U. S. Banks See new risks in connection with war and cryptocurrency
2022.04.01 00:41
U. S. Banks See new risks in connection with war and cryptocurrency
By Ray Johnson
Budrigannews.com – In light of Russia’s invasion of Ukraine and the rise in cryptocurrency trading, a variety of new financial threats have emerged, and a high-ranking U.S. banking regulator advised banks on Thursday to increase their vigilance when protecting themselves from unlikely but extreme risks.
According to Michael Hsu, the acting currency comptroller, banks could face a number of “tail risks,” which are events with a low probability but high risk.
He mentioned the risks that banks need to keep an eye on through internal scenario testing, such as the possibility of the conflict spreading throughout Europe, Russian cyberattacks, and further rising inflation.
Hsu stated at the Risk conference of the American Bankers Association, “The elevated tail risk environment today warrants heightened attention.” “Imagining scenarios in which multiple tail risks materialize simultaneously or in rapid succession does not require a lot of mental gymnastics,” he warned.
Hsu also mentioned cryptocurrencies, specifically the use of crypto derivatives, as another area in which banks should be cautious. He said that as banks get more involved in the market, they have to deal with price histories that aren’t reliable.
Hsu also expressed concern that banks might mistakenly believe they have hedged the risk of particular crypto positions. He stated, “Hidden positions have exploded numerous times in history.”
