What is the current relationship like between banks and Bitcoin? It continues to ebb and flow.

In March, Reuters reported one of the biggest Bitcoin exchanges struck a rare deal to allow it to open a bank account with Britain’s Barclays. This was intended to make it easier for UK customers of the exchange to buy and sell cryptocurrencies.

Specifically, San Francisco-based Coinbase said its UK subsidiary was the first to be granted an e-money license by the UK’s financial watchdog, a precursor to getting the banking relationship with Barclays. The UK is the largest market for Coinbase in Europe, and the exchange said its customer base in the region was growing at twice the rate of elsewhere.

Laundering and Unpaid Debt

Large global banks have been reluctant to do business with companies that handle Bitcoin and other digital currencies. They are concerned that criminals use these currencies to launder money and that regulators will soon crack down on them.

Some big lenders have limited their customers’ ability to buy digital currencies, fearing a plunge in their value will leave customers unable to repay debts. In February, British banks Lloyds and Virgin Money said they would ban credit card customers from buying such currencies, following the lead of JP Morgan and Citigroup.

Just prior to this, Germany’s central bank weighed in on the how Bitcoin and other digital currencies should be handled. A director at the central bank indicated any attempt to regulate cryptocurrencies such as Bitcoin must be on a global scale as national or regional rules would be hard to enforce on a virtual, borderless community.

Market Impact

The cryptocurrency market has been stung by U.S. Securities and Exchange Commission decisions on exchange-traded funds (ETF). Early this month, the SEC delayed a decision on a proposed Bitcoin ETF submitted by money management firm VanEck and crypto startup SolidX.

Securities and Exchange Commission decisions and recent market indicators may also affect bank interest in digital currencies. This month the total market capitalization for cryptocurrencies tumbled to $191.4 billion, the lowest since early November last year, coinmarketcap.com data showed.

Despite the sell-off in the cryptocurrency market, analysts said Bitcoin has held up pretty well. As a percentage of market capitalization, Bitcoin’s share rose to 54.5 percent, suggesting that investors were willing to hold the more widely held and well-capitalized digital currencies.

Taking a step back, it looks like bank interest in cryptocurrencies is still a bit of a roller coaster. Bitcoin seems to be the ride some are more willing to get on at the present time.

Related article:

Dominant Digital Currency

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Ryan Lahti is the managing principal of OrgLeader and author of The Finesse Factor: How to Build Exceptional Leaders in STEM Organizations being published in early 2019. Stay up to date on Ryan’s STEM organization tweets here: @ryanlahti

(Photo: Bitcoin Currency, Pexels)

How often do you pay with Bitcoin? What about Ether? Up until recently, Bitcoin has been the dominant digital currency. Ether may change that.

Unlike traditional currencies, Bitcoin and Ether are tracked and maintained by a network of computers. Specifically, a separate, global computer network of volunteers hosts and maintains each currency (e.g., Ethereum is the network for Ether). These volunteers are rewarded for their participation with the new digital tokens that are released onto their network each day. No government or company is in charge. So, the prices of both Bitcoin and Ether are established on private exchanges, where people can sell the tokens they own at the going market price.

If you, like many people, are skeptical of these digital currencies, their market value may get your attention. As of June, the combined value of all Ether and Bitcoin is worth more than the market value of PayPal and is approaching the size of Goldman Sachs. According to the New York Times, Ether’s value alone has risen 4500 percent since the beginning of 2017.

User Interest at the Corporate Level

These currencies are not just found in occasional transactions by early adopters and technophiles. Bitcoin has worked its way into mainstream commerce. Companies like Overstock.com and Expedia accept Bitcoin for purchases. Currently, there are fewer real-world uses for Ether, but it was designed to do much more than serve as digital currency. The network of computers hooked into Ethereum can be harnessed to do computational work which makes it possible to run computer programs on the network. Furthermore, the appetite for using Ethereum continues to grow. Over 100 companies (including Toyota, Merck and Samsung) have joined the nonprofit Enterprise Ethereum Alliance to build tools that will make Ethereum useful in corporate settings.

