#credit cards – Federal Financial Analytics

29 02, 2024

DAILY022924

Eliza Allen2024-02-29T16:41:41-05:00February 29th, 2024|2- Daily Briefing|

FSB Says Swiss Standards, Not Its Own, Led to CS Chaos

The FSB today released the review of Swiss GSIB regulation announced after Credit Suisse’s failure.

Basel Tackles Private Credit, GSIB Window-Dressing

The Basel Committee today again pressed nations – clearly here focusing on the U.S. – to finalize the end-game rules as quickly as possible.

FinCEN Releases New AML/CFT Hit List

FinCEN today emphasized that the new FATF report has revised countries where strategic AML and CFT measures are deficient, warning U.S. banks to take this into account – i.e., to ensure appropriate de-risking.

CFPB Targets Bank Comparison-Shopping Posts

The CFPB today loosed another attack on bank marketing practices, arguing that key facts are omitted from credit-card and financial-product descriptions obscuring back-end fees.

Bipartisan HFSC Votes to Repeal SAB 121

At today’s abbreviated markup, HFSC took up H.J. Res. 109, which would repeal the SEC’s Staff Accounting Bulletin 121 requiring banks to keep custody cryptoassets on balance sheet (see FSM Report CUSTODY5).

HFSC Approves Secret Service Cybercrime Bill

As HFSC’s markup continued today, the committee turned to Rep. Fitzgerald’s (R-WI) bipartisan H.R. 7156 expanding Secret Service investigative authorities over cybercrime.

FSB Head Ratchets Up Stablecoin Systemic Worries

In remarks today, FSB Chair Klaas Knot discussed market developments in cryptoassets, suggesting that renewed market interest in stablecoins by bigtechs and financial institutions could have systemic implications.

Daily022924.pdf…

26 02, 2024

M022624

Eliza Allen2024-02-26T11:06:35-05:00February 26th, 2024|6- Client Memo|

The Unintended Consequences of Blocking the Credit-Card Merger

There is no doubt that the banking agencies have approved all too many dubious merger applications along with charter conversions of convenience. However, the debate roiling over the Capital One/Discover merger harkens to an earlier age of thousands more prosperous small banks all operating strictly within a perimeter guarded by top-notch consumer, community, and prudential regulators. Whether this ever existed is at best uncertain. What is for sure is that all this nostalgia for a halcyon past will hasten a future dominated by GSIBs and systemic-scale nonbanks still operating outside flimsy regulatory guardrails.

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26 02, 2024

Karen Petrou: The Unintended Consequences of Blocking the Credit-Card Merger

Eliza Allen2024-04-12T09:46:02-04:00February 26th, 2024|The Vault|

There is no doubt that the banking agencies have approved all too many dubious merger applications along with charter conversions of convenience. However, the debate roiling over the Capital One/Discover merger harkens to an earlier age of thousands more prosperous small banks all operating strictly within a perimeter guarded by top-notch consumer, community, and prudential regulators. Whether this ever existed is at best uncertain. What is for sure is that all this nostalgia for a halcyon past will hasten a future dominated by GSIBs and systemic-scale nonbanks still operating outside flimsy regulatory guardrails.

The best way to demonstrate this awkward certainty is to run a counter-factual – that is, think about what the world would look like if opponents of the Capital One/Discover deal get their way. Would we quickly see a return to card competition housed firmly within a tightly-regulated system? Would the payment system be loosed from Visa and Mastercard’s grip? Would merchants see the dawn of a new era of itsy-bitsy interchange fees? Would card rates plummet and rewards stay splendiferous? I very much doubt it. Space here does not permit a detailed assessment of the analytics underlying my conclusions, so let’s go straight to each of them.

First, banning the CapOne/Discover deal would not ensure robust card competition under strict bank regulation. JPMorgan’s and American Express’ formidable stakes could grow because credit-card lending is a business dependent on economies of scale and scope vital to capital-efficiency through the secondary market. However, large banks will …

22 02, 2024

DAILY022224

Eliza Allen2024-02-22T17:00:09-05:00February 22nd, 2024|2- Daily Briefing|

CapOne Deal Draws GOP Fire

Late yesterday, Sen. Josh Hawley (R-MO) joined Democrats in strongly opposing the CapOne/Discover merger, doing so not only via a short statement, but also a letter to Assistant AG Kanter.

