#FRB Cleveland – Federal Financial Analytics

27 03, 2024

DAILY032724

Eliza Allen2024-03-27T16:47:24-04:00March 27th, 2024|2- Daily Briefing|

FRB-Cleveland Study: Banks Beat Capital-Rule Reaper

One of the major complaints banks have raised with the pending end-game capital rules is that the proposed transition period for final implementation does not soften the blow as the agencies argue.

Treasury Points to AI Fraud, Cyber Risk; Presses for New Rules, Best Practices

Adhering to the President’s AI executive order (see Client Report AI3), Treasury today assessed AI risk in the financial sector, concluding that further work is required to address AI-related fraud and cybersecurity risks.

FRB-NY: Mid-Size Regionals Show Deposit/Asset Recovery

A new report from Federal Reserve Bank of New York staff finds that the 2023 failures had little lasting impact on bank deposit costs and funding practices save for banks between the $50 to $250 billion level the study dubs “super-regionals.”

KC Fed: Core-System Providers May Have Undue Market Power

A new report from Kansas City Fed staff finds that three core-system providers dominate this critical sector, making it difficult for depository institutions and especially smaller banks to obtain better service levels.

Daily032724.pdf…

30 11, 2023

DAILY113023

Eliza Allen2023-11-30T17:02:53-05:00November 30th, 2023|2- Daily Briefing|

FRB-Cleveland Head Calls for Reg Redesign

The head of the Federal Reserve Bank of Cleveland, Loretta Mester, yesterday argued for higher bank capital requirements, including counter-cyclical imposition of a capital buffer during low-risk periods so it can be released under stress based on credit growth under a formula ensuring that the CCyB in fact moves quickly to ease stress.

Brown, Colleagues Stand Behind GSIB Surcharge

Ahead of next week’s hearing with GSIB CEOs, Senate Banking Chairman Brown (D-OH) was joined today by Sens. Warren (D-MA), Fetterman (D-PA), and Reed (D-RI) in a letter to FRB Vice Chair Barr voicing their strong support for the Board’s GSIB surcharge proposal (see FSM Report GSIB22).

IMF: Future of AI’s Impact on Banking Unpredictable

The IMF today released an article focused on AI, concluding that banking has the potential to be the biggest beneficiaries of AI, but also may have the most to lose. The article considers the unpredictable future of AI technology through optimistic and pessimistic scenarios, concluding that AI could better protect assets and markets, but also could be put to various nefarious uses.

Daily113023.pdf…

6 02, 2023

GSE-020623

Arezou Rafikian2023-02-08T13:03:48-05:00February 6th, 2023|4- GSE Activity Report|

Disparate Refinancing Reviewed

A new post from the Federal Reserve Bank of Atlanta summarizes key findings from recent pandemic-era mortgage refinancing research, reiterating prior findings that more White mortgage borrowers got lower refinancing interest rates in 2020 compared to Blacks.

GSE020623.pdf…

22 08, 2022

GSE-082222

Arezou Rafikian2023-01-04T10:56:18-05:00August 22nd, 2022|4- GSE Activity Report|

Forbear to Forget

A new Federal Reserve Bank of Cleveland study validates forbearance as a mortgage-market buffer, reinforcing the likelihood that policymakers and servicers will turn quickly to it if current mortgage-market conditions turn ugly under the combined stress of higher rates and slow to no growth. If bank regulators also reinstate regulatory forbearance on forborne loans, the regulatory-capital cost of higher-risk loans gets a nice counter-cyclical boost, perhaps encouraging banks to tread softly back into at least some of this sector if parallel calculations under the all-powerful stress capital buffer prove propitious.

GSE-082222.pdf

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16 08, 2022

DAILY081622

Eliza Allen2023-01-04T11:59:26-05:00August 16th, 2022|2- Daily Briefing|

FRB-Cleveland Study: Banks are Better Small-Business Lenders Than Fintechs

Using data from the 2021 Small Business Credit Survey, a new Federal Reserve Bank of Cleveland study concludes that small businesses that made use of online lenders were less satisfied with their experiences and more likely to report high rates and unfavorable repayment options than those that used banks. The study also found that online lenders were less likely than banks to approve the full extent of financing, noting that this was not the case prior to the pandemic.

Fed Gives Guarded Guidance re Crypto Activities

The Federal Reserve Board today released a supervisory letter requiring state member banks to obtain prior approval before commencing cryptoasset-related activities and to ensure that appropriate internal controls are in place in order to do so. This letter comes a day after the board announced its new payment-system access policy and is likely intended to make it clear that activities in or out of FDIC-insured banks related to cryptoassets will not get the free pass some fear.

Toomey Presses for FDIC-Authorized Crypto Activity

Sen. Toomey (R-PA) sent a letter today to acting Chairman Gruenberg alleging that the FDIC has instructed FDIC regional offices to send letters to multiple banks requesting that they refrain from expanding relationships with crypto firms without any legal basis, citing multiple whistleblower complaints. He asks that Mr. Gruenberg provide any communications that the Washington office has had with FDIC regional offices on the subject by August 30.

