#Gruenberg – Page 2 – Federal Financial Analytics

15 11, 2023

REFORM230

Eliza Allen2023-11-15T15:58:45-05:00November 15th, 2023|5- Client Report|

Bipartisan Capital Bashing Continues in the House

Following yesterday’s Senate Banking hearing (see Client Report REFORM229), today’s HFSC session with top bank regulators again highlighted growing bipartisan consternation over the unintended consequences of the agencies’ capital proposal (see FSM Report CAPITAL230). Although Ranking Member Waters (D-CA) echoed Chairman Brown’s defense, Democratic criticism today went beyond concerns about mortgages and green bonds also to address credit availability, new trading and derivatives standards, capital recognition of securities losses, and insufficient review of the proposal’s quantitative impacts. Republicans continued to bash the proposal for what they said is insufficient economic analysis. Unlike yesterday, attention to the FDIC’s harassment scandal most notably came from Democrats’ side of the aisle, with Ranking Member Waters using all of her questioning time to criticize the FDIC and request a report from each agency describing how they will review sexual-harassment. Reiterating concerns he and Subcommittee on Financial Institutions Chairman Barr (R-KY) recently raised regarding regulators’ interactions with international standard-setters, Chairman McHenry grilled Vice Chair Barr and Acting Comptroller Hsu about staff compensation and agency documentation practices at international events. Mr. Barr emphasized that all Board and staff member compensation comes from the Fed, while Mr. Hsu only said that his agency tracks participation in these bodies to ensure mission alignment. We continue to expect GOP pressure on the international-agency front but no action until GAO completes its report. Chair Gruenberg noted broad alignment with a new incentive-compensation proposal, but revised the initial timeline …

14 11, 2023

REFORM229

Eliza Allen2023-11-14T15:57:18-05:00November 14th, 2023|5- Client Report|

Capital Proposal Gets Bipartisan Bashing in Senate Banking

Today’s Senate Banking hearing with top bank regulators showcased broad bipartisan concern over the interagency capital proposal (see FSM Report CAPITAL230). Although Chairman Brown (D-OH), Sen. Warren (D-MA), and Sen. John Fetterman (D-PA) staunchly defended the proposal on countercyclicality grounds, other senators on both sides of the aisle sounded the alarm over its impact on credit availability, small-business lending, and shadow-bank migration. FRB Vice Chair Barr repeatedly defended his agency’s analysis while emphasizing openness to comment, also highlighting that the proposal relates primarily to non-credit activity and would apply to only 37 banks. Some Republicans also raised concerns over other recent rulemakings, with Sen. Britt (R-AL) asking Vice Chair Barr if the agencies would consider a comment deadline extension for the LTD proposal (see FSM Report TLAC9). Although Mr. Barr stated that the rule is far simpler than the capital proposal, he also said the agencies would consider a similar extension. FDIC Chairman Gruenberg drew bipartisan ire over reports of FDIC widespread harassment, with Republicans seizing the occasion to criticize Mr. Gruenberg’s leadership. Grilled by Sen. Tillis (R-NC) about reports of a Fed leak of confidential supervisory information, Mr. Barr only said that he is deeply concerned. Separately, Chairman Brown emphasized unfinished work on bank executive accountability and urged Congress to pass the RECOUP Act (see FSM Report COMPENSATION37), which passed the Committee nearly unanimously in July.

REFORM229.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…

8 11, 2023

DAILY110823

Eliza Allen2023-11-08T16:56:25-05:00November 8th, 2023|2- Daily Briefing|

BIS: No Stablecoin Peg Has Held

Ahead of HFSC Chairman McHenry’s push for new stablecoin legislation, the BIS today issued a report looking at 68 stablecoins and found that not a single stablecoin tied to fiat-currency or similarly-robust assets sustained parity with its peg at all times, regardless of size or type of backing. The paper also suggests that there is no guarantee that issuers of stablecoins would be able to redeem stablecoins on demand or in full and identifies younger coins and unbacked coins as more price volatile.

Gruenberg, Barr Say Agencies Must Work With Banks to Implement CRA Standards

Commenting today on CRA, FDIC Chairman Gruenberg indicated that he is looking forward to working with banks to “figure out” how to make the rule work in critical areas such as the retail-lending and community-development lending tests. Vice Chair Barr and Acting Comptroller Hsu also highlighted implementation challenges, but all strongly supported the rule as a major advance sure to support community development and modernize banking requirements.

Daily110823.pdf…

3 11, 2023

DAILY110323

Eliza Allen2023-11-03T17:39:35-04:00November 3rd, 2023|2- Daily Briefing|

FSOC Advances Designation Framework, Ready to Deploy

The FSOC today voted unanimously to finalize the Council’s analytic framework for financial stability risk identification (see FSM Report SYSTEMIC95) and guidance on nonbank financial company systemic designations (see FSM Report SIFI35). FedFin will soon provide clients with in-depth reports on each item. In addition to minor clarifications to the analytic framework, the Council importantly decided not to add cost-benefit analysis. Further, the final nonbank designation guidance is unchanged from the proposal, meaning that designation standards will not require a determination of imminent threat to financial stability.

