I get it’s risky for banks but I do still feel surprised larger banks are averse to banking crypto companies - even for basic services. I’ve consulted with a few and always had to onboard them with small neo banks. I couldn’t even get them banked at Signature in 22. I always assumed since big banks could more easily absorb the risk they’d be less averse to taking on high risk clients. But no, the opposite is definitely the case.
Not all risk is the same. The "high risk" due to possible failure to repay is quite different from "high risk" due to potential money-laundering or sanctions-busting.....
In that case, a larger bank would still be better positioned to handle that risk as they'd be better resourced to mitigate money laundering and other potential financial crimes. So it still doesn't make sense why a larger bank would be less willing, based on those risks. If anything, that just implies that smaller banks shouldn't bank crypto.
I've read the OCC warning and the FRB policy statement (I even got an invite on CNBC crypto world to discuss them). Maybe it's just my interpretation, but I saw them as just highlights of the inherent risk. Meaning banks then design their risk management to cope with the risk rather than avoid it. Though, I ironically told CNBC that I foresaw a more difficult banking environment for crypto through the end of the year. So, perhaps thats the case - they assess the risk as too high compared to what it would take/cost to mitigate it.
I don’t think you appreciate what motivates careers in the financial services industry. For mid-level managers making decisions like you’re referring to, it’s all about surviving to continue collect good paychecks and hopefully better bonuses. There is zero - ZERO - incentive to take risks.
Hmmm. The idea of "mitigating financial crimes" is strangely relevant, isn't it? 😁 But seriously, the reputational risk of being involved in money laundering is vastly greater than that of, say, missing the goal for delinquent loans. (No bank CEO ever got hauled in to a Senate Banking Committee session because a couple of clients went bankrupt.)
A small bank does not have much of a reputation to put at risk. On the contrary potentially losing their reputation is normally a show stopper for large established banks.
PPP and all programs like it were, and are, a total fraud from the top down. Nothing but grift, theft, and wholesale, widespread international fraud on a scale larger than most could imagine. Absolutely sickening and a total affront to responsible savers and taxpayers.
I get it’s risky for banks but I do still feel surprised larger banks are averse to banking crypto companies - even for basic services. I’ve consulted with a few and always had to onboard them with small neo banks. I couldn’t even get them banked at Signature in 22. I always assumed since big banks could more easily absorb the risk they’d be less averse to taking on high risk clients. But no, the opposite is definitely the case.
Not all risk is the same. The "high risk" due to possible failure to repay is quite different from "high risk" due to potential money-laundering or sanctions-busting.....
Agree.
In that case, a larger bank would still be better positioned to handle that risk as they'd be better resourced to mitigate money laundering and other potential financial crimes. So it still doesn't make sense why a larger bank would be less willing, based on those risks. If anything, that just implies that smaller banks shouldn't bank crypto.
The point is that they don’t see the risk as worthy of the reward… read the recent FDIC/FED and OCC reports and you will see why.
I've read the OCC warning and the FRB policy statement (I even got an invite on CNBC crypto world to discuss them). Maybe it's just my interpretation, but I saw them as just highlights of the inherent risk. Meaning banks then design their risk management to cope with the risk rather than avoid it. Though, I ironically told CNBC that I foresaw a more difficult banking environment for crypto through the end of the year. So, perhaps thats the case - they assess the risk as too high compared to what it would take/cost to mitigate it.
Exactly- the risks are not worth the reward.
I don’t think you appreciate what motivates careers in the financial services industry. For mid-level managers making decisions like you’re referring to, it’s all about surviving to continue collect good paychecks and hopefully better bonuses. There is zero - ZERO - incentive to take risks.
Hmmm. The idea of "mitigating financial crimes" is strangely relevant, isn't it? 😁 But seriously, the reputational risk of being involved in money laundering is vastly greater than that of, say, missing the goal for delinquent loans. (No bank CEO ever got hauled in to a Senate Banking Committee session because a couple of clients went bankrupt.)
A small bank does not have much of a reputation to put at risk. On the contrary potentially losing their reputation is normally a show stopper for large established banks.
PPP and all programs like it were, and are, a total fraud from the top down. Nothing but grift, theft, and wholesale, widespread international fraud on a scale larger than most could imagine. Absolutely sickening and a total affront to responsible savers and taxpayers.
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