#LTD – Federal Financial Analytics

21 09, 2023

DAILY092123

Eliza Allen2023-09-21T16:52:36-04:00September 21st, 2023|2- Daily Briefing|

Hill Stands by Opposition to Pending Rules, Presses for Holistic Liquidity Approach

Reflecting his votes on all of the recent proposals, FDIC Vice Chairman Hill today criticized recent rulemakings as an overreaction to March bank failures and urged regulators to carefully consider the proposals’ aggregate effects amid uncertain economic conditions. Although he reiterated his general support for the LTD proposal (see FSM Report TLAC9), Mr. Hill argued that the FDIC should focus more on regional bank resolvability via a weekend sale. He also pushed for a more holistic approach to liquidity requirements, arguing that they should be more durable for a wider range of stress events and better reflect bank behavior in times of stress.

Daily092123.pdf…

19 09, 2023

DAILY091923

Eliza Allen2023-09-19T18:11:29-04:00September 19th, 2023|2- Daily Briefing|

FSB Finally Takes Concrete CCP-Resolution Action

Following longstanding announcements that it would advance CCP resolvability, the FSB today released a consultative report recommending a toolbox approach to CCP resolution providing sufficient loss absorption and liquidity that is readily available and mitigates adverse effects on financial stability.

Treasury Advances Climate-Risk Principles, Not Mandates

Cautiously advancing the President’s climate-risk order (see FSM Report GREEN8), Treasury today released nine nonbinding principles for net-zero financing and investment encouraging financial institutions to focus on limiting scope 3 emissions by implementing robust net-zero transition plans.

CFPB Expands AI Crackdown

Expanding on last year’s adverse action guidance (see FSM Report FAIRLEND11), the CFPB today issued a circular stating that lenders – especially those using AI – cannot use CFPB sample adverse actions forms and checklists to deny consumers credit if the samples do not accurately portray the reasoning behind the denial.

HFSC Republicans Expand Attack From Capital to LTD Rules

Today’s HFSC Financial Institutions Subcommittee hearing on the economic consequences of the banking agencies’ slate of recent proposals showcased strong Republican concerns.

Daily091923.pdf…

15 09, 2023

Al091823

Eliza Allen2023-09-15T16:53:45-04:00September 15th, 2023|3- This Week|

Let It Be Resolved…

Or, maybe not. As detailed below, FedFin has delved into the depths of three new proposals designed to ensure that any big U.S. bank that isn’t made still more impregnable by all the new rules proposed and to come is also indestructible. Karen Petrou has written about the wisdom – if there is any – of making big banks de facto utilities, but this will occur only if all of the new rules work as intended. We’ve had our doubts about that with regard to recent proposals, and our review of the new resolution proposals raises still greater concerns.

Al091823.pdf…

8 09, 2023

Al091123

Eliza Allen2023-09-08T16:03:06-04:00September 8th, 2023|3- This Week|

We’re Flummoxed

FedFin’s in-depth analyses continue to plumb the strategic import of the post-SVB regulatory rewrite U.S. agencies have initiated and are determined to finish no matter industry and Congressional concern. As with our impact assessment of the capital proposal (see FSM Report CAPITAL230), our resolution-standard analyses look at key strategic points in what the agencies say they are doing and then also at what they leave out, what seems not to make as much sense as the agencies suggest, and where the sanguine impact analyses that always accompany these proposals may be at fault.

Al091123.pdf…

7 09, 2023

FedFin on: Living-Will Requirements

Arezou Rafikian2023-09-07T16:39:01-04:00September 7th, 2023|The Vault|

In conjunction with proposing a new long-term debt (LTD) requirement for categories II, III, and IV banks, the Fed and FDIC are pursuing other ways to enhance resolvability. Among these is new guidance for large domestic and foreign banking organizations that requires U.S. banking organizations and foreign banking organization (FBO) intermediate holding companies (IHCs) along with all their insured depositories when any is over $100 billion to file resolution plans. These are also redesigned to make the plans much closer in substance to those mandated for GSIBs.

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

7 09, 2023

LIVINGWILL22

Eliza Allen2023-09-07T16:03:26-04:00September 7th, 2023|1- Financial Services Management|

Living-Will Requirements

In conjunction with proposing a new long-term debt (LTD) requirement for categories II, III, and IV banks, the Fed and FDIC are pursuing other ways to enhance resolvability. Among these is new guidance for large domestic and foreign banking organizations that requires U.S. banking organizations and foreign banking organization (FBO) intermediate holding companies (IHCs) along with all their insured depositories when any is over $100 billion to file resolution plans. These are also redesigned to make the plans much closer in substance to those mandated for GSIBs. However, in a leading indicator of what the FRB is also likely to demand of GSIBs, smaller companies would be required to ensure severability – that is, the ability to cut off a weak limb to save the rest of the banking organization or ensure ready resolution without undue cost to the FDIC or systemic risk. However, easing one aspect of current planning, banking organizations are expressly allowed to count on use of discount-window or other Fed lending facilities to avert failure if – and this is a significant new if – the plan rests atop sound collateral valuation and data-management systems.

LIVINGWILL22.pdf…

6 09, 2023

TLAC9

William Cross2023-09-06T15:59:28-04:00September 6th, 2023|1- Financial Services Management|

Long-Term Debt Requirements

Building on an advance notice of proposed rulemaking, the banking agencies have issued several proposals to enhance the resolvability of large banking organizations not covered by stringent GSIB standards. Among these is a proposal mandating long-term debt (LTD) to increase regional-bank total loss-absorbing capacity (TLAC) and, the agencies believe, reduce resolution costs and/or increase the FDIC’s options, thus avoiding the systemic designation and costly resolutions that occurred for regional banks earlier this year. The LTD requirements for category II, III, and IV banking organizations do not go as far as those mandated for GSIBs, based instead exclusively on a “capital-refill” construct in which eligible LTD is issued in amounts the agencies believe sufficient to provide enough capital-equivalent funding to achieve the proposal’s expected results.

TLAC9.pdf…

6 09, 2023

FedFin on: Long-Term Debt Requirements

Arezou Rafikian2023-09-07T16:38:46-04:00September 6th, 2023|The Vault|

Building on an advance notice of proposed rulemaking, the banking agencies have issued several proposals to enhance the resolvability of large banking organizations not covered by stringent GSIB standards. Among these is a proposal mandating long-term debt (LTD) to increase regional-bank total loss-absorbing capacity (TLAC) and, the agencies believe, reduce resolution costs and/or increase the FDIC’s options, thus avoiding the systemic designation and costly resolutions that occurred for regional banks earlier this year. The LTD requirements for category II, III, and IV banking organizations do not go as far as those mandated for GSIBs, based instead exclusively on a “capital-refill” construct in which eligible LTD is issued in amounts the agencies believe sufficient to provide enough capital-equivalent funding to achieve the proposal’s expected results.

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