Press Center

The stablecoin bill is now law. What’s next for banks?

By   Claire Williams

WASHINGTON — Now that President Donald Trump has signed the stablecoin bill into law, banks are gearing up to lobby regulators as they make rules that could either further threaten or protect banks’ traditional turf.
The stablecoin bill poses both an existential threat and opportunity for bankers, experts say….”The issues on which we’re more focused with our banking clients are really the rules that will be forthcoming about how the nonbank issuers can engage on stablecoin,” said Karen Petrou, co-founder of Federal Financial Analytics. “There certainly is the question of the extent to which a bank holding company or an insurance or subsidiary of an IDI could engage in stablecoins. But the bigger issue from most of our clients is what the marketplace is likely to look like and who’s coming at them.” The Fed is also responsible for a key piece. The stablecoin bill says that master account status for nonbank payment stablecoins maintains the status quo, not explicitly banning nonbanks from access.  “Arguably, the Fed has the authority to open master accounts,” Petrou said. “Now, that’s what the stablecoin issuers believe. Banks say no, and the status quo says ‘back over to you, Fed — you decide.”

https://www.americanbanker.com/news/the-stablecoin-bill-is-now-law-whats-next-for-banks

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The matter of central bank independence

Who should the head of the Federal Reserve be accountable to? We’ll discuss that and more with Karen Petrou of Federal Financial Analytics.

https://www.marketplace.org/episode/2025/07/22/the-matter-of-central-bank-independence…

Why Banks Are on High Alert About Stablecoins

By Dylan Tokar and Gina Heeb

Stablecoins are poised to become a part of the mainstream financial system, and banks are on high alert about how the cryptocurrency could threaten their business. The House voted 308-122 Thursday to pass a bill that spells out some ground rules for stablecoins, which function as digital dollars in the wider crypto world. The Genius Act is now headed to President Trump, who has indicated he would sign it. A major issue for banks is whether stablecoin issuers will lure away customer deposits. A Treasury Department report in April estimated that stablecoins could lead to as much as $6.6 trillion in deposit outflows, depending in part on whether issuers could offer yields similar to bank accounts….Those concerns would be especially acute if nonbank stablecoin issuers were to get access to the Federal Reserve system, said Karen Petrou, managing partner of consulting firm Federal Financial Analytics, in a recent memo. The Genius Act doesn’t prohibit access to the Fed by nonbank stablecoin issuers, so it will remain up to Fed officials to determine who gets access. The Fed system gives banks access to extra cash in the event of market stress. The trade-off for banks are costly liquidity requirements, which don’t currently apply to stablecoin issuers. Nonbank stablecoin issuers could sap deposits from banks and simply invest them for their own benefit, rather than use them to help fund loans “that benefit banks, borrowers and …

‘Huge deal’: White House probe fuels speculation Trump could oust Powell

By Sam Sutton

President Donald Trump swore that he wouldn’t attempt to fire Federal Reserve Chair Jerome Powell before his term expires next spring. A new White House investigation of cost overruns at the Fed’s headquarters has reignited speculation that he just might try. White House Budget Director Russ Vought’s probe into a yearslong, $2.5 billion renovation of the central bank’s Washington offices represents a serious escalation in the administration’s offensive against Powell. Trump and other top officials have blasted the Fed chair repeatedly over his refusal to cut interest rates. …. “They appear to be trying to build a strong case for mismanagement and the violation of certain federal rules,” said Karen Petrou, the managing partner of Federal Financial Analytics. “All of the accusations on monetary policy are irrelevant to this. It is a straightforward administrative action.” The Supreme Court has signaled that the president can’t summarily dismiss central bankers. But the White House’s investigation into Powell’s oversight of agency finances — rather than his monetary policy decisions…

https://bit.ly/44G0stG

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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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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 …

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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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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Trump Has Cut Thousands of Wall Street Cops While Markets Wobble

By Katanga Johnson and Weihua Li

Donald Trump’s administration is set to shrink the ranks at the top US financial regulators by more than 2,300 workers, a group that includes bank examiners, criminal investigators and economists. The cuts are the steepest in decades for the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Securities and Exchange Commission, the primary agencies responsible for oversight of banks, trading houses and the public markets…“The problem with bank supervision is not lack of personnel, but rather where they are deployed, how they are supervised by senior officials, and the extent to which the agencies demand rapid action on problem institutions,” said Karen Shaw Petrou, the managing partner at Federal Financial Analytics, a Washington-based consulting firm.

https://news.bloomberglaw.com/us-law-week/trump-has-cut-thousands-of-wall-street-cops-while-markets-wobble…