Arezou

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So far Arezou Rafikian has created 2159 blog entries.
8 07, 2025

FedFin on: SLR Reform

2025-07-08T10:09:26-04:00July 8th, 2025|The Vault|

Reflecting a new approach to bank regulation and the strong hand of the Treasury Secretary, federal banking agencies have proposed a sweeping rewrite of the enhanced supplementary leverage ratio (eSLR) applicable to the eight U.S. banking organizations designated as global systemically important banks (GSIBs). The proposal does not expressly exempt Treasury obligations from the eSLR denominator, but it alters the manner in which the ratio is calculated….

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

1 07, 2025

Banking Dive, Tuesday, July 1, 2025

2025-07-01T16:52:02-04:00July 1st, 2025|Press Clips|

Making sense of the ‘crazy quilt’ of financial regulators

Caitlin Mullen Senior Reporter

As the U.S. bank regulatory system has grown throughout history, so have calls to simplify it. Bank of America CEO Brian Moynihan this year lamented “the spaghetti chart of overlap” among bank regulators and reiterated suggestions from big-bank executives that it’s time to “start with a fresh sheet of paper.” …It’s an issue that can pit large banks against small: Bigger banks tend to be annoyed by the plethora of regulators, but smaller banks like the choice, Hsu said. “It does feel like Hamilton versus Jefferson,” he said during a June Brookings event. “That tension’s always been there.” And the resources required to stay on top of such a large and complicated banking system demand a sizable apparatus. There’s a comfort factor, too: Consolidation attempts fail “because individual institutions want things the way they are,” said Karen Petrou, managing partner at Federal Financial Analytics. There are, to some degree, captive regulators “everybody’s quite comfortable with,” and arbitrage opportunities between national and state charters that banks don’t want to lose, she added….

https://www.bankingdive.com/news/bank-regulators-fed-occ-fdic-consolidation-supervision-treasury-trump/751240/

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25 06, 2025

FedFin on: Stablecoin Regulatory Framework

2025-06-26T12:07:17-04:00June 25th, 2025|The Vault|

After extensive controversy and debate, the Senate has passed S. 1582, a bill designed to create the federal framework for dollar-denominated stablecoins subject to U.S. law advocates believe are essential to speed innovation, improve the payment system, protect the dollar’s status, and ensure U.S. leadership in cryptoasset policy.  Opponents generally do not dispute these assertions about possible stablecoin benefits, but strongly object to asymmetries between how payment-stablecoin providers would be regulated compared to banking organizations even when it comes just to offering these instruments.  Concerns are also raised about the extent to which stablecoins would compete directly with bank deposits and disintermediate the economy as well as the extent ….

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

23 06, 2025

Karen Petrou: How to Rewrite the Leverage Ratio

2025-06-23T09:42:05-04:00June 23rd, 2025|The Vault|

In 2016, FedFin  issued a paper urging a radical rethink of leverage capital standards.  Good things come to those who wait.  Still, why we had to wait so long is hard to fathom given the predicted, manifest systemic problems due to the leverage standards evident as early as 2019 and in the two systemic crises that followed in short order.

What to do?  Revisiting rules he once refused to touch, former Fed supervisory-head Dan Tarullo last week argued for an end to the enhanced supplementary leverage ratio (eSLR), with this add-on charge for the largest U.S. banks replaced by higher risk-based standards And tougher treatment of Treasury holdings.  Indeed, Mr. Tarullo opposes taking Treasuries, even just short-term ones, out of the leverage denominator, pressing also for continued inclusion of central-bank deposits.  A lower SLR, he suggests, captures the risks of these obligations in concert with his proposed capital add-ons.But what risk to central-bank deposits really pose?  If they are at the Fed, which holds the vast majority of U.S. central-bank deposits, then these funds are as liquid and robust as the Federal Reserve itself.  If the Fed’s no good, then neither is the dollar and much, much else is wrong that even the toughest eSLR cannot fix.

Further, imposing a capital requirement on reserves held at the Fed makes it less likely that banks will be liquid in any form of run or market crisis. The banking agencies could of course again exempt reserves in a crisis just as they …

16 06, 2025

FedFin on: The Way Out via a Golden Arch?

2025-06-16T16:36:45-04:00June 16th, 2025|The Vault|

The President’s Friday executive order and subsequent statements indicate that the President has taken a “golden share” in U.S. Steel as a condition for the long-delayed Nippon acquisition.  Might this be the way the White House could maintain control of Fannie and Freddie while monetizing at least some of Treasury’s stake in the two companies?  As we show here, it’s not easy, but it’s also not an impossible way to reconcile all the competing objectives sketched out so far by Bill Pulte and the White House….

