#margining market – Federal Financial Analytics

17 04, 2024

DAILY041724

Eliza Allen2024-04-17T17:36:07-04:00April 17th, 2024|2- Daily Briefing|

Global Regulators Tackle NBFI Margining, Collateral Transformation

As it has long promised, the FSB today issued a consultation on standards designed to buttress derivatives, commodity, and securities-financing markets under stress through more stringent margining and collateral requirements.

Basel Head Says Go Slow re AI Risk, Supervisory Models

Basel’s Secretary General, Pablo Hernández de Cos, today focused on AI’s risk-reward profile in the banking sector, concluding that it raises a series of profound questions global regulators must work cooperatively to address.

Lummis, Gillibrand Begin Senate Stablecoin Debate

As long anticipated, Sens. Lummis (R-WY) and Gillibrand (D-NY) today introduced a significantly revised version of their 2022 Bill (see FSM Report CRYPTO28) laying out U.S. stablecoin standards.

FIO Subpoena Power Faces Rollback

At HFSC’s mark-up today, the committee began with Rep. Fitzgerald’s (R-WI) Insurance Data Protection Act, H.R. 5335, which would repeal the Federal Insurance Office’s authority to subpoena insurance companies for data collection.

HFSC Likely to Pass RegTech Bill

At HFSC’s extended mark-up today, the committee turned to H.R. 7437, a bipartisan bill that would require federal banking regulators to regularly review and report to Congress on their use of technology to ensure they’re equipped to address threats to the financial system.

HFSC Set to Pass AOCI Recognition, Systemic-Risk Designation Study Measures

Continuing our coverage of today’s mark-up, HFSC was generally supportive of the two bills on the agenda from Democrats, H.R. 4206 from Rep. Sherman (D-CA) requiring large banks with available for sale securities to mark to market …

14 02, 2024

DAILY021424

Eliza Allen2024-02-14T17:29:47-05:00February 14th, 2024|2- Daily Briefing|

Global Regulators Propose Ways to Limit Variation-Margining Stress

As promised, CPMI and IOSCO have issued a discussion paper on CCP and clearing-member variation-margin practices. The global agencies propose eight principles to enhance the likelihood that margins will be covered in stress situations, a continuing challenge based on a recent IMF paper finding that up to a third of EU active-derivatives users would not be able to meet variation-margin calls under stress and would thus turn to liquidating MMF shares or other assets in a manner likely to amplify market stress.

HFSC Deploys Power of the Purse to Pressure FinCEN

As anticipated, today’s HFSC hearing with Treasury and FinCEN was highly partisan, with Republicans continuing to blast FinCEN for what they call SAR surveillance and now threatening to block any increased funding for FinCEN until it also improves beneficial-ownership reporting to the GOP’s liking. Rep. Loudermilk (R-GA) also criticized FinCEN for failing to release the statutorily-mandated BSA review and the $10,000 threshold review.

Barr Sees Banking System as Strong, Liquid

In remarks today, FRB Vice Chair Barr emphasized that, despite pockets of risk and CRE worries, the banking system is sound and he sees no liquidity-risk concerns across the financial system. Still, March 2023 taught hard lessons, he said, with banks since taking significant steps to reduce HTM holdings and enhance liquidity resilience.

Daily021424.pdf…

16 01, 2024

DAILY011624

Eliza Allen2024-01-16T16:33:43-05:00January 16th, 2024|2- Daily Briefing|

Waller Raises Stakes for End-Game Finalization

Going beyond his longstanding critique of the end-game rules, FRB Gov. Waller today reflected industry comments and litigation plans, saying that he now thinks the proposal needs a “major overhaul” or should be withdrawn and reissued. As we noted in our recent 2024 outlook, Gov. Bowman will surely side with this view, but Chair Powell holds the gavel when it comes to the end-game outcome at the Federal Reserve. Mr. Waller also is personally opposed to the pending rewrite of debit-card interchange fees (see FSM Report INTERCHANGE12) because it forces the Fed to pick winners and losers.

