Eliza Allen – Federal Financial Analytics

26 04, 2024

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Eliza Allen2024-04-26T16:54:49-04:00April 26th, 2024|3- This Week|

Gratifying the Urge to Merge

Next week’s Financial Institutions Subcommittee meeting at HFSC on bank mergers will surely give GOP Members a chance to lay out the reasons many banks think current anti-merger policy is more than misguided. Republicans and their witnesses will surely argue that President Biden’s competition order (see Client Report MERGER6) quashes growth, that the FTC and DOJ guidelines prevent fair competition (see FSM Report MERGER13), that the OCC’s merger proposal is bad (see FSM Report MERGER14), and the FDIC’s is even worse (see FSM Report MERGER15). Progressive Democrats will side with Sen. Warren (D-MA), saying that the OCC hasn’t gone far enough and wanting still more from the FDIC’s policy along lines advocated by CFPB Director Chopra. Where do moderate Democrats come out and will this give bigger banks comfort that regional deals are doable? We’ll be listening, analyzing, advising.

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26 04, 2024

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Eliza Allen2024-04-26T16:53:42-04:00April 26th, 2024|2- Daily Briefing|

Treasury Slams PR Banking AML, Sanction Compliance

Providing an unusually blunt warning, Treasury Undersecretary Brian Nelson yesterday stated that further action is necessary in Puerto Rico to combat illicit finance, tighten supervision, and increase transparency.

BCBS Moves Forward With New Counterparty Risk Guidelines

As anticipated, the Basel Committee this week announced that it approved a consultation on proposed guidelines to strengthen bank counterparty credit risk management, replacing the Committee’s 1999 global guidance that failed to address the now-significant role of NBFIs and their heightened leverage.

HFSC Merger Hearing to Test Agency Proposals

The memo for Wednesday’s merger hearing before HFSC’s Financial Institution Subcommittee indicates that witnesses are senior attorneys from the OCC and FDIC sure to be grilled by Republicans on their agencies’ proposed merger-policy rewrites.

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25 04, 2024

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Eliza Allen2024-04-25T17:12:36-04:00April 25th, 2024|2- Daily Briefing|

FSB Tackles CCP Resolvability

Continuing its NBFI work, the FSB today released final CCP-resolution standards. The standards call on systemic-CCP regulators to have tools and backstops specific to orderly resolution in addition to those deployed to ensure rapid recovery under the FSB’s recent actions addressing margining and CCP liquidity.

FDIC Considers, Tables Passivity Proposals

As anticipated, the FDIC today took up proposals to address concerns regarding index-fund managers’ compliance with passivity commitments. Surprisingly, there were two competing proposals, both of which were withdrawn prior to a vote.

BIS Head Suggests NBFIs Get a Targeted Global Standard-Setter

BIS General Manager Carstens this week said that there is insufficient global momentum to address the risks posed by NBFIs, asking international bank supervisors to consider the need for a committee akin to Basel for NBFIs.

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24 04, 2024

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Eliza Allen2024-04-24T16:29:15-04:00April 24th, 2024|2- Daily Briefing|

CapOne/Discover Deal Open for More Comment

The FRB and OCC today took the unusual step of extending the public comment period on the Capital One/Discover merger until May 31. Typically, the agencies keep the comment deadlines as is, receiving more comments when desired via public hearings and then delaying action on a proposal until it suits them to make an announcement. This move seems intended to ensure that the furor over this merger is not exacerbated by assertions that the agencies cut short the public-comment process in any way.

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23 04, 2024

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Eliza Allen2024-04-23T16:38:38-04:00April 23rd, 2024|2- Daily Briefing|

New Fed Study: Economic Inequality Key to Growing NBFI Role, Systemic Risk

A new Fed staff note builds on prior research to show not just the link between economic inequality and financial instability, but also how heightened systemic risk due to factors such as NBFI growth is driven by economic inequality. The study for the first time finds significant correlations between economic inequality and the growing role of nonbank asset managers, investors, and short-term wholesale lenders, observing the proven link between NBFIs and financial-system amplification.

Asset-Manager Passivity Standards Set for Thursday Rewrite

As anticipated, the FDIC has set this Thursday as the date at which it will address concerns that index-fund and other asset managers are no longer passive investors in banking organizations and thus may warrant BHC designation. We will of course analyze the FDIC’s action immediately after it is released and then provide clients with an in-depth analysis of a proposal that, depending on how far it goes, could not only bring some NBFIs within the regulatory perimeter, but also have a negative impact on banking-organization market capitalization.

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22 04, 2024

FedFin on: Fed Systemic-Risk Assessment: Some Worries, No Troubles

Eliza Allen2024-04-23T16:37:21-04:00April 22nd, 2024|The Vault|

The latest Federal Reserve financial-stability assessment continues the Fed’s practice of detailing vulnerabilities without drawing bottom-line conclusions; the Board once did so, but ceased this practice after opining that the financial system’s risk was “moderate” shortly before the 2020 crash. The Board’s report now also says that it assesses vulnerabilities, not the likelihood of near-term shock. Survey respondents do make this assessment, with this report showing a striking increase in concerns about policy uncertainty in light of continuing inflation and the higher-for-longer rate outlook…

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

18 04, 2024

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Eliza Allen2024-04-18T17:08:48-04:00April 18th, 2024|2- Daily Briefing|

G7 Backs NBFI Reform

Although prioritizing Ukraine and broad statements about the global economy, the new statement from G7 finance ministers and central bankers also emphasizes the need to pursue the kind of NBFI reforms advanced yesterday by the FSB.

