#FDIC – Page 2 – Federal Financial Analytics

21 03, 2024

DAILY032124

Eliza Allen2024-03-21T17:00:13-04:00March 21st, 2024|2- Daily Briefing|

FDIC Plans Merger Squelch

Both the policy and politics of the FDIC’s proposed merger policy follow that of its 2022 RFI (see FSM Report MERGER9), a very stringent approach to bank-merger review that split the FDIC 3-2 on party lines. We will shortly provide clients with an in-depth analysis of the proposed approach, approved on a 3-2 vote. It tracks much in the OCC’s proposal (see FSM Report MERGER14) but is still more stringent in several key areas. Notably, it does not rely on qualitative financial-stability considerations, instead setting a $100 billion threshold for additional scrutiny.

Chopra Wants Far Tougher Bank-Merger Policy

CFPB Director Chopra elaborated today on his comments at the FDIC meeting, saying that he thinks the proposal is fine as far as it goes but that federal policy should go considerably further to curtail bank consolidation. Actions he advocates include hard caps on bank growth and size (presumably meaning a limit on organic growth as well as via acquisition) and a roll-back of the systemic exemption in failing-bank acquisitions to block any future JPM/FRC-style transactions.

Daily032124.pdf…

18 03, 2024

M031824

Shane Smith2024-03-18T12:20:49-04:00March 18th, 2024|6- Client Memo|

The OCC Blesses a Buccaneer Bank

In a column last week, Bloomberg’s Matt Levine rightly observed that only a bank can usually buy another bank. He thus went on to say that a SPAC named Porticoes ambitions to buy a bank are doomed because Porticoes isn’t a bank. Here, he’s wrong – Porticoes in fact was allowed last December to become a unique form of national bank licensed to engage in what is often, if unkindly, called vulture capitalism. This is another OCC charter of convenience atop its approvals leading to NYCB’s woes, and thus yet another contradiction between the agency’s stern warnings on risk when it pops up in existing charters versus its insouciance when it comes to new or novel applications.

M031824.pdf…

18 03, 2024

Karen Petrou: The OCC Blesses a Buccaneer Bank

Shane Smith2024-03-18T09:03:04-04:00March 18th, 2024|The Vault|

In a column last week, Bloomberg’s Matt Levine rightly observed that only a bank can usually buy another bank. He thus went on to say that a SPAC named Porticoes ambitions to buy a bank are doomed because Porticoes isn’t a bank. Here, he’s wrong – Porticoes in fact was allowed last December to become a unique form of national bank licensed to engage in what is often, if unkindly, called vulture capitalism. This is another OCC charter of convenience atop its approvals leading to NYCB’s woes, and thus yet another contradiction between the agency’s stern warnings on risk when it pops up in existing charters versus its insouciance when it comes to new or novel applications.

According to the OCC’s charter approval, the Porticoes bank has no other purpose than serving as a wholly-owned subsidiary of Porticoes Capital LLC, a Delaware limited-liability company formed to be a proxy for a parent holding company. The parent holdco is “expected” to enter into binding commitments for the capital needed to back its wholly-owned bank plans to acquire a failed bank or even banks. This is essentially a buy-now, pay-later form of bank chartering, a policy even more striking because funding commitments for the holdco then to downstream – should they materialize – are more than likely to come from private-equity investors who may or may not exercise direct or indirect control.

Based on the OCC’s approval, it seems that Porticoes’s new charter can buy another bank without capital, pre-approval from …

15 03, 2024

Al031824

Arezou Rafikian2024-03-15T17:23:21-04:00March 15th, 2024|3- This Week|

Answered Prayers?

Banks have been asking regulators for years – decades? – to update 1995 merger guidance. So the banking agencies are beginning to do, but not exactly as banks would have liked to see it done. Although Sen. Warren (D-MA) thinks the OCC’s proposed merger policy is too soft, our analysis (see FSM Report MERGER14) and that of many others finds it a formidable barrier to all but the simplest, smallest transactions. Now comes the FDIC. As the schedule below makes clear, it plans on Thursday to issue a proposal based on its 2021 RFI (see FSM Report MERGER9). We doubt any bank-merger policy influenced as strongly by CFPB Director Chopra will be a bank merger policy banks will like any better than the OCC’s, although some compromises may have to be made if Republican members of the FDIC board are willing to contemplate at least some of what Mr. Chopra, surely seconded by Chair Gruenberg, wants done.

Al031824.pdf…

14 03, 2024

DAILY031424

Eliza Allen2024-03-14T16:33:10-04:00March 14th, 2024|2- Daily Briefing|

Bipartisan Senators See More ILC Charters

Led by Sen. Romney (R-UT), bipartisan senators generally from states with large ILC presence or interest urged the agency to advance pending ILC charters and consider new ones. The Senators oppose regulatory actions that may “target” ILC charter applications, expressing concerns about delays in the FDIC’s decision process.

Global Supervisors Target Mortgages, BNPL, Fintech as Top NBFI Systemic Priorities

An FSI report today recommends a holistic approach to regulating NBFI retail lenders, urging a policy mix increasing NBFI oversight. This may well be right, but it will take statutory change in nations such as the U.S. to achieve it.

New Open-Standard-Setting for Open-Banking Set for Stringent Eligibility Standards

CFPB Director Chopra now states that the open-banking regulation regarding consumer data rights (see FSM Report DATA4) will be finalized in the fall, with proposed new standards for standard-setters released ahead of time so that the final rule addresses both issues. Mr. Chopra is concerned that some forms of standard-setting organizations “weaponize” data to enhance their competitive position.

