#fintech – Federal Financial Analytics

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 …

5 12, 2023

FINTECH33

Shane Smith2023-12-05T15:39:20-05:00December 5th, 2023|5- Client Report|

HFSC GOP Grills Regulators Over Novel Activities, Third-Party Risk Management Guidance

At today’s HFSC Digital Assets Subcommittee hearing on banking agency financial innovation, Republicans raised concerns about the Fed’s novel activities guidance (see FSM Report FINTECH32), interagency guidance on third-party risk management (see FSM Report VENDOR10), and the SEC’s predictive data analytics proposal. Members on both sides of the aisle also focused on AI, crypto, and CBDC, with Republicans pressing for hands-off crypto policy while Democrats urged faster action to curb AI risk. Pointing to the OCC’s recent hiring scandal, Subcommittee Chairman Hill (R-AR) suggested that more oversight might be necessary.

FINTECH33.pdf…

21 11, 2023

DAILY112023

Eliza Allen2023-11-21T10:36:54-05:00November 21st, 2023|2- Daily Briefing|

Thompson: No Regulatory “Silos” in a Crisis

Reiterating much in FHFA’s sweeping FHLB report, FHFA Director Thompson today reinforced suggestions that FHLBs can avoid acting as lenders of last resort because there are no regulatory “silos” in a crisis.

IMF Reconsiders CBDC

On Friday, the IMF updated its CBDC work, concluding that it is prudent for most countries to consider CBDC implementation even though nations are increasingly hesitant to do so.

IMF: Nations Should Block Fintech Reg Arbitrage

A new IMF study finds that Fintechs adversely affect bank profitability, concluding that “well-designed” fintech regulations are necessary to foster a level bank-fintech playing field.

House Opens New Front vs. FDIC

Following an official HFSC investigation and a raft of letters from Democrats and Republicans, House Oversight Subcommittee on Health and Financial Services Chairwoman McClain (R-MI) along with Rep. Biggs (R-AZ) today sent a letter to Chairman Gruenberg requesting briefings, documents, and communications regarding harassment and workplace practices.

Daily112023.pdf…

15 11, 2023

PAYMENT27

Eliza Allen2023-11-15T15:05:15-05:00November 15th, 2023|1- Financial Services Management|

Nonbank Payment Provider CFPB Supervision

Building on its director’s longstanding focus on fintech and tech-platform companies, the CFPB has proposed to extend its supervisory reach to nonbank providers of general-use digital payments services. The Bureau’s definition of these terms is broad and thus would bring almost all covered nonbank services into its ambit with considerable potential for subsequent demands for significant operational change along with heightened legal and reputational risk. The extent to which the Bureau pursues the ends enabled by this proposal remains to be seen, but it could set high roadblocks restricting the network-effect benefits major tech-platform companies have long enjoyed not only due to real and perceived regulatory exceptions, but also by virtue of their financial and commercial activities.

PAYMENT27.pdf…

13 11, 2023

DAILY111323

Eliza Allen2023-11-13T17:07:02-05:00November 13th, 2023|2- Daily Briefing|

Senate Banking GOP Demand End-Game Withdrawal, Holistic Review Release

Making still clearer their line of attack at tomorrow’s hearing, all GOP Members of the Senate Banking Committee today sent Chairs Powell, Gruenberg and Acting Comptroller Hsu another letter demanding the withdrawal of the capital proposals.

FRB-PHL: Fintech Spots Credit Risk Better than Banks

A new study from the Federal Reserve Bank of Philadelphia finds not only that fintech loan-risk scoring performed well during the pandemic, but also that the proprietary loan rating systems of large fintech companies better predict default likelihood in the personal loan market compared to traditional measures of credit risk.

Barr Stands By His Proposals

Vice chairman Barr’s testimony for forthcoming hearings emphasizes that the banking system is resilient and sound, eschewing the caveats included in Friday’s supervisory report about pockets of weakness.

Gruenberg Defends DIF Rewrites

While echoing comments from Messrs. Barr and Hsu about the sound banking system, FDIC Chair Gruenberg’s testimony pointed to what he called significant downside risk from higher rates, geopolitical tension, unrealized losses, and other factors.

Hsu Differentiates OCC Supervision, Defends Regs

Acting Comptroller Hsu’s testimony reiterates Mr. Barr’s comment about a sound banking system, pointedly noting that all of the recent failures were state-chartered.

Daily111323.pdf…

7 11, 2023

DAILY110723

Eliza Allen2023-11-07T17:01:20-05:00November 7th, 2023|2- Daily Briefing|

Treasury Advances Financial-Inclusion Agenda

In conjunction with its read-out of yesterday’s meeting of its most recent financial-inclusion discussion group, Treasury announced that it will shortly release a request for information about how best to accomplish the national financial-inclusion strategy demanded in the Department’s FY23 appropriations.

HFSC GOP Challenges Motives, Process of Basel, NGFS Standard-Setting

As anticipated, today’s Financial Institutions Subcommittee hearing on global banking accords was acrimonious, with Republicans strongly attacking what they characterized as Democratic agency head’s participation in a range of global banking accords as well as the Network for Greening the Financial System.

CFPB Proposes to Extend its Supervisory Reach to Tech-Payment Providers

The CFPB today proposed a sweeping rule bringing tech-platform or fintech companies offering general-use digital-payment services under bank-like consumer-protection standards via more direct CFPB supervision.

Bowman Stands by Basel

Perhaps due to today’s HFSC hearing on global accords, FRB Gov. Bowman today went beyond her ongoing critiques of pending rules to defend participation in the Basel Committee and other forums.

