#GSE – Page 3 – Federal Financial Analytics

8 08, 2023

FedFin on: Say It’s Simple

Arezou Rafikian2023-08-09T14:19:41-04:00August 8th, 2023|The Vault|

Our most recent analysis of the inter-agency capital proposal focuses on significant changes to the rules for securitization and credit-risk transfer positions. In short, super-traditional securitizations have an easier path to the secondary market, but GSEs still beat banks. Complex ABS face often-formidable obstacles, as does CRT given or taken by banks.

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

8 08, 2023

GSE-080823

Eliza Allen2023-08-08T13:46:46-04:00August 8th, 2023|4- GSE Activity Report|

Say It’s Simple

Our most recent analysis of the inter-agency capital proposal focuses on significant changes to the rules for securitization and credit-risk transfer positions. In short, super-traditional securitizations have an easier path to the secondary market, but GSEs still beat banks. Complex ABS face often-formidable obstacles, as does CRT given or taken by banks.

GSE080823.pdf…

4 08, 2023

FedFin on: Credit-Risk Capital Rewrite

Arezou Rafikian2023-08-04T13:41:04-04:00August 4th, 2023|The Vault|

In this report, we proceed from our assessment of the proposed regulatory capital framework to an analysis of the rules governing credit risk. In addition to eliminating the advanced approach, the proposal imposes higher standards for some assets than under the old standardized approach (SA) via new “expanded” requirements. As detailed here, many expanded risk weightings are higher than current requirements either due to specific risk-weighted assessments (RWAs) or definitions and additional restrictions. This contributes to the added capital costs identified by the banking agencies in their impact assessment, suggesting that lower risk weightings in the expanded approach reflected the reduced risks described in the proposal for other assets and will ultimately have little bearing on regulatory-capital requirements and thus ….

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

4 08, 2023

CAPITAL231

Eliza Allen2023-08-04T13:40:43-04:00August 4th, 2023|1- Financial Services Management|

Credit-Risk Capital Rewrite

In this report, we proceed from our assessment of the proposed regulatory capital framework to an analysis of the rules governing credit risk. In addition to eliminating the advanced approach, the proposal imposes higher standards for some assets than under the old standardized approach (SA) via new “expanded” requirements. As detailed here, many expanded risk weightings are higher than current requirements either due to specific risk-weighted assessments (RWAs) or definitions and additional restrictions. This contributes to the added capital costs identified by the banking agencies in their impact assessment, suggesting that lower risk weightings in the expanded approach reflected the reduced risks described in the proposal for other assets and will ultimately have little bearing on regulatory-capital requirements and thus on the overall ability of banks to expand into lower-risk areas and compete more effectively with nonbanks and foreign banks. Big banks forced to abandon certain activities may expand others receiving capital discounts in the new rules, increasing their footprint in traditional banking in ways that may increase industry consolidation.

CAPITAL231.pdf…

18 07, 2023

GSE-071823

Eliza Allen2023-07-18T11:42:19-04:00July 18th, 2023|4- GSE Activity Report|

40 Percent!?

Reuters is reporting today and other sources are echoing three regulatory sources saying that the impending capital rewrite will propose risk weighted assessments (RWAs) between 40 and 90%, up from the minimum 20 and 70% Basel standards. The rationale according to Reuters is a desire not to set big-bank RWAs lower than those applicable to smaller banks. However, the rule could also amend smaller-bank RWAs if regulators are or become so inclined.

GSE071823.pdf…

7 07, 2023

DAILY070723

Eliza Allen2023-07-07T16:47:33-04:00July 7th, 2023|2- Daily Briefing|

House Judiciary Joins GOP Asset-Manager ESG Attack

Continuing the GOP campaign against ESG, House Judiciary Chairman Jordan (R-OH) and Reps. Massie (R-KY) and Bishop (R-NC) sent letters late yesterday to the leadership of BlackRock, Vanguard, State Street Global Advisers, the Glasgow Financial Alliance for Net Zero, and the Net Zero Asset Managers initiative, claiming that what they call “collusive agreements” violate antitrust law.

FRB-KC: Farm Credit System Mergers May Influence Ag-Bank Portfolio Strategy

New research from Federal Reserve Bank of Kansas City staff concludes that, while Farm Credit System mergers over the past twenty years had relatively minor effects on agricultural-bank profitability and efficiency, they may have altered bank portfolio decisions with broader implications both for banks and the communities they serve.

