Fintech
SEC Staff Releases Report on U.S. Credit Market Interconnectedness and the Effects of the COVID-19 Economic Shock
Washington, D.C.–(Newsfile Corp. – October 5, 2020) – The Securities and Exchange Commission today published a staff report titled U.S. Credit Markets: Interconnectedness and the Effects of the COVID-19 Economic Shock, which focuses on the origination, distribution and secondary market flow of credit across U.S. credit markets. The staff report also addresses how the related interconnections in our credit markets operated as the effects of the COVID-19 pandemic took hold. In addition, staff will host a Roundtable on Interconnectedness and Risk in U.S. Credit Markets to discuss the issues raised in the report on the afternoon of Oct.14.
In the U.S. credit markets, banking and non-banking entities and intermediaries are intricately and inextricably interconnected. These interconnections are essential for the functioning of the markets, the provision of credit and the distribution of risk. These interconnections can also transmit and amplify risks in times of stress. The report identifies these interconnections and, with that framework, discusses how the COVID-19 economic shock reverberated through the credit markets in March and April 2020.
The principal purpose of the report is to identify and place in context key structural- and flow-related interdependencies in the U.S. credit markets as well as areas of stress revealed by the COVID-19 shock, with an eye toward informing policymakers as they seek to improve the functioning and resilience of our financial markets. The report does not make policy recommendations. The report is accompanied by a cover letter from SEC Chairman Jay Clayton and SEC Chief Economist S.P. Kothari and will be discussed at the roundtable, which includes policymakers and market participants, on Oct. 14.
“I am grateful to S.P. Kothari, SEC Chief Economist, and the many members of our staff who contributed to this report,” said Chairman Clayton. “We look forward to the Oct. 14 roundtable and welcome public comment.”
Analytical Framework
The report identifies approximately $54 trillion of credit issued and outstanding in the U.S. financial system at the end of 2019 and broadly traces the flow of that credit through various intermediaries and prior holders to the ultimate holders of the credit at that time. It then takes a deeper look at interconnections across six key U.S. credit markets with a focus on their function during and after the COVID-19 shock. These six markets—short-term funding, corporate bonds, leveraged loans/CLO, residential and commercial real estate, and municipal securities—account for more than $40 trillion in outstanding credit.
Key takeaways from the report are:
- The U.S credit markets, in size, structure and function have changed significantly since the 2008 global financial crisis.
- The credit markets are highly interconnected, which can both accelerate risk transmission and facilitate risk absorption.
- The ability of intermediaries (e.g., “market makers”) to absorb significant, rapid shifts in investor sentiment (e.g., a “dash for cash”) is limited in absolute terms and may become more limited as spreads widen and volatility increases during periods of stress and uncertainty.
- Due to the interconnected nature of our credit markets and the size and scope of the COVID-19 shock, it was insightful, prudent and, perhaps, essential that the actions of the Federal Reserve and the CARES Act were multi-faceted and immediate. Those actions were instrumental in ameliorating stress in the credit markets, particularly the short-term funding markets.
- The combination of the Federal Reserve’s intervention and the CARES Act also was extremely important in stabilizing prices (e.g., housing prices) and sustaining economic activity (e.g., consumer spending), which in turn added stability to the credit markets.
- Banks and the banking system have been resilient to the COVID-19 shock to date notwithstanding their exposure to several trillions of dollars of residential and commercial mortgages and leveraged loans to corporations.
Oct. 14 Roundtable
The Oct. 14 roundtable announced today will bring together U.S. and international regulators as well as other experts to discuss the interconnections within our capital markets and the impact of the COVID-19 economic shock. Chairman Clayton will host a fireside chat discussing the interconnections between banking and non-banking entities and intermediaries in the U.S. credit markets. The first of two panels will feature leading market participants discussing the impact of COVID-19 on the six credit markets discussed in the report. In the second panel, U.S. and international regulators will address the interconnectedness of the market from a regulatory perspective. This will include a discussion on the areas where the markets functioned well, areas that were stressed, and where further attention may be warranted.
Members of the public who wish to provide views on the issues raised in the report may submit their views electronically to [email protected] or use the Internet submission form. Comments may be submitted either in advance of or after the roundtable. Information that is submitted will be posted on the SEC’s website. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make publicly available.
Roundtable on Interconnectedness and Risk in U.S. Credit Markets
Oct. 14, 2020
1 p.m. Welcome and Introduction
- SP Kothari, Chief Economist and Director of the Division of Economic and Risk Analysis, SEC
1:10 p.m. Panel 1: Market Perspective
The economic shock of COVID-19 impacted liquidity and price volatility in our capital markets. It also brought to light some of the changes that have taken place since the 2008 global financial crisis, including regulatory reforms, changes in market structure and the growth of credit. This panel will focus on six credit markets spanning over $40 trillion of outstanding debt, including the short-term funding, corporate bond, leveraged loan, residential and commercial real estate, and municipal securities markets.
