#Barr – Page 2 – Federal Financial Analytics

22 03, 2024

Al032524

Shane Smith2024-03-22T16:35:16-04:00March 22nd, 2024|3- This Week|

One Down, Not Out

As we noted, Vice Chair Barr has bowed to the institutional might of the central bank he helps govern, agreeing Friday that the consensus which Chair Powell committed (see Client Report FEDERALRESERVE75) on the capital rules will lead to significant, material changes. This is a major victory for banks who mustered what Mr. Powell and others said is the most omnipresent, potent regulatory-advocacy campaign they’ve ever seen. Still, it leaves open what will change, how Acting Comptroller, and – more problematic – FDIC Chair Gruenberg and Director Chopra will join in. We anticipated this outcome in our January forecast on the future of the capital rule, also laying out just what the concession might look like and what could happen if only the Fed or just the Fed and OCC are able to agree. We will shortly provide clients with an updated forecast of what’s to come along with a look at a question of almost equal importance: when changes will come and if that’s enough time to ensure finalization before the political landscape could take a decided change all its own this November.

Al032524.pdf…

22 03, 2024

DAILY032224

Shane Smith2024-03-22T16:13:11-04:00March 22nd, 2024|2- Daily Briefing|

Banking Agencies Push Back Key Deadline

Easing a bit of burden and doubtless with litigation in mind, the banking agencies today issued an interim final rule extending the applicability date of facility-based assessment areas and public file provisions of the CRA rule from April 1, 2024 to January 1, 2026. With this change, the manner in which assessment areas are evaluated is aligned to the same deadline. The IFR also includes non-substantive revisions to the final rule.

HFSC GOP Calls for GAO Interchange Fee Study

Following introduction of HFSC Subcommittee Chair Luetkemeyer’s (R-MO) bill (H.R. 7531) to require the Fed to conduct a qualitative impact study of the interchange fee proposal, he and Subcommittee Chair Barr (R-KY) yesterday sent a letter to the GAO requesting a study of the potential impacts of the proposal (see FSM Report INTERCHANGE12). The members state that the proposal would cause banks and credit unions to face “material obstacles” to offset the regulatory, anti-fraud, and operating costs for extending banking services to low-balance consumers, with the proposal also raising “unique concerns” because the Fed offers competing payment services. The members request that the GAO’s analysis examine the rule’s effects on consumer access to checking account services with regards to minimum balance costs, increases in ancillary fee revenue, LMI population access, and the cumulative impacts of agency rules since January 1, 2023 affecting debit accounts.

Barr Concedes Capital Rules Will Change

Ending speculation that Vice Chair Barr will not accede to Chair Powell’s end-game …

11 03, 2024

DAILY031124

Eliza Allen2024-03-11T17:15:23-04:00March 11th, 2024|2- Daily Briefing|

Hagerty Demands Signature-Asset Sale Answers ASAP

Sen. Bill Hagerty (R-TN) yesterday sent a letter to Chair Gruenberg questioning the FDIC’s adherence to requirements in its auction process during the sale of Signature Bank’s loan portfolio, accusing the FDIC of making political choices inconsistent with its least-cost mandate.

Scott Again Calls for Gruenberg Resignation

Adding to GOP pressure on FDIC Chair Gruenberg, Senate Banking Ranking Member Scott (R-SC) yesterday sent a letter reiterating his demand that Mr. Gruenberg step down.

BTFP Demise if FHLB Opportunity

As anticipated, the BTFP window closed today.

FDIC’s Hill Wants New Blockchain, Liquidity Standards

FDIC Vice Chair Hill today said there are “significant downsides” to the agency’s current approach to blockchain, describing its message and that of the inter-agency policy (see Client Report CRYPTO32) as “don’t bother trying.”

Warren Tries to Divide Powell from Other Regulators to Conquer Capital Regs

Following her grilling of Chair Powell last week regarding his decision to intervene in setting the new capital rules, Sen. Warren (D-MA) yesterday sent a letter to Vice Chair Barr, Chair Gruenberg, and Acting Comptroller Hsu asking them if pressure from big banks has “weakened your resolve.”

GAO Wants FinCEN to Move Better, Faster

Reinforcing longstanding bank complaints about the current AML regime, GAO today published a report finding that FinCEN needs to improve transparency surrounding its progress implementing the Anti-Money Laundering Act of 2020 (see FSM Report AML132).

