Latest news with #banking
Yahoo
an hour ago
- Business
- Yahoo
Rewarding carbon-conscious consumers isn't radical—it's the future of banking
Gabriele Buffo is a member of the Harvard Innovation Lab specializing in banking transformation and super app solutions. For all the innovation in fintech, the banking sector remains tethered to outdated metrics. Credit scores, income brackets, and spending levels continue to dominate assessments of trustworthiness. But in 2025, it's not your salary that should make you bankable, it's your behavior. It's time for a financial system that rewards not just how much you spend, but how you live. Banks today face an existential dilemma. On one side are agile super apps already dominant in markets like China. They bundle commerce, lifestyle, and payments into seamless ecosystems. On the other hand, 86% of U.S. consumers expect brands to drive a positive change towards sustainability, with 77% losing respect when brands don't prioritize our planet over their profits. And 63% of consumers opt to purchase from brands that align with their personal ethics. Traditional banks, stuck offering points for purchases and fee waivers for deposits, are being left behind. Here's the uncomfortable truth: If banks want to stay relevant, they must stop playing catch-up on tech and start leading on values. Disclaimer: While I'm currently pursuing a master's degree in data science at Harvard, I'm also a member of the Harvard Innovation Lab specializing in lifestyle- and sustainability-focused super app solutions that use AI to reward sustainable lifestyle choices. Digitizing services or offering sleek apps is no longer sufficient. Gen Z and many millennials are increasingly choosing financial institutions and bank partners based on their values. They want assurance that if they make conscious decisions to reduce waste, eat healthier, or choose ethical products, their bank notices and cares. We reward airline miles, luxury spending, and stock trading. Why not carbon reduction, mindfulness, or sustainable food choices? There's a smarter, more future-facing loyalty model: one that integrates environmental, social, and governance (ESG) signals directly into how customers are scored, segmented, and rewarded. This isn't charity. It's business. Purpose-aligned engagement builds deeper loyalty, reveals new cross-sell opportunities (such as eco-loans for EVs), and even opens the door to alternative credit risk indicators (e.g., rent payments and utility bills). Some might balk at the idea of embedding lifestyle choices into financial products, arguing that it's invasive or biased. They might object that tying financial incentives to behaviors, like wellness or carbon impact, could cross a line, penalizing those who don't or can't opt in. But let's be honest: Banks already reward behavior; they've just been rewarding the wrong ones. The financial system has long incentivized volume over values. That was fine in the age of plastic cards and paper statements. But today's consumers live in ecosystems, not ledgers. They want their financial institutions to serve as life partners, not just service providers. A tiered-reward system that tracks and supports low-impact lifestyles is more than possible: It's practical. Imagine a world where someone who consistently rides public transit, eats sustainably, or improves their sleep gets lower loan rates or higher-yield savings. Or a platform that nudges users toward sustainability goals and rewards action with real financial benefits. These aren't pipe dreams. The technology exists. What's missing is institutional will. There are already early signs of movement in this direction. Forward-thinking fintechs are exploring behavioral indicators that measure financial responsibility through how people spend, not just how much they earn. Mastercard, for instance, has developed a Carbon Calculator in collaboration with Swedish fintech Doconomy. This tool allows consumers to track the carbon footprint of their purchases directly within their banking apps, helping them make more informed spending decisions. Over 50 banks worldwide have integrated this tool, aiding millions of users in aligning their spending with their environmental values. A behavioral approach also allows banks to be more adaptive and more human. Today's models often treat people recovering from financial setbacks as inherently risky, even when their day-to-day behaviors show discipline and intention. Of course, not all spending is created equal. Wellness apps and public transit aren't universal virtues, and what looks like 'positive' behavior to one person may seem indulgent or irrelevant to another. But that's precisely why nuance matters. A high earner spending recklessly with no debt is not necessarily a better credit risk than someone budgeting carefully after a layoff. The goal isn't to moralize spending: It's to contextualize it. In other industries, personalization is table stakes. Why should banking still rely on blunt instruments like static scores and raw income alone? Banks have spent decades becoming digital. The next leap is to become ethical allies: not with vague ESG reports or net-zero pledges, but through actual product design. Real loyalty is earned when reward systems reflect