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16 11, 2022

DAILY111622

2022-11-16T17:14:29-05:00November 16th, 2022|2- Daily Briefing|

Treasury Calls for Tough Fintech and Bank-Partnership Protection, Prudential Standards

Treasury has completed a long-pending study of the extent to which nonbank fintechs compete with banks and how this affects financial stability and consumer protection.  We will shortly provide clients with an in-depth analysis of this report, for which Karen Petrou was extensively interviewed as now noted publicly in the appendix.  The report was ordered by the Secretary in compliance with President Biden’s competition order (see Client Report MERGER6), finding that nonbank fintechs directly compete with banks and thus may reduce current concentration levels, sure to influence the inter-agency bank-merger policy that remains to be finalized.

Williams Presses for NBFI Standards

In remarks today, FRB-NY President John Williams said that the central bank should not adjust monetary policy to address the price-stability challenges of volatile Treasury markets and that financial-stability questions have generally been well-addressed as evident in the sound U.S. banking system.  Noting recent findings in the latest staff report (see Client Report TMARKET3), Mr. Williams also called for structural changes to NBFIs along lines also laid out by the FSB (see Client Report NBFI2), arguing that MMFs and other NBFIs must be a market source of strength, not of vulnerability requiring rescue beyond the Fed’s new standing facility.

G20 Blesses FSB, Basel Work Plans

In addition to top-priority concerns such as Ukraine, the G-20 Leader’s Declaration today tackled the usual financial-policy agenda, supporting the FSB’s recent NBFI report (see Client

15 11, 2022

DAILY111522

2022-11-15T17:28:46-05:00November 15th, 2022|2- Daily Briefing|

Recognizing Early Stage, FSB Still Slams Climate Stress Scenario Analytics

In collaboration with the Network for Greening the Financial System (NGFS), the FSB today concluded that risk exposures and vulnerabilities may be underestimated under current climate-stress scenarios because metrics fail to capture second-round effects, potential climate non-linearities, risk-management costs and externalities, and asset-price corrections triggered by transition shocks.  Further, while orderly scenarios do not yield severe impacts, disorderly scenarios and scenarios involving no financial system transition accompanied by high medium- to long-term physical risks correlate with significant GDP and financial losses.  As a result, the FSB determines that, although the impact of climate risk is concentrated in certain sectors and currently contained from a domestic financial perspective, tail risks may pose notable resilience threats.

FRBNY Launches CBDC Feasibility Project

Advancing more of the U.S. CBDC infrastructure, the Federal Reserve Bank of New York today announced that its Innovation Center (NYIC) will engage in a proof-of concept project testing the technical, legal, and business feasibility of distributed ledger technology to settle financial institution liabilities through transfer of central bank liabilities.  Work includes collaboration between NYIC and private sector organizations and will harness simulated data to explore the feasibility of central bank wholesale and commercial digital money interoperating on a shared multi-entity distributed ledger, but will not advance policy outcomes or signal imminent Federal Reserve CBDC adoption or design specifications.

Daily111522.pdf

14 11, 2022

DAILY111422

2022-11-14T17:00:05-05:00November 14th, 2022|2- Daily Briefing|

FSB Thinks 2020 Reg Relief Could Go, Stay – It All Depends

In conjunction with the G20 summit, the FSB has released a policy paper assessing the extent to which various pandemic-related regulatory forbearances should be continued.

FSB Reiterates Climate, Crypto, NBFI Plans

The FSB head’s letter to the G20 today reiterates all of the priorities expressed in its October letter to G20 finance ministers.

Regulatory Hearings to Address Last-Gasp 2022 Agenda, Position Panels for a Busy New Year

With GOP House and Democratic Senate control largely assured, this week’s hearings with Messrs. Barr, Gruenberg, Harper, and Hsu will illuminate not only current priorities – most notably what’s next for federal crypto law and rule – but also the very different priorities HFSC and Senate Banking will advance in the next Congress.

