#FMU – Federal Financial Analytics

26 04, 2023

FedFin on: Systemic-Risk Determinations

Arezou Rafikian2023-04-26T16:59:28-04:00April 26th, 2023|The Vault|

Rejecting the Trump Administration’s hands-off approach to designating systemically-important nonbank financial institutions or activities and practices, the Biden Administration’s FSOC has bifurcated this construct with one proposal on designating entities and another that lays out an analytical approach to identifying systemic risk that would then guide firm and activity designation as well as Council staff coordination with primary federal regulators leading to new rules, product or service prohibitions/restrictions, or firm-specific supervisory action. If the final framework is as comprehensive as this proposal and FSOC is as actively engaged as its plan requires, then U.S. systemic standards could extend far more widely than is now the case even if firm-specific nonbank designations are few and far between…

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

26 04, 2023

SYSTEMIC95

Eliza Allen2023-04-26T13:51:20-04:00April 26th, 2023|1- Financial Services Management|

Systemic-Risk Determinations

Rejecting the Trump Administration’s hands-off approach to designating systemically-important nonbank financial institutions or activities and practices, the Biden Administration’s FSOC has bifurcated this construct with one proposal on designating entities and another that lays out an analytical approach to identifying systemic risk that would then guide firm and activity designation as well as Council staff coordination with primary federal regulators leading to new rules, product or service prohibitions/restrictions, or firm-specific supervisory action. If the final framework is as comprehensive as this proposal and FSOC is as actively engaged as its plan requires, then U.S. systemic standards could extend far more widely than is now the case even if firm-specific nonbank designations are few and far between.

SYSTEMIC95.pdf…

19 12, 2022

FedFin on: FSOC Targets Usual Suspects but Also Points to Big-BHC, Nonbank Mortgage Systemic Risk

Arezou Rafikian2023-01-03T15:56:33-05:00December 19th, 2022|The Vault|

As promised, this FedFin report provides an in-depth analysis of FSOC’s 2022 annual report, focusing on findings with near-term policy implications. As always, the report is lengthy and includes many observations and market details that provide insight into Treasury and member-agency-staff thought. Much in it reiterates concerns about short-term funding markets, CCPs, and….

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

19 12, 2022

FSOC28

Eliza Allen2022-12-19T13:00:38-05:00December 19th, 2022|5- Client Report|

FSOC Targets Usual Suspects but Also Points to Big-BHC, Nonbank Mortgage Systemic Risk

As promised, this FedFin report provides an in-depth analysis of FSOC’s 2022 annual report, focusing on findings with near-term policy implications. As always, the report is lengthy and includes many observations and market details that provide insight into Treasury and member-agency-staff thought. Much in it reiterates concerns about short-term funding markets, CCPs, and investment funds (with FSOC for the first time urging regulators to look not only at MMFs and OEFs, but also at collective investment vehicles). As previously noted, the report is relatively sanguine about digital-asset systemic risk but, also reiterates findings in FSOC’s report (see Client Report CRYPTO33) demanding rapid action on a raft of reforms in this high-risk sector. What surprised us is the discussion of large BHCs, which departs from longstanding Fed and FSOC comfort in the post-GFC regulatory regime for this sector.

FSOC28.pdf…

16 12, 2022

DAILY121622

Eliza Allen2022-12-16T17:19:37-05:00December 16th, 2022|2- Daily Briefing|

GHOS Presses Speedy Bank-Crypto Capital Standards

Basel’s governing body, the Governors and Heads of Supervision, today endorsed the Committee’s planned work schedule.

Fed Finally Finalizes LIBOR Transition Regs

Narrowly ahead of its year-end statutory deadline, the Federal Reserve today issued a final version of its detailed proposal (see FSM Report LIBOR8) to implement the LIBOR Act’s provisions on replacement rates for existing contracts without fallback language (see FSM Report LIBOR7).

Regulators Highlight P2P, Crypto, NBFI Risks at FSOC Meeting

Although most of the FSOC’s discussion today of the LIBOR transition and climate risks was perfunctory, comments on the now-released 2022 Treasury annual report were not.

