ElizaAllen

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So far Eliza Allen has created 718 blog entries.
14 03, 2024

CREDITCARD37

2024-03-14T15:57:19-04:00March 14th, 2024|1- Financial Services Management|

Credit-Card Late Fee Regulation

Following a very controversial proposal, the CFPB has finalized credit-card late-fee restrictions in a final rule that does not differ significantly from the proposal on its key point:  elimination of the manner in which inflation adjustments are now made by credit-card lenders when it comes to late fees.  The rule will sharply curtail issuer revenue related to these fees, likely affecting the market as a whole rather than the large issuers expressly covered by the new rule.  Although the Bureau did not go as far as proposed in several areas, its core late-fee standard could lead lenders to raise interest rates, curtail rewards, reduce high-risk exposures, or otherwise redesign products with adverse implications for borrowers who meet their monthly-payment requirements in a timely fashion.

CREDITCARD37.pdf

12 03, 2024

DAILY031224

2024-03-12T16:59:10-04:00March 12th, 2024|2- Daily Briefing|

Hsu Says Opsrisk Not Cured by Capital, Liquidity

In remarks today on operational resilience, Acting Comptroller Hsu notes that operational risk is not “a problem that capital or liquidity can solve.”  Karen Petrou has noted this most recently with regard to the operational-risk capital rules included in the current proposal, which are founded on the longstanding regulatory assumption that capital indeed buffers operational risk.

Senate Talk of Affordable Housing Turns to FHLB Role

At today’s Senate Banking Committee affordable-housing hearing, Chairman Brown (D-OH) again called for the Fed to cut interest rates to address the crisis.  The hearing also touched on the role FHLBs can play, with Sen. Lummis (R-WY) stating her intentions to work with the system to expand its impact on the housing supply shortage.

CFPB to Proceed to Mortgage-Fee Rulemaking

NEC Director Brainard today said that the CFPB will pursue a rule or similar action to curtail mortgage-closing “junk” costs along the lines we identified following last week’s Bureau post in conjunction with the new White House competition strike force.

Daily031224.pdf

11 03, 2024

DAILY031124

2024-03-11T17:15:23-04:00March 11th, 2024|2- Daily Briefing|

Hagerty Demands Signature-Asset Sale Answers ASAP

Sen. Bill Hagerty (R-TN) yesterday sent a letter to Chair Gruenberg questioning the FDIC’s adherence to requirements in its auction process during the sale of Signature Bank’s loan portfolio, accusing the FDIC of making political choices inconsistent with its least-cost mandate.

Scott Again Calls for Gruenberg Resignation

Adding to GOP pressure on FDIC Chair Gruenberg, Senate Banking Ranking Member Scott (R-SC) yesterday sent a letter reiterating his demand that Mr. Gruenberg step down.

BTFP Demise if FHLB Opportunity

As anticipated, the BTFP window closed today.

FDIC’s Hill Wants New Blockchain, Liquidity Standards

FDIC Vice Chair Hill today said there are “significant downsides” to the agency’s current approach to blockchain, describing its message and that of the inter-agency policy (see Client Report CRYPTO32) as “don’t bother trying.”

Warren Tries to Divide Powell from Other Regulators to Conquer Capital Regs

Following her grilling of Chair Powell last week regarding his decision to intervene in setting the new capital rules, Sen. Warren (D-MA) yesterday sent a letter to Vice Chair Barr, Chair Gruenberg, and Acting Comptroller Hsu asking them if pressure from big banks has “weakened your resolve.”

GAO Wants FinCEN to Move Better, Faster

Reinforcing longstanding bank complaints about the current AML regime, GAO today published a report finding that FinCEN needs to improve transparency surrounding its progress implementing the Anti-Money Laundering Act of 2020 (see FSM Report AML132).

Biden Presses for Statutory Change Boosting FHLB Affordable-Housing Contributions

President Biden’s FY25 …

8 03, 2024

DAILY030824

2024-03-08T16:54:53-05:00March 8th, 2024|2- Daily Briefing|

Biden Continues Junk Fee Campaign

The President continued his attack on junk fees in the State of the Union, applauding the CFPB’s new credit-card late fee rule.  The President also boasted about recent monetary data, calling the American economy “the envy of the world” and called for Congress to pass Sen. Casey’s (D-PA) bill to stop shrinkflation.

FRB Finalizes FMU OpsRisk Update

The FRB today unanimously voted to finalize an update to rules governing operational risk-management for certain systemically-important financial market utilities (FMUs).

CFPB Lays Groundwork for Mortgage Closing-Cost Regulation

Continuing its campaign against junk fees, the CFPB today released a blog post focusing on mortgage closing cost fees, stating that the agency will issue rules and guidance “as necessary” to improve competition and affordability in the coming months.  The post states that median total loan costs increased 22 percent on home purchase loans from 2021 to 2022, noting that many of these costs are fixed and not affected by interest rates.

Daily030824.pdf

7 03, 2024

DAILY030724

2024-03-07T16:51:03-05:00March 7th, 2024|2- Daily Briefing|

HFSC GOP Press Discount-Window Reform, Slow-Go on Liquidity Risk

Building on questioning at a recent HFSC hearing (see Client Report LIQUIDITY34), Financial Institutions Subcommittee Chair Barr (R-KY) led all Republican members of his subcommittee in a letter to Chair Powell, Chair Gruenberg, and Acting Comptroller Hsu urging them to address stigma and operational issues associated with the discount window.

Powell Reiterates: Capital Rules Will Change

Today’s Senate Banking hearing with Chair Powell covered much of the same ground as the Chair’s appearance before HFSC (see Client Report FEDERALRESERVE75) with Democrats focusing on housing affordability and Republicans expressing their satisfaction with Mr. Powell’s statement that the Basel III proposal may have to be withdrawn and re-proposed.

