#IMF – Federal Financial Analytics

25 09, 2023

DAILY092523

Eliza Allen2023-09-25T16:05:07-04:00September 25th, 2023|2- Daily Briefing|

IMF Report: CBDC Designs Could Boost Financial Inclusion

On Friday, the IMF released a report concluding that a well-designed CBDC could foster financial inclusion and act as an entry point for the unbanked to the broader financial system. This will strengthen Democratic demands for a U.S. CBDC, but we expect GOP opposition to remain firm and the Fed’s posture to retain its current focus on wholesale CBDCs.

FRB-NY: Stablecoins, MMFs Have Same Dynamic Runs

An FRB New York study today concludes that stablecoin investors behaved similarly to MMF investors in numerous recent runs. Staff found that investors consider a stablecoin to have been effectively depegged once its price drops below $0.99 which triggers a run and mirrors the dynamics of MMFs “breaking the buck.”

Senate Dems Target SIFI Designation, Scenarios to Curb Climate Risk

Senator Warren (D-MA) along with Sens. Sanders (I-VT), Heinrich (D-NM), Markey (D-MA), Whitehouse (D-RI), and Merkley (D-OR) today released a letter dated last Wednesday to Treasury Secretary Yellen and Climate Counselor Zindler calling on the Department to significantly increase the urgency with which it targets climate-related financial risk.

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7 09, 2023

DAILY090723

Eliza Allen2023-09-07T16:43:25-04:00September 7th, 2023|2- Daily Briefing|

FSB-IMF Report Lays Out Crypto-Policy Roadmap

The FSB and IMF today published a joint report synthesizing their policy and regulatory recommendations for cryptoassets, laying out a policy roadmap that breaks no new ground.

Senate Dems Try Again to End State Usury Ceilings

Senate Majority Whip Durbin (D-IL) yesterday introduced another effort (S. 2730) to impose a federal usury ceiling.

NGFS Warns Ecological Risk Could Be Systemic

The Network for Greening the Financial System (NGFS) today released a report on nature-related financial risk concluding that ecological risk transmission could cause contagion leading to systemic risk.

CFPB Soon to Advance Its Open-Banking Construct

CFPB Director Chopra today announced that the CFPB will be issuing proposed rules next month to reactivate its DFA consumer data rights powers (see FSM Report DATA3).

Global Securities Regulators Craft DeFi Standards

IOSCO today released a DeFi consultation report proposing nine policy recommendations intended to support heightened regulatory consistency and oversight.

Waters Presses Agencies to Change SSN Collection Requirements

HFSC Ranking Member Waters (D-CA) today wrote to the leadership of the banking agencies, Treasury, and FinCEN asking them to consider allowing financial institutions only to collect a SSN’s last four digits to minimize cybersecurity risks.

Fed Staff Suggest Solution to CBDC Privacy Problem

Addressing one of the biggest CBDC challenges in the U.S., Fed staff today published a report arguing that the use of privacy-enhancing technologies preserves digital asset user confidentiality while maintaining enough visibility for official audits in order to prevent illicit finance.

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6 09, 2023

Daily090623

William Cross2023-09-07T09:07:08-04:00September 6th, 2023|2- Daily Briefing|

FSB Focuses on NBFI Liquidity, Leverage with Few Concrete Actions

Following its report recommending resolution-policy review, the FSB today continued its G20 reports with two focusing on NBFIs. The most substantive of these addresses sector liquidity. Recommendations here include adoption of pending OEF standards, continuing review of margining and work to determine if NBFI systemic-risk standards are warranted.

Fed Study: Big Bank Branches May Better Serve Customers

Fed staff have issued a report suggesting that new large bank branches tend to grow faster than new ones at small banks because large bank branches are favored by customers seeking lower prices or greater value.

IMF Outlines Post-SVB Supervision Standards

In an opaque but nonetheless stinging rebuke to U.S. bank supervision, the IMF today released a working paper emphasizing the importance of supervisors having the will and ability to act on effective supervision, recommending that supervisors are given strong operational independence and accountability, clarity regarding the primacy of their safety-and-soundness mandate, adequate resources, and legal protection.

Daily090623.pdf…

5 09, 2023

DAILY090523

Eliza Allen2023-09-05T17:16:52-04:00September 5th, 2023|2- Daily Briefing|

FSB Considers Resolution Construct Revamp

In addition to calling for full and consistent implementation of the Basel III framework, the FSB head’s letter to the G20 today stresses that this year’s bank failures challenge long-held views about deposit stickiness and the speed of bank runs, leading international standard-setters now to consider unspecified policy changes to the resolution construct.

