#IOSCO – Page 2 – Federal Financial Analytics

4 08, 2022

DAILY080422

Eliza Allen2023-01-04T13:25:43-05:00August 4th, 2022|2- Daily Briefing|

Global Regulators Tackle CCP Operational, Liquidity Risk

Although no new standards are planned, IOSCO and the CPMI nonetheless today released a request for views on how CCPs can best manage operational and other risks unrelated to default events.

Senate Climate Change Session Yields Familiar Talk, Little Action

Today’s Senate Banking hearing on the economic costs of climate change yielded familiar climate, energy, and financial-stability arguments along party lines.

Toomey Demands Fed Transparency, Presses Reform

In a Bloomberg interview today, Senate Banking Ranking member Toomey (R-PA) disclosed that a conservative group pressing the Fed for Reserve Trust information determined that there are at least a dozen pages germane to the question of how this firm obtained payment-system access.

CFPB Plans to Combat Bigtech in Payments and Commerce

The CFPB today released a report laying out more details of how it plans to proceed on at least one bigtech concern: the integration of payments and commerce. The report details numerous risks in this arena, including those related to security and privacy and the ability of bigtech to quickly gain a dominant market share.

Brown, Other Dems Demand USB Consumer-Account Data

Sens. Brown (D-OH), Warren (D-CA), and three other Banking Committee Democrats today demanded information from U.S. bank regarding a recent CFPB enforcement action related to improperly-opened consumer accounts.

Daily080422.pdf…

13 07, 2022

DAILY071322

Eliza Allen2023-01-06T15:18:57-05:00July 13th, 2022|2- Daily Briefing|

Small Business Committee Urges Fintech Transparency, New CFPB Role in Fintech Lending

Today’s Small Business Subcommittee on Oversight, Investigations, and Regulations hearing on fintech transparency focused on financial practices that may harm small businesses’ access to credit.

HFSC Party Lines Form on CRA Rewrite

As anticipated, the Subcommittee on Consumer Protection and Financial Institutions today held a hearing examining the banking agencies’ proposed rule to modernize the CRA (see FSM Report CRA32).

Fed Proposes Debit-Card, Payment-System Data Collections

Although the Fed has yet to finalize a controversial proposal related to debit-interchange fees (see FSM Report INTERCHANGE8), it has proposed changes to how it collects debit-card information essential to implementing changes to network selection and, should it come to do so, fee calculations.

FSB Chair Reiterates Need for Crypto Regulation, Highlights Progress on Climate Roadmap

FSB Chair Klaas Knot’s letter today to the G20 ministerial reiterated all the points regarding COVID exit strategies, regulation of cryptoassets, and executing FSB’s climate roadmap outlined after June’s plenary meeting.

Senate Democrats Demand More Stringent, Binding Fed Ethics Standards

Senate Banking Committee Chairman Sherrod Brown (D-OH) joined by four other Democrats today sent a letter to Chairman Powell again calling for more stringent, enforceable Fed ethics standards, and reminded Mr. Powell in strongly-written arguments about the need to do so via binding regulation or by the kind of statutory change they have already introduced.

Global Regulators Press for Global Stablecoin Payment-Risk Standards

Doubtless spurred by FSB requests and market …

7 07, 2022

DAILY070722

Eliza Allen2023-01-24T15:30:00-05:00July 7th, 2022|2- Daily Briefing|

IOSCO Releases 2022-2023 Crypto Roadmap

IOSCO today released its Crypto-Asset Roadmap for 2022-2023, outlining two work plans on crypto- and digital assets on DeFi.

Basel Reaffirms Proportionate Policy

The Basel Committee today released high-level “considerations” on proportionality – i.e., how to apply its standards taking account of a bank’s size and complexity.

CFPB Demands Tighter Reporting-Data Controls

Using another advisory to issue what some may consider a rulemaking, the CFPB today threatened to pursue criminal penalties if credit-report data are not used for permissible purposes (i.e., for credit, housing, employment or insurance decisions).

FSB Report Promotes LEI Adoption for Cross-Border Payments

The FSB today issued a report recommending that G20 members promote Legal Entity Identifier (LEI) adoption, aiming particularly at cross-border payments.