FRB-NY Staff: Big U.S. Banks Remain Extremely Resilient

In its latest assessment of the vulnerability of the fifty largest U.S. BHCs, Federal Reserve Bank of New York staff confirmed the overall rosy assessment of bank resilience in the Board’s latest financial-stability report (see Client Report SYSTEMIC94).

OCC Ramps Up Fair-Lending Enforcement

In remarks delivered for Acting Comptroller Hsu, Senior Deputy Comptroller for Bank Supervision Policy Grovetta Gardineer reiterated that ensuring fairness is a top OCC priority.

Gruenberg Finally Gets the Nod

Knowing now that he has secured Democratic Senate control into next year, President Biden today finally and formally nominated Acting FDIC Chairman Gruenberg to assume the chairmanship.

Daily111422.pdf

14 11, 2022

FedFin on:  Global Regulators Prioritize CCP, End-User Resilience

2022-11-14T16:00:23-05:00November 14th, 2022|The Vault|

As promised, this FedFin report provides an in-depth analysis of the FSB’s latest policy on nonbank financial intermediation.  As is often the case, much in the report discusses data gaps, presses for international cooperation, and details FSB and national work to date on the issues identified in its initial analysis after the 2020 crisis (see FSM Report NBFI).  Most of FSB’s work since has focused on MMFs (see FSM Report MMF18), with this latest report going on to lay out ….

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

14 11, 2022

NBFI2

2022-11-14T12:16:04-05:00November 14th, 2022|5- Client Report|

Global Regulators Prioritize CCP, End-User Resilience

As promised, this FedFin report provides an in-depth analysis of the FSB’s latest policy on nonbank financial intermediation.  As is often the case, much in the report discusses data gaps, presses for international cooperation, and details FSB and national work to date on the issues identified in its initial analysis after the 2020 crisis (see FSM Report NBFI).  Most of FSB’s work since has focused on MMFs (see FSM Report MMF18), with this latest report going on to lay out more specific policy options for OEFs, margining, core bond markets, and other target areas.  The report also calls for attention to systemic NBFI concerns, noting risks at family offices, prime brokers, life insurers, and pension funds, as well as “hidden leverage” without discussing what might best be done about them.

NBFI2.pdf

10 11, 2022

DAILY111022

2022-11-10T17:35:13-05:00November 10th, 2022|2- Daily Briefing|

Inter-Agency Treasury-Market Rewrite Progresses

Treasury’s Inter-Agency Working Group on Treasury Market Surveillance (IAWG) today released a progress report on its efforts to guide action to stabilize the Treasury marketplace.

Fed Reg Report Highlights Future Priorities

The Fed today released its semiannual Supervision and Regulation Report, reiterating that banks entered 2022 in historically sound financial shape and outlined its priorities based on the potential risks of changing market conditions.

FSB NBFI Report Highlights Liquidity, Systemic Risk

The FSB today released a progress report on improving the resilience of non-bank financial intermediation (NBFI), recommending a number of enhancements to the current policy toolkit to better mitigate liquidity and financial stability risk.

CFPB Spotlights Cryptoasset Complaints

The CFPB today published a bulletin analyzing cryptoasset complaints the Bureau has received since 2018, observing a large spike in these complaints over the past two years and concluding that fraud, theft, hacks, and scams are widespread problems affecting participants in crypto markets.

CFPB Continues Furnisher Accountability Campaign

The CFPB today continued its campaign for furnisher accountability by issuing a circular upholding the Bureau’s belief that consumer credit reporting agencies and furnishers must conduct a reasonable investigation of non-frivolous consumer disputes and that failure to do so may subject them to CFPB enforcement under the FCRA.

CFPB Modifies Nonbank Financial-Company Standards

The CFPB today acted again by fiat to amend what it calls its procedural rule (see FSM Report CONSUMER41) revising its “dormant” authority and, as we noted in our analysis, creating a sweeping …

20 10, 2022

DAILY102022

2022-10-20T17:36:06-04:00October 20th, 2022|2- Daily Briefing|

Fed Staff Study: Climate Risk-Based Capital Impossible for Foreseeable Future

FRB staff released a stylized study of one critical climate-risk policy question:  the extent to which banks should hold capital against it.  Members of Congress have suggested this over recent years (see FSM Report GREEN9) and the BIS at the outset of its thinking recommended both “brown-penalty” and “green-incentive” capital charges (see Client Report GREEN).

