#capital standards – Page 2 – Federal Financial Analytics

27 09, 2023

DAILY092723

Eliza Allen2023-09-27T16:36:21-04:00September 27th, 2023|2- Daily Briefing|

FinCEN Bows to BOI Pressure

Responding to bipartisan concerns, FinCEN today issued an NPR to extend the beneficial ownership information (BOI) report filing deadline from thirty to ninety days for companies created or registered in 2024.

Chopra Considering Refi, Point Rules

The CFPB today released its annual report on residential mortgage lending, finding that mortgage applications, originations, and affordability declined significantly in 2022 while costs, loan denials, HELOC originations, and the percentage of cash-out refinances all increased.

HFSC GOP Presses Gensler on Banking-Reg Cumulative Impact

During Chairman Gensler’s as-always contentious HFSC hearing today, Rep. Barr (R-KY) asked if the SEC is in consultation with the Federal Reserve regarding the combined CRE effects of recent SEC proposals and the Basel III endgame standards (see Client Report CAPITAL234).

Carstens Says Law Must Catch Up To CBDC

BIS General Manager Agustín Carstens today emphatically called for rapid development of clear CBDC legal frameworks based on defined rights and obligations for privacy, AML compliance, and user choice.

Daily092723.pdf…

25 09, 2023

Al092523

Eliza Allen2023-09-25T11:00:27-04:00September 25th, 2023|3- This Week|

Systemic Steps

We held this weekly update on Friday because Washington was awash with rumors that FSOC would issue final versions of proposed systemic-evaluation standards (see FSM Report SYSTEMIC95) along with a new designation methodology (see FSM Report SIFI35). As it turned out, FSOC said so little in its closed-door meeting readout that it didn’t suffice even for a client alert, let alone a weekly. Still, something is coming soon and, when it does, it will start yet another partisan and sometimes even emotional debate over financial regulation redefining the sector’s strategic landscape.

Al092523.pdf…

11 09, 2023

M091123

Eliza Allen2023-09-11T09:40:12-04:00September 11th, 2023|6- Client Memo|

The PCA Cure for Much That Ails New Banking Rules

It’s a cliché, but it’s also true that one can’t beat something with nothing, especially in Washington. This is an axiom well worth remembering when it comes to all of the new capital and resolution rules befalling the nation’s biggest banks. I don’t think they need to be beaten back in their entirety – much in the proposals fixes vital flaws. But the agencies have done a remarkably poor job conjuring the impact of each of these sweeping proposals, let alone their cumulative impact in the context of all the other rules and the grievous supervisory lapses that contributed to recent failures no matter all the rules that could well have sufficed if enforced. Thus, the most obvious problems with this new construct are opacity, complexity, and most importantly reasonable doubts that, even with all these sharpened arrows, supervisors will still fail to draw their bows and then fire early and often. All too much in the new rules is false science, as even a cursory read of the impact analyses makes painfully clear. Instead of setting standards on lofty, unproven models, safeguards should rely on an engineering axiom: use warning lights that force prompt and corrective action. Think of the ground warning in an airplane followed by urgent “pull-up” commands and then go to work on the banking dashboard with clear, enforceable rules and new PCA thresholds forcing supervisory action and accountability.

M091123.pdf…

11 09, 2023

Karen Petrou: The PCA Cure for Much That Ails New Banking Rules

Eliza Allen2023-09-11T09:40:05-04:00September 11th, 2023|The Vault|

It’s a cliché, but it’s also true that one can’t beat something with nothing, especially in Washington. This is an axiom well worth remembering when it comes to all of the new capital and resolution rules befalling the nation’s biggest banks. I don’t think they need to be beaten back in their entirety – much in the proposals fixes vital flaws. But the agencies have done a remarkably poor job conjuring the impact of each of these sweeping proposals, let alone their cumulative impact in the context of all the other rules and the grievous supervisory lapses that contributed to recent failures no matter all the rules that could well have sufficed if enforced. Thus, the most obvious problems with this new construct are opacity, complexity, and most importantly reasonable doubts that, even with all these sharpened arrows, supervisors will still fail to draw their bows and then fire early and often. All too much in the new rules is false science, as even a cursory read of the impact analyses makes painfully clear. Instead of setting standards on lofty, unproven models, safeguards should rely on an engineering axiom: use warning lights that force prompt and corrective action. Think of the ground warning in an airplane followed by urgent “pull-up” commands and then go to work on the banking dashboard with clear, enforceable rules and new PCA thresholds forcing supervisory action and accountability.

