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    F.D.I.C. Says Banks Need to Keep a Record of Their Fintech Customers

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    Banks holding customer funds for money management apps should keep track of customers’ identities and balances, the agency says.When a banking software company collapsed this spring, thousands of people keeping cash in online money management apps found themselves cut off from their own money for months. On Tuesday, the Federal Deposit Insurance Corporation proposed new rules designed to prevent that from happening again.Customers often choose to put money they would otherwise hold in a bank checking account into an online app. Some apps offer higher interest rates on deposits than traditional banks do, while others offer customers new saving and investing plans or small loans ahead of their paydays.But money that customers send to online financial companies almost always ends up in a brick-and-mortar bank — and sometimes it is pooled into a single account. Customers often do not know which bank has their money.Banks are under no obligation to keep track of the identity of fintech customers. The federal bank regulator’s proposal would require the banks to pay more attention.Traditional banks holding funds for fintech customers would have to know each person’s identity and keep daily tabs on their balances. They would have to make sure that, no matter what happened to the other companies in the chain linking customers to their funds, the banks had a record of those funds and could share their identities and balances with regulators.This change would also help if a bank at the end of one of those long chains of software companies were to fail, the regulators said on Tuesday. At present, it is hard for the F.D.I.C. to determine whose money is covered by the $250,000 deposit insurance guarantee.Senior F.D.I.C. officials said in a briefing held for journalists on Tuesday that while they had been contemplating such rules for years, the collapse this spring of Synapse Financial Technologies, which operated banking software for online lenders, provided a good real-world example of how customers could be harmed.When Synapse filed for bankruptcy and shut down its services, it said it had only $2 million in cash on hand. But customers who had funds at the online lenders Synapse supported were collectively cut off from $300 million of their own money. The F.D.I.C. said it had received more than 1,000 customer complaints related to Synapse since May.The banks that take deposits from fintech customers are often small institutions trying to grow. Their managers could complain about having to meet new record-keeping requirements. Regulators said on Tuesday that any new requirements would apply narrowly to banks taking the kinds of deposits that could get lost in a chain of software companies.There are other methods smaller banks use to swap deposits and increase their customers’ deposit insurance coverage that would not be affected by the new proposal, the regulators said.The proposal made Tuesday was the first step toward putting the new rules in place. Regulators now want banks and other members of the public to provide feedback to help shape it. More

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      Christy Goldsmith Romero Is Front-Runner to Lead F.D.I.C.

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      The front-runner for the bank regulatory job is Christy Goldsmith Romero, a member of the Commodity Futures Trading Commission.Three weeks after President Biden vowed to pick a new leader for the Federal Deposit Insurance Corporation, the bank regulator shaken by a vast workplace abuse scandal, a front-runner has emerged: Christy Goldsmith Romero, who sits on the five-member Commodity Futures Trading Commission, according to two people with knowledge of the administration’s thinking.Ms. Goldsmith Romero is a lawyer who, after the financial crisis, spent more than 12 years in an office created by Congress to investigate fraud and other misconduct by banks that received money from the government’s roughly $450 billion crisis rescue package, the Troubled Asset Relief Program. From 2011 to 2022, Ms. Goldsmith Romero led the office as the special inspector-general for the program.Her work exposing fraud, which often put her at odds with not only bankers but also some government officials who were concerned about the potential damage it would do to overall public opinion of the bailout, has made her especially appealing for the job of cleaning up the F.D.I.C., said the people, who asked for anonymity to discuss the matter.Mr. Biden has not made a final decision. Ms. Goldsmith Romero’s position as the front-runner for the job was first reported by The Wall Street Journal.Ms. Goldsmith Romero declined to comment for this article.Republicans and Democrats both want a new leader for the bank regulator as soon as possible. Managers there were routinely sexually harassing junior employees and working to silence anyone who complained, according to reports last fall by The Wall Street Journal. The fact that Ms. Goldsmith Romero is a woman and a member of the L.G.B.T.Q. community — she is bisexual — is also seen as a plus, the people said, because she may be better able to build trust and restore morale among embattled junior employees.And there’s another advantage to her candidacy: Ms. Goldsmith Romero has been unanimously confirmed by the Senate — twice. Her most recent confirmation, for the C.F.T.C. post, was in 2022, recently enough that the paperwork she submitted to the Senate as part of her nomination process, as well as the background check she underwent at the time, are likely to still be valid.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Regulators Seize Republic First, a Troubled Philadelphia Bank

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      The relatively small bank, the first to fail this year, will have its deposits assumed by another Pennsylvania lender, Fulton Bank.Regulators late Friday seized Republic First Bancorp, a troubled Philadelphia lender, in the first U.S. bank failure this year.Republic First Bancorp, known as Republic Bank, had about $4 billion in deposits at the end of January and assets worth $6 billion, the Federal Deposit Insurance Corporation said in a statement.“Substantially all” of its deposits will be assumed by Fulton Bank of Lancaster, Pa., the F.D.I.C. said, with Republic First’s 32 branches in Pennsylvania, New Jersey and New York reopening as soon as Saturday as Fulton Bank branches.Founded in 1988, Republic First was smaller than the midsize banks that collapsed last year — including First Republic Bank and Silicon Valley Bank, whose assets each topped $200 billion. The F.D.I.C. expects the cost to the Deposit Insurance Fund to be $667 million.The failure comes amid continuing concern about the health of regional banks. In a presentation for investors in July, Republic First said that deposits were declining and that the bank’s mortgage lending business had become less valuable as interest rates increased.It had planned to exit the mortgage business and refocus on consumer deposits. It was delisted by Nasdaq in August, after it failed to file its annual report with the Securities and Exchange Commission, and an expected $35 million investment in the bank was scuttled this year, as reported by Banking Dive.Feddie Strickland, a bank analyst at Janney Montgomery Scott, said that Republic First’s failure was likely to be an isolated incident and that the overall banking sector is stable.“I think small banks are in good shape,” Mr. Strickland said. “Some of the failures we saw last year were really banks with a certain specialization. I think there’s an importance of being diversified.”Mr. Strickland called Fulton, which is taking over Republic First’s deposits, “a boring bank in the best way,” calling the commercial bank “careful” and “good operators.”“Depositors should feel safe with Fulton,” he added.Maureen Farrell More