Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro.

Wall Street behemoths and mid-sized banks alike are under pressure to pay customers higher rates in exchange for deposits, pinching margins just as the industry braces for losses on loans to commercial real estate businesses.

As earnings from small and mid-sized financial institutions start to roll in, Washington policymakers and financial analysts are watching for any echo of the troubles that brought down Silicon Valley Bank, Signature Bank and First Republic earlier this year. Several institutions faced credit downgrades and short-seller attacks as banking regulators scrambled to assess the risk of market contagion.

While many believe the worst of the so-called mini-bank crisis is in the rearview, the road ahead for many regional banks won’t be smooth.

There are signs deposits could fall at larger commercial banks. Last week, Wells Fargo reported a drop-off as customers search for higher returns from money market funds and other investment products. Even JPMorgan Chase CFO Jeremy Barnum — whose bank reported strong profits in Q2 on the back of its First Republic acquisition — said during an earnings call that he expects to see “modest deposit declines across the franchise” in the future.

“Regional banking stocks have not really recovered much from” a sell-off earlier this spring, Van Hesser, the senior managing director and Chief Strategist at KBRA, told MM, adding that investors are still factoring in “lower profitability.”

Growing deposit costs constrain net interest margins — the difference between what banks earn on their loans minus what they pay customers for their funds. At the same time, investors and analysts are looking for forward guidance on how much banks have to set aside to account for future losses on some of their riskier loans (read: office buildings).

Does that mean other regionals will be felled by the idiosyncratic challenges that brought down Silicon Valley Bank, Signature Bank and First Republic? Probably not, said Hesser.

“Is it a solvency issue? For the vast, vast majority, we would say not,” he said.

And if U.S. economic growth slows without falling into recession — an outcome that a growing number of Wall Street institutions believe is possible — the market appetite for regional bank shares should stabilize, said Dave Sekera, the chief U.S. market strategist at Morningstar.

“We fully recognize and forecast that earnings growth will decrease sequentially for the next three quarters,” Sekera said, adding that he expects the sector to rebound in 2024. “We don’t think that the regional bank business model is broken for the long term.”

IT’S TUESDAY — Send tips, gossip and suggestions to Sam at [email protected] and Zach at [email protected]

Federal Reserve Vice Chair Michael Barr delivers a keynote at a National Fair Housing Alliance event at 10 a.m. … House Financial Services Capital Markets Subcommittee holds a pair of hearings on the SEC’s Division of Corporation Finance and the role of federal regulators in climate risk at 10 a.m. … House Appropriations marks up the Transportation, Housing and Urban Development, and Related Agencies bill at 10:30 a.m. … Council of Economic Advisers Chair Jared Bernstein speaks at a Washington Post event at 11 a.m. … The CFTC’s Technology Advisory Committee meets at noon … House FS has a hearing on FinCEN’s beneficial ownership rule at 2 p.m.

Eye on inflation — POLITICO’s Meredith Lee Hill: “Western countries are hoping Beijing can help pressure Moscow into rejoining a key global food security deal after the Kremlin formally pulled out of the agreement Monday. The Black Sea Grain Initiative, which suspended a Russian naval blockade that kept Ukrainian food supplies from reaching global markets, has served as a key lifeline to poor countries across Africa and the Middle East struggling with widespread drought and famine conditions.”

— As China’s economy slows, Treasury Secretary Janet Yellen told Bloomberg there could be spillover but she still doesn’t anticipate a recession.

Can Powell preserve the jobs market? — The NYT’s Jeanna Smialek: “The Federal Reserve chair spent the early pandemic bemoaning the loss of a strong job market. It roared back — and now its fate is in his hands.”

First in MM: Airlines crash the interchange fight — Eleanor Mueller reports that the nation’s largest airlines are lining up in opposition to Sens. Dick Durbin (D-Ill.) and Roger Marshall’s (R-Kan.) push to bring down credit card processing fees. The banking and credit card industries have been fighting Durbin and Marshall’s attempt to append the legislation to the annual defense bill.

“This proposed mandate ... will jeopardize payment security while failing to address the costs, risks and unintended consequences of this proposed policy on popular credit card rewards programs,” American Airlines, Delta, United, Alaska, Southwest, JetBlue and Hawaiian Airlines wrote in a letter their lobbyists are circulating around the Hill.

Is that Gary Gensler’s music? — Our Bjarke Smith-Meyer: “Crypto conglomerates will have to break off parts of their business empire if regulators see a conflict of interest in services they provide under a global plan to rein in the volatile market. The Financial Stability Board, a global standard-setter set up after the 2008 financial meltdown, will present the industry crackdown to G20 finance ministers and central banks, who are meeting in India today.”

NDAA — From Eleanor: “Sen. Elizabeth Warren is trying again to append her bill that would crack down on Russian use of cryptocurrency to the NDAA.”

“There’s no reason to leave wide open a crypto loophole for Russia, Iran, and North Korea to evade U.S. sanctions,” Warren said in a statement.

Ripple — Bloomberg’s Allyson Versprille: “Securities and Exchange Commission Chair Gary Gensler said he’s ‘disappointed’ with a judge’s ruling that Ripple Labs Inc.’s XRP token wasn’t a security when sold to retail investors on exchanges.”

More time — House Financial Services pushed back the markup on crypto legislation that had been tentatively scheduled for Wednesday, Eleanor reports. It’s been scheduled for July 26.

Into the breach — Bloomberg’s Yueqi Yang: “Customers Bancorp Inc. partners with hundreds of digital-asset firms, including major exchanges, market makers and stablecoin issuers, according to people with knowledge of the matter. It attracted new clients after crypto-friendly lenders Silvergate Capital Corp. and Signature Bank collapsed, leaving Customers Bank — the West Reading-based company’s primary subsidiary — one of a few facilitators of dollar transactions that crypto businesses could turn to.”

[Common voice] A.I. — Our Declan Harty: “Artificial intelligence has become the newest tool for fraudsters looking to exploit investors across the financial markets, SEC Chair Gary Gensler warned on Monday.”

— The role of AI in financial markets is also on the agenda at today’s CFTC Technology Advisory Committee meeting. “Through deep-dive reports and recommendations reflecting broad and diverse views of subcommittee members, the Commission will have the benefit of expert advice from different viewpoints that is necessary to keep pace with technology in our markets, while managing emerging risk, and protecting customers and market integrity,” said Commissioner Christy Goldsmith Romero.

Wells Fargo to OCC — Tim Stumhofer is the Office of the Comptroller of the Currency’s new director of climate risk, in charge of integrating “climate risk into the OCC’s operations to help the agency deliver on its mandate of ensuring the safety and soundness of the US banking system.” He’s coming to OCC from Wells Fargo, where he served as director of climate alignment. — Debra Kahn

Aramco — Weeks after CEO Larry Fink dropped the term “ESG” from his vocabulary, BlackRock has named Amin Hassan Ali Nasser, President and CEO of the Saudi Arabian Oil Company — better known as Aramco — to its board.

The Tighten Up — Bloomberg’s Alexandre Tanzi: “Americans are increasingly likely to get turned down when they apply for credit, according to a new Federal Reserve survey that shows the combined impact of high interest rates and a cautious turn among the country’s lenders.”

As I was saying… — The WSJ’s Telis Demos: “A surge of profits at some of the nation’s largest banks might make people forget that there was a banking crisis earlier this year. But just offstage, reminders are lurking—and they might grab the spotlight as regional banks begin to report this week.”