To be sure, the sudden drop in the dollar, by itself, “isn’t large enough to break anything,” as Setser put it. And on Friday the U.S. currency recovered some of its recent losses after Trump nominated Kevin Warsh, an experienced Republican banker, to replace Jerome Powell as the chair of the Federal Reserve. The market’s immediate reaction reflected a perception that Warsh is an inflation hawk and that his influence at the Fed could bolster the dollar. That remains to be seen, though. In auditioning for the job, he told Trump that he favored lower interest rates, which is what the President wanted to hear. If Warsh came to be regarded as a yes-man for Trump, that would be very negative for the dollar. More generally, the fear is that currency weakness could feed on itself if foreign investors lose faith in U.S. economic stewardship. Not only is Trump undermining NATO and using tariffs coercively, Prasad pointed out to me, but he has also spent twelve months attacking many of the domestic pillars of U.S. economic might, including the rule of law, the system of checks and balances, and the independence of the Fed.
For many decades, the U.S. dollar’s status as the dominant global currency was largely unchallenged. Foreign financial institutions and central banks built up large positions in U.S. financial assets, partly because they generated high returns and partly because they were widely viewed as a safe haven in an unsafe world. Right now, European countries are the biggest investors in America, holding an estimated eight trillion dollars in U.S. stocks and bonds. These investments help to finance the U.S. trade deficit and the U.S. budget deficit, both of which are very large. In the nineteen-sixties, Valéry Giscard d’Estaing, France’s finance minister (and subsequently its President), described the capacity of the United States government to attract large amounts of foreign money at low rates as an “exorbitant privilege” that enabled the country to live beyond its means. The privilege has endured. But, as Trump was issuing thinly veiled threats to invade Greenland, George Saravelos, the global head of foreign-exchange research at Deutsche Bank, Germany’s largest bank, suggested, in a note to clients, that these moves might make European investors less willing to accumulate U.S. financial assets and help America finance its dual deficits. “In an environment where the geoeconomic stability of the western alliance is being disrupted existentially, it is not clear why Europeans would be as willing to play this part,” Saravelos wrote.
For a country that has more than thirty trillion dollars of debt, and which ran a budget deficit of nearly $1.8 trillion last year, any indication that foreign investors may hesitate before buying more of its assets cannot be taken lightly. Treasury Secretary Scott Bessent, who was also in Davos, announced in an interview that the C.E.O. of Deutsche Bank, Christian Sewing, had called him to say that the bank, which has a large U.S. operation, didn’t stand by Saravelos’s report. But Saravelos himself hasn’t disowned his pessimistic analysis, and for good reason. Ultimately, the supremacy of the dollar rests on U.S. economic hegemony and trust in the American government, which Trump is busy eroding.
At this point, it’s not entirely clear who has been selling dollars. “The price action is consistent with European institutions reconsidering whether they want to keep adding to their U.S. assets,” Setser said. “It’s also consistent with fast money”—hedge funds and other speculators—“anticipating this trend and front-running it.” In the markets, betting against the dollar is known as the debasement trade. By early last week, the currency had fallen far enough for a political reporter to ask Trump, whether it had gone too far. “No, I think it’s great,” he replied. “The dollar’s doing great.” These comments prompted further selling, and the currency hit a four-year low. As often happens, Bessent was left to explain away his boss’s remarks. He appeared on CNBC the following day and insisted that “we have a strong dollar policy,” and argued that, over time, Trump’s tax cuts and tariffs would lead to more money coming into the United States and greater dollar strength.
Such an outcome isn’t inconceivable. Since the global financial crisis of 2007-09, the U.S. economy has grown faster than other major advanced economies; this has made it even more attractive to overseas investors. If, in the coming months and years, A.I. delivers the boost to G.D.P. and productivity which its promoters say it will, this U.S. outperformance could persist, or even quicken, and the dollar could rebound as Bessent predicted.
The U.S. dollar recovered from a selloff in early trade on Monday as investors hoped Washington may temper its latest escalation of the trade war with Beijing, while political developments in France and Japan undermined the euro and the yen.
The dollar index, which measures the greenback’s strength against a basket of six currencies, edged higher to 99.002, retracing some losses sustained after U.S. President Trump announced 100 percent tariffs on China.
That revived fears of Trump’s Liberation Day rollout of sweeping tariffs in April, sparking a selloff in stocks and cryptocurrencies on Friday. “Certainly it’s pretty nervous out there,” said Tim Kelleher, head of institutional FX Sales at Commonwealth Bank in Auckland.
“If you look at the U.S. and China stuff, it looks like Trump has done a bit of a TACO again and softened his tone,” he added, referring to a trading rule of thumb that “Trump always chickens out.”
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Earlier in the day, Trump said: “Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment,” he posted on the Truth Social network. “He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!”
Market liquidity may be affected by holidays as the U.S. observes Columbus Day/Indigenous Peoples’ Day today, while Japan is also closed to mark Health and Sports Day.
Against the yen, the dollar fetched 151.985 yen, up 0.5 percent as markets assessed the path ahead for new Liberal Democratic Party leader Sanae Takaichi after Komeito quit the ruling coalition on Friday, dealing a blow to her hopes to become the first female prime minister of the world’s fourth largest economy.
The euro stood at $1.1609, down 0.1 percent, after the French presidency announced Prime Minister Sebastien Lecornu’s new cabinet line-up on Sunday, reappointing Roland Lescure, a close ally of Emmanuel Macron, as finance minister.
Cryptocurrency markets fluctuated between gains and losses after a sharp selloff on Friday, with bitcoin last trading up 0.4 percent at $115,486.04. Gold hit a fresh record of $4,059.30 and was last up 0.8 percent.
The offshore yuan traded at 7.137 yuan per dollar, tacking on 0.1 percent in early Asian trade. The Australian dollar fetched $0.6513, rising 0.6 percent in early trade, while the kiwi traded at $0.57345, up 0.3 percent. Sterling changed hands at $1.33415, up 0.1 percent so far on the day.
Reporting by Gregor Stuart HunterEditing by Shri Navaratnam
After surging nearly 50% so far this year, gold could skyrocket 150% as early as 2028 if its current pace keeps up.
The precious metal topped $4,000 per ounce for the first time ever earlier this week, then got another jolt Friday, when President Donald Trump said he will impose an additional 100% tariff on China and limit U.S. exports of software.
Stocks suffered their worst loss since the height of Trump’s trade war chaos in April. The dollar fell while gold jumped 1.5%, reinforcing its status as a safe haven asset as investors lose confidence in the greenback.
