#FRB NY – Federal Financial Analytics

3 04, 2024

DAILY040324

Eliza Allen2024-04-03T17:21:51-04:00April 3rd, 2024|2- Daily Briefing|

Bowman Wants Policy Review, Fed-Operational Improvements Ahead of New Liquidity Regs

Turning from mergers to the Fed’s lender-of-last-resort role, Gov. Bowman today argues that new liquidity policies require careful review before any new rules are adopted.

Fed Treads Carefully in New Global Money-Tokenization Project

The BIS today announced a new program exploring ways in which tokenizing central-bank and bank money for wholesale transactions on programmable platforms would benefit the monetary system.

Powell Defends Independence, Mandate Limits

In remarks today on monetary policy and Fed independence, Chair Powell was at pains to emphasize that climate risk was outside the Federal Reserve’s mandate.

FHFA Treads Cautiously Towards FHLB Reform

Issuing a minor ruling regarding Puerto Rico cooperatives, FHFA today also laid out its 2024 priorities following last year’s report on the Home Loan Bank System.

Barr Stands by CRA Rule

Responding to questions about the court injunction on the CRA rule, FRB Vice Chair Barr today stated that the rules are restated expectations within the boundaries of the Act and Congress intended the agencies to update the 1977 law.

Chopra: Merger Approval Requires Affirmative, Additive Community Benefit

Building on his comments when the FDIC board voted 3-2 to issue its merger proposal (see FSM Report MERGER15), CFPB Director Chopra today doubled down on the view that bank mergers should only be approved if there is demonstrable community benefit over an extended period of time.

Daily040324.pdf…

1 04, 2024

Daily040124

Eliza Allen2024-04-01T16:24:02-04:00April 1st, 2024|2- Daily Briefing|

FRB-NY: Experience Begets Overdraft Fee Knowledge

Perhaps reflecting the Biden Administration’s examination of overdraft fees, a new report from the Federal Reserve Bank of New York staff on overdraft credit found that experienced overdrafters are roughly twice as likely to know their bank’s overdraft fee than customers who have not overdrawn in the past year. The report also finds that half of customers surveyed did not know their bank’s overdraft fee, which the report calls “potentially worrisome,” but notes that 41 percent of respondents are also indifferent to their bank’s overdraft policies.

Barr Takes Over CFPB Card-Fee Fight

As anticipated, HFSC Financial Institutions Subcommittee Chair Barr (R-KY) has introduced H.J. Res. 122, the same CRA resolution overturning CFPB’s late fee rule introduced last week by freshman Rep. Ogles (R-TN). Reports indicate poor communication between the Chair and junior member, and we expect this resolution to be the one that moves forward.

Daily040124.pdf…

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…

28 02, 2024

DAILY022824

Eliza Allen2024-02-29T11:26:05-05:00February 28th, 2024|2- Daily Briefing|

HFSC Dems Press for New Bank-Merger Policy

Although she issued a statement strongly opposed to the CapOne/Discover merger after it was announced, HFSC Ranking Member Waters (D-CA) today led a letter instead focusing on the need for the banking agencies and DOJ to quickly issue updated merger policies.

US Standards Complicate Transborder Personal-Financial Data Flows

The President plans later today to issue an executive order banning the transfer of sensitive data to “countries of concern” and certain persons subject to their jurisdiction.

Fed Worries About Regional-Bank Risk

Anna Kovner, Director of Financial Stability Policy Research at the New York Fed, today outlined four sources of systemic risk that worry the central bank even though the Fed still sees risks as manageable according to the analyses released last October (see Client Report SYSTEMIC97).

Daily022824.pdf…

5 02, 2024

DAILY020524

Eliza Allen2024-02-05T16:54:06-05:00February 5th, 2024|2- Daily Briefing|

Bowman Opposes Tech Self-Regulation, Highlights Emerging Risks

In remarks Friday on the future of banking, FRB Gov. Bowman joined Acting Comptroller Hsu in expressing concern over supervisory and governance complacency, especially when it comes to interest-rate and liquidity risk. The speech picks up on Karen Petrou’s memo last week, pointing to the way in which regulators now appear focused principally on new rules, not emerging risks including those from fraud-renewed threats and third-party vendors. Ms. Bowman thus urges greater accountability for banks based on third-party actions not only to enhance risk management, but also to reduce migration risk.

House GOP Expands Attack on Fed Work With Global Bodies

Continuing previous attacks on Federal Reserve Banks and federal banking agencies’ work with global entities, HFSC Chair McHenry (R-NC) and Financial Institutions Subcommittee Chair Barr (R-KY) sent letters today to the San Francisco and New York Reserve Banks disputing what they describe as undue cooperation with the Network for Greening the Financial System (NGFS) and Bank for International Settlements (BIS).

