Finance

FDIC rule would make banks keep fintech customer data after Synapse debacle

Published

9 months ago

September 17, 2024

Tsingha25 | Istock | Getty Images

The Federal Deposit Insurance Corporation on Tuesday proposed a new rule forcing banks to keep more detailed records for customers of fintech apps after the failure of tech firm Synapse resulted in thousands of Americans being locked out of their accounts.

The rule, aimed at accounts opened by fintech firms that partner with banks, makes the institution maintain records of who owns the account and the daily balances attributed to the owner, according to an FDIC memo.

Fintech apps often use a type of account where many customers funds are pooled into a single large account at a bank, which relies on either the fintech or a third party to maintain ledgers of transactions and ownership.

That situation exposed customers to the risk that the nonbanks involved would keep shoddy or incomplete records, making it hard to determine who to pay out in the event of a failure. That’s what happened in the Synapse collapse, which impacted more than 100,000 end users of fintech apps including Yotta and Juno, customers with funds in these “for benefit of” accounts have been unable to access their money since May.

“In many cases, it was advertised that the funds were FDIC-insured, and consumers may have believed that their funds would remain safe and accessible due to representations made regarding placement of those funds in” FDIC-member banks, the regulator said in its memo.

Keeping better records would allow the FDIC to quickly pay depositors in the event of a bank failure, and if the fintech provider fails, it would also help a bankruptcy court determine who is owed what, FDIC officials said Tuesday in a briefing.

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Finance

Swiss government proposes tough new capital rules in major blow to UBS

Published

2 days ago

June 6, 2025

Business Finance News

A sign in German that reads “part of the UBS group” in Basel on May 5, 2025.

Fabrice Coffrini | AFP | Getty Images

The Swiss government on Friday proposed strict new capital rules that would require banking giant UBS to hold an additional $26 billion in core capital, following its 2023 takeover of stricken rival Credit Suisse.

The measures would also mean that UBS will need to fully capitalize its foreign units and carry out fewer share buybacks.

“The rise in the going-concern requirement needs to be met with up to USD 26 billion of CET1 capital, to allow the AT1 bond holdings to be reduced by around USD 8 billion,” the government said in a Friday statement, referring to UBS’ holding of Additional Tier 1 (AT1) bonds.

The Swiss National Bank said it supported the measures from the government as they will “significantly strengthen” UBS’ resilience.

“As well as reducing the likelihood of a large systemically important bank such as UBS getting into financial distress, this measure also increases a bank’s room for manoeuvre to stabilise itself in a crisis through its own efforts. This makes it less likely that UBS has to be bailed out by the government in the event of a crisis,” SNB said in a Friday statement.

‘Too big to fail’

UBS has been battling the specter of tighter capital rules since acquiring the country’s second-largest bank at a cut-price following years of strategic errors, mismanagement and scandals at Credit Suisse.

The shock demise of the banking giant also brought Swiss financial regulator FINMA under fire for its perceived scarce supervision of the bank and the ultimate timing of its intervention.

Swiss regulators argue that UBS must have stronger capital requirements to safeguard the national economy and financial system, given the bank’s balance topped $1.7 trillion in 2023, roughly double the projected Swiss economic output of last year. UBS insists it is not “too big to fail” and that the additional capital requirements — set to drain its cash liquidity — will impact the bank’s competitiveness.

At the heart of the standoff are pressing concerns over UBS’ ability to buffer any prospective losses at its foreign units, where it has, until now, had the duty to back 60% of capital with capital at the parent bank.

Higher capital requirements can whittle down a bank’s balance sheet and credit supply by bolstering a lender’s funding costs and choking off their willingness to lend — as well as waning their appetite for risk. For shareholders, of note will be the potential impact on discretionary funds available for distribution, including dividends, share buybacks and bonus payments.

“While winding down Credit Suisse’s legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands,” Johann Scholtz, senior equity analyst at Morningstar, said in a note preceding the FINMA announcement.

“Such measures may place UBS’s capital requirements well above those faced by rivals in the United States, putting pressure on returns and reducing prospects for narrowing its long-term valuation gap. Even its long-standing premium rating relative to the European banking sector has recently evaporated.”