Bank Failures and The Nightmares That You Can Avoid

When a bank collapses, it sets off a riple effect that is often underestimated. Losses of livelihoods, businesses and lives can occur. Here are some steps you can take to avoid a contagion effect near you.

Banking failures are a serious issue that can have far-reaching economic consequences. Banks play an important role in the financial space by providing services to consumers and businesses, so when they collapse, it has a ripple effect on many aspects of society.

From the Silicon Valley Bank, Silvergate Bank to the Signature Bank failure in 2023, the lessons are similar. This guide will discuss the causes of banking failure and its potential effects on individuals, businesses, and economies around the globe.

A Short History

The history of bank failures is a long and storied one. In the United States, banks have been failing since the early 1800s when they began to emerge as an important part of our economic system. Since then, there have been numerous bank failures throughout American history that can be attributed to various causes such as mismanagement, fraud, or economic downturns.

In the 19th century in particular, banking panics were common due to lack of regulation and oversight at both state and federal levels. During this time it was not uncommon for banks to fail due to poor management practices or even outright fraud by executives who would use deposits for their own gain rather than investing them into sound business ventures with good returns on investment (ROI).

Poor bank management made many people in rural areas especially vulnerable when a bank fail occurs. This is as rural folks had no other means by which they could access money during these times except from local banks which often failed leaving them without any financial resources whatsoever until another institution opened shop nearby, eventually replacing it.

Today’s banking regulations are much more stringent than those from earlier eras but still some institutions fall victim each year either through mismanagement or external factors beyond their control like natural disasters or pandemics like COVID-19 that disrupt entire economies worldwide.

As a result of the COVID debacle, businesses were unable to repay loans taken out against them resulting in massive losses for lenders including both private individuals as well as public entities. Laws that ensure that all stakeholders involved receive equal protection under law has become increasingly important over time.

Why Banks Fail

The primary cause of bank failure is poor management decisions or risky investments made by bank executives. When banks make bad loans or invest in high-risk assets like derivatives or subprime mortgages there has to be a comfort layer.

Without adequate capital reserves to back these risky assets, they can quickly become insolvent as seen with Lehman Brothers if those investments don’t pay off as expected. Banks like Washington Mutual, Indymark Bank and Country Wide, were all directly in the eye of the storm.

Other contributing factors to the failures include:

Fraud committed by employees or customers
Inadequate oversight from regulators
Unexpected changes in market conditions such as interest rate fluctuations
Natural disasters such as floods or earthquakes; cyberattacks targeting customer data stored at banks
Political instability which may lead to currency devaluation resulting in losses for foreign investors holding deposits with local banks abroad.

The effects of banking failures can be severe depending on their size and scope. Job losses for bank employees along with significant disruption for customers who may find themselves unable to access accounts are the immediate after-effects.

In addition, small business owners who rely heavily upon credit lines provided through their relationship with local community bankers could suffer greatly if these lenders were forced out of business due to too much risk taking. In actuality, large scale collapses involving multiple institutions could trigger broad systemic issues. And, entire economies can be imperilled by potentially catastrophic outcomes including recessions, deflationary spirals , hyperinflationary cycles among others.

Avoiding the Contagion Near You

Banking failures are a serious issue that can have far-reaching economic consequences. To shield yourself from bank failures, you need to choose a bank that is FDIC-insured. The Federal Deposit Insurance Corporation (FDIC) protects deposits up to $250,000 per depositor per bank.

Make sure your bank is FDIC-insured so your money is protected in case the bank fails. You should also:

Diversify your savings: Instead of keeping all your money in one bank, spread your savings across multiple banks to reduce your risk. This way, if one bank fails, you won’t lose all your savings.
Stay informed: Keep track of the financial health of your bank by reading financial news and reports. Monitor the bank’s ratings and financial statements to ensure it is stable and sound.
Avoid risky investments: Don’t invest your money in risky financial products or instruments that could put your savings at risk.
Support government regulations: Regulations like the Dodd-Frank Act and the FDIC have been put in place to prevent bank failures and protect customers. Support these regulations to ensure they are effective and enforced.
Use common sense: Don’t put all your eggs in one basket. Use common sense when saving and investing your money to minimize your risk of loss.

