#BIS – Federal Financial Analytics

6 03, 2023

DAILY030623

Eliza Allen2023-03-06T16:54:30-05:00March 6th, 2023|2- Daily Briefing|

GOP Revs Up Fight Vs. Big-Bank Capital Hikes

Firing a fusillade ahead of capital rewrites expected late this month, Senate Banking Republicans late Friday sent FRB Chairman Powell a letter arguing strongly against capital increases and laying out a strong view that the agencies are required by law to tailor key standards.

BIS Project Finds Retail-CBDC Cross-Border Benefits

In a project boosting retail CBDC, the BIS Innovation Hub today announced the results of Project Icebreaker, a cross-border retail CBDC pilot between Sweden, Norway, and Israel.

GOP Will Deploy IGs To Demand Fed, CFPB, SEC Reform

In addition to a hearing that morning with Chairman Powell, the full HFSC will call federal banking agencies on the carpet Wednesday for “wasteful” spending and other governance issues.

Dems Beg Gensler Not to Scrap Scope 3 Climate Disclosures

Responding to intense GOP opposition to the SEC’s climate disclosure proposal, fifty Congressional Democrats led by Sen. Warren (D-MA) sent a letter to SEC Chairman Gensler today urging him not to scale the proposal back, especially its Scope 3 provisions.

Treasury Wants Fast NBFI, OEF, Crypto Standards

Treasury International Affairs Under-Secretary Jay Shambaugh today outlined U.S. priorities, emphasizing not only the importance of containing Russia and countering new threats, but also quickly advancing numerous global initiatives.

Hsu Pushes To Start The End Game

Acting Comptroller Hsu today reiterated his determination to act as quickly as possible on Basel’s end-game rules, noting the interagency statement last year that this would soon be done without providing …

22 02, 2023

DAILY022223

Eliza Allen2023-02-22T16:44:44-05:00February 22nd, 2023|2- Daily Briefing|

BIS Backs Away From Old CBDC, Presses New “Unified Ledger”

BIS General Manager Agustín Carstens today distanced the global central bank somewhat from its prior calls for two-tier CBDC as quickly as possible (see Client Report CBDC6).

Administration Drops FHA Premiums in Broad Housing Push

In a victory for mortgage lenders and defeat for private mortgage insurance and the GSEs, Vice President Harris announced that FHA will shortly reduce mortgage premiums by .30 percent, saving the average homeowner $800 in total premiums or $67 a month.

GOP Opens Anti-CBDC Campaign

Starting the GOP’s 2023 campaign against CBDC with a specific initiative, Rep. Tom Emmer SP (R-MN) and nine Republicans have introduced H.R. 1122.

FDIC Found Remiss re Systemic Resolution

In its assessment of challenges facing FDIC leadership, the Office of Inspector General (OIG) finds that the agency may not be ready to handle an OLA or systemic resolution, nor is it yet able to assess climate financial risk and sanctions compliance.

FHFA Looks Into FHLB-Member Community Activities

Perhaps advancing FHFA Director Thompson’s commitment to review aspects of the FHLB System, her agency today released a request for views on the extent to which a Home Loan Bank member supported its community to retain eligibility for long-term System advances.

Daily022223.pdf…

21 02, 2023

DAILY022123

Eliza Allen2023-02-21T16:39:53-05:00February 21st, 2023|2- Daily Briefing|

Nonbank Corporate Finance Stokes Systemic, Macro Risk

A new BIS paper supports bank assertions that nonbank corporate finance is considerably more procyclical in terms of its threat to financial stability and macroeconomic growth than that conducted by regulated companies. This risk-arbitrage question is germane not only to the ongoing debate about NBFI regulation, but also efforts to ensure that U.S. “end-game” capital rules sharply reduce the RWA for lower-risk corporate obligations.

FSB Fears Systemic Risk from Bank, CCP Commodity Risk

A new FSB report today assesses systemic risk posed by the oil, gas, and wheat commodity markets given its highly-leveraged and illiquid nature and its deep interconnections into the global banking system. Global regulators conclude that bank exposures in general are “manageable,” but some banks and CCPs have significant sector exposure and thus risk. Commodity firms have recently reduced liquidity risk, but they also hiked credit and market risk at a time of tightening that exacerbates them, leading the FSB to describe emerging risks and detail the data gaps that make it challenging to draw clear conclusions.

