#CFTC – Federal Financial Analytics

26 03, 2024

DAILY032624

Eliza Allen2024-03-26T16:39:52-04:00March 26th, 2024|2- Daily Briefing|

CBO Flags Long-Term Fiscal Risk to Financial Stability

CBO’s latest long-term fiscal forecast now includes a financial-stability warning absent from the Fed’s recent analysis (see Client Report SYSTEMIC97) and FSOC’s annual report (see Client Report FSOC29): the rising U.S. debt burden.

Chopra Expands CFPB Attack to Card Rewards

Undaunted by a CBA audience suing him on many actions, CFPB Director Chopra today gave a rousing defense of his agency’s credit-card late fee rule (see FSM Report CREDITCARD37), making clear he will vigorously defend it in the courts.

CFPB/FTC Press for More Tech-Finance Enforcement

Building on the Bureau’s recent efforts to limit AI use in comparison-shopping and other consumer-finance applications (see FSM Report CONSUMER56), the CFPB joined the FTC today in issuing a statement coordinating federal and state enforcement efforts against generative AI in particular and digital consumer-finance products more generally.

HFSC, AG Republicans Press SEC on Crypto-Custody Standards

HFSC Chair McHenry (R-NC) and House Ag Chair Thompson (R-PA), alongside 46 Republican members today sent a letter to SEC Chair Gensler calling for clarification the position on special purpose broker dealer’s (SPBD) ability to custody non-security digital assets, the agency’s willingness to address SPBD non-compliance, the regulatory classification of ETH, and the SEC’s position regarding Prometheum’s custody services announcement.

Daily032624.pdf…

19 03, 2024

Daily031924

Arezou Rafikian2024-03-20T11:57:36-04:00March 19th, 2024|2- Daily Briefing|

Progressive Dems Keep Pressure on Powell

Ahead of today’s FOMC meeting, progressive Democrats again sent a letter to Chair Powell calling for an interest-rate reduction timeline on grounds that higher-for-longer adversely affects the public good. Signed by Sens. Warren (D-MA), Sanders (I-VT), and nineteen House Democrats, the letter calls the Fed’s monetary policy “excessively contractionary,” stressing its negative impacts on the housing market and financial stability.

HFSC GOP Takes on GSE Title-Insurance Pilot

Laying pipe before HFSC’s housing hearing tomorrow, Subcommittee Chairs Davidson (R-OH) and Huizenga (R-MI) along with Rep. Garbarino (R-NY) sent a letter to FHFA Director Thompson Friday sharply criticizing her for undue politicization given the President’s recent call for title-insurance reform. Th

HFSC GOP Takes on GSE Title-Insurance Pilot

Joining attacks against the Basel end-game rules, Republican CFTC Commissioner Mersinger today criticized the proposal for its impact on derivatives markets. It would, she said, disincentivize banks from offering client-clearing services to derivatives end-users, exacerbate the downward trend in the number of entities offering client clearing services, challenge the portability of customer positions, and increase systemic risk.

KC Fed Study: Vulnerable Crypto Users at Financial Risk

Buttressing calls for cryptoasset standards, the Kansas City Fed today published an article finding that crypto transactors are less financially literate and more risk tolerant compared to nonowners, stressing the importance of improved education regarding cryptoasset risks. C

HFSC GOP Goes after Climate-Risk Standards

HFSC’s majority staff memo on Thursday’s hearing indicates that the panel of top federal bank supervisors …

1 02, 2024

FedFin on: AI Regulation

Arezou Rafikian2024-02-05T16:39:39-05:00February 1st, 2024|The Vault|

Although FSOC’s latest annual report highlights AI risk, it does not request any express agency action, a hands-off approach that led to bipartisan legislation demanding a more forceful approach. Possibly leading the way as it did on climate risk, the CFTC now seeks comment on both the way it uses AI and how it affects not only financial markets under its jurisdiction, but also financial-system stability.

