupational, and associational groups, and wage effective immediately. That’s higher Importantly also, this money-creating communities primarily located in New York than the minimum at the largest U.S. banks, process is governed not by any kind of rule City and New Jersey. with Bank of America saying it would raise its but by a policy committee — the Federal Call report data for the credit union shows lowest wages to that level by 2025. Open Market Committee — that has broad income of more than $52,000 in the first discretion in setting U.S. monetary policy. quarter of 2021 compared to a loss of more It is granted a degree of independence from than $10,000 in the year-ago quarter. BANKTHINK political interference to allow decisions to be made in the public’s long-term best interest, which makes sense. CHALLENGER BANK Fed should But that lack of binding rules or constraints also renders U.S. monetary policy subject to get real the same vagaries that the Fed’s independence Challenger was meant to counteract: Events, personal judgment and politics influence monetary bank about its role policy far more than the Fed likes to admit. This bias is no better illustrated than by the in crypto’s dramatic growth of its balance sheet over just Aspiration this past decade, a pattern being replicated by central banks across the globe. weighs an IPO volatility The growth in the Fed’s balance sheet has done little to spark general price inflation, but By Bloomberg News By Thomas M. Hoenig it has sparked asset inflation in everything May 24, 2021 May 24, 2021 from real estate to stocks and even art objects. Aspiration, a financial-technology Cryptocurrencies are faith-based — they Holding money is no longer as profitable company that’s gained the backing of high- have no intrinsic value. There is no sovereign as it once was, and so to hedge against that profile actors, is laying the groundwork for a authority backing them. They are the “pet relative depreciation investors are buying public listing. rock” of currency, worth only what someone almost anything else. Any one of these asset The Los Angeles-based firm may seek to can get you to believe they are worth. classes potentially could be a bubble, but go public through a traditional initial public These are some of the reasons they with the Fed greatly expanding the nation’s offering or another route, according to a are so frequently questioned as a reliable monetary base, these trends reflect rational person familiar with the matter, asking not investment. And yet they have been steadily choices. to be identified discussing the firm’s plans. appreciating against major sovereign Enter cryptocurrencies. In contrast to The unicorn’s investors include actors Robert currencies and compete with gold and national fiat currencies, cryptocurrencies Downey Jr., Leonardo DiCaprio and Orlando silver as an inflation hedge. Mainstream have no government sponsor. But also Bloom, investment bank Allen & Co. and commercial and investment banks unlike national fiat currencies, they play by eBay co-founder Jeff Skoll. increasingly are willing to purchase and hold a firm set of rules that more systematically Aspiration may go public as early as this them in safekeeping for their clients, and the constrains their ability to arbitrarily expand year and is in talks with bankers, the person Office of the Comptroller of the Currency has in volume. Though they are not widely used said. The plan is still in early stages. confirmed in writing that national banks can as a medium of exchange today, they could A representative for Aspiration declined to take on this responsibility. Why? develop the capacity to serve that purpose. comment on the firm’s plans. Part of the reason is because most major So while cryptocurrencies are fiat currency —

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY MAY 26, 2021 AMERICANBANKER.COM PAGE 10 again, pet rocks — their rules-based supply caught up in this desperate cycle and could and potential utility as a form of money experience significant losses. However, if have made them a preferred intangible asset they are prudent, it is unlikely that their among investors and speculators. involvement with cryptocurrencies would This rapid — some might say explosive — pose any more of a risk to banks or the rise in the value of cryptocurrencies has many financial system than any other inflated asset. of the markings of an asset bubble, doomed Editor’s note: This op-ed is part of a monthly to collapse. There appears to be a rush to buy series called “Deposits and Withdrawals” them by investors who poorly understand that offers different viewpoints on hot-button their origin or their risks, and some investors topics. The next installment, also on the subject will even borrow against other assets to of cryptocurrency, is scheduled to be published fund their purchase, with the expectation Thursday. that their value will continue to rise. That’s a source of systemic risk that regulators and Thomas M. Hoenig is a distinguished senior banks should be aware of. fellow at the Mercatus Center of George Mason Nevertheless, they remain a favored University. He has served as the vice chairman investment among some with their of the Federal Deposit Insurance Corp. and controlled growth, their expected longer- president of the of run value appreciation and their ability to Kansas City. q act as a medium of exchange. And cryptos may not even be the riskiest asset out there © 2021 Arizent and American Banker. — compared to other leveraged assets or the All rights reserved. explosive growth in derivatives and synthetic derivatives, cryptocurrencies may appear relatively safe. Under these circumstances, the banking industry’s role in serving clients who invest or speculate in cryptocurrencies is comparable with many other assets, real and intangible. A bank should understand its risks, and a rational bank may choose to limit its exposure if the crypto market seems too speculative. But so long as it understands its fiduciary responsibilities, understands it risks and applies consistent standards in providing its services to its client, there should be no prohibition against a bank providing such services. Even if banks want to lend against cryptocurrencies and have sensible underwriting standards and the capital resources to accept that risk, bank supervisors should not necessarily block them from doing so. The loss is theirs to bear. But it’s important for all concerned to understand that the growth of cryptocurrency valuations isn’t happening for no reason. The world’s major central banks have been dramatically expanding the money base for over a decade and appear intent on continuing that pattern. Thus, there is good reason to expect asset inflation to continue — including cryptos. Should circumstances change and should central banks slow or contract their monetary expansion — or should the market fear such actions — asset values would likely fall, and in some cases collapse. Banks could be

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