24 07, 2023


2023-07-24T17:00:47-04:00July 24th, 2023|2- Daily Briefing|

FDIC Clamps Down On Uninsured Deposit Reporting

Likely reacting to mid-size bank accusations that large banks are under-counting uninsured deposits, the FDIC today posted a financial institution letter highlighting that some financial institutions have incorrectly estimated uninsured deposits on their Call Reports.

Fed Archegos Order Lays Out Broader FBO Issues

Joining the U.K.’s record-breaking order, the Federal Reserve added $268.5 million to the $387 million fine imposed on Credit Suisse for governance and numerous other risk-manage failings related to its $5.5 billion Archegos loss.  The Fed’s order is an important reminder that FBO branches may be held to full account for failings tolerated at the time by U.S. or home-country regulators (who today also joined in this enforcement action).

GAO Anticipating Mark-Ups, Calls for Stablecoin, Crypto Spot Market Legislation

Ahead of HFSC’s mark-up, GAO today released a report sure to be cited as it calls for statutory change to address regulatory gaps in stablecoins and spot markets.  It notes that the lack of stablecoin reserve, disclosure, and redemption requirements may pose consumer-protection and financial-stability risks.


16 03, 2023


2023-03-16T17:11:59-04:00March 16th, 2023|2- Daily Briefing|

FedFin Assessment: One CS Consequence – LISCC Reinstatement For All Large Foreign GSIBs

In the wake of CS’s distress, we draw client attention to a 2021 exchange sure to factor heavily in the political response.

Brown Presses For In-Depth SVB, Signature Review

As anticipated (see Client Report RESOLVE49), Senate Banking Chairman Brown (D-OH) today called on all the banking agencies and Treasury quickly to undertake a review of SVB and Signatures failures.

Warren Heaps Still More Blame On Powell

In another letter today, Sen. Warren (D-MA) once again lambasted Chair Powell for what she claimed was his direct contribution to the collapse of Signature Bank and SVB as well as a “a culture of corruption” at the Fed.

Senate GOP Blames Fed, California re SVB

Senate Banking Republicans today tweeted a series of comments citing articles going back to last year identifying SVB risk and suggesting strongly that the Fed and California state supervisors are at fault for missing clear warning signs.

Bipartisan Senators Push Better Beneficial-Ownership Data Access

Senate Budget Committee Chairman Whitehouse (D-RI) was joined by Sens. Wyden (D-OR), Warren (D-MA), Grassley (R-IA), and Rubio (R-FL) late yesterday in submitting a comment letter to FinCEN taking serious issue with its proposed implementation of the Corporate Transparency Act (CTA) (see FSM Report AML135).

Senate Finance Hearing Deepens SVB Divide

At a heated Senate Finance hearing with Treasury Secretary Yellen, Members were quick to deviate from the hearing’s budget-focused agenda to address who should bear the …

28 03, 2022

Karen Petrou: Why the Fed Might Bail Out the Commodity Market

2023-03-27T15:57:01-04:00March 28th, 2022|The Vault|

In the midst of chaos, volatility always makes matters worse and this is very much the case with the commodities sector.  This has led to growing speculation that central banks will step in should unprecedented price swings show signs of systemic impact.  As we noted, we don’t know a central banker that wants to bail out commodities.  But none of them wanted to bail out anyone else either.  If market stress turns systemic, then central banks will step in.  Indeed, they may intervene even if stress seems manageable if they also believe that public welfare is at risk when core commodities go from pricey to prohibitive.

In the U.S., the Fed will resist calls to backstop commodities companies or traders for as long as it can by citing what it believes to be its limited mandate even as it argues that its anti-inflation policies will stabilize markets – just you wait.  However, whatever the Fed is able to do about inflation will take time and whatever it does about its portfolio to address inflation will exacerbate commodity-market stress.

Three possible sources of extreme volatility are already on the horizon.

First, there’s the liquidity stress sparked by CCP margin demands.  This was the culprit in the letter from energy traders to the European Central Bank and it’s at least as much of a factor in the U.S.  The more commodity-market volatility, the higher clearinghouse initial and variation margin demands and the harder it is to post eligible assets already scarce …

20 12, 2021

Karen Petrou: For the Next Vice Chair: Stringent Enforcement and Meaningful Supervision

2023-05-22T15:43:38-04:00December 20th, 2021|The Vault|

As we noted last week, the Fed decided to issue some post-Archegos guidance telling big banks to watch their counterparty credit-risk exposures.  As a banker with all too much experience dodging risk bullets told me, this guidance followed lots of prior guidance saying the same thing after each big boo-boo – think Long-Term Capital Management more than two decades ago and follow the trail of Fed statements thereafter.  Each time, the Fed looks stern and banks say they’re sorry but soon go back to following the money, not the risk.  And, over and over, examiners fail to notice anything amiss until the amount of realized risk is impossible to ignore.  Interestingly, the Bank of England acted with the Fed but with far more force.  Unlike the Fed’s renewed “you better watch out” guidance, the BoE demanded an immediate review of prime-brokering, reports back to regulators, and senior-management pay cuts if flaws go unrepaired.  Thus, unlike the Fed, the Bank of England’s response to costly and thoroughly avoidable lapses has teeth.  Whether the British then bite anyone is another question – the record is not replete with supervisory success – but the difference should nonetheless be instructive to the Fed’s next supervisory vice chair.

This difference is just like that between telling a child that she’ll be sorry next time and ensuring that the kid immediately knows that bad actions have tangible, actual consequences.  One doesn’t have to beat the kid silly – indeed, of course one more than shouldn’t.  But, …

10 12, 2021


2023-05-23T12:44:10-04:00December 10th, 2021|2- Daily Briefing|

FRB Stipulates Archegos-Risk Remedies
As forecast when Archegos broke (see Client Report HEDGE59), the FRB today issued new, tough guidance detailing its supervisory expectations for large-bank exposures to investment funds.

FSB Advances Cross-Border Payment Revamp
Building on its new cross-border payment policy (see FSM Report PAYMENT23), the FSB today sought comment on how national and regional data frameworks affect the cost, speed, access, security, and the interoperability of cross-border payments.

Aborted Merger Paper Hits Partisan Battle Lines
Following yesterday’s battle over an RFI on bank mergers, senators are squaring off on both process and policy. Banking Chair Brown (D-OH) agreed with it, arguing that what he calls M&A “rubber stamping” hurts communities and creates banking deserts.

Waters Demands Regional-Bank Merger Moratorium
Uping the ante on bank mergers after the FDIC fracas over an RFI, HFSC Chairwoman Waters (D-CA) late this afternoon called on the FRB, OCC, and FDIC to hold all M&A over $100 billion until completion of this review, one under way by the FRB and Department of Justice, and any similar OCC assessments.


15 09, 2021


2023-08-03T14:55:22-04:00September 15th, 2021|2- Daily Briefing|

FHFA Changes Capital Course on Key Requirements
Yesterday, FHFA said it would soon issue revisions to GSE capital regulation. Today, it did, proposing to retract the prior rule’s dim view of credit-risk transfer (CRT) with a new approach actively promoting it.

Acting Comptroller Expands on Equality Banking, Other Priorities
In remarks today, Acting Comptroller Hsu reiterated his priorities: reducing inequality, addressing digitalization, countering climate risk, and guarding against complacency.


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