#crypto

27 02, 2024

Daily022724

2024-02-27T16:49:32-05:00February 27th, 2024|2- Daily Briefing|

Barr Presses for Counterparty-Risk Management

FRB Vice Chair Barr today called for large banks to ensure that counterparty exposures are well managed according to actions he describes, announcing no new Fed initiatives in this arena.  Mr. Barr was particularly focused on the need for banks to ensure sound margining and to dynamically adjust margins and other risk buffers.

FSB Cites SEC MMF Global Leadership

The FSB today released its thematic peer review report on MMF reforms, generally finding that global progress on its 2021 MMF rule (see FSM Report MMF18) has been inconsistent across jurisdictions.  However, U.S. progress is detailed, with the FSB noting key points in the agency’s 2023 MMF rule (see FSM Report MMF20) despite ongoing concerns about lingering risks such as vulnerability to large and sudden redemption pressure due to large MMF holdings of risky assets.

Fed Staff: Private Credit Poses Banking, Insurance, Systemic Risk

Reflecting concerns most recently expressed by Acting Comptroller Hsu and FSOC (see Client Report FSOC29), the Fed’s new staff paper on private credit contains not only a taxonomy about this fast-growing sector, but also a warning of emerging systemic risk.  Differing from the Fed’s May 2023 financial-stability assessment of low risk (see Client Report SYSTEMIC96), the paper argues for greater systemic-risk focus due to illiquidity, rising corporate leverage and default risk, and the extent to which large amounts of “dry powder” and the need to compete with banks for higher-quality loans lead to still …

22 02, 2024

DAILY022224

2024-02-22T17:00:09-05:00February 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

13 02, 2024

DAILY021324

2024-02-13T17:42:19-05:00February 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.

Daily021324.pdf

2 02, 2024

DAILY020224

2024-02-02T16:21:33-05:00February 2nd, 2024|2- Daily Briefing|

Powell, Hsu Add to Pressure on SEC Crypto-Custody Standards

As we noted yesterday, Congressional Republicans are now mounting a Congressional Review Act effort to repeal the SEC’s staff accounting bulletin (see FSM Report CUSTODY5) requiring balance-sheet recognition of crypto-custody deposits at considerable cost to banking institutions.

Trump to Dump Powell

As we expected, Donald Trump today said that, if elected, he will not reappoint Jerome Powell.  This decision will not present itself to the next president until Mr. Powell’s term ends in January of 2026, but we do not think either of the candidates is likely to reappoint Mr. Powell should he seek a third term.

GOP Bill Challenges Capital Proposal

Echoing long-held concerns of other HFSC Republicans, Rep. Ogles (R-TN) along with Rep. Donalds (R-FL) have introduced legislation (H.R. 7143) forcing regulators to withdraw the capital proposal (see FSM Report CAPITAL230).

Senate Presses for Anti-Hungary Sanctions

In a statement that may lead financial institutions to review their exposures, Senate Foreign Relations Chair Cardin (D-MD) called on the Biden Administration to consider sanctions against Hungary due to its government’s refusal until late yesterday to support EU efforts for Ukraine and its broadly anti-democratic program in general and with specific regard to pressuring the U.S. and its ambassador to Hungary.

HFSC Republicans Take Another Shot at FDIC

Continuing their campaign against FDIC Chair Gruenberg, HFSC Chair McHenry (R-NC) along with Subcommittee Chairs Barr (R-KY) and Hill (R-AR) sent a letter today to the FDIC questioning …

1 02, 2024

Daily020124

2024-02-01T16:56:10-05:00February 1st, 2024|2- Daily Briefing|

CRA Rules Finally Go Live

The Federal Register today contains the OCC, FDIC, and FRB’s CRA final rule over three months after it was approved last October. The effective date of April 1 is unchanged and the regulation is now official; anyone contemplating litigation can begin formal proceedings.

Congress Takes on SEC Crypto-Custody Accounting

As anticipated, Sen. Lummis (R-WY) has today introduced a resolution to overturn the SEC’s staff accounting bulletin (SAB) 121 via the Congressional Review Act (see FSM Report CUSTODY5).  Reps. Nickel (D-NC) and Flood (R-NE) have introduced an identical resolution in the House, with HFSC Chairman McHenry (R-NC) already making clear that he intends to support the measure.

Daily020124.pdf

26 01, 2024

Al012624

2024-01-26T16:10:55-05:00January 26th, 2024|3- This Week|

Here We Go Again

Late last week, Bloomberg reported that the same kind of interest-bearing stablecoin products that wreaked havoc in 2023 and even some that purport to offer checking accounts are proliferating again with kudzu’s tenacity.  Offshore trading volumes for stablecoins grew 28 percent to almost touch $1 trillion at the end of last year, a move said to be bolstered by larger reserve assets at the largest stablecoin issuers.  The problem is that other than the case-by-case enforcement actions that drove this market offshore, there is still no U.S. law or rule to protect investors and, as stablecoins head over the $1 trillion hump, also the financial system.  Will that change this year?