CFPB, Treasury, HHS Launch Interagency Inquiry Into Medical-Payment Products

As part of the White House initiative to address medical-sector “junk fees” and consumer protection, the CFPB today was joined by HHS and Treasury in issuing an RFI on high-cost specialty financial products it says harm medical patients by driving up debt.

FHFA Joins Repeat-Offender Crackdown

Acting on the “repeat-offender” crackdown initiated by the CFPB and recently picked up by the OCC, FHFA today issued a proposed rule that would revise its Suspended Counterparty Program (SCP) regulation to authorize FHFA to immediately suspend business between the GSEs and counterparties who are found to have committed civil or criminal misconduct in connection with real property management or ownership.

Daily070723.pdf…

30 06, 2023

GSE-063023

Eliza Allen2023-06-30T11:00:43-04:00June 30th, 2023|4- GSE Activity Report|

The Ides of IRR

In non-public remarks ahead of a presentation by FedFin managing partner Karen Petrou, Sen. Jack Reed (D-RI) laid out what he thinks banking agencies will do next, doubtless based on what they’ve told him that they’ll do next. We have predicted that new interest-rate risk (IRR) standards are high odds, but Reed’s comments suggest they are a near-term for-sure.

GSE-063023.pdf…

8 06, 2023

GSE-060823

Arezou Rafikian2023-06-14T16:20:36-04:00June 8th, 2023|4- GSE Activity Report|

Under Their Thumb and What a Big Thumb It Is

As we will detail in a forthcoming in-depth report, the banking agencies’ new “guidance” on third-party vendors essentially brings all nonbank counterparties with whom banking organizations deal under the agencies’ enforcement thumb. As a result, nonbank mortgage companies, MIs, credit enhancers, and tech providers and even the GSEs – Home Loan Banks included – will be forced at the least to answer a lot of questions from the banking entities with whom they do pretty much any kind of business. And, if the agencies don’t like the answers, they now assert that they will issue enforcement orders not just against banks, but also nonbank entities to ensure they comply with the full panoply of safety-and-soundness standards referenced in the guidance along with ensuring appropriate consumer protection.

https://fedfin.com/wp-content/uploads/2023/06/GSE-060823.pdf…

8 06, 2023

FedFin on: Under Their Thumb and What a Big Thumb It Is

Arezou Rafikian2023-06-14T16:20:52-04:00June 8th, 2023|The Vault|

As we will detail in a forthcoming in-depth report, the banking agencies’ new “guidance” on third-party vendors essentially brings all nonbank counterparties with whom banking organizations deal under the agencies’ enforcement thumb. As a result, nonbank mortgage companies, MIs, credit enhancers, and tech providers and even the GSEs – Home Loan Banks included – will be forced at the least to answer a lot of questions from the banking entities with whom they do pretty much any kind of business. And, if the agencies don’t like the answers, they now assert that they will issue enforcement orders not just against banks, but also nonbank entities to ensure they comply with the full panoply of safety-and-soundness standards referenced in the guidance along with ensuring appropriate consumer protection.

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

…

30 05, 2023

Daily053023

Eliza Allen2023-05-30T17:13:13-04:00May 30th, 2023|2- Daily Briefing|

Fed Study Validates Bank/Shadow-Bank Interconnections, Systemic Risk

A new study by staff from the Federal Reserve Banks of Boston and New York evaluates the banking-sector impact of fire sales across multiple NBFI segments, finding numerous bank vulnerabilities to nonbanks not only through direct exposures, but also through complex, indirect channels.

McHenry Protests U.S. Outbound-Investment Constraints

HFSC Chairman McHenry (R-NC) sent a letter to Secretary Yellen late Friday demanding information about a potential executive order that would enable CFIUS to prohibit or require notification of outbound investments into China, stating that the Administration’s interest in capital controls necessitates Congressional oversight.

IMF Article Calls SVB Resolution “Riskless Capitalism”

An article in the IMF’s forthcoming Finance and Development magazine issue argues that SVB’s uninsured depositors enjoyed “riskless capitalism,” concluding that high moral hazard-risks will persist without incentives for depositor due diligence.

FTC Demands Greater Debit-Card Data Access

The FTC today finalized a consent order requiring Mastercard to provide competing card networks with the customer account information necessary to process debit payments, alleging that the company illegally withheld that information to prevent merchants from using its competitors or Mastercard-branded debit cards saved in e-wallets outside of traditional networks.

Daily053023.pdf…