#DIF – Federal Financial Analytics

7 09, 2023

FedFin on: Living-Will Requirements

Arezou Rafikian2023-09-07T16:39:01-04:00September 7th, 2023|The Vault|

In conjunction with proposing a new long-term debt (LTD) requirement for categories II, III, and IV banks, the Fed and FDIC are pursuing other ways to enhance resolvability. Among these is new guidance for large domestic and foreign banking organizations that requires U.S. banking organizations and foreign banking organization (FBO) intermediate holding companies (IHCs) along with all their insured depositories when any is over $100 billion to file resolution plans. These are also redesigned to make the plans much closer in substance to those mandated for GSIBs.

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

7 09, 2023

LIVINGWILL22

Eliza Allen2023-09-07T16:03:26-04:00September 7th, 2023|1- Financial Services Management|

Living-Will Requirements

In conjunction with proposing a new long-term debt (LTD) requirement for categories II, III, and IV banks, the Fed and FDIC are pursuing other ways to enhance resolvability. Among these is new guidance for large domestic and foreign banking organizations that requires U.S. banking organizations and foreign banking organization (FBO) intermediate holding companies (IHCs) along with all their insured depositories when any is over $100 billion to file resolution plans. These are also redesigned to make the plans much closer in substance to those mandated for GSIBs. However, in a leading indicator of what the FRB is also likely to demand of GSIBs, smaller companies would be required to ensure severability – that is, the ability to cut off a weak limb to save the rest of the banking organization or ensure ready resolution without undue cost to the FDIC or systemic risk. However, easing one aspect of current planning, banking organizations are expressly allowed to count on use of discount-window or other Fed lending facilities to avert failure if – and this is a significant new if – the plan rests atop sound collateral valuation and data-management systems.

LIVINGWILL22.pdf…

20 07, 2023

FedFin on: Senate Banking Kicks Deposit-Insurance Reform Down the Road

Arezou Rafikian2023-07-21T17:03:13-04:00July 20th, 2023|The Vault|

In the wake of today’s Senate Banking deposit-insurance reform hearing, it seems certain that there will be no legislation in the near term and most likely in this Congress to increase FDIC-insurance thresholds. Although the FDIC recommended a new approach to transaction accounts in its policy review following recent bank failures (see Client Report DEPOSITINSURANCE119), Senators on both sides of the aisle demurred. Chairman Brown (D-OH) made it clear that any change in FDIC-coverage limits is conditioned on final, tougher bank regulations, essentially telling banks that successfully opposing new rules means keeping FDIC coverage as is….

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

20 07, 2023

DEPOSITINSURANCE121

Eliza Allen2023-07-20T15:16:53-04:00July 20th, 2023|5- Client Report|

Senate Banking Kicks Deposit-Insurance Reform Down the Road

In the wake of today’s Senate Banking deposit-insurance reform hearing, it seems certain that there will be no legislation in the near term and most likely in this Congress to increase FDIC-insurance thresholds. Although the FDIC recommended a new approach to transaction accounts in its policy review following recent bank failures (see Client Report DEPOSITINSURANCE119), Senators on both sides of the aisle demurred. Chairman Brown (D-OH) made it clear that any change in FDIC-coverage limits is conditioned on final, tougher bank regulations, essentially telling banks that successfully opposing new rules means keeping FDIC coverage as is. Ranking Member Scott (R-SC) is no fan of new rules, but he also said that review of FDIC coverage should only follow significant improvements in bank supervision likely in his view to moot the need for higher deposit protection. Sen. Scott was also emphatic that higher thresholds would need to come with higher premiums that could adversely affect bank competitiveness and credit availability. Undeterred, Sen. Vance (R-OH) has introduced legislation to end deposit-insurance coverage limits for community banks. Senators on both sides of the aisle focused instead on ensuring community-bank relief from pending special assessments (see FSM Report DEPOSITINSURANCE120) and, for Sen. Warren (D-MA), urging higher premiums for “TBTF” banks.

DEPOSITINSURANCE121.pdf…

30 06, 2023

DAILY063023

Eliza Allen2023-06-30T16:31:38-04:00June 30th, 2023|2- Daily Briefing|

Warren Blasts Goldman Over SVB Dual Role

Raising an issue that could lead to broad demands for internal firewalls, Sen. Warren (D-MA) today sent a letter to the CEO of Goldman Sachs demanding more information about the bank’s dual role advising and buying financial instruments from SVB. The senator raises concerns that this caused conflicts of interest and accuses the bank of using “accounting tricks” that were very costly to the DIF.

Key House Member Posits China Sanctions For Hong Kong Banking Activities

Joined by two U.K. MPs, House Select Committee on the CCP Chairman Mike Gallagher (R-WI) today sent a letter to HSBC’s CEO raising concerns with what he says was the bank’s decision as well as that of other unnamed banks to block Mandatory Provident Fund withdrawal requests for Hong Kong residents with British National (overseas) passports. Firing what may be a first shot into the broader battle of how global banks manage their relations with China, the letter highlights instructions to the fund’s trustee institutions – which include HSBC – from the Hong Kong Mandatory Provident Fund Authority to disregard BN(O) passports.

