#hedge fund – Federal Financial Analytics

4 03, 2024

DAILY030424

Eliza Allen2024-03-04T16:58:40-05:00March 4th, 2024|2- Daily Briefing|

BIS Targets Prime-Broker Risk

The BIS quarterly review contains an assessment of the risk prime brokers may pose both to GSIBs and financial stability. This sector has long been a concern of central bankers and risk managers, but the BIS analysis is the first in recent years to quantify it and decompose key risk drivers (e.g., wrong-way risk) to conclude that the inter-connections between hedge funds and prime brokers are a source of systemic instability and potential hazard to banks as evidenced all too clearly last year at Credit Suisse. These risks are of course also a key part of the Fed’s new exploratory stress-test related to hedge funds (see Client Report STRESS32).

Daily030424.pdf…

13 02, 2024

DAILY021324

Eliza Allen2024-02-13T17:42:19-05:00February 13th, 2024|2- Daily Briefing|

Durbin Tries Another Approach to Advance Card-Fee Limits

After trying various ways to bring his credit-card fee bill to the floor, Senate Judiciary Committee Chair and Majority Leader Durbin (D-IL) has scheduled a hearing on this controversial bipartisan measure (see FSM Report INTERCHANGE10).

FinCEN Reaches SEC Agreement to Bring Investment Advisers Under AML/CFT Standards

As it has repeatedly promised, FinCEN today revised a 2015 proposal and issued a new one to subject investment advisers to AML and CFT requirements similar to, but still less restrictive than, those that have long governed banks.

HFSC Rallies to Crypto AML/CFT Defense

The HFSC staff memo on Thursday’s Digital-Assets Subcommittee hearing makes it clear that cryptoasset entities will be given a strong platform from which to resist calls in the Senate to subject cryptoasset transactions to AML and sanctions law.

Gensler Reinforces AI Concerns

In remarks today, SEC Chair Gensler acknowledged AI’s benefits in a manner consistent with the President’s executive order (see Client Report AI3), but then launched into a sharp critique of its risks in line with the agency’s pending rule in this arena.

Bowman Takes Fed Accountability, Transparency to Task

In an essay today, FRB Gov. Bowman emphasized that regulatory accountability does not undermine the independence also essential to a sound, innovative banking system.

Gensler Turns to Bank/Hedge-Fund Interconnection

In addition to his speech on AI earlier today, SEC Chair Gensler today engaged in a wide-ranging discussion of key financial policy questions.

Daily021324.pdf…

6 02, 2024

DAILY020624

Eliza Allen2024-02-06T16:33:54-05:00February 6th, 2024|2- Daily Briefing|

Agencies Begin Pro Forma Reg Review Likely to Take on New Urgency

The FRB, FDIC, and OCC today released the first of the requisite ten-year request for comment on the extent to which existing rules are outdated or unduly burdensome. We will shortly provide clients with an in-depth analysis of the request if it goes beyond the nominal inquiries in the past that led to little meaningful regulatory reform.

Senate GOP Turns to FHFA, FHLB on “Woke” Standards

Criticizing what they call the FHFA’s and FHLBs “politically contentious social agendas,” Senate Banking Republicans Hagerty (R-TN), Tillis (R-NC), Britt (R-AL), and Vance (R-OH) sent a letter to FHFA Director Thompson late yesterday arguing that several FHLB pilot programs are “racially discriminatory” and defy congressional intent. They also argue that the pilot programs highlight a potential gap in FHFA oversight because the final rule governing Fannie and Freddie pilot programs does not also apply to the FHLBs.

SEC Finalizes Contentious Treasury-Market Registration Standards

The SEC today voted 3-2 to approve a revised version of an earlier proposal subjecting certain hedge funds and other Treasury-market participants to registration and SRO regulation, thus reducing their competitive advantages vis-à-vis banks in the secondary-dealer arena. The new approach uses a qualitative test based on the extent to which a covered entity acts as a market-maker as well as Treasury investor.

Daily020624.pdf…

15 12, 2023

DAILY121523

Eliza Allen2023-12-15T17:31:25-05:00December 15th, 2023|2- Daily Briefing|

Crypto Measures Await Next Session

As anticipated, HFSC Chair McHenry (R-NC) was able to fend off concerted efforts by Sens. Brown (D-OH) and Warren (D-MA) to add the Warren-Marshall crypto bill to the National Defense Authorization Act.

FSOC to Target Hedge Funds, Nonbank Mortgage Companies

The readout from Treasury on yesterday’s FSOC meeting provides insight into the Council’s executive session suggesting significant near-term systemic action regarding hedge funds.

