#FIO – Federal Financial Analytics

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 …

18 12, 2023

FSOC29

Eliza Allen2023-12-18T11:36:07-05:00December 18th, 2023|5- Client Report|

FedFin Assessment: FSOC Worries A Lot, Watches, Waits

This year’s FSOC report trods much old ground with two exceptions. The first pertains to a new focus on artificial intelligence, machine learning, and new, generative technologies. That said, the report does little beyond highlight this risk and include it among all the others federal agencies are told to monitor. Private credit now also alarms FSOC, with insurance company investment in this sector of particular systemic concern in concert with the sectors’ CRE and junk-bond exposures, offshore reinsurance, and PE ownership. As detailed in this report, banks are found to be resilient and have ample capital even as the report supports consideration of pending regulatory revisions. Banking agencies are also asked to monitor uninsured-deposit levels and assess run-risk in light of social media and other accelerants. In sharp contrast to more alarmist statements in the past and extensive Treasury reports (see Client Report CRYPTO32), this year’s report downplays cryptoasset risk because federal regulators are said to have taken steps to contain it. The report also reiterates FSOC’s continuing focus on cyber and climate risk, with the closed session preceding the meeting considering a framework being developed by the OCC to measure and monitor financial risks and bank exposures. Agencies are also encouraged to pursue comparable, “decision-useful” climate disclosures. The LIBOR transition is considered a success and no longer poses a systemic risk.

FSOC29.pdf…

27 06, 2023

DAILY062723

Eliza Allen2023-06-27T16:53:41-04:00June 27th, 2023|2- Daily Briefing|

Treasury, FIO Target Insurance, Banking Interconnections

In conjunction with FIO’s new report on Insurance Supervision and Regulation of Climate-Related Risks, Treasury’s Assistant Secretary for Financial Institutions, Graham Steele, today emphasized the need for further work to understand the insurance industry’s climate-related financial stability risks, especially from housing and banking sector spillovers. In a panel discussion, FIO Director Steven Seitz also highlighted the report’s recommendations around macroprudential risks, including prioritizing the growth of the residual and surplus lines markets, “hardening” of the reinsurance market, and realizing the effects climate risk may have on state insurance guarantee funds.

Warren Gives No Merger Ground

In a letter sent today to Chair Gruenberg, Acting Comptroller Hsu, Vice Chair Barr, Assistant Attorney General Kanter, and Secretary Yellen, Sen. Warren (D-MA) demands fast action on the rewrite of bank merger guidelines pending since at least the President’s executive order in 2021 (see FSM Report MERGER10) as well as an end to large-bank M&A. Sen. Warren takes particular issue with Secretary Yellen’s recent comments suggesting the need for industry consolidation and again confronts Acting Comptroller Hsu’s “openness” to at least some transactions. It thus seems clear that her opposition to his nomination as Comptroller remains as firm as ever.

Daily062723.pdf…

9 11, 2022

DAILY110922

Eliza Allen2022-11-09T16:59:00-05:00November 9th, 2022|2- Daily Briefing|

FIO, HHS Plan Longer Ponder on Federal Cyberinsurance

The Federal Insurance Office and the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency today extended the comment deadline for comments on whether a federal insurance response is warranted for catastrophic cyber risk. The earlier notice asked what type of catastrophic attacks on U.S. critical infrastructure are most likely, how best to measure their effect, the current catastrophic insurance landscape, and how any federal insurance should be structured.

FDIC Board Stands By DSIB Resolution Reform

At today’s FDIC Systemic Resolution Advisory Committee session, Acting Chairman Martin Gruenberg defended the release of proposed DSIB resolution standards as guidelines, not rules. Director Chopra reiterated concerns he expressed at a recent FDIC board meeting (see Client Report DEPOSITINSURANCE115), pressing for a structural rewrite of both DSIB and GSIB resolution standards. Acting Comptroller Hsu focused largely on supervisory build-out, noting the need for more creative, forward-looking assessments of resolution plans. Mr. Hsu also wants regulatory statements to ensure that investors understand that TLAC is a buffer of capital-at-risk in the event of extreme stress.

Daily110922.pdf…

18 10, 2022

DAILY101822

Eliza Allen2022-10-18T17:16:23-04:00October 18th, 2022|2- Daily Briefing|

CFPB Uses Enforcement Action to Press Payment-System Digital, Fee, Safety, Fairness Standards

Using an enforcement action today against ACTIVE Network, CFPB Director Chopra emphasized that this case epitomized broader Bureau concerns. These are monitoring use of “digital dark patterns” – i.e., design features that manipulate users into harmful behavior that are profitable for companies.

Treasury’s FIO Seeks Input On Climate-Related Data Collection

Taking further action in response to the President’s Executive Order on Climate-Related Financial Risk (see FSM Report GREEN8), Treasury’s Federal Insurance Office today requested comment on a proposed data collection regarding current and historical underwriting data on homeowners’ insurance from property and casualty insurers to assess climate-related financial risk.

HFSC Republicans Push Yellen to Support IFI Nuclear Energy Funding

In light of recent energy shortages in Europe, Ranking Member McHenry (R-NC) and Rep. Hill (R-AR) sent a letter today to Treasury Secretary Yellen urging her to support the European Bank for Reconstruction and Development and other IFIs financing nuclear energy projects. They claim that an absence of Western funding has allowed China and Russia to fill the void, especially in developing countries.

