#NBFI

4 01, 2024

NBFI3

2024-01-04T10:30:14-05:00January 4th, 2024|1- Financial Services Management|

NBFI Data Reporting

The banking agencies have proposed significant changes to call-reporting data illuminating how banking organizations are inter-connected with nonbank financial intermediaries and to implement pending requirements for long-term debt (LTD) issuance.1 New NBFI transparency is likely to result in additional supervisory scrutiny and market discipline.

NBFI3.pdf

3 01, 2024

DAILY010324

2024-01-03T16:38:18-05:00January 3rd, 2024|2- Daily Briefing|

EBA Plans Full-Bore NBFI Crackdown

We will shortly provide clients with an in-depth analysis of notable changes to call reporting released for comment late last year.  Today’s Financial Times interviews José Manuel Campa, the chair of the European Banking Authority (EBA), whose comments on NBFIs make it clear that, as we expected, the U.S. action is part of a broader global push to map bank/NBFI interconnections and then curtail them.  The EBA is also planning to stress-test these interconnections, a move we expect also from the Fed when it moves forward on Vice Chair Barr’s multi-scenario test plans.

Women Do Too Know

The Federal Reserve Board this week has issued a staff note finding that the so-called financial literacy gender gap is largely driven by study design, not gender differences in financial literacy.  This has considerable implications for many financial-literacy programs now specifically targeted to women.  The note finds that women are much more likely than men to utilize the “don’t know” choice even though men and women actually respond incorrectly at similar rates.

Daily010324.pdf

29 12, 2023

Al010124

2023-12-29T10:35:55-05:00December 29th, 2023|3- This Week|

Federal Financial Analytics’ Weekly report will be abbreviated this week due to the holidays. In-depth analyses of weekly developments as well as Karen Petrou’s weekly memo will return next week. All of us at FedFin wish you a happy New Year.

Al010124.pdf

27 12, 2023

Daily122723

2023-12-29T10:36:38-05:00December 27th, 2023|2- Daily Briefing|

Banking Agencies Drill Down on NBFI Exposures

Reflecting a raft of FSOC recommendations (see Client Report FSOC29) and those from global regulators, U.S. banking agencies have proposed significant call-reporting changes gathering more data on bank/NBFI inter-connections.  Newly-granular data break-outs are proposed for credit exposure to numerous NBFIs (e.g., PEs, insurance companies, mortgage intermediaries) from banks with over $10 billion.  The agencies justify this by the sharp spike in NBFI credit exposures from 0.8 percent of reported credit to 6.4 percent of respondent data in June of this year (a number we expect downplays far larger concentrations at the nation’s biggest banks).  Granular data on off-balance sheet exposures to NBFIs would also be required along with new IDI reports on long-term debt – a proposal presumably intended to backstop the proposed LTD standards (see FSM Report TLAC9).  We will shortly review the release to determine if in-depth analysis is helpful; comments are due by February 26.

Daily122723.pdf

18 12, 2023

DAILY121823

2023-12-18T17:12:20-05:00December 18th, 2023|2- Daily Briefing|

House Dems Press Tax-Equity Bond Capital Fix

Emphasizing their strong support for the capital proposals, 107 Democratic lawmakers led by Rep. Sean Casten (D-IL) have sent a letter to Chair Powell, Chair Gruenberg, and Acting Comptroller Hsu again asking for revised treatment for clean energy tax-equity bonds.

Updated GSIB Indicator Amounts Now Effective

The Fed today published updated Aggregate Global Indicator Amounts pursuant to its GSIB surcharge rule (see Client Report GSIB5).

FSB Finds U.S. NBFI Assets Continue to Dwarf Banks

The FSB today released its 2023 Global NBFI monitoring report, finding that NBFIs continue to hold a larger percentage of financial assets than banks in the U.S.

DOJ/FTC Stand Firm on New Anti-Concentration Merger Policy

Justice and the FTC today released the final version of new merger guidelines, softening but not clearly weakening the agencies’ draft (see FSM Report MERGER12).

Warren, Allies Attack Hsu’s Preemption Policy

Making it clear that Acting Comptroller Hsu will have challenges from Democrats should the White House ever nominate him as Comptroller, seven Democrats led by Sen. Warren (D-MA) sent him a letter today accusing the agency of overstepping and abusing its preemption authority.

McHenry Asks CFPB to Change Open-Banking Secondary Data Approach

HFSC Chairman McHenry (R-NC) today sent a comment letter to CFPB Director Chopra reiterating the support expressed at a recent hearing (see Client Report CONSUMER53), for the agency’s open banking proposal (see FSM Report DATA4), but now asking for changes related to …

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

15 12, 2023

DAILY121523

2023-12-15T17:31:25-05:00December 15th, 2023|2- Daily Briefing|

Crypto Measures Await Next Session

As anticipated, HFSC Chair McHenry (R-NC) was able to fend off concerted efforts by Sens. Brown (D-OH) and Warren (D-MA) to add the Warren-Marshall crypto bill to the National Defense Authorization Act.

