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So far Alma Vujasinovic has created 71 blog entries.
15 07, 2020

FedFin on The Designation Decision

2020-07-15T16:24:54+00:00July 15th, 2020|The Vault|

As we noted yesterday, FSOC has officially begun the activity-and-practice designation of the secondary-mortgage market foreshadowed late last year in FSOC’s annual report.  Of course, a “market” cannot be designated – it is its entities or practices within it that can.  The most immediate targets are Fannie and Freddie post-conservatorship and mortgage servicing as it is conducted by nonbanks.

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

15 07, 2020

National Public Radio, Wednesday, July 15, 2020

2020-07-15T09:29:54+00:00July 15th, 2020|Press Clips|

It’s Nice To Be Rich: Wall Street Is Raking In Profits In The Stock Market
By Jim Zarroli
The economy is tanking across the country, with layoffs and bankruptcies as far as the eye can see. But the richest sliver of the country continues to do quite well, thank you. The latest evidence came Wednesday morning as Goldman Sachs, the bluest of blue-chip banks, said it’s raking in money on Wall Street. …ZARROLI: Goldman is the bluest of blue-chip investment banks. Its clients are among the richest in the world. Big banks like Goldman make a lot of their money arranging deals for their clients and trading stocks, stocks they either own themselves or trade on their clients’ behalf. And stocks have staged a dramatic rebound recently, especially big technology shares like Amazon and Facebook. Karen Shaw Petrou is managing partner of Federal Financial Analytics. KAREN SHAW PETROU: Anybody with money in the markets has done very, very well. Anyone running a small business or having a job, particularly a lower-income job, has struggled.
https://www.npr.org/sections/coronavirus-live-updates/2020/07/15/891318651/its-nice-to-be-rich-big-banks-are-raking-in-profits-in-the-stock-market 

13 07, 2020

Marketplace, Monday, July 13, 2020

2020-07-13T13:55:33+00:00July 13th, 2020|Press Clips|

Quarterly bank earnings may tell a bigger story about the U.S. economy right now
By Mitchell Hartman
The earnings season is about to begin for corporations to report their profits, losses, write-offs and all the rest for the quarter that ended in June. This week we get a slew of earnings reports from big banks, starting with JPMorgan Chase, Citigroup and Wells Fargo on Tuesday and followed by Goldman Sachs and Bank of America later in the week. …“Bank earnings tell you the most about the nation’s economy as a whole,” said Karen Petrou at Federal Financial Analytics. “Because banks trade with, lend to, take money from every segment: consumer, retail and corporate.” Petrou said banks are putting aside more capital to cover losses on business and real estate loans, as well as credit card and car loans. Banks are also earning less from lending because interest rates are so low.
https://www.marketplace.org/2020/07/13/covid-19-bank-earnings-second-quarter/ 

10 07, 2020

Karen Petrou: What Wirecard Wrought for New FinTech Regulation

2020-07-10T19:39:27+00:00July 10th, 2020|The Vault|

Earlier this week, the American Banker spotlighted an experienced M&A hand’s prediction of “hundreds of fintech failures.”  Wirecard of course does not augur well for this sector, but many so far dismiss its strategic implications on grounds that the German fintech was essentially a fraud.  True, but while not all canaries are in the best of health when they go down the mine shaft, they at least start out singing the same song.  The weakest croak first, but even the fittest soon expire.  Wirecard succumbed due to the climate created by investors and regulators alike. It has somehow become a given that taking a financial activity and turning it into tech magically dematerializes risk.  As two FedFin papers demonstrate, here and here, of course it doesn’t – risk changes.  Sometimes it changes for the better, but often there turn out to be a lot of little bodies on the mine-shaft floor.  As a result, a regulatory reset is already under way in Europe and will soon be joined by one in the U.S.

To forecast the future of fintech regulation, one has first to create a risk taxonomy.  Fintech is of course a broad rubric, subsuming everything from Robinhood’s day-trading platform to P2P lending to payment-service firms such as Wirecard and to far more business models and product suites.  And, as we’ve noted, fintech is different not only in scope, but also scale.  An activity housed in an ambitious start-up partnering with a bank is materially different than one