Key players in the financial sector are taking digital currencies like Bitcoin and Ether more seriously. For example, Fidelity Investments will allow its clients to see their holdings of Bitcoin and other digital currencies on its website. At a recent blockchain conference in New York City, Fidelity chief executive Abigail Johnson shared, “I love this stuff – Bitcoin, Ethereum, blockchain technology – and what the future holds.” Blockchain, a shared online ledger of transactions which first emerged as Bitcoin’s underlying technology, has been attracting growing investments by established financial institutions which hope it can help them save money and time.

More than 90 banks worldwide, including HSBC and Deutsche Bank, are exploring the potential of blockchain. Santander InnoVentures, a venture capital fund, estimates that this new technology could save banks up to $20 billion a year by 2022, by making transactions and bookkeeping faster and more streamlined.

For those who wish to purchase digital currency but find the idea of the transaction difficult to grasp without physical proof, it might be helpful to have a bridge. This bridge already exists thanks to Zug, Switzerland. This town of 30,000 people 20 miles south of Zurich has become known as Crypto Valley in the financial world due to the digital currency entrepreneurs it attracts. It is here that Bitcoin Suisse created the bridge in the form of a Bitcoin ATM.

The ATM isn’t really necessary, because Bitcoin is made up of lines of computer code instead of a physical form. Nonetheless, Bitcoin Suisse has installed 10 of these ATMs across Switzerland. The ATM accepts Swiss francs and euros in exchange for a slip of paper with a code that represents the equivalent amount in Bitcoin. Scan the code with your smartphone, and the currency is yours.

Maybe you don’t deal with digital currency on a consistent basis like those in Zug. Given the increasing interest and activity of investors, businesses and entrepreneurs, there is a pretty good chance that some form of digital currency (whether it is Bitcoin, Ether or something else) will soon become a regular part of your transactions.

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Ryan Lahti is the founder and managing principal of OrgLeader, LLC. Stay up to date on Ryan’s STEM organization tweets here: @ryanlahti

(Photo: Bitcoin, Pixabay)

High-profile names in retail banking like Barclays and HSBC have already adopted biometric authentication in some form. So, how comfortable are you with banks using biometrics to confirm your identity? In Great Britain, they seem pretty comfortable. According to research from Visa, British consumers are nearly twice as likely to trust banks (60 percent) to store and keep their biometric information safe than they are to trust government agencies (33 percent).

When asked whom they would trust to offer biometrics authentication as a service to confirm identity, the largest percentage selected banks (85 percent) and payment networks (81 percent) ahead of global online brands (70 percent), and smartphone companies (64 percent). This level of trust has grown significantly in the past two years, up by 20 percent since 2014, when the Visa Biometric Payments study was first conducted.

Fingerprint authentication is viewed by survey respondents as the most secure form of payment (88 percent), ranking higher than other biometric authentication options such as iris-scanning (83 percent) and facial recognition (65 percent). The growth in fingerprint authentication for mobile payments is bringing to life the benefits of biometric authentication. This is why 80 percent of the people surveyed said they were the most comfortable with fingerprint recognition.

Since many banks and lenders are now using the latest biometric technology to give customers a more convenient way to check their account balance or make payments, how safe is it? A cyber security expert from consultancy NCC recently provided a demonstration to the Financial Times for how simple it is to hack into a smartphone’s biometric authentication software. Matt Lewis, NCC research director, showed how to make a copy of his own fingerprint using wood glue, candle wax and a printed circuit board that allowed a Financial Times correspondent to hack into his smartphone. Mr. Lewis also tricked voice-recognition software by playing back recordings of his own voice and produced a 3D-printed mask of his face based on photos of himself, which was then worn by the Financial Times correspondent to hack into his phone.

