The Global Regulatory Environment: Commercial Payments Still Rely on a Safe, Sound Traditional Banking System

The recent demises of Silicon Valley Bank, Signature Bank, Silvergate Bank, and Credit Suisse have the global community once again calling into question the quality of bank regulations, the ability of government personnel to be stewards of those regulations, and the diligence of bank leadership to comply. Indeed, during the formation of this report, regulators seized First Republic Bank, making it the second-largest bank failure in history and resulting in the sale of most of its assets to JP Morgan Chase and Co. In the wake of the first wave of failures, Treasury Secretary Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and FDIC Chairman Martin J. Gruenberg released a joint statement declaring that the “U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry.”

However, there are issues regulators must address: First, those safeguards were designed by the regulators for globally systemically important banks (known collectively as GSIB). As a result, medium-sized and small banks in the United States would not receive a lifeline in crisis. Second, corporate deposits are insured only up to the consumer-oriented $250,000 limit. The FDIC would not reimburse deposits beyond that amount. Third, rising interest rates, the ebb of capital into the startup community, and $1.5 trillion of debt coming due in 2025 on commercial properties laden with vacancies and devaluation will contribute significantly to ongoing stress.

The banking system is on solid footing, but the March and April events highlight how important it is globally for FI leadership to anticipate market movements, for regulators to adapt policy as markets evolve, and for both to have the pulse of emerging technology.

Commercial and enterprise payments are reliant on a solid global financial system. Quite simply, they would not exist without it. While emerging technologies and non-traditional bank charters are evolving, a healthy and efficient global payments ecosystem remains dependent on traditional banks and a robust regulatory environment.

This impact note provides our view of the current state of global banking and payments. It provides insights into the global regulatory environment, the interplay of global payments that cross borders, and emerging technologies. In addition, the report provides a future view of regulations and presents critical regulatory checkpoints for corporate banking groups to consider.