The need for new PCA triggers is even more urgent than I thought when I first outlined…

17 08, 2023

CAPITAL234

Eliza Allen2023-08-17T15:22:40-04:00August 17th, 2023|5- Client Report|

FedFin Assessment: What the Agencies Think the Rules Will do and Why Much of That is Wrong

With this report, we conclude our assessment of the regulatory-capital proposal with analysis of what the sum total of the credit (see FSM Report CAPITAL231), operational (see FSM Report OPSRISK22), and market (see FSM Report CAPITAL233) rules could do in the real world of banks, nonbanks, foreign banks, and complex market interconnections. Our first assessment of the proposal’s framework (see FSM Report CAPITAL230) provided the agencies’ quantitative-impact statement (QIS). Here, we evaluate the QIS, expand on the agencies’ qualitative conclusions, and add our own assessment of what might actually happen in the face of these sometimes-contradictory capital incentives.

CAPITAL234.pdf…

11 08, 2023

Al081423

Eliza Allen2023-08-11T16:27:33-04:00August 11th, 2023|3- This Week|

The Capital Construct Continued

Even as we stay on watch for new regional-bank resolution rules, and keep you posted on some high-impact events (see below), we’ve been plowing through hundreds of pages of regulatory-capital rewrites. Last week, we built on our in-depth analyses of the overall capital framework (see FSM Report CAPITAL230) and the new approach to credit risk (see FSM Report CAPITAL231) with several new in-depth assessments.

Al081423.pdf…

10 08, 2023

FedFin on: Operational Risk-Based Capital Standards

Arezou Rafikian2023-08-11T16:25:34-04:00August 10th, 2023|The Vault|

Noting that operational risk is present at all banks due to most activities, the U.S. regulatory-capital rewrite would end the current approach to operational risk-based capital (ORBC). This now subjects only categories I and II banks to ORBC and then only to the advanced measurement approach (AMA) premised on each bank’s internal models. Consistent with the overall decision to end internal-model reliance, this section of the proposal subjects categories I, II, III, and IV banks to a new operational-risk standardized approach (SA). This would result in very steep capital requirements based on a bank’s experience over the past ten years compared to various sources of revenue over the past three years, perhaps taking business-model changes over the course of the last three years into account if regulatory standards are met for doing so….

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

10 08, 2023

OPSRISK22

Eliza Allen2023-08-10T16:10:43-04:00August 10th, 2023|1- Financial Services Management|

Operational Risk-Based Capital Standards

Noting that operational risk is present at all banks due to most activities, the U.S. regulatory-capital rewrite would end the current approach to operational risk-based capital (ORBC). This now subjects only categories I and II banks to ORBC and then only to the advanced measurement approach (AMA) premised on each bank’s internal models. Consistent with the overall decision to end internal-model reliance, this section of the proposal subjects categories I, II, III, and IV banks to a new operational-risk standardized approach (SA). This would result in very steep capital requirements based on a bank’s experience over the past ten years compared to various sources of revenue over the past three years, perhaps taking business-model changes over the course of the last three years into account if regulatory standards are met for doing so. Steps banks have taken to prepare and avoid operational risk and respond to prior incidents are also generally not captured in a meaningful ORBC adjustment. As a result, ORBC capital standards may be premised on risks the bank is now unlikely to encounter on a go-forward basis or offsetting the costs essential to preventing and absorbing the operational risks it now might encounter.

OPSRISK22.pdf…

8 08, 2023

FedFin on: Say It’s Simple

Arezou Rafikian2023-08-09T14:19:41-04:00August 8th, 2023|The Vault|

Our most recent analysis of the inter-agency capital proposal focuses on significant changes to the rules for securitization and credit-risk transfer positions. In short, super-traditional securitizations have an easier path to the secondary market, but GSEs still beat banks. Complex ABS face often-formidable obstacles, as does CRT given or taken by banks.

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

8 08, 2023

GSE-080823

Eliza Allen2023-08-08T13:46:46-04:00August 8th, 2023|4- GSE Activity Report|

Say It’s Simple

Our most recent analysis of the inter-agency capital proposal focuses on significant changes to the rules for securitization and credit-risk transfer positions. In short, super-traditional securitizations have an easier path to the secondary market, but GSEs still beat banks. Complex ABS face often-formidable obstacles, as does CRT given or taken by banks.

GSE080823.pdf…