FDIC Joins CFPB Targeting UDAP
The FDIC today published Consumer Compliance Supervisory Highlights showing that UDAP violations related to NSF representment constituted the second highest number of total citations and were by far the largest number of serious citations in 2022. The FDIC reiterates August guidance that third-party arrangements related to re-presented items may present numerous risks. We note that the FDIC’s UDAP focus is new under Chairman Gruenberg and comes at a time when the CFPB is expanding the reach of its own UDAAP enforcement powers with a focus in part on overdrafts and NSF practices.
IMF Staff Highlight New Systemic Risk: Geopolitical Stress
At a panel event today, IMF staff reported that their model-based study in the IMF’s global financial stability report found that geopolitical risks and global fragmentation gravely threaten financial stability by weakening interconnectivity between geopolitical blocs. Their model found that increased fragmentation results in reduced cross-border banking between blocs, higher lending costs, substantial diversification losses among G7 countries, and reduced bank profitability. Staff also drew a link between the war in Ukraine and the recent banking crisis, arguing that the war’s inflationary pressures led to an aggressive monetary policy reaction, revealing bank vulnerability to interest rate risk.