#IOSCO – Page 2 – Federal Financial Analytics

21 02, 2023

DAILY022123

Eliza Allen2023-02-21T16:39:53-05:00February 21st, 2023|2- Daily Briefing|

Nonbank Corporate Finance Stokes Systemic, Macro Risk

A new BIS paper supports bank assertions that nonbank corporate finance is considerably more procyclical in terms of its threat to financial stability and macroeconomic growth than that conducted by regulated companies. This risk-arbitrage question is germane not only to the ongoing debate about NBFI regulation, but also efforts to ensure that U.S. “end-game” capital rules sharply reduce the RWA for lower-risk corporate obligations.

FSB Fears Systemic Risk from Bank, CCP Commodity Risk

A new FSB report today assesses systemic risk posed by the oil, gas, and wheat commodity markets given its highly-leveraged and illiquid nature and its deep interconnections into the global banking system. Global regulators conclude that bank exposures in general are “manageable,” but some banks and CCPs have significant sector exposure and thus risk. Commodity firms have recently reduced liquidity risk, but they also hiked credit and market risk at a time of tightening that exacerbates them, leading the FSB to describe emerging risks and detail the data gaps that make it challenging to draw clear conclusions.

FSB Prioritizes Crypto, NBFIs

The FSB head’s letter to the G20 yesterday reiterates priorities outlined in his November letter, stating that global regulators will deliver a joint paper with the IMF later this year synthesizing policy findings and regulatory issues around cryptoassets. The FSB will also continue to prioritize NBFI supervision (see Client Report NBFI2), re-emphasizing the importance of studying hidden leverage and addressing liquidity mismatches in open-end funds.

Daily022123.pdf…

16 02, 2023

DAILY021623

Eliza Allen2023-02-16T16:46:08-05:00February 16th, 2023|2- Daily Briefing|

House GOP Slams Beneficial-Ownership Database

Reiterating longstanding concerns, HFSC Chairman McHenry (R-NC) and National Security, Illicit Finance, and International Financial Institutions Subcommittee Chairman Luetkemeyer (R-MO) submitted a comment letter today strongly opposing FinCEN’s latest beneficial ownership NPR.

House GOP Decries SEC Crypto-Custody Construct

Reflecting GOP concerns about the SEC’s new custody proposal as well as broad GOP objections to much of what Chairman Gensler does, HFSC Republicans today tweeted that the proposal will not ensure sufficient investor safeguards in part because restrictions on bank custody services remain.

Biden Order Reasserts Racial-Equity Agenda

Reiterating much of his last racial-equity executive order, President Biden today issued an order directing federal agencies to establish equity teams and comprehensive strategies to implement the order’s new equity initiatives.

FSB Pledges Further Work on DeFi Financial-Stability Risks

The FSB today released a report finding that DeFi’s financial stability risks are limited but may grow should linkages increase to traditional finance.

CFPB: Unfair Credit-Card Competition Evident Via Data Suppression

Following strongly-worded letters to six credit card lenders last May, the CFPB today concluded that these companies have suppressed payment data for competitive purposes.

FHFA Floats Single-Family ESG Bonds

Building on its equitable-finance initiative, FHFA today released a request for input on the benefits and risks of Fannie and Freddie single family social bonds.

Daily021623.pdf…

27 01, 2023

DAILY012723

Eliza Allen2023-01-27T17:09:47-05:00January 27th, 2023|2- Daily Briefing|

IOSCO Report Calls for More Hedge-Fund Liquidity Data, Studies Continue on MMFs/OEFs

IOSCO today released its Investment Funds Statistics Report, consisting almost entirely of data on matters such as leverage, portfolio liquidity, and fund exposures. The paper also mentions recent SEC proposals to amend the investment adviser reporting form and to require more frequent portfolio reporting.

Fed Takes Tough Stand Against Wyoming Crypto Charter

The Federal Reserve today took two policy-making actions cracking down on non-traditional charters. We will shortly provide clients with an alert and then an in-depth analysis of a new Fed policy redefining state-member bank charter powers.

Fed Not Only Quashes Custodia, But Also Constrains Non-Traditional Charter Powers

In addition to rejecting Custodia’s member application (see prior FedFin alert), the Fed today issued a sweeping policy statement scuttling efforts to use uninsured state member banks for activities impermissible for state IDIs and, in most cases, those allowed for national banks.

White House Expands Crypto Legislative Demands

In a new White House crypto “roadmap,” National Economic Council Director Brian Deese largely reiterated actions such as those by the Fed today and ongoing efforts to block AML and sanctions violations in this volatile sector.

Daily012723.pdf…

18 01, 2023

DAILY011823

Eliza Allen2023-01-18T16:37:19-05:00January 18th, 2023|2- Daily Briefing|

FSB Pledges Further Work on Bank NBFI Capital Exposures, MMFs, OEFs

The FSB today published an update on its non-bank financial intermediation (NBFI) reforms, finding that further progress is needed in implementing capital requirements for bank exposures to investment funds and large exposures.

CFPB Tells Examiners To Look At Servicer Fees, Foreclosure Process

The CFPB today released updated Mortgage Servicing Examination Procedures reflecting newly identified consumer risks since its 2016 update as well as pandemic-era servicing changes.

FRB-NY: Small Banks Behind Recent Discount Window Lending Spike

A new post from FRB-NY staff looks at why discount-window lending has recently increased, providing data that make it still more interesting that Silvergate chose emergency support from Home Loan Banks, not the Fed.

