#FRB SF – Federal Financial Analytics

2 10, 2023

DAILY100223

Eliza Allen2023-10-02T16:36:52-04:00October 2nd, 2023|2- Daily Briefing|

FRB FAQs Open a Small, But Significant Capital Window

In what Reuters takes as a sign of hope that the end-game rules may not be as crushing as banks fear, the FRB has issued a new FAQ related to credit-linked notes and SPVs.

Bowman Turns to Specific Supervisory Reforms

In remarks today, FRB Governor Bowman expanded on her prior comments about Fed supervisory lapses, but made it clear that she also opposes a “heavy-handed” supervisory approach that relies primarily on call report data, instead calling for a new approach to CAMELS and regular engagement with financial institutions to express areas of concern or to better understand a bank’s strategic direction.

Fed OIG re Silvergate: Far More Scathing re Supervision, Need for New Guidance

The OIG report today from the Fed regarding supervisory lapses at Silvergate is considerably less expansive than the prior report on SVB because the parent company remains open despite the IDI’s voluntary liquidation and relevant data are thus deemed confidential.

Barr Presses Emergency-Window Readiness

FRB Vice Chair Barr’s comments today on monetary policy and financial stability provide a detailed rationale for addressing the linkages between these two arms of the Fed’s mandate without any specific steps for doing so.

Daily100223.pdf…

28 09, 2023

DAILY092823

Eliza Allen2023-09-28T16:44:03-04:00September 28th, 2023|2- Daily Briefing|

White House Resilience Plan Focuses on Physical Infrastructure, Not Finance

The White House today released a National Climate Framework focused principally on promoting climate resilience in non-financial sectors such as building and energy use, improving federal agency climate preparedness, ensuring land and water resilience, and increasing climate-related community benefits and job opportunities.

BIS Conducts Successful Wholesale CBDC FX Pilot

Looking at the wholesale CBDCs of most interest in the U.S., the BIS today announced the conclusion of Project Marina, a wholesale CBDC FX pilot with DeFi elements among the central banks of France, Switzerland, and Singapore.

OCC Moves Interest-Rate Risk to Supervisory Priority List

The OCC today released its 2024 bank supervision operating plan announcing that there will be heightened supervision focus on interest-rate risk, AML/CFT, payments, DLT, and CRA.

All But The Smallest, Simplest Regional Banks Face Tougher Supervision

Signaling tougher supervisory standards for most regional banks, the long-anticipated Federal Reserve OIG report on SVB’s failure largely reiterates findings in Vice Chair Barr’s SVB report (see Client Report REFORM221) on failures by Board and FRB-SF supervisory staff quickly to adapt to SVB’s rapidly-changing risk profile.

Gruenberg Again Calls for Targeted Deposit Insurance Reform

In remarks today, FDIC Chair Gruenberg said that cross-border cooperation enhanced resolution of SVB’s international subsidiaries, using a talk to global deposit insurers also to reiterate prior recommendations on deposit-insurance reform (see Client Report DEPOSITINSURANCE119).

Daily092823.pdf…

10 07, 2023

DAILY071023

Eliza Allen2023-07-10T16:43:24-04:00July 10th, 2023|2- Daily Briefing|

HFSC Lays Out Its ESG Priorities

The majority staff memo ahead of Wednesday’s HFSC hearing on ESG follows the outline anticipated last week and that laid out in the GOP agenda for ESG-related action (see Client Report ESG4).

OCC Concurs On Capital, Tries For The Merger Middle

Acting Comptroller Hsu today confirmed our assessment of Vice Chair Barr’s comments earlier today (see Client Report CAPITAL228) that the three banking agencies are aligned on the new capital construct to be shortly released for public comment.

Barr, Foster Demand Delay to Capital Rewrite

Anticipating Vice Chair Barr’s remarks this morning detailing near-term capital policy changes (see Client Report CAPITAL228), HFSC Financial Institutions Subcommittee Chair Barr (R-KY) and Ranking Member Foster (D-IL) sent a letter late Friday demanding that he appear before the Subcommittee to present the conclusions of his capital review and upcoming Basel III implementation plans prior to public release, asking also for details and likely outcomes for industry consolidation.

House Republicans Keep Spotlight On FRB-SF

Continuing the GOP’s attack on the San Francisco Fed’s supervision of SVB in the wake of what many believe are “woke” priorities, House Oversight Committee Chairman Comer (R-KY) was joined today by Financial Services Subcommittee Chairwoman McClain (R-MI) in sending a letter to FRB Chairman Powell taking serious issue with the Federal Reserve Bank of San Francisco and the Fed for what they describe as SVB-related transparency and communication failures.

