#Knot

29 09, 2023

DAILY092923

2023-09-29T16:49:25-04:00September 29th, 2023|2- Daily Briefing|

FSB Head Signals Limits on – Not Just Look at – NBFI Leverage

As the FSOC finalizes a new U.S. systemic framework, FSB chair Klaas Knot today told the FT that the Board along with international standard-setters is conducting a review of nonbank leverage in an effort to improve bank-NBFI interconnections and ultimately limit nonbank borrowing.  The express focus on specific leverage constraints goes beyond the FSB’s more general statements to date.  Mr. Knot also highlighted imposing tougher collateral requirements for investment fund borrowing against higher-risk securities.

OIG: FDIC Inability to Deploy OLA Acute, Could Hike Systemic Risk

The FDIC’s OIG today released a polite, but still withering criticism of the FDIC’s inability to use OLA over a decade after Dodd-Frank gave it sweeping powers to address systemic-risk resolutions without resorting to bailouts.  Specifically, the OIG found that, while the FDIC has made some progress readying OLA-readiness since 2010, it failed to establish key elements needed to use this authority under stress, especially if this stress occurred in an entity other than a U.S. GSIB holding company.  However, the FDIC is not operationally ready to resolve a GSIB HC under OLA, nor does it have policies, procedures, or the operational capacity to do so for other entities or in scenarios where multiple systemic-risk failures are possible.

Daily092923.pdf

24 01, 2023

DAILY012423

2023-01-24T16:47:35-05:00January 24th, 2023|2- Daily Briefing|

FSB Chair Presses Need to Finalize Global Crypto Standards

In remarks today, FSB Chair Klaas Knot reiterated FSB’s 2023 priorities regarding NBFI, crypto, and climate change risks, also emphasizing that the FSB seeks to improve financial resilience rather than predicting the cause of the next financial crisis.

McHenry, Hill Suggest Crypto Action Plan

In a new tweet, HFSC Chairman McHenry (R-NC) emphasized the crypto plan he discussed earlier in a media interview.

Brown, Van Hollen Press Tough TLAC, Regional-Bank Resolvability Rule

Senate Banking Committee Chairman Brown (D-OH) and Sen. Van Hollen (D-MD) sent a letter to FDIC Chairman Gruenberg and FRB Vice Chair Barr late yesterday praising the agencies’ recent ANPR on large bank resolution standards (see FSM Report RESOLVE48), calling for TLAC that prevents taxpayer bailouts in the event of failure.

CFPB Kicks Off Credit Card Regulatory Rewrite

Following its credit card late-fee notice of proposed rulemaking (see FSM Report CREDITCARD35), the CFPB today sought comment on the credit card sector as a whole for its biennial review of the industry.

Daily012423.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 …

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

20 04, 2022

DAILY042022

2023-03-02T10:41:49-05:00April 20th, 2022|2- Daily Briefing|

FSB Targets Commodity Markets, Prime Brokers

In his letter today to G20 ministers, FSB head Klaas Knot observes remarkable financial resilience to date but states that many worrisome concerns remain.

U.S. Expands Demands for New International Financial Order

Building on her comments last week outlining a new international financial order, Treasury Secretary Yellen today called on the World Bank and its related organizations to go beyond current activities to address the cross border risks resulting from climate change, health , migration, and “fragility.”

US Expands Sanctions Reach to Payments, Crypto

The U.S. today took two first-time actions in sanctioning Russia with far-reaching implications for the future of money and payments.  It named Transkapitalbank as a sanctioned entity, not so much because it is a Russian bank, but because it has been found to facilitate sanctions evasion by virtue of Russia’s effort to create an alternative payment messaging service to get around SWIFT.

GOP Tries Again to Halt Postal-Banking Pilot

Continuing their strong opposition to postal banking, Ranking HFSC Member McHenry (R-NC), Ranking Oversight and Reform Committee Member Comer (R-KY), and Ranking Consumer Protection and Financial Institutions Subcommittee Member Luetkemeyer (R-MO) today sent a letter to Postmaster General Louis DeJoy slamming USPS for overstepping its statutory authority by extending what they call its “failed” postal-banking pilot program.

Daily042022.pdf

17 02, 2022

DAILY021722

2023-04-04T15:48:56-04:00February 17th, 2022|2- Daily Briefing|

FSB Details Work on NBFIs, Climate, Crypto

In his first letter to G20 finance ministers and central bankers, Chairman Klaas Knot of The Netherlands reiterated work on longstanding FSB priorities (i.e., ensuring resilience and a smooth post-pandemic transition).  Pending actions include a mid-year report on ways to ensure inclusive financial recovery and continuing work on MMFs, open-end funds, margining, bond-market liquidity, and EME dollar-funding vulnerabilities.  Near-term work will also revisit 2017 standards on asset-management liquidity (see FSM Report ASSETMANAGEMENT6) and create a set of systemic-risk tools focused on NBFIs.

FSI Counters FSB plans for Climate Macroprudential Standards

Although the FSB chairman earlier today argued in favor of climate-risk macroprudential standards, a report from the BIS’s Financial Supervision Institute today concludes that doing so would be ineffective and even counter-productive. This is due to uncertainty about the extent to which climate-risk systemic implications may already be well addressed in current macroprudential standards or to those now under development with specific regard to individual institutions.  The FSI, for example, notes the data challenges that also trouble the OCC (see FSM Report GREEN12) and other U.S. regulators, arguing against any near-term binding capital or prudential standards in this arena.

Daily021722.pdf

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