#payment-system – Page 2 – Federal Financial Analytics

14 06, 2022

FedFin On: U.S. Digital-Asset Framework

Arezou Rafikian2023-01-27T15:30:30-05:00June 14th, 2022|The Vault|

After protracted negotiations and much public attention, bipartisan senators have introduced a far-reaching bill designed to encourage digital-asset use without undue risk to consumers, investors, or the financial system. The bill decides most, if not all, of the outstanding regulatory barriers to digital-asset use in favor of digital assets and their providers. Provisions in many cases go farther than public discussion has so far noted – for example, the measure not only expands the ability of digital-asset providers to reach retail and wholesale customers, but also gives them access to FDIC resolution without the cost of paying insurance premiums or coming under many of the rules that govern insured depositories…

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

15 04, 2022

FedFin: BIS Finds Ways to Give Nonbanks Payment-System Access, Increase CBDC’s Inclusion Impact

Arezou Rafikian2023-03-02T10:53:48-05:00April 15th, 2022|Uncategorized|

As promised, we turn here to an in-depth analysis of a paper from global regulators on whether CBDC contributes to financial inclusion – one of the most vital arguments from those advocating CBDC in the U.S. and in many other nations. The paper is not analytical, as it is based on interviews with nine central banks exploring retail CBDC, but all of those interviewed view CBDC as an effective tool to promote inclusion if designed to do so and the paper also surveys research to back up its findings. It details numerous ways CBDC could prove inclusive, including a first-time assessment of how making certain CBDC aspects programmable and how regtech could permit nonbanks to enter the CBDC payment system without undue risk…

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

9 03, 2022

FedFin Analysis: Payment-System Access

Arezou Rafikian2023-04-04T10:54:03-04:00March 9th, 2022|The Vault|

Following considerable controversy surrounding how Federal Reserve Banks grant master accounts, the FRB has proposed a somewhat more explicit set of guidelines than provided in its initial notice seeking views on expanding payment-system access. The first proposal laid out the Fed’s policy goals for granting access but said only that insured depositories would get the most straightforward review and other institutions would be subject to more detailed scrutiny. The Fed has now reissued that proposal and differentiated applicants into three classes, getting the lightest to the strictest review…..

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

7 03, 2022

Karen Petrou: Why Armies Now March on Their Wallets

Arezou Rafikian2023-04-04T12:29:27-04:00March 7th, 2022|The Vault|

Napoleon famously said that armies march on their stomachs. Now, it’s clear that armies also march on their wallets.

The dollar’s blitzkrieg triumph isn’t due to any love of the greenback — even America’s closest allies have long hoped to counterbalance US. economic dominance with rival payment systems able to operate unscathed regardless of U.S. sanctions. However, the EU, U.K., and Japan have never gotten much past dreaming about payment-system challenges because the embedded dollar-based system has become essentially friction- and risk-free. That’s hard to beat.

China might still have a shot at a yuan-based substitute, but it would have to ensure liquidity (essentially impossible when a currency isn’t freely convertible) as well as political neutrality. China’s decision suddenly to mount de facto nationalization of what was once a thriving, privately-owned digital-commerce sector will at the least give pause to those whose funds would move through a Chinese-dominated system.

Any nation that wants to replace the dollar also has to have sovereign obligations readily understood to be a safe haven under acute stress that are issued in amounts sufficient to absorb extreme shock. China and the EU has no single issuer of sovereign bonds in quantity and quality sufficient to substitute for Treasury obligations. Most market participants think China is more likely to be the cause of a shock than ever to serve as a shock absorber, ruling out its sovereign debt even if it grows large enough to mount a challenge to the U.S. Treasury.

And, finally, there’s the …

1 02, 2022

FedFin: “Fair-Fee” Policy

Arezou Rafikian2023-04-05T14:22:57-04:00February 1st, 2022|The Vault|

Taking action to advance President Biden’s competition order, 1 the CFPB is seeking views on fees which it believes exploit consumers by virtue of unfair competition. Although many of the fees it cites are covered by statutory
disclosure regimes designed to ensure both front- and back-end fee transparency, the Bureau believes that many of these fees are unfair due to large-bank market power.