Daily110323.pdf…

24 10, 2023

DAILY102423

Eliza Allen2023-10-24T17:18:54-04:00October 24th, 2023|2- Daily Briefing|

McHenry, Barr Blast Basel Adherence in End-Game Regs

Although today’s hearing challenging regulatory actions aligned with global regulators was postponed, HFSC Chairman McHenry (R-NC) and Financial Institutions Subcommittee Chairman Barr (R-KY) today kept up the pressure, releasing a letter to the GAO commissioning a study of the end-game rules.

New CRA Reg Sets Controversial, Complex Standards

Leading the way to certain inter-agency approval, the Federal Reserve today voted 6-1 to approve a final version of their 2022 controversial proposal (see FSM Report CRA32).

FDIC OIG: Supervisors Missed So Much, Acted So Slowly re SBNY

The FDIC’s OIG report today on SBNY’s failure follows much of the line the Fed’s OIG took when it came on the material-loss review of SVB’s collapse.

House Republicans Pressure Biden on $6 Billion Iran Ransom

Although HFSC continues to cancel all its hearings as the speakership battle continues, its Oversight Subcommittee today optimistically released a memo outlining goals for Thursday’s Iran-sanctions hearing.

Treasury Presses CSPs to Negotiate With Banks

Treasury Assistant Secretary for Financial Institutions Graham Steele today highlighted Treasury’s work with cloud service providers (CSPs) to improve transparency and security.

Divided FDIC Advances CRA Rewrite, Climate-Risk Principles

As anticipated, the FDIC on a 3-2 vote joined the Fed in approving a 1400+ page final CRA rule.

Daily102423.pdf…

5 10, 2023

DAILY100523

Eliza Allen2023-10-05T16:36:40-04:00October 5th, 2023|2- Daily Briefing|

Kanter, Khan Mount Stout Defense of Draft Merger Guidelines

FTC Chair Khan and DOJ Assistant AG Kanter today defended the agencies’ draft merger guidelines (see FSM Report MERGER12) on grounds that they are faithful to congressional intent, reflect core legal principles, are more accessible and easier to apply, and better reflect the modern competitive landscape.

Basel Plans NBFI Ops-Risk Supervisory Standards, Continuing Review of Bank Supervision, New Disclosures

The Basel Committee today released its long-awaited report on 2023 vulnerabilities, deciding based on it to prioritize new supervisory approaches and additional analytical tools.

Bipartisan Bill Provides Transaction Account Deposit Insurance

Following Chairman Gruenberg’s remarks yesterday highlighting targeted deposit insurance reform, Sens. Manchin (D-WV), Braun (R-SD), and Hickenlooper (D-CO) yesterday introduced legislation to reinstate the Transaction Account Guarantee (TAG) program, expanding deposit insurance to non-interest bearing transaction accounts up to $10 million.

FDIC Proposes Public-Good Policy for IDI Corporate Governance

The FDIC today announced the Board’s 3-2 approval of an NPR establishing guidelines on corporate governance and risk management for FDIC-supervised IDIs with over $10 billion in assets.

Daily100523.pdf…

4 10, 2023

DAILY100423

Eliza Allen2023-10-04T16:40:00-04:00October 4th, 2023|2- Daily Briefing|

Bowman Unbending in Demands for Better Reg Analytics, Community-Bank Mergers

In what might have been only perfunctory introductory remarks, FRB Gov. Bowman today instead continued her all-out campaign to force far more independent research before the Fed finalizes pending rules.

Brown Asks for No Wells Fargo Mercy

Senate Banking Chairman Brown (D-OH) today sent a letter to FRB Vice Chair Barr and OCC Acting Comptroller Hsu taking serious issue with what he calls unfair labor relations practices, consumer abuses, and compliance failures at Wells Fargo, urging the regulators to take stronger action to change the bank’s culture.

McKernan Counters Gruenberg on Endgame’s Nonbank Effects

Fleshing out official comments made in dissent against pending rules, FDIC Board member Jonathan McKernan today countered Chair Gruenberg’s recent comments that any migration of bank activities to nonbanks due to the capital rules should not be considered in the regulatory process.

Gruenberg Reiterates His Top Risk Worries

As with Gov. Bowman earlier today, FDIC Chair Gruenberg used his remarks later in the day to emphasize continuing concerns: in this case, uninsured deposits, maturity mismatches, and rapid growth.

Daily100423.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…

25 09, 2023

Al092523

Eliza Allen2023-09-25T11:00:27-04:00September 25th, 2023|3- This Week|

Systemic Steps

We held this weekly update on Friday because Washington was awash with rumors that FSOC would issue final versions of proposed systemic-evaluation standards (see FSM Report SYSTEMIC95) along with a new designation methodology (see FSM Report SIFI35). As it turned out, FSOC said so little in its closed-door meeting readout that it didn’t suffice even for a client alert, let alone a weekly. Still, something is coming soon and, when it does, it will start yet another partisan and sometimes even emotional debate over financial regulation redefining the sector’s strategic landscape.

Al092523.pdf…