Agencies End COVID-Related Servicer Flexibility
The Federal banking agencies, CFPB, NCUA, and state financial regulators today rescinded their April, 2020 joint statement providing supervisory and enforcement relief from certain timing requirements under the mortgage servicing rules.
Fed Ramps Up Worries, Outlines Preferred MMF Option
Late yesterday, the Federal Reserve released its most recent financial-stability report. As in its predecessor earlier this year (see Client Report SYSTEMIC91), this report takes a cautious view, counting on continuing bank resilience to counteract old worries, such as asset-price bubbles, along with containing at least some new fears. These now include meme-driven equity market volatility, Chinese leveraged debt, and emerging-market fragility. In this report, we assess the policy implications of the Fed’s findings without going into detail on data or methodology. Surprisingly, in light of the recent FSOC report (see Client Report GREEN11), climate risk is now less of a high-profile Fed systemic concern, with the Board saying its planned actions are “broadly aligned” with FSOC recommendations. Perhaps the most concrete remedy outlined in the report pertains to MMF resilience, with the Fed reiterating its preference for some form of swing pricing, minimum balances at risk, and/or capital buffers.
Global Regulators Set Anti-Greenwashing Standards
IOSCO’s board today issued a report targeting asset-management greenwashing. With this in hand, we expect the SEC soon to proceed on the like-kind ESG standards Chairman Gensler has prioritized as an action item (see Client Report INVESTOR19).
Gensler Reiterates Wide-Ranging Agenda, Push-Out Plans
As noted yesterday, the President’s Working Group on Financial Markets (PWG) was joined by the OCC and FDIC yesterday issuing a report calling for prompt Congressional action to regulate stablecoins and, even in its absence, also for fast action by federal regulators and the FSOC.
Senate LIBOR Bill Faces Partisan Dispute
Senate Banking’s hearing today on LIBOR transition led to the first public announcement of a Tester-Tillis bill akin to the Sherman measure (see FSM Report LIBOR6) along with a bipartisan consensus on the need for action, if not also on how to act. Chairman Brown (D-OH) said that he supports the as-yet-unintroduced bill, but that it must prevent what he called the willingness of big banks to use benchmarks to their own advantage.
A LIBOR Carrot?
Later this week, Senate Banking will finally hold a hearing on the LIBOR transition, giving both regulators and the market hope that it may take action on a companion to House legislation providing legal certainty for legacy contracts. As our in-depth analysis of that bill made clear (see FSM Report LIBOR6), the bill is a carefully-crafted, complex construct designed to reduce the uncertainties and litigation attendant to this tricky transformation of all outstanding contracts tied to LIBOR no matter its imminent end. We’ll be monitoring this hearing not only due to the critical importance of a smooth LIBOR transition that reflects market realities, but also because the hearing notice suggests the Banking Committee has concerns above and apart from the systemic risk that troubled their House colleagues: consumer and investor protection.
Fed Seeks Views on Primary-Dealer Status for Spain
Providing a sharp reminder of the limits of national treatment, the FRB today sought comment on the treatment of U.S. sovereign-bond dealers in Spain prior to allowing a Spanish financial institution to become a primary dealer.
IOSCO Sets Tougher Resilience Standards
IOSCO today issued new outsourcing principles for the securities market, tightening them in the wake of the COVID crisis to reflect new operational-resilience concerns.
Fed Stands by LIBOR Hard Stop
Building on Acting Comptroller Hsu’s tough talk yesterday, FRB Senior Vice President Nathaniel Wuerffel today reiterated that new inter-agency guidance sets a hard stop not only on new LIBOR exposures at year-end, but also on additional or longer exposures under an existing contract.
FTC Turns Data-Security Screws
Continuing the Administration’s campaign to govern nonbank financial companies, the FTC today unanimously approved a new data-safeguards rule governing nonbank financial institutions. The rule
McWilliams Positions Herself as Crypto Liberal Among Agency Skeptics
In remarks posted this morning, FDIC Chair McWilliams provided an update on the inter-agency “crypto sprint.” Ms. McWilliams made it clear that her intent is not to prohibit bank crypto activities but instead to govern them, announcing that a series of policy statements will be issued in “coming months.”