10 07, 2020

Coindesk, Friday, July 10, 2020

2020-07-10T16:11:06+00:00July 10th, 2020|Press Clips|

Money Reimagined: COVID-19’s Crash Course in Exponential Math
By Michael Casey
OPEN-SOURCE CBDC. The Digital Dollar Project of former Commodity Futures and Trading Commission Chairman Chris Giancarlo got a solid endorsement from Karen Petrou, one of the most trusted analysts of federal finance policy. In her “Economic Equality” blog, a must-read chronicle of how finance impacts the kind of disparities described in the prior item, she first skewers the more centralized version of a central bank digital currency – the kind contained in China’s DCEP. She worries about financial inclusion. Whereas CBDC advocates tout the model as a way to “bank the unbanked,” Petrou argues it will hurt the poor. She offers two reasons: 1) The “digital divide” means the poor don’t have access to the online tools they’ll need, and 2) the centralized surveillance of transactions will be used in a discriminatory way against low-income users. She also worries the transfer of bank deposits to Federal Reserve-based CBDC accounts would undermine the autonomy of banks to offer credit, creating incentives for the politicization of the central bank as an arbiter of lending in the economy. The solution, she says, is an “open-source CBDC,” a more decentralized model in which banks and, potentially, tech companies would be approved to create reserve-backed tokens that track the value of the actual currency. In doing so, she explicitly cited Giancarlo’s June congressional testimony about the Digital Dollar Project’s tokenized model.
https://www.coindesk.com/money-reimagined-covids-crash-course-in-exponential-math 

10 07, 2020

Analysis: Global TBTF Policy

2020-07-10T14:58:51+00:00July 10th, 2020|The Vault|

Moving cautiously to assess the extent to which large banks are no longer too big to fail (TBTF), the FSB has gone beyond a request for comment to a somewhat more specific solution that may lead to policy actions not yet spelled out for public comment in this report.  The FSB does, however, lay out what it describes as “gaps” in the anti-TBTF regime for consideration by its member agencies, with the Basel Committee principally targeted here since the report addresses only banks.  Looking only at the period before the pandemic and only at global systemically-important banks (GSIBs) and those designated as domestic SIBs, the FSB preliminarily concludes that many nations – and perhaps most notably the U.S. – have indeed quelled TBTF banking.

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

8 07, 2020

Analysis of Volcker 2.0 Covered-Funds Rule

2020-07-08T13:44:04+00:00July 8th, 2020|The Vault|

The banking agencies, SEC, and CFTC have finalized a long-awaited, complex, and comprehensive proposal rolling back many of the restrictions on covered funds imposed in the 2013 rules implementing the Volcker Rule provisions of the Dodd-Frank Act.  Strongly opposed by those who fear greater integration of banking and “speculative” finance or commerce, the rule liberalizes the “Super 23A” inter-affiliate transaction restrictions on excluded covered funds that limited their ability to benefit from funding and operational capacity within affiliated insured depositories.

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

7 07, 2020

FedFin: Big Banks Cut Loose

2020-07-07T16:27:11+00:00July 7th, 2020|The Vault|

In the final version of “Volcker 2.0,” the FRB, FDIC, OCC, SEC, and CFTC finalized a massive, controversial rewrite of the rules governing the funds which U.S. banks and foreign banks doing business here may hold, own, sponsor, or otherwise serve and even market across an array of asset classes.  These of course include housing finance, an arena of even more interest now in light of the FDIC’s recent safe-harbor liberalization and pending FHFA capital and conservatorship actions.  The new construct gives large banks an arsenal of new “credit fund,” securitization, and other tools with which to redesign private loan securitization and even their own mortgage portfolios.  Now, banks can organize funds that engage in mortgage securitization, credit-risk transfer or covered-bond issuance on their own, with other financial institutions, and in concert with the GSEs or Ginnie Mae.

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

6 07, 2020

Analysis of Non-Cleared Derivatives Regulatory/Reference-Rate Relief

2020-07-06T20:14:11+00:00July 6th, 2020|The Vault|

Reflecting strong industry pressure and growing concerns about market structure, the banking agencies have joined others with which they share jurisdiction to finalize proposed revisions reducing the capital cost of the 2015 margin rule for non-cleared derivatives.  This is accomplished via repeal of current inter-affiliate initial-margin requirements with a new limit intended to constrain insured depository institution (IDI) risk.  The rule also expands the class of swaps designated as legacy swaps grandfathered under current standards that retain their grandfather even if amended to replace LIBOR with a new benchmark rate.

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

6 07, 2020

Risk.net, Friday, July 3, 2020

2020-07-06T15:40:11+00:00July 6th, 2020|Press Clips|

How the Fed’s Covid stress test got stuck in the middle
By Sharon Thiruchelvam
What’s the purpose of a bank stress test? That might sound like an overly philosophical question in the middle of a global pandemic, but it’s the question that market participants, together with former and some current regulators, have ended up asking after the results of this year’s Comprehensive Capital Analysis and Review (CCAR) were published in the US on June 25. …“I doubt any dividend payments will scuttle any large US bank, but the Fed has now positioned itself to take the fall should any of them tremble under continuing macroeconomic stress or market fragility,” says Karen Petrou, managing partner at consultancy Federal Financial Analytics. “In 2008, the banking crisis was the banks’ fault; this time, folks will say it’s the Fed’s.” She warns that the Fed’s handling of this year’s stress test “may have lost all the critical credibility it gained when the 2009 exercise rescued the banking system”.
https://www.risk.net/investing/regulation/7649621/how-the-feds-covid-stress-test-got-stuck-in-the-middle?utm_source=twitter&utm_medium=organic&utm_campaign=7649621 

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