Barr Presses for Counterparty-Risk Management

FRB Vice Chair Barr today called for large banks to ensure that counterparty exposures are well managed according to actions he describes, announcing no new Fed initiatives in this arena.  Mr. Barr was particularly focused on the need for banks to ensure sound margining and to dynamically adjust margins and other risk buffers.

FSB Cites SEC MMF Global Leadership

The FSB today released its thematic peer review report on MMF reforms, generally finding that global progress on its 2021 MMF rule (see FSM Report MMF18) has been inconsistent across jurisdictions.  However, U.S. progress is detailed, with the FSB noting key points in the agency’s 2023 MMF rule (see FSM Report MMF20) despite ongoing concerns about lingering risks such as vulnerability to large and sudden redemption pressure due to large MMF holdings of risky assets.

Fed Staff: Private Credit Poses Banking, Insurance, Systemic Risk

Reflecting concerns most recently expressed by Acting Comptroller Hsu and FSOC (see Client Report FSOC29), the Fed’s new staff paper on private credit contains not only a taxonomy about this fast-growing sector, but also a warning of emerging systemic risk.  Differing from the Fed’s May 2023 financial-stability assessment of low risk (see Client Report SYSTEMIC96), the paper argues for greater systemic-risk focus due to illiquidity, rising corporate leverage and default risk, and the extent to which large amounts of “dry powder” and the need to compete with banks for higher-quality loans lead to still more risk-taking.

HFSC Mark-Up Includes Partisan Measures and Crypto, Capital, Systemic Proposals

The agenda released today for HFSC’s Thursday mark-up includes numerous bills designed to achieve GOP objectives with agencies such as the CFPB, FinCEN, and HUD.  These will take considerable time due to how controversial they are, but may well not advance to the House floor, let alone in the Senate.

Bowman Also Worries About New Liquidity Regs

Expanding her focus now to liquidity regulation, FRB Gov. Bowman today pushed back against the revisions outlined by Acting Comptroller Hsu and perhaps even the more modest agenda outlined by Vice Chair Barr.

GOP Tries a New Tack to Quell Asset-Manager ESG Voting

Continuing the GOP campaign to curb asset-management ESG activities, House Oversight Committee Chair James Comer (R-KY) today attempted to force the Fed’s hand in making a decision about whether  asset managers are no longer passive investors and thus could be considered BHCs or trigger changes in control for their influence voting bank stock.