FSB Prioritizes Crypto, NBFIs

The FSB head’s letter to the G20 yesterday reiterates priorities outlined in his November letter, stating that global regulators will deliver a joint paper with the IMF later this year synthesizing policy findings and regulatory issues around cryptoassets. The FSB will also continue to prioritize NBFI supervision (see Client Report NBFI2), re-emphasizing the importance of studying hidden leverage and addressing liquidity mismatches in open-end funds.

Daily022123.pdf…

8 02, 2023

DAILY020823

Eliza Allen2023-02-08T17:36:06-05:00February 8th, 2023|2- Daily Briefing|

Biden Puts His Stamp On CFPB Credit-Card Fee Controls

Scuttling industry expectations that the CFPB’s credit-card fee clampdown will never be implemented, President Biden last night zeroed in on his administration’s campaign to eliminate “junk” fees, including “exorbitant” overdraft fees and credit card late fees.

Senate GOP Launches Anti-Woke Attack

Accelerating the GOP’s anti-woke endeavor, Sen. Kevin Cramer (R-SD) and 36 GOP senators have introduced S. 293 to impose strict sanctions on banks that provide or deny financial services for what the senators consider political reasons.

Treasury: Happy In The Cloud If It Doesn’t Rain

In its long-awaited report today on the systemic implications of cloud computing, Treasury today encouraged more rapid adoption even as it pointed to systemic-risk considerations.

HFSC Subcomm: Privacy Compromise May Not Prove Impossible

Today’s kick-off hearing by HFSC’s Subcommittee on Financial Institutions and Monetary Policy suggested that Chairman Barr (R-KY) will move deliberately on his priorities even as full Committee Chairman McHenry (R-NC) pursues higher-profile items such as anti-China policy.

BIS Renews Campaign For Bigtech Systemic Standards

Reiterating longstanding BIS concerns about bigtech platforms, General Manager Agustín Carstens today updated the changes he believes are urgently needed to address growing systemic risk in this sector.

Daily020823.pdf…

31 01, 2023

DAILY013123

Eliza Allen2023-01-31T16:58:29-05:00January 31st, 2023|2- Daily Briefing|

BIS Finds Digital Payments Have Yet to Conquer Cash

In a brief today, the BIS Committee on Payments and Market Infrastructures (CPMI) found that digital payments, while rapidly growing, have not supplanted cash. CPMI does report a record high value and volume of cashless payments, crediting this to changing consumer preferences, increasing prevalence of fast payments systems, and COVID, noting that cashless options may also bolster financial inclusion. However, the brief also finds a deceleration in the decline of cash withdrawals, concluding there is still a significant ongoing, if diminishing, demand for cash.

Warren, GOP Allies Grill Silvergate on FHLB Loan, Fed Supervision

Signaling bipartisan plans to take on crypto banking and now also the FHLBs as quickly as possible in the new Congress, senator Warren (D-MA) was joined yesterday by Sens. Kennedy (R-LA) and Marshall (R-KS) in sending another letter to the CEO of Silvergate Bank. Following an earlier inquiry which they said led to an insufficient response, the letter now focuses on the bank’s use of a $4.3 billion FHLB loan as a liquidity backstop. As in Karen Petrou’s recent memos and today’s podcast, the letter focuses on the System’s prior lien ahead of all other creditors (including the FDIC) and the extent to which this puts taxpayers at risk.

Daily013123.pdf…

23 01, 2023

DAILY012323

Eliza Allen2023-01-23T16:47:01-05:00January 23rd, 2023|2- Daily Briefing|

BIS: How Low Can Central-Bank Equity Go?

An historical examination of central-bank negative equity was published last week by the BIS. Doubtless undertaken as central banks such as the Fed record losses, the paper assesses how low central-bank equity can fall before it adversely affects confidence in fiat money. Noting as Karen Petrou’s book does that money is a “social convention,” the paper describes wide fiat-money acceptance depends in part on central-bank credibility based largely on the collapse of the Bank of Amsterdam in 1820. This has limited application to the Federal Reserve and other modern central banks in that the Bank of Amsterdam largely lacked fiscal backing and thus could not print money to rebuild equity.