BIS Survey: Most Central Banks Considering CBDCs

The BIS …

22 06, 2023

DAILY062223

Eliza Allen2023-06-22T16:52:30-04:00June 22nd, 2023|2- Daily Briefing|

Gruenberg: End-Game Almost Done, Will Be Tough

In remarks today, FDIC Chair Gruenberg erased any of the doubt Chair Powell left yesterday as to the nature of the U.S. end-game capital rewrite (see Client Report FEDERALRESERVE74).

FSB Tackles Third-Party Risk

The FSB today issued a consultation on third-party vendor management, with comments due by August 22.

Senior Democrats Reintroduce Fed Racial Equity Measure

HFSC Ranking Member Waters (D-CA) and Senate Banking member Sen. Warren (D-MA) today reintroduced legislation that would create a new racial justice mission at the Fed.

Powell Announces Internal Endgame Draft, Defends FRB-SF

At a Senate Banking hearing today covering much of the territory discussed in yesterday’s HFSC hearing (see Client Report FEDERALRESERVE74), Chairman Powell noted that an endgame draft proposal has been circulated internally, he has been briefed on it and that all governors will have ample time to review it.

Daily062223.pdf…

24 05, 2023

DAILY052423

Eliza Allen2023-05-24T17:16:58-04:00May 24th, 2023|2- Daily Briefing|

New Fed Paper Shows Link Between Twitter, Market Sentiment, Run Risk

A new FRB staff paper uses natural-language models and social-media data to craft a “twitter sentiment index” (TSI) that is then compared to actual market conditions.

Democrats Press Clawback, Regulatory Fixes as HFSC Considers Transparency Measures

Today’s HFSC mark-up so far has focused on one of Rep. Barr’s (R-KY) three regulatory transparency bills, with Democrats proposing a series of amendments without any deciding votes.

House Oversight Panel Focuses On Supervisory Accountability, Reform

At today’s hearing of the Financial Services Subcommittee of House Oversight on bank failures and supervision at the San Francisco Fed, Subcommittee Chairwoman McClain (R-MI) opened with a series of sharply-worded questions on who oversaw the bank, what factors might have distracted them from traditional supervision, why glaring risk factors were not more forcefully addressed, whether regulators were unduly complacent, whether the Fed and FDIC used all of their regulatory tools, and if the agencies have been objective and transparent in their bank failure post-mortems as well as their accounts of the systemic risk exception.

Markup Votes Postponed for Transparency, LLPA Bills

Since our last alert, Democrats continued to submit amendments for Rep Barr’s (R-KY) transparency bill at today’s HFSC markup and party lines cemented over Rep. Davidson’s (R-OH) LLPA bill.

Daily052423.pdf…

17 05, 2023

REFORM225

Eliza Allen2023-05-17T16:03:47-04:00May 17th, 2023|5- Client Report|

HFSC Subcommittees Plow More Ground for Supervisory Accountability, Capital Reform, Clawbacks

A joint hearing today of HFSC’s Financial Institutions and Oversight Subcommittees expanded on themes at yesterday’s full Committee session with bank regulators (see Client Report REFORM224) and Senate Banking’s session with SVB’s and SBNY’s CEOs, with First Republic’s CEO now added to the Congressional firing line. Much in this session repeated prior themes, with Rep. Dave Scott (D-GA) going beyond prior, sharp criticism to accuse SVB’s CEO of being the worst CEO in U.S. financial history. Democrats demanded that he give up the bonus he received the day SVB failed and he went to Hawaii, receiving little satisfaction on this score and continuing demands for clawback legislation. Rep. Bill Foster (D-IL) continued to argue that contingent-capital instruments would ensure smooth resolutions, a position he said is shared by Chairman McHenry (R-NC) even though it supports a controversial Fed/FDIC proposal for regional-bank TLAC (see FSM Report RESOLVE48).

REFORM225.pdf…

16 05, 2023

DAILY051623

Eliza Allen2023-05-16T17:44:43-04:00May 16th, 2023|2- Daily Briefing|

Hsu Presses Reg Harmonization, Resolution Reform, Merger-Policy Rewrite

We now add our assessment of Acting Comptroller’s Hsu’s testimony to our analyses of those from Messrs. Barr and Gruenberg ahead of HFSC’s hearing later this morning.

Yellen Says White House Supports Community-Bank Exemptions

Speaking today to the ICBA, Secretary Yellen today joined the parade of policy-makers affirming the national importance of community banks.

JEC GOP Counter FRB on SVB Causality

JEC Republican staff today released a memo finding that tailored liquidity rules did not contribute to SVB’s failure, a contrast to the FRB’s SVB report (see Client Report REFORM221).

LLPAs Set for GOP Frying Pan

The majority-staff memo for tomorrow’s Housing Subcommittee hearing makes it clear that, as anticipated, the sole topic will be FHFA’s controversial LLPAs and related GSE pricing.