While you cannot forget your voice or face — making them a simpler way to verify your identity — they are also much harder to change than your password if they are ever stolen by cybercriminals. This means that if biometrics become the dominant form of authentication it is likely to be much more damaging if the systems are hacked.

“Unlike passwords, physical biometrics can’t be changed. It’s the lasting and permanent nature of physical biometric data that may have more negative impacts than passwords since, as in the OPM [Office of Personnel Management] Breach, once these have been released into the wild, they pose a risk for the lifetime of the victim who can do nothing to change this core data,” cautioned Robert Capps of NuData Security in an interview with The Register.

Ultimately, making mobile banking truly convenient while reassuringly secure is likely to rely on even more sophisticated systems that use hundreds of different data points — from how fast we type to where we are — to build up a unique profile that can be used to recognize us automatically whenever we use our phone. These behavioral biometric systems are already being piloted by several banks and have the advantage of being much harder to fake while also not being usable across multiple accounts of the same person. Consequently, identity authentication used by banks in the next several years is likely to go well beyond fingerprint-based biometrics. Given what’s at stake, it should.

Related posts:

Selfie Pay Augments Credit Card Biometrics

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Ryan Lahti is the founder and managing principal of OrgLeader, LLC. Stay up to date on Ryan’s STEM-based organization tweets here: @ryanlahti

(Photo: Binary Digital, PublicDomainPictures.net)

Who or what are you using to help make your investing decisions…a human or computer program? Mark Andress and Troy Hooper point out in Forbes that sophisticated financial advice used to be just for the wealthy. But in the last couple of years, “robo advisors” – which use computer programs to make intelligent investing decisions – have emerged, threatening to open up the market to the masses.

Until now, these robo advisors have been more of a novelty than a mainstay, with advisors of the flesh-and-blood variety overwhelmingly in command. But this year is expected to be a turning point for the rise of the robo advisor, particularly if a new Department of Labor rule comes into effect.

Under the rule change, anyone who gives out retirement investment advice and gets paid for it would now become a fiduciary, meaning they would have to put their clients’ best interests before their own profits. Robo advisors are already regarded as fiduciaries because they use computer algorithms to make investment decisions automatically.

Many robo advisors will license their platforms to the big banks and traditional wealth managers, enabling them to be compliant with the new rule. Goldman Sachs, JP Morgan, Merrill Lynch and Morgan Stanley could find value in purchasing a robo advisory service and pairing it with their network of in-the-flesh experts. Wells Fargo has also reportedly looked into buying a robo advisor.

Today, there are 22 robo advisors, but Tiburon Strategic Advisors believes that number will consolidate to 10 by 2019. Until now, they accounted for just a fraction of the overall wealth management space. But they are expected to gather $78.6 billion in assets under management in 2019, up from $7.2 billion in 2015. By 2019, robo advisors will serve 1.1. million clients, more than triple the 300,000 people served by the online-only advisors today.

While banks and wealth managers may look at robo advisors as a buying opportunity, robo advisors do have some critics. In InvestmentNews, David Zolt explains that the term “robo advisor” is not accurate, because there is no advising taking place. Robo-investing is the correct term.

David John Marotta of Marotta Wealth Management shares that automatic investing and rebalancing tools don’t provide any advising services. Even with such limited factors, there are significant problems with the help given by robo-investing that potential users may not realize. For example, the review he and his colleagues did of Schwab Intelligent Portfolios found that they were not very intelligent. They also found that Schwab’s rebalancing algorithm has more faults than virtues. Marotta and his colleagues believe that computers can do better than the current capabilities of robo-investing, and competent advisors who know their clients and use computer technology can do even better.

Marotta further argues that a program is only as good as its programmer. Therefore, robo-investing programs produced by commission-based brokerage firms will automatically make all the same mistakes the firms’ human agents do. They will not act in clients’ best interests simply because they are executing a program.

Robo advisors are going to have a presence in the coming years. The question to consider is…will you be one of the people who supports it happening?

