#Federalreserve

5 03, 2024

Daily030524

2024-03-05T16:37:23-05:00March 5th, 2024|2- Daily Briefing|

CFPB Fires All Cylinders on Credit Card Fees

In conjunction with a new White House “price-gouging” initiative today ahead of the President’s address, the CFPB finalized its controversial credit-card late-fee proposal (see FSM Report CREDITCARD36).

Presidential Strike Force Targets Financial-Services Fees, Mergers

In conjunction with the CFPB’s new credit-card fee standard, the White House today announced a “strike force” attacking what it believes to be price-gouging across the U.S. economy.

Interchange, Small-Dollar Lending Bills Added to House Docket

Although Thursday’s HFSC Financial Institutions’ hearing will be a largely partisan review of the “politicized” nature of bank regulation, bills on the docket include a draft measure from Rep. Luetkemeyer (R-MO) requiring the FRB to conduct a quantitative study of the implications of its pending interchange rule before finalization (see FSM Report INTERCHANGE12).

McHenry Supports At Least Some Liquidity-Reg Rewrite

Redoubling his campaign against the capital proposal, HFSC Chairman McHenry (R-NC) today made it clear that he does support at least some revisions to liquidity rules.

IMF Looks Under U.S. Bank “Weak Tail”

Looking at U.S. bank failures one year later, the IMF today released a global financial stability note finding that the “weak tail” of U.S. banks continues to present a possible systemic risk despite ongoing supervisory and regulatory efforts.

Daily030524.pdf

1 03, 2024

DAILY030124

2024-03-01T17:10:56-05:00March 1st, 2024|2- Daily Briefing|

Fed Emergency Powers Back on Senate Docket

Just before the Senate passed the stopgap bill to avert a shutdown, Sen. Paul (R-KY) forced a vote on an amendment to prevent the Fed from buying debt from states and municipalities.

DOJ Goes After “Gate-Keepers”

In remarks late yesterday, Assistant AG Jonathan Kanter highlighted the impact of new DOJ/FTC guidelines (see FSM Report MERGER13) and enforcement efforts with regard to “gate-keepers” – i.e., “monopoly chokepoints” so powerful that they control entry and pricing in a key sector in which they also often compete.

Fed Seems a Bit Warier of Banking-System Stress

The Fed monetary-policy report submitted today ahead of Chair Powell’s testimony next week includes a financial-stability analysis largely derived from the FRB’s most recent financial-stability report (see Client Report SYSTEMIC97) and the update provided earlier this week by a key FRB-NY official.

White House Steps in to Comfort NYCB Worries

At close of business, NYCB shares had sunk to levels not seen since 1997 following the release of still more bad news on Thursday.

Daily030124.pdf

1 03, 2024

Al030424

2024-03-01T17:07:55-05:00March 1st, 2024|3- This Week|

A Central Bank Very Much in the Middle

As always, we will provide clients with in-depth analyses after Chair Powell comes before Congress later this week to face the usual fusillade of political inquiry along with policy questions.  As before (see Client Report FEDERALRESERVE74), Mr. Powell will face hard questioning from Republicans on the pending capital rules, with many now trying to pin him down on likely changes and the extent to which Mr. Powell’s promise of consensus before a final rule still holds.  A lot of questions will also come from both sides of the aisle on bank mergers, with House Democrats demanding a new merger policy, Sen. Warren (D-MA) trying to get Mr. Powell to signal disapproval of the CapOne/Discover deal – he won’t, and Republicans trying to get Mr. Powell to say that deals such as this one must get done to ensure regional-bank survival – again, he won’t.  We also expect a new grilling from the GOP on Fed emergency-liquidity powers, along with continuing questions on climate risk, CBDC, and the quality of bank supervision.  The fate of NYCB by the time of the hearing will also be a major preoccupation on both sides of the aisle even if bad doesn’t immediately go to worse.  Democrats will try to shore up CBDC but many are also troubled by emergency-liquidity powers.  All sides will of course take much of the hearing’s bandwidth by pushing Mr. Powell to go one way or …

26 02, 2024

DAILY022624

2024-02-26T16:36:24-05:00February 26th, 2024|2- Daily Briefing|

BIS: More Bank Competition Leads to Increased Credit Risk

A new BIS paper looks at a question critical to the debate over bank-merger policy:  the extent to which competition drives bank risk-based pricing decisions in corporate lending and, by extension, other credit markets.

OCC Proposes Changes to FOIA Procedures

The OCC today proposed several changes to its FOIA procedures, including allowing expedited processing requests and appeals of denials of these requests and those for fee waivers.

