#LCR – Page 2 – Federal Financial Analytics

25 07, 2023

DAILY072523

Eliza Allen2023-07-25T17:18:26-04:00July 25th, 2023|2- Daily Briefing|

Key Democrat Takes On Fed Rate Hikes

Ahead of today’s FOMC meeting, Joint Economic Committee Chair Heinrich (D-NV) yesterday sent a letter to Fed Chair Powell cautioning against additional policy tightening.

Second HFSC Markup Targets Stablecoins, Regulatory Restrictions, ESG

Thursday’s HFSC has now added another day to its mark-up calendar this week, moving the stablecoin and ESG bills to Thursday doubtless in order to avoid an endurance contest before the August recess and still meet Chairman McHenry’s (R-NC) commitments.

Senate GOP Tries to Block Capital Rewrite

Just days before the banking agencies take up new capital rules, Senate Banking Ranking Member Scott (R-SC) and ten other committee Republicans sent a letter to Chairman Powell demanding greater transparency and prior consultation.

Waters Presses FHFA for FHLB Reform

Following FHFA listening sessions and in anticipation of a final report this September on the FHLB system, HFSC Ranking Member Waters (D-CA) late yesterday sent a letter to FHFA Director Thompson laying out a series of recommendations to significantly reform the system.

Ag Committees Slam SEC Custody Proposal

In a letter to SEC Chairman Gensler released today, Senate Agriculture Committee Ranking Member Boozman (R-AR) and Chairwoman Stabenow (D-MI) along with House Ag. Committee Chairman Thompson (R-PA) and Ranking Member Scott (D-GA) raised strong objections to what they called serious flaws in the SEC’s proposed custody rule (see FSM Report CUSTODY5).

Warren, Scott Renew Fed-Ethics Campaign

Continuing their bipartisan campaign against the Fed, Sens. Warren (D-MA) and Scott (R-FL) yesterday sent a letter…

22 06, 2023

DAILY062223

Eliza Allen2023-06-22T16:52:30-04:00June 22nd, 2023|2- Daily Briefing|

Gruenberg: End-Game Almost Done, Will Be Tough

In remarks today, FDIC Chair Gruenberg erased any of the doubt Chair Powell left yesterday as to the nature of the U.S. end-game capital rewrite (see Client Report FEDERALRESERVE74).

FSB Tackles Third-Party Risk

The FSB today issued a consultation on third-party vendor management, with comments due by August 22.

Senior Democrats Reintroduce Fed Racial Equity Measure

HFSC Ranking Member Waters (D-CA) and Senate Banking member Sen. Warren (D-MA) today reintroduced legislation that would create a new racial justice mission at the Fed.

Powell Announces Internal Endgame Draft, Defends FRB-SF

At a Senate Banking hearing today covering much of the territory discussed in yesterday’s HFSC hearing (see Client Report FEDERALRESERVE74), Chairman Powell noted that an endgame draft proposal has been circulated internally, he has been briefed on it and that all governors will have ample time to review it.

Daily062223.pdf…

18 05, 2023

DAILY051823

Eliza Allen2023-05-18T16:51:22-04:00May 18th, 2023|2- Daily Briefing|

FRB-NY: SLR, Other Bank Stress Led to ONRRP Growth

A new post from the Federal Reserve Bank of New York summarizes a recent staff report analyzing the ONRRP’s explosive growth. As we have noted before, the study confirms that the combination of a revised SLR and strong deposit in flows in 2021 severely stressed bank balance-sheet capacity, leading large institutions to push deposits to sponsored MMFs. Indeed, bank-sponsored MMFs had larger inflows than independent MMFs at this time and banks with tighter capital ratios moved disproportionately more funds to their sponsored MMFs.

Reserve Banks Reconsider Liquidity-Backstop Standards, Set-Up

FRB-Dallas President Logan today reinforced findings in recent bank failures about the importance of advance planning for accessing FRB liquidity, urging banks to have legal documentation and collateral arrangements well in advance of possible stress. Presaging standards we expect shortly from the banking agencies, she also urged regular operational dry runs to ensure ready access to funding sources such as Home Loan Banks and Fed liquidity windows, noting that this would reduce discount-window stigma.

Daily051823.pdf…

16 05, 2023

DAILY051623

Eliza Allen2023-05-16T17:44:43-04:00May 16th, 2023|2- Daily Briefing|

Hsu Presses Reg Harmonization, Resolution Reform, Merger-Policy Rewrite

We now add our assessment of Acting Comptroller’s Hsu’s testimony to our analyses of those from Messrs. Barr and Gruenberg ahead of HFSC’s hearing later this morning.

Yellen Says White House Supports Community-Bank Exemptions

Speaking today to the ICBA, Secretary Yellen today joined the parade of policy-makers affirming the national importance of community banks.

JEC GOP Counter FRB on SVB Causality

JEC Republican staff today released a memo finding that tailored liquidity rules did not contribute to SVB’s failure, a contrast to the FRB’s SVB report (see Client Report REFORM221).

LLPAs Set for GOP Frying Pan

The majority-staff memo for tomorrow’s Housing Subcommittee hearing makes it clear that, as anticipated, the sole topic will be FHFA’s controversial LLPAs and related GSE pricing.

Senate Banking: Tough Grilling For Failed-Bank CEOs, Growing Consensus For Clawback Bill/Tough Rules

As predicted, today’s Senate Banking hearing with the CEOs of SVB and SBNY was a feisty session in which Democrats built their case for executive clawback legislation and the failed bank executives defended management while repeatedly placing blame on what they called an “unprecedented series of events.”