FHFA Starts FHLB Redesign

FHFA today released its long-awaited assessment of the Federal Home Loan Banks, laying out an ambitious program of supervisory, regulatory, and statutory issues.

McHenry Slams CFPB Digital-Payment Proposal

HFSC Chairman McHenry (R-NC) today slammed the CFPB not for usual causes, but because he believes the agency’s proposed supervisory standards for nonbank general-use digital-payment providers will “entrench the status quo” – i.e., the role of banks – by eliminating consumer choice and impeding innovation.

Daily110723.pdf…

19 10, 2023

DAILY101923

Eliza Allen2023-10-19T16:30:42-04:00October 19th, 2023|2- Daily Briefing|

OIG Blasts FDIC’s Crypto-Policy Delay

Late yesterday, the FDIC’s Office of Inspector General (OIG) issued a report critical of the FDIC’s supervisory crypto policy.

Fed May Signal Possible Compromise as GOP Barr Demands Capital Answers

Amid press reports that Chair Powell has implicitly promised capital-rule compromise, HFSC Financial Institutions Chair Barr (R-KY) released a letter today pressing Vice Chair Barr still harder on the cost-benefit analytical (CBA) and cumulative-impact issues raised at the September hearing at which Karen Petrou testified.

Fed Data Show Increases in Household Financial Resilience, Profound Home-Affordability Gap

The Federal Reserve yesterday released its triennial Survey of Consumer Finances (SCF). As always, we here highlight data with financial-policy implications; Petrou blogs and other releases will update economic-equality indicators.

BIS Head Calls for Review of Large Bank Supervision

BIS General Manager Agustin Carstens today said that the mid-March failures show the need for nations to review how they supervise larger banks, specifically highlighting liquidity risk and setting frameworks for emergency liquidity assistance.

OCC Analysis Shows Broad IRR Resilience With Startling Risk Pockets

Showing some pockets of severe risk but overall resilience, the OCC today released a statistical analysis of interest rate risk based on projected changes in twelve-month net interest income as well as the economic value of equity in parallel interest rate shock scenarios ranging from -200 basis points to +400 bps.

CFPB Thinks Big on Open Banking

As anticipated, the CFPB today advanced from a review of consumer data rights (see FSM Report…

7 09, 2023

DAILY090723

Eliza Allen2023-09-07T16:43:25-04:00September 7th, 2023|2- Daily Briefing|

FSB-IMF Report Lays Out Crypto-Policy Roadmap

The FSB and IMF today published a joint report synthesizing their policy and regulatory recommendations for cryptoassets, laying out a policy roadmap that breaks no new ground.

Senate Dems Try Again to End State Usury Ceilings

Senate Majority Whip Durbin (D-IL) yesterday introduced another effort (S. 2730) to impose a federal usury ceiling.

NGFS Warns Ecological Risk Could Be Systemic

The Network for Greening the Financial System (NGFS) today released a report on nature-related financial risk concluding that ecological risk transmission could cause contagion leading to systemic risk.

CFPB Soon to Advance Its Open-Banking Construct

CFPB Director Chopra today announced that the CFPB will be issuing proposed rules next month to reactivate its DFA consumer data rights powers (see FSM Report DATA3).

Global Securities Regulators Craft DeFi Standards

IOSCO today released a DeFi consultation report proposing nine policy recommendations intended to support heightened regulatory consistency and oversight.

Waters Presses Agencies to Change SSN Collection Requirements

HFSC Ranking Member Waters (D-CA) today wrote to the leadership of the banking agencies, Treasury, and FinCEN asking them to consider allowing financial institutions only to collect a SSN’s last four digits to minimize cybersecurity risks.

Fed Staff Suggest Solution to CBDC Privacy Problem

Addressing one of the biggest CBDC challenges in the U.S., Fed staff today published a report arguing that the use of privacy-enhancing technologies preserves digital asset user confidentiality while maintaining enough visibility for official audits in order to prevent illicit finance.

Daily090723.pdf…

31 08, 2023

DAILY083123

Eliza Allen2023-08-31T16:04:01-04:00August 31st, 2023|2- Daily Briefing|

BIS Report: Big Tech in Insurance Poses Financial Stability Risks

The BIS Financial Stability Institute (FSI) released a report today highlighting the financial stability risks associated with big tech’s entry into insurance, noting that a big tech specific regulatory approach may be warranted. The report finds big tech has a significant footprint in the insurance industry as a service provider but its activities as risk carriers or intermediaries are limited. Thus, financial stability concerns stem from the concentration of technology services and linkages between financial institutions and commercial activities.

Fed Study: Fintech Partnerships Arbitrage National-Bank Preemption Power

A new study by Federal Reserve staff finds that strategic bank-fintech partnerships heavily and profitably target near- and low-prime consumers in states with restrictive interest rate ceilings. Thus, fintech partnerships – termed “rent-a-bank” arrangements by critics – in fact arbitrage national-bank preemption powers in states with strict usury ceilings. This is said to be due in large part to mainstream-bank and non-fintech aversion to higher-risk customers at lower interest rates.

Daily083123.pdf…

9 08, 2023

FINTECH32

Eliza Allen2023-08-09T15:04:49-04:00August 9th, 2023|1- Financial Services Management|

Novel-Activity Supervision

FRB Vice Chairman Barr’s assessment of SVB’s failure included a commitment to pay additional supervisory attention to “novel” activities. New supervisory “information” from the Federal Reserve now acts on this conclusion, creating what is described as a new supervisory program and stating explicitly that the Board will assess certain BHC and state member bank tech-focused activities. The standards by which this is done are not made clear even though all but the stablecoin activities cited here are under way in varying forms at state member banks and BHCs.

FINTECH32.pdf…