U.S. Adds Voice to Health/Finance G20 Construct
The U.S. Treasury has now joined other G20 finance ministers in calling for a new forum coordinating health and finance policy. The proposal was sparked by an earlier report from former government officials such as Larry Summers based on the need to ensure that all national and global resources are prepositioned to prevent the next pandemic.
Global Regulators Tackle Margining, CCP Resilience
Advancing an FSB priority most recently emphasized in the Board’s forward-looking plan, the Basel Committee, IOSCO, and the Committee on Payment and Market Infrastructures today invited comment on additional margining standards addressing problems identified in the March 2020 COVID crisis.
House Advances Open-Source Regulatory Data
The House late yesterday passed 400-19 the Financial Transparency Act (H.R. 2989), legislation reintroduced by Reps. Maloney (D-NY) and McHenry (R-NC) requiring the federal financial regulatory agencies to adopt data collection-and-distribution standards on format, searchability, and transparency.
OCC Stands Firm on LIBOR Transition, Supervisory Priorities
In remarks generally focused on LIBOR transition, Acting Comptroller Hsu today emphasized that the U.S. agencies fully intend to end LIBOR and “zombie LIBOR” as of year-end and that even banks that think …
Senate Dems Demand Facebook End Crypto Projects
Five Senate Democrats including Banking Chairman Brown (D-OH) late yesterday demanded that Facebook terminate its cryptocurrency (Diem) and digital wallet (Novi) projects, citing CEO Mark Zuckerberg’s 2019 HFSC testimony (see Client Report CRYPTO12) pledging not to launch financial products such as these without U.S. regulatory approval.
Banking Agencies, CFPB Do What They Can to Accelerate LIBOR Transition
Today, the Federal banking agencies and the CFPB, NCUA, and state regulators issued guidance yet again emphasizing their LIBOR transition expectations. This follows an OCC self-assessment tool to gauge transition readiness earlier this week and emphatic statements from the other agencies.
Quarles Takes FSB Victory Lap
Speaking as he heads toward the end of his term as FSB chair, FRB Gov. Quarles today applauded the FSB for all the work it did to ensure financial stability during the pandemic.
Fed Researchers Conclude U.S. Regulatory Perimeter More Permeable Than Ever
A new Fed staff note builds on a major recent research paper to assess the U.S. regulatory perimeter. It concludes that the debate between entity- and activity-based regulation is a “red herring” in the U.S., urging an “if you do, you are and because you are, you do” approach.
BIS Advances CBDC, Payments Projects
In remarks today, BIS Managing Director Carstens reinforced the benefits of ongoing global work to advance CBDCs, focusing in particular on the BIS Innovation Hub’s recent project on CBDC cross-border settlement and the retail-facing construct (see Client Report CBDC6) endorsed last week by the G7.
OCC’s Libor Assessment Addresses Benchmark Replacement
The OCC today provided national banks with an updated self-assessment tool to gauge their readiness for the end of LIBOR. While a self-assessment, the tool is also an important advisory as to issues about which examiners are likely to inquire.
FHFA Revises Refi Standards, Continues Capital and Mission Rewrite
In remarks today, Acting FHFA Director Thompson announced changes to the GSEs’ refi-underwriting standards aimed at expanding access for low- and moderate-income households.
White House climate Roadmap Revisits Past Destinations
Pursuant to President Biden’s Executive Order on climate financial risk (see FSM Report GREEN8), the White House today issued its roadmap to build a climate-resilient economy ahead of the Glasgow summit.
OCC Adds Climate-Risk, Fintech, Crypto to Supervisory Priorities
The OCC today released its bank supervision operating plan for FY22 incorporating several Biden Administration priorities with significant strategic impact for federally-chartered institutions.
Although the majority of FHA ARMs are now LIBOR-linked, HUD has been waiting for Congress, the Fed, or forces on high to help it set a new benchmark. Although deliverance may come, HUD has now taken the belated step of tentatively starting its own replacement-benchmark exercise. What it does how for whom will of course drive not just all FHA loans, but also the market as a whole.
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