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16 11, 2022

REFORM215

2022-11-22T15:02:46-05:00November 16th, 2022|5- Client Report|

HFSC Session Brings Crypto Action to Fore, “Holistic” Capital Under Scrutiny

HFSC today largely focused bank regulators on the same range of questions posed at yesterday’s Senate Banking session (see Client Report REFORM214).  However, Chairwoman Waters (D-CA) emphasized the importance of federal legislation in sharp contrast to Chairman Brown (D-OH), also announcing a hearing in December on FTX.  Ranking Member McHenry (R-NC), who will become HFSC chairman in the next Congress, concurred with the chairwoman’s views on the need for digital-finance statutory reform.  However, he took strong issue with inter-agency policy with regard to new capital rules, merger restrictions, and third-party relationship constraints.  Republican members also targeted Vice Chairman Barr’s holistic capital review, arguing that banks are currently well capitalized and that additional standards would hamper lending.  Mr. Barr indicated that an SLR rewrite is part of the holistic review but not immediately necessary to quell Treasury-market volatility or illiquidity.  As discussed in more detail below, regulators promised banking-sector crypto rules at least as stringent as Basel’s proposal.

REFORM215.pdf

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15 11, 2022

REFORM214

2022-11-22T15:27:38-05:00November 15th, 2022|5- Client Report|

Crypto, Deposit Rates, Capital Top Senate Discussion

At today’s Senate Banking oversight hearing with the banking agencies, Chairman Brown (D-OH) generally applauded the work of regulators, emphasizing the need for tough standards, like-kind rules for bigtech companies, and an inquiry into why depositor interest rates lag Fed rate hikes along lines posed earlier by Sen. Reed (D-RI).  FDIC Acting Chairman Gruenberg concurred, criticizing banks for sluggish rates.  Ranking Member Toomey (R-PA) reiterated his longstanding complaints about regulators straying outside their mission in areas such as climate change.  He also called for SLR relief to reduce Treasury-market risk and opposed pending large-bank resolution guidance (see FSM Report LIVINGWILL19) on grounds that it is unnecessary.

REFORM214.pdf

8 11, 2022

DAILY110822

2022-11-08T16:54:50-05:00November 8th, 2022|2- Daily Briefing|

EU Council Eases Basel End-Game Rules

Ahead of U.S. action on what is now being called the Basel “end-game,” the Council of the European Union today announced a set of compromises and delays to finalize the standard.  The output floors (see FSM Report CAPITAL220) will apply at both the parent banking group and subsidiary banks, but EU banks will have the discretion to consolidate capital at the highest parent level in each EU nation.  The Council release provides no details, indicating only “technical improvements” were made to the Basel credit-, market-, and operational- risk standards and small banks now have unspecified breaks, including with regard to disclosure.

BIS: CBDC Could Boost Deposit Rates, Small Banks

A new BIS staff paper differentiates its analysis of CBDC’s monetary-policy transmission impact by distinguishing between the extent to which large and small U.S. banks respond to different rates paid in interest on reserves (IOR).  Large banks are found to be unresponsive to IOR changes, making CBDC necessary to force them to increase rates on deposits via the competition channel rather than a traditional monetary-policy tool.  To the extent this reasoning takes hold, it could prove potent with Democrats who not only often favor CBDC, but are also increasingly angry about what they see as large-bank failures to raise deposit rates in lock-step with Fed hikes.

Daily110822.pdf

7 11, 2022

DAILY110722

2022-11-07T17:22:53-05:00November 7th, 2022|2- Daily Briefing|

Toomey Calls for More Fed Transparency

Sen. Toomey (R-PA) continued Republican demands for still more Fed transparency, sharply criticizing the Fed’s Friday proposal to provide some transparency into which institutions are granted master accounts.

Sweeping CFPB Fee Restrictions Now Effective

The Federal Register today includes the CFPB’s circular on Unanticipated Overdraft Fee Assessment Practices and a bulletin now effective on Unfair Returned Deposited Item Fee Assessment Practices.

CFPB Advances Bigtech Market Power Campaign

Continuing its campaign against bigtech’s market power, the Federal Register today includes the CFPB’s notice and request for comment on what fees bigtech payment operators levy on users for violations of acceptable use policies and whether their policies include provisions to restrict user platform access.

Fed Staff Paper Tries To Gauge Social Welfare Impact Of Liquidity, Capital Regs

A new Fed staff study attempts to lay out the social costs and benefits of large-bank liquidity and capital regulation.

