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18 11, 2022

DAILY111822

2022-11-18T16:59:14-05:00November 18th, 2022|2- Daily Briefing|

GAO Study Hikes Pressure on SEC Process

Adding to the Chairman Gensler’s woes, the GAO today released a report finding that the SEC Division of Enforcement did not document its work reviewing staff procedure assessments, hindering future internal reviews.  Republicans have been harshly critical of SEC procedures and processes, as well as of the Commission’s enforcement-focused approach to cryptoassets.  The GAO’s finding adds fuel to a campaign sure to gain force next year, recommending as it does that the Division Director ensure that information is collected and reported in its memorandum as required by Dodd-Frank.

Fed Study Endorses Bank Supervision

A new Fed staff study uses their unique access to bank examination reports from banks with less than $10 billion in assets to evaluate the extent to which supervisory reports and associated CAMELS ratings predict bank outcomes.  Looking at reports from 2004 through 2016 and thus capturing the great financial crisis, the study concludes that ratings for capital, assets, management, and earnings are effective even after controlling for factors including the ratings themselves.  Ratings are also associated with bank improvement in areas censured in earlier supervisory reports.  The analytical method is textual – i.e., based on a reading of supervisory reports then run through various models to determine impact.

Daily111822.pdf

4 11, 2022

Al110722

2022-11-04T17:12:11-04:00November 4th, 2022|3- This Week|

Till Soon…

Assuming no sudden financial crises, geopolitical shocks, or any of the other increasingly-plausible ills that could befall the financial system this week, the big news will come following the U.S. mid-term elections on November 8.  Or November 9, 10, or whenever given the uncertainties in some key races and thus the prospects not just for recounts, but also furious denunciations of the electoral system.  Still, a final tally will come upon us and, when it does, the prospects for both financial legislation and regulation are likely to change in significant ways.  As soon as we know enough to know who will control the House and Senate, we’ll provide you with an in-depth analysis of how new committee leadership will change the outlook.

Al110722.pdf

19 10, 2022

DAILY101922

2022-10-20T17:16:10-04:00October 19th, 2022|2- Daily Briefing|

CFPB Brings Older Adults Into Fair-Fee Focus

Following yesterday’s enforcement action and furthering its “fair-fee” policy agenda (see FSM Report CONSUMER38), the CFPB today published an Issue Brief on overdraft fees and economically-insecure older adults.

HUD Advances LIBOR Replacement As Deadline

Following its ANPR on replacing LIBOR last year, HUD today published a proposed rule to remove LIBOR as an approved index for forward ARMs and reverse mortgages, replacing it with SOFR.  For existing ARMs, HUD proposes to establish a spread-adjusted SOFR index to transition from LIBOR, with a lifetime five percent interest-rate cap for monthly adjustable rate reverse mortgages.

House Republicans Question PayPal’s Content Fine Mistake

Following revelations that PayPal had temporarily imposed a penalty fee on certain content, HFSC Ranking Member McHenry (R-NC), Energy and Commerce Ranking Member Rodgers (R-WA), and Reps. Emmer (R-MN) and Griffith (R-VA) sent a letter to PayPal CEO Dan Schulman requesting more information about PayPal mistakenly updating its Acceptable Use Policy to include a fine for sharing “objectionable” messages on the platform.

Fed Study Finds Little Evidence of Discrimination in Mortgage Lending

A new Fed study on racial bias in mortgage lending finds little evidence of discrimination, concluding instead that disparities in observable applicant risk explain most racial denial disparities.  The study uses confidential HMDA supervisory data from 2018-2019 that controls for credit scores, DTI, and LTV on top of automated underwriting systems (AUS) recommendations.

Daily101922.pdf

18 10, 2022

DAILY101822

2022-10-18T17:16:23-04:00October 18th, 2022|2- Daily Briefing|

CFPB Uses Enforcement Action to Press Payment-System Digital, Fee, Safety, Fairness Standards

Using an enforcement action today against ACTIVE Network, CFPB Director Chopra emphasized that this case epitomized broader Bureau concerns.  These are monitoring use of “digital dark patterns” – i.e., design features that manipulate users into harmful behavior that are profitable for companies.

Treasury’s FIO Seeks Input On Climate-Related Data Collection

Taking further action in response to the President’s Executive Order on Climate-Related Financial Risk (see FSM Report GREEN8), Treasury’s Federal Insurance Office today requested comment on a proposed data collection regarding current and historical underwriting data on homeowners’ insurance from property and casualty insurers to assess climate-related financial risk.

