Starting-Gate Signals
As is traditionally the case, Congress kicked off legislative action upon the President’s State of the Union Address even if the response to Mr. Biden was often decidedly untraditional. Last week was the first of what seem sure to be many busy ones and Senate Banking began work on one of its Chairman’s top priorities – housing – ahead of an opening salvo on another high-impact concern – crypto – later this week.
Biden Puts His Stamp On CFPB Credit-Card Fee Controls
Scuttling industry expectations that the CFPB’s credit-card fee clampdown will never be implemented, President Biden last night zeroed in on his administration’s campaign to eliminate “junk” fees, including “exorbitant” overdraft fees and credit card late fees.
Senate GOP Launches Anti-Woke Attack
Accelerating the GOP’s anti-woke endeavor, Sen. Kevin Cramer (R-SD) and 36 GOP senators have introduced S. 293 to impose strict sanctions on banks that provide or deny financial services for what the senators consider political reasons.
Treasury: Happy In The Cloud If It Doesn’t Rain
In its long-awaited report today on the systemic implications of cloud computing, Treasury today encouraged more rapid adoption even as it pointed to systemic-risk considerations.
HFSC Subcomm: Privacy Compromise May Not Prove Impossible
Today’s kick-off hearing by HFSC’s Subcommittee on Financial Institutions and Monetary Policy suggested that Chairman Barr (R-KY) will move deliberately on his priorities even as full Committee Chairman McHenry (R-NC) pursues higher-profile items such as anti-China policy.
BIS Renews Campaign For Bigtech Systemic Standards
Reiterating longstanding BIS concerns about bigtech platforms, General Manager Agustín Carstens today updated the changes he believes are urgently needed to address growing systemic risk in this sector.
FRB-NY Confirms Regional-Bank Struggle Following LIBOR Transition
A new Federal Reserve Bank of New York staff study and blog post reaffirms many regional-bank fears about the LIBOR transition not fully allayed by compromise provisions in the Fed’s recent benchmark-setting regulation (see FSM Report LIBOR9). Focusing on the credit-line sector (which is largely unfunded), the paper finds that the likely cost of bank wholesale funding under stress will sharply exceed that earned on corporate-line drawdowns priced to SOFR, with these spreads likely especially wide for regional banks. The paper’s models and data thus lead to the conclusion that the shift to SOFR will decrease line availability.
Barr Prioritizes Privacy, Small-Bank Capital, FSOC Restraints
A new staff memo provides not only the agenda for Wednesday’s House Financial Institutions & Monetary Policy Subcommittee, but also the priorities Chairman Barr (R-KY) will pursue with regard to financial regulation. Key concerns are encouraging fintech, data privacy (a priority issue also for Chairman McHenry), facilitating de novo charters, and holding the banking agencies accountable. Bills on which a record will be established is one yet to be introduced to revise the Gramm-Leach-Bliley Act’s privacy standards to stipulate federal preemption, expand coverage and give consumers rights akin to those now also under consideration by the CFPB for a limited number of banking activities (see FSM Report DATA3).
Many rules determine the terms of combat in key financial markets, but none is as fundamental as bank-capital standards because every decision a bank makes first factors capital costs or benefits. These are axiomatic because, even if every other business assumption a company makes is good, a financial product or service will still prove unprofitable if capital requirements are high enough to doom returns sufficient for insatiable investors. Said by some only to be a tidy Basel III clean-up, the Basel IV “end-game” capital rules set to come in the next month or so are actually a substantive recalibration of which businesses make banks how much money compared to all the competitors empowered over the years by the happy – if highly risky – absence of like-kind requirements. It’s thus no wonder that it’s already game-on for the future of the end-game regulations.
As we’ve noted in recent client updates, Rep. Andy Barr (R-KY) now chairs the HFSC subcommittee with power over both financial-institution regulation and monetary policy. Although one of his first bills in this Congress deals only with loosening capital rules for de novo banks (H.R. 758), he has made it very clear that he fears that the new big-bank capital construct will prove unduly costly and anti-competitive. Senate Banking Ranking Member Tim Scott (R-SC) said the same thing in more guarded tones when he released his priorities, making it clear that the GOP has its eyes on the new capital rules.
No coincidence, conservative critics are …
It’s Game-On for End-Game Capital Regulation
Many rules determine the terms of combat in key financial markets, but none is as fundamental as bank-capital standards because every decision a bank makes first factors capital costs or benefits. These are axiomatic because, even if every other business assumption a company makes is good, a financial product or service will still prove unprofitable if capital requirements are high enough to doom returns sufficient for insatiable investors. Said by some only to be a tidy Basel III clean-up, the Basel IV “end-game” capital rules set to come in the next month or so are actually a substantive recalibration of which businesses make banks how much money compared to all the competitors empowered over the years by the happy – if highly risky – absence of like-kind requirements. It’s thus no wonder that it’s already game-on for the future of the end-game regulations.