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Ryan Lahti is the founder and managing principal of OrgLeader, LLC. Stay up to date on Ryan’s STEM-based organization tweets here: @ryanlahti

(Photo: Robot, Flickr)

How did the U.S. banking industry look in the first quarter of 2016? According to the Financial Times, the six biggest U.S. banks have suffered their steepest decline in quarterly revenues since 2011, after a profound slump on Wall Street overshadowed a boost from their consumer businesses.

JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo generated total revenues of $98 billion in the first quarter, down 9 percent from a year earlier. This is the steepest fall in five years, according to a Financial Times analysis of Bloomberg data.

Deep cost cuts failed to counteract the fall in revenue so the six lenders also saw their collective net income plummet 24 percent year over year to $18 billion. Goldman Sachs became the latest victim of the slowdown in trading and dealmaking when the investment bank posted its lowest first quarter revenue since Lloyd Blankfein became chief executive in 2006. Net earnings dropped more than half, echoing a similar decline at its competitor Morgan Stanley.

The aggregate figures for the big six banks illustrate the sector’s reliance on turbulent securities businesses. Banks that have sizeable consumer divisions held up significantly better. Net income at the retail arms of JPMorgan Chase and Bank of America rose 12 percent and 22 percent, respectively.

Still, the overall results from the big six were not as bad as feared, spurring an 8 percent rally in bank stocks since JPMorgan started the reporting season last Wednesday. Of the six banks only Wells Fargo, which has the smallest investment banking arm, managed to increase revenues by 4 percent from a year earlier.

The collective performance stands in contrast to the first quarter of 2015, when a revival of trading desk revenue stirred hopes investment banks had finally put a long period of depressed returns behind them. While the battering was caused largely by difficult markets, the drops also reinforce fears that post-crisis regulation and a shift to electronic trading platforms have permanently damaged investment banks’ fortunes.

While analysts have forecast another year-over-year dip in total revenues in the second quarter, some executives were more optimistic. They said trading businesses had recovered in March and April. Some also said they expected advisory and underwriting fees from deals, initial public offerings and debt raising to recover.

Whether or not investment banks make a recovery, analysts expect retail and commercial operations to continue to act as a ballast. Several financial executives said they believed American consumers were resilient so they planned to increase lending through credit cards, mortgages and car loans. “The consumer is in good shape,” said Tony DeSpirito, portfolio manager of the BlackRock Equity Dividend Fund, which manages $21 billion.

From a big-picture perspective, the Q1 results were not as bad as expected. Let’s see what happens in the next three quarters.

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Ryan Lahti is the founder and managing principal of OrgLeader, LLC. Stay up to date on Ryan’s STEM-based organization tweets here: @ryanlahti

(Photo: Piggy Bank, Flickr)

Financial technology (fintech) companies are threatening banks on many fronts according to American Banker. While this is true, it is in peer-to-peer (P-to-P) payments that banks may be most at risk.

Banks may not have much time to reverse this trend. The advantages they have are their legacy as well as the history and trust they have built with customers. Banks need to figure out a way to link that trust with the ease and convenience that their competitors are offering. So, expect the major bank vendors to make accessibility in their P-to-P payments a priority in the coming year.

Meanwhile the payments system backed by several of the largest banks in the United States, ClearXchange, is hoping to build on the momentum it achieved last year by making use of the system more convenient. “We want to leverage that trust and security that banks already have, and help them move faster in this rapidly evolving marketplace,” explained Melissa Lowry, head of product and marketing at ClearXchange.

In 2015, the number of ClearXchange registered users rose threefold to 25 million. These users came from 7,500 financial institutions. Anyone with a bank account can sign up for and use the service, but those who are customers of registered member banks can transfer money in real time. Ultimately, Lowry said, the goal is to enable real-time payments for all money movement through ClearXChange by the end of this year.

Michael Moeser, director of payments at Javelin Strategy & Research, pointed out that money movement was a key battleground in financial services in 2015, one where traditional institutions found themselves losing ground. In his words, “Financial Institutions were slow in offering P-to-P capabilities and therefore found themselves at a disadvantage in 2015.”

