#credit scores

27 11, 2023

GSE-112723

2023-11-27T11:49:59-05:00November 27th, 2023|4- GSE Activity Report|

An Advanced View of Regulatory Capital?

The most significant thing in FHFA’s final capital rule is not what is to be done, but what FHFA left out: ending the GSEs’ advanced-approach requirement.  As a result, Fannie and Freddie can still use models for key calculations, a requirement that makes more sense for two complex organizations than it did for the regional banks also long subject to advanced-approach requirements even though the rules required them, like GSIBs, to hold the higher of the standardized or advanced approach.

GSE-112723.pdf

24 05, 2023

DAILY052423

2023-05-24T17:16:58-04:00May 24th, 2023|2- Daily Briefing|

New Fed Paper Shows Link Between Twitter, Market Sentiment, Run Risk

A new FRB staff paper uses natural-language models and social-media data to craft a “twitter sentiment index” (TSI) that is then compared to actual market conditions.

Democrats Press Clawback, Regulatory Fixes as HFSC Considers Transparency Measures

Today’s HFSC mark-up so far has focused on one of Rep. Barr’s (R-KY) three regulatory transparency bills, with Democrats proposing a series of amendments without any deciding votes.

House Oversight Panel Focuses On Supervisory Accountability, Reform

At today’s hearing of the Financial Services Subcommittee of House Oversight on bank failures and supervision at the San Francisco Fed, Subcommittee Chairwoman McClain (R-MI) opened with a series of sharply-worded questions on who oversaw the bank, what factors might have distracted them from traditional supervision, why glaring risk factors were not more forcefully addressed, whether regulators were unduly complacent, whether the Fed and FDIC used all of their regulatory tools, and if the agencies have been objective and transparent in their bank failure post-mortems as well as their accounts of the systemic risk exception.

Markup Votes Postponed for Transparency, LLPA Bills

Since our last alert, Democrats continued to submit amendments for Rep Barr’s (R-KY) transparency bill at today’s HFSC markup and party lines cemented over Rep. Davidson’s (R-OH) LLPA bill.

Daily052423.pdf

23 03, 2023

DAILY032323

2023-03-23T17:09:59-04:00March 23rd, 2023|2- Daily Briefing|

OFR Study Predicts Household Gains, Banking Instability From Digital Currencies

A new OFR working paper concludes that full integration of digital currencies into the economy would reduce financial-system volatility and improve household welfare, but also increase the probability of a banking crisis.

HFSC Poses Still Tougher SVB/SBNY Resolution Questions

Following tough GOP letters to the Fed and FDIC earlier this week, HFSC Chairman McHenry (R-NC) and Subcommittee Chair Hill (R-AR) last night sent even sterner missives to Chairman Gruenberg and Secretary Yellen.

Bipartisan Push Begins For CEO Clawbacks

Ahead of its first of many hearings on the collapse of SVB and SBNY, Senate Banking Chairman Brown (D-OH) and Ranking Member Scott (R-SC) today sent letters to the former CEOs of the banks demanding that they answer for the bank failures, noting also that they will be expected to testify before the Committee if they are unable to do so next week.

OFR Blog: CRE, Residential Markets Pose Little Systemic Risk

Despite growing concerns about CRE and even potential systemic risk, an OFR blog post today concludes that neither the residential nor commercial real estate market poses a significant threat to the financial system.

Basel Stands By Its Rules, Contemplates New Supervisory Standards

The Basel Committee’s release following its March 14 meeting unsurprisingly notes the bank failures preceding it just days before, but attributes them principally to poor risk management in the face of rising rates.

GSEs Seek Public Comment on Credit Score Model Transition

The FHFA today announced

2 02, 2023

DAILY020223

2023-02-02T17:01:46-05:00February 2nd, 2023|2- Daily Briefing|

Scott Seeks Innovation, Competitiveness, Responsibility, Administrative Neutrality

Announcing his priorities for this Congress, Senate Banking Ranking Member Tim Scott (R-SC) struck the guarded stance in favor of bipartisan cooperation expressed yesterday by HFSC Chairman McHenry (R-NC).  His top priority is increasing credit availability, with a mention of global competitiveness suggesting perhaps some interest in the Basel proposals as well as the need to advance fintech expressly mentioned in his release.  Like Rep. McHenry, Sen. Scott also highlights regulatory accountability; unlike the HFSC chairman, he cannot call hearings to achieve this although he can of course ask committee witnesses pointed questions.

