#OTC – Federal Financial Analytics

17 01, 2024

DAILY011724

Eliza Allen2024-01-17T16:21:16-05:00January 17th, 2024|2- Daily Briefing|

CFPB Tries to Bring Overdraft Fees Under New Benchmark

Arguing that overdraft fees are a big-bank “junk-fee harvesting machine,” CFPB Director Chopra today released a long-awaited proposal to cap fees to what the agency considers a reasonable threshold.

Bowman Expands Basel Critique, Key Dem Now Points to Problems

In remarks today, FRB Gov. Bowman did not go quite as far as her colleague Chris Waller yesterday, but she nonetheless urged that the end-game rules be re-proposed after comments are taken into account.

Senate Banking GOP Again Urges Capital Proposal Withdrawal

Senate Banking Ranking Member Scott (R-SC) along with all Committee Republicans late yesterday sent a letter to FRB Chair Powell, FDIC Chairman Gruenberg, and Acting Comptroller Hsu once again calling on the regulators to withdraw the capital proposal (see FSM Report CAPITAL230).

Biden, Brown Praise CFPB Overdraft Proposal

Following the CFPB’s announcement of its proposed rule regarding overdraft fees today, President Biden again denounced “junk fees” as “exploitation,” and included the CFPB’s proposal in his administration’s efforts to lower costs for American consumers.

FRB/FDIC Provide Limited-Time Resolution-Plan Filing Flexibility

Reflecting a problem we identified in our assessment of the resolution-plan proposal (see FSM Report LIVINGWILL22), the FRB and FDIC today extended the resolution plan submission deadline for categories II and III banks from July 1, 2024 to March 31, 2025.

Global Regulators Turn to OTC-Derivative Margin Improvement

Following yesterday’s release with the CPMI focused on CCPs and clearing members, the Basel Committee and IOSCO today …

7 12, 2023

DAILY120723

Eliza Allen2023-12-07T16:42:01-05:00December 7th, 2023|2- Daily Briefing|

BIS: CCP Collateral Holdings Pose Systemic Risk

A new BIS study looks at the risk that the transformation of OTC markets to centrally-cleared ones has in turn transformed markets based in part on know-your-counterparty into those dependent principally on collateral backing margin positions – an inherently more fragile market structure.

White House Presses FHLB Affordable-Housing Action

In remarks today, National Economic Advisor Lael Brainard not only highlighted the Biden Administration’s actions to address housing affordability, but also mentioned plans for new financing programs.

Ambitious CFPB Regulatory Plans Come Into View

The CFPB’s fall 2023 regulatory agenda provides status updates for several significant rulemaking items.

Basel to Set IRR, Window-Dressing, Crypto Standards

The Basel Committee’s year-end meeting advanced plans to address interest-rate risk (IRR) with a concrete agreement to issue a new consultation later this month updating current global IRR standards (see FSM Report IRR7).

BIS Points to MMF Risk When Rates Rise

Another new BIS paper concludes that the record size of MMFs poses significant threat to dollar-funding market stability.

OCC Warns Banks of AI Risk, Possible Supervisory Action

Reflecting growing Congressional, regulatory, and industry concerns over AI, today’s OCC semiannual risk assessment for federal banks states that national banks should be mindful of AI risks as these fall under current supervisory procedures.

Senate GOP Goes for Gruenberg’s Jugular

Despite efforts by the FDIC to reassure critics about its independent investigation, Senate Banking Republicans today fired off a ferocious letter demanding that FDIC Chair Gruenberg immediately resign …

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

Arezou Rafikian2022-11-14T12:16:04-05:00November 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…

30 11, 2021

FEDERALRESERVE64

Arezou Rafikian2023-05-23T14:42:56-04:00November 30th, 2021|5- Client Report|

Powell Threads His Way Through Macro, Monetary, Regulatory Challenges

Most of the news at today’s Senate Banking hearing revolves around Chairman Powell’s concession that inflation may not be transitory and economic growth is now so robust that quantitative tightening might proceed more quickly than planned, pandemic permitting. Mr. Powell was pressed on this dramatic turn-around, but none of the questioning appears to dim his chances for rapid confirmation. Secretary Yellen focused her comments on fiscal stimulus and the debt ceiling. In this report, we analyze in depth financial-policy issues, addressing issues such as CBDC, stablecoin, LIBOR transition, and economic inequality.

FEDERALRESERVE64.pdf…

26 10, 2021

Daily102621

Arezou Rafikian2023-06-05T13:54:59-04:00October 26th, 2021|2- Daily Briefing|

McWilliams Positions Herself as Crypto Liberal Among Agency Skeptics
In remarks posted this morning, FDIC Chair McWilliams provided an update on the inter-agency “crypto sprint.” Ms. McWilliams made it clear that her intent is not to prohibit bank crypto activities but instead to govern them, announcing that a series of policy statements will be issued in “coming months.”

U.S. Adds Voice to Health/Finance G20 Construct
The U.S. Treasury has now joined other G20 finance ministers in calling for a new forum coordinating health and finance policy. The proposal was sparked by an earlier report from former government officials such as Larry Summers based on the need to ensure that all national and global resources are prepositioned to prevent the next pandemic.

Global Regulators Tackle Margining, CCP Resilience
Advancing an FSB priority most recently emphasized in the Board’s forward-looking plan, the Basel Committee, IOSCO, and the Committee on Payment and Market Infrastructures today invited comment on additional margining standards addressing problems identified in the March 2020 COVID crisis.

House Advances Open-Source Regulatory Data
The House late yesterday passed 400-19 the Financial Transparency Act (H.R. 2989), legislation reintroduced by Reps. Maloney (D-NY) and McHenry (R-NC) requiring the federal financial regulatory agencies to adopt data collection-and-distribution standards on format, searchability, and transparency.

OCC Stands Firm on LIBOR Transition, Supervisory Priorities
In remarks generally focused on LIBOR transition, Acting Comptroller Hsu today emphasized that the U.S. agencies fully intend to end LIBOR and “zombie LIBOR” as of year-end and that even banks that think …