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16 11, 2022

REFORM215

2022-11-22T15:02:46-05:00November 16th, 2022|5- Client Report|

HFSC Session Brings Crypto Action to Fore, “Holistic” Capital Under Scrutiny

HFSC today largely focused bank regulators on the same range of questions posed at yesterday’s Senate Banking session (see Client Report REFORM214).  However, Chairwoman Waters (D-CA) emphasized the importance of federal legislation in sharp contrast to Chairman Brown (D-OH), also announcing a hearing in December on FTX.  Ranking Member McHenry (R-NC), who will become HFSC chairman in the next Congress, concurred with the chairwoman’s views on the need for digital-finance statutory reform.  However, he took strong issue with inter-agency policy with regard to new capital rules, merger restrictions, and third-party relationship constraints.  Republican members also targeted Vice Chairman Barr’s holistic capital review, arguing that banks are currently well capitalized and that additional standards would hamper lending.  Mr. Barr indicated that an SLR rewrite is part of the holistic review but not immediately necessary to quell Treasury-market volatility or illiquidity.  As discussed in more detail below, regulators promised banking-sector crypto rules at least as stringent as Basel’s proposal.

REFORM215.pdf

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14 11, 2022

DAILY111422

2022-11-14T17:00:05-05:00November 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.

Daily111422.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

30 09, 2022

DAILY093022

2022-10-03T13:40:26-04:00September 30th, 2022|2- Daily Briefing|

Brainard Acknowledges Risk But Sticks to Policy Guns

Responding to acute concerns that Fed policy will shatter global financial stability, Fed Vice Chair Brainard today emphasized her longstanding and once-isolated view that monetary policy must consider financial stability.

Global Standard-Setters Turn to Clearing Margin, Liquidity

The Basel Committee, IOSCO, and CPMI issued the first substantive response to the FSB’s decision to target margining practices following its review of the 2020 financial crisis and the need to address nonbank financial intermediation (see Client Report NBFI).

HFSC Republicans Denounce Beneficial Ownership Rule

HFSC Ranking Member McHenry (R-NC) and Rep. Luetkemeyer (R-MO) released a statement today sharply criticizing FinCEN’s beneficial ownership final rule as overly broad and complex.

Basel Concludes High Capital Compatible with Sustained Profitability

The Basel Committee today released its latest report on bank capitalization, finding that profitability remains robust despite capital ratios increasing to the highest level since the beginning of the exercise in 2012.

Bowman Comes Out Swinging on New, Costly Big-Bank Rules

Following a speech earlier this week largely siding with banks on merger policy, FRB Gov. Bowman today agreed with assertions from bank CEOs (see Client Report REFORM213) and others that the largest U.S. banks are now well capitalized as judged by ratios and effective stress testing.

FRB/FDIC Turn to Regional Resolvability

The Fed and FDIC today announced that they will shortly propose resolution guidance for most regional banks.

Daily093022.pdf

22 09, 2022

DAILY092222

2022-09-26T15:10:10-04:00September 22nd, 2022|2- Daily Briefing|

CFPB Starts Mandatory Refi, Loan-Mod Redesign Project

Expanding its actions to increase consumer-finance innovation and competition, the CFPB today began an effort to increase refi accessibility as well as provide for automatic loan modifications.  The release reiterates Director Chopra’s assertions that rules prior to the Bureau’s new approach were unduly favorable to industry, especially when innovation is authorized only via no-objection letters, sandboxes, or similar agency actions.

Treasury Presses Open-End Bond Fund Rules

In remarks today on Treasury-market stability, Under-Secretary Liang focused on open-end corporate-bond funds.  Noting that these funds use Treasury securities for liquidity but lack stress resilience and thus caused the “cash for cash,” Ms. Liang strongly supported the SEC’s focus on open-end fund liquidity, pricing and resilience.

House Republicans Take New Tack to Constrain the CFPB

Joined by Republicans on the House Oversight Committee, HFSC’s GOP today continued its campaign against Rohit Chopra, giving the CFPB director only a week to provide them with an explanation of how many recent actions comply with the Supreme Court’s recent restrictions on administrative action.

Daily092222.pdf

22 09, 2022

REFORM212

2022-10-12T17:06:54-04:00September 22nd, 2022|5- Client Report|

HFSC Goes Easy on CEOs

At today’s big-bank oversight HFSC hearing, Committee Democrats focused on each bank’s progress on social issues, such as internal diversity, unionization, and historic roles in financing slavery.  Although Chairwoman Waters (D-CA) called for more restrictive merger-approval criteria in her opening statement, Democrats largely left the issue untouched.  Ranking Member McHenry (R-NC) framed the hearing as political “theater,” focusing on discrediting capital increases.  Committee Republicans also asked CEOs about inflation, fiscal policy, and gun merchant codes.  Chairwoman Waters concluded this marathon session by chastising the CEOs for failing fully to answer the questions she posed ahead of the hearing and demanding that they do so in five legislative days.

REFORM212.pdf

20 09, 2022

DAILY092022

2022-09-27T16:49:38-04:00September 20th, 2022|2- Daily Briefing|

FedFin Assessment: Tales of a New TLAC

With press reports strongly suggesting that U.S. banking agencies will impose TLAC requirements on at least some regional BHCs, we think it helpful to provide an update on the 2016 rule imposing this resolution buffer (see FSM Report TLAC6) to note the implications of reopening the regulation.

HFSC Dems Attack Lack of Diversity in Insurance

Ahead of an HFSC hearing on Thursday, Chairwoman Waters (D-CA) and Rep. Beatty (D-OH) released a report sharply critical of the lack of diversity in the largest US insurance companies.  Noting an array of problematic practices, the report also calls for action on legislation to require insurance companies to report their diversity data and policies to their respective regulators and to publicly disclose the gender and race makeup of their board directors and senior executives.

Senate Banking Fires Another Shot at Big Banks

Following yesterday’s “snapshots” of Truist, PNC, and USB ahead of the Thursday big-bank hearing, Senate Banking Democrats today continued their attack on large banks, releasing similar reports on Citi and Bank of America.  These snapshots again focus on consumer issues such as Zelle fraud and also highlight recent enforcement actions.

Daily092022.pdf

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