#CRE

14 05, 2024

DAILY051424

2024-05-14T17:38:28-04:00May 14th, 2024|2- Daily Briefing|

HFSC Set for Marathon Markup

According to the majority-staff memo released yesterday for HFSC’s mark-up on Thursday, the mark-up will focus on eleven bills including H.R. 8337, a new bill introduced by Rep. Barr (R-KY) which includes six previous bills.

BIS Advances Tokenized Cross-Border Payments

Advancing its general manager’s campaign to encourage tokenization, the BIS today invited private-sector financial institutions to apply to participate in Project Agorá, testing whether tokenized deposits could enhance cross-border payment functionality via tokenized commercial bank deposits and tokenized wholesale central bank money in a public-private platform.

Barr to Say Liquidity Regs Coming, Capital Standards in the Works

In the testimony he will present starting tomorrow, FRB Vice Chair Barr makes it clear that, despite the banking system’s current sound condition, banks and supervisors must remain vigilant due to emerging challenges such as CRE and consumer-debt risk.

Gruenberg’s Promised Workplace Reforms Set for Buzzsaw

Events late today surrounding FDIC Chair Gruenberg’s testimony indicate his going may be even stormier than we anticipated.

Hsu Focuses on Operational Resilience, Check Fraud

Acting Comptroller Hsu’s testimony says the banking system is sound, but also at risk of increasing disruptions with heightened impact due to natural disasters, geopolitical risk, and internal operational failings or poor risk management.

Fed, OCC Open CapOne/Discover to Public Hearing

The FRB and OCC today extended the public-comment period on the CapOne/Discover merger until July 24.

Daily051424.pdf

30 04, 2024

DAILY043024

2024-04-30T16:56:40-04:00April 30th, 2024|2- Daily Briefing|

Changes to Fed Reporting Requirements Augurs Shift in M&A Policy

The Federal Reserve has proposed two changes to reporting requirements related to merger-and-acquisition transactions.

Basel Rewrites Global CCR Standards

As anticipated, the Basel Committee today issued proposed counterparty credit risk (CCR) standards.

CFPB Price Complexity Study May Presage Action on Credit Cards, Mortgages, Savings Accounts

The CFPB today issued a report finding that increasing price complexity leads to higher transaction and total costs and increased consumer errors, with this not offset by increased competition.

House Oversight Subcommittee Considers CRE Risk

Today’s House Oversight Health Care and Financial Services Subcommittee hearing on commercial real estate focused on preventing systemic risk.  Chair McClain (R-MI) argued that the CRE market is generally strong, encouraging Congress and the Fed to eliminate red tape.

Daily043024.pdf

7 03, 2024

DAILY030724

2024-03-07T16:51:03-05:00March 7th, 2024|2- Daily Briefing|

HFSC GOP Press Discount-Window Reform, Slow-Go on Liquidity Risk

Building on questioning at a recent HFSC hearing (see Client Report LIQUIDITY34), Financial Institutions Subcommittee Chair Barr (R-KY) led all Republican members of his subcommittee in a letter to Chair Powell, Chair Gruenberg, and Acting Comptroller Hsu urging them to address stigma and operational issues associated with the discount window.

Powell Reiterates: Capital Rules Will Change

Today’s Senate Banking hearing with Chair Powell covered much of the same ground as the Chair’s appearance before HFSC (see Client Report FEDERALRESERVE75) with Democrats focusing on housing affordability and Republicans expressing their satisfaction with Mr. Powell’s statement that the Basel III proposal may have to be withdrawn and re-proposed.

House Judiciary Now Says 12 Large Banks Colluded with FinCEN

Prior to the House Judiciary’s Select Subcommittee on the Weaponization of the Federal Government hearing today on large bank “collusion,” the subcommittee yesterday published a report finding that FinCEN and the FBI engaged in backchannel discussions with large financial institutions to gather private financial data.

