Categoría: Banking

Link:  https://www.thebanker.com/World/Americas/US/Fed-plans-new-round-of-bank-stress-tests-in-response-to-Covid-19

Date: 15^th of October 2020

Media: The Banker

What happened?

Due to the ongoing uncertainty around the Covid-19 pandemic, the US Federal Reserve Board has announced another round of bank stress tests to see how large banks stand up against two scenarios featuring severe recessions.

Whom and where it affects?

Firstly, it affects US-based banks and financial institutions, especially those with large trading or processing operations, because their strength and solvency will be tested.

It also affects all creditors of those banks, as the results of the tests will give them insight into the banks’ capital strength under a tailored set of assumptions, given the ongoing coronavirus-related uncertainty.

Finally, it indirectly affects everyone, as the strength and health of the international banking system is something that has effects on our daily life.

What sort of public or private institutions are involved?

The most important institution involved in this piece of news is the US Federal Reserve, which is the central bank of that country and the competent authority for carrying out stress tests, which are now needed because of the fragile economic situation due to the Covid-19 pandemic.

Also, private banks are important in the article because they will be subjected to those stress tests, what means that their resiliency is going to be evaluated by the FED.

Why is it important for Banking and Finance?

As we are facing a pandemic that is affecting all aspects of our lives, the strength of the international financial system is a fundamental key to prevent possible future crashes.

Therefore, it is important to evaluate the health of the most important financial institutions worldwide, especially private banks, because we need to know if they would be capable of resisting to an adverse economic scenario derived from the pandemic. Depending on the results of those tests, the confidence in the financial system will either increase or decrease.

What do you think will be the consequences in the foreseeable future?

If the results are positive and banks can demonstrate their solvency and strength despite the adverse financial situation, creditors and investors would be more willing to keep investing on them, and therefore, the economic situation might improve, as those investors would maintain their confidence in the system. That could also reduce the impact of the pandemic in the economy.

However, if banks fail those tests, the confidence in the banking system would plummet, and consequently depositors and investors might want to withdraw their money, what would lead to a bank failure that could easily extend to the rest of the institutions because of the adverse situation resulting from the pandemic.

Key words

Stress test, banks, FED, scenario, economy, pandemic.

Source: https://www.valuewalk.com/2020/10/central-bank-bahamas-sand-dollar/  

Thursday, October 22nd, 2020

Media: ValueWalk

What happened?

The Central Bank of the Bahamas has developed one of the first Central Bank Digital Currency (CBDC) in the world, the Sand Dollar, which is a digital version of the Bahamian dollar. 

Whom and where it affects?

This digital currency has an instant availability for all Bahamian residents. Even though The Bahamas is not a big nation, having only three hundred and ninety-three thousand habitants, this CBDC development can have a huge financial impact worldwide, mostly thanks to its direct link to the US market. 

What sort of public or private institutions are involved?

The CBDC adoption is mainly intended to provide financial access to the Bahama’s increasingly unbanked population due to the banking sector downsizing physical branches. The Sand Dollar is backed by the Central Bank of the Bahamas and tied to the BSD, and thus the USD, so it would be a regulated alternative to non-governmental third party stablecoins. 

Why is it important for Banking and Finance?

The main purpose of Project Sand Dollar is to modernize and streamline the archipelago’s financial system, with the benefits of greatly reducing costs and improving financial inclusion among communities throughout The Bahamas.

What do you think will be the consequences in the foreseeable future?

We will soon see other nations follow the bahamas by creating their own state backed crypto currency. The Sand Dollar will serve as a live test, with new currencies being implemented in different manners, depending on the success or failure of the Sand Dollar.

Key words: Central Bank Digital Currency, Sand Dollar, Digital Transformation, Banking Sector.

Above, PayPal payment with Bitcoin

Link: https://www.reuters.com/article/paypal-cryptocurrency/paypal-to-allow-cryptocurrency-buying-selling-and-shopping-on-its-network-idINL1N2HB14U

Date: October 21st, 2020

Media: Reuters

What happened?

Paypal Holdings Inc. is joining the cryptocurrency market allowing its customers to buy, sell and hold cryptocurrencies. So Paypal Holdings Inc is getting prepare for this new way of payment processing and encouraging its use. US account holders will be able to trade with crypto currencies in the next few weeks. 

Whom and where it affects?

The main affected group of people is the U.S. accounts holders of Paypal. For now only the U.S. customers will be able to trade with crypto currencies but Paypal plans to expand to Venmo (Company property of Paypal and dedicated to mobile payment services) and more countries in 2021.

What sort of public or private institutions are involved?

There are some institutions involved in this move done by Paypal. Obviously, Paypal Holdings Inc is the main institution here alongside some central banks because the firm wants to be involved with every digital currency they can. In another side there is another institution that played a big role and it is the New York State Department of Financial Services because they gave Paypal the first conditional cryptocurrency license.

There are some more important FinTechs companies, as RobinHood Markets Inc and Square Inc, that are joining this “crypto movement” but not in the same size as Paypal. 

Why is it important for Banking and Finance?

It is all about the payment processing. All Central Banks will have, eventually, their own crypto currency and this move done by Paypal is encouraging the use and development of all kind of digital currencies. 

What do you think will be the consequences in the foreseeable future?

In the foreseeable future we can predict that there will be an increase of the use of crypto currency as a payment method. Furthermore, there is going to be an increase of companies that join the movement and an increase of the amount of crypto currencies that we can work with. 

Key words

Cryptocurrency, PayPal, Payment method, Digital currency, Central Bank, Mobile payment, Bitcoin