Ed Crutchfield, who was CEO of First Union, photographed at One First Union in Charlotte in 1999. The longtime bank executive took charge of Charlotte-based First Union and forged a national banking powerhouse while championing the city’s growth.
CHRISTOPHER A. RECORD
CHARLOTTE OBSERVER FILE PHOTO
Ed Crutchfield, who died Tuesday at age 82 at his Florida home, was a major force in the banking world during his decades spent in Charlotte.
Here’s a timeline of his career.
July 1941 — Crutchfield is born in Detroit, and raised in Albemarle, Stanly County, an hour east of Charlotte.
1965 — Crutchfield joins Charlotte-based First Union as a 23-year-old bond trader.
1973 — He is named president of the bank.
1984 — Crutchfield adds the title of chief executive officer.
1985 — Crutchfield’s expansion era begins when First Union enters Florida; he’s also named board chairman.
1988 — The bank opens its 42-story headquarters tower in uptown Charlotte.
1993 — First Union jumps to No. 9 among publicly traded banks with acquisitions in Virginia, Washington, D.C., and Tennessee.
1996 — The bank becomes the nation’s sixth-largest with the $5.9 billion purchase of First Fidelity in New Jersey.
1997 — First Union buys Signet Bancorp. of Richmond, Virginia.
1998 — The bank buys CoreStates Financial Corp. of Philadelphia, the Wheat First Butcher Singer brokerage firm and The Money Store consumer lending chain.
March 2000 — Diagnosed with lymphoma, Crutchfield steps down as CEO but plans to remain chairman through 2001. Bank President Ken Thompson succeeds him.
June 2000 — First Union announces a restructuring that will include cutting thousands of jobs, shedding poorly performing business units (including The Money Store) and a $2.8 billion charge against earnings.
August 2000 — Crutchfield tells employees his cancer is in remission.
October 2000 — Thompson announces that Crutchfield will step down as chairman on March 1, 2001, some 10 months ahead of schedule.
Jan. 2, 2024— Crutchfield dies peacefully at his home in Vero Beach, Florida.
Ed Crutchfield, who was chairman of First Union when he was photographed in 2000, spoke about his battle with cancer, and his decision to retire from the bank early. He died on Tuesday, Jan. 2, 2024, at age 82. PATRICK SCHNEIDER CHARLOTTE OBSERVER FILE PHOTO
Former First Union CEO Ed Crutchfield has died at age 82. He built the Charlotte-based bank into a powerhouse, while also championing the city it called home.
JEFF WILLHELM
Observer archive photo
Ed Crutchfield, who took charge of Charlotte-based First Union and forged a national banking powerhouse while also championing the city’s growth, died Tuesday at age 82.
In 15 years as CEO of a bank that is now part of Wells Fargo, Crutchfield made more than 80 acquisitions to create the nation’s No. 6 bank by the time he retired in 2001.
Wells Fargo is based in San Francisco and has some 230,000 employees nationwide. Its largest employment hub is in the Charlotte area, where it employs more than 27,000 people. Much of that is a legacy of Crutchfield’s construction of First Union.
“He was my best friend and a fantastic dad and a hero to me,” his son, Elliott Crutchfield told The Charlotte Observer Tuesday night. “On a broader basis, I can tell you from inside the house, he gave it all he had for the bank and by extension Charlotte.
“And I can tell you he took significant steps to make sure the bank was headquartered here (in Charlotte) when others had some other ideas. It was important to him that that be the case.”
Ed Crutchfield died peacefully at his home in Vero Beach, Fla., after a battle with dementia, his son said.
Former First Union CEO Ed Crutchfield has died at age 82. He built the Charlotte-based bank into a powerhouse, while also championing the city it called home. JEFF WILLHELM Observer archive photo
Competing and collaborating in Charlotte
One of Charlotte’s leading businessmen in the last quarter of the 20th century, Crutchfield built a major bank headquarters in the city, and — despite a professional rivalry — was a frequent partner of then-Bank of America CEO Hugh McColl when it came to Charlotte’s civic growth.
McColl told the Observer Wednesday that he and Crutchfield competed intensely in trying to gobble up banks around the nation, with each winning their share. First Union snapped up Atlantic Bank in Florida just as McColl was in discussions with them, while NationsBank, as McColl’s company was then known, won Boatmen’s Bancshares in St. Louis, for example.
“It was quite competitive,” McColl said. “We chased each other around the country buying companies.”
That competition turned to collaboration, though, when it came to building up Charlotte. The two would back each other’s projects, whether it be supporting the symphony, Johnson C. Smith University or any of the dozens of other efforts.
“Everyone thinks we were enemies, but that wasn’t really true,” McColl said. “We both ran our companies and got along fine on civic matters. And we both disliked Wachovia intensely.”
Crutchfield retired earlier than expected at age 59 to successfully fight lymphoma, turning the company over to his hand-picked successor, Ken Thompson. First Union later merged with Winston-Salem’s Wachovia and was bought by Wells Fargo after the bank nearly collapsed in the 2008 financial crisis.
Some of Crutchfield’s deals were duds. But he was often praised in Charlotte for helping the city become a major banking center and particularly for developing much of the southern half of uptown.
“Ed Crutchfield has been tremendously admired by the banking community, not just in North Carolina, but across the country, because he didn’t just sit on the sidelines and watch the parade go by. He was a drum major,’’ Thad Woodard, head of the N.C. Bankers Association, said when Crutchfield retired.
Ed Crutchfield NC ties
Born in Detroit, Crutchfield was raised in Albemarle in Stanly County, about an hour east of Charlotte. His mother was a school teacher and his father worked as an FBI agent, lawyer and county judge, his son said.
After graduating from Davidson College and the University of Pennsylvania’s Wharton School, Crutchfield joined First Union as a bond trader at age 23.
He rose quickly through the ranks, becoming president in 1973 and CEO in 1984, succeeding Cliff Cameron.
Crutchfield would spend much of his career buying banks. Soon after taking charge, he merged First Unionwith Greensboro-based Northwestern Financial Corp.
It was the biggest bank merger in state history at the time and formed North Carolina’s second-largest bank.
His dealmaking days were full of colorful stories that earned him the nickname “Fast Eddie” from Wall Street analysts, some of whom fretted about his expensive purchases.
One of his dogs, Bud, became a good-luck charm after barely surviving being hit by a car in 1995 while Crutchfield awaited news on a bid for First Fidelity Bancorp. First Union bought the Newark, N.J., bank for $5.4 billion — the biggest U.S. bank acquisition at the time.
In 1997, the dealmaker bragged about the technique he used to buy Signet Banking Corp. of Richmond, Va., another key acquisition.
To get the bank’s management to sell, he said, “I just kept stacking billion-dollar bills on the table.’’