Al012924.pdf

23 01, 2024

DAILY012324

2024-01-23T16:37:28-05:00January 23rd, 2024|2- Daily Briefing|

Waters Tries to Block Libra Redux

Reflecting long-held Democratic concerns over Big Tech’s crypto plans, HFSC Ranking Member Waters (D-CA) late yesterday sent a letter to Meta Platforms CEO Mark Zuckerburg and COO Javier Olivan once again raising strong objections to Meta’s potential expansion into digital assets.  The letter highlights that several of the company’s recent patent applications relate to digital-asset services and blockchain technology, seemingly contradicting Meta’s recent assertions to HFSC Democrats that it is not working in this arena.

Daily012324.pdf

18 01, 2024

DAILY011824

2024-01-18T16:58:16-05:00January 18th, 2024|2- Daily Briefing|

Basel Head Backs U.S. End-Game

In an FT interview today, the Basel Committee’s chair, Pablo Hernández de Cos, unsurprisingly endorsed the U.S. end-game proposal, indirectly but firmly rebutting assertions that it is at variance with global norms.

The Shape of Liquidity Rules to Come

Previewing the construct of what may soon be the anticipated inter-agency proposal addressing liquidity-risk lessons-learned, Acting Comptroller Hsu today argued that the liquidity coverage ratio’s treatment of retail depositors (see FSM Report LIQUIDITY17) does not address likely depositor herding as they run for the exit.

Rounds, Sinema Press for SIFI-Designation Rollback

Senate Banking Committee Member Rounds (R-SD) alongside Sen. Sinema (I-AZ) introduced S.3601, legislation to codify 2019 standards (see FSM report SIFI35) adding significantly more obstacles to systemic designation compared to FSOC’s new approach (see FSM report SIFI36).

Steele’s Good-Bye Presses for More Tough Standards

In his last speech in office, Assistant Secretary for Financial Institutions Graham Steele today called for reassessment of the treatment of unrealized gains or losses not just under the capital rules, but also in the liquidity standards (where they are in fact to some degree now captured).

House Democrats Damn Capital Proposal With Faint Praise

In this report, we begin our assessment of Congressional end-game comment letters.

Senate Letters Slam Capital Proposal’s Tax-Equity Risk Weight Changes

Here, we turn to several Senate letters on the end-game proposal.

Daily011824.pdf

22 12, 2023

DAILY122223

2023-12-29T10:01:49-05:00December 22nd, 2023|2- Daily Briefing|

President Imposes Sweeping Secondary Sanctions

Responding to ongoing evidence that sanctions are not working as hoped despite recent Treasury assurances they are, the President today issued a sweeping executive order and Treasury laid out secondary sanctions for financial institutions found to facilitate Russian Federation finances related to its “war machine.”  We will shortly provide clients with an in-depth analysis of these actions which pose significant threats to dollar-clearing access for financial institutions that have so far been largely outside the reach of existing sanctions.

Treasury Requests Feedback for Financial Inclusion Strategy

Following a statutory directive, Treasury today issued an RFI to develop a national strategy for financial inclusion.  We will shortly provide clients with an in-depth report on the RFI.  Noting significant disparities in banking-system access for LMI, low-wealth, Black, and Hispanic households as well as discrepancies in rates of stock and business ownership between white, Black, and Hispanic households, the RFI invites recommendations for policy, government programs, financial products, technology, and other tools and market infrastructure.

Brown Prioritizes Housing, ILC Bill, AI in 2024

The Senate Banking Committee today released its policy outlook entering 2024 prioritizing affordable housing, enacting the ILC-powers bill (see FSM Report ILC17), and AI financial-sector policy (likely here picking up the Warner-Kennedy bill we will shortly assess in depth).

Daily122223.pdf

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20 12, 2023

DAILY122023

2023-12-20T16:49:55-05:00December 20th, 2023|2- Daily Briefing|

CFPB Small-Business Reporting Reg Remains

In conjunction with his expected veto last night of legislation that would have overturned the CFPB’s small-business reporting rule, President Biden indicated that the Bureau’s rule is central to CRA implementation and would bring transparency to small-business lending.

FSB, IOSCO Try Get-Tough Approach to OEF Illiquidity

As promised, the FSB and IOSCO today finalized recommendations designed to enhance OEF resilience.

HFSC GOP Demands CFPB Nonbank Delay, Clarification

HFSC Chairman McHenry (R-NC) and nineteen Committee Republicans sent a letter to CFPB Director Chopra urging the Bureau to extend by thirty days the comment deadline for its proposal to supervise large nonbank payment providers (see FSM Report PAYMENT27).

FERC Passive-Ownership Inquiry Poses Challenges to Funds, Banks

The Federal Energy Regulatory Commission has opened another avenue scrutinizing the extent to which large asset managers may control the companies in which they invest.

FDIC Approves Significantly Revised Sign, Advertising Standards

The FDIC Board today unanimously approved a final rule modernizing requirements for use of the FDIC’s official sign and clarifying what constitutes misrepresentation and misuse of the FDIC’s name or logo.

Daily122023.pdf

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