17 05, 2024


2024-05-17T16:46:55-04:00May 17th, 2024|2- Daily Briefing|

Gruenberg Turns to Regulatory Rewrites

Turning back to his day job, FDIC Chair Gruenberg today spoke to European regulators on lessons from last year’s U.S. banking crisis.

Waller Reinforces Fed Dominant Role Across U.S. Payment System

FRB Gov. Chris Waller today addressed an array of technical payment-system issues, also reiterating the Fed’s plan to remain firmly engaged in payment services as well as serving as technology convenor and dominant provider.

Freedom Caucus Republicans Resurrect Bill to Abolish the Fed

Leading a group of Freedom Caucus Republicans, Rep. Thomas Massie (R-KY) yesterday introduced H.R. 8421, a bill to abolish the Federal Reserve Board and Federal Reserve banks, along with repealing the Federal Reserve Act.

Fed Denies Petitions to Review CAMELS, Social-Commitment Disclosure

The Federal Reserve Board today voted 7-0 to reject two petitions on grounds that they do not demonstrate that the FRB erred on statutory or policy grounds.

Bowman Lumps Fed M&A Reports Into Policy Critique

FRB Gov. Bowman today reinforced the substantive nature of recent Fed changes to M&A reporting first identified in a FedFin client alert, saying that these could increase up-front costs in a way particularly harmful to small institutions.


16 05, 2024


2024-05-17T09:49:00-04:00May 16th, 2024|2- Daily Briefing|

Basel Again Contemplates Digitalization

In its first look at technology-enable finance since 2018 (see FSM Report FINTECH18), the Basel Committee today published a report acknowledging that much has happened in areas such as AI, tech platforms, and cloud services since it last looked at digitalization.

SCOTUS Decision re CFPB Also Upholds FDIC, OCC Funding

Although we defer to counsel for interpretation of the Supreme Court’s 7-2 decision today to uphold the CFPB’s funding mechanism, we note its application not only to preserving the Bureau, but also the premium funding mechanism behind the FDIC’s DIF and the OCC’s assessments.

SEC Coming for Bank Investment Funds

SEC Chair Gensler today announced that SEC staff are talking with bank regulators about risks posed by bank trust and retirement-plan collective investment fund offerings, noting that rules governing these funds do not address illiquidity or leverage nor do they provide sufficient investor disclosure or find dependent fund governance.

Senate Strikes Down SEC’s Custody Accounting Bulletin

In a rebuke to the White House and SEC, the Senate today voted 60-38 to approve H.J. Res. 109, the CRA resolution previously approved in the House to revoke the SEC’s Staff Accounting Bulletin 121 requiring balance-sheet recognition of custody assets (see FSM Report CUSTODY5).

FHFA Starts to Rewrite How and Who Home Loans Serve

Building on its FHLB 100 report, the FHFA today advanced codification of a new FHLB mission with a request for public input on how best to do so.

Dems Demand

16 05, 2024


2024-05-16T15:43:29-04:00May 16th, 2024|5- Client Report|

Gruenberg Stands His Ground

Faring somewhat better than he did yesterday (see Client Report REFORM232), FDIC Chair Gruenberg weathered repeated calls from Democrats to reform the agency’s culture without being subjected to direct demands that he resign.  That said, Ranking Member Scott (R-SC) called for a separate hearing on the Cleary report; he will not get one in the Senate, but this request suggests the one HFSC Chair McHenry (R-NC) mentioned yesterday may well be in the works.  If it is, then this may prove challenging to Mr. Gruenberg, who otherwise seems unwilling to resign and is not yet facing dismissal from the White House.  Senate Banking Republicans were as scathing as their House counterparts, with Sen. Kennedy (R-LA) comparing Mr. Gruenberg’s efforts to fix the FDIC to “asking Alec Baldwin to conduct a course in gun safety.” Sen. Warnock (D-GA) asked for and received a commitment for a ninety-day progress report on FDIC reform.  Acting Comptroller Hsu also took tough questioning today from Republicans such as Sen. Britt (R-AL), although he does not face demands for resignation.  Chair Brown (D-OH) also pressed Vice Chair Barr to join the FDIC and FRB in issuing a formal merger policy, but Mr. Barr again demurred, saying that the FRB is working with the OCC, FDIC, and DOJ on an inter-agency effort Mr. Hsu also acknowledged under questioning.   Mr. Barr also acknowledged the need to issue an incentive-compensation rule but declined to say if the FRB might join the FDIC and …