BIS Study: Fed, FDIC Reassurances Offset Bank Run Risk

Contributing to analysis of viral runs and how to stop them, a new paper from BIS staff concludes that public communication from the Fed on banking system stability and from the FDIC on deposit insurance during crises can mitigate systemwide run risk, while similar statements from political figures such as President Biden are less effective.

IMF: Money Laundering Undermines Financial Stability

The IMF yesterday published a blog post on money laundering’s financial-stability impact, concluding that cross-border illicit payments result in equity-price declines, higher CDS costs, elevated perceived credit risk, and declines in deposits for the individual banks involved. The blog also states that there is a contagion dynamic as a result of spillover effects between targeted banks and other banks within the region.

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22 08, 2023

DAILY082223

Max Camateros-Mann2023-08-23T10:19:39-04:00August 22nd, 2023|2- Daily Briefing|

Waters Presses GAO to Study AI Mortgage Lending Discrimination

Reflecting ongoing concerns at the CFPB and the IMF when it comes to generative AI (see earlier today), HFSC Ranking Member Waters (D-CA) today sent a letter requesting that the GAO study the extent to which AI and especially AVMs may lead to housing discrimination.

IMF Spots Systemic Macro Risk as Gen-AI Advances

A new IMF Fintech Note concludes that generative AI (GenAI) may heighten risk, undermine institutional trust, and accelerate procyclicality. It thus advises policymakers to ensure close human GenAI supervision as regulatory frameworks take shape, pressing also that this be done in conjunction with strengthened regulation and effective monitoring.

FRB-NY Staff: SEC Proposals May Not Prevent MMF, OEF Run Risk

A New York Fed blog post yesterday concluded that, while the SEC’s recent MMF liquidity reforms (see FSM Report MMF20) and proposed OEF rules make significant progress ensuring resilience, open- and closed-end funds may nonetheless remain vulnerable.

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8 08, 2023

Daily080823

William Cross2023-08-08T16:56:31-04:00August 8th, 2023|2- Daily Briefing|

IMF Staff Presents New CCyB Trigger

A new IMF paper weighs into an important question inherent in the new construct of U.S. regulatory capital: how to set the counter-cyclical capital buffer (CCyB) to anticipate financial stress. As noted in a recent Karen Petrou memo, the Basel CCyB (see FSM Report CAPITAL173) is linked to a ratio of credit growth to GDP; the Fed’s CCyB (see FSM Report CAPITAL213) gives the Fed unlimited discretion to sound the capital alarm or release the buffer.

GAO Asks Banking Agencies To Focus On Blockchain, Alternative Data, PCA

The GAO today issued its annual policy recommendations to the federal banking agencies and the SEC. All of the agencies are asked to coordinate policy on blockchain to better address risks; the agencies neither agreed nor disagreed, each flagging routine interagency engagement. GAO maintains that coordination efforts have failed to address cryptoasset risks in a timely manner.

Warren Presses Goldman Hard on SVB Conflicts

Not letting one letter to Goldman Sachs suffice when it comes to SVB, Sen. Warren (D-MA) yesterday sent another letter to the bank taking serious issue with its response, particularly regarding the steps it took to avoid conflicts of interest.

OCC Targets Fintech Partnerships

Continuing its fintech-partnership crackdown, the OCC today clarified that its legal lending-limit standards apply to purchased loans and particularly to those purchased from nonbanks.

IMF Reiterates Need for U.S. Mid-sized Bank Regs, Better Contingency Funding

Building on its prior assessment of U.S. performance in …

7 08, 2023

DAILY080723

Eliza Allen2023-08-07T16:43:53-04:00August 7th, 2023|2- Daily Briefing|

McHenry Highlights New PayPal Stablecoin, Legislative Progress

In response to PayPal’s announcement this morning of a new payment stablecoin, HFSC Chairman McHenry today championed the new product, emphasizing that there has been bipartisan progress toward legislative action on his bill and touting strong state regulatory regimes such as New York’s. This is the venue PayPal has selected in concert with working with Paxos Trust, also New York State licensed but a firm sanctioned this year for prior stablecoin activities.

IMF: Fed Should Focus on Corporate-Bond Risk

A new study from the IMF on corporate bond shocks and commercial bank lending urges the Fed to limit its market maker of last resort function and focus future policy interventions on mitigating corporate-bond dealer vulnerabilities and increasing investment-fund resilience. It bases these recommendations on findings that corporate bond market shocks can generate significant contagion to the commercial banking sector that reduces bank lending and increases prices and that commercial banks cannot be expected to shore up corporate bond markets.

