#NGFS

5 02, 2024

DAILY020524

2024-02-05T16:54:06-05:00February 5th, 2024|2- Daily Briefing|

Bowman Opposes Tech Self-Regulation, Highlights Emerging Risks

In remarks Friday on the future of banking, FRB Gov. Bowman joined Acting Comptroller Hsu in expressing concern over supervisory and governance complacency, especially when it comes to interest-rate and liquidity risk.  The speech picks up on Karen Petrou’s memo last week, pointing to the way in which regulators now appear focused principally on new rules, not emerging risks including those from fraud-renewed threats and third-party vendors.  Ms. Bowman thus urges greater accountability for banks based on third-party actions not only to enhance risk management, but also to reduce migration risk.

House GOP Expands Attack on Fed Work With Global Bodies

Continuing previous attacks on Federal Reserve Banks and federal banking agencies’ work with global entities, HFSC Chair McHenry (R-NC) and Financial Institutions Subcommittee Chair Barr (R-KY) sent letters today to the San Francisco and New York Reserve Banks disputing what they describe as undue cooperation with the Network for Greening the Financial System (NGFS) and Bank for International Settlements (BIS).

Daily020524.pdf

7 11, 2023

DAILY110723

2023-11-07T17:01:20-05:00November 7th, 2023|2- Daily Briefing|

Treasury Advances Financial-Inclusion Agenda

In conjunction with its read-out of yesterday’s meeting of its most recent financial-inclusion discussion group, Treasury announced that it will shortly release a request for information about how best to accomplish the national financial-inclusion strategy demanded in the Department’s FY23 appropriations.

HFSC GOP Challenges Motives, Process of Basel, NGFS Standard-Setting

As anticipated, today’s Financial Institutions Subcommittee hearing on global banking accords was acrimonious, with Republicans strongly attacking what they characterized as Democratic agency head’s participation in a range of global banking accords as well as the Network for Greening the Financial System.

CFPB Proposes to Extend its Supervisory Reach to Tech-Payment Providers

The CFPB today proposed a sweeping rule bringing tech-platform or fintech companies offering general-use digital-payment services under bank-like consumer-protection standards via more direct CFPB supervision.

Bowman Stands by Basel

Perhaps due to today’s HFSC hearing on global accords, FRB Gov. Bowman today went beyond her ongoing critiques of pending rules to defend participation in the Basel Committee and other forums.

FHFA Starts FHLB Redesign

FHFA today released its long-awaited assessment of the Federal Home Loan Banks, laying out an ambitious program of supervisory, regulatory, and statutory issues.

McHenry Slams CFPB Digital-Payment Proposal

HFSC Chairman McHenry (R-NC) today slammed the CFPB not for usual causes, but because he believes the agency’s proposed supervisory standards for nonbank general-use digital-payment providers will “entrench the status quo” – i.e., the role of banks – by eliminating consumer choice and impeding innovation.

Daily110723.pdf

7 09, 2023

DAILY090723

2023-09-07T16:43:25-04:00September 7th, 2023|2- Daily Briefing|

FSB-IMF Report Lays Out Crypto-Policy Roadmap

The FSB and IMF today published a joint report synthesizing their policy and regulatory recommendations for cryptoassets, laying out a policy roadmap that breaks no new ground.

Senate Dems Try Again to End State Usury Ceilings

Senate Majority Whip Durbin (D-IL) yesterday introduced another effort (S. 2730) to impose a federal usury ceiling.

NGFS Warns Ecological Risk Could Be Systemic

The Network for Greening the Financial System (NGFS) today released a report on nature-related financial risk concluding that ecological risk transmission could cause contagion leading to systemic risk.

CFPB Soon to Advance Its Open-Banking Construct

CFPB Director Chopra today announced that the CFPB will be issuing proposed rules next month to reactivate its DFA consumer data rights powers (see FSM Report DATA3).

Global Securities Regulators Craft DeFi Standards

IOSCO today released a DeFi consultation report proposing nine policy recommendations intended to support heightened regulatory consistency and oversight.

Waters Presses Agencies to Change SSN Collection Requirements

HFSC Ranking Member Waters (D-CA) today wrote to the leadership of the banking agencies, Treasury, and FinCEN asking them to consider allowing financial institutions only to collect a SSN’s last four digits to minimize cybersecurity risks.