Senate Banking: Tough Grilling For Failed-Bank CEOs, Growing Consensus For Clawback Bill/Tough Rules

As predicted, today’s Senate Banking hearing with the CEOs of SVB and SBNY was a feisty session in which Democrats built their case for executive clawback legislation and the failed bank executives defended management while repeatedly placing blame on what they called an “unprecedented series of events.”

Daily051623.pdf…

3 04, 2023

REFORM219

Eliza Allen2023-04-03T11:07:12-04:00April 3rd, 2023|5- Client Report|

FedFin Forecast: Probable Changes to Bank Supervision, Regulation, Law

With Thursday’s White House announcement, we know that the Administration will do its best to support Fed and FDIC efforts to color recent events as a failure of Republican-led rulemaking, not also one of agency supervisory acumen, speed, and even competence. So far, key Democrats are instead pursuing a two-track strategy: complaining mightily about Trump-era rules but also joining with Republicans to cite an array of supervisory lapses they want quickly remediated by new standards, new rules, and – if need be – also by new law. Indeed, on Friday, Democrats made it clear that they want considerably more from the Administration than the fixes on which the agencies prefer to focus. Given how much is in motion and how much could advance, this report details FedFin’s forecast for near-term action in each of these arenas, focusing on matters with broad industry impact rather than specific SVB/Signature- enforcement issues. We thus provide forecast for immediate supervisory actions, those Congress will demand, new rules (tailoring and beyond), and the few legislative initiatives we believe have a reasonable chance of passage and Presidential approval.

REFORM219.pdf…

24 03, 2023

DAILY032423

Eliza Allen2023-03-24T17:13:54-04:00March 24th, 2023|2- Daily Briefing|

GOP Expands Attack On Fed Supervisory Actions

In yet another letter ahead of next week’s hearings, Senate Banking Ranking Member Scott (R-SC) and all Republican Members of the committee asked Fed Chairman Powell and FRB-SF President Daly a series of questions asserting that SVB’s failure reflects significant supervisory lapses.

FSOC Breaks The Glass

Although there is no formal announcement, FSOC will hold what is clearly an emergency, closed meeting later today per a new media advisory.

Top HFSC Republicans Join SVB-Supervisory Inquest

Following a similar letter from Senate Banking Republicans earlier today, HFSC Subcommittee Chairmans Barr (R-KY) and Huizenga (R-MI) along with Rep. Kim (R-CA) sent yet another letter to Vice Chair Barr and FRB-SF President Daly also demanding detailed supervisory-related information on SVB.

Reserve Banks Promise to Bear Some Sometime Soon

Under ever-growing pressure, all of the Federal Reserve Banks today under the New York Fed’s aegis announced a common transparency policy.

HFSC GOP Targets State Bank Supervisors

Top House Republicans today brought state banking commissions into the SVB and SBNY fray, asking each for extensive details on recent actions and setting the April 6 deadline now evident in all recent GOP requests in this arena.

GOP Leaders Also Demand FSOC Answers

HFSC Subcommittee Chairman Barr (R-KY) and Huizenga (R-MI) today also sent letters to FSOC Chair Yellen and Council of Inspectors General on Financial Oversight Chair Delmar requesting detailed information on meetings surrounding the banking agencies’ March 12 decision to invoke a systemic risk exception for SVB …

16 03, 2023

DAILY031623

Eliza Allen2023-03-16T17:11:59-04:00March 16th, 2023|2- Daily Briefing|

FedFin Assessment: One CS Consequence – LISCC Reinstatement For All Large Foreign GSIBs

In the wake of CS’s distress, we draw client attention to a 2021 exchange sure to factor heavily in the political response.

Brown Presses For In-Depth SVB, Signature Review

As anticipated (see Client Report RESOLVE49), Senate Banking Chairman Brown (D-OH) today called on all the banking agencies and Treasury quickly to undertake a review of SVB and Signatures failures.

Warren Heaps Still More Blame On Powell

In another letter today, Sen. Warren (D-MA) once again lambasted Chair Powell for what she claimed was his direct contribution to the collapse of Signature Bank and SVB as well as a “a culture of corruption” at the Fed.

Senate GOP Blames Fed, California re SVB

Senate Banking Republicans today tweeted a series of comments citing articles going back to last year identifying SVB risk and suggesting strongly that the Fed and California state supervisors are at fault for missing clear warning signs.

Bipartisan Senators Push Better Beneficial-Ownership Data Access

Senate Budget Committee Chairman Whitehouse (D-RI) was joined by Sens. Wyden (D-OR), Warren (D-MA), Grassley (R-IA), and Rubio (R-FL) late yesterday in submitting a comment letter to FinCEN taking serious issue with its proposed implementation of the Corporate Transparency Act (CTA) (see FSM Report AML135).

Senate Finance Hearing Deepens SVB Divide

At a heated Senate Finance hearing with Treasury Secretary Yellen, Members were quick to deviate from the hearing’s budget-focused agenda to address who should bear the …