#interchange

6 11, 2023

Karen Petrou: How Regulators Unwittingly Run Roughshod Over the Public Good

2023-11-06T15:47:01-05:00November 6th, 2023|The Vault|

Friday’s American Banker included a Kyle Campbell article quoting me reiterating some points in my recent testimony about the need for cumulative-impact analyses of the raft of pending rules.  This led others to suggest ulterior motives, arguing that calls for cumulative-impact analyses are fig-leaves dangling over efforts to gut the rules.  While advocates do not often argue for analytical purity when obscurity suits them, the absence of analytical rigor is nonetheless an abrogation of the public good by public officials.  Setting rules based on airy assertions that it will all come right in the end since there most likely won’t be financial crises or at least new financial crises like the old financial crises ensures that this regulatory round will have at least as much wreckage as those that came before.

The public good when it comes to financial policy is best measured by careful consideration of something wholly absent in all of the agencies’ thinking:  economic equality.  In its absence, the nation will suffer from still-worse political acrimony, an even worse public-health crisis, growing populations of Americans without fundamental financial security, and even higher odds for still more devastating financial crises.  How do I know this?  Look at American financial policy since at least 2000 and see what happened.

The Fed is particularly high-handed when it comes to public-good rationales not just for its rules, but also for its still more vital monetary-policy responsibilities.  The Fed cloaks itself with the “dual” mandate of “maximum employment” and “price stability” even …

1 11, 2023

DAILY110123

2023-11-01T16:52:56-04:00November 1st, 2023|2- Daily Briefing|

Vance, GOP Seek to Reverse New Immigration Credit Ruling

Following a joint CFPB-DOJ statement asserting that financial institutions’ “unnecessary or overbroad reliance” on immigration status in a credit decision may violate the ECOA, Sen. Vance (R-OH) along with all Republican members of the Senate Banking Committee today sent a scathing letter to CFPB Director Chopra and DOJ AG Garland urging the regulators to retract it on legal and financial stability grounds.

Congress Takes on SEC Custody Construct

Members of Congress are mobilizing against the SEC’s custody proposal (see FSM Report CUSTODY5) following yesterday’s block-buster GAO ruling against the SEC’s SAB 121 ruling, a ruling with considerable impact also in the broader custody rewrite.  Republicans responded to the GAO with anticipated demands for rapid Congressional Review Act repeal.

Powell Pledges Fed Capital Consensus

In the midst of much monetary-policy discussion today, Chair Powell now said more publicly that the Fed will work towards consensus on controversial capital rules.  Rep. Barr (R-KY) previously said Mr. Powell assured him that the final rule will reflect the Board of Governors as a whole, encouraging Rep. Barr and others that Vice Chair Barr will need to modulate some of the proposal’s most controversial provisions.

Daily110123.pdf

27 10, 2023

Al103023

2023-10-27T17:00:24-04:00October 27th, 2023|3- This Week|

Take a Deep Breath

But don’t relax too much as newly-minted Speaker Johnson (R-LA) figures out what he’s going to do with the gavel now that he’s got it.  The House has barely three weeks to see if unanimity holds and a shutdown is avoided in favor of yet another can-kicking continuing resolution.  Regardless, with HFSC Chairman McHenry (R-NC) happily freed of his Speaker Pro Tem assignment, HFSC will this week (see below) return to the high-impact hearing schedule if was forced to cancel during the speakership battle, move a raft of bills through mark-up, and work hard to put Mr. McHenry’s plans to realign crypto jurisdiction into must-pass legislation if the House agrees (likely) and the Senate doesn’t object (far less certain).  Among the bills to be marked up and those on the Senate’s agenda will surely be measures reviewed at last week’s Senate Banking hearing to ensure Treasury is super-tough when it comes to Iran and Hamas.  Secondary sanctions are in the works, putting any financial institution doing business in the U.S. on notice that offshore activities so far out of law-enforcement’s reach are about to come in range.  And, if that’s not enough, then there’s all the regulatory action.

Al103023.pdf

27 10, 2023

DAILY102723

2023-10-27T17:02:18-04:00October 27th, 2023|2- Daily Briefing|

Barr Reiterates CBDC Slow-Go

FRB Vice Chair Barr today reiterated his recent comments that the Federal Reserve will only proceed with a CBDC if it gets express support from the executive branch and authorization from Congress.

Top BIS Official Questions Need for Higher Deposit-Insurance Coverage, Stronger Bank Regs

The BIS’s top bank supervisor, Fernando Restoy, today indirectly took sharp issue with several pending changes in U.S. deposit-insurance, regulation, and resolution standards.  Pointing to supervisory lapses as the principal cause of recent bank failures, Mr. Restoy argued that more stringent capital and liquidity requirements matter less to bank resilience than strengthened supervision.

Daily102723.pdf

25 10, 2023

Daily102523

2023-10-25T16:58:50-04:00October 25th, 2023|2- Daily Briefing|

Divided Fed Advances Climate-Risk Principles

Following the FDIC’s 3-2 vote yesterday to approve final inter-agency climate-risk standards, the FRB late yesterday afternoon released its 5-2 decision to do the same.  Chair Powell emphasized as he has frequently before Congress that the guidance focuses only on climate financial risk and is thus fully consistent with the Board’s mandate, a reading of the principles also endorsed by Vice Chair Barr as he described its “narrow” construct.

CFPB Report Seeks to Validate Late-Fee Restrictions

Adding ammunition to the CFPB’s pending late-fee restrictions (see FSM Report CREDITCARD36), the Bureau’s biennial consumer credit card market report today finds that credit card companies in 2022  were significantly more profitable compared to pre-pandemic levels and charged consumers $130 billion in interest and fees.

