#G20 – Federal Financial Analytics

5 09, 2023

DAILY090523

Eliza Allen2023-09-05T17:16:52-04:00September 5th, 2023|2- Daily Briefing|

FSB Considers Resolution Construct Revamp

In addition to calling for full and consistent implementation of the Basel III framework, the FSB head’s letter to the G20 today stresses that this year’s bank failures challenge long-held views about deposit stickiness and the speed of bank runs, leading international standard-setters now to consider unspecified policy changes to the resolution construct.

BIS Study: Fed, FDIC Reassurances Offset Bank Run Risk

Contributing to analysis of viral runs and how to stop them, a new paper from BIS staff concludes that public communication from the Fed on banking system stability and from the FDIC on deposit insurance during crises can mitigate systemwide run risk, while similar statements from political figures such as President Biden are less effective.

IMF: Money Laundering Undermines Financial Stability

The IMF yesterday published a blog post on money laundering’s financial-stability impact, concluding that cross-border illicit payments result in equity-price declines, higher CDS costs, elevated perceived credit risk, and declines in deposits for the individual banks involved. The blog also states that there is a contagion dynamic as a result of spillover effects between targeted banks and other banks within the region.

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6 07, 2023

DAILY070623

Eliza Allen2023-07-06T16:55:22-04:00July 6th, 2023|2- Daily Briefing|

Basel Redesigns Global Bank-Supervision Construct

As promised at its last meeting, the Basel Committee today released a public consultation on revisions to its 2012 core supervisory principles (see FSM Report REFORM92).

Accommodative CRE Policy Goes Live

Publication in the Federal Register today makes effective a finalized policy statement issued by the banking agencies and NCUA late last week on how financial institutions are to handle troubled commercial real estate (CRE) loans.

Senate Dems Demand CFPB Voice-Cloning Action

Following his letter to large bank CEOs regarding AI fraud, Chairman Brown (D-OH) along with Sens. Menendez (D-NJ), Reed (D-RI), and Smith (D-MN) today sent a letter to Director Chopra urging action against AI-related financial scams.

FSB Turns to GSIB Resolvability

The FSB’s plenary today announced that recent events have spurred it to assess the resolvability of GSIBs and other large banks, providing neither timeline nor focus for this work.

FRB-NY Study Advances Wholesale Digital Currency

Although making clear that it sets no new policy nor endorses any CBDC action, the Federal Reserve Bank of New York’s Innovation Center published a DLT proof-of-concept finding that shared ledgers can effectively support both wholesale domestic interbank and cross-border payments.

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23 02, 2023

DAILY022323

Eliza Allen2023-02-23T16:48:42-05:00February 23rd, 2023|2- Daily Briefing|

Agencies Strengthen Defenses vs. Crypto-Related Funding

As FedFin forecast when significant bank crypto-related deposit exposures came to light (see Client Report CRYPTO38), the banking agencies today issued guidance telling banks to monitor and mitigate risks related to resulting liquidity risk.

FSB Sets Out Key Cross-Border Payments Action Items

The Financial Stability Board today released a list of actions for implementing the G20’s Roadmap for Enhancing Cross-border Payments, including three priorities. These are payment system interoperability and extension; legal, regulatory and supervisory finalizing frameworks; and cross-border data exchange and message standards.

IMF Presses CBDC, New “Unified Ledger”

A new IMF blog post advocates for public sector implementation of new payment technologies including tokenization, encryption, and programmability to improve cross-border payments, limit counterparty risk, and facilitate AML and other compliance.

FHFA Proposes GSE-Capital Revamp

FHFA today sought comment on several significant revisions to the regulatory-capital rules governing Fannie and Freddie. As we will detail in a forthcoming in-depth report, several of these changes concede to comments rejected as the current rules were finalized.

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21 02, 2023

DAILY022123

Eliza Allen2023-02-21T16:39:53-05:00February 21st, 2023|2- Daily Briefing|

Nonbank Corporate Finance Stokes Systemic, Macro Risk

A new BIS paper supports bank assertions that nonbank corporate finance is considerably more procyclical in terms of its threat to financial stability and macroeconomic growth than that conducted by regulated companies. This risk-arbitrage question is germane not only to the ongoing debate about NBFI regulation, but also efforts to ensure that U.S. “end-game” capital rules sharply reduce the RWA for lower-risk corporate obligations.

FSB Fears Systemic Risk from Bank, CCP Commodity Risk

A new FSB report today assesses systemic risk posed by the oil, gas, and wheat commodity markets given its highly-leveraged and illiquid nature and its deep interconnections into the global banking system. Global regulators conclude that bank exposures in general are “manageable,” but some banks and CCPs have significant sector exposure and thus risk. Commodity firms have recently reduced liquidity risk, but they also hiked credit and market risk at a time of tightening that exacerbates them, leading the FSB to describe emerging risks and detail the data gaps that make it challenging to draw clear conclusions.

