#Credit Suisse

22 01, 2024

DAILY012224

2024-01-22T16:57:16-05:00January 22nd, 2024|2- Daily Briefing|

FRB Reconsiders Interchange-Fee Cuts

Bowing to critics in the banking industry and on the Board, the Federal Reserve today extended the comment period on its debit-card interchange fee proposal (see FSM report INTERCHANGE12) by a surprisingly-long ninety days to May 12.  The extension is in part due to the Board’s decision to publish additional interchange fee cap data which may have persuaded the Board that the initial data analysis supporting a mandatory pricing reduction was incorrect.

OIG Finds Reserve-Bank Trades Legal, But Problematic

The Federal Reserve’s Office of the Inspector General (OIG) today released long-awaited reviews of personal trades by former Dallas and Boston Reserve Bank Presidents two years ago that raised numerous and often vociferous assertions of conflicts of interest.  Indeed, Sen. Warren (D-MA) stated that she believed these epitomized a “culture of corruption” at the Fed, introducing bipartisan legislation to force considerably more transparency at the Reserve Banks.

FSB Plans Global Run-Risk Buffers

The head of the Financial Stability Board, Secretary General John Schindler, today briefed media on the global regulator’s plans to brief the G20 in October about viral-run risk and the standards needed to avert it.  Mr. Schindler said little about what the FSB is likely to propose although the Basel Committee is now considering rewrites to global LCR and NSFR standards likely to be reflected in the FSB’s recommendations.

Daily012224.pdf

6 12, 2023

DAILY120623

2023-12-06T16:42:25-05:00December 6th, 2023|2- Daily Briefing|

OFR Sees Heightened Systemic Risk

Striking a considerably more somber note than the FRB (see Client Report SYSTEMIC97), OFR today concluded that systemic risk is elevated due to an upcoming economic slowdown, heightened inflation,  and geopolitical risk and global conflict.

OCC Cracks Down on BNPL Finance

Reflecting continuing CFPB concerns about buy-now/pay-later finance, the OCC today sets new risk-management standards for federally-chartered entities in this arena.

HFSC Housing Subcommittee Revisits Housing Debate

Today’s HFSC Housing Subcommittee hearing largely followed the staff memo’s outlined political playbook, with Chairman Davidson (R-OH) calling for market-based solutions and Ranking Member Presley (D-MA) arguing that expanded subsidies are necessary alongside zoning reform to make housing affordable.

Fed Proposes Market-Risk Valuation Reporting

Readying disclosures for the market-risk capital rewrite (see FSM Report CAPITAL233), the Federal Reserve has proposed new reporting standards that would require covered banks to disclose valuations of their covered positions taking into account unearned credit spreads, close-out costs, early termination costs, investing and funding costs, liquidity, and model risk.

Fed Proposes New Liquidity Risk Reporting Standards

Reflecting growing fears that banks could not actually monetize HQLAs under stress as proved the case for Credit Suisse, the FRB is also proposing new reporting standards requiring covered companies to report on qualifying master netting agreement compliance with current liquidity-risk measurement standards.

Daily120623.pdf

11 10, 2023

DAILY101123

2023-10-11T16:47:36-04:00October 11th, 2023|2- Daily Briefing|

Bowman Targets U.S. Leverage Ratio, NBFIs

In remarks during the Morocco IMF/Bank meeting today, FRB Gov. Bowman contrasted U.S. bank resilience with the IMF’s findings yesterday on potential vulnerabilities as rates rise and macroeconomic conditions soften.

FSB Reiterates Stability Concerns

The FSB’s latest work plan reiterates all it most recently said to the G20.

CFPB Barrels Down on “Basic” Banking Fees

In conjunction with a new White-House junk-fee initiative, the CFPB today issued “guidance” – i.e., essentially a final rule – banning large banks and credit unions from collecting “unreasonable” fees for what the Bureau considers reasonable and “basic” account information.

SEC Throws Wrench into TLAC Standards

As we noted yesterday, the FSB’s assessment of the global resolution framework’s effectiveness found significant glitches it urges national regulators quickly to address via standards such as those now pending in the U.S. to bring smaller banking organizations into the resolution-planning regime (see FSM Report LIVINGWILL23).