In a note on Monday, market veteran Ed Yardeni, president of Yardeni Research, went over his earlier bullish calls on gold, which has repeatedly reached his forecasts ahead of schedule.
During that time, he cited gold’s traditional role as a hedge against inflation, central banks de-dollarizing after Russia’s assets were frozen, the bursting of China’s housing bubble, as well as Trump’s trade war and his attempts to upend the world’s geopolitical order.
“We are now aiming for $5,000 in 2026,” Yardeni added. “If it continues on its current path, it could reach $10,000 before the end of the decade.”
Based on gold’s trajectory since late 2023, the price could reach the $10,000-per-ounce milestone sometime between mid-2028 and early 2029.
Gold has also gotten a lift recently from the Federal Reserve’s pivot back to rate cuts last month, with policymakers shifting more attention to the stagnating labor market and away from fighting inflation, which has remained stubbornly above their 2% target amid Trump’s tariffs.
While the Fed hasn’t signaled an aggressive easing cycle, the prospect of more rate cuts while GDP growth remains strong has added to inflation concerns.
At the same time, soaring debt among top developed economies, including the U.S., has turned investors skittish on global currencies. That’s fueled a so-called debasement trade that bets on precious metals and bitcoin assuming governments let inflation run hotter to ease debt burdens.
In a note on Wednesday, Capital Economics climate and commodities economist Hamad Hussain said “FOMO” is creeping into the gold trade, making it harder to objectively value the metal. He expects prices to continue rising, though the pace of gains will slow as key tailwinds weaken.
On the bullish side, Hussain pointed to Fed rate cuts, geopolitical uncertainty, and fiscal sustainability concerns. On the other hand, he noted the recent gold rally came as the dollar was stable (until Friday) with inflation-protected bond yields higher—telltale signs of market exuberance.
“As ever, the lack of an income stream makes it notoriously hard to value gold objectively,” he said. “On balance, we think that gold prices will probably grind higher in nominal terms over the next couple of years.”
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An unexpected result in Japan’s leadership contest over the weekend rippled through global financial markets with the dollar surging against the yen on Sunday.
Markets had expected the more fiscally cautious Shinjiro Koizumi to win. But the LDP’s decision to go with Takaichi, who favors looser fiscal and monetary policies, could raise expectations that Tokyo will issue more debt while the central bank rethinks rate hikes.
With Japan’s debt burden already more than 200% of its GDP, the prospect of more debt-fueled stimulus spending could cause investors to demand higher rates on long-term bonds.
That in turn could add more upward pressure on bond yields elsewhere, like the U.S., which relies heavily on Japanese investors as top buyers of Treasury debt.
The yield on the 10-year Treasury rose 1.9 basis points to 4.138%. The U.S. dollar was up 1.5% against the yen and up 0.2% against the euro.
Futures tied to the Dow Jones Industrial Average rose 40 points, or 0.1%. S&P 500 futures were up 0.18%, and Nasdaq futures added 0.27%. Japan’s Nikkei 225 index jumped 4% to a record high.
U.S. oil prices rose 1.35% to $61.70 per barrel, and Brent crude added 1.3% to $65.37. Gold edged up 0.47% to $3,927.30 per ounce.
Takaichi is expected to formally become prime minister in a parliamentary vote later this month, and her approach to President Donald Trump will also be scrutinized.
While she previously suggested Japan renegotiate the trade deal it struck with the U.S. this summer, Takaichi toned down her rhetoric after securing the LDP leadership spot on Saturday, saying that’s not on the table now.
Meanwhile, financial markets must continue to grapple with the ongoing government shutdown, which shows no signs of ending anytime soon and will keep key economic indicators under wraps.
That leaves Wednesday’s release of minutes from the Federal Reserve’s last policy meeting as the main economic report to watch in the coming week as the central bank is self-funded and unaffected by the shutdown.
Several Fed officials are also scheduled to speak throughout the coming week, including Chairman Jerome Powell on Thursday.
Because the government shutdown prevented the Bureau of Labor Statistics from issuing its jobs report for September on Friday, Wall Street is turning to alternate gauges from the private sector.
“The bottom line is that not having the BLS jobs data is a serious problem for assessing the health of the economy and making good policy decisions,” he said in a series of posts on X. “But the private sources of jobs data are admirably filling the information gap, at least for now. And this data shows that the job market is weak and getting weaker.”
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In our increasingly digitally borderless world, the dream of international expansion is more accessible than ever for American entrepreneurs. The reach of social media and a strategic web presence has the power to make your brand visible to a global audience in seconds. Yet, as U.S. small and medium-sized businesses (SMBs) increasingly venture beyond borders, a significant yet often underestimated challenge emerges: currency volatility.
From selling goods in Europe to sourcing materials from Asia, or managing a remote team spread across continents, operating internationally inherently means SMBs are engaging with different currencies. This involves added layers of complexity, not only because it entails managing Profit and Loss (P&L) statements in multiple currencies, but because the value of one currency against another is not static. A currency’s value can shift due to geopolitical events, economic news and market sentiment, often quickly and without warning. For small businesses, this can directly impact their bottom line in ways they might not be prepared for.
Consider this scenario: You’re a small business owner and the U.S. dollar strengthens significantly against the currency in which you’ve priced an export contract. This means that your expected profit in dollars could sharply diminish upon conversion. Conversely, a weaker dollar could drastically increase the cost of imported goods, squeezing your profit margins or even making your products less competitive in the market. Beyond profitability, currency swings can make it difficult to accurately forecast spending or build a predictable budget. What you forecast to pay one month could significantly vary more or less the next, leading to instability that can derail your financial planning.
For any U.S. small business looking to succeed in multiple markets, it’s essential to mitigate these risks by adopting a proactive currency management strategy. Here are three simple steps SMBs can take to hedge against currency volatility.
Small business owners should start by assessing how currency movements could affect their business. Consider which countries the business operates in and investigate the stability of local currency values over time. This provides an up-front indication of the level of risk you are taking on.
From there, the next step is to establish the best way to manage a cross-border cash flow. For example, if you know you’re sourcing goods and materials from local vendors in a country with a volatile currency, you may want to keep most of the funds siphoned for those payments in USD until the time comes for you to actually make the payment. Alternatively, if you’re working with a foreign currency that is considered stable, it might be more cost-effective for your business to hold funds in that local currency consistently using a multi-currency account. By keeping those funds readily available, you can reduce the number of times you pay conversion fees and manage that revenue stream just like you would in dollars.
It’s also worth noting that some businesses and individuals living and working in countries with volatile currencies may request to be paid in a non-native currency themselves, including USD. So it’s worth checking with suppliers and employees what their preference is before setting up payments.
