Correspondent Blog

Set aside the noise of cryptocurrency for a second and focus on the potential of a new digital asset, or crypto, wallet. The crypto wallet can be the centerpiece of customer engagement for Web 3.0 and can be used for a myriad of new applications. The bigger picture here that banks should consider is that…

We recently posted an article (HERE) about how the Federal Reserve is bursting the everything bubble, and this will cause pain for some banks in the form of interest rate, credit, and liquidity risk.  One of the likely outcomes of this tightening cycle is stagflation, which will cause cash flow constraints for borrowers and create…

Every bank wants to be “innovative,” but the truth is innovation is difficult. Add to that a bank’s resource constraints, compliance demands, budget goals, legacy IT infrastructure and talent gaps, and innovation for a bank is extremely difficult. When it comes to bank innovation, it pays to have a methodology in which to think about…

Last week the Federal Reserve hiked interest rates by 75 basis points – its most significant hike since 1994. This decision coincided with rate hikes by the Swiss National Bank, its first since 2007, the Bank of England, and the European Central Bank announced at an emergency meeting that they would raise interest rates next…

A Tumultuous Week Comes to a Close We mentioned on Monday to tighten your seat belt as it could be a wild ride this week and that prediction certainly came true. The peculiar thing, however, is that with all the volatility this week has brought, the 10yr Treasury is practically back where it started the…

Fed Delivers a 75bps Rate Hike The Fed relented to market pressure and raised the overnight fed funds target rate 75bps to 1.50% – 1.75%. The stronger-than-expected May CPI Report has kept financial markets under pressure since its release last Friday and the Fed acknowledged that pressure with the need to move in larger increments…

Treasuries Finally Find a Bid On Fed Day, Treasuries are finally finding a bid as news that the ECB convened an emergency meeting added a flight-to-safety bid into the Treasury market. The ECB is worried that some of its peripheral members are seeing yield spreads significantly widen as they prepare to hike rates and that…

Treasury Yields Reach Highest in a Decade The May CPI Report continues to reverberate around the world, and in its wake are Treasury yields not seen in over a decade.   Investors are betting the Fed will either not be able to contain inflation anytime soon, or that if they do it will necessitate a…

Banks that are looking to enhance their risk management practices should consider incorporating the concept of the velocity of risk into their enterprise-wide risk management practices. Some risks occur slowly; others strike quickly and hard. The velocity of risk is the time frame in which the risk may occur. In this age of social media,…

May CPI Hits 40-Year High May CPI disappointed markets with a hotter-than-expected read and that has sent short to intermediate Treasury yields higher once again.   The overall inflation rate rose a full 1.0% for the month which was well above the 0.3% increase in April and higher than the 0.7% expected. Rebounding gas prices…

Many community banks are searching for ways to increase fee income, and many bank CEOs have concluded that fee income is a significant driver of revenue and profitability.  We argue that larger banks do not have an inherent advantage over community banks in generating fee income because of their scale.  Most fee income generated by…

Banks don’t respect the power of understanding customer lifetime value (CLV). It is the one performance metric with the highest correlation to long-term bank profitability, around 88%. It is more important than margin, cost of funds, non-interest income, and loan profitability COMBINED. Not only do few banks calculate it, but many banks also spend resources…