Sharp Interchange-Fee Reduction Out for Comment

The FRB today voted 6-1 to approve a proposal mandating an approximate thirty percent reduction in debit-card interchange fees from the current cap (see FSM Report INTERCHANGE7).  As under current laws and required by the Dodd-Frank Durbin Amendment (see FSM Report CONSUMER14), the new approach would only apply to issuers with over $10 billion in assets.

Senate Banking GOP Raises New CCP Finance Concerns

As the Administration meets with Chinese financial authorities to hammer out ongoing concerns, all Senate Banking Republicans led by Ranking Member Scott (R-SC) today sent a letter to Treasury Secretary Yellen USTR Head Tai raising concerns that the CCP’s expansion into U.S. and global payments markets …

14 09, 2023

DAILY091423

2023-09-14T16:47:09-04:00September 14th, 2023|2- Daily Briefing|

IOSCO Proposes Leveraged Loan, CLO Best Practices

IOSCO today released a consultation report proposing best practices for leveraged loans and CLOs that address origination and refinancing, EBITDA and documentation transparency, aligning interests from loan origination to end investors, managing conflicts of interest throughout the intermediation chain, and disclosures.

Durbin, Marshall Press Credit-Card Interchange Bill

Reiterating concerns expressed last month and comments yesterday on the Senate floor, Senate Whip and Judiciary Chairman Durbin (D-IL) and Sen. Marshall (R-KS) were joined this time by Sen. Welch (D-VT) and four House Members calling on Visa and Mastercard to reverse planned fee hikes.

GAO Presses for FSOC Power to Regulate, Not Just Designate

The GAO today issued a report recommending that Congress consider legislation allowing FSOC to compel regulatory action, arguing that this would better accomplish the Council’s mission because FSOC currently has limited power to respond to systemic risk.

HFSC GOP Highlight CBDC Privacy Concerns

As anticipated, HFSC Digital Assets GOP Members continued their staunch opposition to a U.S. CBDC, with Subcommittee Chairman Hill (R-AR) and Majority Whip Emmer (R-MN) asserting that private innovation can modernize payments without the risk of government surveillance.

Brown Doubles Down on Opposition to House Crypto Bill

Making it still more clear that he is not supportive of pending House cryptoasset legislation, Senate Banking Chairman Brown (D-OH) today sent a letter to Treasury Secretary Yellen, SEC Chairman Gensler, and CFTC Chairman Benham asking for views on where new authority may be needed.

Daily091423.pdf

26 01, 2023

DAILY012623

2023-01-26T16:44:02-05:00January 26th, 2023|2- Daily Briefing|

Effective Date Set for LIBOR Termination

The Federal Register today includes the FRB’s final rule Implementing the Adjustable Interest Rate (LIBOR) Act, setting the rule’s effective date as February 27.  As noted (see FSM Report LIBOR9), the final rule settles many LIBOR transition questions in favor of SOFR, leaving numerous complex implementation questions  up in the air despite this added certainty.

Fed Study Finds Card Rewards Result in $15 Billion Wealth Transfer

A new Federal Reserve staff study finds that credit-card rewards annually redistribute approximately $15.1 billion a year to more financially-sophisticated consumers.  This result is likely to weigh heavily into debate later this year if, as we expect, Sen. Durbin (D-IL) reintroduces legislation to force card-routing alternatives to Visa and Mastercard (see FSM Report INTERCHANGE10).

ISDA Lays Groundwork for Crypto Rules, Law

The self-regulatory body for global derivatives, ISDA, today released a contractual framework for digital-asset derivatives.  These are now likely to be widely adopted by major financial institutions but may not resolve legal-ownership issues when cryptoasset entities use intermediaries or other avenues into global capital markets that obscure contractual rights.

Daily012623.pdf

29 11, 2022

DAILY112922

2022-11-30T11:20:13-05:00November 29th, 2022|2- Daily Briefing|

Fed Finalizes Revisions to Interchange Survey

After finalizing a controversial proposal opening up debit-card routing (see FSM Report INTERCHANGE11), the FRB has also set changes to reporting on interchange-fees proposed in July.  The final requirements track the proposal, gathering data now on reporting changes when multiple networks are involved in processing transactions as well as revising the survey to prevent overcounting certain transactions.

Senate Finance Chair Challenges Crypto-Exchange Conduct

Continuing Congressional pressure on crypto following FTX’s collapse, Senate Finance Chairman Wyden (D-OR) today sent six letters to some of the largest crypto exchanges to determine if the factors leading to FTX’s collapse are widespread.  It is unclear what Sen. Wyden intends to do with the information he requests given that his panel does not have jurisdiction over the conflicts of interest and related concerns he cites, but it can surely call hearings and at the least build a record for the kind of legislation Mr. Wyden may support.

Daily112922.pdf

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

11 10, 2022

INTERCHANGE11

2022-10-12T10:22:34-04:00October 11th, 2022|1- Financial Services Management|

Debit-Card Routing Requirements

Leaving its interchange-fee restrictions intact – at least for now – the Federal Reserve has finalized its proposal expanding on its existing requirement that all debit- card transactions must be enabled for processing on at least two unaffiliated payment-card networks for card-not-present transactions.  Although the rule does not address the still more contentious question of the ceilings on debit-card interchange fees, it does indicate that the FRB may turn to these.  Any change in permissible fees would have still more dramatic impact on bank and network- provider income, benefiting merchants, tech-platform companies, small networks, and perhaps also consumers if merchants pass along any savings and new networks prove robust.

INTERCHANGE11.pdf

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