Once SMBs have established their currency exposure, it’s time to start thinking strategically about how they’re spreading risk across the business. Especially this year, as new tariffs — taxes on imported goods — have created additional complexities for many small businesses, it’s more important than ever to mitigate the risk of unforeseen costs.
A good place for SMBs to start is to take inventory of their suppliers. If they are all concentrated in one region with a volatile currency, it might be worth exploring alternatives. Similarly, if retail-based businesses shipping goods abroad are consistently paying cargo fees that they can’t readily predict, they might look for local suppliers of those same goods to avoid paying import charges on every order.
Diversifying where the business buys and sells goods and services can significantly smooth out both currency risk and the impact of sudden tariff changes. In other words, rebalancing purchasing zones is a smart way to distribute and lessen overall financial exposure.
Regardless of a businesses’ chosen international structure, it’s crucial to choose financial tools that make managing a global cash flow simple. As I’ve already alluded to, multi-currency accounts can be a game-changer for SMBs operating across borders, allowing them to hold funds in multiple currencies and send money like a local to foreign accounts.
Some multi-currency account offerings even allow businesses to set thresholds for automatic currency conversions, which means their account will automatically convert funds when a currency hits a designated rate. This seamlessly allows SMBs to capture gains and avoid losses without adding to their mental load.
It’s also important to choose fast, affordable and transparent financial services providers. Faster international payments mean funds arrive quicker, reducing the window of exchange rate exposure. Some providers also offer a fixed exchange rate within a certain time frame, so businesses know that even if funds arrive the next day, it will be the exact amount they expected — no more, no less. For SMBs, having clarity on how much they’re paying in fees, when their money will arrive and how much their recipient will receive can be an enormous relief.
Ultimately, managing exchange rate risk isn’t just about protection; it’s about creating opportunity. When currency volatility is well-managed, it can become a lever for competitiveness. Businesses that have the right tools can leverage these variations to optimize their purchases or strengthen their positions in critical markets.
For U.S. entrepreneurs venturing into the global marketplace, understanding and proactively managing currency risk is no longer optional. By embracing transparency, demanding speed and prioritizing control over your international finances, SMBs can protect their margins, empower their growth and unlock the vast potential of the international economy.
In our increasingly digitally borderless world, the dream of international expansion is more accessible than ever for American entrepreneurs. The reach of social media and a strategic web presence has the power to make your brand visible to a global audience in seconds. Yet, as U.S. small and medium-sized businesses (SMBs) increasingly venture beyond borders, a significant yet often underestimated challenge emerges: currency volatility.
From selling goods in Europe to sourcing materials from Asia, or managing a remote team spread across continents, operating internationally inherently means SMBs are engaging with different currencies. This involves added layers of complexity, not only because it entails managing Profit and Loss (P&L) statements in multiple currencies, but because the value of one currency against another is not static. A currency’s value can shift due to geopolitical events, economic news and market sentiment, often quickly and without warning. For small businesses, this can directly impact their bottom line in ways they might not be prepared for.
Consider this scenario: You’re a small business owner and the U.S. dollar strengthens significantly against the currency in which you’ve priced an export contract. This means that your expected profit in dollars could sharply diminish upon conversion. Conversely, a weaker dollar could drastically increase the cost of imported goods, squeezing your profit margins or even making your products less competitive in the market. Beyond profitability, currency swings can make it difficult to accurately forecast spending or build a predictable budget. What you forecast to pay one month could significantly vary more or less the next, leading to instability that can derail your financial planning.
Global markets are calming today after suffering a rout on Monday on the heels of a weaker-than-expected jobs report in the United States, and the Japanese yen’s reverse carry trade. The KBW Nasdaq Bank Index, a benchmark that tracks the performance of 24 publicly-traded banks, including JPMorgan Chase, Citi, Bank of America and BNY Mellon, […]
Often referred to as the Wise credit card, the Wise card is actually a prepaid card available to residents of Canada and dozens of other countries. To use the card, you must have funds loaded into your Wise account. What makes Wise appealing is that it allows you to hold multiple currencies. That means you could potentially purchase some foreign dollars when the exchange rate is in your favour and then spend it as needed when you’re abroad.
No additional fees apply when making purchases with a currency you currently hold in your Wise account. However, if you don’t hold the currency in which you’re making a purchase, Wise will automatically deduct the funds from the currency in your account with the lowest conversion fees. That said, when making a purchase abroad and given the option to be charged in the local currency or Canadian dollars, always choose the local currency for the best exchange rate.
The Wise card also allows you to withdraw money from ATMs while abroad. Think of it as a Wise debit card, since you can use it for purchases and ATM withdrawals. Oddly enough, you can’t use the card within Canada.
The first two ATM withdrawals are free, up to a cumulative value of CAD$350 per calendar month. Any additional withdrawals will cost you $1.50 each, and a 1.75% fee will be added to amounts over $350. Also, note that the ATM provider may charge its own fee when you withdraw cash. Wise withdrawal fees and third-party ATM fees count towards your withdrawal limits—so plan accordingly.
How long does it take to get a Wise card?
You must have a Wise account if you want to apply for a Wise card. The registration process only takes a few minutes and is done completely online. Once your account is active, you need to add funds. Doing so is simple, as you have many options including Interac e-Transfer, direct debit from your bank, and wire transfer.
Each loading method has a fee. Interac e-Transfer typically has the lowest fee, and your money will arrive in about five minutes. How much you’ll pay in fees depends on the currency and how much you’re loading.
To order your Wise card, log into your account and click on Wise Card on the side bar. The physical card will arrive within 14 days, and you also get a digital card you can use immediately. While the digital option is convenient, it won’t help people who are travelling soon and may need ATM access.
Wise card pros and cons
The Wise card is a unique option that many people will naturally be attracted to. That said, you should consider the pros and cons before you open an account.
The Reserve Bank of India’s move to absorb most of the Dollar (USD) flows in a bid to prevent a sharp appreciation of the Rupee (INR) has led to a record build up in forex reserves, which stood at $642.49 billion as of March 15.
India holds the fourth largest foreign exchange (forex/Fx) reserves in the world. China, Japan and Switzerland are the top three holders of forex reserves.
India’s Fx reserves have surpassed the previous record of $642.45 billion in September 2021.
“We believe India’s growth resilience, along with the forthcoming bond index inclusion (worth about $30 billion of flow and nearly half of India’s annual Current Account balance), will keep the capital account in a surplus.