By following these tips, you can reduce the risk of losing your savings in the event of bank failures.

Lessons Learned

All told, it’s clear that banking failures are not only costly but also very disruptive events whose impact should not be underestimated nor taken lightly.

In view of how interconnected our globalized modern world has become today, a little spark of shaky boardrooms can dovetail into a global mess if not managed promptly. This brings to the fore the need for proper risk management practices among all responsible financial institutions operating today.

Timely interventions by regulators are crucial to prevent future occurrences of similar past events. Proper liquidity within markets, ensuring stability of the macro economy and proactive regulatory frameworks are required to shield the economic ecosystem from the contagion of bank failures.

The Idea Behind Cryptocurrency Mining and the Current Trends That You Need to Know

Cryptocurrency mining was driven by power intensive processes till late 2022 , when Ethereum migrated to the Proof of Stake algorithm. Here are insights into the mining process.

Mining is still one of the best-known crypto related activities. However, it is also one of the most misunderstood, with doubts ranging from what it really does or how much to expect as earnings. It is no doubt an intensive process that has also become a worldwide enterprise since 2015, though it emerged in 2009.

Must-Read: All the Reasons Why the ETH Merge Could Be a Big Deal

What mining means

Mining, in blockchain terms, refers to a competition of sorts that takes place among active nodes within an ecosystem. This competition consists in finding the answer to a difficult math problem that can only be solved by participants via brute force – that is, by trial and error. This answer is a number, and it is referred to as the nonce. The first miner to find the nonce has the right to validate a block of transactions.

It is then the miner’s duty to ensure all the transactions in that block are legitimate in other to be authorized by the group of validators. As a reward for the effort, the miner gets a certain amount of crypto that varies depending on blockchains, which on Bitcoin, for example, amount equals to 6.25BTC for 1 block till mid-2024

Why mining is so expensive

Anyone who has investigated cryptocurrencies, and particularly into crypto mining has seen reports on how Bitcoin mining consumes massive amounts of energy. It can be quite profitable for most people, although it has only become a preserve of organizations, individuals, or parties with special and otherwise costly hardware.

While the above assertions are true for Bitcoin and some other digital currencies, there are still cryptocurrencies that can be mined to some degree without specialized equipment.

The reason mining consumes so much energy is simple: Since finding the nonce is a race, the miner must use the processing power of a mining hardware. Specialized hardware is designed by the manufacturers to specifically perform tasks by brute forcing these problems, but as should be obvious, high processing power usually comes with high energy usage. This is even more true when, as miners usually do, the hardware stays on and runs 24/7.

On eligibility for mining

Most cryptocurrencies can be mined by anyone, and all you need for this is a computer or even a mobile phone. However, regular computers or phones are not optimized for mining. This leads to low performance, wasted processing power, and poor earnings. Still, many cryptocurrencies can still be mined with regular household electronics. Bitcoin, however, is not one of them.

Why mining is becoming less common

Over the last few years, cryptocurrency mining has become less and less common with new projects. This is both due to the extreme resource intensity of mining algorithms and the vulnerability to 51% attacks that cryptocurrency algorithms must contend with globally.

The touted option to the above is the proof-of-stake model, where instead of wasting resources solving a random problem, nodes instead stake (that is, swap) some of their cryptocurrency in exchange for the chance to authenticate transactions. If the resulting block then passes the proof-of-consensus, a certain incentive then goes to the approving nodes.

Outlook

The outlook for the cryptocurrency market is one that presents a shift to less energy-intensive algorithms as the Ethereum blockchain has done in recent weeks. With the crypto mining process becoming energy-efficient, its uses and adoption should soar in the years to come

Also Read: These Are The 4 Fastest Cryptocurrencies For Money Transfer Purposes

How to Reverse a Wire Transfer?

Wire transfers are commonplace globally, but what can go wrong in the process is less talked about. Here are insights on how to reverse a wire transfer,

Money transfers can go wrong for a variety of reasons and when this occurs, the sender has to know what to do. If you know how to reverse a wire transfer, when errors occur, you could get a way out. Electronic money transfers happen globally, making them convenient. Bu,t speed can become a disadvantage if something goes wrong.