the values and aspirations of the people using them. In a 2024 Accenture report, analysts warned that banks risk losing customer loyalty and brand differentiation if they fail to integrate more deeply with broader digital ecosystems. Meanwhile, the Gen Z generation sees their financial provider as a reflection of their ethics, expecting better transparency and leading social change. The shift is clear: Consumers are managing meaning as much as money. They aren't just looking for convenience; they're looking for alignment. Banks that ignore this are already losing relevance; one in five consumers switches banks due to poor customer experiences and lack of relevance. Banks that move now have a narrow but powerful way to lead, not with the marketing language but with product actions that reward the kinds of decisions the world needs more of. This is no longer about positioning. It's about permanence. The future of banking will be defined by trust, not just trust in security but trust in values, vision, and shared purpose. The banks that win will be the ones bold enough to say that what you believe matters more than what you earn. The opinions expressed in commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune. This story was originally featured on
Washington Post
an hour ago
- Business
- Washington Post
Big banks all pass the Federal Reserve's stress tests, but the tests were less vigorous this year
NEW YORK — All the major banks passed the Federal Reserve's annual 'stress tests' of the financial system, the central bank said Friday, but the test conducted by the central bank was notably less vigorous than it had been in previous years. All 22 banks tested this year would have remained solvent and above the minimum thresholds to continue to operate, the Fed said, despite absorbing roughly $550 billion in theoretical losses. In the Fed's scenario, there would be less of a rise in unemployment, less of a severe economic contraction, less of a drop in commercial real estate prices, less of a drop in housing prices, among other metrics compared to what they tested in 2024. All of these less harmful, but simulated, drops mean there would be less damage to these banks' balance sheets and less risk of these banks of potentially failing. Since the banks passed the 2024 tests, it was expected that the banks would pass the 2025 tests. 'Large banks remain well capitalized and resilient to a range of severe outcomes,' said Michelle Bowman, the bank's vice chair for supervision, in a statement. An appointee of President Trump, Bowman became the Fed's vice chair of supervision earlier this month. The Fed said it went with a less vigorous test because the global economy has weakened since last year, and therefore the test tends to weaken. Further, the bank said previous tests had shown 'unintended volatility' in the results and it plans to seek public and industry comment to adjust stress tests in future years. The Fed also chose to not test the banks as heavily on their exposure to private equity assets, arguing that private equity assets are typically held for the long term and are not typically sold at times of distress. The Fed also didn't test for any bank exposure to private credit, a $2 trillion asset class that even Fed researchers themselves have observed to be growing alarmingly quickly . The Federal Reserve Bank of Boston recently pointed out that private credit could be a systemic risk to the financial system under a severe adverse scenario, which is exactly what the stress tests are supposed to test for. There was no wording or phrasing in the Fed's press release, reports or methodology about testing or measuring private credit or private debt in this year's test. The Fed did do what it calls an 'exploratory analysis' of the private credit market, which concluded the major banks were 'generally well-positioned' to withstand losses in the private credit market. That analysis was entirely separate and not part of this year's test. The Fed's 'stress tests' were created after the 2008 financial crisis as a way to gauge whether the nation's 'too big to fail' banks could withstand another financial crisis like the once that happened nearly 20 years ago. The tests are effectively an academic exercise, where the Fed simulates a scenario in the global economy and measures what that scenario would do to bank balance sheets. The 22 banks that are tested are the biggest names in the business, such as JPMorgan Chase, Citigroup, Bank of America, Morgan Stanley and Goldman Sachs, which hold hundreds of billions of dollars in assets and have wide-ranging businesses that touch every part of the U.S. and global economy. Under this year's hypothetical scenario, a major global recession would have caused a 30% decline in commercial real estate prices and a 33% decline in housing prices. The unemployment rate would rise to 10% and stock prices would fall 50%. In 2024, the hypothetical scenario was a 40% decline in commercial real estate prices, a 55% decline in stock prices and a 36% decline in housing prices. With their passing grades, the major banks will be allowed to issue dividends to shareholders and buy back shares of stock to return proceeds to investors. Those dividend plans will be announced next week.
