Press Clips

Will regulators hit the gas or brakes on remaining post-Basel reforms? By Kyle Campbell For more than a year, a once ambitious bank regulatory reform agenda has largely been on hold as agencies deal with the fallout from last summer's much maligned joint capital proposal. Now that the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency are in apparent agreement on a path forward for the so-called Basel III endgame, regulators are poised to work through their backlog of joint initiatives, including expanded long-term debt requirements and new liquidity standards....The Fed, the FDIC and the OCC have been eyeing a long-term debt expansion since 2022, when they issued what is known as an advanced notice of proposed rulemaking — a precursor to a formal rulemaking process — before issuing an official proposal last September. But finalizing that rule while risk-based capital changes [...]

Political bluster threatens the Fed's 'vibes-based' independence By   Kyle Campbell  Once taken as a given, the Federal Reserve's independence is facing existential questions in the current political environment. Former president and Republican presidential nominee Donald Trump said in an interview last week that if elected he would "bring interest rates way down" while also combating inflation, which he said was "destroying our country."...Others see the agreement as a capitulation by the Treasury to secure short-term participation by the Fed in its war financing efforts. Karen Petrou, founder of Federal Financial Analytics and highly regarded expert on financial policy, said the accord amounted to an acknowledgment by the Treasury that it never had the ability to force the Fed's hand. "It was essentially Appomattox for the Treasury Department," Petrou said, referring to the Confederate surrender in the Civil War. "They had to sign it." https://www.americanbanker.com/news/political-bluster-threatens-the-feds-vibes-based-independence  

'They need to kick the tires': Karen Petrou on bank-fintech alliances By Penny Crosman The bankruptcy of bank-fintech partnership middleware provider Synapse and the many consent orders banks have received from regulators regarding their fintech relationships have formed a dark cloud over banking as a service. The way forward should include much more due diligence on banks' part, according to Karen Petrou, co-founder and managing partner of Federal Financial Analytics, a Washington, D.C. firm that provides analytical and advisory services on legislative, regulatory and public-policy issues affecting financial services companies.  "I think they really need to kick the tires and not just look at the fee revenue, but at the resilience of their counterparty in these deals," Petrou said. "Clearly one of the issues with Synapse is at least a hundred million dollars of customer money is missing, and while [compared to] the scale of trillion dollar financial crises, that [...]

 Some banks are making a Faustian bargain with fintechs: Karen Petrou By Penny Crosman Welcome to the American Banker Podcast. I'm Penny Crosman. The disputes between banking-as-a-service middleware provider Synapse and its banking partners have cast doubt on the whole practice of banking as a service, where fintechs build relationships with customers directly and bank partners keep the money in their vaults. Today we're here with Karen Petrou, managing partner at Federal Financial Analytics, to get her take on this whole situation and what the way forward might look like. Welcome, Karen. https://www.americanbanker.com/podcast/some-banks-are-making-a-faustian-bargain-with-fintechs-karen-petrou

Unpacking the June jobs report by Sabri Ben-Achour The U.S. economy added 206,000 jobs in June, according to the labor department.   On the other hand, the job growth in previous months was revised down significantly. Let’s discuss with Karen Petrou, co-founder and managing partner at Federal Financial Analytics. https://www.marketplace.org/shows/marketplace-morning-report/more-signs-of-a-cooling-labor-market/#Unpacking-the-June-jobs-report

Why are bond prices up right now? And what difference does it make? By Mitchel Hartman We’re in the midst of a bond market rally. In the last eight weeks — barring Monday, when the bond market retreated a bit — bond prices have been going up, as their yields — the annual interest rate they pay — have been going down....The Fed’s got interest-rate-setting meetings in July and September. But here’s the thing: It met just last week: At that meeting, “they changed their forecast,” said Joanna Gallegos. “They said for the end of the year, we anticipate only making one rate cut versus three.” Basically, said Karen Petrou, a managing partner at Federal Financial Analytics, the bond market is saying to the Fed: “We can hear you. We’re just not listening.” “Even though [Chair] Jay Powell said, ‘We’re going to keep rates about where they are for a [...]

Will Democrats stand by Gruenberg? By Clair Williams Lawmakers — mostly Republicans — let loose almost immediately after the release of an independent review of the Federal Deposit Insurance Corp.'s workplace culture, calling for the agency's chairman, Martin Gruenberg, to resign. Those calls, while neither entirely new nor unexpected, were being made by lawmakers farther afield from the usual suspects on the House Financial Services Committee and Senate Banking Committee who are typically involved in financial policy issues....Those hearings could be critical to Gruenberg's survival at the agency. So far, both the White House and his Democratic allies on Capitol Hill haven't asked for his resignation, but that could change in the time between the release of the review and his testimony. Lawmakers are receiving closed-door briefings today on the results of the review, according to multiple committee sources familiar with the matter, which could affect lawmakers' views. I think [...]

Is the Fed board eroding regional Fed banks' independence? By  Kyle Campbell  The Federal Reserve Board of Governors has a greater say over leadership at the reserve banks than it once did. But whether that benefits the central banking system is an open debate...Karen Petrou, managing partner of Federal Financial Analytics, understands the Board's involvement in presidential approvals to be largely consistent with its historical approach. The only meaningful change, she said, is the Board's insistence that it review candidate pools to ensure they are "broad and diverse." The Board has outlined its policy around its reserve bank presidential search involvement on a frequently asked questions page on its website. According to archived versions of the site, the page has been live and has highlighted the focus on "broad and diverse" candidate pools since at least December 2014. Because the Fed has taken a stance that fostering diversity, equity and [...]