“We estimate a reasonable BOP (balance of payments) surplus of about $40 billion in FY24 and $20 billion in FY25, which would bode well for FX reserve accretion,” said Tanvee Gupta Jain, Economist; Nihal Kumar, Associate Economist; and Rohit Arora, Strategist; UBS Securities India.
Reflecting the CA balance forecast revisions (estimating India’s CAD/ current account deficit narrowing to less than 1 per cent of GDP in FY24 vs 1.2 per cent forecast earlier; and CAD modestly rising to 1.3 per cent in FY25), UBS has shifted its USD/INR end-FY25 forecast from 84 to 82.
Suman Chowdhury, Chief Economist and Head- Research, Acuité Ratings & Research, said the Indian rupee has moved within a narrow trading band of 81.6-83.5 in FY24 so far.
This marks the tightest trading band for the currency in 29 years, something that is also reflected in its current levels of extremely subdued volatility.
“While a mild strength in the INR was visible over the last one month, a rise in volatility driven by the demand for dollars during the fiscal year end and the pressure on the Chinese yuan may lead to a weakness in the INR towards the end of March.
“We continue to expect INR to post a moderate weakness towards 84.5-85.0 levels by March 2025 (given the delay and the relatively moderate rate cuts in the developed nations along with RBI’s active management of the currency to keep it reasonably anchored to the real effective exchange rate),” Chowdhury said.
TAIPEI — 2024 will be a bumper year of elections around the world, but one of the first votes on the calendar will also be one of the most hotly contested and consequential: Taiwan, where there are vital strategic interests at play for both the U.S. and China on January 13.
If the campaign started with expectations in the U.S. that the ruling, pro-independence Democratic Progressive Party (DPP), whose top brass are frequent and welcome guests in Washington, would stroll to victory, the final stages of the presidential and legislative race have turned into a nail-biter.
Chinese President’s Xi Jinping’s Communist Party leadership, increasingly assertive in its claim that democratic Taiwan is part of China and keen to see the ruling party in Taipei ousted, is trying to swing the election through a disinformation campaign of hoaxes and outlandish claims on social media.
And the tactics may be working. The latest polls for the first-past-the-post presidential race on the My Formosa portal have DPP leader William Lai on 35.2 percent, only just keeping his nose out in front of his main challenger from the Beijing-friendly Kuomintang (KMT), Hou Yu-ih,on 30.6 percent. On Tuesday, the Beijing-leaning United Daily News put both candidates on 31 percent.
“This is not a walk in the park,” admitted Vincent Chao, a city councillor and prominent DPP personality, speaking to POLITICO’s Power Play podcast at a campaign event in New Taipei, a municipality surrounding the capital.
It could hardly be a more febrile period in terms of security fears over the Taiwan Strait, where insistent Chinese maneuvering has been matched by a high-stakes U.S.-backed boost to the island’s defenses. Only on December 15, the U.S. approved another $300 million of spending on defense kit, sparking a retort from China that the expenditure would harm “security interests and threaten peace and stability across the Taiwan Strait.”
Lai’s opponents are playing hard on these security implications of the vote, and are accusing him of bringing the island closer to conflict because of his past comments in favor of the island’s independence. China has, after all, continually warned that independence “means war” and Xi has said Beijing is willing to use “all necessary measures” to secure unification. Lai has hit back that his rivals “are parroting the [Chinese Communist Party line] as propaganda to score electoral benefits.”
For the global economy, open war over Taiwan would be a disaster, perhaps even outstripping the shock of Russia’s invasion of Ukraine, due in particular to the island’s critical role in microchip supplies.
Head-to-head race
The specter of a DPP defeat has raised the temperature of the fevered last few weeks of the campaign.
Chao, the DPP councillor and a former political secretary in Taiwan’s Washington representation, admitted that the DPP ends the year in “a head-to-head race” in the final stretch. “I mean, it’s democracy and the party has been in power for eight years. Anything could change,” he said.
Wearing a jaunty white and green “Team Taiwan” tracksuit, the party’s signature colors, he talks above the backstage din of an evening event, held among the tower block estates of New Taipei. Volunteers hand out pork dumplings, the outgoing president Tsai Ing-wen gives a rousing speech about freedom and security, and there are ballads of national loyalty and singalong love songs. It feels heartfelt, but also very Taiwanese in its orderliness, the crowd sitting on stools in the evening heat, waving small flags in unison.
Chao is candid about the scale of China’s social media offensive.
The specter of a DPP defeat has raised the temperature of the fevered last few weeks of the campaign | Annabelle Chih/Getty Images
“What we’re seeing is a much more sophisticated China,” Chao reflected. “They’ve grown much more confident in their abilities to influence our elections, not through military coercion or other overt means, but through disinformation, through influencing public opinion, through controlling the information that people see … through social media organizations like TikTok.”
One of the many unfounded stories that gained currency on social posts was a claim the U.S. had asked Taiwan to develop biological weapons research, a rumor aimed at raising anxiety about an arms race. Another accused the DPP of covert surveillance of its rivals.
Trade and business links are another lever. According to Japan’s Nikkei newspaper, some 300 executives from big Taiwanese businesses operating China were called to a meeting by by China’s Taiwan Affairs Office Director Song Tao, a close ally of China’s President Xi, in early December and roundly encouraged to fly home to Taiwan support a pro-Beijing outcome in January.
A third concern is an international system buckling under new conflicts and crises, with less time to devote to Taiwan’s freedoms, all compounded by an uncertain outcome in the upcoming U.S. election. In the wake of Beijing’s ’s clampdown on freedoms in Hong Kong and with the backwash of the Ukraine crisis, anxieties run high among DPP supporters about Taiwan’s outlook and the need for high levels of deterrence.
“We really do not want to be the next Ukraine,” Chao added, with feeling.
Bending with Beijing
Opinion is strongly divided about the smartest tactical response toward China’s muscle flexing.
Opinion is strongly divided about the smartest tactical response toward China’s muscle flexing. | Annabelle Chih/Getty Images
Across town, at one of the opposition’s bases, where campaigners wear tracksuits in the white and blue of the Kuomintang party, International Relations Director Alexander Huang said his political troops were “within touching distance” of a possible victory.
Keen to shake off a reputation of being reflexively pro-China, as opposed to merely cautious about riling its powerful neighbour, the KMT hosted cocktails for foreign journalists in a trendy, Christmas-decorated bar, bringing together Chinese news-agency writers with Western reporters covering the election.
Huang, who hails from a military intelligence background and studied Chinese military and security doctrine in Washington, argued renewed Western support and commitments of defence expenditure by the U.S. administration increased the risk of something backfiring over Taiwan’s security. “We are under a great military threat [from China],” he told Power Play. “Our position is deterrence without provocation: assurance without appeasement.”
