#IMF – Federal Financial Analytics

8 04, 2024

DAILY040824

Shane Smith2024-04-08T16:31:06-04:00April 8th, 2024|2- Daily Briefing|

Schumer Weighs In Against CapOne/Discover Deal

Senate Majority Leader Schumer (D-NY) made it clear that the Capital One/Discover merger faces an unusually high hurdle: strong opposition with the power to pack even more of a political punch than concerns voiced so far by progressive Democrats.

Treasury IMF Presses for Bank Insurance, Pension, Bond-Fund Rules Restricting Private-Credit Interconnection

The IMF continued its pressure on private credit, finding that the sector clocked in last year at $2.1 trillion with three quarters of this in the U.S. and soon to eclipse syndicated lending and high-yield bonds.

GOP Introduces CRA Resolutions Challenging Climate-Risk Rules

Splitting the issue among various GOP sponsors, GOP members have introduced Congressional Review Act resolutions to overturn climate-risk rules finalized by the OCC (H.J. Res 124 by Rep. Donalds [R-FL] et al.), the FRB (H.J. Res 125 by Rep. Fitzgerald [R-WI] et al.), and FDIC (H.J. Res 126 by Rep. Houchin [R-IN] et al.).

CFPB Criticizes Credit Report Inaccuracies for Victims of Human Trafficking, Identity Theft

A CFPB report criticized furnishers for providing false or fraudulent information to consumer reporting companies and accused consumer reporting agencies of failing to ensure the accuracy of credit reports related to victims of human trafficking and identity theft, finding significant non-compliance with its 2022 rule requiring reporting companies to block adverse information.

FRB-NY Finds that Brokers with BHCs are Better, But Are They?

The Federal Reserve Bank of New York’s blog today posted a brief about a May 2021 study …

18 03, 2024

DAILY031824

Eliza Allen2024-03-18T16:42:54-04:00March 18th, 2024|2- Daily Briefing|

IMF: More Work Needed to End Too-Big-to-Fail Banks

In a blog post today, the IMF stated that progress is required to put an end to too-big-to-fail banks following last year’s bank failures. The Tobias Adrian post cites the need for more “intrusive” supervisory action, noting that last year’s failed US banks were allowed to pursue risky strategies without proper risk-management procedures. The post calls for improved liquidity support for banks approaching resolution, also concluding that smaller banks may pose systemic risks.

SEC Sets AI-Use Standards via New Enforcement Action

Although actual fines are small, the SEC’s enforcement action today countering “AI washing” is not just aimed at investment advisers touting AI as their guide to investment choice either for their own actions or those of their customers. The standard also applies to other financial entities (e.g., broker-dealers) and – with still greater effect – to public-company filings related to AI and machine learning both in terms of firm focus and products offered. Both advisers targeted by the order were also charged with violations of SEC marketing and other standards.

Daily031824.pdf…

5 03, 2024

Daily030524

Eliza Allen2024-03-05T16:37:23-05:00March 5th, 2024|2- Daily Briefing|

CFPB Fires All Cylinders on Credit Card Fees

In conjunction with a new White House “price-gouging” initiative today ahead of the President’s address, the CFPB finalized its controversial credit-card late-fee proposal (see FSM Report CREDITCARD36).

Presidential Strike Force Targets Financial-Services Fees, Mergers

In conjunction with the CFPB’s new credit-card fee standard, the White House today announced a “strike force” attacking what it believes to be price-gouging across the U.S. economy.

Interchange, Small-Dollar Lending Bills Added to House Docket

Although Thursday’s HFSC Financial Institutions’ hearing will be a largely partisan review of the “politicized” nature of bank regulation, bills on the docket include a draft measure from Rep. Luetkemeyer (R-MO) requiring the FRB to conduct a quantitative study of the implications of its pending interchange rule before finalization (see FSM Report INTERCHANGE12).

McHenry Supports At Least Some Liquidity-Reg Rewrite

Redoubling his campaign against the capital proposal, HFSC Chairman McHenry (R-NC) today made it clear that he does support at least some revisions to liquidity rules.

IMF Looks Under U.S. Bank “Weak Tail”

Looking at U.S. bank failures one year later, the IMF today released a global financial stability note finding that the “weak tail” of U.S. banks continues to present a possible systemic risk despite ongoing supervisory and regulatory efforts.