Moeser further explained this is because nontraditional entrants, besides offering real-time money movement and minimal fees, also incorporate social aspects into payments. Services like Facebook Messenger payments, Snapchat’s “Snapcash” feature and Venmo — which utilizes a news feed and other aspects of social networks — have made headway by seamlessly integrating digital payments into the social structure.

“These are platforms where you might be chatting with someone and then say ‘Let me send you that money I owe for dinner last night,’ or you see your friend is going to a game and you send them money and say ‘Pick me up a Knicks hat,’ ” Moeser said. “It’s convenient to be able to send money while you’re already in that application.”

Competing with the social aspect of some of the fintech payments providers will be difficult. In fact, typical Venmo users check in to the app four to five times a week to look at the social feed, even if they don’t transfer money according to Adrianne Wright, a spokeswoman for the company.

As Wright explained, “It’s a different type of social network. Our users like the simplicity and organic feel of the service.” She further clarified that Venmo doesn’t see itself as a competitor to banks, but rather “works with them” to help its users send money.

Banks should make a note of the fact that innovations in P-to-P payments are likely to continue given the substantial growth in consumer-focused fintech. According to Forbes, the boom in consumer-facing fintech startups is a global phenomenon. From Silicon Valley and New York, to London and across Asia and Australia’s financial hubs of Singapore, Hong Kong and Sydney, startups offering services such as tech-enabled payments are sprouting up and competing with traditional retail banking and financial services firms.

The number of fintech startups is difficult to pinpoint, but data sources and industry watchers estimate that Asia has approximately 2,500 fintech startups while the U.K. and the U.S. have a combined total of 4,000. This immense growth can be attributed to a large extent to investment in fintech startups. CB Insights reports that more than $24 billion has been invested in fintech startups worldwide since the beginning of 2010.

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Ryan Lahti is the founder and managing principal of OrgLeader, LLC. Stay up to date on Ryan’s STEM-based organization tweets here: @ryanlahti

(Photo: Facebook Messenger App, Flickr)

Online advertising for banks is no longer defined by Web banners and pop-ups. Marketing departments are also building campaigns on what Kelly Colbert, vice president of social media at US Bank, calls “experimental canvases” in a SearchCIO article. Examples of these canvases include social media sites like Pinterest, Vine and Instagram.

Recently, US Bank teamed up with news media company BuzzFeed to create a series of “listicles” for first-time homebuyers. The campaign did well, according to Colbert, netting 10 million impressions and helping the bank connect with hundreds of customers interested in learning more.

US Bank is not alone in capitalizing on social media. Reuters reports that Goldman Sachs launched a series of quick-hit recruiting ads on Snapchat last week to broaden its appeal to millennials. This makes Goldman Sachs the first major Wall Street bank to turn to the instant-but-fleeting messaging app for potential hires.

The ads appear on Snapchat’s Campus Story function, a curated platform for user-generated contents such as pictures and videos at college campuses nationwide. In the 10-second video clips, Goldman says it is seeking a “Campus Environmental Leader,” “Youth Sports Coach” or “Crowd Funding Champion,” and provides a link to gs.com/campus. Only Snapchatters whose phones indicate they are in and around a campus, or were there in the last 24 hours, are able to post to and view the Campus Story.

Goldman’s efforts to reach out to millennials comes amid mounting indications that careers in banking and finance hold a diminishing appeal among recent graduates. Even at elite business programs like Massachusetts Institute of Technology, Harvard Business School and the University of Pennsylvania’s Wharton School, the percentage of students opting for banking as a career is down by half or more since before the recession.

The move is the latest leg of Goldman’s bid to appeal to soon-to-be college grads and push back against the prevalent view of investment banking as an all-work-and-no-play career. The Snapchat clips along with establishing guidelines so that young employees do not work excessive hours are likely to help Goldman continue the growth of its employee population.