Ed Crutchfield, who was chairman of First Union when he was photographed Oct. 19, 2000, spoke about his battle with cancer, and his decision to retire from the bank early. PATRICK SCHNEIDER CHARLOTTE OBSERVER FILE PHOTO
Wall Street style in Charlotte
In the coming year, he would make even more deals, ultimately expanding First Union from Connecticut to Key West, Florida, and into new business lines.
Crutchfield paid $19.8 billion for Philadelphia’s last big bank, CoreStates Financial, in 1998. He set a new record for the most expensive deal in U.S. banking history. The same year he also spent $2.1 billion on a consumer finance company, The Money Store.
He also built a Wall Street-style capital markets business at First Union, recruiting investment bankers, many from the Northeast, to the Queen City.
Some of these deals would have their pitfalls.
He paida high price for CoreStates and when Crutchfield moved quickly to integrate operations the rapid pace spawned computer glitches that sent customers fleeing. A revenue shortfall at CoreStates and an accounting change at the Money Store led to lower earnings estimates that soured the company’s reputation on Wall Street in the late 1990s.
In 2000, Crutchfield at age 59 was diagnosed with lymphoma and handed his CEO title to Thompson, who quickly restructured the company and improved customer service. Crutchfield went through chemotherapy and beat the disease, but gave up his chairman post in March 2001, leaving behind the bank he forged.
Thompson merged First Union with Winston-Salem’s Wachovia in 2001 and kept the smaller company’s more-respected name.
“To me the biggest thrill has been seeing the company start when nobody was giving us a plugged nickel for our chances, and at least as of today, pulling it off,’’ Crutchfield told the Observer in an interview before his retirement. “That’s been a kick.’’
Ed Crutchfield, CEO of First Union, photographed at One First Union in Charlotte Feb. 9, 1999. The longtime bank executive took charge of Charlotte-based First Union and forged a national banking powerhouse while championing the city’s growth. CHRISTOPHER A. RECORD CHARLOTTE OBSERVER FILE PHOTO
Ed Crutchfield’s civic involvement
Although known for his hard-charging ways, Crutchfield once said an admonishment from his mother, Katherine, encouraged him to develop a warm workplace for his thousands of employees. He once made news when he banned voicemail at the company to encourage human contact.
In 1996, he married Barbara Massa, First Union’s former director of corporate communications. He had two grown children. He was divorced from his first wife, Nancy.
Besides his banking accomplishments, Crutchfield also was known for being part of “The Group’’ — a handful of businessmen who once helped shape Charlotte.
Although he was a fierce competitor with McColl, Crutchfield collaborated with him and other business leaders on community projects.
“I believe the last 20 years of focus on developing the uptown area of Charlotte has been appropriate,’’ he said in a 2003 letter to the Observer. “However, it is my belief that Charlotte-Mecklenburg should now shift its priority, focus and dollars in a major way to the issues of education and human services for young people.’’
In the late 1980s, he played a quiet but influential role during a campaign to diversify Charlotte’s then all-white country clubs.
In 1997, when five Mecklenburg County commissioners moved to cut funding to the Charlotte-Mecklenburg Arts & Science Council because of objections to gay characters and themes in a play, he got involved to diversify the board.
Like McColl, Crutchfield also left his mark by molding the city’s skyline. In 1988, the bank opened its 42-story headquarters tower on South College Street.
Although known for his hard-charging ways, Ed Crutchfield once said an admonishment from his mother, Katherine, encouraged him to develop a warm workplace for his thousands of employees at First Union. He’s seen here in a 1998 file photo in front of the bank’s new building. HO
The Green park on South Tryon that hides an underground parking garage also was part of his vision. A proposed tower that would have topped McColl’s 60-story headquarters, however, never materialized.
“While he always knew that his major responsibility was looking out for First Union and its shareholders, he also understands the health of this community and the vitality of this community are good for business,’’ the late Mecklenburg County Commissioners Chairman Parks Helms once told the Observer.
In his retirement, Crutchfield spent time in Charlotte, Florida and the N.C. mountains. He enjoyed flyfishing with his wife and spending time with his grandchildren.
Observer editors Taylor Batten and Adam Bell, and former Observer reporters Rick Rothacker, Hannah Lang and Austin Weinstein, and Observer archives, contributed to this report.
Editor’s note: A previous version of this story incorrectly stated the professional background of Crutchfield’s father.
This story was originally published January 2, 2024, 7:50 PM.
Truist bank plans to close more branches in the Charlotte region, as well as elsewhere in North Carolina, as the bank grapples with $750 million in companywide cuts, including layoffs.
Charlotte-based Truist will close branches at 818 Church St. N. in downtown Concord and 2414 West Franklin Blvd. in Gastonia on March 19.
Seven more branches North Carolina will close on the same day, according to the bank’s filings with the North Carolina Commissioner of Banks. Those branches are: 201 W. Market St. and 1310 Battleground Ave, Greensboro; 3410 Robinhood Road, Winston-Salem; 3405 Hillsborough Road, Durham; 1301 Eastchester Drive, High Point; 1000 Village Market Place, Morrisville; and 1803 N. Sandhills Blvd., Aberdeen.
More customers are banking digitally with Truist, spokesman Brain Davis told The Charlotte Observer in an email interview. As a result, the bank is closing 3% of its 285 branches North Carolina in March 2024, based on customer behavior, branch traffic and transaction volume.
“For the vast majority of branches that are closing, clients will have access to a branch about 2 1/2 miles away on the average,” Davis stated.
In March 2022, the bank closed five Charlotte-area branches because of overlap following the BB&T and SunTrust merger that formed Truist in 2019. In total, Truist planned to close 800 branches .
Truist Bank is closing nine branches across North Carolina, including a couple in the Charlotte region. DAVID T. FOSTER III
When a branch closes, Truist gives customers plenty of notice, Davis said. They were sent letters in mid-December explaining the closure and directions to the nearest location. Notices inside the branches were also posted.
Clients won’t experience any changes with accounts with the closings, other than those with safe deposit boxes, Davis said.
“We’ll continue to offer access to more than 1,900 branches and 2,900 ATMs — one of the most expansive branch and ATM networks in the communities we serve,” Davis added.
Challenges continue for Truist bank
In September, Truist CEO Bill Rogers said there will be sizable” layoffs at the bank as part of a $750 million companywide cost-cutting plan. The layoffs are to take place between the third quarter of this year and the first quarter of 2024. The plan also includes consolidating leadership roles for fewer layers of management.
Truist also has missed profit estimates.
The bank reported a net income of $1.1 billion in the third quarter ending Sept. 30, compared to $1.5 billion the same time last year.
As of last year, Truist had more than 50,000 workers throughout the U.S., including more than 3,000 workers in the Charlotte area. Truist is headquartered at 214 N. Tryon St.
This story was originally published December 22, 2023, 11:28 AM.
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Catherine Muccigrosso is a business reporter for The Charlotte Observer. An award-winning journalist, she has worked for multiple newspapers and McClatchy for more than a decade.
The European Union is enhancing the European Central Bank’s role to oversee climate risks and digital assets in the banking sector.