McHenry, Davidson Point to Forex-Clearing Systemic Risk

Picking up a recent BIS report finding at least $65 trillion at risk in off-balance sheet foreign-exchange clearing, incoming HFSC Chairman McHenry (R-NC) and the top Republican on the panel’s fintech task force, Rep. Warren Davidson (R-OH), called on Fed Chairman Powell and Secretary Yellen to investigate what they consider a looming risk to U.S. financial stability.

Chopra Presses Cloud-Service Provider, Stablecoin Systemic Designation

CFPB Chairman Chopra’s written statement for the FSOC meeting is considerably different than the oral one described in our earlier client alert.

Daily121622.pdf…

23 09, 2022

DAILY092322

Eliza Allen2022-09-26T08:37:38-04:00September 23rd, 2022|2- Daily Briefing|

Dems Reintroduce Instant Funds Availability Bill

Sens. Van Hollen (D-MD) and Warren (D-MA) yesterday introduced S. 4946, a bill they also introduced in 2019 (see FSM Report PAYMENT16) to require banks immediately to offer instant funds availability. As Sen. Van Hollen noted yesterday (see FSM Report REFORM213), the measure is intended to force banks to ensure instant funds availability and thus press membership in FedNow. It stands no chance of passage in this Congress, but were it to pass now or next year, FedNow likely could not handle a sudden influx of retail transactions as it remains only in its advance pilot stage.

FRB Proposes Sweeping FMU Operational-Risk Update

The FRB today proposed an update to rules governing operational risk-management for certain systemically important financial market utilities (FMUs). These requirements were last updated in 2014 and thus did not account well for cyber-threats and technology changes. The revised rules would, among other things, focus on incident management and notification; business continuity management and planning; third-party risk management; and review and testing of operational risk management measures.

Daily092322.pdf…

25 08, 2022

DAILY082522

Eliza Allen2023-01-04T10:34:26-05:00August 25th, 2022|2- Daily Briefing|

KC-Fed: Data Aggregation Requires Rules Before Mass Adoption

The Kansas City Fed yesterday released a briefing on data aggregators concluding that they can improve the efficiency and quality of consumer financial services if proper regulation protecting data security and privacy is enacted.

SEC Prioritizes Enforcement, Disclosure, Working-Families and Systemic Risk

The SEC’s new strategic plan through 2026 speaks to Chairman Gensler’s focus on fairness, economic opportunity, and enforcement. Specifics are sparse, but the plan puts the agency’s enforcement policy in the context of protecting “working families” especially when it comes to enforcement in areas such as cryptoassets.

FSI Report: Bigtech, Third Party Vendors Pose Operational Risk

The BIS Financial Stability Institute today released a study examining operational resiliency through a macroprudential lens, offering recommendations on how to address systemic risks presented by critical third-party service providers and bigtech.

Daily082522.pdf…

17 05, 2022

DAILY051722

Eliza Allen2023-02-21T14:40:03-05:00May 17th, 2022|2- Daily Briefing|

Chopra’s Call for FDIC Insurance Revocation Gains Strength

Although Republican Members of Congress last week sharply criticized Rohit Chopra’s suggestion that FDIC coverage be denied banks that violate consumer-protection standards, the proposal has picked up support among at least some Democratic state legislators.

FDIC Advertising Rule Sets New Course for CFPB Fintech Enforcement

The FDIC today finalized its proposal (see FSM Report DEPOSITINSURANCE112) to increase the penalties when advertising or other actions mislead consumers as to the extent to which FDIC insurance covers deposits or deposit-like placements.

SEC Turns to Systemic Standards

In remarks today, SEC Chairman Gensler expanded his campaign against market concentration related to payment-for-order flow to a broader set of systemic-risk concerns due to increased concentration of key securities-market infrastructure activities in a small number of very large firms.

Hsu Sounds Alarm re Risk Concentrations, Consumer Fragility

In remarks today, SEC Chairman Gensler expanded his campaign against market concentration related to payment-for-order flow to a broader set of systemic-risk concerns due to increased concentration of key securities-market infrastructure activities in a small number of very large firms.

Daily051722.pdf…