#Federalreserve – Federal Financial Analytics

6 05, 2024

DAILY050624

Eliza Allen2024-05-06T17:02:34-04:00May 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.

Daily050624.pdf…

1 05, 2024

DAILY050124

Eliza Allen2024-05-01T16:56:16-04:00May 1st, 2024|2- Daily Briefing|

Treasury Urged to Consider Green Bonds

The Treasury Borrowing Advisory Group’s latest report to the Treasury includes a proposal that the U.S. join other sovereigns and issue “green bonds.” The recommendation comes in a “blue-sky” assessment of Treasury obligations suggesting that Treasury also explore other new instruments such as callable bonds.

Powell Says No Decision on Basel 3 Reproposal

Refuting coverage earlier today that the FRB does not plan to repropose the Basel end-game rules, Chair Powell today said that the central bank has made no decisions yet on either policy or process beyond a commitment to final standards faithful to the global rules and comparable to those in other jurisdictions. The chair acknowledged that the end-game rules are taking up so much time that other initiatives may be on hold.

Daily050124.pdf…

30 04, 2024

DAILY043024

Eliza Allen2024-04-30T16:56:40-04:00April 30th, 2024|2- Daily Briefing|

Changes to Fed Reporting Requirements Augurs Shift in M&A Policy

The Federal Reserve has proposed two changes to reporting requirements related to merger-and-acquisition transactions.

Basel Rewrites Global CCR Standards

As anticipated, the Basel Committee today issued proposed counterparty credit risk (CCR) standards.

CFPB Price Complexity Study May Presage Action on Credit Cards, Mortgages, Savings Accounts

The CFPB today issued a report finding that increasing price complexity leads to higher transaction and total costs and increased consumer errors, with this not offset by increased competition.

House Oversight Subcommittee Considers CRE Risk

Today’s House Oversight Health Care and Financial Services Subcommittee hearing on commercial real estate focused on preventing systemic risk. Chair McClain (R-MI) argued that the CRE market is generally strong, encouraging Congress and the Fed to eliminate red tape.

Daily043024.pdf…

24 04, 2024

DAILY042424

Eliza Allen2024-04-24T16:29:15-04:00April 24th, 2024|2- Daily Briefing|

CapOne/Discover Deal Open for More Comment

The FRB and OCC today took the unusual step of extending the public comment period on the Capital One/Discover merger until May 31. Typically, the agencies keep the comment deadlines as is, receiving more comments when desired via public hearings and then delaying action on a proposal until it suits them to make an announcement. This move seems intended to ensure that the furor over this merger is not exacerbated by assertions that the agencies cut short the public-comment process in any way.

Daily042424.pdf…

23 04, 2024

DAILY042324

Eliza Allen2024-04-23T16:38:38-04:00April 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.

Daily042324.pdf…

17 04, 2024

DAILY041724

Eliza Allen2024-04-17T17:36:07-04:00April 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 …

3 04, 2024

DAILY040324

Eliza Allen2024-04-03T17:21:51-04:00April 3rd, 2024|2- Daily Briefing|

Bowman Wants Policy Review, Fed-Operational Improvements Ahead of New Liquidity Regs

Turning from mergers to the Fed’s lender-of-last-resort role, Gov. Bowman today argues that new liquidity policies require careful review before any new rules are adopted.

Fed Treads Carefully in New Global Money-Tokenization Project

The BIS today announced a new program exploring ways in which tokenizing central-bank and bank money for wholesale transactions on programmable platforms would benefit the monetary system.

Powell Defends Independence, Mandate Limits

In remarks today on monetary policy and Fed independence, Chair Powell was at pains to emphasize that climate risk was outside the Federal Reserve’s mandate.

FHFA Treads Cautiously Towards FHLB Reform

Issuing a minor ruling regarding Puerto Rico cooperatives, FHFA today also laid out its 2024 priorities following last year’s report on the Home Loan Bank System.

Barr Stands by CRA Rule

Responding to questions about the court injunction on the CRA rule, FRB Vice Chair Barr today stated that the rules are restated expectations within the boundaries of the Act and Congress intended the agencies to update the 1977 law.

Chopra: Merger Approval Requires Affirmative, Additive Community Benefit

Building on his comments when the FDIC board voted 3-2 to issue its merger proposal (see FSM Report MERGER15), CFPB Director Chopra today doubled down on the view that bank mergers should only be approved if there is demonstrable community benefit over an extended period of time.

Daily040324.pdf…

2 04, 2024

DAILY040224

Eliza Allen2024-04-03T11:33:54-04:00April 2nd, 2024|2- Daily Briefing|

Bowman Attacks “Regulation by Application”

FRB Governor Bowman today expressed concerns about the regulatory agencies’ evolving approach to M&A, stating that pending reforms may exacerbate existing procedural problems such as long delays and regulatory uncertainty that may undermine the viability of banks.

OFR Examines Stress-Event LCR

The OFR today published a brief examining the performance of components of the LCR on U.S. GSIBs in response to the COVID-19 shock.

FRB-PHL: Majority of Consumers Receptive to CBDC

The Federal Reserve Bank of Philadelphia today released a report on CBDCs, finding that a majority of consumers were generally receptive to a U.S. CBDC despite obstacles to widespread CBDC consumer adoption.

Daily040224.pdf…

1 04, 2024

M040124

Eliza Allen2024-04-01T11:17:29-04:00April 1st, 2024|6- Client Memo|

The Frightening Similarity Between Key Bridge and Bank Stress Tests

On Friday, the Washington Post reported that Key Bridge passed all its stress tests before it fell into the harbor. These were well-established protocols looking at structural resilience – acceptable, if not awesome – and, after 9/11, also at terrorist attack. That a giant container ship might plow into the bridge was not contemplated even though this has happened before in the U.S. and not that long ago. Which brings me to bank stress-testing and how unlikely it is to matter under actual, acute stress because the current U.S. methodology correlates risk across big banks in ways that can make bad a lot worse. Even more troubling, tests still don’t look over the banking parapet.

M040124.pdf…

1 04, 2024

Karen Petrou: The Frightening Similarity Between Key Bridge and Bank Stress Tests

Eliza Allen2024-04-12T09:41:28-04:00April 1st, 2024|The Vault|

On Friday, the Washington Post reported that Key Bridge passed all its stress tests before it fell into the harbor. These were well-established protocols looking at structural resilience – acceptable, if not awesome – and, after 9/11, also at terrorist attack. That a giant container ship might plow into the bridge was not contemplated even though this has happened before in the U.S. and not that long ago. Which brings me to bank stress-testing and how unlikely it is to matter under actual, acute stress because the current U.S. methodology correlates risk across big banks in ways that can make bad a lot worse. Even more troubling, tests still don’t look over the banking parapet.

To be sure, the Fed’s semi-annual financial-stability reports (see Client Report SYSTEMIC97) muse about risks that lurk outside the largest banks, and FSOC dutifully catalogs nonbank risk each and every year in a copious annual report (see Client Report FSOC29). Last year, FSOC also said a lot about what might someday be done to address it via systemic designation (see FSM Report SIFI36). But what’s being done, not just said, about nonbank risk even as inter-connections become ever more entwined? Not much in the U.S. even though other national regulators are taking meaningful steps first to know where it lies and then to curtail it.

For example, the Bank of England and Australia’s Prudential Regulatory Authority are quickly moving past bank-centric stress testing, with Australia importantly looking not just within the financial …