This move comes with the expanding scope of risks facing the banking sector, notably those associated with climate change and the burgeoning field of digital assets.
Under the new mandate, the ECB’s responsibilities will now encompass overseeing banks’ transition strategies towards a net-zero carbon economy spanning the next three decades. This development places the ECB at the forefront of supervising how banks prepare and adapt to environmental changes, which is increasingly seen as critical given the potential financial risks of climate change.
Moreover, the ECB’s jurisdiction is extended to include the supervision of bank-owned crypto asset services. This change reflects the growing importance of digital assets like Bitcoin (BTC) in the financial landscape and the need for robust regulatory frameworks to manage associated risks, such as money laundering.
This expansion of powers is expected to bring together the approach of European banking regulators towards climate-related issues. Previously, there was tension over how aggressively the ECB should enforce climate-related policies, with some board members cautious about overstepping the institution’s mandate.
The reform also empowers the ECB to oversee operational leasing businesses owned by banks. While not traditionally at the center of regulatory focus, these businesses present unique challenges, as evidenced by issues like the IT integration at Societe Generale SA’s LeasePlan.
Notably, the EU’s decision to strengthen the ECB’s role comes amid a broader context of regulatory adjustments. For instance, there has been a scaling back of international standards for bank capital, initially drafted in response to the 2008 financial crisis. Additionally, the reforms didn’t fully meet the ECB’s expectations regarding the vetting processes for senior bank leadership.
Commerzbank becomes the first major German bank to receive a cryptocurrency custody license, signaling a strategic move into digital asset services.
Commerzbank AG, Germany’s fourth-largest banking institution, has obtained a regulatory custody license for cryptocurrencies. This makes Commerzbank the first German full-service bank to acquire such a license, marking a significant step in integrating digital assets into traditional banking services.
Wir haben als erste deutsche Universalbank die #Kryptoverwahrlizenz erhalten. Diese ermöglicht uns, ein breites Spektrum von Dienstleistungen im Bereich digitaler Vermögenswerte, speziell Kryptowerte, aufzubauen. Mehr dazu im Interview mit Dr. Jörg Oliveri del Castillo-Schulz.
The authorization, under Article 1 Section 1a Sentence 1 No 6 of the German Banking Act (KWG), allows Commerzbank to offer extensive services centered around digital assets. This move aligns with the bank’s strategic vision to leverage innovative technologies in enhancing its service offerings, especially in cryptocurrencies.
In the initial phase, Commerzbank aims to launch a robust and secure platform, complying with strict regulatory standards, to facilitate the custody of crypto assets for its institutional clients. This platform will be grounded in blockchain technology, ensuring a high level of security and reliability for its users.
Dr. Jörg Oliveri del Castillo-Schulz, the Chief Operating Officer of Commerzbank, emphasized the significance of this development. He emphasized that this achievement lays a solid foundation for the institute to support its clients in navigating the emerging landscape of digital assets.
Germany has recently seen significant developments in cryptocurrency adoption from institutional entities. Blockchain funding in the country increased by 3% this year, and it hosted several key blockchain events throughout the year. Coinbase also recently selected Germany as a key hub for talent development, because of the region’s growing adoption of web3 technologies compared to the U.S.
A newly formed organization will begin a dialogue among central banks to support adapting technical standards of different CBDC solutions.
The Nobel Sustainability Trust (NST), a charity established by the members of the Nobel family, is set to push the adoption of central bank digital currencies (CBDCs) with a new initiative called Central Bank Digital Currency Collaboration Organization (CBDCCO).
According to a press release, the program aims to facilitate “efficient and reliable carbon asset life cycle management” for central bank digital currencies.
With CBDCCO, the trust wants to begin a dialogue among central banks to support integrating “innovative digital financial infrastructure” developed by central banks and organizations such as BIS, IMF, and World Bank.
“Digital currencies present a unique opportunity to rebuild and reshape our financial systems with sustainability at their core.”
Peter Nobel, the Chairman of NST
Moreover, the organization is also said to support the adaptation of technical standards of different CBDC solutions to make state-issued digital currencies mutually convertible on an international level.
The newly formed organization is expected to start operation in January 2024.
Founded in 2007, the Nobel Sustainability Trust was established to encourage the research, development, action, and implementation of sustainable solutions, as per the charity’s official website. The trust is financially supported by sovereign entities, family offices, and corporations “who support its agenda.”
Swiss financial services company UBS Group AG will now allow wealthy clients in Hong Kong to access three crypto exchange-traded funds (ETFs), joining its rival HSBC Holdings.
According to Bloomberg, citing anonymous sources, UBS Group’s Hong clients can trade Samsung Bitcoin Futures Active, CSOP Bitcoin Futures, and CSOP Ether Futures ETFs. Those are authorized by the Securities and Futures Commission (SFC), starting from Nov. 10th.
Hong Kong’s largest financial institution, HSBC, became the first bank to allow its customers in the special administrative region of China to trade the three crypto ETFs in response to growing demand.
Hong Kong, which is working towards becoming a major crypto hub, allows futures-based cryptocurrency ETFs, with previous reports stating that the SFC is mulling, allowing retail investors to access spot crypto ETFs.
Meanwhile, anticipation for a spot Bitcoin ETF in the United States continues to gain momentum, with the co-founder of Valkyrie, Steven McClurg, expecting the Securities and Exchange Commission (SEC) to approve applications in November 2023.
Valkyrie, which has seen its spot Bitcoin ETF filing rejected by the SEC in the past, recently submitted an amended application to the regulator.
Currently, there are 12 pending spot-based Bitcoin ETF applications, with Bloomberg ETF analysts Eric Balchunas and James Seyffart, noting that there is an available window between Nov. 9 and Nov. 17, for the SEC to approve all applications.
Seyffart also speculated that there was a 90% chance that the American regulatory watchdog could green light applications by Jan. 10, 2024.
Wells Fargo is based in San Francisco but has its largest employment hub in Charlotte, with about 27,000 workers here and more than 247,000 worldwide.
“We continue to believe we’ve got a lot more to do to make the company as efficient as it should be,” Santomassimo said at the conference.
He did not detail the extent of the coming layoffs.
Santomassimo said employee totals have decreased every quarter since the third quarter of 2020. “Now I’m not suggesting it’s going to be down every quarter forever, right. But I do think that there’s more to do,” he said.
Wells Fargo expects more layoffs and a decrease in office space as the bank looks to continue to reduce expenses. Joshua Komer jkomer@charlotteobserver.com
Where will Wells Fargo job cuts come from?
There is no one specific business line that will be the focus of the layoffs, according to Santomassimo.
“It really just is business by business, group by group,” he said, “making sure we come in every day, every quarter and have a plan to continue to incrementally get better and better.”
Santomassimo also said that attrition rates at the bank have slowed noticeably since last fall. “And so that’s why you see us having to use severance more than what we’ve had to do over the last couple of years,” he said.