Daily081622.pdf…

29 06, 2022

DAILY062922

Eliza Allen2023-01-24T16:00:53-05:00June 29th, 2022|2- Daily Briefing|

FRB-Cleveland Study: Small-Business Finance Availability Shows Continuing Disparate Impact

The Federal Reserve Bank of Cleveland today published the results of the Small Business Credit Survey, finding that small businesses owned by people of color were far less likely to have recovered to pre-pandemic levels than their white counterparts, due in part to continuing gaps in financial access.

GOP Renews Demand for Reserve Bank Reform

Picking up on the GOP’s serious concern about Federal Reserve Bank governance expressed when Chairman Powell came before them last week (see Client Report FEDERALRESERVE70), Senate Banking Republicans today sharply criticized the head of the Kansas City Fed for what they call her unresponsiveness and even untruthfulness related to how Reserve Trust achieved payment-system access.

CFPB Report: Credit Line Reductions Harm Vulnerable Borrowers

Continuing the CFPB’s assessment of credit-card finance, Bureau staff today issued a report about the adverse impact that credit line reductions or withdrawals have on consumers, especially those under stress.

HFSC Homeownership Session Fans Partisan Flames

Today’s HFSC hearing on homeownership and inequality was a largely partisan session where each side repeated policy and macroeconomic arguments along party lines about the best ways to govern the nation’s housing market.

IMF Calls for Improvements to Capital Market Regulation

The IMF issued a report today on capital-markets regulation calling for new market liquidity backstops, strengthened CCP risk management, and greater attention to emerging risks to strengthen the regulatory perimeter focus.

Waters Renews Demands to Break Up Big Bad Banks

Following the hearing …

3 06, 2022

DAILY060322

Eliza Allen2023-02-10T16:02:13-05:00June 3rd, 2022|2- Daily Briefing|

Agency Heads Stress Need for CRA Reform

Acting Comptroller Hsu, Fed Vice Chair Brainard, and Acting FDIC Chairman Gruenberg today took questions on the controversial, far-reaching inter-agency CRA regulatory rewrite (see FSM Report CRA32).

FRB-Cleveland Study: Small-Business Lending Continues Race/Ethnic Disparities

A new paper published by the Federal Reserve Bank of Cleveland finds evidence that race-based lending disparities persisted through the pandemic, concluding that Black business owners in particular struggled to receive loans compared to whites, fintechs have not overcome credit disparities, and minority-owned businesses were less likely to receive the PPP amounts for which they applied.

Waller Seeks Balance in Crypto Rules

FRB Gov. Waller today described the advantages of innovative, unregulated markets such as that created by cryptography at its outset.

FinCEN Takes Baby Step to No-Action Letters

Reflecting demands from Congress in recent AML law (see FSM Report AML133), FinCEN today issued an advance notice of proposed rulemaking outlining how a no-action letter process might work.

Daily060322.pdf…

27 05, 2022

Daily052722

Eliza Allen2023-02-21T13:31:35-05:00May 27th, 2022|2- Daily Briefing|

KC Fed: Advanced Nations Struggling to Find a CBDC Rationale

In concert with Vice Chair Brainard’s testimony yesterday (see Client Report CBDC13), the Kansas City Fed released a brief assessing the reason advanced economies have so far been considerably more hesitant than emerging ones to craft retail focused CBDCs. By laying out how many advanced economies are at best lukewarm to CBDC, the brief’s review illuminates reasons why the FRB is hesitant without directly addressing the U.S. The post looks at numerous CBDC rationales (e.g., financial inclusion, Payment-system speed) and differentiates them by major nations.

FRB-Cleveland: Post-1994 Bank Restructuring Improved LMI Inclusion

A new study from the Federal Reserve Bank of Cleveland offers perhaps the first literature survey of financial inclusion. It largely summarizes outstanding work, but notes that interstate banking following the Riegle-Neal Act of 1994 correlates with increased bank-branch density correlated in turn with a four percent increase in LMI household financial inclusion. This conclusion is interesting in light of the significant increase following the Act also in bank consolidation in light of continuing concern about “banking deserts” said to be due to M&A (see FSM Report MERGER9).

Daily052722.pdf…

3 01, 2022

GSE-010322

Arezou Rafikian2023-04-25T15:56:14-04:00January 3rd, 2022|4- GSE Activity Report|

Home, Risky Home?

New economic commentary from the Federal Reserve Bank of Cleveland assesses several recent studies on homeownership from an investment perspective. Contradicting the traditional political narrative about the importance of homeownership to wealth accumulation, it concludes that homeownership is fine if you’ve got some wealth, but may well be risky for lower-income and -wealth homeowners.

GSE-010322.pdf…

11 10, 2021

AL101121

Arezou Rafikian2023-06-20T15:12:39-04:00October 11th, 2021|3- This Week|

DON’T EVEN THINK ABOUT IT

As our in-depth analysis (see FSM Report MERGER8) makes clear, the Warren- García legislation on bank M&A makes the Biden competitiveness policy (see Client Report MERGER6) – strongly opposed by the industry – seem positively congenial. Just for starters, the legislation goes beyond bank consolidation also to attack bank expansion via new or even revised BHC activities. One pillar of the proposal is the assertion that bank consolidation fosters banking “deserts.” However, as we also noted, recent Federal Reserve Bank of Cleveland research doesn’t support this proposition.

AL101121.pdf…