#OCC – Federal Financial Analytics

7 09, 2023

DAILY090723

Eliza Allen2023-09-07T16:43:25-04:00September 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…

6 09, 2023

TLAC9

William Cross2023-09-06T15:59:28-04:00September 6th, 2023|1- Financial Services Management|

Long-Term Debt Requirements

Building on an advance notice of proposed rulemaking, the banking agencies have issued several proposals to enhance the resolvability of large banking organizations not covered by stringent GSIB standards. Among these is a proposal mandating long-term debt (LTD) to increase regional-bank total loss-absorbing capacity (TLAC) and, the agencies believe, reduce resolution costs and/or increase the FDIC’s options, thus avoiding the systemic designation and costly resolutions that occurred for regional banks earlier this year. The LTD requirements for category II, III, and IV banking organizations do not go as far as those mandated for GSIBs, based instead exclusively on a “capital-refill” construct in which eligible LTD is issued in amounts the agencies believe sufficient to provide enough capital-equivalent funding to achieve the proposal’s expected results.

TLAC9.pdf…

6 09, 2023

FedFin on: Long-Term Debt Requirements

Arezou Rafikian2023-09-07T16:38:46-04:00September 6th, 2023|The Vault|

Building on an advance notice of proposed rulemaking, the banking agencies have issued several proposals to enhance the resolvability of large banking organizations not covered by stringent GSIB standards. Among these is a proposal mandating long-term debt (LTD) to increase regional-bank total loss-absorbing capacity (TLAC) and, the agencies believe, reduce resolution costs and/or increase the FDIC’s options, thus avoiding the systemic designation and costly resolutions that occurred for regional banks earlier this year. The LTD requirements for category II, III, and IV banking organizations do not go as far as those mandated for GSIBs, based instead exclusively on a “capital-refill” construct in which eligible LTD is issued in amounts the agencies believe sufficient to provide enough capital-equivalent funding to achieve the proposal’s expected results.

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

29 08, 2023

DAILY082923

Eliza Allen2023-08-29T16:55:20-04:00August 29th, 2023|2- Daily Briefing|

Agencies Advance Controversial Long-Term Debt, Resolution Proposals

The FDIC, OCC, and FRB today tackled several critical resolution issues in the wake of recent bank failures, proposals that raise strong objections from regional banks despite FDIC and FRB unanimity today on at least one of them. As anticipated, the FDIC and FRB approved an NPR that would impose minimum long-term debt requirements for banks and BHCs with assets over $100 billion, with the FDIC and Fed boards voting unanimously in favor even as FRB Gov. Bowman strongly dissented despite a three-year transition period. Similar to the ANPR floating this rule (see FSM Report RESOLVE48), the proposal would require large banks to hold a minimum amount of eligible long-term debt equal to the greater of six percent of risk weighted assets, 3.5% of average total consolidated assets, or 2.5% of total leverage exposure for banks subject to the SLR.

Daily082923.pdf…

9 08, 2023

DAILY080923

Eliza Allen2023-08-09T16:35:20-04:00August 9th, 2023|2- Daily Briefing|

Brown, Other Senate Dems Demand Fast Action on Fed Merger Policy Rewrite

Building on Sen. Warren’s (D-MA) longstanding Fed criticism, Chairman Brown (D-OH) along with Sens. Warren, Reed (D-RI), and Fetterman (D-PA) today directly demanded a substantive and speedy rewrite of Fed merger policy to ensure that statutory requirements related to financial-stability impact are met. The letter not only criticizes past mergers Sen. Warren has long said are “rubber-stamped” and JPMorgan’s acquisition of First Republic, but also cites the Fed’s decision to allow UBS to acquire Credit Suisse.

Waters Doubles Down On Opposition To GOP Stablecoin Bill

In stark contrast to HFSC Chairman McHenry’s (R-NC) comments praising PayPal’s new payment stablecoin, Ranking Member Waters (D-CA) today sharply criticized the product and the risks its poses given that the HFSC GOP has advanced a bill she thinks both highly problematic and unlikely to be enacted.

Daily080923.pdf…

8 08, 2023

Daily080823

William Cross2023-08-08T16:56:31-04:00August 8th, 2023|2- Daily Briefing|

IMF Staff Presents New CCyB Trigger

A new IMF paper weighs into an important question inherent in the new construct of U.S. regulatory capital: how to set the counter-cyclical capital buffer (CCyB) to anticipate financial stress. As noted in a recent Karen Petrou memo, the Basel CCyB (see FSM Report CAPITAL173) is linked to a ratio of credit growth to GDP; the Fed’s CCyB (see FSM Report CAPITAL213) gives the Fed unlimited discretion to sound the capital alarm or release the buffer.

GAO Asks Banking Agencies To Focus On Blockchain, Alternative Data, PCA

The GAO today issued its annual policy recommendations to the federal banking agencies and the SEC. All of the agencies are asked to coordinate policy on blockchain to better address risks; the agencies neither agreed nor disagreed, each flagging routine interagency engagement. GAO maintains that coordination efforts have failed to address cryptoasset risks in a timely manner.

Warren Presses Goldman Hard on SVB Conflicts

Not letting one letter to Goldman Sachs suffice when it comes to SVB, Sen. Warren (D-MA) yesterday sent another letter to the bank taking serious issue with its response, particularly regarding the steps it took to avoid conflicts of interest.

OCC Targets Fintech Partnerships

Continuing its fintech-partnership crackdown, the OCC today clarified that its legal lending-limit standards apply to purchased loans and particularly to those purchased from nonbanks.

