5 banking trends to watch in 2023

In predicting hot spots for the year ahead, sometimes it’s worth seeing what was written a year ago. While some of early 2022’s concerns — COVID-related ones, perhaps — seem of their time, others surprisingly grew legs. When Banking Dive included crypto on its list last year, the paramount concern seemed how to regulate it. That may still be true. But 2022 in action turned a hypothetical risk scenario into a very real numerical nightmare for some institutions.

Another 2022 trend, regulatory developments — particularly, the “who” involved — ran its course as the Biden administration staffed up the Federal Reserve board and gave the Federal Deposit Insurance Corp. (FDIC) a full-fledged figurehead. In that regard, 2023 presents a follow-up question: Now that the regulators are in place, what about the actual regulation? 

Here is a look at Banking Dive’s top trends for the year ahead.

CFPB leading on tougher penalties

Before 2022 ended, Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra made good on his promise to crack down on institutions with a track record of consumer rights abuses. 

The regulator in December announced a record $3.7 billion settlement with Wells Fargo over a slew of consumer abuses related to auto loans, mortgages and deposit accounts.

Since taking the helm of the CFPB in 2021, Chopra has vowed to impose stricter penalties on repeat offenders.

“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” Chopra said in a statement last month.

Wells’ laundry list of consumer abuses, beginning with the bank’s 2016 fake-accounts scandal, has arguably made the bank an easy first target. 

But the formation of the bureau’s “repeat offender unit” likely means the CFPB in 2023 intends to ramp up efforts to rein in other large institutions with similar records.

“The Repeat Offender Unit will focus on ways to enhance the detection of repeat offenses, develop a process for rapid review and response designed to address the root cause of violations, and recommend corrective actions designed to stop recidivist behavior,” the agency wrote in a supervisory highlights report published in November. “This will include closer scrutiny of corporate compliance with orders to ensure that requirements are being met and any issues are addressed in a timely manner.”

In a March 2022 speech, Chopra called corporate recidivism a “vexing problem” facing regulators, and one that “undermines the promise of the financial sector and the entire market system.”

“We must forcefully address repeat lawbreakers to alter company behavior and ensure companies realize it is cheaper, and better for their bottom line, to obey the law than to break it,” Chopra said.

In his speech, Chopra listed JPMorgan Chase and Citi, in addition to Wells, among banks “guilty of crossing legal fault lines over and over again.”

And Wells may not be entirely out of the woods. 

Chopra called the bank’s agreement to refund billions of dollars to consumers “an important initial step for accountability.”

Where are the next cuts?

In 2022, it seemed mortgage lending — especially if you’re Wells Fargo, JPMorgan Chase or Citi — bore more of the right-sizing burden than other banking sectors. The justification, from a bottom-line perspective, appeared easy: The Federal Reserve steadily jacked interest rates, dwindling the demand for homebuying and refinancing. 

As banks brace for a potential recession in 2023, which sectors are next at high risk for reduction?

One strategy could be to watch early movers for clues. Goldman Sachs is set to launch a cull this week encompassing 3,200 employees. The cuts come too late to be reflected in the bank’s fourth-quarter results, to be released Jan. 17. But the numbers may surface next month when Goldman holds its investor day. 

A better bet, in the short term, maybe to look at Morgan Stanley, which let go of 1,600 employees in December, or Credit Suisse, which was set to cut loose 2,700 last quarter. Credit Suisse’s report comes Feb. 9.

Like Goldman, Morgan Stanley also releases its fourth-quarter financials Jan. 17, but headcount numbers — because reductions occurred before Dec. 31 — should be up to date. The bank has not yet offered a breakdown by unit, rather couching its reductions as “modest cuts all over the globe.”

Goldman, if we’re looking for clues further into the future, said more than one-third of its cuts will be from within the bank’s core trading and banking units.

The bank’s president, John Waldron, in late December, called the economic forecast “challenging.”

“We may be wrong, we may get a soft landing and we’ll staff up again,” he told the Financial Times.

That indicates a flexible view of staffing. Trimming the ranks of investment bankers, in Goldman’s case, is not a long-term strategy.


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