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13 04, 2023

FedFin Assessment: Implications Of An IRR Capital Charge, New Liquidity Rules

2023-04-13T14:02:25-04:00April 13th, 2023|The Vault|

As we noted yesterday, the head of the Basel Committee has targeted two capital and liquidity  compromises included in the current Basel III construct not addressed in the end-game rules to which the U.S. plans shortly to turn.  Actions whether by Basel or, even without it, the U.S. to return to Basel’s initial proposals have significant strategic consequence.  Thus, this report assesses these options and how the U.S. might act on them.  We conclude that the U.S. will quickly impose a de facto interest-rate risk (IRR) capital charge and tighten LCR assumptions related to uninsured deposits.

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

13 04, 2023

IRR8

2023-04-13T11:27:21-04:00April 13th, 2023|5- Client Report|

FedFin Assessment: Implications Of An IRR Capital Charge, New Liquidity Rules

As we noted yesterday, the head of the Basel Committee has targeted two capital and liquidity  compromises included in the current Basel III construct not addressed in the end-game rules to which the U.S. plans shortly to turn.  Actions whether by Basel or, even without it, the U.S. to return to Basel’s initial proposals have significant strategic consequence.  Thus, this report assesses these options and how the U.S. might act on them.  We conclude that the U.S. will quickly impose a de facto interest-rate risk (IRR) capital charge and tighten LCR assumptions related to uninsured deposits.

IRR8.pdf

16 03, 2023

DAILY031623

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 …

5 10, 2022

DAILY100522

2022-10-05T16:59:59-04:00October 5th, 2022|2- Daily Briefing|

GOP Demands AG’s CBDC Ruling

HFSC Republicans today sent a letter to Attorney General Merrick Garland demanding a copy of the DoJ’s assessment on whether legislation is necessary to issue a CBDC required and due on September 5 by the President’s crypto executive order (see Client Report CRYPTO26).  Citing both Congress’ exclusive authority to coin money and Chairman Powell’s (see Client Report FEDERALRESERVE71) and Vice Chair Brainard’s (see Client Report CBDC13) ambiguous discussion of what constitutes CBDC “approval,” the Republicans reiterate that the Fed does not have the authority to issue a CBDC under current law.

Basel Blesses Counter-Cyclical Buffers

Following the FSB’s directive, the Basel Committee today issued a newsletter on counter-cyclical capital buffers (CCyBs) and a detailed report on capital and liquidity buffers.  The FSB has posited that one reason for both bank resilience and pandemic-related credit shortages was the unwillingness of banks to dip into buffers.  As we noted recently, Treasury Under Secretary Liang praised CCyBs and Basel’s newsletter reaches the same conclusion.  However, the detailed report finds that CCyB release had a weaker, albeit discernible, effect than express regulatory decisions to allow banks to use their capital buffers.

Daily100522.pdf

11 05, 2022

DAILY051122

2023-02-21T15:33:13-05:00May 11th, 2022|2- Daily Briefing|

HFSC re FSOC: SIFIs, Climate, Stablecoins, Lots More

Looking ahead to tomorrow’s HFSC hearing with Secretary Yellen, the Democratic staff memo suggests that this session will track much of what occurred yesterday at Senate Banking (see Client Report FSOC26): i.e., discussion of the need for stablecoin legislation, the role of SIFI designation, and the overall risks presented by higher inflation, Russia, China, and climate change.

Basel Plans Wholesale Review of Post-GFC Regulatory Regime

The head of the Basel Committee, Pablo Hernández de Cos, today announced a full-scale evaluation of the Basel III construct set for release later this year.  The report will evaluate complexity, regulatory interactions and systemic-risk dynamics, focusing on capital, liquidity, leverage, and macroprudential elements of the Basel III reforms.  The report will also evaluate resilience and financial-activity behavioral incentives.

