26 07, 2023


2023-07-26T14:30:18-04:00July 26th, 2023|5- Client Report|

FedFin Assessment: What to Watch in the Regulatory-Capital Rewrite

As promised, we plan in-depth coverage of the Fed and FDIC meetings tomorrow as well as of the capital rewrites they are set to propose no matter all the warning shots from Congressional Republicans.  In this report, we provide an overview of each of the rules the agencies will propose based on key issues in the Basel end-game standards they will finally advance.  We do not focus on details or how the U.S. may adapt these rules except where public releases have provided advance insight.  Instead, we highlight key issues to provide vital background and context of tomorrow’s actions as well as key decision points on which comment and political advocacy are sure to center.


5 07, 2023


2023-07-05T16:15:35-04:00July 5th, 2023|2- Daily Briefing|

Basel Targets Credit-Risk Models, Assumptions

The Basel Committee yesterday issued a newsletter highlighting recent internal credit-risk discussions as well as supervisory action and remaining concerns in this area.  Although few specifics are provided, national supervisors’ main priorities include governance controls around model risk management, capturing economic uncertainty, and identifying credit deterioration in vulnerable sectors and borrowers.  The newsletter also notes that supervisors have issued guidance on IRB models and taken remedial action for some banks with under-calibrated probability-of-default models—issues not yet addressed in the U.S. that may come in concert with the pending end-game capital rules.

FSB/IOSCO Focus on OEF Redemption Risk

Departing from the SEC’s swing-pricing approach to open-end fund risk, global regulators today proposed a new exit-fee construct.  If the U.S. chooses to advance this – as it well may given the SEC’s role on these bodies – it will almost surely require a new SEC proposal, significantly delaying U.S. action in this controversial area.  The FSB’s consultation proposes three OEF “buckets” intended to reduce liquidity mismatch risk by mandating new “anti-dilutive” liquidity-risk mitigation tools that not only create new daily-redemption obstacles as OEF assets become increasingly illiquid, but also impose new fees stipulated in the accompanying the IOSCO consultation.


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