GAO Presses Need For MMF Reform

As required by the CARES Act, the GAO today issued a study on the March 2020 MMF runs that led the SEC to propose reforms last February (see FSM Report MMF19).  It finds that the SEC’s current MMF liquid assets rules (see FSM Report MMF13) not only failed to prevent MMF runs during the pandemic, but also may have contributed to them by encouraging preemptive MMF share redemption.  It also finds that, even though no MMF imposed a fee or gate in March 2020, their possibility likely contributed to redemption incentives.

Daily020223.pdf

26 01, 2023

DAILY012623

2023-01-26T16:44:02-05:00January 26th, 2023|2- Daily Briefing|

Effective Date Set for LIBOR Termination

The Federal Register today includes the FRB’s final rule Implementing the Adjustable Interest Rate (LIBOR) Act, setting the rule’s effective date as February 27.  As noted (see FSM Report LIBOR9), the final rule settles many LIBOR transition questions in favor of SOFR, leaving numerous complex implementation questions  up in the air despite this added certainty.

Fed Study Finds Card Rewards Result in $15 Billion Wealth Transfer

A new Federal Reserve staff study finds that credit-card rewards annually redistribute approximately $15.1 billion a year to more financially-sophisticated consumers.  This result is likely to weigh heavily into debate later this year if, as we expect, Sen. Durbin (D-IL) reintroduces legislation to force card-routing alternatives to Visa and Mastercard (see FSM Report INTERCHANGE10).

ISDA Lays Groundwork for Crypto Rules, Law

The self-regulatory body for global derivatives, ISDA, today released a contractual framework for digital-asset derivatives.  These are now likely to be widely adopted by major financial institutions but may not resolve legal-ownership issues when cryptoasset entities use intermediaries or other avenues into global capital markets that obscure contractual rights.

Daily012623.pdf

5 08, 2022

DAILY080522

2023-01-04T13:22:18-05:00August 5th, 2022|2- Daily Briefing|

Senate Dems Demand Answers from Equifax re Inaccurate Credit Scores

In a letter today to Equifax’s CEO, Sens. Warren (D-MA), Warner (D-VA), and Krishnamoorthi (D-IL) demanded answers about erroneous credit scores, asking why the company failed to notify affected borrowers and waited several weeks to notify lenders.  The Senators claim that Equifax’s response in an environment of rising interest rates forced some borrowers to pay higher rates or rejection and ask Equifax to explain the cause and scope of the error, compensation plans, and whether all affected parties or any relevant regulatory authorities have been notified.

Brown Targets Life-Insurance Systemic Risk

Senate Banking Chairman Brown (D-OH) today announced that he plans a hearing questioning the role of private-equity companies in the life-insurance sector.  In letters to FIO and the NAIC, he cites Federal Reserve statements regarding insurance-industry leverage (see Client Report SYSTEMIC93), indicating that he believes this poses systemic challenges akin to those in the banking sector before 2008.  FIO is asked to target analysis of offshore reinsurance sector risk-taking across the life-insurance sector; NAIC is asked to work with the FIO on issues raised in its prior letter to the chairman.

Daily080522.pdf

28 07, 2022

DAILY072822

2023-01-04T15:35:02-05:00July 28th, 2022|2- Daily Briefing|

End-August Deadline Set for LIBOR Comments

The Federal Register today includes the Fed’s proposal to implement the LIBOR Act.  Comments are due by August 29.  As we noted (see FSM Report LIBOR8), a smooth transition from LIBOR by its effective end date in June 2023 appears unlikely, with the Fed leaving several questions unresolved in its NPR in favor of meeting this deadline.

HFSC Votes in On Key Bills

Turning to recorded votes from yesterday’s markup, the HFSC today approved several bills including reforms to overdraft fees and credit reporting.  The overdraft bill, H. R. 4277 (Maloney, D-NY), passed 27-22.  Also voted on were H.R. 8485 (Williams, D-GA), and H.R. 8478 (Pressley, D-MA).  Both passed the Committee 28-23.