FSOC to Target Hedge Funds, Nonbank Mortgage Companies

The readout from Treasury on yesterday’s FSOC meeting provides insight into the Council’s executive session suggesting significant near-term systemic action regarding hedge funds.

FSB Plans Broad Rewrite of Public Backstops, GSIFI Resolvability, Operational Readiness

The FSB’s 2023 Resolution Report today advises banks and public sector authorities to be prepared to access public sector funding in resolution, with the Board planning to review whether existing public sector backstops are adequate to meet potential failure scenarios.

Brown Renews Bipartisan Quest to Constrain Nonbank Banks

Advancing the big-tech concerns he most recently voiced before GSIB CEOs (see Client Report GSIB23), Senate Banking Chairman Brown (D-OH) has introduced S. 3538, bipartisan legislation to impose bank regulation on non-bank parent companies of insured depository institutions.

DOJ Targets Fraudulent Microtransactions

Cracking down on unauthorized bank account charges, the DOJ today announced multiple actions against “sham” companies alleged to have used misrepresentations or unauthorized charges to steal money from consumers’ financial accounts.

CRS Warns Credit Card Act Could Result In Risky Retailer Payment Networks

The CRS this week issued a report analyzing the Durbin-Marshall Credit Card Competition Act, S.1838 (see FSM Report INTERCHANGE10), projecting that fee caps will have a greater impact on transaction fees than competition, with …

8 12, 2023

Al121123

2023-12-08T16:55:05-05:00December 8th, 2023|3- This Week|

Another Book Report?

At a recent hearing (see Client Report CONSUMER54), CFPB Director Chopra wasn’t shy in his critique of the Financial Stability Oversight Council.  He called it a “book report club,” a moniker Karen Petrou last week suggested was not wholly untrue when it comes to emerging risks such as private credit.  FSOC’s meeting this Thursday is likely to show the Council at its bookwormy best given that the agenda consists largely of ritual release of yet another FSOC report.  We’ve dutifully catalogued these year-in, year-out as hundreds of FSOC blessed pages spew forth about what the Council did, how many facts its staff gathered about whom in the past year, and what it thinks might go wrong where in concert with little indication of what the Council might then do to prevent the worst from happening.

Al121123.pdf

7 12, 2023

DAILY120723

2023-12-07T16:42:01-05:00December 7th, 2023|2- Daily Briefing|

BIS: CCP Collateral Holdings Pose Systemic Risk

A new BIS study looks at the risk that the transformation of OTC markets to centrally-cleared ones has in turn transformed markets based in part on know-your-counterparty into those dependent principally on collateral backing margin positions – an inherently more fragile market structure.

White House Presses FHLB Affordable-Housing Action

In remarks today, National Economic Advisor Lael Brainard not only highlighted the Biden Administration’s actions to address housing affordability, but also mentioned plans for new financing programs.

Ambitious CFPB Regulatory Plans Come Into View

The CFPB’s fall 2023 regulatory agenda provides status updates for several significant rulemaking items.

Basel to Set IRR, Window-Dressing, Crypto Standards

The Basel Committee’s year-end meeting advanced plans to address interest-rate risk (IRR) with a concrete agreement to issue a new consultation later this month updating current global IRR standards (see FSM Report IRR7).

BIS Points to MMF Risk When Rates Rise

Another new BIS paper concludes that the record size of MMFs poses significant threat to dollar-funding market stability.

OCC Warns Banks of AI Risk, Possible Supervisory Action

Reflecting growing Congressional, regulatory, and industry concerns over AI, today’s OCC semiannual risk assessment for federal banks states that national banks should be mindful of AI risks as these fall under current supervisory procedures.

Senate GOP Goes for Gruenberg’s Jugular

Despite efforts by the FDIC to reassure critics about its independent investigation, Senate Banking Republicans today fired off a ferocious letter demanding that FDIC Chair Gruenberg immediately resign …

14 11, 2023

DAILY111423

2023-11-14T16:51:55-05:00November 14th, 2023|2- Daily Briefing|

Comment Deadline Set for Debit-Card Interchange Fee Cap

The Federal Register today includes the Federal Reserve’s proposed sharp reduction in the cap for debit-card interchange fees.  As previously noted (see FSM Report INTERCHANGE12), the reduction is premised on the Fed’s finding of lowered debit-card costs, but its methodology is largely unchanged and thus may not reflect current and prospective costs such as those associated with pending deposit-insurance, capital, liquidity, CRA, and open-banking standards.

FSB Hones in on Insurance Company Risk, Resolvability

At its plenary meeting over the last two days, the FSB reviewed its longstanding priorities in areas such as NBFIs, climate risk, and cryptoassets.  The most notable change in priorities comes with renewed focus on insurance-company systemic risk due to challenging resolution.

Daily111423.pdf

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