#capital proposal – Federal Financial Analytics

1 05, 2024

DAILY050124

Eliza Allen2024-05-01T16:56:16-04:00May 1st, 2024|2- Daily Briefing|

Treasury Urged to Consider Green Bonds

The Treasury Borrowing Advisory Group’s latest report to the Treasury includes a proposal that the U.S. join other sovereigns and issue “green bonds.” The recommendation comes in a “blue-sky” assessment of Treasury obligations suggesting that Treasury also explore other new instruments such as callable bonds.

Powell Says No Decision on Basel 3 Reproposal

Refuting coverage earlier today that the FRB does not plan to repropose the Basel end-game rules, Chair Powell today said that the central bank has made no decisions yet on either policy or process beyond a commitment to final standards faithful to the global rules and comparable to those in other jurisdictions. The chair acknowledged that the end-game rules are taking up so much time that other initiatives may be on hold.

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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 …

20 03, 2024

DAILY032024

Eliza Allen2024-03-20T16:23:55-04:00March 20th, 2024|2- Daily Briefing|

Gottheimer Confirms Bipartisan Basel Worries

Rep. Josh Gottheimer (D-NJ) today told the ABA summit that there is bipartisan concern over the impact the Basel III endgame proposal could have on American competitiveness, calling the requirements “overly-burdensome.”

FHFA Advancing FHLB Troubled-Bank Funding Limits

Speaking today at the ABA summit, the Deputy Director of the FHFA’s Division of Banking Regulation Joshua Stallings indicated that the agency is following up on the FHLB100 report by working with the FRB to set cut-off points between acceptable FHLB funding and the discount window.

Tester Slams Fed Interchange Proposal, Durbin-Marshall Bill

Sen. Tester (D-MT) today told the ABA Summit that the Fed’s debit interchange fee proposal (see FSM Report INTERCHANGE12) is a “mistake,” creating uncertainty and adversely affecting community banks and rural America.

Powell: Retail CBDC A Long Way from Anywhere

Reiterating comments made to Sens. Cramer (R-ND) and Lummis (R-WY) in his last appearance on Capitol Hill, Chair Powell today said the Fed is a long way from making any decision about offering a retail CBDC.

Daily032024.pdf…

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.

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5 03, 2024

Daily030524

Eliza Allen2024-03-05T16:37:23-05:00March 5th, 2024|2- Daily Briefing|

CFPB Fires All Cylinders on Credit Card Fees

In conjunction with a new White House “price-gouging” initiative today ahead of the President’s address, the CFPB finalized its controversial credit-card late-fee proposal (see FSM Report CREDITCARD36).

Presidential Strike Force Targets Financial-Services Fees, Mergers

In conjunction with the CFPB’s new credit-card fee standard, the White House today announced a “strike force” attacking what it believes to be price-gouging across the U.S. economy.

Interchange, Small-Dollar Lending Bills Added to House Docket

Although Thursday’s HFSC Financial Institutions’ hearing will be a largely partisan review of the “politicized” nature of bank regulation, bills on the docket include a draft measure from Rep. Luetkemeyer (R-MO) requiring the FRB to conduct a quantitative study of the implications of its pending interchange rule before finalization (see FSM Report INTERCHANGE12).

McHenry Supports At Least Some Liquidity-Reg Rewrite

Redoubling his campaign against the capital proposal, HFSC Chairman McHenry (R-NC) today made it clear that he does support at least some revisions to liquidity rules.

IMF Looks Under U.S. Bank “Weak Tail”

Looking at U.S. bank failures one year later, the IMF today released a global financial stability note finding that the “weak tail” of U.S. banks continues to present a possible systemic risk despite ongoing supervisory and regulatory efforts.

Daily030524.pdf…

4 03, 2024

M030424

Eliza Allen2024-03-04T11:50:09-05:00March 4th, 2024|6- Client Memo|

The Madness of a Model and its Unfounded Policy Conclusion

As the pending U.S. capital rules head into their own end-game, there is finally a good deal of talk about an issue long neglected in both public discourse and banking-agency thinking: the extent to which higher bank capital rules accelerate credit-market migration. Simple assertions that more capital means less credit are, as I’ve noted before, simplistic. One must consider how banks reallocate credit exposures to optimize capital impact and, still more importantly, how the credit obligations banks decide to leave behind take a hike. Now comes a new paper the Financial Times touts concluding that, thanks to shadow banks, “we can jack up capital requirements more.” Maybe, but not judging by this study’s design. Even with considerable charity, it can be given no better than the “very creative” grade which kind primary-school teachers accord nice tries.

M030424.pdf…

4 03, 2024

Karen Petrou: The Madness of a Model and its Unfounded Policy Conclusion

Eliza Allen2024-03-04T11:50:02-05:00March 4th, 2024|The Vault|

As the pending U.S. capital rules head into their own end-game, there is finally a good deal of talk about an issue long neglected in both public discourse and banking-agency thinking: the extent to which higher bank capital rules accelerate credit-market migration. Simple assertions that more capital means less credit are, as I’ve noted before, simplistic. One must consider how banks reallocate credit exposures to optimize capital impact and, still more importantly, how the credit obligations banks decide to leave behind take a hike. Now comes a new paper the Financial Times touts concluding that, thanks to shadow banks, “we can jack up capital requirements more.” Maybe, but not judging by this study’s design. Even with considerable charity, it can be given no better than the “very creative” grade which kind primary-school teachers accord nice tries.

The paper in question is by Bank of International Settlements staff. It looks empirically – or so it says – at what it calls the U.S. banking sector’s share since the 1960s of what it lugubriously calls “informationally-sensitive loans.” It documents a lot of numbers said to demonstrate lower bank lending share, using a model founded on both erroneous data and wild leaps to conclude in a fit of circular reasoning that more nonbank lending explains why there is less bank lending. In the study’s words, “intermediaries themselves have adjusted their business models.” What might have led banks to decades of technological intransigence and strategic indolence is neither clearly explained nor verified.

What …

1 03, 2024

Al030424

Eliza Allen2024-03-01T17:07:55-05:00March 1st, 2024|3- This Week|

A Central Bank Very Much in the Middle

As always, we will provide clients with in-depth analyses after Chair Powell comes before Congress later this week to face the usual fusillade of political inquiry along with policy questions. As before (see Client Report FEDERALRESERVE74), Mr. Powell will face hard questioning from Republicans on the pending capital rules, with many now trying to pin him down on likely changes and the extent to which Mr. Powell’s promise of consensus before a final rule still holds. A lot of questions will also come from both sides of the aisle on bank mergers, with House Democrats demanding a new merger policy, Sen. Warren (D-MA) trying to get Mr. Powell to signal disapproval of the CapOne/Discover deal – he won’t, and Republicans trying to get Mr. Powell to say that deals such as this one must get done to ensure regional-bank survival – again, he won’t. We also expect a new grilling from the GOP on Fed emergency-liquidity powers, along with continuing questions on climate risk, CBDC, and the quality of bank supervision. The fate of NYCB by the time of the hearing will also be a major preoccupation on both sides of the aisle even if bad doesn’t immediately go to worse. Democrats will try to shore up CBDC but many are also troubled by emergency-liquidity powers. All sides will of course take much of the hearing’s bandwidth by pushing Mr. Powell to go one way or …