#CFTC – Federal Financial Analytics

19 12, 2022

FedFin on: FSOC Targets Usual Suspects but Also Points to Big-BHC, Nonbank Mortgage Systemic Risk

Arezou Rafikian2023-01-03T15:56:33-05:00December 19th, 2022|The Vault|

As promised, this FedFin report provides an in-depth analysis of FSOC’s 2022 annual report, focusing on findings with near-term policy implications. As always, the report is lengthy and includes many observations and market details that provide insight into Treasury and member-agency-staff thought. Much in it reiterates concerns about short-term funding markets, CCPs, and….

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

19 12, 2022

FSOC28

Eliza Allen2022-12-19T13:00:38-05:00December 19th, 2022|5- Client Report|

FSOC Targets Usual Suspects but Also Points to Big-BHC, Nonbank Mortgage Systemic Risk

As promised, this FedFin report provides an in-depth analysis of FSOC’s 2022 annual report, focusing on findings with near-term policy implications. As always, the report is lengthy and includes many observations and market details that provide insight into Treasury and member-agency-staff thought. Much in it reiterates concerns about short-term funding markets, CCPs, and investment funds (with FSOC for the first time urging regulators to look not only at MMFs and OEFs, but also at collective investment vehicles). As previously noted, the report is relatively sanguine about digital-asset systemic risk but, also reiterates findings in FSOC’s report (see Client Report CRYPTO33) demanding rapid action on a raft of reforms in this high-risk sector. What surprised us is the discussion of large BHCs, which departs from longstanding Fed and FSOC comfort in the post-GFC regulatory regime for this sector.

FSOC28.pdf…

2 12, 2022

AL120522

Max Camateros-Mann2022-12-06T11:23:10-05:00December 2nd, 2022|3- This Week|

The CFTC Showdown

As our in-depth client report described (see Client Report CRYPTO35), CFTC Chairman Rostin Behnam stoutly insisted that the Commission not only couldn’t have averted FTX’s collapse, but also that it did it all it could within the strict limitations of its authority. What he needed, he said, was more power and, to at least some extent, bipartisan senators on the Senate Agriculture Committee concurred. Those who had worked closely with FTX and the CFTC may have felt they had little choice but to join the CFTC in doubling-down in support of S.4760, the Digital Commodities Consumer Protection Act. This is a bill we previously noted would not stand unnoticed and uncriticized by the Biden Administration, Banking Committee, and progressives calling for stringent crypto standards.

AL120522.pdf…

1 12, 2022

CRYPTO35

Max Camateros-Mann2022-12-02T10:01:16-05:00December 1st, 2022|5- Client Report|

Senate Ag Crypto Bill Faces Uphill Climb Despite CFTC Efforts

In the first Congressional review of crypto since the collapse of FTX, Senate Agriculture leadership largely defended the bill they produced, S.4760. However, members outside of leadership were more skeptical of CFTC regulation and more broadly of the need for crypto in any part of the financial market. Senate Banking Chairman Brown (D-OH) reiterated that he is working with Secretary Yellen to create a crypto framework that protects the traditional financial system and consumers. Sen. Gillibrand (D-NY) seems to have moved away from her unequivocal support of cryptoassets, asking numerous questions on regulatory arbitrage and foreign domiciles, while Sen. Marshall (R-KS) joined Sen. Brown in suggesting that cryptoassets pose national-security risks. Ag Committee Chair Stabenow (D-MI) countered that the bill would have prevented FTX’s failure, a view Ranking Member Boozman (R-AR) largely supported even as he said additional work may be needed on matters such as inter-affiliate transaction restraints.

CRYPTO35.pdf…

16 11, 2022

REFORM215

William Cross2022-11-22T15:02:46-05:00November 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 09, 2022

INVESTOR20

William Cross2022-10-13T11:52:44-04:00September 15th, 2022|5- Client Report|

After Senate Banking Session, SEC Stays on Course

The Senate Banking hearing with Chairman Gensler today went as expected: Democrats generally praised his work while Republicans strongly opposed it on both substantive and procedural grounds. As a result, we expect the chairman to continue as he has in the wake of prior, comparable hearings – pretty much as he pleases and as the rest of the commission will support. This will clearly change if Republicans gain control of both Houses of Congress after the midterm. Unless or until it does, the SEC will continue its enforcement-focused approach to cryptoasset regulation and climate disclosures. Chairman Brown (D-OH) also confirmed our forecast: he will defend not only his jurisdiction, but also a much more stringent approach to crypto regulation than contemplated by the Senate Agriculture Committee’s bipartisan legislation.