IMF Reiterates Need for U.S. Mid-sized Bank Regs, Better Contingency Funding

Building on its prior assessment of U.S. performance in …

1 08, 2023

DAILY080123

Eliza Allen2023-08-01T16:49:48-04:00August 1st, 2023|2- Daily Briefing|

Curtain Falls on Fintech-Charter Hopeful

In a blow to the waning chartering prospects for fintech and crypto banks, the OCC today announced that Figure – a fintech platform that applied in 2020 for a strikingly-novel national bank charter (see Client Report CHARTER28) – has officially withdrawn its application. As noted, Figure’s application followed OCC revisions to federal-charter activities making any activity authorized for national banks possible via electronic, not just traditional, means (see FSM Report CHARTER27).

Discount-Window Stigma Persists

The Fed today released the results of its May 2023 Senior Financial Officer Survey, with most banks continuing to fear public disclosure of discount window advances. As noted, the banking agencies last week told banks not only to improve contingency-funding planning, but also to look more favorably on the discount window. This seems unlikely absent a change in current market perception or repeal of the disclosure requirements.

Daily080123.pdf…

28 07, 2023

DAILY072823

Eliza Allen2023-07-28T17:09:55-04:00July 28th, 2023|2- Daily Briefing|

FSOC Considers Nonbank Systemic Risk, Credit-Based LIBOR Replacements

At today’s FSOC meeting, participants as usual said nothing about the closed-door agenda, which notably featured more discussion of the systemic risk that may be posed by nonbank mortgage servicers. Different agencies presented their work to address this risk, which was also flagged when FSOC finalized its new approach to identifying systemic risk (see FSM Report SYSTEMIC95). Whether FSOC as a whole is satisfied with FHFA and Ginnie actions and even if these agencies think their work to date suffices will determine the extent to which FSOC intervenes, but the session reinforced the systemic importance accorded to nonbank mortgage firms and the potential for additional action.

Agencies Take Action to Enhance Emergency Liquidity, Whitewash Discount Window

As presaged at Chair Powell’s press conference earlier this week, the banking agencies today issued liquidity-planning guidance designed both to ensure adequate preparation for acute liquidity stress and take the stigma off discount-window draws. The guidance deals only with liquidity planning and thus does not alter the treatment of discount-window funding for purposes of the LCR, admonishing banks to take account of the hard lessons of the March bank failures and prepare for runs and other extreme-stress scenarios.

Daily072823.pdf…

27 07, 2023

DAILY072723

Eliza Allen2023-07-27T17:47:02-04:00July 27th, 2023|2- Daily Briefing|

FSB Tries to Calm CoCo Confusion

Doubtless responding to the CoCo chaos when Credit Suisse failed, the FSB today issued a report laying out how cross-border crisis-management groups are to handle unallocated TLAC (UTLAC) such as the “alternative Tier 1” bonds popular in the EU.

FDIC 3-2 Vote Presages Knock-Down Basel Battle

As anticipated, the FDIC today voted 3-2 to issue a sweeping rewrite of U.S. regulatory capital requirements.

Divided, Cautious Fed Advances End-Game, GSIB Rewrites

As anticipated, Gov. Bowman today voted against the new capital framework, as did Gov. Waller; as a result, the vote was 4-2.

Stablecoin Bill Advances, Compromises to Come

At a fiery HFSC markup today, Chairman McHenry (R-NC) announced that bipartisan negotiations had broken down largely due to the White House, choosing to proceed to a final package as he remains open to amendment before floor action.

House Republicans Skewer Basel Rules

Hill comment so far in response to the new capital rules is sparse.

Daily072723.pdf…

25 07, 2023

DAILY072523

Eliza Allen2023-07-25T17:18:26-04:00July 25th, 2023|2- Daily Briefing|

Key Democrat Takes On Fed Rate Hikes

Ahead of today’s FOMC meeting, Joint Economic Committee Chair Heinrich (D-NV) yesterday sent a letter to Fed Chair Powell cautioning against additional policy tightening.

Second HFSC Markup Targets Stablecoins, Regulatory Restrictions, ESG

Thursday’s HFSC has now added another day to its mark-up calendar this week, moving the stablecoin and ESG bills to Thursday doubtless in order to avoid an endurance contest before the August recess and still meet Chairman McHenry’s (R-NC) commitments.

Senate GOP Tries to Block Capital Rewrite

Just days before the banking agencies take up new capital rules, Senate Banking Ranking Member Scott (R-SC) and ten other committee Republicans sent a letter to Chairman Powell demanding greater transparency and prior consultation.

Waters Presses FHFA for FHLB Reform

Following FHFA listening sessions and in anticipation of a final report this September on the FHLB system, HFSC Ranking Member Waters (D-CA) late yesterday sent a letter to FHFA Director Thompson laying out a series of recommendations to significantly reform the system.

Ag Committees Slam SEC Custody Proposal

In a letter to SEC Chairman Gensler released today, Senate Agriculture Committee Ranking Member Boozman (R-AR) and Chairwoman Stabenow (D-MI) along with House Ag. Committee Chairman Thompson (R-PA) and Ranking Member Scott (D-GA) raised strong objections to what they called serious flaws in the SEC’s proposed custody rule (see FSM Report CUSTODY5).

Warren, Scott Renew Fed-Ethics Campaign

Continuing their bipartisan campaign against the Fed, Sens. Warren (D-MA) and Scott (R-FL) yesterday sent a letter…