FSB Presses for MMF, Open-End Rules; Government-Bond CCPs

Continuing its NBFI focus (see Client Report NBFI), the FSB today issued new recommendations to address government-security market illiquidity.

Gruenberg Gives No Clue as to Timing, Content of Inter-Agency Crypto Guidance

In remarks today, Acting Chairman Gruenberg reiterated the risks laid out in the FSOC digital asset report (see Client Report CRYPTO33), repeated warnings against misrepresenting FDIC deposit insurance, and announced forthcoming interagency crypto guidance without providing any details or timeline.

Bipartisan Senators Press Secondary Sanctions for Enactment

Sens. Toomey (R-PA) and Van Hollen (D-MD) released a readout of a conversation with the Ukrainian Ambassador on the upcoming G7 Russian oil price cap, positioning their oil sanctions amendment for inclusion in the National Defense Authorization Act (NDAA) in light of the Ambassador’s support for it.

Warren Calls for Stronger, More Transparent CFPB Remittance Rule

Joined by four Senate Democrats, Sen. Warren (D-MA) today sent a letter to CFPB Director Chopra asking that the agency strengthen its remittance rule to ensure greater transparency for exchange rates and fees it …

17 10, 2022

CRYPTO34

2022-10-24T11:26:12-04:00October 17th, 2022|1- Financial Services Management|

Global Cryptoasset/Stablecoin Standards

Speaking for global banking, securities, and insurance regulators, the Financial Stability Board has taken its firmest stand to date on cryptoassets and outlined high-level and often principles-based global standards to govern them going forward.  Although generally limited to financial stability and often couched in broad terms, these global standards would generally track the very crypto-cautious stand taken by U.S. regulators as well as policy set by the Securities and Exchange Commission, not that also of the Commodity Futures Trading Commission when it comes to cryptoassets that cross traditional sectoral boundaries.

CRYPTO34.pdf

13 10, 2022

DAILY101322

2022-10-13T16:58:46-04:00October 13th, 2022|2- Daily Briefing|

Final FSB Climate Standards Push Scenario Analysis, Stress Testing to Macropru Bucket

Building on its interim report (see FSM Report CLIMATE13), the FSB today published its final report on Supervisory and Regulatory Approaches to Climate-related Risks. FedFin will shortly provide clients with an in-depth analysis of the report, which focuses on regulatory reporting and data collection, system-wide supervisory and regulatory approaches, and assessing the extent to which current policies and tools address climate-related risks.

Daily101322.pdf

11 10, 2022

DAILY101122

2022-10-12T10:26:48-04:00October 11th, 2022|2- Daily Briefing|

FSB Slow-Walks Global Crypto Action

As promised, the FSB today released preliminary recommendations for global cryptoasset regulation and questions for consultation.

FSB Demurs on Crypto Systemic Risk

In its latest letter to the G20, the FSB today leaves its prior global-risk assessment largely unchanged, but refines its action plan.

Hsu Hunts for Reasons to Tolerate Crypto

In two speeches today, Acting Comptroller Hsu has again reiterated his concerns that cryptoassets pose an array of risks, a view of course echoing the FSOC’s findings (see Client Report CRYPTO33) and those in recent Treasury reports (see Client Report CBDC14 and Client Report CRYPTO32).

FRB KC: Better Data, Research Needed to Guide Payment Inclusion

A new research briefing from the Federal Reserve Bank of Kansas City calls for more research and data collection on underserved populations excluded from the payment system as well as more systematic research into public and private payment inclusion initiatives.

HFSC Republicans Press Hsu on Bank-Fintech Partnerships

HFSC Ranking Member McHenry (R-NC) and four other House Republicans today sent a letter to Acting Comptroller Hsu demanding clarification on the OCC’s treatment of bank-fintech partnerships.

Daily101122.pdf

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