#OLA

Home/Tag:#OLA
3 04, 2023

REFORM219

2023-04-03T11:07:12-04:00April 3rd, 2023|5- Client Report|

FedFin Forecast: Probable Changes to Bank Supervision, Regulation, Law

With Thursday’s White House announcement, we know that the Administration will do its best to support Fed and FDIC efforts to color recent events as a failure of Republican-led rulemaking, not also one of agency supervisory acumen, speed, and even competence.  So far, key Democrats are instead pursuing a two-track strategy:  complaining mightily about Trump-era rules but also joining with Republicans to cite an array of supervisory lapses they want quickly remediated by new standards, new rules, and – if need be – also by new law.  Indeed, on Friday, Democrats made it clear that they want considerably more from the Administration than the fixes on which the agencies prefer to focus.  Given how much is in motion and how much could advance, this report details FedFin’s forecast for near-term action in each of these arenas, focusing on matters with broad industry impact rather than specific SVB/Signature- enforcement issues.  We thus provide forecast for immediate supervisory actions, those Congress will demand, new rules (tailoring and beyond), and the few legislative initiatives we believe have a reasonable chance of passage and Presidential approval.

REFORM219.pdf

28 03, 2023

FedFin Assessment: Policy Implications of FDIC-Resolution Innovations

2023-04-03T12:48:36-04:00March 28th, 2023|The Vault|

As noted yesterday, the FDIC’s recent rescues have had several unusual features with implications not only for future policy, but also for pending special assessments to replenish the DIF for the $22.5 billion estimated costs to the Deposit Insurance Fund.  Analyzed here, new tools – e.g., voluntary liquidation, equity-appreciation rights, lines of credit – have determine the extent to which this estimate holds, how FHLB advances are treated in future resolutions, and the role the FDIC may play in companies that acquire failed IDIs….

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

28 03, 2023

RESOLVE50

2023-03-28T11:42:40-04:00March 28th, 2023|5- Client Report|

FedFin Assessment: Policy Implications of FDIC-Resolution Innovations

As noted yesterday, the FDIC’s recent rescues have had several unusual features with implications not only for future policy, but also for pending special assessments to replenish the DIF for the $22.5 billion estimated costs to the Deposit Insurance Fund.  Analyzed here, new tools – e.g., voluntary liquidation, equity-appreciation rights, lines of credit – have determine the extent to which this estimate holds, how FHLB advances are treated in future resolutions, and the role the FDIC may play in companies that acquire failed IDIs.  A forthcoming FedFin report will assess another issue sure to come up at Congressional hearings:  why the FDIC and other agencies used these options in concert with a systemic designation protecting uninsured depositors rather than their OLA powers designed to prevent both uninsured-depositor protection and the most recent of the Fed’s facilities backing the banking system.

RESOLVE50.pdf

24 03, 2023

FedFin Analysis: Whom and What the FDIC and Fed Can Save How

2023-03-24T17:05:38-04:00March 24th, 2023|The Vault|

Recent editorials and other media have often said that the FRB and/or FDIC have powers or taken actions that is not the factual case as we understand it.  Members of Congress also appear sometimes willing to make assertions about what agencies can do now even if it is unclear if there is statutory authority to do so.  We have provided individual clients with key clarifications, but do so now more generally to support strategic and advocacy decision-making.  Of particular importance is the authority the FDIC is said to have or lack related to uninsured deposits; as detailed below, the agency actually has significant authority to do so as well as even to back BHC debt, as long as certain stringent conditions are met.  As detailed in FSM Report RESCUE65, Congress limited both the FDIC and Fed in hopes that….

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

24 03, 2023

RESCUE79

2023-03-24T16:30:20-04:00March 24th, 2023|5- Client Report|

FedFin Analysis: Whom and What the FDIC and Fed Can Save How

Recent editorials and other media have often said that the FRB and/or FDIC have powers or taken actions that is not the factual case as we understand it.  Members of Congress also appear sometimes willing to make assertions about what agencies can do now even if it is unclear if there is statutory authority to do so.  We have provided individual clients with key clarifications, but do so now more generally to support strategic and advocacy decision-making.  Of particular importance is the authority the FDIC is said to have or lack related to uninsured deposits; as detailed below, the agency actually has significant authority to do so as well as even to back BHC debt, as long as certain stringent conditions are met.  As detailed in FSM Report RESCUE65, Congress limited both the FDIC and Fed in hopes that the Dodd-Frank orderly-liquidation authority (OLA, see FSM Report SYSTEMIC30) would permit orderly resolution of even the largest banks and nonbanks without long-term federal support; a subsequent FedFin report will bring the assessment of OLA powers into the current crises’ context given that Congress will surely seek to determine why the FDIC and its sister authorities chose to provide taxpayer support rather than deploy OLA.