Wells Fargo has reduced its employee totals by about 40,000 people over the past couple years, Santomassimo said.
Wells Fargo office space
Shrinking its real estate portfolio also will help the bank cut expenses.
“We had too much real estate before COVID,” Santomassimo said. “And so we’ve been methodically sort of working through that portfolio over the last few years, and we still have more to do there.”
Office workers working from home since the pandemic has had a major impact on commercial real estate. In Charlotte, for instance, a Charlotte Observer analysis in June found that 1 in 5 uptown office floors is vacant now amid record high vacancy rates.
There is “systematic stress” in the office space portfolio, Santomassimo said. “I personally spent a lot of time going through property by property about where we are, how are we managing it, what are the risks, how are we getting ahead of it.”
One Wells Fargo Center in uptown. Wells Fargo employees have been moving out of the building as the bank consolidates its office space. Arthur H. Trickett-Wile atrickett-wile@charlotteobserver
Wells Fargo stunned the Charlotte office market in January when it said it would be moving all workers from two of its uptown Charlotte towers. That includes leaving its iconic longtime home at 301 South College St., the site of its 1980s-era building that resembles a jukebox.
Then in April, the bank detailed plans for a $500 million upgrade at its largest local campus, in northeast Charlotte.
This story was originally published September 13, 2023, 8:52 AM.
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Award-winning journalist Adam Bell has worked for The Charlotte Observer since 1999 in a variety of reporting and editing roles. He currently is the business editor and the arts editor. The Philly native and U.Va. grad also is a big fan of cheesesteaks and showtunes. Support my work with a digital subscription
That’s the $750-million question facing Truist bank, which disclosed this week it would make three-quarters of a billion dollars in expense cuts in the coming months, including “sizable” layoffs at the Charlotte-based bank.
Truist did not say how many of its workers would lose their jobs, but said the dismissals would happen between the third quarter of this year and the first quarter of 2024. CEO Bill Rogers delivered the presentation about the bank’s plans at a Barclays Global Financial Services Conference on Monday.
The job cuts would result in about $300 million in savings, according to the bank. Additional savings would come from $200 million in technology modernization and optimization, and $250 million from consolidating business operations over the next 12 to 18 months.
Rogers also detailed plans to consolidate the leadership team to have fewer layers of management. In 2019, Atlanta-based SunTrust and Winston-Salem-based BB&T merged in a $66 billion deal to form Truist, and chose Charlotte for the new bank’s headquarters city.
All of the changes have multiple goals, Truist said, including: simplify the business; accelerate franchise growth; lower growth of expenses; improve its capital position; and align compensation to shareholder return.
But Wells Fargo Securities analyst Mike Mayo, in a research note Monday after Truist detailed its plans but before Rogers spoke at the conference, said, “The main question w/(Truist’s) new reorg is whether it goes far enough with a target to reduce expense growth… Yet, it at least shows mgmt is taking tougher actions.”
As of June 30, Truist had assets of $555 billion, making it the seventh largest U.S. bank by asset total.
Truist CEO Bill Rogers delivered a presentation about the bank’s plans cost-cutting plan that include layoffs during a Barclays Global Financial Services Conference. Observer file photo
Truist’s struggles
Mayo has been vocal about the challenges facing Truist.
Investors are at “a boiling point” after the company’s most recent earnings call, Mayo told American Banker last week. Truist reported net income of $1.2 billion in the second quarter ending June 30, compared to $1.5 billion a year ago.
Mayo said Truist has one of banking’s best footprints, but hasn’t capitalized on that potential. “We expect this to change given increased pressure by investors and management’s own comments that it needs to improve the rate of expense growth,” he stated.
A couple weeks ago, Janney Montgomery Scott director of research Chris Marinac told Business North Carolina that Truist contends it met its targets for merger-related expense cuts. But inflation rates and COVID-era wage hikes forced the bank to spend more than it anticipated to spur revenue growth, Marinac said.
On Monday, he told the Winston-Salem Journal that Truist’s new initiatives could be a short-term catalyst for the stock.
Truist stock ended the trading day on Tuesday at $30.01 after starting the day at $30.37.
Some analysts question if Truist’s $750 million cost-cutting plan is enough. Jeff Siner jsiner@charlotteobserver.com
Truist’s planned layoffs
As of last year, the bank employed more than 50,000 workers throughout the U.S., including more than 3,000 people in the Charlotte area. Truist declined to say Tuesday how many jobs will be lost companywide or in Charlotte.
“As we continue to transform Truist to focus on our strengths and drive long-term growth and profitability, we’re hiring in some areas and rightsizing in others through natural attrition and planned staffing reductions,”Truist said in a statement to The Charlotte Observer on Tuesday.
The bank did not respond directly to any questions about its layoff plans.
In his report, Mayo said he suspects job losses “will be more higher-paying middle levels of management.”
Still, with all of the cost cutting that Truist has outlined, Mayo questioned “why more savings don’t reach the bottom line… The hope is that mgmt may be trying to under-promise.”
This story was originally published September 12, 2023, 4:42 PM.
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Catherine Muccigrosso is the retail business reporter for The Charlotte Observer. An award-winning journalist, she has worked for multiple newspapers and McClatchy for more than a decade.
Charlotte-based Truist bank warned at an investors conference this week that it will make “sizable reductions” in its workforce as part of $750 million in companywide cuts in expenses.
Truist did not disclose the number of people who would be laid off, but said the actions would happen between the third quarter of this year and the first quarter of 2024. CEO Bill Rogers delivered the presentation at a Barclays Global Financial Services Conference Monday.
The job cuts would result in about $300 million in savings, according to the bank.
Rogers also detailed plans to consolidate the leadership team to have fewer layers of management. In 2019, Atlanta-based SunTrust and Winston-Salem-based BB&T merged in a $66 billion deal to form Truist, and chose Charlotte for the new bank’s headquarters city.
The changes have multiple goals, Truist said, including: simplify the business; accelerate franchise growth; lower growth of expenses; improve its capital position; and align compensation to shareholder return.
As of last year, Truist had more than 3,000 workers in the Charlotte area, part of more than 50,000 employees companywide.
“As we continue to transform Truist to focus on our strengths and drive long-term growth and profitability, we’re hiring in some areas and rightsizing in others through natural attrition and planned staffing reductions,”Truist said in a statement to The Charlotte Observer on Tuesday.
The bank did not respond directly to any questions about its layoff plans.
Truist had assets of $555 billion as of June 30, making it the seventh largest U.S. bank by asset total.
Trusit bank said it will make sizable jobs cuts and other changes as part of $750 million in expense cuts. DAVID T. FOSTER III
This story was originally published September 12, 2023, 10:56 AM.
The numbers: Commercial and industrial loans — a key economic driver — held roughly steady in the week ending July 5, the Federal Reserve said Friday. Loans rose $200 million to $2.754 trillion, the central bank said.
