Fed raises concerns over Goldman Sachs's risk oversight


The Federal Reserve has released an official warning to US-based investment banking firm Goldman Sachs over risk and compliance oversight at its TxB fintech unit

The Federal Reserve has released an official warning to US-based investment banking firm Goldman Sachs over risk and compliance oversight at its TxB fintech unit. The US-based banking regulators have raised risk and compliance warnings and concerns over the partnerships that Goldman Sachs had with multiple financial technology companies.

According to Financial Times, a division of the financial institutions’ transaction banking businesses (TxB) has announced its plan to stop signing on riskier fintech clients and customers, following the warning released by the Federal Reserve earlier this year. The issues and problems raised by Fed included insufficient due diligence, as well as monitoring processes for the procedure of accepting high-risk non-bank clients. The concern follows a situation where some employees of TxB were warned internally over their tendency to minimise risks and threads.

The team of Goldman Sachs that received the warning offers customers and partners banking infrastructure services, while the other TxB businesses and branches were not criticised. Federal Reserve’s recent releases The Federal Reserve System represents the central bank of the US and it performs five general processes and functions in order to promote and maintain effective operations in the region’s economy, as well as the general public interest. In the last couple of months, the institutions announced multiple launches, covering different geographies worldwide.

In July 2023, the Federal Reserve announced that its system for instant payments FedNow Service was launched in the US. Following this news, banks, credit unions, and financial institutions were enabled to sign up and leverage the tool in order to instantly transfer money to their clients at any time, regardless of the company’s size. In the initial stage of the launch, 35 early-adopting banks and credit unions were ready to provide their clients with instant payment capabilities and offerings by using the FedNow Service.

In addition to this number, 16 device providers were prepared to support payment processing for banks, financial institutions, and credit unions as well. The US-based Federal Reserve published in February 2023 a new paper in which it looked closely at Bitcoin and its overall management. The paper was authored by Gianluca Benigno and Carlo Rosa and it investigated the connection between Bitcoin and its macroeconomic fundamentals.

The investigation was maintained by estimating the impact of the macroeconomic news on Bitcoin and by using an event study with intraday data and information. The main takeaway of the publishing was that Bitcoin was orthogonal to monetary and macroeconomic news, unlike other US-based asset classes. Moreover, the Federal Reserve Bank of New York compared Bitcoin to other asset classes, such as the S&P 500 and precious metals, concluding that it could not be used as a form of payment at scale, mainly because of its overall high volatility.

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Sep 04, 2023 08:54
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