#resolvability – Page 2 – Federal Financial Analytics

2 10, 2023

DAILY100223

Eliza Allen2023-10-02T16:36:52-04:00October 2nd, 2023|2- Daily Briefing|

FRB FAQs Open a Small, But Significant Capital Window

In what Reuters takes as a sign of hope that the end-game rules may not be as crushing as banks fear, the FRB has issued a new FAQ related to credit-linked notes and SPVs.

Bowman Turns to Specific Supervisory Reforms

In remarks today, FRB Governor Bowman expanded on her prior comments about Fed supervisory lapses, but made it clear that she also opposes a “heavy-handed” supervisory approach that relies primarily on call report data, instead calling for a new approach to CAMELS and regular engagement with financial institutions to express areas of concern or to better understand a bank’s strategic direction.

Fed OIG re Silvergate: Far More Scathing re Supervision, Need for New Guidance

The OIG report today from the Fed regarding supervisory lapses at Silvergate is considerably less expansive than the prior report on SVB because the parent company remains open despite the IDI’s voluntary liquidation and relevant data are thus deemed confidential.

Barr Presses Emergency-Window Readiness

FRB Vice Chair Barr’s comments today on monetary policy and financial stability provide a detailed rationale for addressing the linkages between these two arms of the Fed’s mandate without any specific steps for doing so.

Daily100223.pdf…

28 09, 2023

DAILY092823

Eliza Allen2023-09-28T16:44:03-04:00September 28th, 2023|2- Daily Briefing|

White House Resilience Plan Focuses on Physical Infrastructure, Not Finance

The White House today released a National Climate Framework focused principally on promoting climate resilience in non-financial sectors such as building and energy use, improving federal agency climate preparedness, ensuring land and water resilience, and increasing climate-related community benefits and job opportunities.

BIS Conducts Successful Wholesale CBDC FX Pilot

Looking at the wholesale CBDCs of most interest in the U.S., the BIS today announced the conclusion of Project Marina, a wholesale CBDC FX pilot with DeFi elements among the central banks of France, Switzerland, and Singapore.

OCC Moves Interest-Rate Risk to Supervisory Priority List

The OCC today released its 2024 bank supervision operating plan announcing that there will be heightened supervision focus on interest-rate risk, AML/CFT, payments, DLT, and CRA.

All But The Smallest, Simplest Regional Banks Face Tougher Supervision

Signaling tougher supervisory standards for most regional banks, the long-anticipated Federal Reserve OIG report on SVB’s failure largely reiterates findings in Vice Chair Barr’s SVB report (see Client Report REFORM221) on failures by Board and FRB-SF supervisory staff quickly to adapt to SVB’s rapidly-changing risk profile.

Gruenberg Again Calls for Targeted Deposit Insurance Reform

In remarks today, FDIC Chair Gruenberg said that cross-border cooperation enhanced resolution of SVB’s international subsidiaries, using a talk to global deposit insurers also to reiterate prior recommendations on deposit-insurance reform (see Client Report DEPOSITINSURANCE119).

Daily092823.pdf…

21 09, 2023

DAILY092123

Eliza Allen2023-09-21T16:52:36-04:00September 21st, 2023|2- Daily Briefing|

Hill Stands by Opposition to Pending Rules, Presses for Holistic Liquidity Approach

Reflecting his votes on all of the recent proposals, FDIC Vice Chairman Hill today criticized recent rulemakings as an overreaction to March bank failures and urged regulators to carefully consider the proposals’ aggregate effects amid uncertain economic conditions. Although he reiterated his general support for the LTD proposal (see FSM Report TLAC9), Mr. Hill argued that the FDIC should focus more on regional bank resolvability via a weekend sale. He also pushed for a more holistic approach to liquidity requirements, arguing that they should be more durable for a wider range of stress events and better reflect bank behavior in times of stress.

Daily092123.pdf…

20 09, 2023

DAILY092023

Eliza Allen2023-09-20T17:11:25-04:00September 20th, 2023|2- Daily Briefing|

Brown, Rounds Agree: AI Credit-Underwriting Warrants Regulatory Attention

At today’s Senate Banking hearing on AI in financial services, Chairman Brown (D-OH) argued that AI should be governed by the same rules as the rest of the financial system, with new law necessary if existing rules prove inadequate.

HFSC FinCEN Bills Draw Bipartisan Support

HFSC Chairman McHenry (R-NC) at today’s markup praised the scope of bipartisan support on today’s FinCEN, sanctions, and other national security bills.

HFSC Delays Bipartisan Sanction Bill Vote

Today’s HFSC markup also considered two bills addressing sanctions policy: H.R. 5512 from Rep. Sherman (D-CA) to require bank subsidiaries to comply with sanctions on Russia and Belarus and H.R. 760 from Rep. Barr (R-KY) imposing blocking sanctions on Chinese defense or surveillance companies and the third-party companies that supply them.

HFSC Dems Continue Strongly Opposing GOP Anti-CBDC Measure

The bipartisan spirit of today’s HFSC markup dissipated as Members fiercely debated H.R. 5403 from Majority Whip Emmer (R-MN), a bill that would bar the Fed from issuing a CBDC to individuals.

Gruenberg: New Shadow Bank Standards Would Cure a Capital Proposal Problem

FDIC Chairman Gruenberg today gave remarks arguing that FSOC along with OFR should establish a new reporting framework to assess the financial stability risks posed by nonbanks and ensure that public reporting is sufficient for market participants to understand nonbank counterparty risk.

