#credit unions – Federal Financial Analytics

4 08, 2023

FedFin on: Credit-Risk Capital Rewrite

Arezou Rafikian2023-08-04T13:41:04-04:00August 4th, 2023|The Vault|

In this report, we proceed from our assessment of the proposed regulatory capital framework to an analysis of the rules governing credit risk. In addition to eliminating the advanced approach, the proposal imposes higher standards for some assets than under the old standardized approach (SA) via new “expanded” requirements. As detailed here, many expanded risk weightings are higher than current requirements either due to specific risk-weighted assessments (RWAs) or definitions and additional restrictions. This contributes to the added capital costs identified by the banking agencies in their impact assessment, suggesting that lower risk weightings in the expanded approach reflected the reduced risks described in the proposal for other assets and will ultimately have little bearing on regulatory-capital requirements and thus ….

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

4 08, 2023

CAPITAL231

Eliza Allen2023-08-04T13:40:43-04:00August 4th, 2023|1- Financial Services Management|

Credit-Risk Capital Rewrite

In this report, we proceed from our assessment of the proposed regulatory capital framework to an analysis of the rules governing credit risk. In addition to eliminating the advanced approach, the proposal imposes higher standards for some assets than under the old standardized approach (SA) via new “expanded” requirements. As detailed here, many expanded risk weightings are higher than current requirements either due to specific risk-weighted assessments (RWAs) or definitions and additional restrictions. This contributes to the added capital costs identified by the banking agencies in their impact assessment, suggesting that lower risk weightings in the expanded approach reflected the reduced risks described in the proposal for other assets and will ultimately have little bearing on regulatory-capital requirements and thus on the overall ability of banks to expand into lower-risk areas and compete more effectively with nonbanks and foreign banks. Big banks forced to abandon certain activities may expand others receiving capital discounts in the new rules, increasing their footprint in traditional banking in ways that may increase industry consolidation.

CAPITAL231.pdf…

15 08, 2022

DAILY081522

Eliza Allen2023-01-04T12:03:15-05:00August 15th, 2022|2- Daily Briefing|

FDIC Study Finds Changing Assessment Rates Had Procyclical Effects During the Financial Crisis

A new FDIC staff study tackles an immediate concern in the wake of the FDIC’s proposal to raise DIF premiums (see FSM Report DEPOSITINSURANCE114): procyclicality. In what its authors describe as one of the first studies to provide large-scale empirical evidence on deposit insurance’s procyclical effects, this model-driven study looks at the effect of changing deposit insurance assessment rates during the period between 2009 and 2011. Using credit unions as a control group, it finds a 1.6 percent decrease in bank lending after a 7 bp increase in the assessment rate and a 0.3 increase after a 5-10 bp rate decrease.

Fed Tries to Sooth Payment-Access Critics with New Policy

Doubtless reflecting all the political pressure it’s under regarding payment-system access, the FRB today not only finalized its payment-system access rules, but also made sure to use an e-mail subject line containing the release that these rules are “transparent, risk-based, and consistent.” The board also states that the final standards are consistent with both its 2021 proposal (see FSM Report PAYMENT22) and the 2022 “supplemental” proposal (see FSM Report PAYMENT24) even though the supplemental was considerably more detailed than the initial attempt to give the Reserve Banks broad discretion without the appearance of inconsistent or even insider decision-making.

Daily081522.pdf…

25 07, 2022

DAILY072522

Eliza Allen2023-01-04T15:47:24-05:00July 25th, 2022|2- Daily Briefing|

Stablecoin Bill Still in Limbo

As we noted last week, the fate of stablecoin legislation at this week’s HFSC mark-up has been uncertain. The committee staff memo today does not include a bill in this area; it is our understanding that negotiations continue on a draft amenable to both Chairwoman Waters (D-CA) and Ranking Member McHenry (R-NC).

OCC Seeks Fintech, Nonbank Analyses

The OCC today calls for academic and policy-focused papers on the impact of fintech and nonbanks on banking and the markets for lending, deposit-taking, and payment services. This sweeping inquiry is designed to inform the agency as policy continues to take shape in these high-profile areas, with the announcement today providing no insight into whether these papers – which will doubtless come also from trade associations and other advocacy groups – will do more than provide a symposium’s worth of discussion.