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

1 02, 2024

AI5

Arezou Rafikian2024-02-01T10:20:08-05:00February 1st, 2024|1- Financial Services Management|

AI Regulation

Although FSOC’s latest annual report highlights AI risk, it does not request any express agency action, a hands-off approach that led to bipartisan legislation demanding a more forceful approach. Possibly leading the way as it did on climate risk, the CFTC now seeks comment on both the way it uses AI and how it affects not only financial markets under its jurisdiction, but also financial-system stability.

AI5.pdf…

29 01, 2024

DAILY012924

Eliza Allen2024-01-29T16:36:27-05:00January 29th, 2024|2- Daily Briefing|

White House Advances AI Governance, Government Adoption

Following the President’s AI executive order (see Client Report AI3), the White House today released an update following a steering-group meeting.

BIS Study Examines Stablecoin Run-Risk

A new BIS study supports pending U.S. legislation and possible rules related to stablecoin reserve assets and run-risk, finding that transparency increases stablecoin stability when reserve assets are of high quality, but decreases stability when reserves are perceived to be low quality or when there are low transaction costs to convert to fiat.

Hsu Sets Course to New OCC Merger Policy with No Fed Companion in Sight

In remarks today emphasizing the need for a more transparent bank-merger process, Acting Comptroller Hsu announced that the OCC will today release an NPR eliminating the possibility that merger applications will be approved solely by the passage of time.

Warren Starts the New Year with Political Pressure on Fed Policy

Reiterating concerns about high interest rates, Sen. Warren (D-MA) along with Sens. Hickenlooper (D-CO), Rosen (D-NV) and Whitehouse (D-RI) today sent a letter to Chair Powell calling on him to reverse rate hikes, citing its impact on the current affordable housing crisis.

Daily012924.pdf…

25 01, 2024

DAILY012524

Shane Smith2024-01-25T16:50:12-05:00January 25th, 2024|2- Daily Briefing|

Fed Surprisingly Slams the BTFP’s Doors

At an unusual time and on a day that does not comport with the usual timelines for Fed action, the Board last night unanimously announced it will shutter the Bank Term Funding Program as scheduled on March 11.

Basel Head Backs U.S. Regulators

In response to waves of recent letters pushing back on the Basel III capital rules, Basel Committee Secretary General Esho defended Basel III, arguing that there is little evidence that Basel III implementation will have a detrimental effect on banking and economic growth

FTC Tackles AI Inter-Connections, Concentration

Following remarks by FTC Chair Khan making clear that there is no “AI exception” to lawful behavior, the FTC announced that it has issued orders to Alphabet, Amazon, Anthropic, Microsoft, and OpenAI requiring them to provide their recent investment and partnership information involving gen-AI companies and major CSPs.

CFTC Kicks Off Financial-Agency AI Assessment

Just as it did years ago with climate risk (see Client Report GREEN4), the CFTC took the lead among U.S. financial regulators with respect to AI.

Daily012524.pdf…

18 12, 2023

FSOC29

Eliza Allen2023-12-18T11:36:07-05:00December 18th, 2023|5- Client Report|

FedFin Assessment: FSOC Worries A Lot, Watches, Waits

This year’s FSOC report trods much old ground with two exceptions. The first pertains to a new focus on artificial intelligence, machine learning, and new, generative technologies. That said, the report does little beyond highlight this risk and include it among all the others federal agencies are told to monitor. Private credit now also alarms FSOC, with insurance company investment in this sector of particular systemic concern in concert with the sectors’ CRE and junk-bond exposures, offshore reinsurance, and PE ownership. As detailed in this report, banks are found to be resilient and have ample capital even as the report supports consideration of pending regulatory revisions. Banking agencies are also asked to monitor uninsured-deposit levels and assess run-risk in light of social media and other accelerants. In sharp contrast to more alarmist statements in the past and extensive Treasury reports (see Client Report CRYPTO32), this year’s report downplays cryptoasset risk because federal regulators are said to have taken steps to contain it. The report also reiterates FSOC’s continuing focus on cyber and climate risk, with the closed session preceding the meeting considering a framework being developed by the OCC to measure and monitor financial risks and bank exposures. Agencies are also encouraged to pursue comparable, “decision-useful” climate disclosures. The LIBOR transition is considered a success and no longer poses a systemic risk.