CFPB Buttresses Calls to Block CapOne Deal

Adding still more heat to the fire it built Friday on credit-card industry practices, the CFPB today reported that the average APR margin for credit-cards has reached an all-time high. APR margins were also found also to account for about half of the absolute card rate, which rose from 12.9 percent in 2013 to 22.8 percent in 2023.

Hsu Presses Cross-Border Cryptoasset-Platform Regulation

Speaking before the FSB’s Crypto Working Group today, Acting Comptroller Hsu made it clear that multi-function cryptoasset intermediaries require a home/host-country regulatory construct akin to that adopted in the U.S. and around the world after BCCI’s money-laundering scandal and failure in 1991.

Daily022224.pdf…

20 02, 2024

DAILY022024

Eliza Allen2024-02-20T17:06:56-05:00February 20th, 2024|2- Daily Briefing|

Waters Fails to Muster Meaningful Democratic Capital-Proposal Protest

Late Friday, HFSC Ranking Member Waters (D-CA) released another letter from Democrats protecting the pending capital proposals.

Fed Study: CBDC Impact on Dollar Dominance, Payment System Depends on Many Decisions

A new Fed staff study finds that a U.S. CBDC would have only a marginal impact on the dollar’s role as the reserve currency and within the payment system, although this conclusion depends on a raft of decisions now being made about other CBDCs and the cross-border payment system.

Sanders Targets BlackRock’s Market Power

We will shortly provide clients with an update on Congressional reaction to the C1/Discover merger earlier today, but here draw client attention to a new letter from Sen. Bernie Sanders (I-VT), sure also to be among the credit-card consolidation’s fiercest critics.

Brown Presses Powell for Enforceable Ethics Standards

Senate Banking Chair Brown today renewed his campaign against Fed conflict-of-interest policies, sending another letter to Chair Powell arguing that the Fed’s recent internal-investment and ethics standards are unenforceable.

Initial Response to C1/Discover Merger Starts M&A Debate

With Congress in recess, political response to the Capital One/Discover merger has been muted in terms of sparse comments, but fiery when it comes to Sen. Warren (D-MA).

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16 02, 2024

DAILY021624

Eliza Allen2024-02-16T15:55:14-05:00February 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.

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13 02, 2024

DAILY021324

Eliza Allen2024-02-13T17:42:19-05:00February 13th, 2024|2- Daily Briefing|

Durbin Tries Another Approach to Advance Card-Fee Limits

After trying various ways to bring his credit-card fee bill to the floor, Senate Judiciary Committee Chair and Majority Leader Durbin (D-IL) has scheduled a hearing on this controversial bipartisan measure (see FSM Report INTERCHANGE10).

FinCEN Reaches SEC Agreement to Bring Investment Advisers Under AML/CFT Standards

As it has repeatedly promised, FinCEN today revised a 2015 proposal and issued a new one to subject investment advisers to AML and CFT requirements similar to, but still less restrictive than, those that have long governed banks.

HFSC Rallies to Crypto AML/CFT Defense

The HFSC staff memo on Thursday’s Digital-Assets Subcommittee hearing makes it clear that cryptoasset entities will be given a strong platform from which to resist calls in the Senate to subject cryptoasset transactions to AML and sanctions law.

Gensler Reinforces AI Concerns

In remarks today, SEC Chair Gensler acknowledged AI’s benefits in a manner consistent with the President’s executive order (see Client Report AI3), but then launched into a sharp critique of its risks in line with the agency’s pending rule in this arena.

Bowman Takes Fed Accountability, Transparency to Task

In an essay today, FRB Gov. Bowman emphasized that regulatory accountability does not undermine the independence also essential to a sound, innovative banking system.

Gensler Turns to Bank/Hedge-Fund Interconnection

In addition to his speech on AI earlier today, SEC Chair Gensler today engaged in a wide-ranging discussion of key financial policy questions.

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15 12, 2023

DAILY121523

Eliza Allen2023-12-15T17:31:25-05:00December 15th, 2023|2- Daily Briefing|

Crypto Measures Await Next Session

As anticipated, HFSC Chair McHenry (R-NC) was able to fend off concerted efforts by Sens. Brown (D-OH) and Warren (D-MA) to add the Warren-Marshall crypto bill to the National Defense Authorization Act.

FSOC to Target Hedge Funds, Nonbank Mortgage Companies

The readout from Treasury on yesterday’s FSOC meeting provides insight into the Council’s executive session suggesting significant near-term systemic action regarding hedge funds.

