#capital standards – Federal Financial Analytics

18 01, 2024

DAILY011824

Eliza Allen2024-01-18T16:58:16-05:00January 18th, 2024|2- Daily Briefing|

Basel Head Backs U.S. End-Game

In an FT interview today, the Basel Committee’s chair, Pablo Hernández de Cos, unsurprisingly endorsed the U.S. end-game proposal, indirectly but firmly rebutting assertions that it is at variance with global norms.

The Shape of Liquidity Rules to Come

Previewing the construct of what may soon be the anticipated inter-agency proposal addressing liquidity-risk lessons-learned, Acting Comptroller Hsu today argued that the liquidity coverage ratio’s treatment of retail depositors (see FSM Report LIQUIDITY17) does not address likely depositor herding as they run for the exit.

Rounds, Sinema Press for SIFI-Designation Rollback

Senate Banking Committee Member Rounds (R-SD) alongside Sen. Sinema (I-AZ) introduced S.3601, legislation to codify 2019 standards (see FSM report SIFI35) adding significantly more obstacles to systemic designation compared to FSOC’s new approach (see FSM report SIFI36).

Steele’s Good-Bye Presses for More Tough Standards

In his last speech in office, Assistant Secretary for Financial Institutions Graham Steele today called for reassessment of the treatment of unrealized gains or losses not just under the capital rules, but also in the liquidity standards (where they are in fact to some degree now captured).

House Democrats Damn Capital Proposal With Faint Praise

In this report, we begin our assessment of Congressional end-game comment letters.

Senate Letters Slam Capital Proposal’s Tax-Equity Risk Weight Changes

Here, we turn to several Senate letters on the end-game proposal.

Daily011824.pdf…

17 01, 2024

DAILY011724

Eliza Allen2024-01-17T16:21:16-05:00January 17th, 2024|2- Daily Briefing|

CFPB Tries to Bring Overdraft Fees Under New Benchmark

Arguing that overdraft fees are a big-bank “junk-fee harvesting machine,” CFPB Director Chopra today released a long-awaited proposal to cap fees to what the agency considers a reasonable threshold.

Bowman Expands Basel Critique, Key Dem Now Points to Problems

In remarks today, FRB Gov. Bowman did not go quite as far as her colleague Chris Waller yesterday, but she nonetheless urged that the end-game rules be re-proposed after comments are taken into account.

Senate Banking GOP Again Urges Capital Proposal Withdrawal

Senate Banking Ranking Member Scott (R-SC) along with all Committee Republicans late yesterday sent a letter to FRB Chair Powell, FDIC Chairman Gruenberg, and Acting Comptroller Hsu once again calling on the regulators to withdraw the capital proposal (see FSM Report CAPITAL230).

Biden, Brown Praise CFPB Overdraft Proposal

Following the CFPB’s announcement of its proposed rule regarding overdraft fees today, President Biden again denounced “junk fees” as “exploitation,” and included the CFPB’s proposal in his administration’s efforts to lower costs for American consumers.

FRB/FDIC Provide Limited-Time Resolution-Plan Filing Flexibility

Reflecting a problem we identified in our assessment of the resolution-plan proposal (see FSM Report LIVINGWILL22), the FRB and FDIC today extended the resolution plan submission deadline for categories II and III banks from July 1, 2024 to March 31, 2025.

Global Regulators Turn to OTC-Derivative Margin Improvement

Following yesterday’s release with the CPMI focused on CCPs and clearing members, the Basel Committee and IOSCO today …

27 10, 2023

DAILY102723

Eliza Allen2023-10-27T17:02:18-04:00October 27th, 2023|2- Daily Briefing|

Barr Reiterates CBDC Slow-Go

FRB Vice Chair Barr today reiterated his recent comments that the Federal Reserve will only proceed with a CBDC if it gets express support from the executive branch and authorization from Congress.

Top BIS Official Questions Need for Higher Deposit-Insurance Coverage, Stronger Bank Regs

The BIS’s top bank supervisor, Fernando Restoy, today indirectly took sharp issue with several pending changes in U.S. deposit-insurance, regulation, and resolution standards. Pointing to supervisory lapses as the principal cause of recent bank failures, Mr. Restoy argued that more stringent capital and liquidity requirements matter less to bank resilience than strengthened supervision.