Treasury Releases International Crypto Engagement Framework

As demanded by President Biden’s digital asset executive order (see Client Report CRYPTO26), Treasury in consultation with the State Department, Commerce, and USAID today released a framework for international engagement on digital assets.

Democratic Senators Demand More from Zelle on High-Profile Fraud Allegations

Sens. Menendez (D-NJ), Warren (D-MA), Reed (D-RI) and five Democratic colleagues today ramped up their attack on the extent to which Zelle properly handles payment fraud.

Daily070722.pdf…

11 05, 2022

DAILY051122

Eliza Allen2023-02-21T15:33:13-05:00May 11th, 2022|2- Daily Briefing|

HFSC re FSOC: SIFIs, Climate, Stablecoins, Lots More

Looking ahead to tomorrow’s HFSC hearing with Secretary Yellen, the Democratic staff memo suggests that this session will track much of what occurred yesterday at Senate Banking (see Client Report FSOC26): i.e., discussion of the need for stablecoin legislation, the role of SIFI designation, and the overall risks presented by higher inflation, Russia, China, and climate change.

Basel Plans Wholesale Review of Post-GFC Regulatory Regime

The head of the Basel Committee, Pablo Hernández de Cos, today announced a full-scale evaluation of the Basel III construct set for release later this year. The report will evaluate complexity, regulatory interactions and systemic-risk dynamics, focusing on capital, liquidity, leverage, and macroprudential elements of the Basel III reforms. The report will also evaluate resilience and financial-activity behavioral incentives.

FSB Plans Commodity, Climate, Crypto Agenda

In remarks today, FSB head Klaas Knot reiterated ongoing concern about commodity markets and continuing financial-market resilience despite stress absorption since Russia first invaded Ukraine. Mr. Knot is also concerned that some banks are generally over-leveraged and those with prime brokers may be at particular risk.

Daily051122.pdf…

19 04, 2022

DAILY041922

Eliza Allen2023-03-02T10:47:37-05:00April 19th, 2022|2- Daily Briefing|

CRA Reform Still in “Soon” Timeframe

In remarks today, Acting Comptroller Hsu provided only a little insight into ongoing negotiations over a new CRA proposal, reiterating that one will “soon” be released.

IMF Warns of Payment-System Fragmentation, Dealer-Bank Commodity

The IMF today released more of its annual global financial report, going beyond the assessment of the renewed sovereign doom loop we addressed in yesterday’s FedFin alert to consider other financial-stability risks and call for quick action on a new fintech/crypto regulatory framework.

Fed Finds Nonpublic Prime Funds More Resilient

As the SEC contemplates MMF reform (see FSM Report MMF19), the Fed has continued to issue reports highlighting vulnerabilities that the central bank likely feels are only partially addressed by the Commission’s preferred liquidity fix: swing pricing.

IMF Calls for Fast, Tough Fintech, DeFi Regulation and Supervision

The IMF’s overarching financial-stability report not only deals with the structural risks addressed earlier today, but also those posed by fintechs and DeFi. As presaged in its blog post last week, the report concludes that fintechs pose risks both on their own and to less technologically advanced banks, each of which requires regulatory action to prevent systemic risk.

Carstens Endorses Fed’s Cautious CBDC Stance

In a discussion about the future of digital money during the IMF annual meetings, BIS General Manager Carstens endorsed Federal Reserve Chairman Powell’s cautious approach to creating a CBDC (see FSM Report CBDC10), citing the critical importance of reliability to CBDC success.

Daily041922.pdf…

11 04, 2022

M041122

Arezou Rafikian2023-03-02T11:36:45-05:00April 11th, 2022|6- Client Memo|

Why the Gerontocracy is Right about DeFi Risk

When we started our own analyses of technology-based finance’s stability and equality implications in 2019, we were among the first to focus on disclosures, conflicts of interest, and even self-dealing. Still, we had no idea how many sides of a trade someone could quietly be on if he or she builds out something that purports to be decentralized finance (DeFi) but is anything but. Although regulators have yet to do much about it, their first in-depth DeFi report details a raft of risks they should quickly remedy. Odds are that they won’t until innocent investors and bank customers lose many of their millions, but this too-many-rules-far-too-late habit is particularly dangerous when it comes to fast-moving DeFi.