Biden Presses for Statutory Change Boosting FHLB Affordable-Housing Contributions

President Biden’s FY25 …

7 03, 2024

DAILY030724

Eliza Allen2024-03-07T16:51:03-05:00March 7th, 2024|2- Daily Briefing|

HFSC GOP Press Discount-Window Reform, Slow-Go on Liquidity Risk

Building on questioning at a recent HFSC hearing (see Client Report LIQUIDITY34), Financial Institutions Subcommittee Chair Barr (R-KY) led all Republican members of his subcommittee in a letter to Chair Powell, Chair Gruenberg, and Acting Comptroller Hsu urging them to address stigma and operational issues associated with the discount window.

Powell Reiterates: Capital Rules Will Change

Today’s Senate Banking hearing with Chair Powell covered much of the same ground as the Chair’s appearance before HFSC (see Client Report FEDERALRESERVE75) with Democrats focusing on housing affordability and Republicans expressing their satisfaction with Mr. Powell’s statement that the Basel III proposal may have to be withdrawn and re-proposed.

House Judiciary Now Says 12 Large Banks Colluded with FinCEN

Prior to the House Judiciary’s Select Subcommittee on the Weaponization of the Federal Government hearing today on large bank “collusion,” the subcommittee yesterday published a report finding that FinCEN and the FBI engaged in backchannel discussions with large financial institutions to gather private financial data.

BCBS Proposes GSIB Window-Dressing Revisions

As anticipated, the Basel Committee on Banking Supervision today released a consultation on revisions to the GSIB assessment framework concerning window dressing.

House Republican Targets Interest on Reserves

Following up on yesterday’s HFSC hearing (see Client Report FEDERALRESERVE75), Rep. Davidson (R-OH) has introduced legislation (H.R. 7562) to prevent Federal Reserve Banks from paying interest on excess reserves.

Daily030724.pdf…

27 02, 2024

Daily022724

Arezou Rafikian2024-02-27T16:49:32-05:00February 27th, 2024|2- Daily Briefing|

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 …

16 02, 2024

Al021924

Shane Smith2024-02-16T15:54:42-05:00February 16th, 2024|3- This Week|

Bagehot’s Legacy

HFSC Financial Institutions Chair Barr (R-KY) last week invoked the patron saint of central banks, Walter Bagehot, reminding his hearing (see Client Report LIQUIDITY34) that central banks are to use their lender-of-last-resort powers only for solvent banks and then only at a premium. To do other, Bagehot said and Mr. Barr repeated, is to encourage moral hazard, the sin the chair went on to attribute to the modern-day Federal Reserve. He also floated legislation to curb the Fed’s 13(3) emergency-liquidity powers, legislation on which he will have a surprising ally, Sen. Elizabeth Warren (D-MA). She is a long-time advocate of tougher restrictions on Fed emergency liquidity (see FSM Report FEDERALRESERVE21). Still, we think the odds of legislation in this Congress are small, with Congress, the agencies, and banks sure instead to focus on what will be demanded of them in terms of discount-window readiness, FedWire resilience, FHLB access, and additional liquidity. Vice Chair Barr is less enthusiastic than Acting Comptroller Hsu about new liquidity standards, but much is afoot and thus so are we. More to come…

Al021924.pdf…

16 02, 2024

DAILY021624

Eliza Allen2024-02-16T15:55:14-05:00February 16th, 2024|2- Daily Briefing|

Barr Points to Tough New Fed Supervisory Strategy

FRB Vice Chair Barr today updated FRB efforts to enhance bank supervision since its SVB post mortem revealed severe failings (see Client Report REFORM221). Various internal efforts are under way, but the talk indicates no specific new initiatives beyond far greater focus on near-term CRE risk with an eye in particular to adequate provisioning. The System is now improving supervisory rigor, coordination, and escalation protocols, with Mr. Barr also laying out how Fed supervision has become significantly more rigorous in the last year.

CFPB Report Continues Credit Card Attack

Buttressing its controversial credit-card late-fee proposal (see FSM Report CREDITCARD36), the CFPB today issued a report finding that the 25 largest credit card issuers charged interest rates eight to ten percentage points higher than small-and-medium-sized banks and credit unions. The report states that higher rates among large issuers persist across credit scores, with large issuers also more likely to charge annual fees.