The Independent
2 hours ago
- Business
- The Independent
Big banks all pass the Federal Reserve's stress tests, but the tests were less vigorous this year
All the major banks passed the Federal Reserve 's annual 'stress tests" of the financial system, the central bank said Friday, but the test conducted by the central bank was notably less vigorous than it had been in previous years. All 22 banks tested this year would have remained solvent and above the minimum thresholds to continue to operate, the Fed said, despite absorbing roughly $550 billion in theoretical losses. In the Fed's scenario, there would be less of a rise in unemployment, less of a severe economic contraction, less of a drop in commercial real estate prices, less of a drop in housing prices, among other metrics compared to what they tested in 2024. All of these less harmful, but simulated, drops mean there would be less damage to these banks' balance sheets and less risk of these banks of potentially failing. Since the banks passed the 2024 tests, it was expected that the banks would pass the 2025 tests. 'Large banks remain well capitalized and resilient to a range of severe outcomes,' said Michelle Bowman, the bank's vice chair for supervision, in a statement. An appointee of President Trump, Bowman became the Fed's vice chair of supervision earlier this month. It's not clear why the Fed chose to go with a less vigorous test this year. In a statement, the bank said previous tests had shown 'unintended volatility' in the results and it plans to seek public and industry comment to adjust stress tests in future years. The Fed also chose to not test the banks as heavily on their exposure to private equity assets, arguing that private equity assets are typically held for the long term and are not typically sold at times of distress. The Fed also didn't test for any bank exposure to private credit, a $2 trillion asset class that even Fed researchers themselves have observed to be growing alarmingly quickly. The Federal Reserve Bank of Boston recently pointed out that private credit could be a systemic risk to the financial system under a severe adverse scenario, which is exactly what the stress tests are supposed to test for. There was no wording or phrasing in the Fed's press release, reports or methodology about testing or measuring private credit or private debt in this year's test. The Fed's 'stress tests' were created after the 2008 financial crisis as a way to gauge whether the nation's 'too big to fail' banks could withstand another financial crisis like the once that happened nearly 20 years ago. The tests are effectively an academic exercise, where the Fed simulates a scenario in the global economy and measures what that scenario would do to bank balance sheets. The 22 banks that are tested are the biggest names in the business, such as JPMorgan Chase, Citigroup, Bank of America, Morgan Stanley and Goldman Sachs, which hold hundreds of billions of dollars in assets and have wide-ranging businesses that touch every part of the U.S. and global economy. Under this year's hypothetical scenario, a major global recession would have caused a 30% decline in commercial real estate prices and a 33% decline in housing prices. The unemployment rate would rise to 10% and stock prices would fall 50%. In 2024, the hypothetical scenario was a 40% decline in commercial real estate prices, a 55% decline in stock prices and a 36% decline in housing prices. With their passing grades, the major banks will be allowed to issue dividends to shareholders and buy back shares of stock to return proceeds to investors. Those dividend plans will be announced next week.
Al Arabiya
2 hours ago
- Business
- Al Arabiya
Big banks all pass the Federal Reserve's stress tests, but the tests were less vigorous this year
All the major banks passed the Federal Reserve's annual stress tests of the financial system, the central bank said Friday, but the test conducted by the central bank was notably less vigorous than it had been in previous years. All 22 banks tested this year would have remained solvent and above the minimum thresholds to continue to operate, the Fed said, despite absorbing roughly $550 billion in theoretical losses. In the Fed's scenario, there would be less of a rise in unemployment, less of a severe economic contraction, less of a drop in commercial real estate prices, less of a drop in housing prices, among other metrics, compared to what they tested in 2024. All of these less harmful but simulated drops mean there would be less damage to these banks' balance sheets and less risk of these banks potentially failing. Since the banks passed the 2024 tests, it was expected that the banks would pass the 2025 tests. 