Daily020524.pdf…

14 12, 2023

DAILY121423

Arezou Rafikian2023-12-15T17:22:54-05:00December 14th, 2023|2- Daily Briefing|

Top Senate Democrats Heighten Payment App Scrutiny

Continuing to shift their focus from Zelle to payment-service providers, Senate Banking Chairman Brown (D-OH) along with Sens. Reed (D-RI) and Warren (D-MA) today sent letters to Paypal and CashApp urging them to adopt new scam-reimbursement policies.

Treasury Defends Russian Sanctions, Economic-Warfare Clout

Facing increasing assertions that U.S.-led sanctions are not meaningfully affecting Russia, Treasury today issued a blog stoutly defending sanctions effectiveness.

Reed Presses OFR to Subpoena Shadow-Bank Data

The principal sponsor of the Dodd-Frank provisions creating the Office of Financial Research, Sen. Jack Reed (D-RI), today defended the agency on grounds that it lacks a confirmed director, promising to push the appointment on the floor as quickly as possible.

Basel Targets Stablecoin Reserve-Asset Risk

Moving forward with “targeted” changes to current standards, the Basel Committee today outlined revisions to its crypto standards with significant practical implications.

Liang Disputes Over-Arching Need for New AI Regs

Treasury Under Secretary Liang today argued that AI is not fundamentally different than other financial innovations and is already subject to existing consumer-protection, safety-and-soundness, illicit-finance, and financial-stability guardrails.

FRB-NY Official Highlights AI Promise, Problems, Policy Action

Summarizing a recent Federal Reserve Bank of New York AI conference, the Bank’s chief risk officer, Mihaela Nistor, concluded that AI can now identify GSIB and GSIFI risk due to its ability to detect tail behavior not now captured by relevant models.

Democrats Urge CFPB to Take Second Stand Against Forced Arbitration

Sens. Warren (D-MA) and Sanders (I-VT) were today …

30 11, 2023

FedFin on: FHA’s Mission and Mishaps

Arezou Rafikian2023-11-30T14:04:44-05:00November 30th, 2023|The Vault|

A new FRB-NY study confirms that 83% of loans from 2000-2022 went to first-time homebuyers, compared to 56% for the GSEs and 57% for private lenders. FHA loans of course have very high LTVs and low scores, with scores improving after 2008 when the PLS market stopped adversely selected FHA even though over half of FHA loans still have scores under 680. FHA sustainability has varied based on these and other factors, but 21.8% of borrowers from 2011-2016 still lost their homes.

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

30 11, 2023

GSE-113023

Eliza Allen2023-11-30T12:03:15-05:00November 30th, 2023|4- GSE Activity Report|

FHA’s Mission and Mishaps

A new FRB-NY study confirms that 83% of loans from 2000-2022 went to first-time homebuyers, compared to 56% for the GSEs and 57% for private lenders. FHA loans of course have very high LTVs and low scores, with scores improving after 2008 when the PLS market stopped adversely selected FHA even though over half of FHA loans still have scores under 680. FHA sustainability has varied based on these and other factors, but 21.8% of borrowers from 2011-2016 still lost their homes.

GSE-113023.pdf…

28 11, 2023

DAILY112823

Eliza Allen2023-11-28T16:35:09-05:00November 28th, 2023|2- Daily Briefing|

FRB-Dallas: Reciprocal Deposits Require Policy Attention

The Federal Reserve Bank of Dallas today released a staff study revaluating reciprocal deposits in the wake of SVB’s failure, concluding that policy-makers should reconsider concentration limits imposed in 2018 in conjunction with brokered-deposit constraints (see FSM Report DEPOSITINSURANCE108).

FRB-NY: OEFs Create Run-Run Risk

The Federal Reserve Bank of New York today released a staff study concluding that open-end funds (OEFs) experienced acute outflows after SVB failed, bank deposits received de facto unlimited insurance, and the FRB established the TBFP.

Chopra Testimony Ducks Tough Questions Ahead of Hearings

CFPB Director Chopra’s testimony for forthcoming hearings with HFSC and Senate Banking this week largely recaps Bureau action since his last appearance before Congress in June, with Mr. Chopra focusing on consumer debt issues highlighted in the CFPB’s recent consumer credit card market report.

FSB Wants Action on Crypto Vertical Integration

The FSB today released a report concluding that, while multifunction crypto-asset intermediaries (MCIs) currently pose limited financial-stability threat, cryptoasset stress events such as those that occurred over the past year present spillover risks to banks with concentrated deposit exposures to firms reliant on cryptoassets.

Basel Presses Supervisors to Enforce GSIB Data-Aggregation Standards

The Basel Committee today released a report finding that only two of the 31 GSIBs are fully compliant with its Principles for effective risk data aggregation and risk reporting (see FSM Report RISKMANAGEMENT7).

Daily112823.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…