Bank lending has been slowly decelerating, falling for three straight months. C&I loans hit a peak of $2.82 trillion in mid-March, right before the collapse of Silicon Valley Bank.
Uncredited
Key details: Total bank deposits rose by $24.9 million to $17.367 trillion in the same week. Deposits have been shrinking slowly. They peaked at $18. 21 billion in mid-April.
Big picture: In the wake of the collapse of Silicon Valley Bank in March, economists have been watching the data carefully for signs of a credit crunch, as banks have weak balance sheets as a result of the Fed’s swift increases in interest rates since March 2022.
San Francisco Fed President Mary Daly said Monday she hadn’t seen credit tightening that is in excess of normal.
“I do think, from research literature, that this takes a while to show itself, and so I think we are still looking into the fall before we would have a declarative statement to make about the extent of credit tightening and the impact on the economy,” Daly said.
Wells Fargo is settling a class-action lawsuit from shareholders for $1 billion over claims the bank misled them about how it was complying with regulators in the aftermath of its fake sales scandal
DEVIN YALKIN
NYT
Wells Fargo is settling a class-action lawsuit from shareholders for $1 billion over claims the bank misled them about how it was complying with regulators in the aftermath of its fake sales scandal, new court records show.
The federal suit claimed the bank made “materially false and misleading statements” about its compliance with consent orders it had with federal regulators over previous practices. Wells Fargo has faced regulatory sanctions since the 2016 scandal, when it was discovered the bank opened millions of accounts for customers without their permission.
A proposed settlement order in the class-action case was filed late Monday, records show. The settlement still needs to be approved by the court.
Wells Fargo is based in San Francisco but has its largest employee base in Charlotte, with about 27,000 workers here.
“This agreement resolves a consolidated securities class action lawsuit involving the company and several former executives and a director, who have not been with the company for several years,” the bank said in a statement Tuesday to The Charlotte Observer. “While we disagree with the allegations in this case, we are pleased to have resolved this matter.”
If approved, the $1-billion deal likely would be the 17th-largest settlement of a shareholder class-action suit, the Wall Street Journal reported.
One of the court-appointed lead plaintiffs in the case was the Employees’ Retirement System of Rhode Island.
“Wells Fargo betrayed the trust of Rhode Island pensioners and now is rightly facing consequences because of that,” said Rhode Island General Treasurer James Diossa in a statement. “I am proud that ERSRI stood up for its stakeholders and held Wells Fargo accountable for its misconduct, and for achieving the historic settlement.”
The settlement class consists of people or entities that purchased common stock in Wells Fargo between Feb. 2, 2018, and March 12, 2020, according to the lawsuit. That means anyone who owned Wells Fargo stock during that time is automatically part of the class-action group, Diossa’s office said.
Certain groups were excluded from the settlement, the proposed agreement notes, including Wells Fargo officers and directors, and shareholders who request from the court they be excluded from the settlement.
Claims in the Wells Fargo class-action suit
The class-action suit was filed in 2020 in federal court for the Southern District of New York. It focused on Wells Fargo’s actions in dealing with 2018 consent orders it had with its regulators.
The bank misled investors when it claimed it was in compliance with those orders when it “had yet to even submit an acceptable plan or schedule for compliance to the regulators,” according to plaintiffs’ claims in the lawsuit.
They claimed that Wells Fargo also was “nowhere near” meeting regulators’ requirements that were a precursor to lifting restrictions for the bank, including an asset cap, which the bank remains under. When the pace of the bank’s actions was revealed, including in congressional hearings, the bank’s stock price fell, the suit said.
The fake sales scandal was the first of a number of activities by Wells Fargo that fell under federal scrutiny.
And a former top executive is facing prison time. In March, Carrie Tolstedt, the veteran leader of Wells Fargo’s retail banking division, agreed to plead guilty in federal court to obstructing a government examination of the bank’s misconduct.
Tolstedt faces up to 16 months in prison. In a separate civil settlement, she was banned from working in the banking industry and must pay a $17 million penalty.
Last December, Wells Fargo agreed to $3.7 billion in fines and restitution in a settlement with regulators to resolve issues related to auto lending, mortgages and consumer deposit accounts.
The Consumer Financial Protection Bureau ordered Wells Fargo to pay a $1.7 billion fine, and refund more than $2 billion to customers for “widespread mismanagement” of those types of accounts. The bank was going to be required in a new consent order to pay the fine, pay back customers and stop charging surprise overdraft fees, among other things.
In September 2022, the bank reached a $145 million settlement with the U.S. Labor Department following an investigation into concerns over the the bank’s contributions to its 401(k) plan.
And in 2018, Wells Fargo was charged a combined $1 billion by the CFPB and the Office of the Comptroller of the Currency for auto-lending and mortgage practices that hurt consumers.
This story was originally published May 16, 2023, 8:16 AM.
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Award-winning journalist Adam Bell has worked for The Charlotte Observer since 1999 in a variety of reporting and editing roles. He currently is the business editor and the arts editor. The Philly native and U.Va. grad also is a big fan of cheesesteaks and showtunes. Support my work with a digital subscription
Wells Fargo’s Mary Mack, a top executive in Charlotte, will retire this summer after nearly 40 years in the banking industry and navigating a massive scandal at the bank.
Mack led the transformation of Wells Fargo’s retail bank branch network as CEO of its consumer and small business banking for the past seven years.
Mack also served as president and head of Wells Fargo Advisors, and other leadership roles in consumer banking, brokerage, commercial banking and corporate and investment banking, according to a bank news release Thursday.
“Mary has spent her entire career at Wells Fargo, which spans nearly four decades,” CEO Charlie Scharf said Thursday in a statement. “I can think of few Wells Fargo colleagues who have done as much for our company — and who have been as visible in the communities that we serve — over such a long period of time.”
Mary Mack, head of community banking for Wells Fargo in Charlotte, is retiring after a 40-year career. Observer file photo Observer file photo
Mary Mack’s leadership at Wells Fargo
In 2016, Mack became one of Wells Fargo’s first top executives in Charlotte leading community banking after Carrie Tolstedt stepped own — right before the San Francisco-based bank was fined $185 million over fake accounts.
Wells Fargo employees created millions of fake accounts for customers without their knowledge in order to meet aggressive sales goals. Mack was tasked with winning back angry customers, reinventing the sales culture for 94,000 employees and restoring a tarnished brand.
“Mary is not intimidated by a challenge,” retired Wells Fargo executive John Tate, who hired her into a position at Charlotte-based First Union in the 1980s, told The Charlotte Observer in 2016. “She will meet it head on.”
Under Mack, the community banking division underwent an overhaul including eliminating product sales goals for bankers who sell traditional products like checking accounts and credit cards. The bank also launched a nationwide ad campaign that said the bank was founded in 1852 and “re-established” in 2018, referring to changes that were made to move forward.
Mack was lauded in the financial community for her actions in the aftermath of the scandal, which included “listening tours” with Wells employees across the U.S. in the scandal’s wake.