Bowman Battles New Liquidity Regs

FRB Gov. Bowman today reiterated her conviction that sufficient contingency funding should be a matter between banks and supervisors, not a cause for new rules.

Brown, Reed Press Big Banks on Wire Transfer Fraud

Building on their longstanding campaign pressing banks on Zelle, Senate Banking Chair Brown (D-OH) and Sen. Reed (D-RI) today sent letters to the CEOs of JP Morgan, Wells Fargo, Bank of America, and Citi stating that banks have a responsibility to proactively monitor and prevent fraudulent wire transactions and should reimburse customers when these obligations are not met.

House Select Committee Targets Index-Fund Chinese Investments

Building on its prior report pressing financial institutions to address exposures to China and potential systemic risks, the House Select Committee on the CCP today released a bipartisan report sharply criticizing index-fund and asset managers for investing American savings in sanctioned Chinese companies associated with the PLA and/or human-rights abuses.

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17 04, 2024

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Eliza Allen2024-04-17T17:36:07-04:00April 17th, 2024|2- Daily Briefing|

Global Regulators Tackle NBFI Margining, Collateral Transformation

As it has long promised, the FSB today issued a consultation on standards designed to buttress derivatives, commodity, and securities-financing markets under stress through more stringent margining and collateral requirements.

Basel Head Says Go Slow re AI Risk, Supervisory Models

Basel’s Secretary General, Pablo Hernández de Cos, today focused on AI’s risk-reward profile in the banking sector, concluding that it raises a series of profound questions global regulators must work cooperatively to address.

Lummis, Gillibrand Begin Senate Stablecoin Debate

As long anticipated, Sens. Lummis (R-WY) and Gillibrand (D-NY) today introduced a significantly revised version of their 2022 Bill (see FSM Report CRYPTO28) laying out U.S. stablecoin standards.

FIO Subpoena Power Faces Rollback

At HFSC’s mark-up today, the committee began with Rep. Fitzgerald’s (R-WI) Insurance Data Protection Act, H.R. 5335, which would repeal the Federal Insurance Office’s authority to subpoena insurance companies for data collection.

HFSC Likely to Pass RegTech Bill

At HFSC’s extended mark-up today, the committee turned to H.R. 7437, a bipartisan bill that would require federal banking regulators to regularly review and report to Congress on their use of technology to ensure they’re equipped to address threats to the financial system.

HFSC Set to Pass AOCI Recognition, Systemic-Risk Designation Study Measures

Continuing our coverage of today’s mark-up, HFSC was generally supportive of the two bills on the agenda from Democrats, H.R. 4206 from Rep. Sherman (D-CA) requiring large banks with available for sale securities to mark to market …

16 04, 2024

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Eliza Allen2024-04-16T17:10:39-04:00April 16th, 2024|2- Daily Briefing|

House GOP Takes on New Merger Guidelines

The House Small Business Committee today sent a GOP letter to the FTC and Justice Department strongly protesting new merger guidelines (see FSM Report MERGER13) on grounds that they sharply curtail needed small-business capital.

House Hikes Iran Sanctions

Working through a series of sanctions bills in the wake of recent geopolitical developments, the House yesterday voted 294-105 to advance H.R. 5921, a bill introduced by Rep. Huizenga (R-MI) that prohibits Treasury from authorizing transactions by U.S. financial institutions in connection with Iranian imports or exports other than food, medicine, and other humanitarian assistance.

House Passes Bill Targeting China-Iran Petroleum Trade

Continuing its response to recent geopolitical events, the House yesterday voted by a 383-11 margin to pass H.R. 5923, a bill from Reps. Lawler (R-NY) and Gottheimer (D-NJ) that would require the President to periodically determine if any Chinese financial institutions have purchased petroleum or petroleum products from Iran, stating that U.S. financial institutions also may not open or maintain certain accounts with Chinese institutions that have done so.

Warren Again Targets OCC Merger Decisions

Continuing recent attacks on the OCC’s approach to mergers, Sens. Warren (D-MA) and Blumenthal (D-CT) yesterday sent a letter to Acting Comptroller Hsu sharply criticizing the agency’s decision first to allow NYCB to acquire Flagstar bank and then do the same shortly thereafter for Signature.

OCC Toughens LCR, NSFR via New Reporting Requirements

The OCC today sought public comment as required by law for …

12 04, 2024

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Eliza Allen2024-04-12T16:37:57-04:00April 12th, 2024|3- This Week|

The CFPB Stand-Off

On Tuesday, the HFSC Financial Institutions Subcommittee holds yet another hearing which Republicans hope will so embarrass the CFPB that their decades-long quest to redesign or even kill it gains traction ahead of critical litigation and the national election. The nominal topic of the hearing is the Bureau’s financial audit, and Republicans will surely make as much of it as they can to damage Director Chopra’s leadership. However, the real target is the Bureau’s race to finalize a series of substantive actions ahead of its own political challenges should litigation and the election go against it. The most immediate rule on the GOP’s firing line is the credit-card late-fee standard (see FSM Report CREDITCARD37), a rule now enmeshed in court decisions and challenges of unprecedented intricacy that nonetheless appear likely leading to a near-term injunction blocking the rule as lenders devoutly desire.

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