Moderator: Sumit Rajpal, Senior Policy Advisor, SEC
- David Finkelstein, Chief Executive Officer, Annaly Capital Management
- Dawn Fitzpatrick, Chief Investment Officer, Soros Fund Management
- Steven Goulart, Executive Vice President and Chief Investment Officer, MetLife, Inc.
- Barbara Novick, Vice Chairman, BlackRock
- Thomas Wipf, Vice Chairman of Institutional Securities, Morgan Stanley
2:10 p.m. Break
2:20 p.m. Fireside Chat
In the U.S. credit markets, banking and non-banking entities and intermediaries are intricately interconnected. These interconnections are essential for the functioning of the markets and the provision of credit, but these interconnections can also transmit and amplify risks. The COVID-19 economic shock reverberated through the credit markets in March/April 2020 and the ripple effects continue to be felt. Participants in the fireside chat will discuss these and other issues.
Moderator: Jay Clayton, Chairman, SEC
- Mark Carney, COP 26 Finance Adviser and UN Special Envoy
- Gary Cohn, former Director of the U.S. National Economic Council
- Glenn Hutchins, Chairman, North Island
- Lorie Logan, Executive Vice President, Markets Group, Federal Reserve Bank of New York
3:20 p.m. Break
3:30 p.m. Panel 2: Regulatory Perspective
The COVID-19 economic shock tested the resilience of the U.S. and international financial markets and the effects of monetary interventions and fiscal measures in jurisdictions around the globe. This panel will discuss what areas of the markets functioned well, which areas showed signs of stress, and where there may still be vulnerabilities.
Moderator: SP Kothari, Chief Economist and Director of the Division of Economic and Risk Analysis, SEC
- Tobias Adrian, Financial Counsellor and Director, Monetary and Capital Markets Department, International Monetary Fund
- Natasha Cazenave, Deputy Head of the Policy and International Affairs Directorate, Autorité des Marchés Financiers (France)
- Andreas Lehnert , Director, Division of Financial Stability, Board of Governors of the Federal Reserve System
- Brent McIntosh, Under Secretary for International Affairs, U.S. Department of the Treasury
4:30 p.m. Closing Remarks
Mohamed El-Erian, President of Queens’ College, Advisor to Allianz and Gramercy
As we close out 2024, the fintech industry continues to deliver headlines that underscore its dynamism and innovation. From IPO aspirations to groundbreaking regulatory milestones, today’s updates highlight the transformative power of fintech partnerships, regulatory evolution, and disruptive technologies. Here’s what you need to know.
Chime’s Quiet Step Toward Public Markets
Chime, the U.S.-based financial technology startup best known for its digital banking services, has taken a significant step by filing confidential paperwork for an initial public offering (IPO). As one of the most valuable private fintechs in the U.S., Chime’s move could potentially signal a renewed appetite for fintech IPOs in a market that has been cautious following fluctuating valuations across the tech sector.
With a valuation that reportedly exceeded $25 billion in its last funding round, Chime’s IPO could set a new benchmark for the industry. Observers note that its strong customer base and revenue growth may make it an appealing choice for investors seeking to capitalize on the digital banking boom. However, the timing and success of the IPO will depend on broader market conditions and the regulatory landscape.
Source: Bloomberg
ZBD’s Pioneering Achievement: EU MiCA License Approval
ZBD, a fintech company specializing in Bitcoin Lightning network solutions, has made history by becoming the first to secure an EU MiCA (Markets in Crypto-Assets Regulation) license. This landmark approval by the Dutch regulator positions ZBD at the forefront of compliant crypto-fintech operations in Europe.
MiCA, which aims to harmonize the regulatory framework for crypto-assets across the EU, has been a focal point for industry players aiming to establish legitimacy and expand their offerings. ZBD’s achievement not only validates its operational rigor but also sets a precedent for other fintech firms navigating the evolving regulatory landscape.
Industry insiders view this as a strategic advantage for ZBD as it broadens its footprint in Europe. By leveraging its regulatory approval, the company can accelerate its product deployment and establish trust with institutional and retail users alike.
Source: Coindesk, PR Newswire
The Fintech-Credit Union Synergy: A Blueprint for Innovation
The convergence of fintechs and credit unions continues to reshape the financial services ecosystem. Collaborative initiatives, such as the one highlighted in the recent partnership between fintech innovators and credit unions, are proving to be a potent force in delivering tailored financial solutions.
This “dream team” approach allows credit unions to leverage fintech’s technological expertise while maintaining their community-focused ethos. Key areas of collaboration include digital payments, personalized financial management tools, and enhanced loan processing capabilities. These partnerships not only enhance member engagement but also enable credit unions to remain competitive in an increasingly digital-first financial environment.
Industry analysts emphasize that such collaborations underscore a broader trend of traditional financial institutions embracing fintech-driven solutions to bridge service gaps and foster innovation.