Warren, Progressives Expand Blast on CapOne/Discover Deal to Encompass OCC Merger Proposal

Following other Democratic attacks on the CapOne/Discover merger and her own, Sen. Warren (D-MA) continued her challenge in a letter also signed by twelve House Democrats.

CFPB Takes Precedent-Setting Step Bringing Nonbanks Under Supervision

The CFPB late Friday released its first contested finding that a nonbank is subject to its supervision following the establishment in 2022 of a process for bringing nonbanks under its supervisory wings (see FSM Report CONSUMER44).

Senate Republicans Introduce Anti-CBDC Bill

Sen. Cruz (R-TX) alongside Sens. Hagerty (R-TN), Scott (R-FL), Budd (R-NC) and Braun (R-IN) today introduced a bill to prohibit the Fed from directly or indirectly issuing a CBDC or even using CBDC as a monetary-policy tool.

Daily022624.pdf

20 02, 2024

DAILY022024

2024-02-20T17:06:56-05:00February 20th, 2024|2- Daily Briefing|

Waters Fails to Muster Meaningful Democratic Capital-Proposal Protest

Late Friday, HFSC Ranking Member Waters (D-CA) released another letter from Democrats protecting the pending capital proposals.

Fed Study: CBDC Impact on Dollar Dominance, Payment System Depends on Many Decisions

A new Fed staff study finds that a U.S. CBDC would have only a marginal impact on the dollar’s role as the reserve currency and within the payment system, although this conclusion depends on a raft of decisions now being made about other CBDCs and the cross-border payment system.

Sanders Targets BlackRock’s Market Power

We will shortly provide clients with an update on Congressional reaction to the C1/Discover merger earlier today, but here draw client attention to a new letter from Sen. Bernie Sanders (I-VT), sure also to be among the credit-card consolidation’s fiercest critics.

Brown Presses Powell for Enforceable Ethics Standards

Senate Banking Chair Brown today renewed his campaign against Fed conflict-of-interest policies, sending another letter to Chair Powell arguing that the Fed’s recent internal-investment and ethics standards are unenforceable.

Initial Response to C1/Discover Merger Starts M&A Debate

With Congress in recess, political response to the Capital One/Discover merger has been muted in terms of sparse comments, but fiery when it comes to Sen. Warren (D-MA).

Daily022024.pdf

16 02, 2024

DAILY021624

2024-02-16T15:55:14-05:00February 16th, 2024|2- Daily Briefing|

Barr Points to Tough New Fed Supervisory Strategy

FRB Vice Chair Barr today updated FRB efforts to enhance bank supervision since its SVB post mortem revealed severe failings (see Client Report REFORM221).  Various internal efforts are under way, but the talk indicates no specific new initiatives beyond far greater focus on near-term CRE risk with an eye in particular to adequate provisioning.  The System is now improving supervisory rigor, coordination, and escalation protocols, with Mr. Barr also laying out how Fed supervision has become significantly more rigorous in the last year.

CFPB Report Continues Credit Card Attack

Buttressing its controversial credit-card late-fee proposal (see FSM Report CREDITCARD36), the CFPB today issued a report finding that the 25 largest credit card issuers charged interest rates eight to ten percentage points higher than small-and-medium-sized banks and credit unions. The report states that higher rates among large issuers persist across credit scores, with large issuers also more likely to charge annual fees.

House GOP Tries to Speed Bank M&A

Following up a letter sent to the federal banking agencies in October, HFSC Financial Institutions Subcommittee Chair Barr (R-KY) and Rep. Fitzgerald (R-WI) today introduced the Bank Failure Prevention Act, a bill to require the Federal Reserve to act on bank merger applications within ninety days.  The bill would also require the central bank to acknowledge the application’s completion within thirty days, with approval automatically granted for any application not serviced within the ninety-day window.

Daily021624.pdf

15 02, 2024

DAILY021524

2024-02-15T17:13:22-05:00February 15th, 2024|2- Daily Briefing|

Bowman Focuses on Inclusive Cross-Border Payments

FRB Gov. Bowman today emphasized that national and global payment-system improvements must not only work for the financial system and payment providers, but also for end-users and broader inclusive growth.  This is a policy challenge that, she said, cannot be resolved only by technology.

Senate Dems Resume Attack on Zelle

Retreating from his stand during a recent hearing that seemed to absolve Zelle (see Client Report PAYMENT28), Senate Banking Chairman Brown, (D-OH) along with Sens. Warren (D-MA) and Reed (D-RI), today sent a letter reiterating calls for Zelle to clarify its reimbursement policy for impostor scams.  The letter also demands that Zelle revise its reimbursement policy to cover other scams and to and streamline its reporting process, demanding a new public commitment to doing so.

