#IOSCO

14 12, 2022

DAILY121422

2022-12-14T17:49:04-05:00December 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

2022-11-16T17:14:29-05:00November 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

2022-10-12T16:58:59-04:00October 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

2022-10-03T13:40:26-04:00September 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

2023-01-03T16:36:42-05:00August 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

2023-01-04T13:25:43-05:00August 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

2023-01-06T15:18:57-05:00July 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

2023-01-24T15:30:00-05:00July 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

2023-02-21T15:33:13-05:00May 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

2023-03-02T10:47:37-05:00April 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

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