HFSC Reports FinCEN, Sanctions, CBDC Bills

HFSC today unanimously reported H.R 760 sanctioning Chinese defense companies, H.R. 5512 requiring bank subsidiaries to comply with sanctions …

19 09, 2023

DAILY091923

Eliza Allen2023-09-19T18:11:29-04:00September 19th, 2023|2- Daily Briefing|

FSB Finally Takes Concrete CCP-Resolution Action

Following longstanding announcements that it would advance CCP resolvability, the FSB today released a consultative report recommending a toolbox approach to CCP resolution providing sufficient loss absorption and liquidity that is readily available and mitigates adverse effects on financial stability.

Treasury Advances Climate-Risk Principles, Not Mandates

Cautiously advancing the President’s climate-risk order (see FSM Report GREEN8), Treasury today released nine nonbinding principles for net-zero financing and investment encouraging financial institutions to focus on limiting scope 3 emissions by implementing robust net-zero transition plans.

CFPB Expands AI Crackdown

Expanding on last year’s adverse action guidance (see FSM Report FAIRLEND11), the CFPB today issued a circular stating that lenders – especially those using AI – cannot use CFPB sample adverse actions forms and checklists to deny consumers credit if the samples do not accurately portray the reasoning behind the denial.

HFSC Republicans Expand Attack From Capital to LTD Rules

Today’s HFSC Financial Institutions Subcommittee hearing on the economic consequences of the banking agencies’ slate of recent proposals showcased strong Republican concerns.

Daily091923.pdf…

18 09, 2023

FedFin on: Large-IDI Resolution Plans

Arezou Rafikian2023-09-19T18:09:58-04:00September 18th, 2023|The Vault|

Although a pending FDIC/FRB proposal imposes a raft of new requirements for resolution plans from IDIs with over $100 billion in assets, the FDIC has also issued a freestanding proposal doing the same, also setting information-filing standards for IDIs below $100 billion but above $50 billion. Aspects of the resolution-plan filing standards for large covered IDIs (CIDIs) echo and in some cases allow reliance on aspects of the joint rule with the Fed, but the FDIC notes that this rule is, as required by the Dodd-Frank Act, focused on financial stability. Its own IDI resolution rules now and as proposed instead address how the FDIC is to meet its own statutory requirements (e.g., least-cost resolution). The NPR mandates many new planning or filing requirements to achieve its goals, most notably adding new severability standards that may require new inter-affiliate or -branch firewalls that reduce operating efficiencies and, when it comes to broker-dealer or other entities, lead to indirect resolution requirements not mandated by functional regulators.

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

15 09, 2023

Al091823

Eliza Allen2023-09-15T16:53:45-04:00September 15th, 2023|3- This Week|

Let It Be Resolved…

Or, maybe not. As detailed below, FedFin has delved into the depths of three new proposals designed to ensure that any big U.S. bank that isn’t made still more impregnable by all the new rules proposed and to come is also indestructible. Karen Petrou has written about the wisdom – if there is any – of making big banks de facto utilities, but this will occur only if all of the new rules work as intended. We’ve had our doubts about that with regard to recent proposals, and our review of the new resolution proposals raises still greater concerns.

Al091823.pdf…

15 09, 2023

LIVINGWILL23

Eliza Allen2023-09-15T15:52:05-04:00September 15th, 2023|1- Financial Services Management|

Large-IDI Resolution Plans

Although a pending FDIC/FRB proposal imposes a raft of new requirements for resolution plans from IDIs with over $100 billion in assets, the FDIC has also issued a freestanding proposal doing the same, also setting information-filing standards for IDIs below $100 billion but above $50 billion. Aspects of the resolution-plan filing standards for large covered IDIs (CIDIs) echo and in some cases allow reliance on aspects of the joint rule with the Fed, but the FDIC notes that this rule is, as required by the Dodd-Frank Act, focused on financial stability. Its own IDI resolution rules now and as proposed instead address how the FDIC is to meet its own statutory requirements (e.g., least-cost resolution). The NPR mandates many new planning or filing requirements to achieve its goals, most notably adding new severability standards that may require new inter-affiliate or -branch firewalls that reduce operating efficiencies and, when it comes to broker-dealer or other entities, lead to indirect resolution requirements not mandated by functional regulators. The proposal also tightens enforcement policy, most notably increasing the criteria by which a resolution plan will be judged “credible” and thus the extent to which a CIDI will be subject to monetary penalties or even allowed to operate as is.

LIVINGWILL23.pdf…

8 09, 2023

Al091123

Eliza Allen2023-09-08T16:03:06-04:00September 8th, 2023|3- This Week|

We’re Flummoxed

FedFin’s in-depth analyses continue to plumb the strategic import of the post-SVB regulatory rewrite U.S. agencies have initiated and are determined to finish no matter industry and Congressional concern. As with our impact assessment of the capital proposal (see FSM Report CAPITAL230), our resolution-standard analyses look at key strategic points in what the agencies say they are doing and then also at what they leave out, what seems not to make as much sense as the agencies suggest, and where the sanguine impact analyses that always accompany these proposals may be at fault.

Al091123.pdf…

7 09, 2023

FedFin on: Living-Will Requirements

Arezou Rafikian2023-09-07T16:39:01-04:00September 7th, 2023|The Vault|

In conjunction with proposing a new long-term debt (LTD) requirement for categories II, III, and IV banks, the Fed and FDIC are pursuing other ways to enhance resolvability. Among these is new guidance for large domestic and foreign banking organizations that requires U.S. banking organizations and foreign banking organization (FBO) intermediate holding companies (IHCs) along with all their insured depositories when any is over $100 billion to file resolution plans. These are also redesigned to make the plans much closer in substance to those mandated for GSIBs.

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