Daily051623.pdf…

25 04, 2023

DAILY042523

Eliza Allen2023-04-25T17:12:43-04:00April 25th, 2023|2- Daily Briefing|

Stablecoin 2.0 Is Controversial 3.0

Ahead of Thursday’s stablecoin hearing, HFSC Republicans late yesterday released a second discussion draft of legislation that received a most equivocal response at last week’s subcommittee hearing (see Client Report CRYPTO42).

Treasury Finds Profitability to Blame for De-Risking

Treasury today released its 2023 De-Risking Report, finding that profitability principally explains why financial institutions choose to de-risk.

OFR: No Single Factor To Blame For 2019 Repo Spike

A new OFR paper on the September 2019 repo rate spike concludes that while a confluence of factors – large Treasury issuances, corporate tax deadlines, and lower levels of reserves – caused the crisis, none of them individually would have been disruptive enough to trigger the spike, although limited transparency and market segmentation exacerbated it.

Federal Agencies Launch New Anti-AI Enforcement Effort

The FTC, the Civil Rights Division of the DoJ, CFPB, and EEOC today released a joint statement pledging to enforce all relevant consumer protection, anti-discrimination, and fair competition laws not only on AI, but indeed also on all “automated systems” that the agencies believe to be within their jurisdictions.

HFSC Digital Assets Hearing Set For Jurisdictional Debate

Ahead of Thursday’s hearing on the latest stablecoin discussing draft, HFSC’s staff memo today reiterates GOP opposition to the SEC’s jurisdictional arguments.

ONRRP Revised

The Federal Reserve Bank of New York today revised the terms of access to the overnight reverse-repo program, adding financial stability and bank safety-and-soundness to monetary-policy implementation as ONRRP criteria for eligible counterparties …

13 04, 2023

FedFin Assessment: Implications Of An IRR Capital Charge, New Liquidity Rules

Arezou Rafikian2023-04-13T14:02:25-04:00April 13th, 2023|The Vault|

As we noted yesterday, the head of the Basel Committee has targeted two capital and liquidity compromises included in the current Basel III construct not addressed in the end-game rules to which the U.S. plans shortly to turn. Actions whether by Basel or, even without it, the U.S. to return to Basel’s initial proposals have significant strategic consequence. Thus, this report assesses these options and how the U.S. might act on them. We conclude that the U.S. will quickly impose a de facto interest-rate risk (IRR) capital charge and tighten LCR assumptions related to uninsured deposits.

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

13 04, 2023

IRR8

Eliza Allen2023-04-13T11:27:21-04:00April 13th, 2023|5- Client Report|

FedFin Assessment: Implications Of An IRR Capital Charge, New Liquidity Rules

As we noted yesterday, the head of the Basel Committee has targeted two capital and liquidity compromises included in the current Basel III construct not addressed in the end-game rules to which the U.S. plans shortly to turn. Actions whether by Basel or, even without it, the U.S. to return to Basel’s initial proposals have significant strategic consequence. Thus, this report assesses these options and how the U.S. might act on them. We conclude that the U.S. will quickly impose a de facto interest-rate risk (IRR) capital charge and tighten LCR assumptions related to uninsured deposits.

IRR8.pdf…

12 04, 2023

DAILY041223

Eliza Allen2023-04-12T17:20:45-04:00April 12th, 2023|2- Daily Briefing|

Hill Charts Different FDIC Course

In remarks today, newly-confirmed Republican FDIC Vice Chairman Travis Hill for the first time lays out his thinking ahead of a raft of FDIC decisions in SVB’s wake.

CFPB UDAAP Policy Now Effective

The Federal Register today includes the CFPB’s policy statement expanding the scope of the Bureau’s UDAAP framework, which is now effective upon this publication.

Scott Lays Out Housing Plan

In conjunction with advancing his Presidential campaign, Senate Banking Ranking Member Scott (R-SC) late yesterday announced his new federal housing framework via planned legislation, the Renewing Opportunity in the American Dream (ROAD) to Housing Act.

Basel Turns to Capital, LCR Revamp

The Basel Committee’s head, Pablo Hernández de Cos, today spoke out strongly against regulatory liberalization, implicitly criticizing the U.S. tailoring rules and urging jurisdictions to adhere tightly to Basel’s “multi-metric” standards given their proven value in the recent crisis.

Daily041223.pdf…

17 03, 2023

AI032023

Arezou Rafikian2023-03-17T16:53:34-04:00March 17th, 2023|3- This Week|

What A Week That Was

As the flood of FedFin reports, alerts, and client calls makes clear, the last ten days have not only been busy – they are a threshold moment. Now, U.S. and global bank regulation will proceed to much unfinished business after 2008 along with targeted changes to address hard lessons from SVB, SBNY, Credit Suisse, and broader market stress as this seems still to be evolving. FedFin is continuing to advise clients of each twist and turn in U.S. and global financial policy, but we are also stepping back to provide forward-looking in-depth reports as the shape of things to come becomes clear.

AI032023.pdf

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17 03, 2023

FedFin Assessment: Future of U.S. Bank Capital, Liquidity, Structural Regulation

Eliza Allen2023-03-17T16:50:38-04:00March 17th, 2023|The Vault|

In this report, we continue our policy postmortem of SVB/SBNY and, now, so much more. Prior reports have assessed the overall political context (see Client Report RESOLVE49) and likely changes to FDIC insurance (see Client Report DEPOSITINSURANCE118), with a forthcoming Petrou op-ed in Barron’s focusing on specific ways to reform federal deposit insurance to protect only the innocent. In this report, we look at some key regulatory changes likely as the banking agencies reevaluate the regional-bank capital, liquidity, and the IDI/BHC construct. As noted in our initial assessment and thereafter, we do not expect meaningful legislative action on the Warren, et. al. bill to repeal “tailoring” requirements, but we do expect bipartisan political pressure not just for supervisory accountability (see another forthcoming report), but also regulatory revisions.

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