#LIBOR

Home/Tag:#LIBOR
6 02, 2023

DAILY020623

2023-02-06T16:57:16-05:00February 6th, 2023|2- Daily Briefing|

FRB-NY Confirms Regional-Bank Struggle Following LIBOR Transition

A new Federal Reserve Bank of New York staff study and blog post reaffirms many regional-bank fears about the LIBOR transition not fully allayed by compromise provisions in the Fed’s recent benchmark-setting regulation (see FSM Report LIBOR9).  Focusing on the credit-line sector (which is largely unfunded), the paper finds that the likely cost of bank wholesale funding under stress will sharply exceed that earned on corporate-line drawdowns priced to SOFR, with these spreads likely especially wide for regional banks.  The paper’s models and data thus lead to the conclusion that the shift to SOFR will decrease line availability.

Barr Prioritizes Privacy, Small-Bank Capital, FSOC Restraints

A new staff memo provides not only the agenda for Wednesday’s House Financial Institutions & Monetary Policy Subcommittee, but also the priorities Chairman Barr (R-KY) will pursue with regard to financial regulation.  Key concerns are encouraging fintech, data privacy (a priority issue also for Chairman McHenry), facilitating de novo charters, and holding the banking agencies accountable.  Bills on which a record will be established is one yet to be introduced to revise the Gramm-Leach-Bliley Act’s privacy standards to stipulate federal preemption, expand coverage and give consumers rights akin to those now also under consideration by the CFPB for a limited number of banking activities (see FSM Report DATA3).

Daily020623.pdf

26 01, 2023

DAILY012623

2023-01-26T16:44:02-05:00January 26th, 2023|2- Daily Briefing|

Effective Date Set for LIBOR Termination

The Federal Register today includes the FRB’s final rule Implementing the Adjustable Interest Rate (LIBOR) Act, setting the rule’s effective date as February 27.  As noted (see FSM Report LIBOR9), the final rule settles many LIBOR transition questions in favor of SOFR, leaving numerous complex implementation questions  up in the air despite this added certainty.

Fed Study Finds Card Rewards Result in $15 Billion Wealth Transfer

A new Federal Reserve staff study finds that credit-card rewards annually redistribute approximately $15.1 billion a year to more financially-sophisticated consumers.  This result is likely to weigh heavily into debate later this year if, as we expect, Sen. Durbin (D-IL) reintroduces legislation to force card-routing alternatives to Visa and Mastercard (see FSM Report INTERCHANGE10).

ISDA Lays Groundwork for Crypto Rules, Law

The self-regulatory body for global derivatives, ISDA, today released a contractual framework for digital-asset derivatives.  These are now likely to be widely adopted by major financial institutions but may not resolve legal-ownership issues when cryptoasset entities use intermediaries or other avenues into global capital markets that obscure contractual rights.

Daily012623.pdf

3 01, 2023

DAILY010323

2023-01-03T16:56:20-05:00January 3rd, 2023|2- Daily Briefing|

Update re U.S. LIBOR Standards

In case you missed it, we want to alert you to one of FedFin’s time-critical reports that was sent over  the holidays:  LIBOR9, which details the Fed’s new alternate benchmarks as even harder bargaining over legacy contracts begins early this year.  As we note, the final rule is a faithful reiteration of much of what was in the law mandating it (see FSM Report LIBOR7), narrowing the range of disputes over who wins or loses via which benchmark replacement may or may not be contractually authorized.

US Agencies Raise Red Flag Before Crypto Exposures

Starting the New Year off with a crypto bang, the federal banking agencies today issued a very cautionary statement reiterating and broadening the risks attendant to crypto activities and the care banks need to take conducting them.  The statement also promises additional action, which we think very likely to include U.S. versions of the stringent new Basel standards.  We will shortly send clients our in-depth analyses of this global policy which now erects a strong firewall between banking organizations and all but the most carefully-structured, regulated cryptoasset exposures or activities.

Daily010323.pdf

30 12, 2022

Al010223

2022-12-30T12:27:06-05:00December 30th, 2022|3- This Week|

Warming up for 2023

The last thing another pandemic-saddled holiday season needed was a nation-wide winter weather event and major airline cataclysm, but a year that brought us the Ukraine war and inflation levels not seen since the 1980’s was sure to sign off with a bit of chaos.  We hope you were still able to celebrate and aren’t missing any luggage.  Despite it all, global and U.S. financial regulators advanced many significant issues through the holidays.  To help you catch up, here’s a round-up of what we sent over the past two weeks sure to come immediately into focus as critical issues advance:

Al010223.pdf

28 12, 2022

LIBOR9

2023-01-03T14:18:55-05:00December 28th, 2022|1- Financial Services Management|

Legacy-Contract LIBOR Replacement Benchmarks

Shortly before its statutory year-end deadline, the Federal Reserve finalized its proposal defining legacy-contract benchmarks when there is no clear, practicable contractual fallback rate.