Daily063023.pdf…

26 06, 2023

Daily062623

Eliza Allen2023-06-26T16:49:47-04:00June 26th, 2023|2- Daily Briefing|

Waters Forum On Deposit-Insurance Reform Focuses On Flexibility

HFSC Ranking Member Waters (D-CA) Friday hosted a roundtable on deposit insurance reform with a panel of industry experts and a legal scholar.

Bowman Blasts Barr Agenda, Cautiously Open to End Game

In remarks yesterday, FRB Governor Bowman continued her campaign against new capital rules, urging regulators instead to focus on liquidity and supervision.

FRB Withdraws Reserve Bank Registry Proposal

The Federal Register today published a notice from the FRB announcing that the Board is withdrawing proposed amendments (see FSM Report PAYMENT26) to its Account Access Guidelines that would have required Reserve Banks to publish periodic lists of depository institutions with access to Reserve Bank accounts.

Waters Recruits Treasury, SEC To Block GOP Crypto Bill

Ahead of HFSC mark-ups on digital assets legislation next month (see Client Report FEDERALRESERVE74), Ranking Member Waters (D-CA) today sent letters to Treasury Secretary Yellen and SEC Chairman Gensler asking for analyses of the draft digital assets market structure bill strongly opposed by Democrats.

Daily062623.pdf…

14 06, 2023

CONSUMER51

Eliza Allen2023-06-14T16:55:35-04:00June 14th, 2023|5- Client Report|

Chopra Holds His Own Under GOP SVB, Consumer-Protection Attack

With Rep. Andy Barr (R-KY) leading the attack with an accusation of CFPB “McCarthyism,” today’s HFSC hearing with Director Chopra tracked much in yesterday’s Senate Banking session. As before, Republicans strongly attacked the credit-card late-fee proposal (see FSM Report CREDITCARD36) and new small-business reporting requirements. However, the lengthy session also allowed Members on both sides of the aisle to probe issues to which Senate Banking failed to turn. One of these was the FDIC’s decision to establish bridge banks for SVB and Signature and to sell FRC to JPM. Mr. Chopra vigorously denied any role of what some have called progressive ideology in opposing bids for SVB, noting also systemic concerns at that time partly due to fears about Credit Suisse. The agency’s controversial data-rights proposal will be out in October, with Director Chopra saying also that the proposal covers nonbanks by virtue of the data to be covered. Provider cyber-security will also be addressed. This report covers additional high-impact issues at the hearing including AI, UDAAP, and systemic designation.

CONSUMER51.pdf…

31 05, 2023

DAILY053123

Eliza Allen2023-05-31T17:00:40-04:00May 31st, 2023|2- Daily Briefing|

IMF: Housing Risk Not At GFC Level, Still Worrisome

While falling home prices are unlikely to trigger another financial crisis, an IMF blog post today finds that a drop could still harm the global economic outlook.

FDIC Tries Guarded Optimism

The FDIC’s first-quarter report on the condition of the U.S. banking industry was guardedly optimistic, but that in part appears to be due to the way in which the agency foresees its problems. Problem banks are up by 4 to 43 with $58 billion in assets among them.

End-Game Starts Soon

FRB Governor and Vice-Chair nominee Jefferson today expanded on the Fed’s financial-stability objectives, resolutely disavowing any of the credit-allocation ambitions Republicans sometimes ascribe to its work on climate risk.

CFPB Small-Business Disclosures Go Live

The Federal Register today includes the CFPB’s controversial final rule on small business data collection published late March which the Bureau says will increase transparency in small business lending, promote economic development, and combat unlawful discrimination.

FHA Expands Pandemic Mortgage Relief As Rates Rise

FHA today requested comment on a new loss mitigation proposal called the Payment Supplement Partial Claim allowing servicers to use FHA funds to bring a borrower’s mortgage current and temporarily reduce principal payments.

Daily0523123.pdf…

24 05, 2023

DAILY052423

Eliza Allen2023-05-24T17:16:58-04:00May 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…

19 05, 2023

DAILY051923

Eliza Allen2023-05-19T17:03:07-04:00May 19th, 2023|2- Daily Briefing|

Bowman Strengthens Stand Against New Rules, Possible Supervisory Overkill

In case anyone doubted her meaning last week, FRB Gov. Bowman today repeated her strong opposition to the regulatory rewrites spelled out in what at first seemed the Fed’s but is now apparently only Vice Chairman Barr’s report (see Client Report REFORM221). Ms. Bowman also reiterates her call for an independent study, continued tailoring, and improved supervision.

Bills To Reduce Regulatory Independence Advance

As anticipated at his last hearing, HFSC Financial Institutions Subcommittee Chairman Barr (R-KY) has now formally introduced three regulatory transparency bills. We will shortly provide clients with in-depth analyses of these bills, which we expect quickly to proceed to mark-up on largely party-line votes.

Warren Pounces On Reports Of Treasury-Bond Assessment Proposal

Sen. Warren (D-MA) yesterday sent a strongly-worded letter to FDIC Chairman Gruenberg demanding that the FDIC reject reported big bank plans to replenish the DIF with at-par Treasury bonds rather than the proposed special assessment (see FSM Report DEPOSITINSURANCE120).

BIS’s Carstens Dismisses Crypto, Calls For Tighter Non-bank Controls

In a wide-ranging speech today, BIS General Manager Agustín Carstens sharply criticized cryptocurrencies and called for greater regulation of the nonbank sector to avert a systemic financial crisis.

Daily051923.pdf…