OFR Study: Short-Selling Does Not Harm Financial Stability

OFR today released a model-based study that finds no evidence that short-selling adversely affects financial stability.

Daily101123.pdf

10 10, 2023

DAILY101023

2023-10-10T16:46:21-04:00October 10th, 2023|2- Daily Briefing|

Barr Stands Firm on Capital Rewrite

In remarks yesterday, Vice Chair Barr made it clear that, no matter all the industry and Republican pressure, the Fed believes the pending capital rewrite has no material problematic consequences and is necessitated by recent events.

FSB Calls for Continued Improvements in Cross-Border Payments

Following its cross-border payments roadmap, the FSB today released two progress reports finding that further work is needed in ensuring payment system interoperability, establishing common data standards for payments messages, developing tools needed for APIs, and providing a vehicle for the investigation of legal, regulatory and supervisory frameworks.

FSB Presses for Better Smaller-Bank, GSIB Resolvability

Following Basel’s review late last week on the 2023 crash (see Client Report REFORM228), the FSB today released its assessment of implications for GSIB resolution.  Basel’s report acknowledged challenges in this area, but largely focused on what we call Basel V.

Fed Finalizes DIHC Insurance-Capital Construct

As promised in the bank-capital proposals (see FSM Report CAPITAL230), the FRB Friday voted 6-0 to finalize long-pending standards for insurance-focused depository institution holding companies.

GOP Hikes Pressure on Iran Payment, Sanctions

Presaging likely HFSC hearings and delays in regular committee action, Ranking Member Scott (R-SC) today called for Secretary Yellen to testify in front of Senate Banking to explain why $6 billion is being released to Iran and to identify any sanctions gaps.

Bowman Pursues Barr, Array of Recent Fed Actions

Continuing her opposition to much of what Vice Chair Barr is doing, …

6 10, 2023

FedFin Assessment: Basel Lays Big Plans for Basel V

2023-10-06T14:47:18-04:00October 6th, 2023|The Vault|

As we noted yesterday, the Basel Committee’s October meeting concluded not only with plans for new disclosure consultations, but also a report on lessons learned from the 2023 crisis.  We have long considered the “end-game” standards so substantive as to constitute Basel IV; now, as this report details, Basel is laying plans for Basel V via new liquidity, interest-rate, capital, and structural changes to the current construct.  We thus focus on the supervisory and regulatory action steps Basel posits as necessary responses to the financial-market volatility sparked earlier this year by SVB, SBNY, FRC, and CS’s failures.  While Basel states that none of its recommendations necessarily presages near-term global standards, …

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

6 10, 2023

REFORM228

2023-10-06T11:45:12-04:00October 6th, 2023|5- Client Report|

FedFin Assessment: Basel Lays Big Plans for Basel V

As we noted yesterday, the Basel Committee’s October meeting concluded not only with plans for new disclosure consultations, but also a report on lessons learned from the 2023 crisis.  We have long considered the “end-game” standards so substantive as to constitute Basel IV; now, as this report details, Basel is laying plans for Basel V via new liquidity, interest-rate, capital, and structural changes to the current construct.  We thus focus on the supervisory and regulatory action steps Basel posits as necessary responses to the financial-market volatility sparked earlier this year by SVB, SBNY, FRC, and CS’s failures.  While Basel states that none of its recommendations necessarily presages near-term global standards, they warrant review not only as likely precursors to at least some new proposals, but also as guides to what is top of mind for national regulators beyond finalizing end-game capital rules and dealing with home-country matters such as resolvability.  If Basel proposes only some of the regulatory revisions it has in mind or, as the Fed clearly intends, the U.S. does so ahead of time, larger banks will face significant revisions to the LCR and NSFR, capital add-ons for interest-rate outliers, and express ring-fencing to prevent a CS repeat – i.e., a case in which the parent company met applicable standards but key subsidiaries fell far short.

REFORM228.pdf

13 09, 2023

DAILY091323

2023-09-13T16:46:21-04:00September 13th, 2023|2- Daily Briefing|

GOP Plans Still More Nails in CBDC Congressional Coffin

The memo for tomorrow’s HFSC CBDC hearing leaves no doubt as to continuing staunch GOP opposition, with Majority Whip Emmer (R-MN) reintroducing legislation barring the Fed from issuing a CBDC to individuals or using it to implement monetary policy.

