Press Clips

Trump win likely to delay Basel III, imperil Biden bank regulation By   Ebrima Santos Sanneh The incoming Trump administration is likely to lead to swift turnover at bank regulatory agencies, which would push finalization of new capital standards for large banks further down the road.... Karen Petrou, a managing partner at Federal Financial Analytics, expects the scope of the new framework to be further narrowed. Specifically, she anticipates the requirements being applied only to banks with $250 billion in assets or more and the market-based requirements being limited to the largest global systemically important banks and others with large trading books. She said some revisions could be made to cap operational risk weights and amend credit risk standards, too. Overall, Petrou said, the final version of the Basel III endgame will be the result of a "very complicated negotiation" — one that would likely escape the attention of a potential [...]

TD money-laundering scandal puts supervision back under the microscope By Kyle Campbell After using one of its most powerful enforcement tools to crack down on rampant money laundering at TD Bank, a Washington regulator finds its own oversight functions under the microscope. The Office of the Comptroller of the Currency implemented an asset cap on TD, prohibiting the Toronto-based bank from growing its balance sheet until its money-laundering controls are fixed...Karen Petrou, managing partner at Federal Financial Analytics, said the extensive consent order issued by the Financial Crimes Enforcement Network outlined a host of red flags that bank examiners should have detected years ago. Based on enforcement actions from Fincen, the OCC and the Federal Reserve, it is not clear if regulators picked up on the issues before last year. At that point, she said, they had few non-drastic options to choose from. "Because the banking agencies didn't catch it [...]

What can quarterly earnings tell us about the economy?  Marketplace talks with Karen Petrou Listen here: https://www.marketplace.org/2024/10/14/what-can-quarterly-earnings-tell-us-about-the-economy/

Bank merger policy has long needed a makeover — just not this one By Karen Petrou Until this month, the Department of Justice hadn't finalized the adoption of new bank merger policy guidelines since 1995. Given the banking industry's rapid evolution during the last three decades, an update was certainly overdue. It unfortunately took the bank failures of 2023 to inspire action on a much-needed bank merger policy makeover, and regulators hastily charged ahead to propose sweeping reforms. Despite soliciting feedback from industry experts and policy analysts that revealed a swath of concerns, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency locked step with the DOJ to finalize their respective rewrites of bank merger criteria largely as proposed. This is not the bank merger makeover we needed. Banking regulators realize that allowing high-risk banks to make still-bigger bets by swallowing other banks can pave [...]

The Potential “Perverse” Consequences for Banks of New M&A Policies Host Rob Blackwell Karen Shaw Petrou, managing partner of Federal Financial Analytics, details how new guidelines by federal regulators to curb M&A could inadvertently increase the market power of the biggest banks and Big Tech. https://bankingwithinterest.libsyn.com/the-potential-perverse-consequences-for-banks-of-new-ma-policies

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