Banking

Bank wires worth trillions of dollars halted by US Fed’s “operational error”

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Over 3 trillion dollars in daily transactions for the world’s biggest banks were disrupted Wednesday, according to an alert status on the Fed’s website announcing a disruption in several business lines for Fedwire, FedACH, and 11 other areas affecting wire transfers, ACH transactions and check-clearing in the U.S. banking system. About 850,000 transactions each day move an average daily volume of $3.4 trillion.

“We are restoring services and are communicating with all Federal Reserve Financial Services customers about the status of operations,” says an email from the Fed explaining that Fedwire is “the premier electronic funds-transfer service that banks, businesses, and government agencies rely on for mission-critical, same-day transactions.”

By Milan Sime Martinic

French bank will stop financing companies that exploit deforested land in the Amazon

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Continuing a trend of European businesses moving independently to protect the Amazon, France’s BNP Paribas announced it will no longer finance companies that buy cattle or soy produced on deforested or converted Amazon lands after 2008. The measure also applies to deforested lands in Brazil’s Cerrado region, a threatened tropical savanna eco-region covering 20% of Brazil that has lost half its land to agricultural clearing.

PNB said it will only finance those who adopt a Cerrado strategy of Zero Deforestation by 2025, promoting criticism from environmentalists that it is weak action that gives deforesters a 5-year free pass in an area they see spiraling into a collapse of its biodiversity.

The immediate move to fight Amazon deforestation, however, will also affect Ecuador, Venezuela, Suriname, Peru, Colombia, Bolivia, Guyana, and French Guiana, which hold parts of the Amazon forest along with Brazil. An area the size of the state of Maryland was lost to deforestation in 2020.

By Milan Sime Martinić

4 Top Banks To Create New Digital Currency

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UBS, Deutsche Bank, Santander, and BNY Mellon are working on a new blockchain-based digital currency.

Currently, the new currency is being referred to by the banks simply as “utility settlement coin.”

The four banks involved belong to the R3 consortium of 50 institutions looking into improving distributed ledger tech.

“You need a form of digital cash on the distributed ledger in order to get maximum benefit from these technologies,” said Hyder Jaffrey at UBS. “What that allows us to do is to take away the time these processes take, such as waiting for payment to arrive. That frees up capital trapped during the process.

The move is significant because it is the first time such a group of first-rate banks have set about creating a specific currency, although Citigroup and Goldman Sachs are also working on digital currencies.

For banks, the main benefit of digital currency is easing transactions between institutions by removing the third party settlement. Banks spend around $65 to 80 million every year on settlement and other associated processes, and it has been estimated that using a blockchain-based digital currency could reduce that by around $20 million.

Are State-Owned Banks a Win-Win?

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Focusing on the recent success of the Bank of North Dakota, talkshow host Thom Hartmann has raised the question of whether state-owned banks are something every state should have.

Hartmann came out in favor of state-owned banks in his opinion blog, calling them a “win-win for all.”

“You need to know this,” wrote Hartmann. “In 2014, the state Bank of North Dakota was more profitable than Goldman Sachs and J.P. Morgan Chase. And, that’s why every state should own their own depository institution.”

He referred to the success of the state-owned bank last year, despite the loss of what had previously been credited with the main reason for its success: the state’s oil boom.

Over the past 18 years, the Bank of North Dakota has outperformed itself year after year, and even with last years oil bust, the return on investment topped 18 percent.

He also referred to points commonly raised by proponents of state-owned banks: how they stimulate the local economy, particularly in tough times, how they save investors money by cutting out Wall Street, how they may be better at helping fund new local businesses as well as state-level projects like trains and energy plants.

“Rather than simply throwing money away in the form of interest and fees, states could protect depositors, boost local economies, and fund the new infrastructure needed for the modern era,” stated Hartmann.

“North Dakota has proven that state-owned banks are a win-win for all of us, and more states should follow their example.”