House GOP Tries to Speed Bank M&A

Following up a letter sent to the federal banking agencies in October, HFSC Financial Institutions Subcommittee Chair Barr (R-KY) and Rep. Fitzgerald (R-WI) today introduced the Bank Failure Prevention Act, a bill to require the Federal Reserve to act on bank merger applications within ninety days. The bill would also require the central bank to acknowledge the application’s completion within thirty days, with approval automatically granted for any application not serviced within the ninety-day window.

Daily021624.pdf…

15 02, 2024

STRESS32

Eliza Allen2024-02-15T15:42:00-05:00February 15th, 2024|5- Client Report|

FedFin Assessment: New Fed Stress Tests are a lot Like the Old Fed Stress Tests

In this report, we assess the strategic and policy implications of the Fed’s new stress-test regime. Released today, it incorporates new “exploratory” scenarios previewed by Vice Chair Barr as a response to the significant stress-test omissions laid bare in the March banking crisis. However, these exploratory tests will not directly factor into the SCB, which will also be calibrated to current capital rules since the banking agencies are now most unlikely to finalize these in time for SCB calculations later this year. We nonetheless expect bank supervisors to run bank results against internal models premised on new capital requirements, using supervisory discretion to address any capital shortfalls they feel warrant distribution restrictions regardless of formal test results. Similarly, we think supervisors will take near-term action if any of the exploratory scenarios points to near-term risk.

STRESS32.pdf…

14 02, 2024

DAILY021424

Eliza Allen2024-02-14T17:29:47-05:00February 14th, 2024|2- Daily Briefing|

Global Regulators Propose Ways to Limit Variation-Margining Stress

As promised, CPMI and IOSCO have issued a discussion paper on CCP and clearing-member variation-margin practices. The global agencies propose eight principles to enhance the likelihood that margins will be covered in stress situations, a continuing challenge based on a recent IMF paper finding that up to a third of EU active-derivatives users would not be able to meet variation-margin calls under stress and would thus turn to liquidating MMF shares or other assets in a manner likely to amplify market stress.

HFSC Deploys Power of the Purse to Pressure FinCEN

As anticipated, today’s HFSC hearing with Treasury and FinCEN was highly partisan, with Republicans continuing to blast FinCEN for what they call SAR surveillance and now threatening to block any increased funding for FinCEN until it also improves beneficial-ownership reporting to the GOP’s liking. Rep. Loudermilk (R-GA) also criticized FinCEN for failing to release the statutorily-mandated BSA review and the $10,000 threshold review.

Barr Sees Banking System as Strong, Liquid

In remarks today, FRB Vice Chair Barr emphasized that, despite pockets of risk and CRE worries, the banking system is sound and he sees no liquidity-risk concerns across the financial system. Still, March 2023 taught hard lessons, he said, with banks since taking significant steps to reduce HTM holdings and enhance liquidity resilience.

Daily021424.pdf…

5 02, 2024

DAILY020524

Eliza Allen2024-02-05T16:54:06-05:00February 5th, 2024|2- Daily Briefing|

Bowman Opposes Tech Self-Regulation, Highlights Emerging Risks

In remarks Friday on the future of banking, FRB Gov. Bowman joined Acting Comptroller Hsu in expressing concern over supervisory and governance complacency, especially when it comes to interest-rate and liquidity risk. The speech picks up on Karen Petrou’s memo last week, pointing to the way in which regulators now appear focused principally on new rules, not emerging risks including those from fraud-renewed threats and third-party vendors. Ms. Bowman thus urges greater accountability for banks based on third-party actions not only to enhance risk management, but also to reduce migration risk.

House GOP Expands Attack on Fed Work With Global Bodies

Continuing previous attacks on Federal Reserve Banks and federal banking agencies’ work with global entities, HFSC Chair McHenry (R-NC) and Financial Institutions Subcommittee Chair Barr (R-KY) sent letters today to the San Francisco and New York Reserve Banks disputing what they describe as undue cooperation with the Network for Greening the Financial System (NGFS) and Bank for International Settlements (BIS).

Daily020524.pdf…