Goldman is one of the few in the investment banking industry adding employees. During the bank’s second-quarter earnings call, Goldman said its workforce grew 8 percent over the last four quarters, and rose 1 percent between March 31 and June 30. At the end of June, the bank had 34,900 employees.

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Ryan Lahti is the founder and managing principal of OrgLeader, LLC. Stay up to date on Ryan’s STEM-based organization tweets here: @ryanlahti

(Photo: The Art of Social Media, Flickr)

According to USA Today, a potential debt deal for Greece appeared to stumble yesterday as Greek Prime Minister Alexis Tsipras suggested that international creditors did not accept the latest round of reform proposals from Athens. Global markets, which have been gaining all week on expectations that a last-minute deal is likely, declined as a result of the news.

Without a deal, there are fears the southern European country could default on a 1.6 billion euros ($1.8 billion) loan repayment to the International Monetary Fund (IMF) that is due June 30th. This is part of a 242.8 billion euros ($271 billion) financial assistance package Greece received from lenders during the financial crisis.

Here is a breakdown of Greece’s foreign debt explained by Newseek:

International Monetary Fund

Greece was promised a total of 48.1 billion euros by the IMF, of which 16.3 billion was still to come by March 2016 if Athens successfully completed the second economic adjustment program. Greece had serviced and repaid loans on time up to this month. In order to try to make the end of June deadline, it used an obscure IMF provision to bundle together four payments totaling 1.6 billion euros.

European Central Bank

The European Central Bank (ECB) owns roughly 18 billion euros of Greek bonds, which would probably be worth a fraction of their face value should the country leave the euro zone, with 6.7 billion euros maturing in July and August.

Beyond a default on Greece’s national debt, any exit of Greece from the euro zone would leave the ECB with a huge bill for lost credit. ECB President Mario Draghi recently said that Greek banks had tapped 118 billion euros of central bank liquidity. This includes 89 billion in what is known as Emergency Liquidity Assistance which would be the responsibility of the country’s central bank only if Greece stays in the euro. Were it to leave, the bill would rebound on other euro countries, including Germany.

The Euro Zone

Euro zone governments gave Greece 52.9 billion euros in loans under the first bailout agreed in 2010, known as the Greek Loan Facility. Under the second bailout agreed in 2012, Athens has so far received 141.8 billion euros from the euro zone’s financial rescue fund. Athens had been due a further 1.8 billion euros by June 30 if it met certain conditions. Barring major surprises, that is off the table.

Of the biggest euro zone members, Germany’s exposure for the two bailouts totals 57.23 billion euros, France’s is 42.98 billion, Italy’s is 37.76 billion and Spain’s is 25.1 billion. That is in addition to their contributions to the IMF loans, commensurate with their respective quotas in the global lender.

Euro zone countries have already extended the maturities of their loans to Greece from 15 to 30 years and reduced the interest rates on some to just 0.5 basis points above their borrowing cost. They also granted Greece a 10-year moratorium on interest payments on the second bailout loan from the euro zone rescue fund.

Greece has asked for further debt relief from the Europeans, a move supported by the IMF. In response, euro zone governments have said they would only discuss this request if Athens further tightens its budget.

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Ryan Lahti is the founder and managing principal of OrgLeader, LLC. Stay up to date on Ryan’s STEM-based organization tweets here: @ryanlahti

(Photo: Carlos ZGZ, Flickr)

While “Pony Express” may sound like a potential offering from Wells Fargo (or possibly another visual to go with its iconic stage coach), it is not a creation of this bank. In fact, it is a service that Google has in the works. According to the tech news website Re/code, Google is developing this service (although it is not clear whether Pony Express will be the permanent name) to enable Gmail users to pay their bills within Gmail instead of having to go to the payee’s website or their bank’s website to complete the transactions.

