#Russia – Federal Financial Analytics

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 …

30 05, 2023

Daily053023

Eliza Allen2023-05-30T17:13:13-04:00May 30th, 2023|2- Daily Briefing|

Fed Study Validates Bank/Shadow-Bank Interconnections, Systemic Risk

A new study by staff from the Federal Reserve Banks of Boston and New York evaluates the banking-sector impact of fire sales across multiple NBFI segments, finding numerous bank vulnerabilities to nonbanks not only through direct exposures, but also through complex, indirect channels.

McHenry Protests U.S. Outbound-Investment Constraints

HFSC Chairman McHenry (R-NC) sent a letter to Secretary Yellen late Friday demanding information about a potential executive order that would enable CFIUS to prohibit or require notification of outbound investments into China, stating that the Administration’s interest in capital controls necessitates Congressional oversight.

IMF Article Calls SVB Resolution “Riskless Capitalism”

An article in the IMF’s forthcoming Finance and Development magazine issue argues that SVB’s uninsured depositors enjoyed “riskless capitalism,” concluding that high moral hazard-risks will persist without incentives for depositor due diligence.

FTC Demands Greater Debit-Card Data Access

The FTC today finalized a consent order requiring Mastercard to provide competing card networks with the customer account information necessary to process debit payments, alleging that the company illegally withheld that information to prevent merchants from using its competitors or Mastercard-branded debit cards saved in e-wallets outside of traditional networks.

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24 02, 2023

Al022723

Eliza Allen2023-02-24T16:57:09-05:00February 24th, 2023|3- This Week|

The Bull In China’s Shop

As we noted as Russia sanctions were introduced almost exactly a year ago and again on Friday, the U.S. is using this “soft-power” tool not only to punish Russia for invading Ukraine, but also to deter other nations – and most especially China – from going beyond rhetorical to military support. This, combined with the subsequent oil-price cap, has kept most neutral nations on the military sidelines, also forcing China to navigate carefully between anti-Taiwan bellicosity and pro-Russian sympathy. However, China has now gone beyond floating the spy balloon that so peeved Members of Congress at an earlier hearing at which sanction sabers were noisily rattled. The House Financial Services Committee will mark up the mildest of its sanctions bills on Tuesday, but China is now in full-throated alliance with Russia, possibly soon sending it armaments and other essentials in express violation of current G7 sanctions. What’s next?

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23 11, 2022

DAILY112322

Eliza Allen2022-11-23T12:42:48-05:00November 23rd, 2022|2- Daily Briefing|

OFAC Updates Guidance For Price-Cap Sanction Compliance

Reflecting ongoing negotiations about the level of the oil-price cap, OFAC last night provided updated guidance to banks and insurers about when transactions may violate this latest sanction. The new guidance identifies “covered services” for financing; this means a commitment for the provision or disbursement of debt, equity, or economic resources related to the maritime transport of Russian oil. However, and as before, U.S. persons are authorized to provide covered services if the Russian oil is purchased at or below the price cap.

FDIC Signals Tougher GSIB Resolution Reviews

With the FDIC signaling a tough new approach to resolution plan approval, the FRB and FDIC today announced the results of the resolution plans filed by U.S. GSIBs in July, 2021. All the banking organizations saw their plans approved except for Citigroup, which had noted shortcomings due to data quality and management concerns; the bank now has until January 31, 2023 to submit a revised plan. FDIC Acting Chairman Gruenberg noted that, going forward, the agencies will conduct more detailed reviews of internal testing results and independent capability assessments.

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13 05, 2022

DAILY051322

Eliza Allen2023-02-21T15:19:42-05:00May 13th, 2022|2- Daily Briefing|

GOP Fuels FDIC Battle With New Letter To Chopra

Following up on their scathing letter yesterday to Acting Comptroller Hsu, leading House Republicans today sent another letter to CFPB Director Rohit Chopra demanding significantly more transparency around the Bureau’s Policy Fellowship Program and accusing the Director of using the Program as a means to circumvent civil service laws. Signatories of the letter, which include HFSC Ranking Member McHenry (R-NC) along with Reps. Emmer (R-MN), Luetkemeyer (R-MO), and Timmons (R-SC), sharply question Director Chopra over possible favoritism in the Fellow selection process.

Treasury Reiterates Need for Shell-Company Transparency

Treasury today announced its 2022 national illicit-finance strategy, now governing the rest of a year in which Russia-related transactions have assumed far greater importance than when risks underlying this strategy were first identified. Four priority recommendations emphasize shell companies and all-cash real estate transactions, with the release reiterating Treasury’s first-ever order sanctioning accountants and other service providers related to corporate formation if they support sanctioned individuals or entities.

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12 05, 2022

DAILY051222

Eliza Allen2023-02-21T15:21:53-05:00May 12th, 2022|2- Daily Briefing|

Basel Heading Towards Tough New Crypto Standards

In remarks today, Basel Committee Director Pablo Hernández de Cos reiterated that Basel’s latest cryptoasset consultation will be out in “coming months,” going on to say that while global negotiations have yet to resolve various controversies raised in the consultation (see FSM Report CRYPTO19), he emphasized that he is not persuaded by comments urging lenient capital treatment to prevent crypto activity from migrating outside banking.