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18 07, 2023

Daily071823

William Cross2023-07-18T17:47:11-04:00July 18th, 2023|2- Daily Briefing|

Barr Puts AI On Fair-Lending Watch

Reflecting the Administration’s new focus on AI and SEC Chairman Gensler’s concerns, Vice Chair Barr today made it clear that the FRB is also mindful of emerging AI risks. As a result, Fed supervisors will evaluate firms on whether they have appropriate risk management and controls for AI-related factors, with Mr. Barr emphasizing that AI-lending models should be transparent and explainable to prevent digital or reverse redlining.

IMF Opposes Crypto Sovereign Currency, Emphasizes AML/Systemic Risk

The IMF today published cryptoasset recommendations previously submitted to the GHOS. Organized around “three pillars” of sound macro-policy, transparency, and effective implementation, the IMF recommends ensuring that monetary-policy frameworks protect sovereign currencies, ensuring also that cryptoassets are not granted official currency-or legal-tender status – a blow to nations such as El Salvador that have done so.

HFSC GOP Advances Beneficial Ownership Legislative Rewrite

Today’s HFSC National Security Subcommittee hearing on FinCEN’s beneficial ownership rulemaking revisited recent bipartisan concerns. These included implementation, transparency, outreach, compliance costs, agency funding, and law enforcement and financial institution BOI registry access. Subcommittee Chairman Luetkemeyer (R-MO) raised concerns over FinCEN’s small business outreach and education as well as the January 1 BOI effective date, criticizing the rulemaking for what he said was undue complexity.

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15 06, 2023

DAILY061523

Eliza Allen2023-06-15T16:36:26-04:00June 15th, 2023|2- Daily Briefing|

Bipartisan Cash-Acceptance Bill Reintroduced

The chairman of Senate Foreign Relations and Banking Committee member Menendez (D-NJ) yesterday reintroduced bipartisan legislation (S. 1984) along with Rep. Payne (D-NJ) (H.R. 4128) to require retail businesses to accept cash for in-person transactions.

CFPB Renews Mortgage-Servicing Rewrite

In a blog post today, CFPB Director Chopra highlighted an issue that failed to come up at hearings earlier this week (see Client Report CONSUMER51): mortgage servicing.

Senate Democrats Focus On P2P Consumer Protection

Reflecting recent CFPB concerns and a consumer warning, Senate Banking Committee Chairman Brown (D-OH) along with Sens. Reed (D-RI), Warren (D-MA), and Menendez (D-NJ) today sent letters to the CEOs of PayPal and Cash App requesting consumer-fraud and scam data as well as steps the companies are taking to protect consumers.

IMF Sees Regional-Bank Risk, Urges Fast Action

The IMF’s financial-stability report for the United States today details recent macroeconomic-, fiscal-, monetary-, and financial-policy developments, with the Fund’s executive directors (including that of the U.S.) emphasizing in response the need to prioritize inflation-fighting over fiscal tightening.

FHFA Housing Equity Session Provides Little Insight

We had intended to listen through today’s FHFA equitable finance listening session, but its opening indicated that it will not address the pending regulatory rewrite.

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31 05, 2023

DAILY053123

Eliza Allen2023-05-31T17:00:40-04:00May 31st, 2023|2- Daily Briefing|

IMF: Housing Risk Not At GFC Level, Still Worrisome

While falling home prices are unlikely to trigger another financial crisis, an IMF blog post today finds that a drop could still harm the global economic outlook.

FDIC Tries Guarded Optimism

The FDIC’s first-quarter report on the condition of the U.S. banking industry was guardedly optimistic, but that in part appears to be due to the way in which the agency foresees its problems. Problem banks are up by 4 to 43 with $58 billion in assets among them.

End-Game Starts Soon

FRB Governor and Vice-Chair nominee Jefferson today expanded on the Fed’s financial-stability objectives, resolutely disavowing any of the credit-allocation ambitions Republicans sometimes ascribe to its work on climate risk.

CFPB Small-Business Disclosures Go Live

The Federal Register today includes the CFPB’s controversial final rule on small business data collection published late March which the Bureau says will increase transparency in small business lending, promote economic development, and combat unlawful discrimination.

FHA Expands Pandemic Mortgage Relief As Rates Rise

FHA today requested comment on a new loss mitigation proposal called the Payment Supplement Partial Claim allowing servicers to use FHA funds to bring a borrower’s mortgage current and temporarily reduce principal payments.

Daily0523123.pdf…