Daily102723.pdf…

26 10, 2023

DAILY102623

Eliza Allen2023-10-26T16:48:48-04:00October 26th, 2023|2- Daily Briefing|

Senate Banking Focuses on Rapid-Fire Administration Action to Sanction Iran, Curb Hamas, Govern Crypto

Today’s Senate Banking Hearing on Illicit Finance and Terrorism showcased continued bipartisan support for stronger Iranian sanctions as well as for secondary sanctions on traditional financial institutions and cryptoasset firms facilitating terrorism. In addition to highlighting their bipartisan measure targeting DeFi-related money laundering and sanctions evasion, Sens. Reed (D-RI) and Warner (D-VA) noted that they are working on a bill that would apply secondary sanctions on banks and DeFi entities that transact with foreign parties that facilitate terrorist financing.

Bipartisan Small-Business Leadership Opens New End-Game Front

Opening a new front of Congressional concern about the capital proposal’s credit impacts, House Small Business Economic Growth Subcommittee Chairman Meuser (R-PA) along with Ranking Member Landsman (D-OH) and two others today sent a letter to FRB Chairman Powell and Vice Chair Barr “imploring” them to commission a comprehensive review of the capital proposal’s effects on small business lending. They also ask that all the agencies counteract any negative repercussions of the proposal, noting that this might entail significantly easing capital requirements.

Daily102623.pdf…

20 10, 2023

DAILY102023

Eliza Allen2023-10-20T17:21:03-04:00October 20th, 2023|2- Daily Briefing|

Senate AI Measure Tackles Financial Services

The text of the key Senate AI bill, S. 3050, has now become available.

Banking Agencies Offer Olive Branch

Reflecting strong pressure and recent FRB Chair Powell statements, the FRB today announced the launch of an open data collection assessing the rule’s effects – an issue on which many bank comment letters and Congressional Republicans have been scathing.

GOP Renew Funding Campaign vs. CFPB via Fed Losses

HFSC Vice Chairman Hill (R-AR) yesterday reintroduced legislation pressuring both the Fed and CFPB by prohibiting the Fed from transferring its earnings to the Bureau if the Fed incurs an operating loss.

FinCEN Highlights Hamas Sanction Red Flags

Reflecting ongoing Congressional pressure and recent Treasury sanctions, FinCEN today issued an alert reminding financial institutions to remain vigilant for suspicious activity related to Hamas funding sources.

Fed Stays Stoic on Financial-Stability Outlook

The FRB today released is semiannual financial-stability report differing little from the relatively-sanguine outlook in its May report (see Client Report SYSTEMIC94).

Daily102023.pdf…

20 10, 2023

Al102323

Eliza Allen2023-11-13T15:46:12-05:00October 20th, 2023|3- This Week|

Relentless Pressure and Resulting Concession

On Friday, the Federal Reserve offered an olive branch – small and partial, but still a branch – to Republican critics of pending standards and the big banks powering up all this pain. As we noted, the comment deadlines for the capital and GSIB-surcharge rules have been extended to January 16, a move also designed to thwart litigation based on procedural considerations. The Fed has also announced a new data-gathering exercise in which stakeholders can send in “data” but due to which much more input will also surely flow. This exercise also answers procedural critics and protects the bill, with the deadline here also January 16.

Al102323.pdf…

10 10, 2023

M101023

Eliza Allen2023-10-10T11:29:24-04:00October 10th, 2023|6- Client Memo|

The Urgent Financial Reform the Fed and FDIC Hope we Forget

Even after the great financial crisis in 2008, the repo meltdown of 2019, a financial-market bailout of unprecedented proportions in 2020, and three bank failures so far this year, the FDIC and Fed are no closer than they were in 2007 to knowing what to do if a medium-size bank fails, a nonbank barrels down on the banking system, or critical financial-infrastructure flickers. Bond markets are back on the brink and geopolitical risk have become a still-greater concern. The agencies may think new capital and resolution rules are an iron dome allowing them to forego agency repair, but history – see the Gaza Strip – provides no comfort – as I hope we don’t have to learn again, fortifications aren’t enough in the absence of effective surveillance and rapid response.