FSOC29.pdf…

4 12, 2023

M120423

Eliza Allen2023-12-04T11:03:03-05:00December 4th, 2023|6- Client Memo|

Why Curbing Banks Won’t Curtail Private Credit

Last Wednesday, Sens. Brown and Reed wrote to the banking agencies pressing them to cut the cords they believe unduly bind big banks to private-credit companies. The IMF and Bank of England have also pointed to systemic-risk worries in this sector, as have I. Still, FSOC is certainly silent and perhaps even sanguine. This is likely because FSOC is all too often nothing more than the “book-report club” Rohit Chopra described, but it’s also because it plans to use its new systemic-risk standards to govern nonbanks outside the regulatory perimeter by way of cutting the banking-system connections pressed by the senators. Nice thought, but the combination of pending capital rules and the limits of FSOC’s reach means it’s likely to be just thought, not the action needed ahead of the private-credit sector’s fast-rising systemic risk.

m120423.pdf

…

4 12, 2023

Karen Petrou: Why Curbing Banks Won’t Curtail Private Credit

Eliza Allen2023-12-04T11:03:15-05:00December 4th, 2023|The Vault|

Last Wednesday, Sens. Brown and Reed wrote to the banking agencies pressing them to cut the cords they believe unduly bind big banks to private-credit companies. The IMF and Bank of England have also pointed to systemic-risk worries in this sector, as have I. Still, FSOC is certainly silent and perhaps even sanguine. This is likely because FSOC is all too often nothing more than the “book-report club” Rohit Chopra described, but it’s also because it plans to use its new systemic-risk standards to govern nonbanks outside the regulatory perimeter by way of cutting the banking-system connections pressed by the senators. Nice thought, but the combination of pending capital rules and the limits of FSOC’s reach means it’s likely to be just thought, not the action needed ahead of the private-credit sector’s fast-rising systemic risk.

One might think that banks would do all they can to curtail private-credit competitors rather than enable them as the senators allege and much recent data substantiate. But big banks back private capital because big banks will do the business they can even when regulators block them from doing the business they want. Jamie Dimon for one isn’t worried that JPMorgan will find itself out in the cold.

Of course, sometimes banks should be forced out of high-risk businesses. There is some business banks shouldn’t do because it’s far too risky for entities with direct and implicit taxpayer backstops. This is surely the case with some of the wildly-leveraged loans private-credit companies …

29 11, 2023

DAILY112923

Eliza Allen2023-11-29T16:51:26-05:00November 29th, 2023|2- Daily Briefing|

FDIC’s OIG Presses for Non-Capital PCA Triggers, Additional Supervisory Reform

The FDIC’s OIG report on First Republic’s failure is at least as scathing as its SBNY post-mortem.

Treasury Launches Anti-Crypto Enforcement Campaign

In remarks today from Deputy Secretary Wally Adeyemo, Treasury officially launched its anti-crypto sanctions and AML campaign.

Basel Proposes Sweeping Climate-Risk Disclosure Standards

Following the FSB’s finding that most banks were failing to provide meaningful climate disclosures, the Basel Committee today issued proposed climate-risk disclosure standards.

3Q Report Highlights AOCI Risk

The FDIC’s 3Q banking-condition report includes a stunning 22.5 percent rise in the total of HTM and AFS unrealized losses, which now stand at $683.9 billion.

Senate Banking Opens Private-Credit Inquiry

Senate Banking Chair Brown (D-OH) and Sen. Reed (D-RI) today asked FRB Vice Chair Barr, Acting Comptroller Hsu, and FDIC Chair Gruenberg to look into the risks private credit poses to the banking system.

Daily112923.pdf…