FSB Plans Broad Rewrite of Public Backstops, GSIFI Resolvability, Operational Readiness

The FSB’s 2023 Resolution Report today advises banks and public sector authorities to be prepared to access public sector funding in resolution, with the Board planning to review whether existing public sector backstops are adequate to meet potential failure scenarios.

Brown Renews Bipartisan Quest to Constrain Nonbank Banks

Advancing the big-tech concerns he most recently voiced before GSIB CEOs (see Client Report GSIB23), Senate Banking Chairman Brown (D-OH) has introduced S. 3538, bipartisan legislation to impose bank regulation on non-bank parent companies of insured depository institutions.

DOJ Targets Fraudulent Microtransactions

Cracking down on unauthorized bank account charges, the DOJ today announced multiple actions against “sham” companies alleged to have used misrepresentations or unauthorized charges to steal money from consumers’ financial accounts.

CRS Warns Credit Card Act Could Result In Risky Retailer Payment Networks

The CRS this week issued a report analyzing the Durbin-Marshall Credit Card Competition Act, S.1838 (see FSM Report INTERCHANGE10), projecting that fee caps will have a greater impact on transaction fees than competition, with …

7 12, 2023

DAILY120723

Eliza Allen2023-12-07T16:42:01-05:00December 7th, 2023|2- Daily Briefing|

BIS: CCP Collateral Holdings Pose Systemic Risk

A new BIS study looks at the risk that the transformation of OTC markets to centrally-cleared ones has in turn transformed markets based in part on know-your-counterparty into those dependent principally on collateral backing margin positions – an inherently more fragile market structure.

White House Presses FHLB Affordable-Housing Action

In remarks today, National Economic Advisor Lael Brainard not only highlighted the Biden Administration’s actions to address housing affordability, but also mentioned plans for new financing programs.

Ambitious CFPB Regulatory Plans Come Into View

The CFPB’s fall 2023 regulatory agenda provides status updates for several significant rulemaking items.

Basel to Set IRR, Window-Dressing, Crypto Standards

The Basel Committee’s year-end meeting advanced plans to address interest-rate risk (IRR) with a concrete agreement to issue a new consultation later this month updating current global IRR standards (see FSM Report IRR7).

BIS Points to MMF Risk When Rates Rise

Another new BIS paper concludes that the record size of MMFs poses significant threat to dollar-funding market stability.

OCC Warns Banks of AI Risk, Possible Supervisory Action

Reflecting growing Congressional, regulatory, and industry concerns over AI, today’s OCC semiannual risk assessment for federal banks states that national banks should be mindful of AI risks as these fall under current supervisory procedures.

Senate GOP Goes for Gruenberg’s Jugular

Despite efforts by the FDIC to reassure critics about its independent investigation, Senate Banking Republicans today fired off a ferocious letter demanding that FDIC Chair Gruenberg immediately resign …

13 11, 2023

DAILY111323

Eliza Allen2023-11-13T17:07:02-05:00November 13th, 2023|2- Daily Briefing|

Senate Banking GOP Demand End-Game Withdrawal, Holistic Review Release

Making still clearer their line of attack at tomorrow’s hearing, all GOP Members of the Senate Banking Committee today sent Chairs Powell, Gruenberg and Acting Comptroller Hsu another letter demanding the withdrawal of the capital proposals.

FRB-PHL: Fintech Spots Credit Risk Better than Banks

A new study from the Federal Reserve Bank of Philadelphia finds not only that fintech loan-risk scoring performed well during the pandemic, but also that the proprietary loan rating systems of large fintech companies better predict default likelihood in the personal loan market compared to traditional measures of credit risk.

Barr Stands By His Proposals

Vice chairman Barr’s testimony for forthcoming hearings emphasizes that the banking system is resilient and sound, eschewing the caveats included in Friday’s supervisory report about pockets of weakness.

Gruenberg Defends DIF Rewrites

While echoing comments from Messrs. Barr and Hsu about the sound banking system, FDIC Chair Gruenberg’s testimony pointed to what he called significant downside risk from higher rates, geopolitical tension, unrealized losses, and other factors.

Hsu Differentiates OCC Supervision, Defends Regs

Acting Comptroller Hsu’s testimony reiterates Mr. Barr’s comment about a sound banking system, pointedly noting that all of the recent failures were state-chartered.

Daily111323.pdf…