Happy New Year everyone! I spent part of the holiday break reading up on stablecoins and tokenized deposits, mostly because I kept seeing the terms used interchangeably and was a bit confused. They’re often treated as the same thing, but they’re not and I wanted to make sure I understand all of the differences that matter for banks, and especially community banks. At a basic level: -Tokenized deposits are regular bank deposits, just represented on new rails (meaning newer payment and...

The Federal Reserve’s new supervisory operating principles that were released last month ( https://lnkd.in/dvsqn8vs ) mark another meaningful step in what has been a steady, months-long shift in regulatory tone, one that emphasizes material financial risks, clearer communication, and a more pragmatic supervisory posture. This direction is consistent with what many of us have already been seeing across agencies recently, which is a push to focus on what truly affects safety and soundness,...

The New York Fed (they are on a great roll lately with their research!) just released a really interesting piece called “Economic Capital: A Better Measure of Bank Failure?” ( https://lnkd.in/dCNeSKWf ) and I think it speaks to something many of us in risk management have been talking about for years. The researchers built a solvency metric called Economic Capital (EC) which is basically the present value of a bank’s assets minus the present value of its liabilities and operating expenses as...

As I’ve mentioned in a few recent posts, even though the Fed has started lowering short rates, the longer end of the curve has remained flat and even ticked up a bit. For example, the 10-year Treasury is up about 10 basis points since the Fed lowered rates. Despite this, mortgage rates have actually come down significantly, from around 6.9% in late May on a 30-yr fixed rate to around 6.30% in early October. What’s driving that? One big factor has been spread tightening in the mortgage...

Model risk management isn’t one-size-fits-all. On October 6, 2025, the OCC issued Bulletin 2025-26 ( https://lnkd.in/diiunKRc ), reminding community banks that model risk practices, including how often models are validated, should be right-sized to an institution’s complexity, resources, and risk profile. I was glad to see the OCC explicitly say it does not expect every model to be validated every year. I’ve long believed that a thoughtful, risk-based approach beats a blanket rule , and that...

It looks like we are headed into a bull steepener yield curve scenario. ↘️ Front-end treasury rates (2-year) are already coming down as markets price in multiple Fed cuts. Futures show an 87% chance for a 25pbs cut in Sept, 54% for another 25bps in October and a 43% chance for an additional 25bps at the December meeting. ↗️ Yet the 10-year remains stubbornly high. This is likely a pivot point in the rate cycle and institutions should be stress-testing their balance sheet. ✔️ Why the long...

As most banks and credit unions work to calculate and finalize their Q2 2025 CECL reserves, KPMG released their Q2 CECL Pulse Check survey ( https://shorturl.at/FJaBi ) and I wanted to share some takeaways. They surveyed 23 banks and 4 finance firms and the results were not surprising. A few things that stood out: - Forecasting remains a big challenge as 88% cited economic outlooks (especially government-driven ones) as the toughest part of ACL estimation. - Economic uncertainty drives...

In an environment marked by rising funding costs, increased deposit mobility, persistent unrealized losses in bond portfolios, and heightened regulatory scrutiny, I wanted to share some practical ideas for how to ensure your liquidity stress testing is a truly meaningful and actionable exercise. 👉 Deposit Segmentation: One of the most persistent challenges I’ve seen over the years is effectively segmenting the deposit portfolio to truly identify where potential outflow risk may reside. I...