In this guide, we have provided the needed information on wire transfer errors and reversals.

How to make a wire transfer?

In the first place, you can do a wire transfer by using a banking app on your mobile or desktop device. You can also walk into your bank to conduct a wire transfer transaction. Whether you can use an app or resort to a banking hall visit depends on your service provider.

The details needed for a wire transfer are:

Sender’s name and address
Sender’s bank account number
Beneficiary’s name and address
Beneficiary’s bank account number
Beneficiary’s bank SWIFT/IBAN code (mostly for international transfers)
Value of transfer and currency
Assent to terms and conditions (with signature appended, where required)

Quick wire transfer facts

In many countries, cases of unsuccessful wire transfers are not uncommon. According to a 2021 report by Vibepay, the following statistics were highlighted:

At least 28% of wire transfers sent to the wrong account could not be reversed by the sending banks
Up to 33% of individuals who made wire transfers with the wrong details had to resort to their banks to cancel such. Recoveries were made within six days of such remedial actions
The money transfer algorithm recognized up to 25% of such wire transfers with wrong input or unmatched beneficiaries and immediate reversals were made

Can a wire transfer can go wrong?

Yes. When a there are errors in the details provided for a wire transfer, the process can go wrong. The errors recorded can make it impossible for the intended recipient to receive the funds, and if there is an inadvertent match for the details provided, the funds could be lost forever.

Recovery of funds when there is an unintended beneficiary has a slim chance to succeed. Even when the complaints are filed, the receiving bank can use its internal systems to attempt to reverse the wire transfer, but no obligation exists here. The recipient has to be willing to assent to the wire transfer reversal for it to happen.

Instead of leaving your fate to chance, always double-check your details before completing a wire transfer transaction. There are internal mechanisms provided by some banks to ensure that an intended beneficiary’s details are verified using a lookup tool. If such an option exists in your bank, you can make use of it.

How to cancel a wire transfer

Cancelling an international wire transfer will take a longer processing time than domestic transactions. The geolocation of sender and beneficiary has to be taken into consideration here. Transfers within North America will sail through faster during reversals than any other between two continents.

Transfers within the same network such as domestic transactions are likely to be barred for inconsistent information immediately the beneficiary’s details are provided. If there is any entry that escapes the first line of check of beneficiary details, a reversal could proceed fast and get completed by the bank within a week. Other problematic cases could linger for a longer time.

SWIFT transfers usually take up to three working days to process and reversing such can take up to a week or more if it is a case of wrong account destination. The recipient bank would reverse the transaction if no account type matched the beneficiary as intended. If there is an inadvertent match, the sender has to file a complaint so that the sending bank can request a reversal. Again, this can become a tussle if the unintended recipient is not honest.

Conclusion

With wire transfers, it is always best for the sender to take the necessary steps to avoid errors. Whenever a wire transfer error occurs, the sender should register an immediate complaint to increase the chances of a wire transfer reversal going through successfully.

Must-Read: As Blue Chips Acquire Bitcoin, Here Is The Pathway To The Future

What To Expect From The Crypto Market In H2 2020

The crypto scene has been abuzz with upbeat signals as 2020 H1 came to a close. What does the H2 hold? Let us delve in here.

2020 has been an eventful year with lots of events having ripple effects on the financial markets and cryptocurrencies by extension occurring in rapid succession.

From the threat of world war 3 to the pandemic, these events have triggered wild movements in stock and commodities prices and cryptocurrencies have not been left out of these price actions as well.

Going into the second half of the year, what can we expect to see? Below are some speculations:

Increased Adoption

Cryptocurrencies have come a long way from being considered a fringe technology. Just in the first half of the year, there was an additional 5 million blockchain wallets created, increasing the global number of cryptocurrency users from about 45 million to just over 50 million.

These wallets are held across various exchanges like Remitano and others. It is predicted that this figure will rise even more sharply as we commence H2. The utility, speed, security and seamlessness of cryptocurrencies and blockchain technology will attract even more people to sign up and get involved in the ecosystem.

Penetration into emerging economies

Emerging economies hold a lot of potential for the expansion of the cryptocurrencies market. Remitano, a crypto exchange created in 2014, seems to have realized this and have tailored its operations to capitalize on the possibilities in these markets.