Mary Mack, Wells Fargo’s CEO of consumer and small business banking, has also been active in the Charlotte community. Diedra Laird dlaird@charlotteobserver.com
Career and community
A native of Augusta, Ga., Mack graduated from Davidson College. Her first job in banking was as a commercial lender in 1984 at Charlotte-based First Union. She eventually managed commercial banking for the East Coast and health care banking group in the capital markets side of the business.
In 2001, when First Union bought Winston-Salem-based Wachovia, she was a regional president in the community bank. By 2006, Mack ran the brokerage business inside bank branches. In 2008, Wells Fargo acquired Wachovia.
In Fort Mill, S.C., the Mary Warner Mack Dog Park at the Anne Springs Close Greenway is named in honor of Mack’s eldest of three daughters who died at age 23 in 2014. Mack and husband Barry were credited as major drivers of the project.
Fortune magazine named Mary Mack one of the “50 Most Powerful Women in Business” for six consecutive years, starting in 2016, and she made American Banker magazine’s top 10 list of “Most Powerful Women in Banking” in 2021 and last year. Diedra Laird dlaird@charlotteobserver.com
Mack also has been involved in the community, including Habitat for Humanity International, Charlotte Executive Leadership Council and United Way Worldwide’s Board of Trustees, according to Wells Fargo website.
Fortune magazine named her one of the “50 Most Powerful Women in Business” for six consecutive years, starting in 2016, and she made American Banker magazine’s top 10 list of “Most Powerful Women in Banking” in 2021 and last year.
New roles after Mack’s departure
Saul Van Beurden, head of technology at Wells Fargo, will succeed Mack, effective May 15. Tracy Kerrins, head of consumer technology, will fill Van Beurden’s seat.
Van Beurden also held senior leadership roles at ING Group, running operations and technology for international retail and direct banks.
Kerrins has worked in the technology and finance industries for over 20 years.
More about Wells Fargo in Charlotte
Wells Fargo is headquartered in San Francisco but has its largest employment hub in Charlotte, with about 27,000 workers.
In late January, the bank announced it was moving all of its workers out of two uptown towers to consolidate into one space. The bank also is spending over $500 million in the next five years to upgrade its northeast Charlotte campus.
Since the 2016 scandal, regulators identified additional problems with how the bank handled mortgages, auto loans and consumer deposit accounts. That culminated in a $3.7 billion charge in fines and restitution from the Consumer Financial Protection Bureau last year.
This story was originally published April 13, 2023, 1:47 PM.
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Catherine Muccigrosso is the retail business reporter for The Charlotte Observer. An award-winning journalist, she has worked for multiple newspapers and McClatchy for more than a decade.
Federal Reserve officials, meeting days after the collapse of Silicon Valley Bank, agreed that the stress in the banking sector would slow U.S. economic growth, but were uncertain about how much, according to minutes of the meeting released Wednesday.
The twelve voting members on the Fed’s interest-rate committee “agree that recent developments were likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation, but that the extend of these effects were…
Carrie Tolstedt, the former head of Wells Fargo’s retail banking division, has agreed to plead guilty to obstructing a government examination of the bank’s misconduct.
File photo
Wells Fargo’s scandalous practice of billing customers for unauthorized accounts could send a former top executive to prison and already has saddled her with millions of dollars in fines.
Under an agreement announced Wednesday in the California federal courts, Carrie Tolstedt, the longtime head of Wells Fargo’s retail banking division, agreed to plead guilty to obstructing a government examination of the bank’s misconduct.
Tolstedt, 63, faces up to 16 months in prison, a $100,000 fine and three years of supervised release, according to her plea agreement.
In a separate civil settlement also announced Wednesday, Tolstedt has also been banned from working in the banking industry and must pay a $17 million penalty.
She is expected to make her first appearance on the criminal charge in the Los Angeles federal courts on April 7. Her plea agreement must be approved by a judge.
Former Wells Fargo community bank head Carrie Tolstedt
“Today’s plea agreement holds the defendant accountable for her role in obstructing the examination into the unlawful sales practices at Wells Fargo, which deceived millions of clients who placed their trust in the institution,” said Acting Inspector General Tyler Smith of the Federal Deposit Insurance Corp., Office of Inspector General, in a statement that followed the announcement of Tolstedt’s upcoming criminal plea.
Wells Fargo, based in San Francisco, maintains a massive financial and employment presence across the Charlotte area, with some 27,000 employees. It came to North Carolina in 2008 with the purchase of Wachovia.
Anatomy of a scandal
For more than a decade, Tolstedt served as the bank’s senior executive vice president of community banking, overseeing Wells Fargo’s consumer and small business retail business.
The Community Bank, which Tolstedt also directed, managed such products as checking and saving accounts, CDs, debit cards and other products.
But to meet excessive sales goals, thousands of Community Bank employees opened millions of accounts and other financial products from 2002 to 2016 that were unauthorized or fraudulent, prosecutors say.
In short, the bank’s customers did not want the products or know about them.
Yet Wells Fargo collected millions of dollars in fees and interest, damaged their customers’ credit ratings and unlawfully used sensitive personal information to both grow and hide the fraud.
Bank employees forged customer signatures, created phony PINs, and moved millions of dollars from actual accounts to the phony ones, practices known internally by bank employees as “gaming.”
Tolstedt, according to the plea agreement, became aware of the practices by 2004.
While the Community Bank under her watch eventually took steps to identify the sales misconduct, it did not look very hard. According to prosecutors, for every bank employee flagged internally for improper sales, more than 100 conducting the same frauds were never examined.
In May 2015, when banking regulators had begun examining Wells Fargo’s sales practices, Tolstedt contributed to an attempted cover-up that significantly downsized the scope of the scandal, according to Wednesday’s court filing.
Prosecutors say she helped prepare a memo that failed to disclose the actual number of employees fired or resigned for sales misconduct, or the tiny fraction of bank workers who were flagged internally.
Tolstedt retired from the bank in 2016.
In 2020, Wells acknowledged its misconduct by agreeing to pay a $3 billion fine to settle civil and criminal allegations with the U.S. Attorney’s Offices in Los Angeles and Charlotte, which continue to prosecute the case.
That same year, Tolstedt was still proclaiming her innocence.
“Ms. Tolstedt acted appropriately, transparently and in good faith at all times,” her attorney said. “We look forward to setting the record straight and clearing her name.”
This story was originally published March 15, 2023, 5:37 PM.
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Michael Gordon has been the Observer’s legal affairs writer since 2013. He has been an editor and reporter at the paper since 1992, occasionally writing about schools, religion, politics and sports. He spent two summers as “Bikin Mike,” filing stories as he pedaled across the Carolinas.
The run on Silicon Valley Bank (SVB) SIVB— on which nearly half of all venture-backed tech start-ups in the United States depend — is in part a rerun of a familiar story, but it’s more than that. Once again, economic policy and financial regulation has proven inadequate.