He also reckoned the current chilly relations between the governing DPP party and Beijing were widening distrust. “Our current government has no direct communication with the other side. If you are not able to communicate your view to your adversary, how can you change that?”
It’s less clear what reassurances the KMT expects from Beijing in return for a more accommodating relationship. Huang cites a possible decrease in trade tensions, which can hit Taiwanese agriculture and fishing when Beijing turns the screws, and further action on climate change and pollution (Taiwan is downwind of China’s emissions).
Colorful cast
The race certainly does not lack for colorful personalities.
The DPP’s presidential candidate, Lai, is a doctor and parliamentarian, while his KMT rival Hou is a former policeman and mayor in New Taipei. Mindful that the mood has become cynical about political elites, both sides have chosen frontmen who can claim humble roots: Hou hails from a family that scratched a living as food market traders, while Lai, the epitome of a slick Taiwanese professional, grew up with a widowed mother after his father died in a mining accident.
Hou is a former policeman and mayor in New Taipei | Annabelle Chih/Getty Images
The “Veep” contenders are flashier than the main candidates and more media-friendly. Hsiao Bi-khim, educated in the U.S. and until recently ambassador to Washington, is a pet-lover who styles herself as an agile “cat warrior” in stark contrast to China’s pugnacious “wolf-warrior” diplomats. Her KMT opponent is Jaw Shaw-kong, a formidable, populist-tinged debater and TV personality, who channels overt pro-Beijing sentiment, recently calling for more alignment in military planning with China’s leadership.
The billionaire Foxconn founder Terry Gou, who had run as a maverick, wafting pets as incentives to couples to have more babies to combat a worryingly low birthrate, quit the race after China’s tax authorities launched punitive investigations into his company, the builder of iPhones.
Russell Hsiao of the Global Taiwan Institute, a non-partisan research organization, reckoned that even if the DPP wins, its mandate will be less compelling than in the glory days of 2020, when it surged to a record level.
The guessing game of how likely an intervention — or even invasion — by China is helps explain the nervy tenor of this race.
The KMT’s Huang thought a “full-scale, kinetic invasion” is unlikely in the immediate future. How long does he think that guarantee would hold? “I would say not for the next five years, if we get our policy right.”
Hardly the most durable time-frame.
Taipei politics being a small world, Huang is a longstanding frenemy of the DPP’s Chao, who counters that Taiwan urgently needs to retain its defiant stance and deepen its strategic alliances with the West. They just disagree widely on the means to secure its future.
“The aim of [Beijing’s] engagements is unification … by force if necessary. Democracy, freedom, they are not just words. They represent what our people sincerely believe and hope to uphold.”
Stuart Lau contributed reporting.
Anne McElvoy is host of POLITICO’s weekly Power Play interview podcast, whose latest episode comes from the Taiwan election campaign.
BRUSSELS — Jacques Delors, who headed the European Commission between 1985 and 1995 and is seen as one of the most important architects of a European internal market and single currency, died on Wednesday, aged 98.
A pivotal figure in reanimating the pursuit of a united Europe after World War II, Delors is best known for presiding over the Single European Act of 1987, which set Europe on a course toward borderless economic integration, and the Maastricht Treaty of 1993 that created the European Union and charted a path for countries to join the euro currency.
Perhaps most significantly in forging the concept of a united European democracy, the Maastricht Treaty also created EU citizens, who would take part in European Parliament elections.
Born in Paris in 1925, Delors worked at the Banque de France until 1962. A committed Christian and active in the trade union confederation, he entered politics as a member of the Socialist Party in 1974 and was appointed as finance minister by President François Mitterrand in 1981. Faced with a recession, he started off by delivering the traditional medicine of increased spending, but ultimately convinced Mitterrand to switch tack to greater alignment with market economics.
The Jacques Delors Institute said his name would be associated with many of the most fundamental binding structures of the European project in addition to the single market and the euro: the Schengen passport-free travel area, enlargement, Erasmus student exchanges and cohesion funds to help development in poorer countries.
French President Emmanuel Macron was quick to pay tribute.
“Statesman of French destiny. Inexhaustible craftsman of our Europe. Fighter for human justice. Jacques Delors was all of that. His commitment, his ideals and his righteousness will always inspire us. I salute his work and his memory and share the pain of his loved ones,” the French president said in a statement on X.
Delors’ death was confirmed by his daughter, Martine Aubry. “He died this morning at his home in Paris in his sleep,” said Aubry, the socialist mayor of the French city of Lille, according to French media.
His current successor as European Commission president, Ursula von der Leyen, called Delors “a visionary who made our Europe stronger.”
European Council President Charles Michel added: “Jacques Delors led the transformation of the European Economic Community towards a true Union, based on humanist values and supported by a single market and a single currency, the euro. He was a passionate and concrete defender of it until his last days. A great Frenchman and great European, he went down in history as one of the builders of our Europe.”
EU chief diplomat Josep Borrell said: “Europe has just lost one of its giants.”
In Britain, Delors was sometimes viewed with more hostile eyes, particularly when he ran up against figures such as Prime Minister Margaret Thatcher, who were more skeptical of deeper European integration.
Notoriously, one of the most famous front pages of the Sun tabloid greeted Delors’ moves toward currency union with two raised fingers and the headline “Up Yours, Delors.”
Despite these run-ins with the British, Delors himself was opposed to Brexit and said U.K. membership of the bloc benefited both parties.
Ultimately, his old sparring partner, the Sun, acknowledged on Wednesday that he “was respected as a passionate and hardworking politician.”
My late Peruvian grandfather was quite the traveling businessman in his day. I found a luggage in his apartment filled with old currency leftover from his travels.
American, the most likely to have collectors value, or at least their official value.
Latin American. Almost all have been superceded by a newer currency, or have been massively devalued. I made sure to grab one coin with each national crest.
Recep Tayyip Erdoğan is set for another five years as Turkey’s president after winning a divisive election that at one point seemed to threaten his hold on power.
The 69-year-old, who has dominated his country’s politics for two decades, was on track to win the runoff vote by 52 percent to 48 percent, with more than 99 percent of ballot boxes counted, beating opposition candidate Kemal Kılıçdaroğlu, according to preliminary official results from Turkey’s Supreme Election Council.
In the first round of voting on May 14, the president also came out on top, defying the polls, but fell short of an outright majority, which triggered the runoff vote.
Erdoğan declared victory in front of his residence in Istanbul, singing his campaign song before his speech. “I thank our nation, which gave us the responsibility of governing again for the next five years,” he said.