Daily101822.pdf…

7 10, 2022

DAILY100722

Eliza Allen2022-10-07T16:40:15-04:00October 7th, 2022|2- Daily Briefing|

FIO Notes Growing PE Insurance Role, Demurs on Action

Treasury’s Federal Insurance Office today issued an annual report replete with data and largely devoid of policy. However, reflecting strong pressure from Sen. Brown (D-OH) (see Client Report INSURANCE61), the report addresses credit risk transfer and private-equity participation in the reinsurance industry. FIO notes that the alternative risk-transfer market grew by $3 billion from 2020 to 2021, with both the property & casualty and life & health insurance sectors seeing over ten percent growth in reinsurance, which boosted total sector revenue growth. It also finds that private equity-owned insurer cash and invested assets grew over 100% over the same period.

Daily100722.pdf…

5 08, 2022

DAILY080522

Eliza Allen2023-01-04T13:22:18-05:00August 5th, 2022|2- Daily Briefing|

Senate Dems Demand Answers from Equifax re Inaccurate Credit Scores

In a letter today to Equifax’s CEO, Sens. Warren (D-MA), Warner (D-VA), and Krishnamoorthi (D-IL) demanded answers about erroneous credit scores, asking why the company failed to notify affected borrowers and waited several weeks to notify lenders. The Senators claim that Equifax’s response in an environment of rising interest rates forced some borrowers to pay higher rates or rejection and ask Equifax to explain the cause and scope of the error, compensation plans, and whether all affected parties or any relevant regulatory authorities have been notified.

Brown Targets Life-Insurance Systemic Risk

Senate Banking Chairman Brown (D-OH) today announced that he plans a hearing questioning the role of private-equity companies in the life-insurance sector. In letters to FIO and the NAIC, he cites Federal Reserve statements regarding insurance-industry leverage (see Client Report SYSTEMIC93), indicating that he believes this poses systemic challenges akin to those in the banking sector before 2008. FIO is asked to target analysis of offshore reinsurance sector risk-taking across the life-insurance sector; NAIC is asked to work with the FIO on issues raised in its prior letter to the chairman.

Daily080522.pdf…

2 06, 2022

DAILY060222

Eliza Allen2023-02-10T16:10:34-05:00June 2nd, 2022|2- Daily Briefing|

Fed Study Outlines Fixes to Make Retail CBDC Functional

A new Federal Reserve paper assesses the interplay between a U.S. retail CBDC and monetary policy transmission if whatever the Fed comes to offer is widely adopted for both payment and investment purposes.

Black Crypto Investments Reflect Wealth Gap Born of Financial System Distrust

A new article by the Kansas City Fed investigates the popularity of cryptoassets among Black investors and explains what may attract them and how this is a symptom of the racial wealth gap. The study found that Black investors are both more likely than whites to own crypto instead of safer assets such as stocks and mutual funds and more likely to expect high returns (i.e., 27 percent for Blacks versus 15 for whites) from crypto.

Fed Study Finds Enforcement Actions Increase Minority Lending

A study today released by the Fed found that, since 1997, banks subject to an enforcement action increased their mortgage lending to minorities and decreased minority denial likelihood, even if the action was not issued for violation of the fair-lending laws.

FIO Prioritizes Biden Climate-Risk Goals

The meeting today of FIO’s Federal Advisory Committee on Insurance focused on FIO’s work to meet the goals set out for it in the President’s climate-risk executive order (see FSM Report GREEN8).

Daily060222.pdf…

22 10, 2021

GREEN11

Arezou Rafikian2023-06-05T15:21:03-04:00October 22nd, 2021|5- Client Report|

FSOC Treads Cautious Middle Path on Climate-Risk Action

As we noted yesterday, the Financial Stability Oversight Council has now complied with President Biden’s executive order (see FSM Report GREEN8), compiling an exhaustive assessment of the financial-stability implications of climate risk and what might best be done about it. Other than administrative action in areas such as procurement, the Biden order actually mandated little specific action, a stance dictated not only by the independent charters of key financial agencies, but also Treasury’s hesitancy to press near-term stress tests, capital buffers, or other hard-wire interventions.

GREEN11.pdf…

1 10, 2021

Daily100121

Arezou Rafikian2023-07-24T15:32:22-04:00October 1st, 2021|2- Daily Briefing|

Warren Anti-Merger Bill Won’t Pass, Still Packs Punch
Following her assertions earlier this week (see Client Report REFORM208) that the Fed “rubber-stamps” bank mergers, Sen. Warren (D-MA) introduced S. 2882, legislation sharply tightening the conditions on which bank mergers may be approved.

IMF Calls for Fast Crypto Rules to Stem Rising Threats
The IMF’s latest blog post summarizes a new IMF report highlighting crypto’s emerging consumer and systemic risks.

FIO: U.S. Insurance Industry Strong, But Challenged by Low Rates
Treasury’s Federal Insurance Office (FIO) late yesterday released its annual report on the insurance industry as required by Dodd-Frank.

Daily100121.pdf…