The full report is available to subscription clients. To find out how you can sign up for the service, click here.…

4 06, 2025

American Banker, Wednesday, June 4, 2025

2025-06-05T10:39:26-04:00June 4th, 2025|Press Clips|

Wells shed its asset cap — but it isn’t clear why

By   Kyle Campbell

In 2018, the Federal Reserve Board’s total growth restriction on Wells Fargo established a new tool for dealing with large banks with broken compliance cultures. Many in and around the banking space viewed the $1.95 trillion asset cap — imposed in response to Wells Fargo’s cross-selling and fake accounts scandals — as a high-water mark for regulatory enforcement, ….Some view the longevity of the penalty as an indictment of the Fed more than the bank. Karen Petrou, co-founder and managing partner of Federal Financial Analytics, said if Wells Fargo was consistently failing to get into compliance, its supervisors should have increased the penalty to force swifter action. On the other hand, she added, if the bank had satisfied the necessary criteria years ago, regulators should not have dragged their feet in removing the cap. “If the supervisors are not just following picky little details and the bank is truly delinquent, then they should move past one enforcement order and slam them with another,” Petrou said. “But seven years of limbo speaks to me of supervisory failure, not Wells Fargo recalcitrance.” Petrou said regulators are incentivized to keep enforcement actions in place longer than necessary to avoid being held accountable for scandals or bad actions that might arise from a bank after their release. It leaves banks in a state of perpetual limbo, she said, hinders their competitiveness. “We need to have a much more …

2 06, 2025

Marketwatch, Monday, June 2, 2025

2025-06-05T10:45:33-04:00June 2nd, 2025|Press Clips|

Trump ‘revenge tax’ may open new front in global trade war, with consequences for your wallet

By Chris Matthews

A little-noticed provision in President Donald Trump’s sweeping tax and spending bill could spark the next battle in an escalating global trade war – and potentially unnerve an already rattled market for U.S. Treasurys that is critical to the global economy….Karen Petrou, managing partner at Federal Financial Analytics, warns that Section 899 may signal something far more consequential than a targeted trade response. In her view, it reflects a broader Trump-era shift toward economic nationalism, one that could fundamentally alter how the U.S. engages with global capital flows. In a Monday note to clients, she cited recent commentary by onetime Trump Fed board nominee Judy Shelton, who has criticized payments the Fed makes to foreign banks on the reserves they have deposited at the U.S. central bank. Petrou predicted that the Trump administration could soon cast these payments as giveaways to foreigners, even though they are a key pillar in the global dollar system, ensuring “dollar-clearing stability in a crisis.” The White House has proved willing to risk disrupting facets of the globalized economy, and Petrou argued that more such moves should be expected in the future. “An Administration determined to kick foreign students out of the United States will not hesitate to bar [interest payments on reserves] to foreign banks and maybe even central banks if the issue arises to its notice,” she wrote.

https://www.marketwatch.com/story/trump-revenge-tax-may-open-new-front-in-global-trade-war-with-consequences-for-your-wallet-f3bec60f

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22 05, 2025

FedFin: Could It Be?

2025-05-23T09:13:51-04:00May 22nd, 2025|The Vault|

Yes, it could, but still… The President’s post yesterday turned the tables on those – ourselves very much included – who had been told by key officials that GSE privatization was a low-order priority at a time of so much macroeconomic and political turmoil.  But, the President seems to thrive on turmoil and it’s thus the GSEs time to get the treatment.  How might the Administration go about capturing all the GSE revenue on which the President has his eye? It’s there to be gotten, but the getting is complicated…..

The full report is available to subscription clients. To find out how you can sign up for the service, click here.…

12 05, 2025

American Banker, Monday, May 12, 2025

2025-05-12T13:42:17-04:00May 12th, 2025|Press Clips|

Examiner discretion takes center stage in CAMELS debate

By   Kyle Campbell
As freshly appointed agency heads aim to refocus their approaches to supervision, an emerging question is how much discretion will be left for bank examiners — if any at all. Regulators and lawmakers have already sought to remove one key discretionary tool by barring the consideration of reputational risks. But some policy specialists want them to go further…Karen Petrou, managing partner of Federal Financial Analytics, said there are ways to put quantitative measures around seemingly qualitative factors. She noted that governance could be examined by establishing benchmarks for things such as executive compensation and board composition against which individual banks can be measured. Petrou said management examination is critical, noting that it is often an early indicator of future issues — but only when done correctly.”I would like it refined, and if the agencies think they cannot refine it, then I want it out,” she said. “It needs to be a largely quantitative, transparent and accountable measure of managerial controls.”

https://www.americanbanker.com/news/examiner-discretion-takes-center-stage-in-camels-debate

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9 05, 2025

Al051225

2025-05-09T16:36:00-04:00May 9th, 2025|Uncategorized|

How Shaky is Stablecoin Legislation?

As we noted last week, Democrats were joined by two populist Republicans in blocking the procedural motion necessary to move the “GENIUS” Act to the Senate floor (see FSM Report CRYPTO48).  The bill foundered on two policy differences and, beneath them, the politics evident in growing determination of even centrist, moderate, and crypto-friendly legislators to block or, if that’s not possible, at the least embarrass the President and friendly Republicans. For Members of Congress, the 2026 midterm election is already well under way, and the President’s stablecoin ventures are not the only stablecoin-related issue on which Democrats think they can put the GOP in a tight spot.  Other considerations in the marathon drafting sessions ahead of the Senate floor debacle reflect key banking-industry concerns in areas such as master-account access, stablecoin return, and affiliate restraints.  The independent bankers who spoke out on these issues as the Senate headed to a vote may not have the money wielded by crypto interest groups, but they have more votes, especially in rural states.  What they want thus influences Congress at least as much as what giant bankers seek.  When community and large banks are united – as they are on stablecoin legislation – this is a formidable concern for many Members, including senior GOP legislators.

Al051225.pdf

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