FDIC: Cryptos and Climate Top Risk List for Banks in 2023
The FDIC has identified cryptocurrencies and climate change as the top risks for banks in 2023. Here are the key points from the report:
1. Cryptocurrencies pose complex risks: The volatile nature of crypto-assets makes it difficult for banks to assess the risks involved. The recent crash in the crypto market exposed vulnerabilities and highlighted the need for additional guidance.
2. Risks associated with crypto-assets: The report mentions various risks, including fraud, legal uncertainties, misleading information, weak risk management practices, and operational vulnerabilities.
3. SBNY report highlights crypto risks: The collapse of Signature Bank and the failure of FTX are cited as significant factors in SBNY’s downfall. The report emphasizes the risks associated with crypto assets and liquidity risk management.
4. Climate change presents physical risks: The FDIC notes that severe weather events caused significant damage in 2022, making it the third most expensive year on record. The increasing frequency and intensity of such events pose challenges and emerging risks to the banking industry.
5. Additional risks from climate change: Changes in climate conditions and natural disasters are expected to pose additional risks to banks in the future.
In conclusion, the FDIC is closely monitoring crypto activities at banks due to the complex risks involved. At the same time, the increasing physical risks from climate change are a growing concern for the banking industry.
Hot Take: The FDIC’s focus on cryptocurrencies and climate change highlights the evolving landscape of risks for banks. As the crypto market continues to be volatile and climate events become more severe, banks will need to adapt and develop robust risk management practices to navigate these challenges.
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