Good morning. Banking tumult featured prominently in 2023. The sometimes staid discipline of risk management had its turn in the spotlight after successive crises engulfed Silicon Valley Bank, Signature Bank and Credit Suisse Group.

The heavily regulated industry also has grappled with new technologies, such as bank accounts that live on smartphones and the growing ubiquity of artificial intelligence.

Risk and Compliance Journal spoke with Acting Comptroller of the Currency Michael Hsu—one of the nation’s top banking regulators and a leading voice on risk and on banks being “too big to manage”—about the past year and the challenges looming for the industry.

Some takeaways from the conversation with Hsu:

• “I do worry about AI from a number of different angles. I don’t think we can zero in on just one of those risks.”
   
• “I have a saying, ‘The better a car’s brakes, the faster you can drive it safely.’ Some people want to sequence it like ‘drive fast, crash, build brakes.’ No. It’s better to do these simultaneously, because [with] stronger controls you can drive confidently at higher speeds. And that’s ultimately what we want.”

How the push for diversity at colleges and companies came under siege.

The management philosophy known as DEI, which had gathered momentum since 2020, has been under siege over the past year amid a collision of legal, economic and geopolitical forces.

The Supreme Court struck down affirmative action in colleges, removing the legal rationale buttressing many diversity programs. An expected slowdown in the economy prompted companies to cut jobs and financial support for diversity, equity and inclusion initiatives. And the Israel-Hamas war and college presidents’ responses to antisemitism on campus led some to question whether DEI programs and the values behind them extended to all students.

Binance’s U.S. Arm Hires New Chief Compliance Officer

The U.S. arm of cryptocurrency exchange Binance has hired Lesley O’Neill as its new compliance chief, as the firm continues to deal with regulatory scrutiny.

O’Neill most recently served as the chief compliance officer at digital identity verification platform Prove Identity. She will lead Binance.US.’s compliance efforts, including its anti-money-laundering and sanctions programs.

Her appointment follows the resignation of her predecessor, Tammy Weinrib, in November. In June, the Securities and Exchange Commission sued Binance; its founder, Changpeng Zhao; and Binance.US, for allegedly operating an illegal trading platform in the U.S.

—Mengqi Sun

• U.S. Attorney Breon Peace in Brooklyn, N.Y., and other law-enforcement officials are focusing on affinity frauds, which target close-knit communities.
   
• Shares in European drinks makers tumbled on Friday after the Chinese government launched an anti-dumping investigation into brandy imported from the European Union in an escalation of trade tensions between the regions.
   
• Tesla is recalling more than 1.6 million electric vehicles in China in another blow to the company’s ambitions for the Chinese market. 

Private equity’s move into insurance provokes systemic-risk concerns.

Financial authorities want to know more about whether surging private-equity investment in the insurance sector poses risks to the broader economy, reports WSJ Pro Private Equity.

In recent weeks, the Financial Stability Oversight Council—a U.S. Treasury Department panel formed to protect the financial system—and the International Monetary Fund both released reports questioning whether private-equity control of insurance companies makes the financial system less stable.

Islamic State claims responsibility for deadly bomb attack at Soleimani memorial.

Islamic State militants claimed responsibility Thursday for a pair of bombings that killed dozens of people a day earlier in the largest attack in Iran since the country’s 1979 Islamic Revolution, dispelling suspicions that Israel might have been behind the attack amid worries of a broadening regional conflagration.

The blasts took place with the Middle East on edge because of the war in Gaza between Israel and Hamas—an Islamist militant group that has moved closer to Iran in recent years—and increasing tensions between the U.S. and Israel on one side and other Iranian-backed militant groups in Lebanon, Syria, Iraq and Yemen on the other.

• Russia Moves Forward With Plans to Buy Iranian Ballistic Missiles

• North Korea fired more than 200 artillery shells near the western border islands of South Korea on Friday, reviving memories of prior violent clashes in the area as inter-Korean tensions escalate once again.
   
• China’s Zhongzhi Enterprise Group has declared bankruptcy, following a calamitous year in which it sparked fears that the world’s second-largest economy was facing a “Lehman moment.”
   
• The ranks of India’s farmworkers have swelled by some 60 million over the past four years, a shift fueled in part by a food-welfare program that feeds hundreds of millions of people. Meanwhile, jobs in manufacturing nationwide haven’t budged, and factories say they are struggling to hire.

• One of the world’s biggest supermarket chains said it would drop several PepsiCo products to protest what it called unacceptable price increases, a rare public standoff between a grocer and food maker after more than two years of rising prices.
   
• Tech stocks continued to limp through the first week of January.
   
• As Oregon reconsiders its decision to decriminalize hard drugs like fentanyl, research shows that mandating treatment programs for drug addicts can benefit them and the public.
   
• The Disney Day Drinkers Club (yes, that exists) is feuding with Epcot.

Follow us on X at @WSJRisk. Follow Risk & Compliance editor David Smagalla @DSmagalla_DJ and reporters Mengqi Sun @_MengqiSun, Dylan Tokar @dgtokar and Richard Vanderford @VanderfordRich.

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