With operations in countries like Nigeria, Cambodia, Vietnam, Cote d’Ivoire, Thailand, Tanzania and Zimbabwe, among others, it can take advantage of reaching a great number of unbanked or underbanked people.

Crypto markets will offer them the technology-enabled ease of transacting with cryptocurrencies rather than the regular fiat currencies. Remitano is also introducing an NGN wallet, based on the Nigerian fiat currency – the naira. This will make it even easier for citizens to purchase cryptocurrencies, and it is expected that this will be extended to other emerging economies before the end of 2020.

Launch of Facebook’s Libra

Despite all the controversy surrounding it, Facebook still seems on track to launch its cryptocurrency, Libra, by the second half of 2020. There has been a mixed reception to the idea with some people considering it a good idea and lots of other parties opposing it. Whichever side you’re on, Libra’s launch is something to look out for in the second half of the year. It will be interesting to see how it all plays out.

Adoption by more countries

China is said to be close to completing the creation of a national digital currency – an unprecedented step that will make cryptocurrencies even more popular, and perhaps, drive its adoption among other countries. The Chinese digital currency will likely be launched by the second half of 2020, and it is surely another event to look forward to.

Finally, we expect that the usual volatility in the crypto markets will continue into the second half of 2020, as major events like reopening and the American elections will swing market sentiments in different directions.

Are Hedge Funds Safe in Unstable Times? Here Are A Few Tips You Can Use

Hedge Funds tend to outperform individual stocks as a result of their diversification. There is a bit more you should know as you read on..

Nobody would have accurately predicted that a pandemic would come to change the course of activities all over the world, but smart investors are always prepared for such a time as this. Do you also want to take advantage of this COVID-19 outbreak to invest in hedge funds?

I know you feel unsafe and insecure about investing this period, and it’s perfectly normal to feel that way, mainly because stocks – even of bigger corporations – are generally depreciating, oil prices have reduced, gold is hitting rock bottom, and many more unfortunate economic events are happening.

Notwithstanding, is it safe for you to invest in hedge funds in this unstable period? I am going to share some of the properties of hedge funds with you in the following paragraphs so you can decide if investing in hedge funds is right for you this period.

1. Diversification

Hedge funds offer an array of investments such as long or short, tactical trading, events-driven or emerging markets, and managers take advantage of diversified investments to earn the highest return for the least risk.

Hedge funds focus on specific risks to reduce its risk exposure, by a large percentage, to the general market movements. This technique works because these investments react differently to the same economic event. So, hedge funds generally outperform equities with much lower volatility even in unstable times.

2. Long or Short Selling of Hedge Funds

This is a killer strategy that most hedge fund managers use; it involves buying and selling stocks that are undervalued. Managers target shares that are about to hit rock bottom, and they borrow it. Then they make a gross profit by selling out the borrowed shares and buying it back when it falls.

However, there are risks associated with this if the market conditions do not go as planned. It may lead to a situation called a ‘short squeeze.’ Long term selling, on the other hand, involves buying undervalued stocks with the hope that it will appreciate with time, and then sell it when it does.

3. Transparency

Hedge funds are not regulated by the Securities and Exchange Commission, but the Dodd-Frank Wall Street Reform and Consumer Protection Act passed in 2010 requires them to be transparent. The transparency, however, does not include disclosing where investments are made.

4. Loss Reduction

Most hedge funds have highly financially intelligent workers, who do not only employ aggressive investment strategies to maximize returns as well as reduce risks but are also very good in financial management to be factual. They provide investors with the best information there is and also use selective strategies that they believe will add to the bottom-line.

5. Risks and Returns

According to the Securities and Exchange Commissions, hedge funds managers in a bid to maximize returns often engage in many risks. If things do not turn out as planned, it may lead to a bottom-out in returns. Also, the lack of a regulating body makes hedge funds prone to the risk of fraud.

Are Hedge Funds Worth It this Period? Final Words

Hedge funds are low-risk investment vehicles, which are not entirely dependent on the situation of the general economy, mainly because of how it is run. So, it is worth trying; however, losses can be incurred like every other investment vehicle.

Must Read:The Price Volatility of Bitcoin and Cryptocurrencies Explained