House Codifies Sanctions for Subsidiaries

The House yesterday passed H.R. 7066, legislation sponsored by Rep. Sherman (D-CA) to tighten secondary sanctions against Russia and its allies. Approved on a 418-2 vote, the bill stands high odds of inclusion in the omnibus Ukraine and sanctions legislation wending its way through Congress.

GOP Takes on Hsu, Merger Policy

Republicans today made it clear that the blame they directed for what they called the “FDIC coup”, so far directed only to CFPB Director Chopra, has now ensnared Acting Comptroller Hsu.

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11 05, 2022

DAILY051122

Eliza Allen2023-02-21T15:33:13-05:00May 11th, 2022|2- Daily Briefing|

HFSC re FSOC: SIFIs, Climate, Stablecoins, Lots More

Looking ahead to tomorrow’s HFSC hearing with Secretary Yellen, the Democratic staff memo suggests that this session will track much of what occurred yesterday at Senate Banking (see Client Report FSOC26): i.e., discussion of the need for stablecoin legislation, the role of SIFI designation, and the overall risks presented by higher inflation, Russia, China, and climate change.

Basel Plans Wholesale Review of Post-GFC Regulatory Regime

The head of the Basel Committee, Pablo Hernández de Cos, today announced a full-scale evaluation of the Basel III construct set for release later this year. The report will evaluate complexity, regulatory interactions and systemic-risk dynamics, focusing on capital, liquidity, leverage, and macroprudential elements of the Basel III reforms. The report will also evaluate resilience and financial-activity behavioral incentives.

FSB Plans Commodity, Climate, Crypto Agenda

In remarks today, FSB head Klaas Knot reiterated ongoing concern about commodity markets and continuing financial-market resilience despite stress absorption since Russia first invaded Ukraine. Mr. Knot is also concerned that some banks are generally over-leveraged and those with prime brokers may be at particular risk.

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10 05, 2022

DAILY051022

Eliza Allen2023-02-21T15:41:13-05:00May 10th, 2022|2- Daily Briefing|

HFSC Looks at NSRO Competition, Insurance Ratings

The HFSC Investor Protection Subcommittee hearing on bond markets reopens debate about the credit rating agencies that is unlikely to end in substantive action despite continuing Democratic displeasure with these agencies and the SEC standards mandated for them by the Dodd-Frank Act (see Client Report RATINGS49).

FinCEN Under Still More Beneficial-Ownership Pressure

Picking up on a theme at a recent HFSC hearing, Sens. Warren (D-MA), Grassley (R-IA), and over a dozen bipartisan senators sent a letter to Treasury demanding faster action on stalled beneficial-ownership disclosure rules. Acknowledging that FinCEN lacks the resources it needs, the senators nonetheless demand action in part to ensure effective anti-Russia sanctions enforcement.

IMF Head Calls for New Global Payment-System Infrastructure

In remarks today, IMF Managing Director Kristalina Georgieva identified financial-market fragmentation in the wake of Russian sanctions as the threat to the global order also discussed in a recent Petrou op-ed.

Daily051022.pdf…

9 05, 2022

DAILY050922

Eliza Allen2023-03-01T13:21:36-05:00May 9th, 2022|2- Daily Briefing|

U.S. Adopts Powerful Back-Door Campaign vs. Shell Companies, Trusts

In conjunction with a G-7 statement strongly condemning Russia, Treasury took an innovative move to address shell companies linked to the Russian Federation even as FinCEN’s beneficial-ownership rules remain bogged down.

Hsu Promises Deal-By-Deal Review of Large Regional M&A Pending Broad, Forward-Looking Policy

Citing changes in both U.S. banking and inequality since the last round of merger-policy statements in 1995, Acting Comptroller Hsu today called for a new policy that is neither pro- nor anti-merger but rather determines which larger mergers are “good” transactions so that only risky ones are rejected.

SEC Bows to Critics with Longer Comment Periods

In a significant concession to Congressional Republicans and industry critics, the SEC today extended the comment period for two of its most controversial initiatives. The deadline for comments on its climate-risk disclosures is moved forward by twenty-eight days to June 17.

CFPB Takes Administrative Action Expanding ECOA Reach, Lender Risk

Living up to its promise on Friday to address structural racism, the CFPB today issued a new advisory extending its fair-lending enforcement scope under the ECOA to all aspects of a credit transaction, not just loan origination or servicing.

Daily050922.pdf…

27 04, 2022

DAILY042722

Eliza Allen2023-03-01T15:04:29-05:00April 27th, 2022|2- Daily Briefing|

Hsu Urges Collaboration, Governance Efforts for Stablecoin, AI

In a statement today, Acting Comptroller Hsu confirmed his longstanding view that stablecoins require strong governance. Adding AI to this list of innovations that also need policy attention, Mr. Hsu also urged private standard-setting efforts such as those undertaken by the Internet Engineering Task Force and the World Wide Web Consortium.

Study Finds Benefits to Central-Bank Reserve Sanctions

In a new research paper, the Federal Reserve Bank of Minneapolis’ staff concludes that seizing reserves in the course of economic sanctions is warranted in “high-risk” scenarios in which the cost to the sanctioning country resulting from a debt default by the sanctioned nation is lower than the cost of the actions being sanctioned. This conclusion is derived from a simple economics model but it is of course very timely given ongoing debate about the extent to which central-bank reserves should be fully sanctioned as the Ukraine invasion continues and related geopolitical risks loom large.

Daily042722.pdf…