Stablecoin Rules – or Lack Thereof – Likely to Remain

As noted in media this afternoon, HFSC will in fact not mark up a stablecoin bill on Wednesday. Instead, some staff indicate that a discussion draft will be released so that the process of crafting a bill can continue in August in hopes of a September vote. However, even if one were to occur, the odds of legislation in this Congress are slim to none at so late a date in the absence of any meaningful Senate Banking action in this arena.

Daily072522.pdf…

16 06, 2022

FedFin On: Big-Bank Consumer Service

Arezou Rafikian2023-01-26T13:35:54-05:00June 16th, 2022|The Vault|

Combining some of its outstanding initiatives and adding new ones, the CFPB is seeking information on how well larger banks and credit unions serve consumers and what steps may be needed to make them do better. The focus of the inquiry is response time, content, and methodology following consumer inquiries based on provisions in the agency’s mandate allowing it to require that banks with assets over $10 billion and their affiliates provide timely responses to consumer requests for information about their accounts. This was included in the Dodd-Frank Act because of ….

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

16 06, 2022

CONSUMER43

Eliza Allen2023-01-26T13:35:49-05:00June 16th, 2022|1- Financial Services Management|

Big-Bank Consumer Service

Combining some of its outstanding initiatives and adding new ones, the CFPB is seeking information on how well larger banks and credit unions serve consumers and what steps may be needed to make them do better. The focus of the inquiry is response time, content, and methodology following consumer inquiries based on provisions in the agency’s mandate allowing it to require that banks with assets over $10 billion and their affiliates provide timely responses to consumer requests for information about their accounts. This was included in the Dodd-Frank Act because of many instances in which borrowers had so much difficulty finding out about their mortgages that foreclosure loomed or even occurred. The Bureau is now inferring a broader rationale for these requirements: the need to preserve relationship banking via the “human touch” rapid responses ensure so that high-quality banking services are readily available in all markets, including those characterized as “banking deserts.”

CONSUMER43.pdf…

13 05, 2022

Al051622

Arezou Rafikian2023-02-21T15:16:59-05:00May 13th, 2022|3- This Week|

Mark-Up Mayhem

On Tuesday, the House Financial Services Committee will meet in open, hybrid session to have another go at each other. The increasingly nasty mood was in relative abeyance when Secretary Yellen testified last week (see Client Report FSOC27), but it was on full display later in the day when Republicans launched a full-bore attack against Acting Comptroller Hsu and earlier in the week when what should have been a staid session on the credit-rating agencies became a sparring match between Chairwoman Waters (D-CA) and Rep. Huizenga (R-MI) over who controls the Committee’s agenda. None of these ill feelings has dissipated and all will be in clear view when the panel meets to report several high-profile, controversial measures.

Al051622.pdf…

7 03, 2022

GSE-030722

Eliza Allen2023-04-04T12:26:31-04:00March 7th, 2022|4- GSE Activity Report|

Banks Take Blame

A new Urban Institute study suggests that banks are more likely to discriminate when it comes to minority borrowers, heightening concerns at a time with increased political risk related to racial equity and mortgage finance.

GSE-030722.pdf…

27 01, 2022

CBDC10

Eliza Allen2023-04-11T16:11:46-04:00January 27th, 2022|1- Financial Services Management|

U.S. Central Bank Digital Currency

Months after initially promising to release a discussion draft on central bank digital currency (CBDC), the Federal Reserve is now seeking comment on whether and how it might create one. Reflecting the hesitancy of several FRB leaders, Chairman Powell included, the draft emphatically states that the Board has made no decision to issue a CBDC and, should it do so, it will seek at least tacit approval from both Congress and whichever Administration is in charge at the time. However, despite this highly-conditional approach, the discussion draft also emphasizes several initial decisions the Fed appears to have made. These would preserve the role of cash and private-sector financial intermediation as well as establish goals for other policy objectives (i.e., privacy protection, illicit-finance prevention, reserve-currency preservation).

CBDC10.pdf…

27 01, 2022

FedFin on: U.S. Central Bank Digital Currency

Arezou Rafikian2023-04-11T16:11:59-04:00January 27th, 2022|The Vault|

Months after initially promising to release a discussion draft on central bank digital currency (CBDC), the Federal Reserve is now seeking comment on whether and how it might create one. Reflecting the hesitancy of several FRB leaders, Chairman Powell included, the draft emphatically states that the Board has made no decision to issue a CBDC and, should it do so, it will seek at least tacit approval from both Congress and whichever Administration is in charge at the time.

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