FSB Plans Broad Rewrite of Public Backstops, GSIFI Resolvability, Operational Readiness

The FSB’s 2023 Resolution Report today advises banks and public sector authorities to be prepared to access public sector funding in resolution, with the Board planning to review whether existing public sector backstops are adequate to meet potential failure scenarios.

Brown Renews Bipartisan Quest to Constrain Nonbank Banks

Advancing the big-tech concerns he most recently voiced before GSIB CEOs (see Client Report GSIB23), Senate Banking Chairman Brown (D-OH) has introduced S. 3538, bipartisan legislation to impose bank regulation on non-bank parent companies of insured depository institutions.

DOJ Targets Fraudulent Microtransactions

Cracking down on unauthorized bank account charges, the DOJ today announced multiple actions against “sham” companies alleged to have used misrepresentations or unauthorized charges to steal money from consumers’ financial accounts.

CRS Warns Credit Card Act Could Result In Risky Retailer Payment Networks

The CRS this week issued a report analyzing the Durbin-Marshall Credit Card Competition Act, S.1838 (see FSM Report INTERCHANGE10), projecting that fee caps will have a greater impact on transaction fees than competition, with …

13 12, 2023

DAILY121323

Eliza Allen2023-12-13T16:50:12-05:00December 13th, 2023|2- Daily Briefing|

HFSC Oversight Subcomm Revisits Iran Sanctions

Today’s HFSC Oversight Subcommittee hearing focused on the Biden Administration’s recent efforts to limit terrorist funding from Iran. Chairman Huizenga (R-MI) questioned the need for the November 14^th renewal of a waiver that allows Iraq to pay Iran for electricity, calling for increased pressure on Iran following Hamas’s October 7^th attack.

SEC Sets Out Treasury Central-Clearing Construct

As anticipated, the SEC this morning voted 4-1 to mandate central clearing for Treasury securities used in many repo and reverse-repo transactions, modifying the proposal in key respects still unsatisfactory to Commissioner Peirce. The rule addresses continuing concerns about Treasury-market fragility, in part by reducing the number of highly-leveraged hedge-fund transactions.

GAO Reaches Equivocal Verdict on Digital-Asset Crypto Evasion Risk

Addressing Congressional concerns such as those in the Warren-Marshall crypto-compliance bill, the GAO today issued a report finding that digital assets pose risk to U.S. sanction implementation and enforcement despite mitigating factors that may reduce certain risks.

Brown Presses Bank CEOs on Servicemember Rights

A week after the GSIB CEOs came before the Senate Banking Committee (see Client Report GSIB23), Banking Committee Chair Brown (D-OH) today sent a letter to the CEOs of the four largest consumer banks encouraging them to ensure that active-duty servicemembers obtain all the financial benefits to which they are entitled.

Daily121323.pdf…

21 04, 2023

DAILY042123

Eliza Allen2023-04-21T17:02:12-04:00April 21st, 2023|2- Daily Briefing|

House Republicans Renew Anti-Woke Banking Battle

In the latest GOP-led action against “woke” finance, HFSC Financial Institutions Subcommittee Chairman Barr (R-KY) yesterday reintroduced the Fair Access to Banking Act (H.R. 2743), which would prevent large banks from limiting or refusing services to the fossil-fuel, digital-asset, and gun industries.

FRB Review Of CBDC Comments Leaves Open All Options

The Federal Reserve late yesterday released a summary of public comments received on its 2022 CBDC discussion draft (see FSM Report CBDC10), arraying comments in ways that make it difficult to judge who said what or where the preponderance of comments is to be found.

FSOC Advances Activity, Nonbank Systemic Designation, Regulation

As anticipated, all FSOC members today voted to advance two key proposals to redesign the U.S. systemic framework and speed action on two clear systemic designation priorities: hedge-fund interconnectedness with the banking system and nonbank mortgage companies.

Waters Praises FSOC, Presses for New Bank Standards

While commending FSOC’s action earlier today, HFSC Ranking Member Waters (D-CA) urged it to quickly go farther, pressing the Council to send the FRB and other banking agencies recommendations for post-SVB reforms.

BIS Paper: Fintech Innovation Amplifies Inequality

A new BIS working paper on fintech concludes that increased financial-technology innovation amplifies inequalities between sophisticated and unsophisticated investors and that bridging this gap will require policy focus on fintech accessibility and usability.

Daily042123.pdf…