Global Regulators Try Transparency as Cure to CCP-Margin Risk

The Basel Committee, CPMI, and IOSCO today released a long-planned consultation on CCP and clearing-member margining practices. These are designed to limit the volatile and potentially-systemic liquidity stresses due to margining practices evident in 2020 and again after the Ukraine invasion, with the extent to which these further shift cost burdens from CCPs to clearing members their most controversial aspect. Largely focused on transparency, the new approach would require CCPs to provide clearing members with margin-simulation tools that members would then make available to end-users to enhance margin-call preparedness.

Daily011624.pdf…

16 11, 2022

DAILY111622

Eliza Allen2022-11-16T17:14:29-05:00November 16th, 2022|2- Daily Briefing|

Treasury Calls for Tough Fintech and Bank-Partnership Protection, Prudential Standards

Treasury has completed a long-pending study of the extent to which nonbank fintechs compete with banks and how this affects financial stability and consumer protection. We will shortly provide clients with an in-depth analysis of this report, for which Karen Petrou was extensively interviewed as now noted publicly in the appendix. The report was ordered by the Secretary in compliance with President Biden’s competition order (see Client Report MERGER6), finding that nonbank fintechs directly compete with banks and thus may reduce current concentration levels, sure to influence the inter-agency bank-merger policy that remains to be finalized.

Williams Presses for NBFI Standards

In remarks today, FRB-NY President John Williams said that the central bank should not adjust monetary policy to address the price-stability challenges of volatile Treasury markets and that financial-stability questions have generally been well-addressed as evident in the sound U.S. banking system. Noting recent findings in the latest staff report (see Client Report TMARKET3), Mr. Williams also called for structural changes to NBFIs along lines also laid out by the FSB (see Client Report NBFI2), arguing that MMFs and other NBFIs must be a market source of strength, not of vulnerability requiring rescue beyond the Fed’s new standing facility.

G20 Blesses FSB, Basel Work Plans

In addition to top-priority concerns such as Ukraine, the G-20 Leader’s Declaration today tackled the usual financial-policy agenda, supporting the FSB’s recent NBFI report (see Client …

14 11, 2022

FedFin on: Treasury Inches Closer to All-to-All Trading

Arezou Rafikian2022-11-14T16:01:03-05:00November 14th, 2022|The Vault|

Building on our initial assessment, this report goes in-depth into the Treasury assessment of the market for its obligations and reforms necessary to avert another dash for cash. Although the Federal Reserve, which participated in this study along with other agencies, indicated in 2020 it will review the supplemental leverage ratio (SLR) to…

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

14 11, 2022

TMARKET3

Eliza Allen2022-11-14T15:46:49-05:00November 14th, 2022|5- Client Report|

Treasury Inches Closer to All-to-All Trading

Building on our initial assessment, this report goes in-depth into the Treasury assessment of the market for its obligations and reforms necessary to avert another dash for cash. Although the Federal Reserve, which participated in this study along with other agencies, indicated in 2020 it will review the supplemental leverage ratio (SLR) to enhance bond-market liquidity, it has yet to do so and no mention is made of any such reform in this report. To be sure, this is only a Treasury report that does not necessarily reflect the views of these other agencies, but the Fed and Treasury usually work closely on matters such as this and it seems unlikely that the matter would go unmentioned if plans were under way to revise the SLR. The 2022 report builds on the inter-agency working group’s 2021 analysis (see Client Report TMARKET2) but still does not reach firm conclusions or lay out specific recommendations suitable for near-term action. However, work is in fact under way at the SEC, which has proposed a new central-clearing mechanism for Treasury obligations that, if finalized, would create at least some of the infrastructure necessary for the all-to-all trading this report now explores in greater detail. Next steps for Treasury-market reform will be discussed at a conference later this week.