15 05, 2024


2024-05-15T16:50:27-04:00May 15th, 2024|5- Client Report|

Gruenberg Grilled on Both Sides

Democrats today were surprisingly scathing about FDIC Chair Gruenberg’s continued service, with Reps. Pressley (D-MA), Velázquez (D-NY), and Foster (D-IL) making clear they had lost confidence in him.  Ranking Member Waters (D-CA) tried to pin the blame at least as much on Mr. Gruenberg’s predecessors, but Rep. Meeks (D-NY) and others were more focused on Mr. Gruenberg, with Rep. Garcia (D-TX) getting him to agree to anger management training.  Republicans were united in blistering statements, with HFSC Chair McHenry (R-NC) closing the hearing by saying that he might convene another hearing solely on the FDIC chair given Democratic concerns about the need to focus more on the FDIC than possible given the overall regulatory agenda.  One major focus nonetheless was of course on the end-game rules, with Republicans trying to get FRB Vice Chair Barr to agree that the rule needs to be re-proposed given plans for material changes.  Mr. Barr refused to do so or to say when the QIS will be released beyond indicating that it should be in the near term.  Mr. Barr also would not outline his view on the new incentive-compensation proposal (see FSM Report COMPENSATION38) when pressed to do so by Rep. Velázquez.  We will defer a forecast of how Mr. Gruenberg is likely to fare until after tomorrow’s Sente Banking hearing, which will surely be as tough and may perhaps indicate additional sentiment that Mr. Gruenberg resign.  Should he continue to refuse to do so as …

14 05, 2024


2024-05-14T17:38:28-04:00May 14th, 2024|2- Daily Briefing|

HFSC Set for Marathon Markup

According to the majority-staff memo released yesterday for HFSC’s mark-up on Thursday, the mark-up will focus on eleven bills including H.R. 8337, a new bill introduced by Rep. Barr (R-KY) which includes six previous bills.

BIS Advances Tokenized Cross-Border Payments

Advancing its general manager’s campaign to encourage tokenization, the BIS today invited private-sector financial institutions to apply to participate in Project Agorá, testing whether tokenized deposits could enhance cross-border payment functionality via tokenized commercial bank deposits and tokenized wholesale central bank money in a public-private platform.

Barr to Say Liquidity Regs Coming, Capital Standards in the Works

In the testimony he will present starting tomorrow, FRB Vice Chair Barr makes it clear that, despite the banking system’s current sound condition, banks and supervisors must remain vigilant due to emerging challenges such as CRE and consumer-debt risk.

Gruenberg’s Promised Workplace Reforms Set for Buzzsaw

Events late today surrounding FDIC Chair Gruenberg’s testimony indicate his going may be even stormier than we anticipated.

Hsu Focuses on Operational Resilience, Check Fraud

Acting Comptroller Hsu’s testimony says the banking system is sound, but also at risk of increasing disruptions with heightened impact due to natural disasters, geopolitical risk, and internal operational failings or poor risk management.

Fed, OCC Open CapOne/Discover to Public Hearing

The FRB and OCC today extended the public-comment period on the CapOne/Discover merger until July 24.


14 05, 2024


2024-05-14T10:42:42-04:00May 14th, 2024|1- Financial Services Management|

Incentive-Compensation Restrictions

The OCC, FDIC, FHFA, and NCUA have revived what was in 2016 a proposal issued also by the FRB and SEC to revise incentive compensation at financial institutions in hopes of better alignment between compensation and safety and soundness.  Rules or formal guidelines were required by the 2010 Dodd-Frank Act to take effect nine months after enactment, but agreement has been hard to achieve as evidenced by a renewed proposal almost fourteen years after the law was passed to which key agencies have yet to consent even in proposed form.  The new proposal reissues the 2016 inter-agency agreement for another round of public comment in concert with asking questions about a few specific alternatives and many aspects of the prior approach. The next step if agreement is reached is unclear unless the FRB and SEC join in the inter-agency process also mandated by the Dodd-Frank Act although each of the agencies that reach agreement could issue freestanding guidelines or perhaps even a formal rule binding the entities over which they have jurisdiction, a process the FDIC in fact initiated in 2011.


13 05, 2024


2024-05-13T16:53:55-04:00May 13th, 2024|2- Daily Briefing|

HFSC Sets Course for Contentious Supervisory Hearing

HFSC’s majority-staff memo ahead of Wednesday’s hearing with prudential regulators lists an array of pending rules and transactions as a platform for numerous measures changing current standards.