m101023.pdf…

10 10, 2023

Karen Petrou: The Urgent Financial Reform the Fed and FDIC Hope we Forget

Eliza Allen2023-10-10T11:29:16-04:00October 10th, 2023|The Vault|

Even after the great financial crisis in 2008, the repo meltdown of 2019, a financial-market bailout of unprecedented proportions in 2020, and three bank failures so far this year, the FDIC and Fed are no closer than they were in 2007 to knowing what to do if a medium-size bank fails, a nonbank barrels down on the banking system, or critical financial-infrastructure flickers. Bond markets are back on the brink and geopolitical risk have become a still-greater concern. The agencies may think new capital and resolution rules are an iron dome allowing them to forego agency repair, but history – see the Gaza Strip – provides no comfort – as I hope we don’t have to learn again, fortifications aren’t enough in the absence of effective surveillance and rapid response.

The hard truth is the banking agencies after 2008 did what politicians and lawyers know best: they identified gaps in the law that the agencies self-defensively said barred them from preventing a crisis, asking for and then getting a new rulebook without also meaningfully addressing and then correcting their own structural weaknesses. And so it goes again. Thinking dominated by lawyers and politicians – for every successful public leader is a politician no matter his or her nominal independence – is writing lots and lots more rules. Some fix gaps found in the old law and rule, many pave over problems that could have been fixed under old law and rule, and some are as counter-productive as we’ve noted in …

4 10, 2023

DAILY100423

Eliza Allen2023-10-04T16:40:00-04:00October 4th, 2023|2- Daily Briefing|

Bowman Unbending in Demands for Better Reg Analytics, Community-Bank Mergers

In what might have been only perfunctory introductory remarks, FRB Gov. Bowman today instead continued her all-out campaign to force far more independent research before the Fed finalizes pending rules.

Brown Asks for No Wells Fargo Mercy

Senate Banking Chairman Brown (D-OH) today sent a letter to FRB Vice Chair Barr and OCC Acting Comptroller Hsu taking serious issue with what he calls unfair labor relations practices, consumer abuses, and compliance failures at Wells Fargo, urging the regulators to take stronger action to change the bank’s culture.

McKernan Counters Gruenberg on Endgame’s Nonbank Effects

Fleshing out official comments made in dissent against pending rules, FDIC Board member Jonathan McKernan today countered Chair Gruenberg’s recent comments that any migration of bank activities to nonbanks due to the capital rules should not be considered in the regulatory process.

Gruenberg Reiterates His Top Risk Worries

As with Gov. Bowman earlier today, FDIC Chair Gruenberg used his remarks later in the day to emphasize continuing concerns: in this case, uninsured deposits, maturity mismatches, and rapid growth.

Daily100423.pdf…

2 10, 2023

DAILY100223

Eliza Allen2023-10-02T16:36:52-04:00October 2nd, 2023|2- Daily Briefing|

FRB FAQs Open a Small, But Significant Capital Window

In what Reuters takes as a sign of hope that the end-game rules may not be as crushing as banks fear, the FRB has issued a new FAQ related to credit-linked notes and SPVs.

Bowman Turns to Specific Supervisory Reforms

In remarks today, FRB Governor Bowman expanded on her prior comments about Fed supervisory lapses, but made it clear that she also opposes a “heavy-handed” supervisory approach that relies primarily on call report data, instead calling for a new approach to CAMELS and regular engagement with financial institutions to express areas of concern or to better understand a bank’s strategic direction.

Fed OIG re Silvergate: Far More Scathing re Supervision, Need for New Guidance

The OIG report today from the Fed regarding supervisory lapses at Silvergate is considerably less expansive than the prior report on SVB because the parent company remains open despite the IDI’s voluntary liquidation and relevant data are thus deemed confidential.

Barr Presses Emergency-Window Readiness

FRB Vice Chair Barr’s comments today on monetary policy and financial stability provide a detailed rationale for addressing the linkages between these two arms of the Fed’s mandate without any specific steps for doing so.

Daily100223.pdf…