“We have opened the door of Turkey’s century without compromising our democracy, development and our objectives,” he added.
Erdoğan also called on his supporters to take Istanbul back in the next local elections in 2024. His AK Party lost the city to the opposition in the 2019.
The triumphant president continued his campaign tactic of targeting LGBTQ+ people. “Can LGBT infiltrate AK Party or other members of the People’s Alliance [the broader coalition backing Erdoğan]? Family is sacred to us,” he said.
Russia’s President Vladimir Putin and French leader Emmanuel Macron were among the first world leaders to congratulate Erdoğan on his victory. Both leaders emphasized working together on world affairs. The government of Qatar and Viktor Orbán, Hungary’s prime minister, also congratulated the re-elected president.
Erdoğan’s victory follows a campaign in which he accused his rival of being linked to terrorism and argued that the country faced chaos if the six-party opposition alliance came to power.
He has ruled Turkey since 2003, first as prime minister and then as president, and the election has been widely seen as a defining moment for the country.
Erdoğan’s supporters say he has made the country stronger, but his critics argue that his authoritarian approach to power is fatally undermining Turkey’s democracy.
Kılıçdaroğlu said it had been “the most unfair election process in years” in his own post-election speech.
“All the resources of the state have been mobilized for one political party. They have been spread at the feet of one man,” he said.
The opposition candidate gave no indication that he was planning to resign, adding that the struggle would go on.
Erdogan taunted his rival, saying: “Bye, bye, bye Kemal.”
By contrast with earlier elections in which the president and his Islamist-oriented AK party easily beat their secular rivals, Erdoğan headed into this May’s contest behind in the polls.
His reelection campaign had to contend with economic problems such as painfully high inflation — currently 43 percent — and a weak currency, as well as the legacy of February’s devastating earthquake. At least 50,000 died in the disaster and the government was criticized for poor construction standards and its own slow response.
But Erdoğan’s first round performance on May 14 put him five percentage points ahead of Kılıçdaroğlu and just a few hundred thousand votes short of an absolute majority.
The opposition candidate then shifted to a more nationalist stance, promising to deport millions of Syrians and Afghans, but that move proved ultimately unsuccessful. Sinan Oğan, the nationalist candidate who won 5 percent in the first round then endorsed Erdoğan, not Kılıçdaroğlu.
Political analysts say Erdoğan’s victory highlights the polarization in Turkish society, particularly divisions between Islamists and secularists. While much of Turkey’s coastline, the big cities and the largely Kurdish southeast voted for Kılıçdaroğlu, the heartlands strongly favored Erdoğan.
Opposition supporters also argue that the election reflected Erdoğan’s grip on power, including his near-total influence on the country’s media, which is largely controlled by groups friendly toward the governing party.
After Kılıçdaroğlu’s candidacy was backed by Turkey’s main pro-Kurdish party, Erdoğan accused his rival of being in league with Kurdish terrorists, showing a doctored video in the closing days of the campaign to make his case.
This article has been updated to include reaction from Erdoğan.
Anyone looking at France right now could be forgiven for thinking the country was on the edge of a revolution.
Major cities from Paris to Lyon erupted in riots overnight on Thursday, with black-clad protesters lighting bonfires and hurling projectiles at riot police after President Emmanuel Macron rammed an unpopular reform of the pension system through parliament. More than 400 police were injured.
The violence capped weeks of mass protests as millions marched through French cities to oppose the reform, which will raise the legal age of retirement to 64 from 62 currently. More protests are already planned for next week, piling pressure on Macron’s already embattled government and prompting Britain’s King Charles to cancel a highly-awaited visit.
Yet for all the sound and fury of the protests, which could yet worsen if students join in, there’s nearly zero risk that Macron himself will have to leave office. Having narrowly survived a vote of no confidence, he may seek to reshuffle his cabinet and sack his prime minister, Élisabeth Borne — but the presidential system is so designed that the leader is nearly guaranteed to remain president until the last day of his term, in 2027.
The bigger question, then, is about what happens after Macron, whose hyper-personal style of leadership has often been described as king-like, even by the standards of France’s monarchical Republic, leaves the stage for good.
Barred from seeking a third term by the constitution, Macron will leave behind a leaderless and rudderless ruling party that may well cease to exist without him, creating a power vacuum that far-left and far-right leaders, including three-time presidential contender Marine Le Pen, are itching to fill.
And while Macron has a solid hold on power now, the parliamentary rebellion his government faced down this week — and the chaos engulfing the country — raise ominous questions about the future for anyone who hopes to see France stay firmly anchored to the pro-EU, pro-NATO liberal camp.
In other words, after Macron, le déluge.
Macron’s shaky platform
The first danger sign flashing over French democracy is the state of Macron’s own party, the centrist Renaissance group. In many systems, ruling parties have deep roots and an ideological foundation that, at least in theory, give them a raison d’être beyond exercising power.
But this isn’t the case for Macron’s party, which was born for the sole purpose of hoisting its founder into the Elysée presidential palace and then supporting his government. As such, it’s docile by nature and, with a few exceptions, hasn’t produced bold personalities who would in other circumstances be natural successors to the president.
And while the party is already short of a majority in parliament, the rebellion against the pension reform this week revealed Renaissance to be much weaker even than was previously thought — more of a hollow platform for Macron to stand on than a launchpad for future leaders. Indeed, Prime Minister Borne believed that she could rely on support from the center-right Les Républicains party to provide the necessary votes to pass the reform, as part of an informal coalition arrangement.
Yet this hope vanished suddenly and unexpectedly when a group of 19 Les Républicains, led by southern lawmaker Aurélien Pradié, defied orders from their own party leadership and announced they would support a motion of no confidence in Macron’s government. As rebellions go, it revealed not just the weakness of Renaissance, but the continued disarray of the mainstream center-right in France — which has produced most of the country’s leaders since World War II and is now a shadow of its former self.
“The political landscape isn’t just fractured; it doesn’t offer any hope for the president, the government or their supporters,” said Jean-Daniel Lévy, a political analyst with pollster Harris Interactive. “There is no such thing as a Macron doctrine or an ideological successor to Macron.”
The rebellion against the pension reform this week revealed President Emmanuel Macron’s party to be much weaker even than was previously thought | John Macdougall/AFP via Getty Images
The second alarm bell ringing is how much the pension crisis has emboldened the far-right and far-left factions in parliament. Take Jean-Luc Mélenchon, a far-left firebrand who’s made two failed bids for the presidency, and is now the most recognizable face in the NUPES, a recently-formed left-wing coalition gathering what’s left of the Socialist party, Mélenchon’s hard-left France Unbowed group and the Greens.