Basel Battles on for End-Game, Punts Crypto Regs

The Basel Committee’s supervisory group of central bankers and supervisors (GHOS) today continued to press the U.S., U.K., and EU to finalize Basel III’s end-game rules quickly and compatibly with the 2017 package.

Yellen Rebukes FDIC Workplace Culture

Ahead of what are sure to be grueling hearings, Treasury Secretary Yellen today told press that the behavior described in the recent FDIC report was “totally unacceptable” and did not align with the Biden administration’s core values.


10 05, 2024


2024-05-10T17:23:08-04:00May 10th, 2024|3- This Week|

Readying for Raucous Hearings

Bank-regulator appearances before Congressional committees have become increasingly lively of late what with all the Basel, merger, process, and CRA battles.  However, the sessions this week will be marked by unusual drama due to the devastating report filed last Tuesday on the FDIC’s internal culture and employee reports of ongoing sexual harassment, discrimination, and insularity.  As we noted, Republicans are united in demanding that Chair Gruenberg resign or be forced out, but Democrats with the exception of Rep. Bill Foster (D-IL) are either biding their time or supporting him on grounds he is mounting needed corrective action and many problems were not on his watch.  The White House carefully positioned itself to side with Democrats without at the same time expressly backing Mr. Gruenberg, a nuanced stand essential given the President’s commitment early in his term to oust any federal employee accused of serious workplace misconduct.  Republicans will surely try to catch Mr. Gruenberg in a misstatement or misstep in order to force the White House to dismiss him, but Mr. Gruenberg in fact still can only be dismissed if the White House comes to this view or, a lot less likely, the GOP tries to impeach him.  All this will take a lot of hearing bandwidth, but there will still be time for critical issues such as the end-game capital rule’s status, forthcoming liquidity rules – if any – and the OCC’s and FDIC’s merger proposals (see FSM Reports MERGER14 and MERGER15).  We’ll …

9 05, 2024


2024-05-09T17:03:02-04:00May 9th, 2024|2- Daily Briefing|

Crypto-Custody Battle Back in Bank Regulators’ Laps

The House yesterday voted 228-182 to approve H.J. Res. 109, a GOP motion under the Congressional Review Act to revoke the SEC’s Staff Accounting Bulletin 121 requiring additional disclosures and balance-sheet recognition related to cryptoasset custody (see FSM Report CUSTODY5).

GOP Tries to Place Gruenberg Blame on President Biden

Late yesterday, the GOP leadership of the House Oversight Committee sought to escalate the political focus on FDIC Chair Gruenberg, writing to the White House to demand all communications with Mr. Gruenberg and others related to workplace conduct.

Brown, Scott Take Usual Stand on “Junk,” Credit-Card Fees

Today’s Senate Banking Hearing focused on “junk fees.”

Waters Focuses on FDIC Report, Not Gruenberg

Without directly supporting FDIC Chair Gruenberg, HFSC Ranking Member Waters (D-CA) today pointed to aspects of the Cleary report that focus narrowly on Mr. Gruenberg rather than all recent FDIC Chairs.

CFPB Heightens Attack on Credit Card Rewards

At today’s CFPB-DoT hearing on credit card rewards, Director Chopra indicated that the agency will protect points against currency devaluation, stop “bait and switch” scams, examine exclusive deals, and promote interest rate competition.

Climate Scenarios Show Significant Challenges

At close of business, the Federal Reserve released the results of the climate risk exploratory stress test imposed on six of the largest banks


8 05, 2024


2024-05-09T03:25:08-04:00May 8th, 2024|2- Daily Briefing|

FedFin Assessment: Gruenberg’s Fragile Hold

As promised, we here update our analysis of Marty Gruenberg’s political risk following yesterday’s blistering report.

FinCEN Warns re Iran-Proxy Transactions

In a de facto warning to financial institutions, FinCEN today issued an advisory on detecting illicit transactions associated with Iran-backed terrorist organizations.

FRB-KC: Core-Provider Concentration Threatens Small-Bank Competitiveness

Continuing critical Federal Reserve Bank attention to core payment-service providers, the Kansas City Fed today released a brief reinforcing prior findings about the adverse impact of core-provider concentration on payment-system innovation.

Cook Says Powell Makes the End-Game Call

FRB Gov. Cook today largely reiterated findings in the Fed’s most recent financial-stability analysis (see Client Report SYSTEMIC99), but under questioning highlighted several emerging issues.


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