Arezou

Stunned by the impact of a recent fintech failure (Synapse) and growing risks in this arena, the FDIC is seeking comment on a proposal requiring IDIs doing business with third parties related to transaction-empowered deposit accounts to keep timely and daily reports of each deposit and its beneficial owner.  The FDIC believes that this would prevent harm to third-party customers who believe funds given to the third party are FDIC-insured when these funds are in fact aggregated into a single account for which the third party is the beneficial owner and the arrangement is not covered by FDIC pass-through insurance….

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In a final statement of stringent bank-merger policy, the FDIC has finalized a little-changed version of its March proposal to do so.  It will make it difficult for all but the smallest and simplest transactions within its jurisdiction to have the clear prospect of regulatory action usually necessary in nonemergency transactions, subjecting other M&A applications to protracted review with a high likelihood of denial.  Strategic alliances involving nonbanks and/or nonbank affiliates and BHCs with nonbank activities may also come under critical FDIC scrutiny, complicating transactions otherwise under the FRB or OCC’s review.  Transactions over $100 billion would face the toughest scrutiny, but even small bank mergers could be denied if the FDIC is dissatisfied with the bank’s prior supervisory, enforcement, or community/consumer record…..

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Under strong pressure from the banking industry and even Members of Congress such as Sen. Mark Warner (D-VA), the Federal Reserve is seeking comments on how to address frictions and inefficiencies that slow or even stall discount-window and intraday liquidity flows from the central bank. The request for input (RFI) takes no stand on possible changes either to the discount window or to daylight-overdraft processes. Indeed, the RFI confines its preamble to descriptions of how the window and intraday credit work rather than highlighting any areas of particular concern. The RFI is also a cautious initial step with an extended comment period (see below), signaling that any procedural improvements are unlikely until at least mid-2025, with delays beyond that likely if the Fed decides to seek comment on specific options….

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The Wall Street Journal last night followed prior press reports that Donald Trump is considering some sort of sovereign wealth fund and that the Biden Administration now says it was also doing so well before Mr. Trump broached the idea.  FedFin stays out of the politics surrounding this issue, but here lays out the structure of a possible U.S. sovereign wealth fund (SWF) and its financial-market implications.  Despite the existence of almost two dozen state-level SWFs and the sharp uptake in U.S. industrial policy, we think neither a new Trump nor Harris Administration could bring forth a U.S. sovereign wealth fund without treading ….

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