RESCUE79.pdf

22 03, 2023

FedFin Assessment: GSIB Rules Set For Post-CS Rewrite

2023-03-22T16:34:58-04:00March 22nd, 2023|The Vault|

In this report, we assess the implications of recent events on two assumptions underlying current U.S. and global policy affecting GSIBs and those considered domestic SIBs:  first, all are likely to be well insulated from illiquidity and/or insolvency and, when this is not the case, then orderly resolution without taxpayer bailout can be readily deployed.  Credit Suisse’s failure and subsequent, subsidized acquisition is just one of the “Minsky moments” rattling regulators and other policy-makers, with the conclusions drawn from all of them surely to lead to significant reevaluation of each of these assumptions.  To be sure, CS was an outlier in terms of idiosyncratic culture-and-control problems, but the Swiss regulatory and resolution system is considered reasonably robust, thus making the bank’s failure…

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

 …

22 03, 2023

GSIB21

2023-03-22T10:52:22-04:00March 22nd, 2023|5- Client Report|

FedFin Assessment:  GSIB Rules Set For Post-CS Rewrite

In this report, we assess the implications of recent events on two assumptions underlying current U.S. and global policy affecting GSIBs and those considered domestic SIBs:  first, all are likely to be well insulated from illiquidity and/or insolvency and, when this is not the case, then orderly resolution without taxpayer bailout can be readily deployed.  Credit Suisse’s failure and subsequent, subsidized acquisition is just one of the “Minsky moments” rattling regulators and other policy-makers, with the conclusions drawn from all of them surely to lead to significant reevaluation of each of these assumptions.  To be sure, CS was an outlier in terms of idiosyncratic culture-and-control problems, but the Swiss regulatory and resolution system is considered reasonably robust, thus making the bank’s failure a global policy concern.  The flood of deposits out of regional banks to the largest U.S. banks also further concentrates the sector, a result the Fed and Department of Justice will view with alarm even though they recognize that recent events are not the fault of the largest banking organizations.  In this report, we assess implications for U.S. merger policy, OLA, TLAC, resolution planning, and other standards.  See our Client Report RESOLVE49 for a discussion of capital and liquidity standards, Client Report DEPOSITINSURANCE118 for revisions to FDIC thresholds, and Client Report LIQUIDITY33 for run-specific policy actions.

GSIB21.pdf

20 03, 2023

Karen Petrou: Three Fast, Urgent Fixes to U.S. Bank Supervision and One Major Change to End Bailouts

2023-03-20T11:35:24-04:00March 20th, 2023|The Vault|

In the wake of recent bank failures, much has rightly been said about how supervisors failed to act even though warning claxons blared.  Nothing that happened to Silvergate, SVB, or Signature is due to forces beyond supervisory control, but there are deep, structural weaknesses in how banks have long been supervised.  How long?  I went back to my 2001 Senate Banking testimony about what was then the largest-ever failure to find that many of the lessons that should have been learned never sunk in.

Given that this hearing was in 2001, a good deal of what I said about bank capital requirements was about Basel I and is thus long out of date.  However, one key point isn’t:  the capital triggers used to spark prompt corrective action (PCA) were and are an unduly-simplistic way to identify the need for rapid supervisory intervention.

Silvergate, SVB, and Signature were all “well” capitalized right up to the brink of collapse because each of the banks in its own way arbitraged the capital rules to enormous – and obvious – advantage.  Nothing in law or rule bars bank supervisors from stepping in well before PCA ratios sink but nothing seems to stir supervisors to do so.  1991’s PCA requirements were an important advance at the time, but it was outdated only a decade later.  Now, it’s a dangerous supervisory distraction.

What else noted in 2001 remains an urgent fix?  Over two decades ago, I urged the FDIC to reinstate the high-growth early-warning system it …

20 03, 2023

M032023

2023-03-20T11:35:13-04:00March 20th, 2023|6- Client Memo|

Three Fast, Urgent Fixes to U.S. Bank Supervision and One Major Change to End Bailouts

In the wake of recent bank failures, much has rightly been said about how supervisors failed to act even though warning claxons blared.  Nothing that happened to Silvergate, SVB, or Signature is due to forces beyond supervisory control, but there are deep, structural weaknesses in how banks have long been supervised.  How long?  I went back to my 2001 Senate Banking testimony about what was then the largest-ever failure to find that many of the lessons that should have been learned never sunk in.

m032023.pdf

22 02, 2023

DAILY022223

2023-02-22T16:44:44-05:00February 22nd, 2023|2- Daily Briefing|

BIS Backs Away From Old CBDC, Presses New “Unified Ledger”

BIS General Manager Agustín Carstens today distanced the global central bank somewhat from its prior calls for two-tier CBDC as quickly as possible (see Client Report CBDC6).

Administration Drops FHA Premiums in Broad Housing Push

In a victory for mortgage lenders and defeat for private mortgage insurance and the GSEs, Vice President Harris announced that FHA will shortly reduce mortgage premiums by .30 percent, saving the average homeowner $800 in total premiums or $67 a month.

GOP Opens Anti-CBDC Campaign

Starting the GOP’s 2023 campaign against CBDC with a specific initiative, Rep. Tom Emmer SP (R-MN) and nine Republicans have introduced H.R. 1122.

FDIC Found Remiss re Systemic Resolution

In its assessment of challenges facing FDIC leadership, the Office of Inspector General (OIG) finds that the agency may not be ready to handle an OLA or systemic resolution, nor is it yet able to assess climate financial risk and sanctions compliance.

FHFA Looks Into FHLB-Member Community Activities

Perhaps advancing FHFA Director Thompson’s commitment to review aspects of the FHLB System, her agency today released a request for views on the extent to which a Home Loan Bank member supported its community to retain eligibility for long-term System advances.

Daily022223.pdf

Go to Top