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

31 01, 2022

Karen Petrou: CBDC’s Big Empty

Arezou Rafikian2023-04-05T16:20:36-04:00January 31st, 2022|The Vault|

Anyone looking for even a scintilla of a clue buried in a hint of an intention in the Fed’s CBDC discussion draft hunted in vain for guidance on the most consequential strategic inflection point for the U.S. financial-services industry, the financial system, the global payment system, and even the future of money. Once, we all would have had to wait for augers from the on-high Fed to see the fate the imperium decreed. Now, the Fed still thinks it rules all it surveys even though it doesn’t. Soon, it may find out the hard way that fast-moving companies crafting digital money care as little for the central bank’s wishes as they did for those of the media, hotel, and retailing magnates they have already supplanted.

This is not to say that we must necessarily have a central-bank digital currency. As I noted in my book, a democracy must ensure privacy and competition in ways China, for one example, disregards. Rather, it’s to say that the U.S. will not have a secure store of value or sound medium of exchange without a payment system on which the economy stands firm. Payment-system finality, accessibility, ubiquity, and cyber-security are all at risk if the Fed cedes the CBDC field without first and fast establishing the new framework it knows we need.

Nor am I saying that CBDC is inevitable because stablecoins are a certainty. Libra’s ignominious demise is ample evidence of the power regulators still have to set the terms of payment …

27 01, 2022

FedFin on: U.S. Central Bank Digital Currency

Arezou Rafikian2023-04-11T16:11:59-04:00January 27th, 2022|The Vault|

Months after initially promising to release a discussion draft on central bank digital currency (CBDC), the Federal Reserve is now seeking comment on whether and how it might create one. Reflecting the hesitancy of several FRB leaders, Chairman Powell included, the draft emphatically states that the Board has made no decision to issue a CBDC and, should it do so, it will seek at least tacit approval from both Congress and whichever Administration is in charge at the time.

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

21 01, 2022

Karen Petrou: Few Financial Fall-Out Shelters If Russia Invades Ukraine

Arezou Rafikian-12023-04-24T11:51:21-04:00January 21st, 2022|The Vault|

Perhaps nothing says as emphatically that market valuations are divorced from reality as the fact that equity and bond markets are essentially ignoring the increasing risk that Russia invades Ukraine. Investors have grown used to shrugging off geopolitical risks – see just the brief chills after Russia’s previous invasions of Crimea and Georgia as cases in point. But this time is different because this time Ukraine is a critical link in Europe’s energy supply, macroeconomic stress in Europe will have immediate global repercussions, and Vladimir Putin is making it more than clear that this time he’s not just playing around with minor nations he thinks of as vassal states. This time, he will go to the economic map if he believes the Western response to his invasion might pose too much risk to Russia’s economy and his popularity and there’s no reason to doubt him. As a result, I hope Treasury and the Fed are keeping a careful eye on the Treasury market and global payment system, not to mention on the cyber-security on which core market infrastructure rests. The threat is all too real.

Treasury has long known that the “nuclear option” when it comes to economic sanctions is denying Russia access to any financial institution with any kind of domicile in the U.S. or any point of access to the U.S. payment system topped off by SWIFT sanctions blocking Russian access to the global payment system. If Treasury fires these high-powered missiles – and it’s likely to have …

12 01, 2022

FedFin Forecast: Prudential Regulatory Framework Set for Structural Change Largely Built on Current Standards

Arezou Rafikian2023-04-24T15:49:23-04:00January 12th, 2022|The Vault|

As promised, FedFin begins our 2022 forecasts with this in-depth report on bank regulation. In general, we conclude that the context of decisions in 2022 and beyond will shift from a focus on tailoring efficiencies and burden relief to one emphasizing risk mitigation, fairness, equity, and — for the very biggest banks — a smaller systemic footprint. This report looks at the impact of pending personnel decisions as well as the outlook for climate-risk, new capital rules, FBO standards, and other key issues….

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

11 01, 2022

FedFin Assessment: Powell Sidesteps Many Challenges, Promises Much

Arezou Rafikian2023-04-24T15:54:45-04:00January 11th, 2022|The Vault|

As promised yesterday (see Client Report FEDERALRESERVE66), we listened closely today to gauge the extent to which Chairman Powell faces a serious challenge to reconfirmation. At least as far as Senate Banking Members are concerned, he doesn’t. Although Sen. Warren (D-MA) and other Democrats lambasted Mr. Powell over insider-trading allegations and what they called the Fed’s unresponsiveness, all still were cordial and seemed generally to blame the problem on institutional failures, not the chairman. Sen. Menendez (D-NJ) called the Fed’s diversity policy “outrageous,” but also does not seem inclined….

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