Having faded from view, Mélenchon has roared back into the limelight during the pension reform battle, appearing constantly in the media. Anti-NATO, Euroskeptic and calling for an end to France’s 5th republic (his 6th Republic would end the presidential monarchy), the ex-socialist whose sympathies lean more toward Venezuela than Brussels is ideally suited to produce revolutionary soundbites.
With his pension reform, Macron has “lit a fire and blocked all the exits,” Mélenchon quipped this week.
Le Pen eyes the crown
Yet Mélenchon’s prospects of taking power in 2027 look slim. According to an IFOP poll published in early March, just 21 percent of the French believe he’s best-positioned to lead the opposition — suggesting he’s not very well-loved by other adherents of the NUPES coalition.
Much better positioned is Marine Le Pen, the far-right chief whom Macron defeated twice in the final rounds of two presidential elections. Indeed, since her last defeat, Le Pen has made further strides toward making herself look presidential while continuing to try to detoxify her party’s image.
Not only has Le Pen ditched the “National Front” party name that was associated with her Holocaust-minimizing father, Jean-Marie Le Pen; she has abandoned an electorally-disastrous plan to exit the euro currency zone and she’s established herself as the leader of her party’s 88-strong delegation in the French parliament, placing her at the center of the action against the pension reform.
She hasn’t confirmed that she’ll make a fourth bid for the presidency. But there’s no reason to believe she wouldn’t. And this time, Macron won’t be around to stop her.
“After Macron, it will be us,” she told BFMTV this week, referring to her National Rally party.
Aside from Le Pen, the obvious choice to succeed Macron would be Édouard Philippe — his remarkably beloved one-time prime minister. Since leaving office in 2017, Philippe has been quietly biding his time as mayor of Le Havre, a mid-sized port city on France’s northern coast, and nurturing his own center-right political platform, Horizons.
The fact that Philippe, in an interview earlier this month, came out to address the fact that he’s suffering both from alopecia and vitiligo only seemed to bolster his popularity with the French, who rate him as their preferred political personality, according to this ranking.
But Philippe’s stance on retirement, backing an increase in the legal age to 67 — above and beyond what Macron proposed — has not done him any favors. According to a poll by Odoxa, 61 percent of the French weren’t happy with his attempt to defend the pension reform.
He still hasn’t said for sure whether he will run in 2027, and the past week’s action suggests his association with Macron could turn out to be a drag on his prospects once campaigning gets started, should he decide to enter the race.
As U.S. banking regulators begin their post-mortem of Silicon Valley Bank, some pundits are pointing the finger at crypto markets, whose own collapse over the past year left the tech-focused lender hopelessly exposed.
The conventional wisdom about crypto is that it’s “self-referential” — a separate universe to conventional finance — and that its inherent volatility can be contained. The emerging “contagion” theory is that there are enough linkages for extreme turmoil to spill over, much as a virus can sometimes jump from one species to another.
That’s what happened here, according to Barney Frank, the former U.S. congressman who wrote sweeping new banking rules after the banking crisis in 2008, and joined the crypto-friendly Signature Bank as a board member in 2015.
“I think, if it hadn’t been for FTX and the extreme nervousness about crypto, that this wouldn’t have happened,” Frank told POLITICO this week. “That wasn’t something that could have been anticipated by regulators.”
FTX, the crypto exchange that collapsed in November amid allegations of massive fraud, capped a year of turmoil in crypto markets, as investors began withdrawing funds from riskier ventures in response to rising interest rates, which in turn exposed the shaky foundations underpinning the industry. The ensuing “crypto winter” saw the value of the industry plummet by two-thirds, from a peak of $3 trillion in 2021.
Policymakers sought to reassure the public that volatility in the crypto market, blighted by scams and charlatans who sought to profit from investors’ fear of missing out, would naturally be contained. With the collapse of SVB, that claim is facing its biggest test yet.
Patient zero
Under the contagion theory, “patient zero” could be traced back to the implosion of TerraUSD, an “algorithmic stablecoin” that relied on financial engineering to keep its value on par with the U.S. dollar. That promise fell short in May last year following a mass sell-off, creating panic among investors who had used the virtual asset as a safe haven to park cash between taking punts on the crypto market. The origin of the crash is still subject to debate but rising interest rates are often cited as one of the main culprits.
TerraUSD’s demise was catastrophic for a major crypto hedge fund called Three Arrows Capital, dubbed 3AC. The money managers had invested $200 million into Luna, a crypto token whose value was used to prop up TerraUSD, which had become the third largest stablecoin on the market. A British Virgin Islands court ordered 3AC to liquidate its assets at the end of June.
The fund’s end created even more problems for the industry. Major crypto lending businesses, such as BlockFi, Celsius Network and Voyager, had lent hundreds of millions of dollars to 3AC to finance its market bets and were now facing massive losses.
Customers who had deposited their digital assets with the industry lender were suddenly locked out of their accounts, prompting FTX — then the third largest crypto exchange — to step in and bail out BlockFi and Voyager. Meanwhile, central banks continued to raise rates.
The contagion seemed under control for a few months until revelations emerged in November that FTX had been using client cash to finance risky bets elsewhere. The exchange folded soon after, as its customers rushed to get their money out of the platform. BlockFi and Voyager, meanwhile, were left stranded.
Outbreak widens
This is the point where the outbreak of risk in the crypto industry might have jumped species into the banking sector.
Silvergate Bank and Signature Bank, two smaller banks that also failed last week, had extensive business with crypto exchanges, including FTX. Silvergate tried to downplay its exposure to FTX but ended up reporting a $1 billion loss over the last three months of 2022 after investors withdrew more than $8 billion in deposits. Signature also did its best to distance itself from FTX, which made up some 0.1 percent of its deposits.
FTX, the crypto exchange that collapsed in November amid allegations of massive fraud, capped a year of turmoil in crypto markets | Leon Neal/Getty Images
SVB had no direct link to FTX, but was not immune to the broader contagion. Its depositors, including tech startups, crypto firms and VCs, started burning their cash reserves to run their businesses after venture capital funding dried up.
“SVB and Silvergate had the same balance sheet structure and risks — massive duration mismatch, lots of uninsured runnable deposits backed by securities not marked to market, and inadequate regulatory capital because unrealized fair value losses excluded,” former Natwest banker and industry expert Frances Coppola told POLITICO.