'Large banks remain well capitalized and resilient to a range of severe outcomes,' said Michelle Bowman, the bank's vice chair for supervision, in a statement. An appointee of President Trump, Bowman became the Fed's vice chair of supervision earlier this month. It's not clear why the Fed chose to go with a less vigorous test this year. In a statement, the bank said previous tests had shown unintended volatility in the results, and it plans to seek public and industry comment to adjust stress tests in future years. The Fed also chose not to test the banks as heavily on their exposure to private equity assets, arguing that private equity assets are typically held for the long term and are not typically sold at times of distress. The Fed also didn't test for any bank exposure to private credit, a $2 trillion asset class that even Fed researchers themselves have observed to be growing alarmingly quickly. The Federal Reserve Bank of Boston recently pointed out that private credit could be a systemic risk to the financial system under a severe adverse scenario, which is exactly what the stress tests are supposed to test for. There was no wording or phrasing in the Fed's press release, reports, or methodology about testing or measuring private credit or private debt in this year's test. The Fed's stress tests were created after the 2008 financial crisis as a way to gauge whether the nation's 'too big to fail' banks could withstand another financial crisis like the one that happened nearly 20 years ago. The tests are effectively an academic exercise where the Fed simulates a scenario in the global economy and measures what that scenario would do to bank balance sheets. The 22 banks that are tested are the biggest names in the business, such as JPMorgan Chase, Citigroup, Bank of America, Morgan Stanley, and Goldman Sachs, which hold hundreds of billions of dollars in assets and have wide-ranging businesses that touch every part of the US and global economy. Under this year's hypothetical scenario, a major global recession would have caused a 30 percent decline in commercial real estate prices and a 33 percent decline in housing prices. The unemployment rate would rise to 10 percent, and stock prices would fall 50 percent. In 2024, the hypothetical scenario was a 40 percent decline in commercial real estate prices, a 55 percent decline in stock prices, and a 36 percent decline in housing prices. With their passing grades, the major banks will be allowed to issue dividends to shareholders and buy back shares of stock to return proceeds to investors. Those dividend plans will be announced next week.
Yahoo
2 hours ago
- Business
- Yahoo
Fed says banks resilient in hypothetical downturn, clearing way for capital plans
By Pete Schroeder WASHINGTON (Reuters) -Twenty-two of the largest banks in the U.S. are well-positioned to weather a hypothetical severe economic downturn and continue lending, with firms maintaining robust capital levels even after suffering hundreds of billions of dollars in losses, the Federal Reserve reported on Friday. The results of the U.S. central bank's annual "stress test" of large banks' finances found firms remain resilient in the face of a potential recession, a spike in unemployment, and market turmoil. In aggregate, the test found the banks suffered losses of more than $550 billion in the Fed's scenario, which drove down their capital levels by 1.8%. But even then, firms retained more than twice the minimum level of capital required by regulations. On average, the test found banks retained an average 11.6% ratio of their common equity tier 1 capital, well above the 4.5% minimum required. "Large banks remain well-capitalized and resilient to a range of severe outcomes," Fed Vice Chair for Supervision Michelle Bowman said in a statement. The results of the annual exam are significant for banks as their performance in the exercise sets the "stress capital buffer" they must hold against potential losses. Those buffers typically are finalized in August, according to Fed officials. The relatively clean bill of health from the central bank clears the way for the firms to announce capital plans to shareholders in the coming days, including stock buybacks and dividends. Banks will be able to announce any capital plans as early as Tuesday after U.S. markets close, Fed officials said. Banks generally performed better in the 2025 test than in the 2024 version, in part because the Fed's test this year was less severe. The stress test runs counter to the overall U.S. economy, so a slightly weaker economy leading up to the test resulted in a slightly less vigorous scenario. The 2025 test involved a severe global recession that included a 30% decline in commercial real estate prices and a 33% decline in home prices. The unemployment rate spiked 5.9 percentage points to 10% under the test. The largest global banks all posted stronger results than in 2024, led by JPMorgan Chase, which retained a capital ratio of 14.2% under the test. The nation's six largest banks all retained double-digit capital ratios under the test. The bank that posted the highest capital ratio under the test was Charles Schwab at 32.7%. BMO's U.S. operations posted the lowest capital ratio at 7.8%. STRESS TEST OVERHAUL The stress test results were released during a transitory period for the exercise, which was established following the 2008 financial crisis to probe big banks' resilience. The Fed announced at the end of 2024 that it would be pursuing major changes to how the test is conducted, largely responding to industry complaints that the exercise is opaque and subjective. Among the changes, the Fed proposed in April that the results should be averaged over two years, in response to complaints about volatility. That rule-writing project is still ongoing, but the central bank said on Friday that if the 2025 and 2024 results were averaged, the bank capital decline would increase to 2.3%. If the Fed is able to complete that rule-writing this year, the average results will be used to set the stress capital buffer beginning in the first quarter of 2026, officials said. In addition to averaging results, the Fed has said it also plans to make the scenarios it concocts and the models it uses to produce results available to the public and will be soliciting public feedback on them. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