Daily030524.pdf…

12 02, 2024

Daily021224

Arezou Rafikian2024-02-13T13:14:07-05:00February 12th, 2024|2- Daily Briefing|

Bowman Presses New Community-Bank Regulatory Construct

FRB Gov. Bowman today recommended that community banks be differentiated from larger ones based not on asset size as now, but rather by their business model. Key criteria, she says, should be a simple and local business model focused on relationship banking. Community-banking standards should reflect this business model in contrast to other banking strategies and be “fair,” i.e., focused on how challenging and costly it is for community banks to comply with rules that may not meaningfully apply to them.

IMF Targets Margining Risks

Reinforcing the work of global regulators addressing margining liquidity-risk fears, the IMF released a staff study finding that as much as a third of EU investment funds that are large derivatives end-users could not meet their variation-margin requirements under stress.

HFSC Set to Demand Much from Treasury, FinCEN

The HFSC majority-staff memo on Wednesday’s FinCEN hearing makes it clear that Under-Secretary Nelson and FinCEN director Gacki will face hard questioning on anti-money laundering and CFT topics. These will surely include critical GOP scrutiny of Treasury’s request for additional authority for greater monitoring and enforcement authority over digital assets even though the Digital Asset Subcommittee plans a hearing specifically on this topic later this week.

FFIEC Redesigns Valuation-Bias Exam Protocol

Arguing that deficient real estate valuations due to bias or discrimination cause consumer harm and pose safety-and-soundness risks, the FFIEC today issued a statement of examination principles regarding valuation discrimination and bias in residential lending. While the principles primarily concern …

12 01, 2024

DAILY011224

Eliza Allen2024-01-12T15:31:11-05:00January 12th, 2024|2- Daily Briefing|

Emmer, HFSC GOP Reintroduce FSOC Oversight Measure

Following a hearing earlier this week at which GOP Members reiterated longstanding FSOC criticism, House Majority Whip Emmer (R-MN) has reintroduced legislation along with ten other HFSC Republicans to bring FSOC under congressional appropriations.

HFSC Bipartisan AI Task Force Already Divided on Key Priorities

Reflecting growing concern about AI’s risks (see Client Report FSOC29), HFSC Chairman McHenry (R-NC) and Ranking Member Waters (D-CA) yesterday announced the creation of a bipartisan AI Working Group to be led by Digital Assets Subcommittee Chairman Hill (R-AR) and Ranking Member Lynch (D-MA).

House Passes Measures to Check Chinese Economic Power

The House today passed several bills addressing the role of China in IMF and World Bank policy and a renewed attempt to limit what many Members of Congress consider Chinese currency manipulation (H. R. 839).

The Fed Becomes a Big Loser

The Federal Reserve System today released its preliminary FY23 financial results, the first look into the System’s operating condition above and beyond its significant mark-to-market losses.

Daily011224.pdf…

4 01, 2024

DAILY010424

Shane Smith2024-01-04T16:28:33-05:00January 4th, 2024|2- Daily Briefing|

IMF Urges CBDC Caution

Taking a more cautious stand on CBDC and cross-border payments than often heard from international financial institutions, the IMF released a study recommending that policymakers ensure that CBDC or any other form of public digital money is carefully designed and interoperable with existing payment systems. Policymakers are also encouraged to enhance public-private policy coordination and regulate global stablecoins as well as other forms of private digital money. The analysis bases these recommendations on findings that efficient digital money could be broadly adopted for cross-border payment purposes and diversify reserve currencies – a concern Members of Congress have long expressed about the Fed’s reluctance to establish a dollar CBDC. However, the IMF also warns that digital money adoption could increase bank disintermediation, currency substitution, spillover risk, and capital-flow volatility. The study’s quantitative analysis examines the effects of digital-money efficiency on reserve currency holdings and international currency adoption, showing a positive correlation between these variables. The study also employs a modeling scenario of a digital money-induced shock on the potential demand for global financial safety net resources, noting here that a multipolar reserve configuration may require global reserve-currency issuers to expand liquidity backstops.

Daily010414.pdf…

12 12, 2023

DAILY121223

Eliza Allen2023-12-12T17:09:22-05:00December 12th, 2023|2- Daily Briefing|

IMF Calls for Enhanced Climate-Risk Analyses, Stress-Testing

Calling for implementation of the Basel Committee’s climate-related financial risk principles (see FSM Report CLIMATE14), the IMF’s Monetary and Capital Markets Department Director, Tobias Adrian, today pressed central banks to enhance their climate risk analyses and adapt stress-testing frameworks to better reflect climate-financial risk transmission and amplification channels.

Agencies Come Under Still More Workplace-Practice Scrutiny, Political Pressure

As we noted last week, House Republicans are now using ongoing assertions of FDIC workplace dysfunction to attack the OCC.