Warren Continues Campaign Against Wells Fargo, Zelle

Sen. Warren (D-MA) today continued her campaign against Zelle by sending letters to its parent company and Wells Fargo, taking particular aim at what she deems the latter’s failure to provide adequate claims and reimbursement data and labelling responses to previous letters “insulting.”

Warren Denounces Fed “Culture of Corruption”

Sen. Warren (D-MA) today also continued her campaign against Chairman Powell, sending him a letter alleging “another set of egregious and embarrassing ethics breaches.”

Daily110722.pdf

20 10, 2022

DAILY102022

2022-10-20T17:36:06-04:00October 20th, 2022|2- Daily Briefing|

Fed Staff Study: Climate Risk-Based Capital Impossible for Foreseeable Future

FRB staff released a stylized study of one critical climate-risk policy question:  the extent to which banks should hold capital against it.  Members of Congress have suggested this over recent years (see FSM Report GREEN9) and the BIS at the outset of its thinking recommended both “brown-penalty” and “green-incentive” capital charges (see Client Report GREEN).

FSB Presses for MMF, Open-End Rules; Government-Bond CCPs

Continuing its NBFI focus (see Client Report NBFI), the FSB today issued new recommendations to address government-security market illiquidity.

Gruenberg Gives No Clue as to Timing, Content of Inter-Agency Crypto Guidance

In remarks today, Acting Chairman Gruenberg reiterated the risks laid out in the FSOC digital asset report (see Client Report CRYPTO33), repeated warnings against misrepresenting FDIC deposit insurance, and announced forthcoming interagency crypto guidance without providing any details or timeline.

Bipartisan Senators Press Secondary Sanctions for Enactment

Sens. Toomey (R-PA) and Van Hollen (D-MD) released a readout of a conversation with the Ukrainian Ambassador on the upcoming G7 Russian oil price cap, positioning their oil sanctions amendment for inclusion in the National Defense Authorization Act (NDAA) in light of the Ambassador’s support for it.

Warren Calls for Stronger, More Transparent CFPB Remittance Rule

Joined by four Senate Democrats, Sen. Warren (D-MA) today sent a letter to CFPB Director Chopra asking that the agency strengthen its remittance rule to ensure greater transparency for exchange rates and fees it …

22 09, 2022

REFORM213

2022-10-12T17:04:04-04:00September 22nd, 2022|5- Client Report|

Senate Republicans Tackle Woke Banking; Democrats Turn Again to Zelle, Fees

Senate Banking’s hearing with big-bank CEOs proved much more combative than HFSC’s session yesterday (see Client Report REFORM212).  From the outset, Republican Senators condemned what they characterized as serious threats of banking politicization around social and cultural issues, with Ranking Member Toomey (R-PA) predicting a Republican counter-offensive should his party regain control.  He also said that the Fed’s decision to join other central banks and supervisors in implementing climate scenario analysis is a precursor to regulatory edicts pressuring banks to divest from energy companies.  Republicans also emphasized that high regulatory-capital requirements have undue macroeconomic effects.  As predicted, Democratic focused extensively on Zelle and bank fees.

REFORM213.pdf

22 09, 2022

REFORM212

2022-10-12T17:06:54-04:00September 22nd, 2022|5- Client Report|

HFSC Goes Easy on CEOs

At today’s big-bank oversight HFSC hearing, Committee Democrats focused on each bank’s progress on social issues, such as internal diversity, unionization, and historic roles in financing slavery.  Although Chairwoman Waters (D-CA) called for more restrictive merger-approval criteria in her opening statement, Democrats largely left the issue untouched.  Ranking Member McHenry (R-NC) framed the hearing as political “theater,” focusing on discrediting capital increases.  Committee Republicans also asked CEOs about inflation, fiscal policy, and gun merchant codes.  Chairwoman Waters concluded this marathon session by chastising the CEOs for failing fully to answer the questions she posed ahead of the hearing and demanding that they do so in five legislative days.

REFORM212.pdf

16 09, 2022

Al091922

2022-10-13T10:10:12-04:00September 16th, 2022|3- This Week|

Question Time

Although cantankerous shareholders can be a bit of an annoyance, big-bank CEOs rarely go through wringers of unrelenting and sometimes downright unpleasant questioning.  This will, though, be their fate when a select group of GSIB and super-regional bank CEOs is called before HFSC and Senate Banking later this week.  Nothing will come of this inquisition in terms of legislation, but – as the shift in overdraft and racial-equity policy makes clear – big banks can feel compelled to change course even as regulators hear the wind at their back.

Al091922.pdf

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