FSI: Contingent Capital Fails as TLAC

Reinforcing the decision by U.S. agencies not to allow CoCo to serve as TLAC (see FSM Report TLAC9), a new BIS staff brief concludes that the current regulatory framework for Additional Tier 1 (AT1) bonds may not be fit for purpose, encouraging regulators to rethink CoCo as well as to consider heightening disclosure standards.

Gensler Emphasizes Prime Broker, Crypto, AI Risks

SEC Chairman Gensler today highlighted his ongoing worries about prime brokers, reiterating leverage and systemic-risk concerns.

Chopra Suggests Bank Merger Rewrite in Works

CFPB Director Chopra today reiterated the Bureau’s priorities, stating that the current bank merger review process lacks analytical rigor which will soon be addressed in ways he did not specify.

Daily091223.pdf

5 09, 2023

DAILY090523

2023-09-05T17:16:52-04:00September 5th, 2023|2- Daily Briefing|

FSB Considers Resolution Construct Revamp

In addition to calling for full and consistent implementation of the Basel III framework, the FSB head’s letter to the G20 today stresses that this year’s bank failures challenge long-held views about deposit stickiness and the speed of bank runs, leading international standard-setters now to consider unspecified policy changes to the resolution construct.

BIS Study: Fed, FDIC Reassurances Offset Bank Run Risk

Contributing to analysis of viral runs and how to stop them, a new paper from BIS staff concludes that public communication from the Fed on banking system stability and from the FDIC on deposit insurance during crises can mitigate systemwide run risk, while similar statements from political figures such as President Biden are less effective.

IMF: Money Laundering Undermines Financial Stability

The IMF yesterday published a blog post on money laundering’s financial-stability impact, concluding that cross-border illicit payments result in equity-price declines, higher CDS costs, elevated perceived credit risk, and declines in deposits for the individual banks involved.  The blog also states that there is a contagion dynamic as a result of spillover effects between targeted banks and other banks within the region.

Daily090523.pdf

9 08, 2023

DAILY080923

2023-08-09T16:35:20-04:00August 9th, 2023|2- Daily Briefing|

Brown, Other Senate Dems Demand Fast Action on Fed Merger Policy Rewrite

Building on Sen. Warren’s (D-MA) longstanding Fed criticism, Chairman Brown (D-OH) along with Sens. Warren, Reed (D-RI), and Fetterman (D-PA) today directly demanded a substantive and speedy rewrite of Fed merger policy to ensure that statutory requirements related to financial-stability impact are met.  The letter not only criticizes past mergers Sen. Warren has long said are “rubber-stamped” and JPMorgan’s acquisition of First Republic, but also cites the Fed’s decision to allow UBS to acquire Credit Suisse.

Waters Doubles Down On Opposition To GOP Stablecoin Bill

In stark contrast to HFSC Chairman McHenry’s (R-NC) comments praising PayPal’s new payment stablecoin, Ranking Member Waters (D-CA) today sharply criticized the product and the risks its poses  given that the HFSC GOP has advanced a bill she thinks both highly problematic and unlikely to be enacted.

Daily080923.pdf

27 07, 2023

DAILY072723

2023-07-27T17:47:02-04:00July 27th, 2023|2- Daily Briefing|

FSB Tries to Calm CoCo Confusion

Doubtless responding to the CoCo chaos when Credit Suisse failed, the FSB today issued a report laying out how cross-border crisis-management groups are to handle unallocated TLAC (UTLAC) such as the “alternative Tier 1” bonds popular in the EU.

FDIC 3-2 Vote Presages Knock-Down Basel Battle

As anticipated, the FDIC today voted 3-2 to issue a sweeping rewrite of U.S. regulatory capital requirements.

Divided, Cautious Fed Advances End-Game, GSIB Rewrites

As anticipated, Gov. Bowman today voted against the new capital framework, as did Gov. Waller; as a result, the vote was 4-2.

Stablecoin Bill Advances, Compromises to Come

At a fiery HFSC markup today, Chairman McHenry (R-NC) announced that bipartisan negotiations had broken down largely due to the White House, choosing to proceed to a final package as he remains open to amendment before floor action.

House Republicans Skewer Basel Rules

Hill comment so far in response to the new capital rules is sparse.

Daily072723.pdf

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