Source: PYMNTS
Tackling Student Loan Debt: A Fintech’s Mission
Student loan debt remains a pressing issue for millions of Americans, and a Rochester-based fintech aims to offer relief through its cloud-based platform. This innovative solution is designed to simplify loan management and provide borrowers with actionable insights to reduce their debt burden.
The platform’s features include repayment optimization tools, personalized financial education, and seamless integration with loan servicers. By addressing the complexities of student loan management, this fintech is empowering borrowers to make informed decisions and achieve financial stability.
As the student loan crisis continues to evolve, solutions like this highlight the critical role fintech can play in addressing systemic financial challenges while fostering financial literacy and inclusion.
Source: RBJ
Industry Implications and Takeaways
Today’s updates underscore several key themes shaping the fintech landscape:
- Regulatory Milestones: ZBD’s MiCA license approval exemplifies the importance of regulatory compliance in unlocking growth opportunities.
- Strategic Partnerships: The collaboration between fintechs and credit unions demonstrates the value of combining technological innovation with traditional financial models to drive customer-centric solutions.
- Market Opportunities: Chime’s IPO move reflects a potential revival in fintech public offerings, signaling confidence in the sector’s long-term prospects.
- Social Impact: Fintech’s ability to tackle systemic issues, such as student loan debt, showcases its role as a force for positive change.
The post Fintech Pulse: Your Daily Industry Brief (Chime, ZBD, MiCA) appeared first on News, Events, Advertising Options.
Leading global payments platform SPAYZ.io has confirmed it will be attending iFX EXPO Dubai 2025 on 14 to 16 January. Exhibiting at Stand 64 at Trade Centre Dubai, SPAYZ.io’s team of professionals will be on hand providing live demonstrations of its renowned payment services for payment providers. Attendees will also receive exclusive insight into SPAYZ.io’s plans for 2025 alongside early early access to its upcoming plans for the new year.
SPAYZ.io delivers a host of payment solutions that leverage the latest technological innovations and open access to the fastest growing emerging markets across Africa, Europe and Asia. Over the past year, there has been huge demand for its Open Banking and local payment method services, alongside bank transfers, mass payouts, online banking and e-wallets.
Yana Thakurta, Head of Business Development at SPAYZ.io commented: “We look forward to once again participating at iFX Dubai to expand our network of partners and clients. It’s a fantastic way to kick off the year, connecting with thousands of industry leaders from FOREX platforms to trading companies, and everything in between.
“Our key goal for iFX Dubai EXPO 2025 is to expand our portfolio of solutions and geographies. We’re using this as an opportunity to partner with like-minded entities who share our ambition to provide payment solutions that are truly global.”
Come meet SPAYZ.io’s team at the Trade Centre Dubai at Stand 64. You can also book a meeting slot with a member of a team.
The post SPAYZ.io prepares for iFX EXPO Dubai 2025 appeared first on News, Events, Advertising Options.
Airtm, the most connected digital dollar account in the world, is proud to announce the addition of two distinguished industry leaders to its Board of Directors: Rafael de la Vega, Global SVP of Partnerships at Auctane, and Shivani Siroya, CEO & Founder of Tala. These appointments reflect Airtm’s commitment to innovation and financial inclusion as the company enters its next phase of growth.
“We are thrilled to welcome Rafael and Shivani to Airtm’s Board of Directors,” said Ruben Galindo Steckel, Co-founder and CEO of Airtm. “Their unique perspectives and proven track records will be invaluable as we continue scaling our platform to empower individuals and businesses in emerging markets. Together, we’ll push the boundaries of financial inclusion and innovation to create a more connected and equitable global economy. Rafael and Shivani bring a wealth of experience and strategic insight that will strengthen Airtm’s mission to connect emerging economies with the global market.”
Rafael de la Vega, a seasoned leader in fintech global partnerships and technology innovation, is currently the Global SVP of Partnerships at Auctane. With a proven track record of delivering scalable, impactful solutions at the intersection of fintech, innovation, and commerce, Rafael’s expertise will be pivotal as Airtm continues to grow. “Airtm has built a platform that breaks down barriers and opens up opportunities for people in emerging economies to connect to global markets. I am excited to contribute to its growth and help further its mission of fostering financial inclusion on a global scale,” said Rafael.
Shivani Siroya, CEO and Founder of Tala, is a pioneer in financial technology, renowned for empowering underserved communities through access to credit and essential financial tools. Her leadership in leveraging data-driven innovation aligns seamlessly with Airtm’s vision of creating more equitable financial opportunities. “Empowering underserved communities has always been at the core of my work, and Airtm’s mission resonates deeply with me. I’m thrilled to join the Board and work alongside such a dynamic team to expand access to financial tools that truly make a difference in people’s lives,” said Shivani.
The post Airtm Enhances Its Board of Directors with Two Strategic Appointments appeared first on News, Events, Advertising Options.
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