7 05, 2024


2024-05-07T17:04:28-04:00May 7th, 2024|2- Daily Briefing|

GAO Presses FDIC, OCC for Blockchain, Third-Party Risk Standards

The GAO today issued its annual reports to the FDIC and OCC, stating that the agencies had failed to implement two of last year’s priority recommendations on the coordination of blockchain policy and policy clarifying how banks must handle third-party relationship’s use of alternative underwriting data.

SF Fed: Less Bank Lending, Fewer Jobs

A new study from the San Francisco Fed looks at why banks curtailed lending in 2023, attributing about half of this to re-evaluating their ability to take on risk without analyzing why this internal decision might have been made.

Gruenberg Faces Fight of His FDIC Life

The key policy question aroused by the independent counsel’s blistering report today on the FDIC is whether Chair Gruenberg can survive it and, if not, what happens next to an FDIC board likely to be tied on key questions such as finalizing all the capital standards and the agency’s particularly stringent merger policy (see FSM Report MERGER15).


6 05, 2024


2024-05-06T17:02:34-04:00May 6th, 2024|2- Daily Briefing|

OFR Mandates OTC-Repo Reporting

The Office of Financial Research today adopted a final rule requiring daily reporting by certain brokers, dealers, and financial companies with large exposures to the non-centrally cleared bilateral repo (NCCBR) market.

Incentive-Comp Standards Take Halting Step Forward

As anticipated, agencies favoring incentive-based compensation constraints today issued a new proposal advancing the standards mandated in the 2010 Dodd-Frank Act (see FSM Report COMPENSATION30).

NCUA on Board With Comp Proposal; Chopra Presses Hard for Action

The NCUA has now joined the other agencies that today asked for comment on the incentive-compensation proposal.


1 05, 2024


2024-05-01T16:23:31-04:00May 1st, 2024|5- Client Report|

GOP Merger-Process Bill Set to Advance

At today’s HFSC Financial Institutions Subcommittee hearing on bank mergers, Democrats said that larger mergers pose numerous risks while Republicans criticized the application-and-approval process as opaque and time-consuming.  However, Rep. Casten (D-IL) said that GSIB organic growth outstrips that of even large regional banks, meaning that a halt on bank mergers could accelerate banking-system concentration.  Subcommittee Chair Barr (R-KY) referenced a comment from BofA’s CEO at the GSIB hearing that a super-regional, Truist, was more of a competitive threat than the banks which preceded it.  Chair Barr referenced his bill, H.R. 7403, to revise the merger process, a bill likely now being prepared for HFSC mark-up.  Democrats also targeted specific mergers, with Reps. Sherman (D-CA) and Waters (D-CA) focusing on Capital One/Discover and Rep. Beatty (D-OH) criticizing UMB/Heartland.


29 04, 2024


2024-04-29T10:51:36-04:00April 29th, 2024|5- Client Report|

FedFin Assessment: Index-Fund Passivity Debate Could Touch Broader Control Questions

As we noted, the FDIC board late last week faced the unusual and perhaps unprecedented situation of a staff resolution supported by its Chair and one Democratic Director that was countered by a different proposal from Republican Directors, with both options finally tabled due to objections from the Acting Comptroller.  Both proposals address the extent to which index-fund managers can hold what would otherwise be controlling stakes in banking organizations exempted by virtue of passivity commitments that have come under fire from all sides.  We expect the next move will be an inter-agency RFI launched by Mr. Hsu and accepted by the FRB as an interim step to a possible inter-agency rule about which the Fed appears to have considerable qualms.  Should this falter, Mr. Hsu also said that he is open to the kind of rulemaking CFPB Director Chopra proposed should the Fed prove unwilling to work with the FDIC on next steps.  This report analyzes these competing proposals; final action or even interim examiner intervention in this arena has considerable impact not only on asset managers, but also on bank corporate governance and market capitalization.  Changes are also possible to the liberal standards set by the FRB in 2020 defining when a controlling interest or even certain seemingly-controlling conditions such as a board seat do not constitute the legal control forcing BHC designation  (see FSM Report TAKEOVER10).


26 04, 2024


2024-04-26T16:54:49-04:00April 26th, 2024|3- This Week|

Gratifying the Urge to Merge

Next week’s Financial Institutions Subcommittee meeting at HFSC on bank mergers will surely give GOP Members a chance to lay out the reasons many banks think current anti-merger policy is more than misguided.  Republicans and their witnesses will surely argue that President Biden’s competition order (see Client Report MERGER6) quashes growth, that the FTC and DOJ guidelines prevent fair competition (see FSM Report MERGER13), that the OCC’s merger proposal is bad (see FSM Report MERGER14), and the FDIC’s is even worse (see FSM Report MERGER15).  Progressive Democrats will side with Sen. Warren (D-MA), saying that the OCC hasn’t gone far enough and wanting still more from the FDIC’s policy along lines advocated by CFPB Director Chopra.  Where do moderate Democrats come out and will this give bigger banks comfort that regional deals are doable?  We’ll be listening, analyzing, advising.


26 04, 2024


2024-04-26T16:53:42-04:00April 26th, 2024|2- Daily Briefing|

Treasury Slams PR Banking AML, Sanction Compliance

Providing an unusually blunt warning, Treasury Undersecretary Brian Nelson yesterday stated that further action is necessary in Puerto Rico to combat illicit finance, tighten supervision, and increase transparency.