Bank Big-Bank Merger Opponent Joins Justice Antitrust

With Jeremy Kress now in place as senior counsel to Jonathan Kanter in the Department of Justice’s Antitrust Division, it seems likely that pending big-bank mergers will get still more skeptical scrutiny. It is also possible that Mr. Kress was brought on to press Justice to finalize long-promised bank-merger guidelines that have been on hold since 2020 (see Client Report MERGER5). Mr. Kress is also a former colleague of Fed Vice Chairman Barr, who has indicated concern with larger-bank consolidation both directly and indirectly via the Fed/FDIC super-regional resolution proposal (see FSM Report RESOLVE48).

Daily012323.pdf…

19 12, 2022

FedFin on: FSOC Targets Usual Suspects but Also Points to Big-BHC, Nonbank Mortgage Systemic Risk

Arezou Rafikian2023-01-03T15:56:33-05:00December 19th, 2022|The Vault|

As promised, this FedFin report provides an in-depth analysis of FSOC’s 2022 annual report, focusing on findings with near-term policy implications. As always, the report is lengthy and includes many observations and market details that provide insight into Treasury and member-agency-staff thought. Much in it reiterates concerns about short-term funding markets, CCPs, and….

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

19 12, 2022

FSOC28

Eliza Allen2022-12-19T13:00:38-05:00December 19th, 2022|5- Client Report|

FSOC Targets Usual Suspects but Also Points to Big-BHC, Nonbank Mortgage Systemic Risk

As promised, this FedFin report provides an in-depth analysis of FSOC’s 2022 annual report, focusing on findings with near-term policy implications. As always, the report is lengthy and includes many observations and market details that provide insight into Treasury and member-agency-staff thought. Much in it reiterates concerns about short-term funding markets, CCPs, and investment funds (with FSOC for the first time urging regulators to look not only at MMFs and OEFs, but also at collective investment vehicles). As previously noted, the report is relatively sanguine about digital-asset systemic risk but, also reiterates findings in FSOC’s report (see Client Report CRYPTO33) demanding rapid action on a raft of reforms in this high-risk sector. What surprised us is the discussion of large BHCs, which departs from longstanding Fed and FSOC comfort in the post-GFC regulatory regime for this sector.

FSOC28.pdf…

19 12, 2022

GSE-121922

Eliza Allen2022-12-19T12:55:45-05:00December 19th, 2022|4- GSE Activity Report|

Nonbanks Get Unwelcome FSOC Attention

As promised Friday when FSOC’s annual report was released, we here go into depth on its implications for residential housing. Most notable to us in the lengthy report was its continuing concern about residential-housing price vulnerability, its new focus on MBS-market volatility, and specific action steps to address longstanding fears about nonbank mortgage originators and servicers.

GSE-121922.pdf…

16 12, 2022

DAILY121622

Eliza Allen2022-12-16T17:19:37-05:00December 16th, 2022|2- Daily Briefing|

GHOS Presses Speedy Bank-Crypto Capital Standards

Basel’s governing body, the Governors and Heads of Supervision, today endorsed the Committee’s planned work schedule.

Fed Finally Finalizes LIBOR Transition Regs

Narrowly ahead of its year-end statutory deadline, the Federal Reserve today issued a final version of its detailed proposal (see FSM Report LIBOR8) to implement the LIBOR Act’s provisions on replacement rates for existing contracts without fallback language (see FSM Report LIBOR7).

Regulators Highlight P2P, Crypto, NBFI Risks at FSOC Meeting

Although most of the FSOC’s discussion today of the LIBOR transition and climate risks was perfunctory, comments on the now-released 2022 Treasury annual report were not.

McHenry, Davidson Point to Forex-Clearing Systemic Risk

Picking up a recent BIS report finding at least $65 trillion at risk in off-balance sheet foreign-exchange clearing, incoming HFSC Chairman McHenry (R-NC) and the top Republican on the panel’s fintech task force, Rep. Warren Davidson (R-OH), called on Fed Chairman Powell and Secretary Yellen to investigate what they consider a looming risk to U.S. financial stability.

Chopra Presses Cloud-Service Provider, Stablecoin Systemic Designation

CFPB Chairman Chopra’s written statement for the FSOC meeting is considerably different than the oral one described in our earlier client alert.

Daily121622.pdf…