Fintech and payments: regulating digital payment services and e-money
FSI Insights No 33, July 2021. This paper explores how non-bank payment service providers (NBPSPs) are regulated and provides a cross-country overview of the regulatory requirements for digital payment and e-money services offered by NBPSPs. It benefited from responses to a CPMI survey of 75 jurisdictions conducted in early 2021.
What role should the SEC play in ESG investing?
Environmental Social Governance (ESG) issues continue to climb in importance for many investors and policy makers. What role should public policy and financial regulation play in response to ESG concerns? These questions are of particular importance for the Securities and Exchange Commission (SEC) tasked with protecting America’s capital markets and American investors.
SEC Commissioner Hester Peirce will share her perspective on these issues during a Brookings event on July 20. The conversation will continue with a panel representing investors and the public interest who will react to Commissioner Peirce and share their own views.
Viewers can submit questions for speakers by emailing events@brookings.edu or via Twitter using #ESGInvesting.
Passive funds affect prices: evidence from the most ETF dominated asset classes
This paper studies exchange-traded funds’ (ETFs) price impact in the most ETF dominated asset classes: volatility (VIX) and commodities. I propose a model-independent approach to replicate the VIX futures contract. This allows me to isolate a non-fundamental component in VIX futures prices that is strongly related to the rebalancing of ETFs. To understand the source of that component, I decompose trading demand from ETFs into three parts: leverage rebalancing, calendar rebalancing, and flow rebalancing. Leverage rebalancing has the largest effects. It amplifies price changes and exposes ETF counterparties negatively to variance.
The future of bank overdraft fees
Bank overdraft fees have been on the rise for many years as income volatility rises and more Americans live paycheck-to-paycheck. Federal bank regulators have done little to help American families, failing to speed up America’s payment system to address one of the many root causes of overdrafts (slow deposit times) while giving a thumbs up to banks who choose to increase profits at the expense of those living on the financial edge. A few banks and financial technology firms are choosing a different path, creating new products designed to help consumers avoid overdraft, attacking the problem of why it is so expensive to be poor.
Join Brookings as we engage in an in-depth conversation with these banks, financial technology firms, and consumer advocates to explore alternatives to overdraft. We will analyze whether new technology and products can meet people’s needs for financial flexibility in a more fair and efficient manner. To facilitate this discussion we will premier a new format to engage industry and consumer voices in this provocative conversation.
Viewers can submit questions for speakers by emailing events@brookings.edu or via Twitter using #Overdraft.
Distrust or speculation? the socioeconomic drivers of U.S. cryptocurrency investments
Employing representative data from the U.S. Survey of Consumer Payment Choice, we disprove the hypothesis that cryptocurrency investors are motivatedby distrust in fiat currencies or regulated finance. Compared with the general population, investors show no differences in their level of security concerns with either cash or commercial banking services. We find that cryptocurrency investors tend to be educated, young and digital natives. In recent years, a gap in ownership of cryptocurrencies across genders has emerged. We examine how investor characteristics vary across cryptocurrencies and show that owners of cryptocurrencies increasingly tend to hold their investment for longer periods.
Annual Economic Report 2021
The BIS describes how the strong policy response to Covid-19 delivered a faster than expected economic rebound, but notes that the uneven recovery creates daunting challenges for policymakers. The report also addresses rising income and wealth inequality, and lays out design choices for central bank digital currencies.
Annual Report 2020/21
The BIS Annual Report explains what we do and who we are as an institution. You can find a description of our activities, governance and organisation, together with our annual financial statements for 2020/21.
Report of the Task Force on Financial Stability
Following the Global Financial Crisis of 2007-09, the U.S. and other economies shored up the resilience of their banks through more demanding capital and liquidity requirements and rigorous stress testing. The disruptions of financial markets at the onset of the pandemic in March 2020 underscored the vulnerabilities of markets and institutions that comprise the important—and growing—nonbank sector of the financial system through which much credit to businesses, households, and government flows.
The Task Force on Financial Stability was formed before the pandemic, in October 2019, by the Hutchins Center on Fiscal & Monetary Policy at the Brookings Institution and the Initiative on Global Markets at the University of Chicago Booth School of Business. Its mission was to identify gaps in the regulatory architecture and other features of the financial system (outside the regulated banking sector) that make it insufficiently resilient, and to recommend mitigating policies to regulators, Congress, and the industry.
The report focuses on the U.S. Treasury market, open-end mutual funds, housing finance, derivatives clearinghouses, and life insurance companies; it also makes recommendations for the structure and process of regulation, including the Financial Stability Oversight Council and the Office of Financial Research, both created by the Dodd-Frank Act, to increase the likelihood of spotting and addressing issues that will arise in the future.
The Task Force was chaired by Glenn Hubbard of Columbia University and Don Kohn of the Hutchins Center at Brookings. Other members were Laurie Goodman, Urban Institute; Kathryn Judge, Columbia Law School; Anil Kashyap, Chicago Booth; Ralph Koijen, Chicago Booth; Blythe Masters, Motive Capital; Sandie O’Connor, independent; and Kara Stein, University of Pennsylvania and University of California law schools.
Read the full report here.
Related Content
Overdraft fees are big money for small banks
Once upon a time, if you tried swiping your debit card to buy something and your bank account was empty what happened was simple: Nothing. The register denied your payment. This happened all the time, particularly to Americans living paycheck-to-paycheck.
Then banks figured out that they could cover the overdraft for their customers with little risk and charge quite a lot for the service. It is hard for people to keep track of just how much is in their bank account, particularly since deposits including direct deposits can take days to post to the account.
Overdraft fees can be high, often $35, sometimes charged for each swipe of your debit card when you are out of money. This fee has become big money for banks, generating more than $31 billion in revenues in 2020. It has also become a major cost for tens of millions of families: One out of eleven Americans spends $350 or more a year in overdraft fees. Overdraft is one of many reasons why it is expensive to be poor in America.
Overdrafts are bigger business for some banks than others. JPMorgan Chase collected the most of any bank, more than $2 billion in 2019, which works out to more than $35 in overdraft fees per account. Sen. Elizabeth Warren (D-Mass.) called JPMorgan Chase CEO Jamie Dimon “star of the overdraft show” at a recent Senate hearing. Even when compared to other big banks, JPMorgan Chase earns a lot more in overdraft; Citibank, by contrast, averaged just over $5 per account.
But stopping the analysis with the largest banks misses an important reality: A handful of smaller banks are the true overdraft giants.
Read the rest of this article in Politico, published on June 24, 2021.
Financial benchmarks – Executive Summary
Financial benchmarks – FSI Executive Summary