HFSC Subcomm Considers Sanctions Enforcement

Today’s HFSC National Security Subcommittee hearing focused primarily on critiques of US energy sanctions enforcement related to Russia, Iran, and Venezuela.

House Select Committee Calls on Fed to Stress Test China Risk

The House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party today released a bipartisan report urging Congress to direct the Fed to stress-test U.S. banks for their ability to withstand Chinese market risk, produce classified reports on these assessments, and consider the financial market impact of potential sanctions on Chinese financial firms.

Basel Proposes Modest Fix to IRR Standards, Post-SVB Revisions Await

As anticipated, the Basel Committee today released a consultation revising global interest-rate risk (IRR), standards updating current banking-book standards (see FSM Report IRR7) to toughen the IRR-shock calibration.

McKernan Extends Capital Olive Branch

FDIC Director McKernan today offered an end-game compromise that might actually lead to final rules in 2024 that defer some of the …

4 12, 2023

M120423

Eliza Allen2023-12-04T11:03:03-05:00December 4th, 2023|6- Client Memo|

Why Curbing Banks Won’t Curtail Private Credit

Last Wednesday, Sens. Brown and Reed wrote to the banking agencies pressing them to cut the cords they believe unduly bind big banks to private-credit companies. The IMF and Bank of England have also pointed to systemic-risk worries in this sector, as have I. Still, FSOC is certainly silent and perhaps even sanguine. This is likely because FSOC is all too often nothing more than the “book-report club” Rohit Chopra described, but it’s also because it plans to use its new systemic-risk standards to govern nonbanks outside the regulatory perimeter by way of cutting the banking-system connections pressed by the senators. Nice thought, but the combination of pending capital rules and the limits of FSOC’s reach means it’s likely to be just thought, not the action needed ahead of the private-credit sector’s fast-rising systemic risk.

m120423.pdf

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4 12, 2023

Karen Petrou: Why Curbing Banks Won’t Curtail Private Credit

Eliza Allen2023-12-04T11:03:15-05:00December 4th, 2023|The Vault|

Last Wednesday, Sens. Brown and Reed wrote to the banking agencies pressing them to cut the cords they believe unduly bind big banks to private-credit companies. The IMF and Bank of England have also pointed to systemic-risk worries in this sector, as have I. Still, FSOC is certainly silent and perhaps even sanguine. This is likely because FSOC is all too often nothing more than the “book-report club” Rohit Chopra described, but it’s also because it plans to use its new systemic-risk standards to govern nonbanks outside the regulatory perimeter by way of cutting the banking-system connections pressed by the senators. Nice thought, but the combination of pending capital rules and the limits of FSOC’s reach means it’s likely to be just thought, not the action needed ahead of the private-credit sector’s fast-rising systemic risk.

One might think that banks would do all they can to curtail private-credit competitors rather than enable them as the senators allege and much recent data substantiate. But big banks back private capital because big banks will do the business they can even when regulators block them from doing the business they want. Jamie Dimon for one isn’t worried that JPMorgan will find itself out in the cold.

Of course, sometimes banks should be forced out of high-risk businesses. There is some business banks shouldn’t do because it’s far too risky for entities with direct and implicit taxpayer backstops. This is surely the case with some of the wildly-leveraged loans private-credit companies …

30 11, 2023

DAILY113023

Eliza Allen2023-11-30T17:02:53-05:00November 30th, 2023|2- Daily Briefing|

FRB-Cleveland Head Calls for Reg Redesign

The head of the Federal Reserve Bank of Cleveland, Loretta Mester, yesterday argued for higher bank capital requirements, including counter-cyclical imposition of a capital buffer during low-risk periods so it can be released under stress based on credit growth under a formula ensuring that the CCyB in fact moves quickly to ease stress.

Brown, Colleagues Stand Behind GSIB Surcharge

Ahead of next week’s hearing with GSIB CEOs, Senate Banking Chairman Brown (D-OH) was joined today by Sens. Warren (D-MA), Fetterman (D-PA), and Reed (D-RI) in a letter to FRB Vice Chair Barr voicing their strong support for the Board’s GSIB surcharge proposal (see FSM Report GSIB22).

IMF: Future of AI’s Impact on Banking Unpredictable

The IMF today released an article focused on AI, concluding that banking has the potential to be the biggest beneficiaries of AI, but also may have the most to lose. The article considers the unpredictable future of AI technology through optimistic and pessimistic scenarios, concluding that AI could better protect assets and markets, but also could be put to various nefarious uses.

Daily113023.pdf…