Fed Staff Suggest Solution to CBDC Privacy Problem

Addressing one of the biggest CBDC challenges in the U.S., Fed staff today published a report arguing that the use of privacy-enhancing technologies preserves digital asset user confidentiality while maintaining enough visibility for official audits in order to prevent illicit finance.

Daily090723.pdf

13 07, 2023

DAILY071323

2023-07-13T16:52:37-04:00July 13th, 2023|2- Daily Briefing|

FSB Sees Climate-Risk Disclosure, Analytical Progress

The FSB today released a progress report on its Roadmap for Addressing Climate-Related Financial Risks that updates work toward the four key goals identified in its 2021 Roadmap.  Progress is evident via the International Sustainability Standards Board’s (ISSB) disclosure standards, with the FSB urging IOSCO quickly to endorse them.

New Lummis-Gillibrand Crypto Bill Faces Steep Odds

Sens. Lummis (R-WY) and Gillibrand (D-NY) yesterday introduced an updated version of their comprehensive crypto bill (see FSM Report CRYPTO28).  Changes include increased consumer protection provisions, AML penalties, proof-of-reserves and asset segregation requirements, requirements for all cryptoassets – aside from truly decentralized ones – to register with the CFTC and requirements also for all payment stablecoins to be issued by financial institutions.

FTC Settlement May Signal Move into Crypto Regulation

Wading into crypto regulation, the FTC today reached a settlement with the crypto platform Celsius Network, permanently barring it from handling customer assets and charging three executives with misleading customers.  It remains to be seen if the FTC expands its enforcement scope to other crypto entities under SEC scrutiny for investor-related risks, but a growing FTC presence in this sector could cast a formidable shadow given the CFPB’s more limited enforcement powers.

Daily071323.pdf

15 11, 2022

DAILY111522

2022-11-15T17:28:46-05:00November 15th, 2022|2- Daily Briefing|

Recognizing Early Stage, FSB Still Slams Climate Stress Scenario Analytics

In collaboration with the Network for Greening the Financial System (NGFS), the FSB today concluded that risk exposures and vulnerabilities may be underestimated under current climate-stress scenarios because metrics fail to capture second-round effects, potential climate non-linearities, risk-management costs and externalities, and asset-price corrections triggered by transition shocks.  Further, while orderly scenarios do not yield severe impacts, disorderly scenarios and scenarios involving no financial system transition accompanied by high medium- to long-term physical risks correlate with significant GDP and financial losses.  As a result, the FSB determines that, although the impact of climate risk is concentrated in certain sectors and currently contained from a domestic financial perspective, tail risks may pose notable resilience threats.

FRBNY Launches CBDC Feasibility Project

Advancing more of the U.S. CBDC infrastructure, the Federal Reserve Bank of New York today announced that its Innovation Center (NYIC) will engage in a proof-of concept project testing the technical, legal, and business feasibility of distributed ledger technology to settle financial institution liabilities through transfer of central bank liabilities.  Work includes collaboration between NYIC and private sector organizations and will harness simulated data to explore the feasibility of central bank wholesale and commercial digital money interoperating on a shared multi-entity distributed ledger, but will not advance policy outcomes or signal imminent Federal Reserve CBDC adoption or design specifications.

Daily111522.pdf

14 07, 2022

DAILY071422

2023-01-06T15:12:22-05:00July 14th, 2022|2- Daily Briefing|

FSB Climate-Risk Progress Report Underscores Disclosure Standards, Improved Data

The FSB today released a climate-risk progress report that also details near-term actions.  These include not only the statement to the G20 in October noted in yesterday’s G20 report, but also a status report in September from the Task Force on Climate-Related Financial Disclosures (TCFD) on industry progress toward adopting its climate disclosure recommendations.

CFPB, OCC Slam BofA for UI-Fraud Lapses

The OCC and CFPB today issued a $225 million enforcement order against Bank of America related to unemployment-insurance and public-benefit fraud that led the bank to improperly withhold prepaid-card payments to legitimate recipients.

BIS Builds “Central Bank Liquidity Bridges”

Continuing its work to promote better cross-border payments, the BIS today floated the idea of “central-bank liquidity bridges” to overcome current frictions in the bank-dominated sector.

Clarida and Powell Cleared, but OIG Still Reviewing Fed Ethics

The Office of the Inspector General at the Fed today cleared former Vice Chair Clarida and Chairman Powell of ethics violations that have dogged them as recently as a letter yesterday from Senate Democrats.