Waller Sees Impregnable Dollar Dominance

FRB Gov. Waller today mounted a strong defense not only of the dollar as the globe’s reserve currency under current conditions, but also even as digital currencies become more widely deployed.  This stand is consistent with those at the FRB opposing proposals in Congress to advance a CBDC on grounds that it is essential to preserve reserve-currency status (see FSM Report CBDC10) and signals no interest in the U.S. central bank to making any other payment-system changes to press sanctions policy with the dollar’s dominance in mind.

Daily021524.pdf

15 02, 2024

STRESS32

2024-02-15T15:42:00-05:00February 15th, 2024|5- Client Report|

FedFin Assessment: New Fed Stress Tests are a lot Like the Old Fed Stress Tests

In this report, we assess the strategic and policy implications of the Fed’s new stress-test regime.  Released today, it incorporates new “exploratory” scenarios previewed by Vice Chair Barr as a response to the significant stress-test omissions laid bare in the March banking crisis.  However, these exploratory tests will not directly factor into the SCB, which will also be calibrated to current capital rules since the banking agencies are now most unlikely to finalize these in time for SCB calculations later this year.  We nonetheless expect bank supervisors to run bank results against internal models premised on new capital requirements, using supervisory discretion to address any capital shortfalls they feel warrant distribution restrictions regardless of formal test results.  Similarly, we think supervisors will take near-term action if any of the exploratory scenarios points to near-term risk.

STRESS32.pdf

14 02, 2024

DAILY021424

2024-02-14T17:29:47-05:00February 14th, 2024|2- Daily Briefing|

Global Regulators Propose Ways to Limit Variation-Margining Stress

As promised, CPMI and IOSCO have issued a discussion paper on CCP and clearing-member variation-margin practices.  The global agencies propose eight principles to enhance the likelihood that margins will be covered in stress situations, a continuing challenge based on a recent IMF paper finding that up to a third of EU active-derivatives users would not be able to meet variation-margin calls under stress and would thus turn to liquidating MMF shares or other assets in a manner likely to amplify market stress.

HFSC Deploys Power of the Purse to Pressure FinCEN

As anticipated, today’s HFSC hearing with Treasury and FinCEN was highly partisan, with Republicans continuing to blast FinCEN for what they call SAR surveillance and now threatening to block any increased funding for FinCEN until it also improves beneficial-ownership reporting to the GOP’s liking. Rep. Loudermilk (R-GA) also criticized FinCEN for failing to release the statutorily-mandated BSA review and the $10,000 threshold review.

Barr Sees Banking System as Strong, Liquid

In remarks today, FRB Vice Chair Barr emphasized that, despite pockets of risk and CRE worries, the banking system is sound and he sees no liquidity-risk concerns across the financial system.  Still, March 2023 taught hard lessons, he said, with banks since taking significant steps to reduce HTM holdings and enhance liquidity resilience.

Daily021424.pdf

13 02, 2024

DAILY021324

2024-02-13T17:42:19-05:00February 13th, 2024|2- Daily Briefing|

Durbin Tries Another Approach to Advance Card-Fee Limits

After trying various ways to bring his credit-card fee bill to the floor, Senate Judiciary Committee Chair and Majority Leader Durbin (D-IL) has scheduled a hearing on this controversial bipartisan measure (see FSM Report INTERCHANGE10).

FinCEN Reaches SEC Agreement to Bring Investment Advisers Under AML/CFT Standards

As it has repeatedly promised, FinCEN today revised a 2015 proposal and issued a new one to subject investment advisers to AML and CFT requirements similar to, but still less restrictive than, those that have long governed banks.

HFSC Rallies to Crypto AML/CFT Defense

The HFSC staff memo on Thursday’s Digital-Assets Subcommittee hearing makes it clear that cryptoasset entities will be given a strong platform from which to resist calls in the Senate to subject cryptoasset transactions to AML and sanctions law.

Gensler Reinforces AI Concerns

In remarks today, SEC Chair Gensler acknowledged AI’s benefits in a manner consistent with the President’s executive order (see Client Report AI3), but then launched into a sharp critique of its risks in line with the agency’s pending rule in this arena.

Bowman Takes Fed Accountability, Transparency to Task

In an essay today, FRB Gov. Bowman emphasized that regulatory accountability does not undermine the independence also essential to a sound, innovative banking system.

Gensler Turns to Bank/Hedge-Fund Interconnection

In addition to his speech on AI earlier today, SEC Chair Gensler today engaged in a wide-ranging discussion of key financial policy questions.

Daily021324.pdf

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