FRB-NY Confirms Regional-Bank Struggle Following LIBOR Transition

A new Federal Reserve Bank of New York staff study and blog post reaffirms many regional-bank fears about the LIBOR transition not fully allayed by compromise provisions in the Fed’s recent benchmark-setting regulation (see FSM Report LIBOR9).  Focusing on the credit-line sector (which is largely unfunded), the paper finds that the likely cost of bank wholesale funding under stress will sharply exceed that earned on corporate-line drawdowns priced to SOFR, with these spreads likely especially wide for regional banks.  The paper’s models and data thus lead to the conclusion that the shift to SOFR will decrease line availability.

Barr Prioritizes Privacy, Small-Bank Capital, FSOC Restraints

A new staff memo provides not only the agenda for Wednesday’s House Financial Institutions & Monetary Policy Subcommittee, but also the priorities Chairman Barr (R-KY) will pursue with regard to financial regulation.  Key concerns are encouraging fintech, data privacy (a priority issue also for Chairman McHenry), facilitating de novo charters, and holding the banking agencies accountable.  Bills on which a record will be established is one yet to be introduced to revise the Gramm-Leach-Bliley Act’s privacy standards to stipulate federal preemption, expand coverage and give consumers rights akin to those now also under consideration by the CFPB for a limited number of banking activities (see FSM Report DATA3).

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