BCBS Moves Forward With New Counterparty Risk Guidelines

As anticipated, the Basel Committee this week announced that it approved a consultation on proposed guidelines to strengthen bank counterparty credit risk management, replacing the Committee’s 1999 global guidance that failed to address the now-significant role of NBFIs and their heightened leverage.

HFSC Merger Hearing to Test Agency Proposals

The memo for Wednesday’s merger hearing before HFSC’s Financial Institution Subcommittee indicates that witnesses are senior attorneys from the OCC and FDIC sure to be grilled by Republicans on their agencies’ proposed merger-policy rewrites.


25 04, 2024


2024-04-25T17:12:36-04:00April 25th, 2024|2- Daily Briefing|

FSB Tackles CCP Resolvability

Continuing its NBFI work, the FSB today released final CCP-resolution standards.  The standards call on systemic-CCP regulators to have tools and backstops specific to orderly resolution in addition to those deployed to ensure rapid recovery under the FSB’s recent actions addressing margining and CCP liquidity.

FDIC Considers, Tables Passivity Proposals

As anticipated, the FDIC today took up proposals to address concerns regarding index-fund managers’ compliance with passivity commitments.  Surprisingly, there were two competing proposals, both of which were withdrawn prior to a vote.

BIS Head Suggests NBFIs Get a Targeted Global Standard-Setter

BIS General Manager Carstens this week said that there is insufficient global momentum to address the risks posed by NBFIs, asking international bank supervisors to consider the need for a committee akin to Basel for NBFIs.


23 04, 2024


2024-04-23T16:38:38-04:00April 23rd, 2024|2- Daily Briefing|

New Fed Study: Economic Inequality Key to Growing NBFI Role, Systemic Risk

A new Fed staff note builds on prior research to show not just the link between economic inequality and financial instability, but also how heightened systemic risk due to factors such as NBFI growth is driven by economic inequality.  The study for the first time finds significant correlations between economic inequality and the growing role of nonbank asset managers, investors, and short-term wholesale lenders, observing the proven link between NBFIs and financial-system amplification.

Asset-Manager Passivity Standards Set for Thursday Rewrite

As anticipated, the FDIC has set this Thursday as the date at which it will address concerns that index-fund and other asset managers are no longer passive investors in banking organizations and thus may warrant BHC designation.  We will of course analyze the FDIC’s action immediately after it is released and then provide clients with an in-depth analysis of a proposal that, depending on how far it goes, could not only bring some NBFIs within the regulatory perimeter, but also have a negative impact on banking-organization market capitalization.


19 04, 2024


2024-04-19T16:22:08-04:00April 19th, 2024|2- Daily Briefing|

GAO Gives CFPB Clear Bill of Financial Health

The GAO today released the report initially scheduled for the Financial Institutions Subcommittee hearing earlier this week convened to discuss CFPB financial management.

Deadline Set for Comment on Controversial FDIC Merger Proposal

The Federal Register today sets the comment deadline on the FDIC’s request for comment on its bank merger policy (see FSM Report MERGER15).

House Bill Revises Exam Appeal Process

HFSC Vice Chair Hill (R-AR) and Rep. Scott (D-GA) yesterday introduced H.R. 8071, a bill to create an FFIEC independent review officer for banks seeking review of supervisory judgements and require supervisors to respond more quickly to bank queries.

FDIC’s Paperwork Request Illuminates Proposed Merger Policy

In conjunction with today’s publication of the FDIC’s proposed merger-policy rewrite (see FSM Report MERGER15) comes a proposed change in the filings that would need to accompany any merger application submitted to the FDIC.


17 04, 2024


2024-04-17T17:36:07-04:00April 17th, 2024|2- Daily Briefing|

Global Regulators Tackle NBFI Margining, Collateral Transformation

As it has long promised, the FSB today issued a consultation on standards designed to buttress derivatives, commodity, and securities-financing markets under stress through more stringent margining and collateral requirements.

Basel Head Says Go Slow re AI Risk, Supervisory Models

Basel’s Secretary General, Pablo Hernández de Cos, today focused on AI’s risk-reward profile in the banking sector, concluding that it raises a series of profound questions global regulators must work cooperatively to address.

Lummis, Gillibrand Begin Senate Stablecoin Debate

As long anticipated, Sens. Lummis (R-WY) and Gillibrand (D-NY) today introduced a significantly revised version of their 2022 Bill (see FSM Report CRYPTO28) laying out U.S. stablecoin standards.

FIO Subpoena Power Faces Rollback

At HFSC’s mark-up today, the committee began with Rep. Fitzgerald’s (R-WI) Insurance Data Protection Act, H.R. 5335, which would repeal the Federal Insurance Office’s authority to subpoena insurance companies for data collection.

HFSC Likely to Pass RegTech Bill

At HFSC’s extended mark-up today, the committee turned to H.R. 7437, a bipartisan bill that would require federal banking regulators to regularly review and report to Congress on their use of technology to ensure they’re equipped to address threats to the financial system.

HFSC Set to Pass AOCI Recognition, Systemic-Risk Designation Study Measures

Continuing our coverage of today’s mark-up, HFSC was generally supportive of the two bills on the agenda from Democrats, H.R. 4206 from Rep. Sherman (D-CA) requiring large banks with available for sale securities to mark to market …

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