Daily011823.pdf…

14 12, 2022

DAILY121422

Eliza Allen2022-12-14T17:49:04-05:00December 14th, 2022|2- Daily Briefing|

Basel Blesses Basel III

In its own version of a holistic review, the Basel Committee today pronounced itself satisfied with the post-GFC regime. Although the new construct increased complexity, Basel finds no redundancy nor any adverse effects. Banks that were forced to raise the most capital and liquidity as a result of these reforms saw the greatest reduction in their cost of capital and, while these banks may have reduced lending, credit availability across the banking system generally increased.

FSB Advances Preliminary OEF Reforms

In its latest policy conclusions on open-end funds (OEFs), the Financial Stability Board praises its 2017 policies as a success but then goes on to describe the sector’s liquidity risk as still so high as to warrant new global standards. The FSB and IOSCO now recommend that national regulators quickly review disclosure and stress-testing practices and improve them as briefly described in this release. The agencies will also advance proposals for public comment that would, among other things, require OEFs either to ensure they can meet daily redemption demands or set a longer redemption period.

Daily121422.pdf…

16 11, 2022

DAILY111622

Eliza Allen2022-11-16T17:14:29-05:00November 16th, 2022|2- Daily Briefing|

Treasury Calls for Tough Fintech and Bank-Partnership Protection, Prudential Standards

Treasury has completed a long-pending study of the extent to which nonbank fintechs compete with banks and how this affects financial stability and consumer protection. We will shortly provide clients with an in-depth analysis of this report, for which Karen Petrou was extensively interviewed as now noted publicly in the appendix. The report was ordered by the Secretary in compliance with President Biden’s competition order (see Client Report MERGER6), finding that nonbank fintechs directly compete with banks and thus may reduce current concentration levels, sure to influence the inter-agency bank-merger policy that remains to be finalized.

Williams Presses for NBFI Standards

In remarks today, FRB-NY President John Williams said that the central bank should not adjust monetary policy to address the price-stability challenges of volatile Treasury markets and that financial-stability questions have generally been well-addressed as evident in the sound U.S. banking system. Noting recent findings in the latest staff report (see Client Report TMARKET3), Mr. Williams also called for structural changes to NBFIs along lines also laid out by the FSB (see Client Report NBFI2), arguing that MMFs and other NBFIs must be a market source of strength, not of vulnerability requiring rescue beyond the Fed’s new standing facility.

G20 Blesses FSB, Basel Work Plans

In addition to top-priority concerns such as Ukraine, the G-20 Leader’s Declaration today tackled the usual financial-policy agenda, supporting the FSB’s recent NBFI report (see Client …

12 10, 2022

DAILY101222

Eliza Allen2022-10-12T16:58:59-04:00October 12th, 2022|2- Daily Briefing|

ECB Staff: Retail CBDC Success May Hang on Interest-Rate Inducements

A new paper from European Central Bank staff looks not so much at CBDC policy objectives, but at whether central banks can achieve them and still satisfy the needs of retail depositors and businesses. Based in part on two small, failed CBDC ventures, the paper concludes that CBDC adoption will prove harder than policy focused CBDC analyses suggest.

Barr Accepts Crypto Activities In Banks But Demands New Safety Rules, Consumer Standards

Although he did not adopt Acting Comptroller Hsu’s attack yesterday on cryptoassets, Fed Vice Chair Barr today made it clear that the Fed believes, as it and global regulators repeatedly say, that the same risks should be covered by the same rules. Mr. Barr does believe that cryptoasset activities may be appropriate for banks if appropriate standards and internal controls are in place, noting that the Fed is now moving past its own supervisory guidance (see FSM Report CRYPTO31) to work with the FDIC and OCC to craft additional standards.

IOSCO Releases Global Online Marketing, Enforcement Standards

IOSCO today increased its focus on digitalization, moving away from longstanding edicts regarding monitoring to a set of specific standards for supervision and enforcement. IOSCO urges supervisors to require firms to have online marketing-and-distribution standards as well as protocols governing online onboarding.

Daily101222.pdf…

30 09, 2022

DAILY093022

Eliza Allen2022-10-03T13:40:26-04:00September 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…

31 08, 2022

DAILY083122

Eliza Allen2023-01-03T16:36:42-05:00August 31st, 2022|2- Daily Briefing|

Fed Study Highlights DeFi Risks

The Federal Reserve yesterday released a staff study concluding that DeFi regulation poses unspecified but unintended consequences even as it reiterated and expanded on potential risks.

FSB’s Domanski Reinforces Calls for Holistic Crypto Framework

Dietrich Domanski, the FSB’s Secretary General, today reiterated global regulators’ call for a holistic crypto framework to rationalize digital payments so that innovation remains well governed.

Fed Study Details Need For, Challenges to Crypto Regulation

Another Fed study today repeats some of the DeFi study’s concerns noted earlier today, but goes on to a broader examination of digital-asset risk based on the Fed’s financial-stability methodology (see Client Report SYSTEMIC93).

FHLB System Opened for Possible Reform

Acting on Director Thompson’s promise to Congress, FHFA today announced a sweeping review of the Federal Home Loan Bank System. This will begin at a late-September “listening” session, proceeding then to additional national and regional discussions.

Daily083122.pdf…

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…