#BHC – Page 2 – Federal Financial Analytics

27 07, 2023

DAILY072723

Eliza Allen2023-07-27T17:47:02-04:00July 27th, 2023|2- Daily Briefing|

FSB Tries to Calm CoCo Confusion

Doubtless responding to the CoCo chaos when Credit Suisse failed, the FSB today issued a report laying out how cross-border crisis-management groups are to handle unallocated TLAC (UTLAC) such as the “alternative Tier 1” bonds popular in the EU.

FDIC 3-2 Vote Presages Knock-Down Basel Battle

As anticipated, the FDIC today voted 3-2 to issue a sweeping rewrite of U.S. regulatory capital requirements.

Divided, Cautious Fed Advances End-Game, GSIB Rewrites

As anticipated, Gov. Bowman today voted against the new capital framework, as did Gov. Waller; as a result, the vote was 4-2.

Stablecoin Bill Advances, Compromises to Come

At a fiery HFSC markup today, Chairman McHenry (R-NC) announced that bipartisan negotiations had broken down largely due to the White House, choosing to proceed to a final package as he remains open to amendment before floor action.

House Republicans Skewer Basel Rules

Hill comment so far in response to the new capital rules is sparse.

Daily072723.pdf…

26 07, 2023

CAPITAL229

Eliza Allen2023-07-26T14:30:18-04:00July 26th, 2023|5- Client Report|

FedFin Assessment: What to Watch in the Regulatory-Capital Rewrite

As promised, we plan in-depth coverage of the Fed and FDIC meetings tomorrow as well as of the capital rewrites they are set to propose no matter all the warning shots from Congressional Republicans. In this report, we provide an overview of each of the rules the agencies will propose based on key issues in the Basel end-game standards they will finally advance. We do not focus on details or how the U.S. may adapt these rules except where public releases have provided advance insight. Instead, we highlight key issues to provide vital background and context of tomorrow’s actions as well as key decision points on which comment and political advocacy are sure to center.

CAPITAL229.pdf…

25 07, 2023

FedFin Analysis: U.S. Merger Policy

Arezou Rafikian2023-07-25T17:18:51-04:00July 25th, 2023|The Vault|

Building on a request for comment, the Department of Justice (DOJ) and Federal Trade Commission (FTC) have now proposed specific revisions to U.S. merger policy that significantly redirect the manner in which M&A transactions – even if only for minority positions – will be considered. Although this is only a draft statement, it tracks much of what President Biden laid out in his 2021 executive order on U.S. competition policy and actions since then by the DOJ and the FTC. As a result, the guidelines are more of a roadmap providing clarity than a new approach unless the final version differs substantively in any major way or future Administrations adopt a different policy. Near-term U.S. merger policy makes it considerably more difficult to finalize horizontal, vertical, and even minority holdings, a challenge likely to be particularly acute in U.S. financial services where government agencies believe there is …

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

24 07, 2023

MERGER12

Eliza Allen2023-07-24T17:03:59-04:00July 24th, 2023|1- Financial Services Management|

U.S. Merger Policy

Building on a request for comment, the Department of Justice (DOJ) and Federal Trade Commission (FTC) have now proposed specific revisions to U.S. merger policy that significantly redirect the manner in which M&A transactions – even if only for minority positions – will be considered. Although this is only a draft statement, it tracks much of what President Biden laid out in his 2021 executive order on U.S. competition policy and actions since then by the DOJ and the FTC. As a result, the guidelines are more of a roadmap providing clarity than a new approach unless the final version differs substantively in any major way or future Administrations adopt a different policy. Near-term U.S. merger policy makes it considerably more difficult to finalize horizontal, vertical, and even minority holdings, a challenge likely to be particularly acute in U.S. financial services where government agencies believe there is undue concentration in banking, payment, private-equity, and other sectors. The clarity and specifics of the guidelines will give firms a clearer understanding of obstacles to possible transactions as well as risks to those that have been previously consummated. However, the guidelines are statements of agency policy based on their read of law, not a binding legal action. As a result, merger participants who believe that their transactions were unduly denied and companies ordered to shed certain operations may still seek legal redress in the courts.

MERGER12.pdf…

7 07, 2023

Al070723

Eliza Allen2023-07-07T16:49:21-04:00July 7th, 2023|3- This Week|

The ESG Jihad

As anticipated, House Republicans have made July their “ESG month” with HFSC and other panels planning an array of actions culminating in an HFSC mark-up of as-yet-unintroduced legislation later this month. Before writing this off as part of the GOP’s pre-election “culture-war” campaign, it’s worth remembering that the Democratic-controlled Senate still approved a House measure overturning Department of Labor ESG pension-investment rules; only a Presidential veto saved those rules and it might take more of them to counter what Republicans now have in store for the financial-services sector.

Al071023.pdf…

7 07, 2023

DAILY070723

Eliza Allen2023-07-07T16:47:33-04:00July 7th, 2023|2- Daily Briefing|

House Judiciary Joins GOP Asset-Manager ESG Attack

Continuing the GOP campaign against ESG, House Judiciary Chairman Jordan (R-OH) and Reps. Massie (R-KY) and Bishop (R-NC) sent letters late yesterday to the leadership of BlackRock, Vanguard, State Street Global Advisers, the Glasgow Financial Alliance for Net Zero, and the Net Zero Asset Managers initiative, claiming that what they call “collusive agreements” violate antitrust law.