LIBOR9.pdf

19 12, 2022

FedFin on: FSOC Targets Usual Suspects but Also Points to Big-BHC, Nonbank Mortgage Systemic Risk

2023-01-03T15:56:33-05:00December 19th, 2022|The Vault|

As promised, this FedFin report provides an in-depth analysis of FSOC’s 2022 annual report, focusing on findings with near-term policy implications.  As always, the report is lengthy and includes many observations and market details that provide insight into Treasury and member-agency-staff thought.  Much in it reiterates concerns about short-term funding markets, CCPs, and….

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

19 12, 2022

FSOC28

2022-12-19T13:00:38-05:00December 19th, 2022|5- Client Report|

FSOC Targets Usual Suspects but Also Points to Big-BHC, Nonbank Mortgage Systemic Risk

As promised, this FedFin report provides an in-depth analysis of FSOC’s 2022 annual report, focusing on findings with near-term policy implications.  As always, the report is lengthy and includes many observations and market details that provide insight into Treasury and member-agency-staff thought.  Much in it reiterates concerns about short-term funding markets, CCPs, and investment funds (with FSOC for the first time urging regulators to look not only at MMFs and OEFs, but also at collective investment vehicles).  As previously noted, the report is relatively sanguine about digital-asset systemic risk but, also reiterates findings in FSOC’s report (see Client Report CRYPTO33) demanding rapid action on a raft of reforms in this high-risk sector.  What surprised us is the discussion of large BHCs, which departs from longstanding Fed and FSOC comfort in the post-GFC regulatory regime for this sector.

FSOC28.pdf

16 12, 2022

DAILY121622

2022-12-16T17:19:37-05:00December 16th, 2022|2- Daily Briefing|

GHOS Presses Speedy Bank-Crypto Capital Standards

Basel’s governing body, the Governors and Heads of Supervision, today endorsed the Committee’s planned work schedule.

Fed Finally Finalizes LIBOR Transition Regs

Narrowly ahead of its year-end statutory deadline, the Federal Reserve today issued a final version of its detailed proposal (see FSM Report LIBOR8) to implement the LIBOR Act’s provisions on replacement rates for existing contracts without fallback language (see FSM Report LIBOR7).

Regulators Highlight P2P, Crypto, NBFI Risks at FSOC Meeting

Although most of the FSOC’s discussion today of the LIBOR transition and climate risks was perfunctory, comments on the now-released 2022 Treasury annual report were not.

McHenry, Davidson Point to Forex-Clearing Systemic Risk

Picking up a recent BIS report finding at least $65 trillion at risk in off-balance sheet foreign-exchange clearing, incoming HFSC Chairman McHenry (R-NC) and the top Republican on the panel’s fintech task force, Rep. Warren Davidson (R-OH), called on Fed Chairman Powell and Secretary Yellen to investigate what they consider a looming risk to U.S. financial stability.

Chopra Presses Cloud-Service Provider, Stablecoin Systemic Designation

CFPB Chairman Chopra’s written statement for the FSOC meeting is considerably different than the oral one described in our earlier client alert.

Daily121622.pdf

19 10, 2022

DAILY101922

2022-10-20T17:16:10-04:00October 19th, 2022|2- Daily Briefing|

CFPB Brings Older Adults Into Fair-Fee Focus

Following yesterday’s enforcement action and furthering its “fair-fee” policy agenda (see FSM Report CONSUMER38), the CFPB today published an Issue Brief on overdraft fees and economically-insecure older adults.

HUD Advances LIBOR Replacement As Deadline

Following its ANPR on replacing LIBOR last year, HUD today published a proposed rule to remove LIBOR as an approved index for forward ARMs and reverse mortgages, replacing it with SOFR.  For existing ARMs, HUD proposes to establish a spread-adjusted SOFR index to transition from LIBOR, with a lifetime five percent interest-rate cap for monthly adjustable rate reverse mortgages.

House Republicans Question PayPal’s Content Fine Mistake

Following revelations that PayPal had temporarily imposed a penalty fee on certain content, HFSC Ranking Member McHenry (R-NC), Energy and Commerce Ranking Member Rodgers (R-WA), and Reps. Emmer (R-MN) and Griffith (R-VA) sent a letter to PayPal CEO Dan Schulman requesting more information about PayPal mistakenly updating its Acceptable Use Policy to include a fine for sharing “objectionable” messages on the platform.

Fed Study Finds Little Evidence of Discrimination in Mortgage Lending

A new Fed study on racial bias in mortgage lending finds little evidence of discrimination, concluding instead that disparities in observable applicant risk explain most racial denial disparities.  The study uses confidential HMDA supervisory data from 2018-2019 that controls for credit scores, DTI, and LTV on top of automated underwriting systems (AUS) recommendations.

Daily101922.pdf

29 07, 2022

AL080122

2023-01-04T13:39:09-05:00July 29th, 2022|3- This Week|

No Summer Sojourn

As noted later in this weekly, Congress is almost completely out of town this week in one sense – the House is all the way gone and most Senate committees are clearing up old business.  We expect Senate Banking’s civil-rights hearing to be ornery and the others to be mostly rhetorical, but neither this nor the other evidence of seeming somnolence means nothing much will happen in August.

AL080122.pdf

Go to Top