Daily031424.pdf…

11 03, 2024

DAILY031124

Eliza Allen2024-03-11T17:15:23-04:00March 11th, 2024|2- Daily Briefing|

Hagerty Demands Signature-Asset Sale Answers ASAP

Sen. Bill Hagerty (R-TN) yesterday sent a letter to Chair Gruenberg questioning the FDIC’s adherence to requirements in its auction process during the sale of Signature Bank’s loan portfolio, accusing the FDIC of making political choices inconsistent with its least-cost mandate.

Scott Again Calls for Gruenberg Resignation

Adding to GOP pressure on FDIC Chair Gruenberg, Senate Banking Ranking Member Scott (R-SC) yesterday sent a letter reiterating his demand that Mr. Gruenberg step down.

BTFP Demise if FHLB Opportunity

As anticipated, the BTFP window closed today.

FDIC’s Hill Wants New Blockchain, Liquidity Standards

FDIC Vice Chair Hill today said there are “significant downsides” to the agency’s current approach to blockchain, describing its message and that of the inter-agency policy (see Client Report CRYPTO32) as “don’t bother trying.”

Warren Tries to Divide Powell from Other Regulators to Conquer Capital Regs

Following her grilling of Chair Powell last week regarding his decision to intervene in setting the new capital rules, Sen. Warren (D-MA) yesterday sent a letter to Vice Chair Barr, Chair Gruenberg, and Acting Comptroller Hsu asking them if pressure from big banks has “weakened your resolve.”

GAO Wants FinCEN to Move Better, Faster

Reinforcing longstanding bank complaints about the current AML regime, GAO today published a report finding that FinCEN needs to improve transparency surrounding its progress implementing the Anti-Money Laundering Act of 2020 (see FSM Report AML132).

Biden Presses for Statutory Change Boosting FHLB Affordable-Housing Contributions

President Biden’s FY25 …

6 03, 2024

DAILY030624

Eliza Allen2024-03-06T16:51:12-05:00March 6th, 2024|2- Daily Briefing|

Bowman Renews Tailoring Defense

In dinner remarks last night, FRB Gov. Bowman argued that tailoring is a “grounding principle” of bank regulation ignored in the pending capital rules and final climate guidance (see FSM Report CLIMATE17), standards she also said are intended to allocate capital, not ensure effective supervision.

GAO Reviews Fed, FDIC Supervisory Practices

The GAO today issued a report examining the Fed and FDIC’s communication and escalation of supervisory concerns towards SVB and Signature prior to their collapse, finding that a lack of clarity and specificity in the Fed’s enforcement procedures contributed to delays in escalation towards SVB.

Scope 3 Removed From Final SEC Climate Disclosure Rule

The SEC today voted 3-2 to finalize its 2022 climate-risk disclosure proposal, opting to remove its controversial Scope 3 provisions.

Daily030624.pdf…

6 02, 2024

DAILY020624

Eliza Allen2024-02-06T16:33:54-05:00February 6th, 2024|2- Daily Briefing|

Agencies Begin Pro Forma Reg Review Likely to Take on New Urgency

The FRB, FDIC, and OCC today released the first of the requisite ten-year request for comment on the extent to which existing rules are outdated or unduly burdensome. We will shortly provide clients with an in-depth analysis of the request if it goes beyond the nominal inquiries in the past that led to little meaningful regulatory reform.

Senate GOP Turns to FHFA, FHLB on “Woke” Standards

Criticizing what they call the FHFA’s and FHLBs “politically contentious social agendas,” Senate Banking Republicans Hagerty (R-TN), Tillis (R-NC), Britt (R-AL), and Vance (R-OH) sent a letter to FHFA Director Thompson late yesterday arguing that several FHLB pilot programs are “racially discriminatory” and defy congressional intent. They also argue that the pilot programs highlight a potential gap in FHFA oversight because the final rule governing Fannie and Freddie pilot programs does not also apply to the FHLBs.

SEC Finalizes Contentious Treasury-Market Registration Standards

The SEC today voted 3-2 to approve a revised version of an earlier proposal subjecting certain hedge funds and other Treasury-market participants to registration and SRO regulation, thus reducing their competitive advantages vis-à-vis banks in the secondary-dealer arena. The new approach uses a qualitative test based on the extent to which a covered entity acts as a market-maker as well as Treasury investor.

Daily020624.pdf…

2 02, 2024

DAILY020224

Eliza Allen2024-02-02T16:21:33-05:00February 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 …

26 01, 2024

DAILY012624

Eliza Allen2024-01-26T16:09:38-05:00January 26th, 2024|2- Daily Briefing|

Agencies Rewrite Call Reports Ahead of Final Capital Regs

Despite growing bipartisan concern over a capital proposal likely to be significantly revised, the Fed, OCC, and FDIC today requested comment on proposed changes to call reporting requirements as well as regulatory capital and market risk capital reporting requirements to ensure that these conform with the agencies’ proposal. Many changes reflect the departure from the advanced approach, with the agencies arguing that new disclosure requirements would increase transparency and complement the supervisory review process. Certain item instructions would also be altered to reflect AOCI transition requirements, while form terminology would change to reflect the proposed expanded risk-based approach and the scope of banking organizations covered.

Daily012624.pdf…