Finance Desk

Another U.S. bank collapses, and experts wonder whether the failure is a canary in a coal mine or a coincidence.

This article appears in the November issue of Global Finance Magazine.

A sixth U.S. bank failure this year has reignited a familiar question on Wall Street: Is the banking system flashing a 2023-like warning?

California’s Department of Financial Protection and Innovation closed Nano Banc of Irvine, California, on Sept. 25, citing the lender’s deteriorating financial condition, and appointed the Federal Deposit Insurance Corp. as receiver. Sunwest Bank assumed approximately $605 million in Nano Banc’s deposits.

The closure occurred about a month after regulators shut Philadelphia’s Tioga-Franklin Savings Bank. Other failed institutions include Metropolitan Capital Bank & Trust (Chicago), Community Bank and Trust (LaGrange, Georgia), Kentland Federal Savings and Loan Association (Kentland, Indiana), and Small Business Bank (Lenexa, Kansas).

That brings the 2026 tally to six, the most since 2017 and one more than in 2023, when Silicon Valley Bank (SVB), Signature Bank and First Republic Bank collapsed. While most of the experts Global Finance spoke to say the current failures appear small, lingering balance-sheet vulnerabilities mean the underlying risks of 2023 haven’t fully disappeared.

No Rapid Runs Bode Well, but…

“They do share a pattern, but it isn’t the 2023 pattern,” said David Maya, global risk lead at Dublin-based management consultancy Accenture. “No deposit runs. No rate-driven bond losses. Every one of them was a slow failure — weak management, then losses, then the capital ran out.”

According to California’s DFPI, Nano Banc suffered from mismanagement, poor governance and “insider trading risks.” A similar “operational weakness” narrative followed Tioga-Franklin Savings Bank’s closure.

Maya cautioned against alarm. “All six together held about $1.4 billion in assets,” he said. “Silicon Valley Bank alone had $209 billion. This is not that.”

This year’s count is also a far cry from the 507 U.S. bank failures recorded between 2008 and 2014. Still, some industry experts are asking whether the liquidity and interest-rate shocks that toppled larger banks in 2023 are resurfacing.

Stephen Curry, founder and chairman of Endurance Advisory, said the problems exposed in 2023 have been only “partially fixed.”

“Uninsured deposits remain concentrated, and losses on held-to-maturity securities are still substantial,” he said. “To me, the biggest unresolved issue is supervisory follow-through. While the regulators did a good job identifying the problems, they still need to be consistent and timely in enforcing regulatory corrections.”

Lessons From Abroad

Europe offers a sharp contrast. The European Banking Authority said that banks in the European Union and European Economic Area remain resilient, with near-record capital ratios and solid asset quality.

Donald van Deventer, managing director of risk research and quantitative solutions at data and AI company SAS, attributes much of the gap to how mortgages are structured.

“European mortgages are much more likely to be floating rate or fixed rate for fairly short maturities before rate reset,” he said. “The 30-year U.S.-style fixed-rate mortgage is something extremely rare in the European market. So in that sense, there is structurally less interest rate risk embedded in the balance sheets of European banks.”

Most U.S. 30-year mortgages are sold to Fannie Mae and Freddie Mac rather than held by banks. Lenders absorb much of the same rate risk by buying mortgage-backed securities, which were the losses that sank SVB.

Echoes of 1990s Japan

Van Deventer sees a closer parallel in mid-1990s Japan, where he was with Kamakura Corp., which he founded. Real estate prices fell by as much as 80%.

“People in the U.S. at the time said that it could never happen to us,” he said. “Then in 2008-2010, it did.”

The danger, he said, is built into how banks are funded. Deposits can be withdrawn at any time, which he described as a put option no corporation would attach to its own bonds. When a bank’s assets are illiquid and depositors exercise that option, the bank cannot sell assets quickly enough to meet the demand for cash.

That dynamic helped sink Lehman Brothers in 2008. Its real estate-linked securities plunged, and rivals, knowing the firm had to sell, lowered their bids. In 2023, it fueled runs on Silicon Valley Bank and First Republic.

“And I worry we will see it again,” van Deventer said.

Where Maya sees isolated management failures, van Deventer sees the same macro forces at work.

“This year’s bank failures were triggered by the rebound in interest rates to higher levels and price pressure on real estate,” he added. “I have spent my career avoiding making forecasts, but the current environment is remarkably similar to the S&L crisis in the late ’80s and early ’90s. It is very similar to 2008-2010. And similar to Japan in 1996-1997.”

Anthony Noto covers corporate finance and private credit. Contact him at anoto@gfmag.com

The FOMC will reduce interest rate-setting meetings starting in 2027 to allow more time for policy discussions.

The Federal Reserve steered clear of a political October surprise but delivered an unexpected shift in monetary policy strategy.

After announcing that the Federal Open Market Committee, or FOMC, decided, as expected, to maintain the federal funds rate between 3.75% and 4%, Chairman Kevin Warsh announced that the body would introduce a monetary policy strategy meeting that would not vote on the federal funds rate or issue a policy statement, replacing one of its eight policy-setting meetings beginning in the autumn of 2027. It expects to replace a second policy-setting meeting with another strategy meeting in 2028.