HFSC Republicans Push Yellen to Support IFI Nuclear Energy Funding

In light of recent energy shortages in Europe, Ranking Member McHenry (R-NC) and Rep. Hill (R-AR) sent a letter today to Treasury Secretary Yellen urging her to support the European Bank for Reconstruction and Development and other IFIs financing nuclear energy projects.  They claim that an absence of Western funding has allowed China and Russia to fill the void, especially in developing countries.

Daily101822.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

5 10, 2022

DAILY100522

2022-10-05T16:59:59-04:00October 5th, 2022|2- Daily Briefing|

GOP Demands AG’s CBDC Ruling

HFSC Republicans today sent a letter to Attorney General Merrick Garland demanding a copy of the DoJ’s assessment on whether legislation is necessary to issue a CBDC required and due on September 5 by the President’s crypto executive order (see Client Report CRYPTO26).  Citing both Congress’ exclusive authority to coin money and Chairman Powell’s (see Client Report FEDERALRESERVE71) and Vice Chair Brainard’s (see Client Report CBDC13) ambiguous discussion of what constitutes CBDC “approval,” the Republicans reiterate that the Fed does not have the authority to issue a CBDC under current law.

Basel Blesses Counter-Cyclical Buffers

Following the FSB’s directive, the Basel Committee today issued a newsletter on counter-cyclical capital buffers (CCyBs) and a detailed report on capital and liquidity buffers.  The FSB has posited that one reason for both bank resilience and pandemic-related credit shortages was the unwillingness of banks to dip into buffers.  As we noted recently, Treasury Under Secretary Liang praised CCyBs and Basel’s newsletter reaches the same conclusion.  However, the detailed report finds that CCyB release had a weaker, albeit discernible, effect than express regulatory decisions to allow banks to use their capital buffers.

Daily100522.pdf

12 09, 2022

DAILY091222

2022-10-13T12:00:09-04:00September 12th, 2022|2- Daily Briefing|

Senate Banking GOP Demand CFPB Recant, Retreat, Redo

All Republican members of the Senate Banking Committee today sent CFPB Director Chopra a scathing letter challenging his legal authority to undertake many recent actions.  The letter specifically cites what it calls the Bureau’s “smear campaign” against banks offering optional overdraft services, calling its February list of the top 20 banks by revenue from overdraft fees an abusive “name-and-shame” tactic.

OFAC Eases Implementation of Oil Price-Cap Sanctions

As anticipated, OFAC late Friday issued initial guidance to banks and insurers on Russian oil price-cap compliance.  Although OFAC plans to follow this guidance with a more comprehensive statement and a “red-flag” advisory, it now makes clear that banks and insurers will not be liable for price-cap violations related to their financing or coverage if the financial company has no independent knowledge of the actual price and reasonably relied on a customer’s attestation.

Fed Study: Credit Profitability Depends on NIM

At a time when credit-card rates reached a quarter-century high, the Fed has released a staff study using new data to conclude that card interest rates are by far the most important source of issuer profitability.  The study decomposes credit-card income into component parts (interchange fees, interest charges, and consumer fees) with interest-rate revenue accounting for eighty percent of card profitability at the largest bank issuers.

Daily091222.pdf

8 09, 2022

DAILY090822

2022-11-09T13:00:10-05:00September 8th, 2022|2- Daily Briefing|

Gensler Stands Crypto Ground

In remarks today, SEC Chairman Gensler stood firm: almost all crypto tokens are securities because they are investment contracts under the “Howey Test.”  Further guidance is unnecessary, he said, because the Commission has been clear and crypto companies request it only because they do not like this conclusion, not because they fail to understand it.

GOP Demands Answers On CBDC Authorization, Construct

Ranking Member McHenry (R-NC) and all of the HFSC’s Republicans today sent a letter to Vice Chair Brainard demanding that she clarify several issues germane to U.S. CBDC issuance.  These most notably include the extent to which the “support” from the Administration and Congress she said was needed (see Client Report CBDC13) means express statutory change and Administration order.

Toomey Demands Greater CRA Transparency, Updated Regulations

Ranking Member Toomey (R-PA) today sent a letter to Vice Chair Brainard, Acting Comptroller Hsu, and Director Gruenberg sharply criticizing what he calls a lack of transparency of CRA-derived community benefit plans (CBPs).  Describing these as an “egregious” circumvention of congressional intent, he demands that the banking regulators update regulations implementing GLBA’s CRA sunshine provision, specifically urging them to establish a public database containing all CRA-related agreements in full.

Daily090822.pdf

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