TMARKET3.pdf…

14 11, 2022

FedFin on: Global Regulators Prioritize CCP, End-User Resilience

Arezou Rafikian2022-11-14T16:00:23-05:00November 14th, 2022|The Vault|

As promised, this FedFin report provides an in-depth analysis of the FSB’s latest policy on nonbank financial intermediation. As is often the case, much in the report discusses data gaps, presses for international cooperation, and details FSB and national work to date on the issues identified in its initial analysis after the 2020 crisis (see FSM Report NBFI). Most of FSB’s work since has focused on MMFs (see FSM Report MMF18), with this latest report going on to lay out ….

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

14 11, 2022

NBFI2

Arezou Rafikian2022-11-14T12:16:04-05:00November 14th, 2022|5- Client Report|

Global Regulators Prioritize CCP, End-User Resilience

As promised, this FedFin report provides an in-depth analysis of the FSB’s latest policy on nonbank financial intermediation. As is often the case, much in the report discusses data gaps, presses for international cooperation, and details FSB and national work to date on the issues identified in its initial analysis after the 2020 crisis (see FSM Report NBFI). Most of FSB’s work since has focused on MMFs (see FSM Report MMF18), with this latest report going on to lay out more specific policy options for OEFs, margining, core bond markets, and other target areas. The report also calls for attention to systemic NBFI concerns, noting risks at family offices, prime brokers, life insurers, and pension funds, as well as “hidden leverage” without discussing what might best be done about them.

NBFI2.pdf…

10 12, 2021

Daily121021

Arezou Rafikian2023-05-23T12:44:10-04:00December 10th, 2021|2- Daily Briefing|

FRB Stipulates Archegos-Risk Remedies
As forecast when Archegos broke (see Client Report HEDGE59), the FRB today issued new, tough guidance detailing its supervisory expectations for large-bank exposures to investment funds.

FSB Advances Cross-Border Payment Revamp
Building on its new cross-border payment policy (see FSM Report PAYMENT23), the FSB today sought comment on how national and regional data frameworks affect the cost, speed, access, security, and the interoperability of cross-border payments.

Aborted Merger Paper Hits Partisan Battle Lines
Following yesterday’s battle over an RFI on bank mergers, senators are squaring off on both process and policy. Banking Chair Brown (D-OH) agreed with it, arguing that what he calls M&A “rubber stamping” hurts communities and creates banking deserts.

Waters Demands Regional-Bank Merger Moratorium
Uping the ante on bank mergers after the FDIC fracas over an RFI, HFSC Chairwoman Waters (D-CA) late this afternoon called on the FRB, OCC, and FDIC to hold all M&A over $100 billion until completion of this review, one under way by the FRB and Department of Justice, and any similar OCC assessments.

Daily121021.pdf…

1 11, 2021

Daily110121

Arezou Rafikian2023-06-05T10:37:24-04:00November 1st, 2021|2- Daily Briefing|

FSB Presses NBFI Analysis, Bank Inter-Connectedness
The FSB today updated its late-2020 paper on nonbank financial intermediaries (see Client Report NBFI), largely reiterating the reasons it then said that global regulators need to act without indicating any actual action beyond its recent MMF Principals (see FSM Report MMF18) and work focused on margin calls.

HFSC Dems: BNPL, Other Fintech Products Present Consumer-Protection Risks
Ahead of its Fintech Task Force hearing tomorrow examining buy-now, pay-later and other fintech cash-flow products, HFSC’s majority staff memo indicates Democrats have significant consumer-protection concerns although no immediate solutions to address them.

PWG Slams Stablecoins, Agencies Outline Action Plan
The President’s Working Group today spearheaded an inter-agency report on stablecoins that, as anticipated, takes a very dim view of this form of cryptography outside the regulatory perimeter. As we will detail shortly in an in-depth analysis, the report lays out a litany of systemic, compliance, trading, and consumer concerns, noting in particular key gaps when it comes to the payment system.

Fed Study Shows Macro Impact of Fed Muni Backstop
A new FRB-NY Staff paper looks at the Fed’s municipal-debt backstop, concluding that it served not only as a generic muni-market stabilizer, but also as a credit risk-share facility for low-rated issuers that supported municipal employment at the worst of the crisis.

Daily110121.pdf…