#AOCI

21 06, 2023

DAILY062123

2023-06-21T17:19:57-04:00June 21st, 2023|2- Daily Briefing|

Waters Advances Post-SVB Proposals

HFSC Ranking Member Waters (D-CA) today released ten Democratic bills in response to recent bank failures, noting — as is indeed the case for at least some of these measures – that Republicans expressed interest in them at the last committee mark-up.   That said, today’s hearing with Chairman Powell (see forthcoming FedFin analysis) indicates that Republicans will launch a full-bore attack on higher bank-capital requirements.

Unusual Bipartisanship Advances Senate Clawback Bill

We will await text to determine the full impact of the bill approved today by Senate Banking, but the 21-2 vote makes it clear that it will have no trouble navigating the Senate floor unless more controversial riders are attached.  We doubt this will be the case given the clear intention on both sides of the aisle to agree on a viable approach to executive clawbacks, moving away from the Warren-Vance bill (see FSM Report COMPENSATION36) to give the FDIC discretion to preserve “white-knight” compensation and slightly limit the bill’s scope.

Schumer Lays Out Senate’s AI Approach

Kicking off a high-priority Senate action plan, Senate Majority Leader Schumer (D-NY) today laid out his AI framework dubbed the Safe Innovation Framework.  Acknowledging that Congress knows very little about AI and what regulation is needed, he did not indicate any specifics or timing on upcoming legislation beyond outlining the framework’s priorities.

Daily062123.pdf

24 05, 2023

DAILY052423

2023-05-24T17:16:58-04:00May 24th, 2023|2- Daily Briefing|

New Fed Paper Shows Link Between Twitter, Market Sentiment, Run Risk

A new FRB staff paper uses natural-language models and social-media data to craft a “twitter sentiment index” (TSI) that is then compared to actual market conditions.

Democrats Press Clawback, Regulatory Fixes as HFSC Considers Transparency Measures

Today’s HFSC mark-up so far has focused on one of Rep. Barr’s (R-KY) three regulatory transparency bills, with Democrats proposing a series of amendments without any deciding votes.

House Oversight Panel Focuses On Supervisory Accountability, Reform

At today’s hearing of the Financial Services Subcommittee of House Oversight on bank failures and supervision at the San Francisco Fed, Subcommittee Chairwoman McClain (R-MI) opened with a series of sharply-worded questions on who oversaw the bank, what factors might have distracted them from traditional supervision, why glaring risk factors were not more forcefully addressed, whether regulators were unduly complacent, whether the Fed and FDIC used all of their regulatory tools, and if the agencies have been objective and transparent in their bank failure post-mortems as well as their accounts of the systemic risk exception.

Markup Votes Postponed for Transparency, LLPA Bills

Since our last alert, Democrats continued to submit amendments for Rep Barr’s (R-KY) transparency bill at today’s HFSC markup and party lines cemented over Rep. Davidson’s (R-OH) LLPA bill.

Daily052423.pdf

17 05, 2023

REFORM225

2023-05-17T16:03:47-04:00May 17th, 2023|5- Client Report|

HFSC Subcommittees Plow More Ground for Supervisory Accountability, Capital Reform, Clawbacks

A joint hearing today of HFSC’s Financial Institutions and Oversight Subcommittees expanded on themes at yesterday’s full Committee session with bank regulators (see Client Report REFORM224) and Senate Banking’s session with SVB’s and SBNY’s CEOs, with First Republic’s CEO now added to the Congressional firing line.  Much in this session repeated prior themes, with Rep. Dave Scott (D-GA) going beyond prior, sharp criticism to accuse SVB’s CEO of being the worst CEO in U.S. financial history.  Democrats demanded that he give up the bonus he received the day SVB failed and he went to Hawaii, receiving little satisfaction on this score and continuing demands for clawback legislation.  Rep. Bill Foster (D-IL) continued to argue that contingent-capital instruments would ensure smooth resolutions, a position he said is shared by Chairman McHenry (R-NC) even though it supports a controversial Fed/FDIC proposal for regional-bank TLAC (see FSM Report RESOLVE48).

REFORM225.pdf

13 04, 2023

DAILY041323

2023-04-13T17:09:21-04:00April 13th, 2023|2- Daily Briefing|

KC Fed: AOCI Recognition Boosts Credit Availability

A new staff study from the Kansas City Fed finds that significant holdings of unrealized losses adversely affect loan growth in addition to posing the solvency challenges all to evident in recent failures.  The channels through which dampening occurs are first higher equity costs due to investor perceptions of greater risk and lower return.  Debt-funding costs are also likely to rise, with higher capital and liquidity costs then passed on to borrowers in terms of higher rates that reduce demand.

Daily041323.pdf

13 04, 2023

GSE-041323

2023-04-13T14:11:50-04:00April 13th, 2023|4- GSE Activity Report|

Another Basel Buzzsaw

As we noted earlier today, global regulators are rethinking their 2015 decision not to require an express capital charge for interest-rate risk, a shift with significant implications for the role of U.S. banks as mortgage lenders and investors.  It will take if the U.S. decides on an express capital charge, but near-term developments promise immediate fixes to interest-rate and duration risk with significant strategic impact.