BCBS Proposes GSIB Window-Dressing Revisions

As anticipated, the Basel Committee on Banking Supervision today released a consultation on revisions to the GSIB assessment framework concerning window dressing.

House Republican Targets Interest on Reserves

Following up on yesterday’s HFSC hearing (see Client Report FEDERALRESERVE75), Rep. Davidson (R-OH) has introduced legislation (H.R. 7562) to prevent Federal Reserve Banks from paying interest on excess reserves.

Daily030724.pdf

5 03, 2024

Daily030524

2024-03-05T16:37:23-05:00March 5th, 2024|2- Daily Briefing|

CFPB Fires All Cylinders on Credit Card Fees

In conjunction with a new White House “price-gouging” initiative today ahead of the President’s address, the CFPB finalized its controversial credit-card late-fee proposal (see FSM Report CREDITCARD36).

Presidential Strike Force Targets Financial-Services Fees, Mergers

In conjunction with the CFPB’s new credit-card fee standard, the White House today announced a “strike force” attacking what it believes to be price-gouging across the U.S. economy.

Interchange, Small-Dollar Lending Bills Added to House Docket

Although Thursday’s HFSC Financial Institutions’ hearing will be a largely partisan review of the “politicized” nature of bank regulation, bills on the docket include a draft measure from Rep. Luetkemeyer (R-MO) requiring the FRB to conduct a quantitative study of the implications of its pending interchange rule before finalization (see FSM Report INTERCHANGE12).

McHenry Supports At Least Some Liquidity-Reg Rewrite

Redoubling his campaign against the capital proposal, HFSC Chairman McHenry (R-NC) today made it clear that he does support at least some revisions to liquidity rules.

IMF Looks Under U.S. Bank “Weak Tail”

Looking at U.S. bank failures one year later, the IMF today released a global financial stability note finding that the “weak tail” of U.S. banks continues to present a possible systemic risk despite ongoing supervisory and regulatory efforts.

Daily030524.pdf

28 02, 2024

DAILY022824

2024-02-29T11:26:05-05:00February 28th, 2024|2- Daily Briefing|

HFSC Dems Press for New Bank-Merger Policy

Although she issued a statement strongly opposed to the CapOne/Discover merger after it was announced, HFSC Ranking Member Waters (D-CA) today led a letter instead focusing on the need for the banking agencies and DOJ to quickly issue updated merger policies.

US Standards Complicate Transborder Personal-Financial Data Flows

The President plans later today to issue an executive order banning the transfer of sensitive data to “countries of concern” and certain persons subject to their jurisdiction.

Fed Worries About Regional-Bank Risk

Anna Kovner, Director of Financial Stability Policy Research at the New York Fed, today outlined four sources of systemic risk that worry the central bank even though the Fed still sees risks as manageable according to the analyses released last October (see Client Report SYSTEMIC97).

Daily022824.pdf

16 02, 2024

DAILY021624

2024-02-16T15:55:14-05:00February 16th, 2024|2- Daily Briefing|

Barr Points to Tough New Fed Supervisory Strategy

FRB Vice Chair Barr today updated FRB efforts to enhance bank supervision since its SVB post mortem revealed severe failings (see Client Report REFORM221).  Various internal efforts are under way, but the talk indicates no specific new initiatives beyond far greater focus on near-term CRE risk with an eye in particular to adequate provisioning.  The System is now improving supervisory rigor, coordination, and escalation protocols, with Mr. Barr also laying out how Fed supervision has become significantly more rigorous in the last year.

CFPB Report Continues Credit Card Attack

Buttressing its controversial credit-card late-fee proposal (see FSM Report CREDITCARD36), the CFPB today issued a report finding that the 25 largest credit card issuers charged interest rates eight to ten percentage points higher than small-and-medium-sized banks and credit unions. The report states that higher rates among large issuers persist across credit scores, with large issuers also more likely to charge annual fees.

