#operational risk – Federal Financial Analytics

12 03, 2024

DAILY031224

Eliza Allen2024-03-12T16:59:10-04:00March 12th, 2024|2- Daily Briefing|

Hsu Says Opsrisk Not Cured by Capital, Liquidity

In remarks today on operational resilience, Acting Comptroller Hsu notes that operational risk is not “a problem that capital or liquidity can solve.” Karen Petrou has noted this most recently with regard to the operational-risk capital rules included in the current proposal, which are founded on the longstanding regulatory assumption that capital indeed buffers operational risk.

Senate Talk of Affordable Housing Turns to FHLB Role

At today’s Senate Banking Committee affordable-housing hearing, Chairman Brown (D-OH) again called for the Fed to cut interest rates to address the crisis. The hearing also touched on the role FHLBs can play, with Sen. Lummis (R-WY) stating her intentions to work with the system to expand its impact on the housing supply shortage.

CFPB to Proceed to Mortgage-Fee Rulemaking

NEC Director Brainard today said that the CFPB will pursue a rule or similar action to curtail mortgage-closing “junk” costs along the lines we identified following last week’s Bureau post in conjunction with the new White House competition strike force.

Daily031224.pdf…

8 03, 2024

DAILY030824

Eliza Allen2024-03-08T16:54:53-05:00March 8th, 2024|2- Daily Briefing|

Biden Continues Junk Fee Campaign

The President continued his attack on junk fees in the State of the Union, applauding the CFPB’s new credit-card late fee rule. The President also boasted about recent monetary data, calling the American economy “the envy of the world” and called for Congress to pass Sen. Casey’s (D-PA) bill to stop shrinkflation.

FRB Finalizes FMU OpsRisk Update

The FRB today unanimously voted to finalize an update to rules governing operational risk-management for certain systemically-important financial market utilities (FMUs).

CFPB Lays Groundwork for Mortgage Closing-Cost Regulation

Continuing its campaign against junk fees, the CFPB today released a blog post focusing on mortgage closing cost fees, stating that the agency will issue rules and guidance “as necessary” to improve competition and affordability in the coming months. The post states that median total loan costs increased 22 percent on home purchase loans from 2021 to 2022, noting that many of these costs are fixed and not affected by interest rates.

Daily030824.pdf…

9 01, 2024

DAILY010924

Eliza Allen2024-01-09T16:48:15-05:00January 9th, 2024|2- Daily Briefing|

Bowman Now Tackles Supervisory Transparency

In remarks late yesterday, FRB Gov. Bowman added a new concern: supervisory transparency. She indicated that the Fed’s supervisory expectations have changed to the point at which some state agencies think the Fed goes too far, but banks have no way of anticipating possible supervisory injunctions. As a result, she argues for near-term transparency via public notice-and-comment guidance or rulemaking.

Barr Bows a Bit

Answering questions today, FRB Vice Chair Barr indicated that the BTFP may well close on March 11, emphasizing the importance of adhering to the Fed’s emergency-liquidity mandate. That said, loans will be extended until the one-year anniversary and may remain until 2025. He also outlined a significant compromise on the operational-risk section of the end-game rules (see FSM Report OPSRISK22), more closely aligning the proposal with the Basel standards as our outlook anticipated.

Daily010924.pdf…

27 11, 2023

GSE-112723

Eliza Allen2023-11-27T11:49:59-05:00November 27th, 2023|4- GSE Activity Report|

An Advanced View of Regulatory Capital?

The most significant thing in FHFA’s final capital rule is not what is to be done, but what FHFA left out: ending the GSEs’ advanced-approach requirement. As a result, Fannie and Freddie can still use models for key calculations, a requirement that makes more sense for two complex organizations than it did for the regional banks also long subject to advanced-approach requirements even though the rules required them, like GSIBs, to hold the higher of the standardized or advanced approach.

GSE-112723.pdf…

24 10, 2023

DAILY102423

Eliza Allen2023-10-24T17:18:54-04:00October 24th, 2023|2- Daily Briefing|

McHenry, Barr Blast Basel Adherence in End-Game Regs

Although today’s hearing challenging regulatory actions aligned with global regulators was postponed, HFSC Chairman McHenry (R-NC) and Financial Institutions Subcommittee Chairman Barr (R-KY) today kept up the pressure, releasing a letter to the GAO commissioning a study of the end-game rules.

New CRA Reg Sets Controversial, Complex Standards

Leading the way to certain inter-agency approval, the Federal Reserve today voted 6-1 to approve a final version of their 2022 controversial proposal (see FSM Report CRA32).

FDIC OIG: Supervisors Missed So Much, Acted So Slowly re SBNY

The FDIC’s OIG report today on SBNY’s failure follows much of the line the Fed’s OIG took when it came on the material-loss review of SVB’s collapse.

House Republicans Pressure Biden on $6 Billion Iran Ransom

Although HFSC continues to cancel all its hearings as the speakership battle continues, its Oversight Subcommittee today optimistically released a memo outlining goals for Thursday’s Iran-sanctions hearing.

Treasury Presses CSPs to Negotiate With Banks

Treasury Assistant Secretary for Financial Institutions Graham Steele today highlighted Treasury’s work with cloud service providers (CSPs) to improve transparency and security.

Divided FDIC Advances CRA Rewrite, Climate-Risk Principles

As anticipated, the FDIC on a 3-2 vote joined the Fed in approving a 1400+ page final CRA rule.

