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The Morning Risk Report: Bank Failures Train Spotlight on Shortcomings in Risk Management
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Good morning. As banks and regulators scurry to respond to the most perilous industry conditions since the 2007-08 financial crisis, experts say that one persistent issue needs attention: risk oversight that’s not always up to the job.
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Risk professionals tell Risk & Compliance Journal's Richard Vanderford that the moment should serve as a wake-up for banks to beef up oversight.
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The law: The largest banks, those with $50 billion or more in consolidated assets, are required to maintain a risk committee that reports directly to the bank holding company’s board. Those committees must include at least one member with experience in “identifying, assessing and managing” risk exposures of large financial firms, according to an amended version of the Dodd-Frank Act, which was passed after the financial crisis.
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The problem: Board-level risk committees at many banks have neither the clout nor the expertise to push back against corporate leadership, risk professionals say, a weakness that should be addressed in the wake of the recent bank collapses.
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The goal: Good risk management can protect a bank—even save it—in times of extreme stress. But the work is laborious, technical and involves poking at business plans to look for potential trouble spots. Although the causes of the recent bank meltdowns aren’t yet fully known, some industry observers have pointed to slack risk management.
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Content from our Sponsor: DELOITTE
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Rethink How Tech Trends Shape Governance
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What does it mean to have effective technology governance? It’s often built on a holistic framework supported by a mix of macro-level innovational and foundational forces. Read More ›
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WSJ Risk & Compliance Forum
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Join us on May 9 for the WSJ Risk & Compliance Forum, where we will be discussing export controls, sanctions, sustainability, privacy laws, workplace compliance, managing in a downturn and addressing risks at the board level. Sign up here.
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Archegos owner Bill Hwang, at center, has pleaded not guilty to charges of racketeering, securities fraud and market manipulation. PHOTO: BRYAN SMITH/ZUMA PRESS
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Judge denies Archegos founder's request to toss criminal charges.
A federal judge on Tuesday denied a request by lawyers for Archegos Capital Management founder Bill Hwang to throw out criminal charges tied to the meltdown of the investment firm.
Mr. Hwang’s lawyers argued at a hearing in New York that federal prosecutors have mischaracterized legal trading as criminal market manipulation. U.S. District Judge Alvin Hellerstein acknowledged Mr. Hwang’s lawyers had raised legitimate questions but said it would be a mistake for him to dismiss the indictment before a trial.
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Crypto trading platform Sushi served with SEC subpoena.
Jared Gray, a top executive at peer-to-peer crypto trading platform Sushi, said on Tuesday that he and Sushi had received a subpoena from the Securities and Exchange Commission.
The subpoena suggests that the SEC is stepping up its focus on the freewheeling world of decentralized finance, in which crypto investors transact with each other through software running online, without a central intermediary overseeing transactions.
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The Federal Trade Commission is prodding tech giants over misleading ads on their platforms.
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A Delaware judge on Tuesday voiced skepticism that Fox News and Fox Business on-air hosts reported fairly and neutrally about unsupported allegations that a voting-machine company helped rig the 2020 presidential election.
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$250,000
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The current cap at which FDIC insurance covers deposits at banks. Recent banking turbulence has sparked debate over whether deposit insurance should be expanded beyond that amount.
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U..S Treasury Secretary Janet Yellen at the American Bankers Association's 2023 Washington Summit on Tuesday. PHOTO: JIM WATSON/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Yellen says U.S. could move to protect deposits at other banks.
Treasury Secretary Janet Yellen said on Tuesday that the federal government could step in to protect depositors at additional banks if regulators see a risk of a run on the banking system.
Raising the stakes. Ms. Yellen’s comment is the clearest sign yet that federal regulators could intervene to protect more deposits to shore up the financial system.
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The Federal Reserve faces one of its thorniest policy decisions in years: whether to lift interest rates again to fight high inflation or hold them steady amid the most intense banking crisis since 2008.
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American consumers are facing another test, from banking-sector turmoil and tighter financial conditions, as households already grappling with elevated inflation and rising interest rates threaten to trim spending that has been a hallmark of the resilient U.S. economy.
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The Biden administration is urging China not to use a U.S. visit by Taiwan’s president to raise tensions.
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Chinese leader Xi Jinping and Russian President Vladimir Putin reaffirmed the deepening political and economic ties between their two countries at a summit that telegraphed their shared interest in challenging a world order led by the U.S. and its democratic allies.
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TikTok’s data trackers were present in 30 U.S. state-government websites, a report shows. PHOTO: ALYSSA SCHUKAR FOR THE WALL STREET JOURNAL
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More than two dozen state governments have placed web-tracking code made by TikTok parent ByteDance Ltd. on official websites, according to a new report from a cybersecurity company, illustrating the difficulties U.S. regulators face in curtailing data-collection efforts by the popular Chinese-owned app. Meanwhile, TikTok has sought to reassure advertisers in recent days that the app is unlikely to be banned in the U.S., according to people familiar with the situation.
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The first year-over-year drop in home prices in more than a decade and a dip in mortgage rates snapped a yearlong streak of declining monthly home sales.
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Switzerland’s move to wipe out $17 billion of Credit Suisse Group AG bonds has prompted investors to reassess a market integral to the safety and resilience of Europe’s banking system.
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Bitcoin was all but left for dead after the implosion of crypto exchange FTX, but its recent rally is proving naysayers wrong.
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The Biden administration moved to implement a new 25% investment tax credit for U.S.-based semiconductor manufacturing and proposed restrictions that would make it difficult for companies to expand China operations if they receive certain federal funds.
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Google is opening public access to the conversational computer program Bard, its answer to the viral chatbot ChatGPT.
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