FRB-KC: Farm Credit System Mergers May Influence Ag-Bank Portfolio Strategy

New research from Federal Reserve Bank of Kansas City staff concludes that, while Farm Credit System mergers over the past twenty years had relatively minor effects on agricultural-bank profitability and efficiency, they may have altered bank portfolio decisions with broader implications both for banks and the communities they serve.

CFPB, Treasury, HHS Launch Interagency Inquiry Into Medical-Payment Products

As part of the White House initiative to address medical-sector “junk fees” and consumer protection, the CFPB today was joined by HHS and Treasury in issuing an RFI on high-cost specialty financial products it says harm medical patients by driving up debt.

FHFA Joins Repeat-Offender Crackdown

Acting on the “repeat-offender” crackdown initiated by the CFPB and recently picked up by the OCC, FHFA today issued a proposed rule that would revise its Suspended Counterparty Program (SCP) regulation to authorize FHFA to immediately suspend business between the GSEs and counterparties who are found to have committed civil or criminal misconduct in connection with real property management or ownership.

Daily070723.pdf…

27 06, 2023

FedFin on: Failed-Bank Compensation, Resolution

Arezou Rafikian2023-06-27T16:13:11-04:00June 27th, 2023|The Vault|

The Senate Banking Committee has overwhelmingly approved bipartisan legislation to reform executive compensation following larger insured-depository institution (IDI) failures, with parent-company executive compensation also at risk in some circumstances. Unlike previous bipartisan claw-back legislation, this measure is targeted to incentive compensation, not salary, expressly exempts “white knights,” institution-affiliated persons and directors, and gives the FDIC discretion also to allow senior officers to retain affected compensation in certain other circumstances…

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

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27 06, 2023

COMPENSATION37

Eliza Allen2023-06-27T16:00:07-04:00June 27th, 2023|1- Financial Services Management|

Failed-Bank Compensation, Resolution

The Senate Banking Committee has overwhelmingly approved bipartisan legislation to reform executive compensation following larger insured-depository institution (IDI) failures, with parent-company executive compensation also at risk in some circumstances. Unlike previous bipartisan claw-back legislation, this measure is targeted to incentive compensation, not salary, expressly exempts “white knights,” institution-affiliated persons and directors, and gives the FDIC discretion also to allow senior officers to retain affected compensation in certain other circumstances. Also unlike the prior bill, this measure would make it more difficult for the FDIC to resolve a failing IDI as it did for First Republic via an assisted acquisition by JPMorgan despite the overall prohibition on any U.S. institution holding more than ten percent of national deposits. The Senate bill also mandates that IDIs and parent companies adopt governance standards that give the firm power to claw back compensation in the event of weak condition or poor management practice.

COMPENSATION37.pdf…

20 06, 2023

M062023

Eliza Allen2023-06-20T14:47:44-04:00June 20th, 2023|6- Client Memo|

Our Baffled, Befuddled Central Bank

After SVB failed, Jay Powell told his monthly press conference that he found this “baffling” even though the Fed was the lead bank supervisor and the only one charged with its BHC’s oversight. At Wednesday’s presser, Mr. Powell took a different, but still-indefensible tack avoiding responsibility for a looming threat by stoutly denying his ability to do anything about nonbank financial-stability risk. However, the Board has an express mandate under the Dodd-Frank Act to address it. To be sure, the Fed does not have direct regulatory authority over nonbanks as it now remembers it did over SVB. But to say that the Fed’s only power is over banks as he Wednesday did is at best befuddled. A baffled, befuddled central bank is a national – indeed global – hazard.

M062023.pdf…

20 06, 2023

Karen Petrou: Our Baffled, Befuddled Central Bank

Eliza Allen2023-06-20T14:47:39-04:00June 20th, 2023|The Vault|

After SVB failed, Jay Powell told his monthly press conference that he found this “baffling” even though the Fed was the lead bank supervisor and the only one charged with its BHC’s oversight. At Wednesday’s presser, Mr. Powell took a different, but still-indefensible tack avoiding responsibility for a looming threat by stoutly denying his ability to do anything about nonbank financial-stability risk. However, the Board has an express mandate under the Dodd-Frank Act to address it. To be sure, the Fed does not have direct regulatory authority over nonbanks as it now remembers it did over SVB. But to say that the Fed’s only power is over banks as he Wednesday did is at best befuddled. A baffled, befuddled central bank is a national – indeed global – hazard.

Of course, perhaps Mr. Powell isn’t befuddled and instead wants to ensure that a crisis he claims the Fed can’t avert isn’t one that damages its already-scant credibility. This wouldn’t be the first time the Fed defended itself at the expense of sound policy, but that makes it no less inexcusable. I’ll have more to say about this in a talk on the 28^th, but last week’s memo looks at just one threat to financial stability and what the Fed could readily do to combat it.

The threat comes from the $1.4 trillion private-credit market’s ambition to use its regulatory-arbitrage advantage to morph into a $40 trillion fixed-income sector. Mr. Powell says all he can do …