House Judiciary Now Says 12 Large Banks Colluded with FinCEN

Prior to the House Judiciary’s Select Subcommittee on the Weaponization of the Federal Government hearing today on large bank “collusion,” the subcommittee yesterday published a report finding that FinCEN and the FBI engaged in backchannel discussions with large financial institutions to gather private financial data.

BCBS Proposes GSIB Window-Dressing Revisions

As anticipated, the Basel Committee on Banking Supervision today released a consultation on revisions to the GSIB assessment framework concerning window dressing.

House Republican Targets Interest on Reserves

Following up on yesterday’s HFSC hearing (see Client Report FEDERALRESERVE75), Rep. Davidson (R-OH) has introduced legislation (H.R. 7562) to prevent Federal Reserve Banks from paying interest on excess reserves.

Daily030724.pdf

6 03, 2024

DAILY030624

2024-03-06T16:51:12-05:00March 6th, 2024|2- Daily Briefing|

Bowman Renews Tailoring Defense

In dinner remarks last night, FRB Gov. Bowman argued that tailoring is a “grounding principle” of bank regulation ignored in the pending capital rules and final climate guidance (see FSM Report CLIMATE17), standards she also said are intended to allocate capital, not ensure effective supervision.

GAO Reviews Fed, FDIC Supervisory Practices

The GAO today issued a report examining the Fed and FDIC’s communication and escalation of supervisory concerns towards SVB and Signature prior to their collapse, finding that a lack of clarity and specificity in the Fed’s enforcement procedures contributed to delays in escalation towards SVB.

Scope 3 Removed From Final SEC Climate Disclosure Rule

The SEC today voted 3-2 to finalize its 2022 climate-risk disclosure proposal, opting to remove its controversial Scope 3 provisions.

Daily030624.pdf

5 03, 2024

Daily030524

2024-03-05T16:37:23-05:00March 5th, 2024|2- Daily Briefing|

CFPB Fires All Cylinders on Credit Card Fees

In conjunction with a new White House “price-gouging” initiative today ahead of the President’s address, the CFPB finalized its controversial credit-card late-fee proposal (see FSM Report CREDITCARD36).

Presidential Strike Force Targets Financial-Services Fees, Mergers

In conjunction with the CFPB’s new credit-card fee standard, the White House today announced a “strike force” attacking what it believes to be price-gouging across the U.S. economy.

Interchange, Small-Dollar Lending Bills Added to House Docket

Although Thursday’s HFSC Financial Institutions’ hearing will be a largely partisan review of the “politicized” nature of bank regulation, bills on the docket include a draft measure from Rep. Luetkemeyer (R-MO) requiring the FRB to conduct a quantitative study of the implications of its pending interchange rule before finalization (see FSM Report INTERCHANGE12).

McHenry Supports At Least Some Liquidity-Reg Rewrite

Redoubling his campaign against the capital proposal, HFSC Chairman McHenry (R-NC) today made it clear that he does support at least some revisions to liquidity rules.

IMF Looks Under U.S. Bank “Weak Tail”

Looking at U.S. bank failures one year later, the IMF today released a global financial stability note finding that the “weak tail” of U.S. banks continues to present a possible systemic risk despite ongoing supervisory and regulatory efforts.

Daily030524.pdf

5 03, 2024

CONSUMER56

2024-03-05T14:27:57-05:00March 5th, 2024|1- Financial Services Management|

Consumer-Financial Product Marketing Practices

The CFPB has issued a circular essentially banning digital and perhaps all other consumer-finance comparison-shopping and lead-generation tools for credit cards and other products not covered by prior orders.  These activities could continue, but only as long as the comparison or lead is completely objective as the Bureau may come to judge it under complex and sometimes conflicting standards.  The circular follows similar CFPB actions outside the Administrative Procedure Act even though the agency clearly intends to enforce its new approach both directly and in concert with other state and federal agencies.

CONSUMER56.pdf

4 03, 2024

DAILY030424

2024-03-04T16:58:40-05:00March 4th, 2024|2- Daily Briefing|

BIS Targets Prime-Broker Risk

The BIS quarterly review contains an assessment of the risk prime brokers may pose both to GSIBs and financial stability.  This sector has long been a concern of central bankers and risk managers, but the BIS analysis is the first in recent years to quantify it and decompose key risk drivers (e.g., wrong-way risk) to conclude that the inter-connections between hedge funds and prime brokers are a source of systemic instability and potential hazard to banks as evidenced all too clearly last year at Credit Suisse.  These risks are of course also a key part of the Fed’s new exploratory stress-test related to hedge funds (see Client Report STRESS32).

Daily030424.pdf

4 03, 2024

M030424

2024-03-04T11:50:09-05:00March 4th, 2024|6- Client Memo|

The Madness of a Model and its Unfounded Policy Conclusion

As the pending U.S. capital rules head into their own end-game, there is finally a good deal of talk about an issue long neglected in both public discourse and banking-agency thinking:  the extent to which higher bank capital rules accelerate credit-market migration.  Simple assertions that more capital means less credit are, as I’ve noted before, simplistic.  One must consider how banks reallocate credit exposures to optimize capital impact and, still more importantly, how the credit obligations banks decide to leave behind take a hike.  Now comes a new paper the Financial Times touts concluding that, thanks to shadow banks, “we can jack up capital requirements more.”  Maybe, but not judging by this study’s design.  Even with considerable charity, it can be given no better than the “very creative” grade which kind primary-school teachers accord nice tries.

M030424.pdf

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