M041122.pdf…

11 04, 2022

Karen Petrou: Why the Gerontocracy is Right about DeFi Risk

Arezou Rafikian2023-03-02T11:37:03-05:00April 11th, 2022|The Vault|

When we started our own analyses of technology-based finance’s stability and equality implications in 2019, we were among the first to focus on disclosures, conflicts of interest, and even self-dealing. Still, we had no idea how many sides of a trade someone could quietly be on if he or she builds out something that purports to be decentralized finance (DeFi) but is anything but. Although regulators have yet to do much about it, their first in-depth DeFi report details a raft of risks they should quickly remedy. Odds are that they won’t until innocent investors and bank customers lose many of their millions, but this too-many-rules-far-too-late habit is particularly dangerous when it comes to fast-moving DeFi.

First and foremost, DeFi isn’t nearly as decentralized as those touting it represent. If DeFi were truly decentralized, then it would be a lot harder for hackers to make off with everything in a DeFi platform in one swipe, but this has a nasty habit of happening over and over again. As a result, at its most essential, DeFi exposes counterparties and customers to loss of assets even if nothing else goes amiss.

And much else could. As the report from the International Organization of Securities Commissions details, DeFi is not only often centralized, but also not even all that digital. Non-digital and centralized aspects of DeFi include not just graphical interfaces with customers and fiat-currency transactions with counterparties, but also very traditional forms of finance such as leveraged trading and rehypothecation …

6 04, 2022

DAILY040622

Eliza Allen2023-03-02T12:25:01-05:00April 6th, 2022|2- Daily Briefing|

IOSCO Dodging Open-End Fund Reform?

IOSCO today asked for comment on corporate-bond market liquidity and ETF best practices. The bond analysis focuses less on the open-end funds on which the SEC and global regulators are addressing in the wake of MMF proposals (see FSM Report MMF19) than on underlying markets. It focuses on the extent to which secondary corporate-bond trading remains dependent on a small network of OTC dealers in markets with scant liquidity despite sharp growth since the 2008 crisis.

Chopra Calls CRAs as Cartel

In a speech today on consumer reporting agencies, CFPB Director Chopra focused not on the sector’s decision to change medical-billing practices as the Bureau recommended, but rather on the fact that the three major agencies did so on the same day in the same announcement. This, he said, suggests that they are a cartel, not competitors.

DAILY040622.pdf…

29 03, 2022

DEFI

Arezou Rafikian2023-03-27T15:45:58-04:00March 29th, 2022|5- Client Report|

Global Securities Regulators Diss DeFi

As promised, this report provides an in-depth analysis of IOSCO’s new paper on decentralized finance, one sure to advance the FSB’s efforts to bring DeFi systems under greater regulatory scrutiny due to the findings we here detail. In the U.S., President Biden’s crypto-focused executive order (see FSM Report CRYPTO26) highlights DeFi’s risk with regard to illicit finance. IOSCO’s work on this report was headed by the SEC, suggesting rapid U.S. action not only on this concern, but also on many other risks by the Commission, as well as the FSOC and other U.S. agencies. IOSCO concerns go well beyond those specific to investors and trading platforms, noting, for example, significant risk posed to retail customers in DeFi lending and payment, settlement, and clearing products. As with the FSB, IOSCO disputes assertions that DeFi is fully decentralized, noting that most of the services delivered via any DLT purporting to be DeFi are analogous to traditional financial products and services (TradFi) other than regulation. The report also details the off-chain activities that result in significant inter-connectedness with TradFi without appropriate controls over possible contagion or even systemic risk.

DEFI.pdf…

29 03, 2022

FedFin: Global Securities Regulators Diss DeFi

Arezou Rafikian2023-03-27T15:46:19-04:00March 29th, 2022|The Vault|

As promised, this report provides an in-depth analysis of IOSCO’s new paper on decentralized finance, one sure to advance the FSB’s efforts to bring DeFi systems under greater regulatory scrutiny due to the findings we here detail. In the U.S., President Biden’s crypto-focused executive order (see FSM Report CRYPTO26) highlights DeFi’s risk with regard to illicit finance. IOSCO’s work on this report was headed by the SEC, suggesting rapid U.S. action not only on this concern, but also on many other risks by the Commission, as well as the FSOC and other U.S. agencies…

The full report is available to retainer clients. To find out how you can sign up for the service, click here.…