The news about the second-biggest bank failure in U.S. history came just days after Federal Reserve Chair Jerome Powell assured Congress that the financial condition of America’s banks was sound. But the timing should not be surprising. Given the large and…
California-based Silicon Valley Bank had a building permit to do renovations at an office suite at The Line, a 16-story office tower in South End. Those plans are in limbo given its collapse Friday and takeover by the FDIC.
Sycamore Brewery
It’s not near the top of its problems, but a California bank’s plans to renovate an office suite at a South End office tower is in limbo after regulators closed down the bank Friday.
Silicon Valley Bank’s closure by regulators Friday is the largest bank to fail since the 2008 financial crisis, The New York Times reported. The Federal Deposit Insurance Corp. took over the bank in what is the second biggest bank failure in U.S. history, The Washington Post reported.
Late last year, Silicon Valley Bank received a Mecklenburg County building permit for a $7 million renovation of a suite at The Line, a 16-story office tower that opened last May.
The bank already had already moved into the building, a bank spokeswoman told The Charlotte Observer at the time. It was planning on opening additional office space in the building this year.
Those plans likely are not front of mind for Silicon Valley Bank.
The bank on Wednesday announced it had sold off $21 billion of its most liquid investments; borrowed $15 billion; and organized an emergency sale of its stock to raise cash, The New York Times reported. The bank’s stock dropped 60% on Thursday, according to The Times.
Here’s what else to know about the closure, and the bank’s presence in Charlotte.
The 16-story office tower called The Line in South End. Silicon Valley Bank had already moved into the building as of late last year, but those office plans are in limbo. Courtesy of Bogza
Silicon Valley Bank’s in Charlotte
Silicon Valley Bank was planning an upfit to Suite 1100 at The Line.
The office tower was developed by Atlanta-based Portman Holdings. It has 285,000 square feet of office and nearly 30,000 square feet of retail. It will be home to Sycamore Brewing, which is moving from next door.
The building sold last year to CBRE Investment Management for $206 million, according to county property records.
It was not clear how much square footage Silicon Valley Bank took up at The Line or how many employees it had here. SVB Securities, the bank’s investment banking division, had already moved in, the Observer reported in January.
The bank had been hiring for several open positions in Charlotte, including a business risk officer role.
Silicon Valley Bank did not return a request for comment on Friday.
The bank is federally insured, meaning if it can’t pay its depositors, they will get some money from the federal government, according to The Post.
Shares in other banks fell Thursday, including a 6.2% drop from Wells Fargo, The Post reported.
The bank, which dates back to 1983, is described as a tech start-up. It is a commercial bank with a focus on startups, technology and healthcare companies, according to its website. It has worked with clients like ZipRecruiter, Wayfair and Pinterest.
This story was originally published March 10, 2023, 2:17 PM.
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Gordon Rago covers growth and development for The Charlotte Observer. He previously was a reporter at The Virginian-Pilot in Norfolk, Virginia and began his journalism career in 2013 at the Shoshone News-Press in Idaho.
Wells Fargo computer problems caused headaches for customers Friday.
Editor’s note: This story was updated Friday to include a new estimate from Wells Fargo of when the issue would be fixed.
Wells Fargo promised to fix by Saturday a nationwide computer glitch that left irate customers with incorrect — and sometimes negative — balances and missing transactions, according to a spokesman. It will also refund fees customers incurred because of the issue.
Some customers started their Friday morning routines hoping to see their latest paychecks directly deposited in their accounts. Instead, they had negative balances, a number of customers reported on social media, and a message from the bank: “If you see incorrect balances or missing transactions, this may be due to a technical issue and we apologize. Your accounts continue to be secure and we’re working quickly on a resolution.”.
Funds remained available, even though some customers’ direct deposit transactions were not showing on their accounts, bank spokesman Josh Dunn said.
Dunn did not say how many customers were impacted by the problem.
‘I do not like to feel massive panic’
The issue is one more reason people should keep cash on hand, one Twitter user wrote. Another tweeted, “i do not like to feel massive panic immediately upon waking but wells fargo decided to give me that gift this morning.”
i do not like to feel massive panic immediately upon waking but wells fargo decided to give me that gift this morning
Others anticipated Chase Bank and Bank of America would see an influx of unhappy Wells Fargo customers. JPMorgan Chase is the nation’s largest bank by assets, at $3.2 trillion, and Charlotte-based Bank of America is its second largest with $2.4 trillion in assets.
Another Wells Fargo customer tweeted about “definitely closing” their account, using a SpongeBob meme to show how they felt — like they were begging for money.
About Wells Fargo
Wells Fargo is based in San Francisco but has its largest employment hub in Charlotte. With about 27,000 workers, it is one of the region’s largest employers.
It also is the nation’s fourth largest bank by assets, at $1.7 trillion. That number is capped by the Federal Reserve, which restricted the bank’s ability to grow in the aftermath of the 2016 fake accounts scandal.
This is a developing story. Check back for updates.
This story was originally published March 10, 2023, 11:00 AM.
For community banks, marketing often points to finding ways to educate, support and grow community, as well as customer knowledge and awareness.
True relationships withstand the test of time, and such is the case with the community bank/customer connection. It’s not unusual to hear about a community bank having served a family or a business for generations, and that’s a testament to the strength of the relationship.
As we consider marketing in this month’s issue, I took time to reflect on exactly what differentiates the community banker and how marketing can help in growing and retaining business. I kept coming back to the fact that for community banks, marketing often points to finding ways to educate, support and grow community, as well as customer knowledge and awareness. By extension, these promotional efforts assume a natural role in a community bank’s journey, just enhancing what are already mission-critical initiatives.
Where I’ll be this month
I’ll be connecting with community bankers from around the country at ICBA LIVE in Honolulu, Hawaii, from March 12–16. I hope to see you there!
For example, consider ICBA chairman Brad Bolton’s Community Spirit Bank in Red Bay, Ala., and its work to share tips for financial resolutions in the local paper. Offering that information to the community helps individuals strengthen their financial savvy and supports a broader story of community bank leadership.
Or look to ICBA past chairman Bob Fisher’s bank, Tioga State Bank in Spencer, N.Y., and how it teams up with local television stations to support cause-related activities, like the No Shave November Cure the Blue 5K. Not only does this event help raise funds for an important program, it also demonstrates the bank’s commitment to its community.
These examples offer only a snapshot of what community banks all over the country do to support their communities from a mission-based approach. In many cases, the added promotion these efforts deliver is a side benefit to serving the community.
That’s precisely why these efforts are successful: They garner attention because they are the right things to do. These stories create a value proposition around why banking with a community bank is so vital, and the differentiation from megabanks and credit unions happens by leading with the community bank relationship model front and center.
So, as you think about your bank’s planned storytelling this year, know that ICBA is standing by to help. In fact, stay tuned for a very exciting announcement that we’ll be making during ICBA LIVE, which will shine a light on what differentiates community banking. And our work won’t stop there. We invite to you join us as we continue to tell the community banking story.