Eventually, the deposit drain forced SVB to liquidate underwater assets to accommodate its clients, while trying to handle losses on bond portfolios and an outsized bet on interest rates. As word got out, the withdrawals turned into a bank run as frictionless and hype-driven as a crypto bubble.
Zachary Warmbrodt and Izabella Kaminska contributed reporting from Washington and London, respectively.
This article has been updated to correct the value of the crypto industry.
Opinions expressed by Entrepreneur contributors are their own.
In a recent research report by Bank of America, analysts concluded that “CBDCs (central bank digital currencies) appear inevitable.” According to their research, CBDCs have “the potential to revolutionize global financial systems and maybe the most significant technological advancement in the history of money.”
While the contents of this report have been making waves in traditional media circles, those of us that have been researching and working with CBDCs over the past few years have been saying similar things for quite some time now. In this article, I will tackle some of the more prominent misconceptions about CBDCs, especially the ones concerning anonymity and the technology’s potential use as a means of totalitarian control.
Some of the most full-throated criticism of CBDC technology tends to come from the cryptocurrency community, where many consider the rollout of state-backed digital currencies to be an existential threat to anonymity. But if you think bitcoin and stablecoins are about privacy, they’re not. Somewhere around 90% of addresses and transfers, if not more, have long since been traced and identified, and even in DeFi, cybercrime gets investigated, and the culprits get caught fairly quickly.
Those who are active in the cryptocurrency industry and those who are knowledgeable about it know this. What is much more likely to be behind this vein of criticism of CBDCs is the perception of the technology not as an existential threat to privacy but as an existential threat to existing cryptocurrencies. However, this too is unfounded.
From working with regulators and countries in the process of launching CBDCs, it has to be said that privacy simply is not on the agenda in most cases. The central issues that are being dealt with currently revolve around what the legal framework should be, how the linkage to banks should work, how to move from stablecoin currencies to CBDCs, how to integrate the technology into international trade, how to incorporate CBDCs into “superapps” and so on.
When we move beyond the idea that CBDCs are a power grab by institutions looking to eliminate financial privacy, the actual value of the technology comes into view. There are two levels on which CBDCs offer vast improvements to the current status quo, that of the state and that of the individual.
On the state level, it is important to understand that every foreign trade transaction now goes through the dollar. For example, take Pakistan and the Arab Emirates. When these countries trade, there is constant pressure on the national currencies because they must constantly sell their currencies and buy dollars. However, the dirham is quite trusted in Pakistan. So, direct payments in dirhams and rupees could be possible, but currently, there is no infrastructure to support this kind of transaction. This is where CBDCs come into play.
Regardless of how it’s done, cross-border transfers must be straightened out. This could be achieved via currency baskets, AMM pools or mutual correspondent banks. One way or another, this will make economic processes easier and cheaper for almost all countries because cross-border rates and long chains of intermediaries will disappear.
The main task facing CBDC development right now is building a basis for cross-border payments, which individuals do worldwide. The need for this to happen can be seen in how cross-border payments currently work in the Philippines and the Emirates.
There are generally two ways of sending money from the UAE. The first is the old-fashioned “hawala” system. Here, the sender goes to their local community leader, gives him dollars, and then the leader’s counterpart in the recipient’s country gives the recipient the same amount in pesos.
The second method involves transferring money through services like Western Union. Depending on cross-border rates, the round-trip commission is between 6% and 12%. You inevitably have to have a double conversion. As a result, the cost of the transfer is extremely high.
This is the process we are trying to build: the sender comes with digital dirhams either to a transfer point or a special machine. He needs to convert the dirhams into pesos. Both currencies are digitally deposited as stablecoins in an AMM pool, where the exchange rate changes very little. Conversely, the pesos are received through a transfer operator, which charges only 0.1% for the exchange of digital currencies. Thus, the total fees do not exceed 3% of the transfer amount.
This is one way you can use CBDCs. And it is convenient and cheap for those who do not have cards or bank accounts, which in Southeast Asia alone amounts to several hundred million people. The fees these people have to pay to add up to a significant burden on a demographic that should be better served by governmental and financial institutions. And this is just a small picture of how revolutionary this technology can be. As development continues, the bigger picture will come into focus, but it is important now to recognize the potential CBDCs have to improve the lives of billions of people worldwide and focus on bringing that potential to fruition.
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.
I am grateful to have had the opportunity to serve as chairman. I will continue to advocate for community banking, and for the rest of my career, stand side by side with you to fight our future battles.
Serving as ICBA chairman has been one of the highest honors of my life. It’s hard to put into words how special this experience is. The work you’re doing every day puts real faces and names to the communities we’re fighting for, and it has been a privilege to be your representative at the national level.
Yet, it takes the voices of many to make a true impact. That’s why I’ve asked community bankers to sacrifice a few minutes every day to advocate for our industry. We are what stands between our customers and an overreaching federal government and regulatory system. We hold the line for Main Street America, which needs us.
My top three
Reflections on community banking:
Never take our community bank mission for granted; advocate for it.
Keep innovating and implementing new technologies for your customers.
Someone at your bank wants to lead it for the next generation. Let them.
In today’s environment, that vigilance is critical to staying ahead of emerging threats. Each day brings forward new concerns, and we have to stay focused on who we are and who we represent. So, keep pressing forward in defending this great industry we get the opportunity to serve.
For example, every community banker has a primary focus on how they can better serve their customers. It isn’t about making more money, but how we respond to community needs. We should also remind policymakers that community bankers are small business owners, too. And even though we have fiduciary and regulatory responsibilities to remain profitable and provide a return to our shareholders, our focus always comes back to how we can serve our customers better. In maintaining that focus on our relationship-centric mission, we will continue to thrive.
That’s why it’s vital for community banks to remain independent, and a big theme for me has been encouraging bank executives to identify their next generation of leaders. There are those within your institution who share your vision and passion. Support their development and groom them to take the reins. Without your bank, your communities are at risk. So, make a succession plan to ensure your bank remains the lifeblood of the community.
With that in mind, I implore you to keep fighting for Main Street. Keep raising your voices to advocate for your customers. Keep engaging with innovative companies to grow, evolve and better serve. Keep identifying future leaders to ensure the longevity of your institution, because your communities need you in their corner.
I want to close by saying I am grateful to have had the opportunity to serve as chairman. I will continue to advocate for community banking, and for the rest of my career, stand side by side with you to fight our future battles. With that passion leading, I’m confident we’ll witness the continued growth and success of our beloved industry.
Brad Bolton, Chairman, ICBA Brad Bolton is president and CEO of Community Spirit Bank in Red Bay, Ala. Connect with Brad @BradMBolton
