#NAIC

18 12, 2023

FSOC29

2023-12-18T11:36:07-05:00December 18th, 2023|5- Client Report|

FedFin Assessment: FSOC Worries A Lot, Watches, Waits

This year’s FSOC report trods much old ground with two exceptions.  The first pertains to a new focus on artificial intelligence, machine learning, and new, generative technologies.  That said, the report does little beyond highlight this risk and include it among all the others federal agencies are told to monitor.  Private credit now also alarms FSOC, with insurance company investment in this sector of particular systemic concern in concert with the sectors’ CRE and junk-bond exposures, offshore reinsurance, and PE ownership.  As detailed in this report, banks are found to be resilient and have ample capital even as the report supports consideration of pending regulatory revisions.  Banking agencies are also asked to monitor uninsured-deposit levels and assess run-risk in light of social media and other accelerants.  In sharp contrast to more alarmist statements in the past and extensive Treasury reports (see Client Report CRYPTO32), this year’s report downplays cryptoasset risk because federal regulators are said to have taken steps to contain it.  The report also reiterates FSOC’s continuing focus on cyber and climate risk, with the closed session preceding the meeting considering a framework being developed by the OCC to measure and monitor financial risks and bank exposures.  Agencies are also encouraged to pursue comparable, “decision-useful” climate disclosures.  The LIBOR transition is considered a success and no longer poses a systemic risk.

FSOC29.pdf

23 08, 2022

DAILY082322

2023-01-04T10:40:24-05:00August 23rd, 2022|2- Daily Briefing|

Life Insurers Depend on FHLB Advances for Stress Liquidity, Long-Term Funding

Reflecting longstanding fears about life-insurance run-risk (see Client Report SYSTEMIC92), a new research note from the Federal Reserve finds that life insurers were quick to establish liquidity buffers when Covid hit in 2020, largely doing so via FHLB advances and interest-rate derivative margins.

JEC Financial Inclusion Report Calls for Postal Banking, Crypto Regulation

The Joint Economic Committee yesterday afternoon released a report on the barriers that people of color and low-income communities face accessing financial services, concluding that traditional banks discriminate, new nonbank offerings may prove predatory, and policy solutions are essential.

OFR: Lower-Risk Hedge Funds Lead to Higher Treasury-Market Stress

A new OFR working paper finds that changes in aggregate hedge fund exposures are related to Treasury yield changes in economically and statistically significant ways, with managed futures and multi-strategy funds having the highest impact on Treasury prices.

FHFA Advances Equity Campaign with New Committee

Building on its equitable housing campaign, FHFA today announced an advisory committee on affordable, equitable, and sustainable housing.  It will provide analysis focused on Fannie, Freddie, and the FHLBs in areas such as the barriers to and need for regulatory or policy changes to expand affordable, equitable, and sustainable housing.

Daily082322.pdf

5 08, 2022

DAILY080522

2023-01-04T13:22:18-05:00August 5th, 2022|2- Daily Briefing|

Senate Dems Demand Answers from Equifax re Inaccurate Credit Scores

In a letter today to Equifax’s CEO, Sens. Warren (D-MA), Warner (D-VA), and Krishnamoorthi (D-IL) demanded answers about erroneous credit scores, asking why the company failed to notify affected borrowers and waited several weeks to notify lenders.  The Senators claim that Equifax’s response in an environment of rising interest rates forced some borrowers to pay higher rates or rejection and ask Equifax to explain the cause and scope of the error, compensation plans, and whether all affected parties or any relevant regulatory authorities have been notified.

Brown Targets Life-Insurance Systemic Risk

Senate Banking Chairman Brown (D-OH) today announced that he plans a hearing questioning the role of private-equity companies in the life-insurance sector.  In letters to FIO and the NAIC, he cites Federal Reserve statements regarding insurance-industry leverage (see Client Report SYSTEMIC93), indicating that he believes this poses systemic challenges akin to those in the banking sector before 2008.  FIO is asked to target analysis of offshore reinsurance sector risk-taking across the life-insurance sector; NAIC is asked to work with the FIO on issues raised in its prior letter to the chairman.

Daily080522.pdf

2 06, 2022

DAILY060222

2023-02-10T16:10:34-05:00June 2nd, 2022|2- Daily Briefing|

Fed Study Outlines Fixes to Make Retail CBDC Functional

A new Federal Reserve paper assesses the interplay between a U.S. retail CBDC and monetary policy transmission if whatever the Fed comes to offer is widely adopted for both payment and investment purposes.

Black Crypto Investments Reflect Wealth Gap Born of Financial System Distrust

A new article by the Kansas City Fed investigates the popularity of cryptoassets among Black investors and explains what may attract them and how this is a symptom of the racial wealth gap.  The study found that Black investors are both more likely than whites to own crypto instead of safer assets such as stocks and mutual funds and more likely to expect high returns (i.e., 27 percent for Blacks versus 15 for whites) from crypto.

Fed Study Finds Enforcement Actions Increase Minority Lending

study today released by the Fed found that, since 1997, banks subject to an enforcement action increased their mortgage lending to minorities and decreased minority denial likelihood, even if the action was not issued for violation of the fair-lending laws.

FIO Prioritizes Biden Climate-Risk Goals

The meeting today of FIO’s Federal Advisory Committee on Insurance focused on FIO’s work to meet the goals set out for it in the President’s climate-risk executive order (see FSM Report GREEN8).

Daily060222.pdf

Go to Top