Because beyond marketing, what you do matters to the customers and communities you serve. You are and will remain a partner through your customers’ lives and financial journeys. From a marketing perspective, that’s an ideal place to be.
Rebeca Romero Rainey President and CEO, ICBA Connect with Rebeca @romerorainey
The time has come for the long-awaited FedNow launch. As community banks navigate this process, there are plenty of resources available to answer questions and provide guidance.
By Colleen Morrison
Between May and July of this year, non-pilot instant payment transactions will be live on FedNow, the first new Federal Reserve payment rail in more than 40 years. After much strategy, planning and discussion, the implementation phase has arrived.
“As we near launch, I’m reminded of where we started,” says Nick Stanescu, senior vice president and business executive of the FedNow Service. “The decision to build the FedNow Service was the result of a multiyear initiative of collaborating with the industry to explore ways to modernize the U.S. payment system.”
He notes that the launch of FedNow will represent a major landmark in modernizing and improving the U.S. payment system. “Importantly, this will level the playing field by allowing financial institutions of every size to benefit from safe and efficient instant payments,” he adds.
Three sources of information on FedNow
As community banks look to take advantage of this new opportunity, they seek resources to help them navigate the journey. With that in mind, industry experts agree there are three key sources of information to support banks in honing their instant payments plans.
1. FedNow Explorer
The Federal Reserve launched the FedNow Explorer to help financial institutions establish their individual evaluation and implementation needs. Offering a guided journey, a self-explore option and a quick link to resources, this site incorporates the latest news and information from the Fed about FedNow. In particular, the Service Readiness Guide and the Service Provider Showcase provide insights into preparation requirements and available solutions.
“You have to educate yourself; you have to educate your employees and your management team. So, starting off with the FedNow Explorer has a lot of great resources,” says Sherri Reagin, chief financial officer at FedNow pilot participant North Salem State Bank, a $590 million-asset community bank in North Salem, Ind. “We even showed one of the videos at our annual training to all of our employees. They’ve heard me talking about FedNow for a couple of years now, but they didn’t fully understand it until there was a visual. There are so many great resources on that website where people can really get started.”
2. Your Federal Reserve account executive
The Federal Reserve account executive stands as a valuable resource for asking bank-specific questions about the FedNow Service and can benefit community banks that want to be early adopters. For example, Stanescu points out that there are four core capabilities of instant payments readiness that a community bank’s Federal Reserve account representative can help evaluate:
Connectivity to FedNow
Real-time posting and immediate funds availability
Settlement through either a Fed master account or a correspondent’s
Send and receive functionality
Each area creates important decisions for the bank, and the Fed account executive can help financial institutions navigate the pros and cons.
“Your Fed account executives are great places to start, as well as your technology solution providers, based on the product lines you think are going to use FedNow,” says Kari Mitchum, vice president of payments policy at ICBA.
3. Core and third-party providers
To that point, solution providers will play a crucial role in implementation from the core system to downstream customer-facing applications. Community banks will need to decide their required functionality in receive-only or a send-and-receive scenarios and work with their providers accordingly. For most, that process starts with talking to their cores.
“My advice: Build a plan, understand what partners must be involved and do a lot of exploring with vendors,” says Debra Matthews, chief of deposit operations at $2.1 billion-asset Texas First Bank in Texas City, Texas, a FedNow pilot participant. “Explore what your core has available and plans to do in the future and determine if any additional third parties are needed for implementation.”
Reagin agrees, emphasizing the enhanced role that core providers will play to accommodate FedNow. “Everything we do, all the fintechs that we use—if you’re going to settle a payment, it has to go through your core provider to get through your system,” she says. “So, they’re going to have to be involved, regardless of who you use to interface between the Federal Reserve and your financial institution.”
Instant payments will soon be table stakes
While the FedNow Service will launch in just a few months, the wide-scale rollout will take some time, and customer adoption will follow suit. However, if market history bears any indication, instant payments will be a critical part of payment processes in the future.
“Keep in mind Apple Pay has been out for almost 14 years, and QR codes were created in 1994. FedNow coming out is not going to be some overnight change,” Mitchum says. “There’s that story from [FedEx founder] Fred Smith that he had the idea for FedEx in the 1960s, and the paper got a ‘C’ on it. They said, ‘Nobody wants stuff next day; there’s no need for this.’
“Now we’re in the time of Amazon same-day delivery, two-hour delivery. But that doesn’t mean that we got rid of USPS. It doesn’t mean we got rid of two-day shipping. There are multiple choices for moving goods; there’s going to be multiple choices for moving money.”
But with the rate of change in today’s digital space and this immediate gratification environment, it won’t take long for demand for instant payments to accelerate.
“I think FedNow is going to transform the way that we do business, and the way that businesses operate in the future.” —Sherri Reagin, North Salem State Bank
Use cases like early wage access, P2P payments and insurance disbursement have already emerged, and others will continue to develop. Community banks that don’t begin exploring instant payments may find themselves at a competitive disadvantage more quickly than they might think.
“Financial institutions need to really learn the benefits of FedNow to be able to accelerate the services that we can offer to our customers. I think FedNow is going to transform the way that we do business, and the way that businesses operate in the future,” Reagin says. “The sooner we can get our customers and our employees acclimated to it, it’s just going to skyrocket.”
FedNow resources from ICBA
Community bankers benefit from education tailored directly to their needs, so ICBA has developed customized education to complement available resources. For example, ICBA Bancard ran a five-part webinar series called Ramping Up for the FedNow Launch, which includes the following sessions:
Delay No More: Creating Your FedNow Plan
FedNow Features, A Deep Dive
Lessons Learned from Community Banks Implementing Instant Payments
Preparing for 2023 and Q&A with a Fed Expert
Exploring Instant Payments Use Cases
ICBA is planning more events as the FedNow go-live date nears.
“We’re looking to put together a robust 2023, and it’s going to be dynamic,” says Kari Mitchum, ICBA’s vice president of payments policy. “So, as we get closer to launch, make sure you’re always reading NewsWatch Today. We’re going to make sure there are frequent webinars and lots of education out there.”
What about RTP?
Currently, more than 180 financial institutions belong to The Clearing House’s Real Time Payments Network (RTP), and 80% of network participants are community institutions with less than $10 billion in assets. It became an attractive option for banks that wanted to get an early jump on instant payments.
“We do think that there’s value in being set up to receive on both the RTP Network and FedNow,” said Nick Denning, senior vice president of payments industry relations at ICBA Bancard. “For a bank that is still trying to figure out what its broad instant payments and FedNow strategy will be, getting set up on RTP to receive now is one thing it can do to get moving forward while they figure out the nuances of their plans and approach.”
Many third-party providers will use the same instant payments solution to hook into FedNow and RTP, so setting up to receive RTP transactions will help banks prepare for FedNow.