FSOC Agency Heads Report Climate-Risk Progress

At today’s FSOC open meeting, member agency heads reported their climate-risk progress following the President’s executive order.  Chairman Powell reiterated that the Fed is updating work on climate risk assessments without providing timing or details.  SEC Chairman Gensler mentioned the SEC’s proposed climate disclosure proposal, stating that hundreds of issuers already disclose climate-related information.

Daily072822.pdf

27 07, 2022

DAILY072722

2023-01-04T15:37:13-05:00July 27th, 2022|2- Daily Briefing|

Waters: Stablecoin Bill Would Authorize CBDC

At the opening of today’s HFSC markup, Chairwoman Waters (D-CA) and Ranking Member McHenry (R-NC) announced that they were close to a bipartisan draft of stablecoin legislation and hope to complete one by the August recess.  Chairwoman Waters said the bill would include authorization for CBDC to ensure U.S. global competitiveness.  We would expect this to follow the outline of the draft Rep. Himes (D-CT) released this spring.

Revised Overdrafts, Credit Data Bills Advance

The HFSC today, although postponing recorded votes, lightly approved H.R. 4277, Rep. Maloney’s (D-NY) overdraft protection bill.  The bill would limit overdraft fees banks can charge customers to no more than one per month or six per year, allowing the CFPB to raise that limit; require the fees to be reasonable and proportional to the amount overdrawn and the cost of providing coverage for the overcharge; prevent institutions from posting transactions in an order that would maximize overdraft fees; and require banks to let customers decide if they want coverage.  It appears that the bill will not have the option for the CFPB to impose a 24-month moratorium included in the legislation when it last came before the Committee, but we will review the bill as reported to determine if that is the case.

Daily072722.pdf

12 07, 2022

DAILY071222

2023-01-06T15:21:46-05:00July 12th, 2022|2- Daily Briefing|

FRB-NY Staff Target Consumer-Welfare Problems with Numeric Scores

A new post from Federal Reserve Bank of New York staff concurs with a recent GAO study and Senate Democratic concerns about consumer risks resulting from numeric scores for purposes other than credit reporting.  GAO called for consumers to have the same transparency and error-correction rights related to scores such as those judging purchasing power or deposit activity as mandated under the FCRA for credit scores.

Treasury Reposts Crypto RFI

As Treasury for some reason today reposted its request for comment on digital assets.  The release is the same as last week’s which we analyzed in today’s in-depth report (see FSM Report CRYPTO30).

OFR Report Finds CBDC Reduces Run-Risk

The Office of Financial Research today released a report concluding that – counter to many fears – a CBDC could reduce banking system run-risk.  This is because a CBDC during normal times is said to lead to less maturity transformation (i.e., less intermediation), as well as the government resolving weak banks more quickly due to greater information signaling of a run evident in CBDC flows.

Daily071222.pdf

7 07, 2022

DAILY070722

2023-01-24T15:30:00-05:00July 7th, 2022|2- Daily Briefing|

IOSCO Releases 2022-2023 Crypto Roadmap

IOSCO today released its Crypto-Asset Roadmap for 2022-2023, outlining two work plans on crypto- and digital assets on DeFi.

Basel Reaffirms Proportionate Policy

The Basel Committee today released high-level “considerations” on proportionality – i.e., how to apply its standards taking account of a bank’s size and complexity.

CFPB Demands Tighter Reporting-Data Controls

Using another advisory to issue what some may consider a rulemaking, the CFPB today threatened to pursue criminal penalties if credit-report data are not used for permissible purposes (i.e., for credit, housing, employment or insurance decisions).

FSB Report Promotes LEI Adoption for Cross-Border Payments

The FSB today issued a report recommending that G20 members promote Legal Entity Identifier (LEI) adoption, aiming particularly at cross-border payments.

Treasury Releases International Crypto Engagement Framework

As demanded by President Biden’s digital asset executive order (see Client Report CRYPTO26), Treasury in consultation with the State Department, Commerce, and USAID today released a framework for international engagement on digital assets.

Democratic Senators Demand More from Zelle on High-Profile Fraud Allegations

Sens. Menendez (D-NJ), Warren (D-MA), Reed (D-RI) and five Democratic colleagues today ramped up their attack on the extent to which Zelle properly handles payment fraud.

Daily070722.pdf

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