This service which is scheduled to be launched in the fourth quarter could provide Google a variety of financial data that could help the company move into new businesses. For example, payment history and credit card bills could provide entry points into the personal finance and lending industries. In a recent American Banker article, payment consultant Richard Crone explained that it threatens everyone in the payment space, because bill payment is a $1.2 trillion per year industry. This makes it the second largest payment class following in-store point of sale at $6.2 trillion. Mary Monahan, executive vice president and research director for mobile at Javelin Strategy & Research, adds that “Google is trying to replace the primary bank’s central position in bill payment aggregation to eventually become the financial center of the consumer’s life.”

Google Wallet originally provided a way for Google to connect with banks by ensuring the prominence of the bank’s brand in the mobile wallet. Google’s virtual MasterCard was another way to enhance the tech company’s relationship with banks. In contrast, Pony Express seems to focus more on access than functionality, because it makes Google more visible to consumers than the banks that fund Google Wallet or Gmail transactions.

Skeptics are likely to highlight the less than positive results of past payment services. For instance, Hearst’s Manilla was a 2011 service offered to manage bill payments and magazine subscriptions that disappeared after three years, because it couldn’t scale. Merchant reactions to Google’s earlier mobile payment offerings have been mixed. Google Checkout (the predecessor to Google Wallet) raised fees in 2009 that subsequently irritated merchants who thought it was inferior to PayPal.

Although these points from skeptics have some validity, Google has a number of advantages in its pocket that bodes well for Pony Express. With more than 420 million Gmail accounts, Pony Express could grab the attention of a substantial number of online banking customers. Google has the clout to partner with another technology company that has a bill payment engine (and its own list of billers) if it is needed to make Pony Express come to fruition. Furthermore, Google just hired former Morgan Stanley executive Ruth Porat as its new CFO which brings her tech banking expertise and financial discipline to the Silicon Valley giant.

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Ryan Lahti is the founder and managing principal of OrgLeader, LLC. Stay up to date on Ryan’s STEM-based organization tweets here: @ryanlahti

(Photo: Gmail, Flickr)

Based on recent stress tests, banks are still in the process of getting into stronger positions. This week, Reuters reports that 36 European Union banks failed a health check of their financial soundness. More specifically, 25 European banks failed a test of whether they could withstand a recession, and another 11 would have failed if the full Basel III standards were in effect today according to data from the European Banking Authority. When Moody’s did further research, it discovered that a number of banks that passed the health check did so by very thin margins. Therefore, all of the banks are expected to do more to be able to meet the standards.

When considering the largest banks around the globe (American, European, etc.), there are some complicating factors. Reuters and Dailyfinance.com point out that the world’s largest banks have increased in size since the 2008 financial crisis and are comprised of even more separate entities that are involved in an unwieldy mix of credit obligations and trading positions. According to regulators, banks are hindered by poor risk-management data and struggling to get a grasp on the full scope of their trading activities and asset quality. As a result, six years after the financial crisis regulators and the industry they oversee can’t confidently assess big-picture threats to the U.S. financial system. Furthermore, the Basel Committee of bank regulators said only one-third of the world’s 30 largest banks would have a sufficient grip on their risk-management data by 2016.

So, what’s being done about these challenges? In trying to address these issues and meet more strict regulatory standards, global banks are hiring people with experience in data governance and analytics. Recruitment calls for these capabilities have jumped up in the last 18 months as regulators have issued more non-public enforcement actions.

Additionally, the U.S. Federal Reserve is considering turning an annual health check it uses to judge whether large U.S. banks have enough capital to survive economic downturns into a critical tool to prevent excessive financial risks. Such a move could force banks to retain billions of dollars that would have gone to shareholders. If the Federal Reserve decides to use the health check as such a tool, don’t be surprised if this action is followed by banking executives complaining of excessive regulatory burdens.

For more information, see Big Banks Risk Assessment, EU Banks and U.S. Banks on Basel III.

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Ryan Lahti is the founder and managing principal of OrgLeader, LLC. Stay up to date on Ryan’s STEM-based organization tweets here: @ryanlahti