House GOP Tries to Speed Bank M&A

Following up a letter sent to the federal banking agencies in October, HFSC Financial Institutions Subcommittee Chair Barr (R-KY) and Rep. Fitzgerald (R-WI) today introduced the Bank Failure Prevention Act, a bill to require the Federal Reserve to act on bank merger applications within ninety days.  The bill would also require the central bank to acknowledge the application’s completion within thirty days, with approval automatically granted for any application not serviced within the ninety-day window.

Daily021624.pdf

14 02, 2024

DAILY021424

2024-02-14T17:29:47-05:00February 14th, 2024|2- Daily Briefing|

Global Regulators Propose Ways to Limit Variation-Margining Stress

As promised, CPMI and IOSCO have issued a discussion paper on CCP and clearing-member variation-margin practices.  The global agencies propose eight principles to enhance the likelihood that margins will be covered in stress situations, a continuing challenge based on a recent IMF paper finding that up to a third of EU active-derivatives users would not be able to meet variation-margin calls under stress and would thus turn to liquidating MMF shares or other assets in a manner likely to amplify market stress.

HFSC Deploys Power of the Purse to Pressure FinCEN

As anticipated, today’s HFSC hearing with Treasury and FinCEN was highly partisan, with Republicans continuing to blast FinCEN for what they call SAR surveillance and now threatening to block any increased funding for FinCEN until it also improves beneficial-ownership reporting to the GOP’s liking. Rep. Loudermilk (R-GA) also criticized FinCEN for failing to release the statutorily-mandated BSA review and the $10,000 threshold review.

Barr Sees Banking System as Strong, Liquid

In remarks today, FRB Vice Chair Barr emphasized that, despite pockets of risk and CRE worries, the banking system is sound and he sees no liquidity-risk concerns across the financial system.  Still, March 2023 taught hard lessons, he said, with banks since taking significant steps to reduce HTM holdings and enhance liquidity resilience.

Daily021424.pdf

8 02, 2024

FSOC31

2024-02-08T14:30:15-05:00February 8th, 2024|5- Client Report|

NonBank Mortgage Companies Are Prime SIFI Target

Treasury Secretary Yellen’s hearing today before Senate Banking followed the path set in Tuesday’s HFSC session (see Client Report FSOC30), with Ms. Yellen refusing to take a stand on matters such as the capital rules and banking-agency supervisory effectiveness.  Republicans in sparse attendance used the session to reiterate their critique of FSOC’s systemic-designation standard (see FSM Report SIFI36) and the capital rules; Democrats were most focused on defending Bidenomics.  However, questioning touched on NBFI risk with a particular focus on nonbank mortgage companies; the secretary reiterated conclusions about possible systemic risks laid out in FSOC’s most recent report (see Client Report FSOC29), now going further to say that one or another nonbank mortgage company could fail under market stress.  As we noted when FSOC standards were released, nonbank mortgage companies are top targets for systemic intervention, with Ms. Yellen’s comment today focused on individual companies suggesting that this might come via designation, not activity-and-practice standards.  There was little focus on NYCB today, but much attention to CRE risk; the secretary reiterated that it is worrisome for smaller banks, but not systemic.

FSOC31.pdf

7 02, 2024

DAILY020724

2024-02-07T17:14:25-05:00February 7th, 2024|2- Daily Briefing|

Fed Study: 96 CRA Reforms Had No Impact on Bank LMI Lending, Subprime Crisis

As banks take on the new CRA rule in the courts (see FSM Report CRA32), a new Fed study suggests that prior CRA changes had no meaningful impact on LMI mortgage lending in assessment areas and did not cause the subprime crisis as a prior study asserted.

NYCB’s Prospects, Policy and Political Consequences

After the markets closed, NYCB was up a bit from its lows, but it remains to be seen if this is a “dead-cat bounce” or stabilization. Regardless, the company’s market capitalization is down 57 percent since it surprised markets with unexpectedly-bad results.

Daily020724.pdf

18 12, 2023

FSOC29

2023-12-18T11:36:07-05:00December 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

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