The move aims to get monetary policy right, said Warsh. “It involves assessing near-term development at timely, regular, and information-rich intervals. But it is equally important that we reserve time and space as an intellectually diverse group for strategic deliberations, for thinking anew about big questions, looking over longer-term horizons, and focusing on the left side of the decimal point.”

The move would reduce the cadence of the FOMC’s policy meetings, “but does not rule out possible inter-meeting policy moves because of potential exigent circumstances,” said Kenneth Kim, a senior economist at KPMG. “Chair Warsh mentioned that this had occurred during the Global Financial Crisis.”

Warsh also announced that the five task forces he commissioned during the first month of his tenure on Fed communications, the Fed’s balance sheet, the use of existing data sources, inflation frameworks, and productivity will deliver their findings by year-end.

On November 16, the Productivity and Jobs task force plans to hold a field hearing to examine productivity’s implications for jobs in the near, medium, and long term.

“I, for one, am keenly interested in refining my own views on that question, but the task force decided that they wanted to hear from more people as part of their undertaking,” said Warsh.

Keeping Politics at Bay

Warsh also knocked down any suggestion that politics affected the FOMC’s decision to maintain the federal funds rate six days before the U.S. congressional mid-term elections.

“I just spent two days with my colleagues upstairs, and didn’t hear an utterance about politics,” he said. “I didn’t hear a reference to politics, elections, or what’s happening in the next week or so.”

When asked whether he or the Federal Reserve Board would be involved in the White House’s Nov. 5 closed-door hearing on allegations of mortgage fraud involving Federal Reserve Governor Lisa Cook, Warsh replied, “Not to my knowledge.”

Future Hikes

Although the FOMC unanimously supported September’s 0.25% hike in the federal funds rate, October’s decision to maintain the rate showed slight division. Fed Gov. Lisa Cook and the Federal Reserve Bank of Cleveland President and CEO Beth Hammock each voted for a 0.25% increase.

That division moves the FOMC closer to raising rates at its December meetings, said Kim. “If you look at market probabilities for December, they’re currently at an 84% chance of a rate hike. I think those dissents are in line with what the market is factoring in will happen at the next FOMC meeting.”

Rob Daly covers the economy and fintech. He can be reached at rdaly@gfmag.com

Verifying AI agents’ identities may separate the rogues from the reliable.

Reported incidents of rogue artificial intelligence agents gaining unauthorized access to customer bank accounts have raised questions about their use in corporate payments.

Banking giants, JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co., and Morgan Stanley & Co. have either restricted access of third-party AI agents or blocked their access completely, citing the difficulty in knowing whether they have difficulty detecting which activity is authorized by the customer or a result of a rogue AI agent.

Without verifiable digital credentials to identify AI agents and their mandates, limiting or eliminating their access to bank systems is the right call, said Andrew Shikiar, CEO of the authentication standards organization FIDO Alliance.

“It’s going to be tough to address these issues that have already played out in ecommerce and fintech around trust, liability, and authorization,” he said. “With humans, it’s hard. With agents, it’s even harder.”

Digital Identities

Verifiable digital identities have been in operation for several years, but their implementation is fragmented. Sweden and Norway issue BankIDs, which provide digital credentials for banking and access to social services. Separately, the European Union has mandated that all member states issue citizens an EU Digital Identity Wallet by the year’s end, with acceptance by banks and other large platform providers by 2027. The EU Commission, however, has reported doubts that every member will meet the deadlines.

Meanwhile, in the Asia-Pacific region, Singapore offers its Singpass, which lets residents access online government and business services using biometric or two-factor authentication.

For the U.S., the federal government has left digital identity regulation to the states. Arizona, California, Colorado, Georgia, Maryland and Utah offer mobile digital licenses that can be stored on a person’s cellphone.

“Most people don’t know what to do with them,” said Shikiar. “It is not super well-coordinated.”

The FIDO Alliance has been working with the International Standards Organization, the OpenID Foundation and the World Wide Web Consortium to create a trusted and interoperable identity ecosystem that will let individuals store, manage, and share digital versions of their credentials like a driver’s license or passport.

“Once I have that, my agent can point to this signed, highly verifiable individual that authorized the agent to do X, Y, and Z with certain parameters and be audited, tracked, and verified,” said Shikiar.

Agent Control

Maintaining up-to-date controls around AI agents is of critical importance to the corporate treasury, and the company in general.

“Control testing examines individual steps, such as transaction approval, user access, or checks that a payment matches an authorization,” said Chris Dimitriadis, global strategy officer at ISACA, a professional association focused on IT governance, cybersecurity, risk management and auditing. “With AI agents, auditors must also test the integrity of the end-to-end sequence, the agent’s authority, and the transition between actions. The key difference is testing the full execution path, including the unexpected paths.”

Any time a company updates an AI model, deploys a new tool connection, changes an AI prompt, or gives an AI agent a broader mandate, it should reassess its control functions, he added. “I would establish a risk-based AI-agent change trigger rather than treating every update equally. Additionally, I would also establish an AI maturity and capability assessment framework like CMMI AIM to gain more confidence and reduce uncertainty.”

For now, Wall Street’s decision to halt agentic access to client accounts is a temporary, effective response until agent management catches up with the technology.

Rob Daly covers the economy and fintech. He can be reached at rdaly@gfmag.com