GSE-041323.pdf

12 04, 2023

DAILY041223

2023-04-12T17:20:45-04:00April 12th, 2023|2- Daily Briefing|

Hill Charts Different FDIC Course

In remarks today, newly-confirmed Republican FDIC Vice Chairman Travis Hill for the first time lays out his thinking ahead of a raft of FDIC decisions in SVB’s wake.

CFPB UDAAP Policy Now Effective

The Federal Register today includes the CFPB’s policy statement expanding the scope of the Bureau’s UDAAP framework, which is now effective upon this publication.

Scott Lays Out Housing Plan

In conjunction with advancing his Presidential campaign, Senate Banking Ranking Member Scott (R-SC) late yesterday announced his new federal housing framework via planned legislation, the Renewing Opportunity in the American Dream (ROAD) to Housing Act.

Basel Turns to Capital, LCR Revamp

The Basel Committee’s head, Pablo Hernández de Cos, today spoke out strongly against regulatory liberalization, implicitly criticizing the U.S. tailoring rules and urging jurisdictions to adhere tightly to Basel’s “multi-metric” standards given their proven value in the recent crisis.

Daily041223.pdf

27 03, 2023

DAILY032723

2023-03-27T17:00:51-04:00March 27th, 2023|2- Daily Briefing|

FDIC Adopts New IDI-Resolution Policy

The FDIC’s announcement late yesterday that it had sold portions of SVB to First-Citizens indicate that a provision also in its Signature bridge-bank sale reflect a new FDIC resolution policy: a willingness to take warrants.

Global Authorities Press FX Payment Redesign

The BIS Committee on Payments and Market Infrastructures (CPMI) today issued a final report offering a number of recommendations to central banks to facilitate the adoption of PvP systems.  To mitigate regulatory barriers, the report recommends that central banks strengthen regulatory incentives for FX market participants to use PvP arrangements, improve settlement risk exposure reporting, and enact robust settlement finality protection.

Barr Defends Fed, Promises Review

Ahead of what is sure to be two raucous days of Congressional hearings, FRB Vice Chairman Barr’s testimony emphasizes that the Federal Reserve will use “all its tools” to protect banks of all sizes and that all deposits at all banks are safe.

Gruenberg Mounts Vigorous FDIC Defense, Presses For Significant Rule, Premium-Assessment Rewrite

FDIC Chairman Gruenberg’s testimony ahead of Congressional hearings describes the Signature and SVB actions, rebutting bailout assertions on grounds that the banks in fact failed and banks – not taxpayers – will make up any FDIC losses.  He also indicates that the FDIC can and will investigate insiders to determine responsibility and pursue penalties if appropriate.

Daily032723.pdf

20 03, 2023

FedFin on: The Collateral Damage of the Banking Crisis

2023-03-20T14:30:07-04:00March 20th, 2023|The Vault|

In this report, we build on FedFin’s in-depth reports about recent bank failures to detail new risks for all of the innocent bystanders in the U.S. mortgage market along with a not so-innocent bystander:  the Federal Home Loan Banks.  We note also some take-aways FHFA may draw from the crisis with regard to GSE regulation, resolution, and supervision.  In short, things will be different assuming they don’t get worse and then still more of a paradigm shift.

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

20 03, 2023

GSE-032023

2023-03-20T13:51:11-04:00March 20th, 2023|4- GSE Activity Report|

The Collateral Damage Of The Banking Crisis

In this report, we build on FedFin’s in-depth reports about recent bank failures to detail new risks for all of the innocent bystanders in the U.S. mortgage market along with a not so-innocent bystander:  the Federal Home Loan Banks.  We note also some take-aways FHFA may draw from the crisis with regard to GSE regulation, resolution, and supervision.  In short, things will be different assuming they don’t get worse and then still more of a paradigm shift.

GSE-032023.pdf

17 03, 2023

FedFin Assessment: Future of U.S. Bank Capital, Liquidity, Structural Regulation

2023-03-17T16:50:38-04:00March 17th, 2023|The Vault|

In this report, we continue our policy postmortem of SVB/SBNY and, now, so much more.  Prior reports have assessed the overall political context (see Client Report RESOLVE49) and likely changes to FDIC insurance (see Client Report DEPOSITINSURANCE118), with a forthcoming Petrou op-ed in Barron’s focusing on specific ways to reform federal deposit insurance to protect only the innocent.  In this report, we look at some key regulatory changes likely as the banking agencies reevaluate the regional-bank capital, liquidity, and the IDI/BHC construct.  As noted in our initial assessment and thereafter, we do not expect meaningful legislative action on the Warren, et. al. bill to repeal “tailoring” requirements, but we do expect bipartisan political pressure not just for supervisory accountability (see another forthcoming report), but also regulatory revisions.

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

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