#OTC – Federal Financial Analytics

14 11, 2022

FedFin on: Global Regulators Prioritize CCP, End-User Resilience

Arezou Rafikian2022-11-14T16:00:23-05:00November 14th, 2022|The Vault|

As promised, this FedFin report provides an in-depth analysis of the FSB’s latest policy on nonbank financial intermediation. As is often the case, much in the report discusses data gaps, presses for international cooperation, and details FSB and national work to date on the issues identified in its initial analysis after the 2020 crisis (see FSM Report NBFI). Most of FSB’s work since has focused on MMFs (see FSM Report MMF18), with this latest report going on to lay out ….

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

14 11, 2022

NBFI2

William Cross2022-11-14T12:16:04-05:00November 14th, 2022|5- Client Report|

Global Regulators Prioritize CCP, End-User Resilience

As promised, this FedFin report provides an in-depth analysis of the FSB’s latest policy on nonbank financial intermediation. As is often the case, much in the report discusses data gaps, presses for international cooperation, and details FSB and national work to date on the issues identified in its initial analysis after the 2020 crisis (see FSM Report NBFI). Most of FSB’s work since has focused on MMFs (see FSM Report MMF18), with this latest report going on to lay out more specific policy options for OEFs, margining, core bond markets, and other target areas. The report also calls for attention to systemic NBFI concerns, noting risks at family offices, prime brokers, life insurers, and pension funds, as well as “hidden leverage” without discussing what might best be done about them.

NBFI2.pdf…

25 04, 2022

M042522

Arezou Rafikian2023-03-01T16:00:41-05:00April 25th, 2022|6- Client Memo|

Why Prime Brokers are Prime Suspects

Although Ukraine and emerging-market distress were the most frequently discussed topics around last week’s Bank/Fund meetings, two other high-impact issues were also top of mind. One is the end of the international financial order as we’ve known it for decades; I’ll return to this shortly as well as in my forthcoming book. The other to which I now turn is more immediate: commodity-market stress and what regulators will do to avert it if they can. I have heard a lot about a number of options, but I fear that regulators will do what they always do when trouble lurks: double-down on banks under their thumb instead of flexing their muscles to govern nonbanks at the heart of the global financial infrastructure.

M042522.pdf…

25 04, 2022

Karen Petrou: Why Prime Brokers are Prime Suspects

Arezou Rafikian2023-03-01T16:00:47-05:00April 25th, 2022|The Vault|

Although Ukraine and emerging-market distress were the most frequently discussed topics around last week’s Bank/Fund meetings, two other high-impact issues were also top of mind. One is the end of the international financial order as we’ve known it for decades; I’ll return to this shortly as well as in my forthcoming book. The other to which I now turn is more immediate: commodity-market stress and what regulators will do to avert it if they can. I have heard a lot about a number of options, but I fear that regulators will do what they always do when trouble lurks: double-down on banks under their thumb instead of flexing their muscles to govern nonbanks at the heart of the global financial infrastructure.

In the commodity markets, as in all but the most direct financial-intermediation functions, banks are increasingly risk enablers, not takers. This isn’t because banks are just too darn good; it’s because they are regulated and, after 2010, regulated to the point at which the capital costs of engaging directly in key businesses outweighed the profit potential in financial markets where nonbanks do not face the same costly constraints.

Going back to 2011, we’ve pointed out that asymmetric market regulation leads to rapid risk migration. In market after market, nonbanks have driven prices down to the point where they can still earn comfortable margins, pushing banks saddled by capital, conduct, and risk-management standards to bow out of a market except where legacy assets such as low-cost funding and …

20 04, 2022

DAILY042022

Eliza Allen2023-03-02T10:41:49-05:00April 20th, 2022|2- Daily Briefing|

FSB Targets Commodity Markets, Prime Brokers

In his letter today to G20 ministers, FSB head Klaas Knot observes remarkable financial resilience to date but states that many worrisome concerns remain.

U.S. Expands Demands for New International Financial Order

Building on her comments last week outlining a new international financial order, Treasury Secretary Yellen today called on the World Bank and its related organizations to go beyond current activities to address the cross border risks resulting from climate change, health , migration, and “fragility.”

US Expands Sanctions Reach to Payments, Crypto

The U.S. today took two first-time actions in sanctioning Russia with far-reaching implications for the future of money and payments. It named Transkapitalbank as a sanctioned entity, not so much because it is a Russian bank, but because it has been found to facilitate sanctions evasion by virtue of Russia’s effort to create an alternative payment messaging service to get around SWIFT.

GOP Tries Again to Halt Postal-Banking Pilot

Continuing their strong opposition to postal banking, Ranking HFSC Member McHenry (R-NC), Ranking Oversight and Reform Committee Member Comer (R-KY), and Ranking Consumer Protection and Financial Institutions Subcommittee Member Luetkemeyer (R-MO) today sent a letter to Postmaster General Louis DeJoy slamming USPS for overstepping its statutory authority by extending what they call its “failed” postal-banking pilot program.

Daily042022.pdf…

6 04, 2022

DAILY040622

Eliza Allen2023-03-02T12:25:01-05:00April 6th, 2022|2- Daily Briefing|

IOSCO Dodging Open-End Fund Reform?

IOSCO today asked for comment on corporate-bond market liquidity and ETF best practices. The bond analysis focuses less on the open-end funds on which the SEC and global regulators are addressing in the wake of MMF proposals (see FSM Report MMF19) than on underlying markets. It focuses on the extent to which secondary corporate-bond trading remains dependent on a small network of OTC dealers in markets with scant liquidity despite sharp growth since the 2008 crisis.

Chopra Calls CRAs as Cartel

In a speech today on consumer reporting agencies, CFPB Director Chopra focused not on the sector’s decision to change medical-billing practices as the Bureau recommended, but rather on the fact that the three major agencies did so on the same day in the same announcement. This, he said, suggests that they are a cartel, not competitors.

DAILY040622.pdf…