#nonbanks – Page 5 – Federal Financial Analytics

28 02, 2022

FedFin: Servicer 2.0 Strikes

Arezou Rafikian2023-04-04T14:50:44-04:00February 28th, 2022|The Vault|

Responding to continuing FSOC complaints about nonbank servicers, FHFA has proposed new seller-servicer eligibility standards that crack down hard on any nonbank servicer whose size evokes systemic qualms. Although all nonbanks and perhaps a few small bank seller-servicers will come under tougher net-worth requirements that hive off Ginnie servicing, FHFA targets its wrath at large nonbanks. These must not only comply with new capital and liquidity planning standards along with stringent liquidity standards, but are apparently viewed so dubiously by the agency that nonbanks also must get a third party to vouch for their viability under standards that get tougher as the servicer gets bigger.

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

15 02, 2022

FedFin: Stablecoin Legislative Consensus in Sight, But from a Distance

Arezou Rafikian2023-04-04T15:59:02-04:00February 15th, 2022|The Vault|

Despite fierce partisan fighting over pending Fed nominations, today’s Senate Banking hearing on stablecoin regulation was considerably more bipartisan that last week’s HFSC session (see Client Report CRYPTO24). Both Chairman Brown (D-OH) and Ranking Member Toomey (R-PA) are in broad agreement on a two-tier structure in which stablecoins are issued either by banks or by nonbanks subject to strict reserve-asset, AML, and related regulation.

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

1 02, 2022

FedFin: “Fair-Fee” Policy

Arezou Rafikian2023-04-05T14:22:57-04:00February 1st, 2022|The Vault|

Taking action to advance President Biden’s competition order, 1 the CFPB is seeking views on fees which it believes exploit consumers by virtue of unfair competition. Although many of the fees it cites are covered by statutory
disclosure regimes designed to ensure both front- and back-end fee transparency, the Bureau believes that many of these fees are unfair due to large-bank market power.

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

31 01, 2022

Karen Petrou: CBDC’s Big Empty

Arezou Rafikian2023-04-05T16:20:36-04:00January 31st, 2022|The Vault|

Anyone looking for even a scintilla of a clue buried in a hint of an intention in the Fed’s CBDC discussion draft hunted in vain for guidance on the most consequential strategic inflection point for the U.S. financial-services industry, the financial system, the global payment system, and even the future of money. Once, we all would have had to wait for augers from the on-high Fed to see the fate the imperium decreed. Now, the Fed still thinks it rules all it surveys even though it doesn’t. Soon, it may find out the hard way that fast-moving companies crafting digital money care as little for the central bank’s wishes as they did for those of the media, hotel, and retailing magnates they have already supplanted.

This is not to say that we must necessarily have a central-bank digital currency. As I noted in my book, a democracy must ensure privacy and competition in ways China, for one example, disregards. Rather, it’s to say that the U.S. will not have a secure store of value or sound medium of exchange without a payment system on which the economy stands firm. Payment-system finality, accessibility, ubiquity, and cyber-security are all at risk if the Fed cedes the CBDC field without first and fast establishing the new framework it knows we need.

Nor am I saying that CBDC is inevitable because stablecoins are a certainty. Libra’s ignominious demise is ample evidence of the power regulators still have to set the terms of payment …

27 01, 2022

FedFin on: U.S. Central Bank Digital Currency

Arezou Rafikian2023-04-11T16:11:59-04:00January 27th, 2022|The Vault|

Months after initially promising to release a discussion draft on central bank digital currency (CBDC), the Federal Reserve is now seeking comment on whether and how it might create one. Reflecting the hesitancy of several FRB leaders, Chairman Powell included, the draft emphatically states that the Board has made no decision to issue a CBDC and, should it do so, it will seek at least tacit approval from both Congress and whichever Administration is in charge at the time.

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

6 12, 2021

Karen Petrou: Why Pro-Competition Consumer Finance May Not be Pro-Consumer Consumer Finance

Arezou Rafikian2023-05-23T13:26:47-04:00December 6th, 2021|The Vault|

Under Rohit Chopra, consumer protection has taken an important, widely-overlooked turn with potent consequences for all retail financial-product providers. Media coverage of the CFPB’s bigtech order, mortgage-discrimination action, and last week’s anti-overdraft campaign highlighted traditional issues such as fair lending and predatory pricing. These are indeed in the CFPB’s sights, but so also is a much bigger target: the extent to which a few large companies are said to be able to set consumer interest rates and otherwise dictate the shape of U.S. retail finance. This might cut big banks down to the puny size their critics seek, but it’s more likely to accelerate the transformation of retail finance into a wild west of unregulated providers outside the reach of safety-and-soundness standards and, in many cases, even of the CFPB. If this pro-competition campaign is mis-calibrated, the CFPB will put consumers at still greater risk.

Mr. Chopra’s interest in market competition doubtless derives from his stint as a lone, strong voice at the Federal Trade Commission who lost pretty much every battle he waged against giant corporate combos. It surely stems also from President Biden’s executive order demanding that federal agencies take express pro-competitive action. And, indeed, there’s a lot to do in sectors such as tech-platform companies that already seem to have skipped over just being monopolies to become potent oligopolies with powerful impact over each aspect of everyday life, not to mention pricing and economic inequality.

However, neither traditional nor neo-Brandeisian antitrust theory applies well …

18 10, 2021

Karen Petrou: How to Make Stablecoins More than Monopoly Money

Arezou Rafikian2023-06-07T15:59:53-04:00October 18th, 2021|The Vault|

In all of the reports on all of stablecoin’s risks that so frighten central bankers and global finance ministers, none is as terrifying as whether the assets backing hundreds of billions of dollar-equivalent transactions are to be had when needed. And needed they will be – see not just all the ministerials on high, but also Gillian Tett’s latest, compelling FT column. Without a meaningful reserve-currency reference, stablecoins are the equivalent of monopoly money without even the teeny little plastic hotels providing an illusion of wealth. Making stablecoins matter as real money requires meaningful reserves but meaningful reserves mean that stablecoin’s gung-ho promoters won’t get anywhere near as rich. The business model changes for the way-better, but the construct of stablecoins may be so altered as to make this looming systemic phenomenon only a passing fancy.

The set of difficult choices needed to realize stablecoin’s promise to anyone but profiteers is detailed in our latest report on critical policy issues. In it, we analyze a set of systemic-risk principles recently proposed by the BIS’s Committee on Payment and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO). As is usually the case with global-regulatory pronouncements, this proposal defines wide parameters for jurisdiction action, stating most clearly what’s wanted, not what will happen if one were actually to get it.

The CPMI/IOSCO paper is even more hesitant than usual because reserve assets aren’t stablecoin’s only tricky bit. For example, the paper describes a governance conundrum of formidable proportions …

27 08, 2021

FedFin on: Green Risk-Based Capital Requirements

Arezou Rafikian2024-03-13T15:50:16-04:00August 27th, 2021|The Vault|

House Democrats are considering legislation to mandate a punitive capital construct for bank and, in some cases, also to certain nonbank exposures to companies with fossil-fuel links. A still higher capital surcharge would also govern large-BHC activities that may increase greenhouse-gas emissions, a criterion bank regulators would have to define ahead of deciding what surcharge to set. This surcharge appears to contemplate a capital requirement on some of the so-called “Scope 3” climate exposures and thus could prove particularly problematic given ongoing methodological uncertainties in this area.

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