Daily102423.pdf…

5 10, 2023

DAILY100523

Eliza Allen2023-10-05T16:36:40-04:00October 5th, 2023|2- Daily Briefing|

Kanter, Khan Mount Stout Defense of Draft Merger Guidelines

FTC Chair Khan and DOJ Assistant AG Kanter today defended the agencies’ draft merger guidelines (see FSM Report MERGER12) on grounds that they are faithful to congressional intent, reflect core legal principles, are more accessible and easier to apply, and better reflect the modern competitive landscape.

Basel Plans NBFI Ops-Risk Supervisory Standards, Continuing Review of Bank Supervision, New Disclosures

The Basel Committee today released its long-awaited report on 2023 vulnerabilities, deciding based on it to prioritize new supervisory approaches and additional analytical tools.

Bipartisan Bill Provides Transaction Account Deposit Insurance

Following Chairman Gruenberg’s remarks yesterday highlighting targeted deposit insurance reform, Sens. Manchin (D-WV), Braun (R-SD), and Hickenlooper (D-CO) yesterday introduced legislation to reinstate the Transaction Account Guarantee (TAG) program, expanding deposit insurance to non-interest bearing transaction accounts up to $10 million.

FDIC Proposes Public-Good Policy for IDI Corporate Governance

The FDIC today announced the Board’s 3-2 approval of an NPR establishing guidelines on corporate governance and risk management for FDIC-supervised IDIs with over $10 billion in assets.

Daily100523.pdf…

4 10, 2023

DAILY100423

Eliza Allen2023-10-04T16:40:00-04:00October 4th, 2023|2- Daily Briefing|

Bowman Unbending in Demands for Better Reg Analytics, Community-Bank Mergers

In what might have been only perfunctory introductory remarks, FRB Gov. Bowman today instead continued her all-out campaign to force far more independent research before the Fed finalizes pending rules.

Brown Asks for No Wells Fargo Mercy

Senate Banking Chairman Brown (D-OH) today sent a letter to FRB Vice Chair Barr and OCC Acting Comptroller Hsu taking serious issue with what he calls unfair labor relations practices, consumer abuses, and compliance failures at Wells Fargo, urging the regulators to take stronger action to change the bank’s culture.

McKernan Counters Gruenberg on Endgame’s Nonbank Effects

Fleshing out official comments made in dissent against pending rules, FDIC Board member Jonathan McKernan today countered Chair Gruenberg’s recent comments that any migration of bank activities to nonbanks due to the capital rules should not be considered in the regulatory process.

Gruenberg Reiterates His Top Risk Worries

As with Gov. Bowman earlier today, FDIC Chair Gruenberg used his remarks later in the day to emphasize continuing concerns: in this case, uninsured deposits, maturity mismatches, and rapid growth.

Daily100423.pdf…

3 10, 2023

DAILY100323

Eliza Allen2023-10-03T16:38:58-04:00October 3rd, 2023|2- Daily Briefing|

Hsu Notes Benefits of International Data Hub, Warns of Nonbank Risks

In remarks today, Acting Comptroller Hsu focused on the benefits of the BIS International Data Hub, noting for example that it provides national authorities with a horizontal view of key risks affecting the global financial system difficult to obtain elsewhere.

Basel Sees End-Game in Sight, US Off Late List

Finally taking the U.S. off the tardy list, the Basel Committee today updated its Basel III implementation dashboard, finding that as of Q3 2023 the US, along with the EU, UK, China, Switzerland, South Africa, and Hong Kong are now working to adopt revisions to the credit valuation adjustment and operational risk frameworks, the standardized approach for credit risk, the minimum requirements for market risk, and the output floor – i.e., Basel’s end-game.

Daily100323.pdf…

25 09, 2023

m092523

Arezou Rafikian2023-09-25T09:26:11-04:00September 25th, 2023|6- Client Memo|

How to Right the Raft of New Rules

What struck me most about the HFSC hearing at which I testified last week was how lukewarm Democrats are to the new rules unless they feel compelled to defend the White House or core political objectives. When the partisan spotlight dimmed, more than a few Democrats said that the rules might have both small and even significant perverse consequences. Given that GOP-led repeal of the rules is impossible and court overturn is at best a lengthy process, hard work to get the rules more to the middle is essential. Even if large banks still think the rules are bad, they’ll be better and that’s all to the good.

m092523.pdf…

18 08, 2023

Al082123

Arezou Rafikian2023-08-22T09:52:13-04:00August 18th, 2023|3- This Week|

Capital Regulation Deconstructed

Last week, we provided clients with several more in-depth analyses of the interagency capital proposal. Of particular note is our wrap-up report (see Client Report CAPITAL234) which looks hard at the agencies’ own quantitative and qualitative impact assessments to see what the raw numbers say, how the numbers comport with current data and market realities, and – most importantly – how to interpret the agencies’ qualitative conclusions in light of these analytics, as well as our understanding of many of the studies on which key assumptions are premised. As the report details, we agree that the agencies’ rationale for every possible capital woe – that anything is better than a financial crisis – is right. But it’s only right if the result of the rules is to make financial crises less likely and that, as our reports make clear, is far from assured. Many provisions of each key section combined with overall quantitative results could well prove profoundly destabilizing.

Al082123.pdf…