FSB Prioritizes Crypto, NBFIs

The FSB head’s letter to the G20 yesterday reiterates priorities outlined in his November letter, stating that global regulators will deliver a joint paper with the IMF later this year synthesizing policy findings and regulatory issues around cryptoassets. The FSB will also continue to prioritize NBFI supervision (see Client Report NBFI2), re-emphasizing the importance of studying hidden leverage and addressing liquidity mismatches in open-end funds.

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16 11, 2022

DAILY111622

Eliza Allen2022-11-16T17:14:29-05:00November 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 …

14 11, 2022

DAILY111422

Eliza Allen2022-11-14T17:00:05-05:00November 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.

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11 10, 2022

DAILY101122

Eliza Allen2022-10-12T10:26:48-04:00October 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.

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31 08, 2022

DAILY083122

Eliza Allen2023-01-03T16:36:42-05:00August 31st, 2022|2- Daily Briefing|

Fed Study Highlights DeFi Risks

The Federal Reserve yesterday released a staff study concluding that DeFi regulation poses unspecified but unintended consequences even as it reiterated and expanded on potential risks.

FSB’s Domanski Reinforces Calls for Holistic Crypto Framework

Dietrich Domanski, the FSB’s Secretary General, today reiterated global regulators’ call for a holistic crypto framework to rationalize digital payments so that innovation remains well governed.

Fed Study Details Need For, Challenges to Crypto Regulation

Another Fed study today repeats some of the DeFi study’s concerns noted earlier today, but goes on to a broader examination of digital-asset risk based on the Fed’s financial-stability methodology (see Client Report SYSTEMIC93).

FHLB System Opened for Possible Reform

Acting on Director Thompson’s promise to Congress, FHFA today announced a sweeping review of the Federal Home Loan Bank System. This will begin at a late-September “listening” session, proceeding then to additional national and regional discussions.

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18 07, 2022

DAILY071822

Eliza Allen2023-01-06T14:51:54-05:00July 18th, 2022|2- Daily Briefing|

HFSC Set for Consequential GSE-Reform Review

As noted last week, HFSC will on Wednesday convene a hearing with FHFA Director Thompson. Although Republicans sought this session, the majority-staff memo ahead of the hearing unsurprisingly reflects Democratic views on matters such as the GSEs’ equitable-finance plans.

Comment Period Extended on Consequential Credit-Card Proposal

The Federal Register today provides a ten-day comment period extension for the CFPB’s ANPR on Credit Card Late Fees and Late Payments (see FSM Report CREDITCARD35). The former deadline was July 22; it is now August 1.

G20 Ministerial Dissolves Over Sanctions, Climate Risk

Reinforcing fears of global fragmentation, the G20 finance ministerial over the weekend was unable to agree on a joint communique even though these are historically anodyne pronouncements that mask considerable disagreement.

CFTC Presses for Commodity-Originator Climate-Risk Comments

The CFTC today extended the comment deadline for its climate-risk RFI from August 8 to October 7. Chairman Rostin Behnam said the Commission did so to encourage feedback from farmers and other small entities critical to the Commission’s mission.

Daily071822.pdf…

14 07, 2022

DAILY071422

Eliza Allen2023-01-06T15:12:22-05:00July 14th, 2022|2- Daily Briefing|

FSB Climate-Risk Progress Report Underscores Disclosure Standards, Improved Data

The FSB today released a climate-risk progress report that also details near-term actions. These include not only the statement to the G20 in October noted in yesterday’s G20 report, but also a status report in September from the Task Force on Climate-Related Financial Disclosures (TCFD) on industry progress toward adopting its climate disclosure recommendations.

CFPB, OCC Slam BofA for UI-Fraud Lapses

The OCC and CFPB today issued a $225 million enforcement order against Bank of America related to unemployment-insurance and public-benefit fraud that led the bank to improperly withhold prepaid-card payments to legitimate recipients.

BIS Builds “Central Bank Liquidity Bridges”

Continuing its work to promote better cross-border payments, the BIS today floated the idea of “central-bank liquidity bridges” to overcome current frictions in the bank-dominated sector.

Clarida and Powell Cleared, but OIG Still Reviewing Fed Ethics

The Office of the Inspector General at the Fed today cleared former Vice Chair Clarida and Chairman Powell of ethics violations that have dogged them as recently as a letter yesterday from Senate Democrats.

Daily071422.pdf…