INVESTOR20.pdf…

9 09, 2022

Al091222

Eliza Allen2022-10-24T11:55:52-04:00September 9th, 2022|3- This Week|

The Crypto Kid

As we noted last week, SEC Chairman Gensler has made it even clearer that he’s giving no crypto ground to the CFTC or indeed to anyone who doesn’t agree that the Commission has the statutory authority to govern anything crypto token or intermediary that the Commission believes engages in securities offering, settlement, or transactions. This follows the “same-risk, same-rules” framework most recently affirmed for bank digital standards in Michael Barr’s maiden speech, but Mr. Gensler takes it to a different level. Unlike his banking-agency colleagues, he doesn’t have to reach inter-agency consensus to get what he wants unless or until Congress or the courts tell him otherwise. To be sure, some members of Congress will try just this later in the week. The Senate Agriculture Committee’s hearing will stand by the CFTC and Senate Banking Republicans will excoriate Mr. Gensler on Thursday for his strong stand on crypto along with much else. As always, we’ll be watching, analyzing, and reporting, but let us know if you’ve any questions in the interim.

Al091222.pdf…

8 09, 2022

DAILY090822

Eliza Allen2022-11-09T13:00:10-05:00September 8th, 2022|2- Daily Briefing|

Gensler Stands Crypto Ground

In remarks today, SEC Chairman Gensler stood firm: almost all crypto tokens are securities because they are investment contracts under the “Howey Test.” Further guidance is unnecessary, he said, because the Commission has been clear and crypto companies request it only because they do not like this conclusion, not because they fail to understand it.

GOP Demands Answers On CBDC Authorization, Construct

Ranking Member McHenry (R-NC) and all of the HFSC’s Republicans today sent a letter to Vice Chair Brainard demanding that she clarify several issues germane to U.S. CBDC issuance. These most notably include the extent to which the “support” from the Administration and Congress she said was needed (see Client Report CBDC13) means express statutory change and Administration order.

Toomey Demands Greater CRA Transparency, Updated Regulations

Ranking Member Toomey (R-PA) today sent a letter to Vice Chair Brainard, Acting Comptroller Hsu, and Director Gruenberg sharply criticizing what he calls a lack of transparency of CRA-derived community benefit plans (CBPs). Describing these as an “egregious” circumvention of congressional intent, he demands that the banking regulators update regulations implementing GLBA’s CRA sunshine provision, specifically urging them to establish a public database containing all CRA-related agreements in full.

Daily090822.pdf…

30 08, 2022

DAILY083022

Eliza Allen2023-01-03T16:41:05-05:00August 30th, 2022|2- Daily Briefing|

FRB-Atlanta: Cardless Consumers Pay More Per Transaction

After the Fed announced imminent FedNow liftoff, the Federal Reserve Bank of Atlanta yesterday issued a release summarizing research that concludes that lower-income consumers pay considerably more per each payment transaction due the use of cash and debit cards that do not provide credit-card rewards and the overall price increase that merchants charge to compensate for interchange fees.

Oversight Subcomm Chair Presses Agencies on Crypto Oversight, Jurisdictional Warfare

The Chairman of the House Oversight Committee’s Subcommittee on Economic and Consumer Policy, Rep. Raja Krishnamoorthi (D-IL), today sent letters to Treasury, the SEC, the CFTC, the FTC, and several major crypto exchanges demanding information and documents showing what each is doing to combat cryptocurrency-related fraud. Calling for improved regulation and guidance, the Chairman criticizes regulators for their insufficient coordination in response to escalating risks.

Daily083022.pdf…

3 08, 2022

DAILY080322

Eliza Allen2023-01-04T13:29:59-05:00August 3rd, 2022|2- Daily Briefing|

Senate Ag Crypto Bill Lauds CFTC, Faces Many Obstacles

As we anticipated as the crypto debate continues, the Senate Agriculture Committee has sought to claim jurisdiction with a new, bipartisan bill granting the CFTC broad regulatory, supervisory, and enforcement powers over most digital-asset platforms and the assets traded on them.

ECB Study Favors CBDCs Over Private Crypto for Cross-Border Payments

A study released by the ECB today argues that CBDCs would be a cheaper, safer, and more effective vehicle for cross border payments for global transactions than privately-issued cryptoassets or stablecoins. Based on assessment of global, not just EU markets, the study thus has implications for those in the U.S. opposing a CBDC.

FRB-Minneapolis Renews Attack on Big-Bank Capital Resilience

Renewing its attack on big-bank capital ratios, the Federal Reserve Bank of Minneapolis today released its own stress-test conclusions, reinforcing its president’s longstanding view that the largest U.S. banks are woefully under-capitalized even though test results show considerable variance on a bank-by-bank basis as well as overall resilience.

FRB Philadelphia President Touts Fintech’s Financial Inclusion Potential

FRB Philadelphia President Patrick Harker today stated that fintech can increase financial inclusion, specifically citing buy-now pay-later products because they offer financial services to low- to moderate-income customers who would otherwise be locked out of traditional lending because they are more likely to be non-White, lower earning, and younger.

Daily080322.pdf…