FSB Plans Commodity, Climate, Crypto Agenda

In remarks today, FSB head Klaas Knot reiterated ongoing concern about commodity markets and continuing financial-market resilience despite stress absorption since Russia first invaded Ukraine.  Mr. Knot is also concerned that some banks are generally over-leveraged and those with prime brokers may be at particular risk.

Daily051122.pdf

29 03, 2022

DEFI

2023-03-27T15:45:58-04:00March 29th, 2022|5- Client Report|

Global Securities Regulators Diss DeFi

As promised, this report provides an in-depth analysis of IOSCO’s new paper on decentralized finance, one sure to advance the FSB’s efforts to bring DeFi systems under greater regulatory scrutiny due to the findings we here detail.  In the U.S., President Biden’s crypto-focused executive order (see FSM Report CRYPTO26) highlights DeFi’s risk with regard to illicit finance.  IOSCO’s work on this report was headed by the SEC, suggesting rapid U.S. action not only on this concern, but also on many other risks by the Commission, as well as the FSOC and other U.S. agencies.  IOSCO concerns go well beyond those specific to investors and trading platforms, noting, for example, significant risk posed to retail customers in DeFi lending and payment, settlement, and clearing products.  As with the FSB, IOSCO disputes assertions that DeFi is fully decentralized, noting that most of the services delivered via any DLT purporting to be DeFi are analogous to traditional financial products and services (TradFi) other than regulation.  The report also details the off-chain activities that result in significant inter-connectedness with TradFi without appropriate controls over possible contagion or even systemic risk.

DEFI.pdf

29 03, 2022

FedFin: Global Securities Regulators Diss DeFi

2023-03-27T15:46:19-04:00March 29th, 2022|The Vault|

As promised, this report provides an in-depth analysis of IOSCO’s new paper on decentralized finance, one sure to advance the FSB’s efforts to bring DeFi systems under greater regulatory scrutiny due to the findings we here detail.  In the U.S., President Biden’s crypto-focused executive order (see FSM Report CRYPTO26) highlights DeFi’s risk with regard to illicit finance.  IOSCO’s work on this report was headed by the SEC, suggesting rapid U.S. action not only on this concern, but also on many other risks by the Commission, as well as the FSOC and other U.S. agencies…

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

1 03, 2022

FedFin: Capital Grease for CRT Expansion

2023-04-04T14:46:28-04:00March 1st, 2022|The Vault|

As we noted late last week, FHFA has finalized revisions to its 2020 capital rule that most importantly lighten the GSEs’ capital load and reinvigorate credit risk transfer.  Deals from both Fannie and Freddie will come fast, but how furiously will depend also on externalities — i.e., how QT redefines RMBS demand and CRT pricing, what Ukraine does to market risk-on tolerance.

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

1 03, 2022

GSE-030122

2023-04-04T14:46:14-04:00March 1st, 2022|4- GSE Activity Report|

Capital Grease for CRT Expansion

As we noted late last week, FHFA has finalized revisions to its 2020 capital rule that most importantly lighten the GSEs’ capital load and reinvigorate credit risk transfer.  Deals from both Fannie and Freddie will come fast, but how furiously will depend also on externalities — i.e., how QT redefines RMBS demand and CRT pricing, what Ukraine does to market risk-on tolerance.

GSE-030122.pdf

12 01, 2022

FedFin Forecast: Prudential Regulatory Framework Set for Structural Change Largely Built on Current Standards

2023-04-24T15:49:23-04:00January 12th, 2022|The Vault|

As promised, FedFin begins our 2022 forecasts with this in-depth report on bank regulation. In general, we conclude that the context of decisions in 2022 and beyond will shift from a focus on tailoring efficiencies and burden relief to one emphasizing risk mitigation, fairness, equity, and — for the very biggest banks — a smaller systemic footprint. This report looks at the impact of pending personnel decisions as well as the outlook for climate-risk, new capital rules, FBO standards, and other key issues….

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

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