Daily071422.pdf

3 11, 2021

Daily110321

2023-06-02T12:54:06-04:00November 3rd, 2021|2- Daily Briefing|

Fed Acknowledge Climate Threat, Avoids Near-Term Commitments
The Federal Reserve today supported the most recent NGFS statement on global central-bank climate initiatives, emphasizing that the global statement allows each central bank to tailor its climate-risk efforts to its mandate and that the Fed’s mandate circumscribes efforts it recognizes to be of great importance.

Omarova Nomination Clears Formal Hurdle
Late yesterday, the White House officially nominated Saule Omarova as the next Comptroller of the Currency. As previously noted, we view this appointment to be part of a larger political negotiation over Jay Powell’s second term and the broader slate of Fed nominees.

Comment Date Set for FHFA Capital-Disclosure Proposal
The Federal Register today includes FHFA’s proposed capital-disclosure regime for Fannie and Freddie, with comment now due January 3. As previously noted, the proposed disclosures would better align the GSEs’ releases with those mandated for large banks, requiring transparency regarding standardized approach, operational, market, and leverage capital requirements.

OCC Climate Guidance Imminent
In his statement today supporting the NGFS Glasgow Declaration (see our earlier alert), Acting Comptroller Hsu expands on his comments about FSOC’s climate-risk report (see Client Report GREEN11).

Powell: Fed No Longer Contemplating SLR Rewrite
While FRB Chair Powell’s press conference today largely focused on the economy and monetary policy, he was also asked if the Fed still plans to seek comment on ways the SLR could be adjusted to increase Treasury-market liquidity.

Daily110321.pdf

26 10, 2021

Daily102621

2023-06-05T13:54:59-04:00October 26th, 2021|2- Daily Briefing|

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 …

21 10, 2021

Daily102121

2023-06-05T15:25:18-04:00October 21st, 2021|2- Daily Briefing|

BIS Advances Push for Central Bank Green Investment
The BIS today announced a new program channeling central-bank funds to green bonds in the Asia-Pacific region. Eligible bonds will be issued by sovereigns, supranational, and corporates that comply with relevant anti-greenwashing standards. While limited, this program adds to growing global pressure for “green” central-bank investments, advancing an initial design for doing so in a 2020 BIS policy paper on green finance, supervision, and regulation (see Client Report GREEN).

CFPB Plows New Path into Bigtech, Competition Policy
With a newly-confirmed director with long experience battling bigtech, the CFPB today issued orders requiring large tech companies operating payments systems to turn over information on their payments products, business plans, and practices. Orders have initially been sent to Amazon, Apple, Facebook, Google, PayPal, and Square, but the Bureau is also studying Alipay and WeChat Pay.

Fed Hops To After Latest Ethics Revelation
Following a still more embarrassing story about Fed trading in today’s New York Times, the FRB this afternoon announced conclusion of a “comprehensive review” and new senior-officer trading restrictions. These bar holding individual securities, restrict active trading, and increase reporting requirements.

FSOC Adopts Tough-Talk, Cautious-Action Climate Plan
FSOC today approved the report on climate-related financial risk required by President Biden’s Executive Order (see FSM Report GREEN8) adopting the cautious, disclosure-focused framework we anticipated when the executive order was issued.

Daily102121.pdf

19 10, 2021

Daily101921

2023-06-07T15:38:53-04:00October 19th, 2021|2- Daily Briefing|

Global Central Bankers Tread Wary Path to Green Scenario Analysis

The central-bank group focused on climate risk, the Network for Greening the Financial System (NGFS), today issued its latest assessment of financial scenario-analytic approaches.  This will guide the FRB as it advances the big-bank supervisory guidance Gov. Brainard recently signaled, but also reinforce those in the U.S. and elsewhere who fear that climate-risk scenarios need additional development before clear conclusions may be drawn from their results.  The type of binding stress tests sought by Democrats (see FSM Report GREEN9) are also a long way off.

FRB-NY Analysis:  BHC Exposure to Open-End MMFs Warrants Supervisory Attention

A new blog post from the Federal Reserve Bank of New York tackles an issue left hanging in the FSB’s new MMF-reform options (see FSM Report MMF18): the fire-sale risk posed by open-end funds.  Reiterating that open-end MMF spillover risk has increased due to their growth and correlation, new quantification shows a six-fold increase in risk to U.S. BHCs since 1996.

Daily101921.pdf

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