#Russia – Federal Financial Analytics

24 01, 2024

Daily012424

Arezou Rafikian2024-01-25T10:33:20-05:00January 24th, 2024|2- Daily Briefing|

FSB Plans Resolution Refinement, New Repo Standards

Renewing much of what it has said in the past, the FSB today released its 2024 official work program. Although the FSB’s head said earlier this week that current FSB resolution standards suffice, global standards are still set to be finalized for resolution reforms, which include a toolkit for CCP resolution authorities to be completed in May as well as publication of a list of insurers subject to the resolution planning standards in December.

CFPB Goes After Fees Banks Have Yet to Charge

Tackling fees it acknowledges banks have yet even to charge, the CFPB today proposed banning NSF fees for real-time non-processed transaction declines such as those at ATMs.

Senate Advances “Nuclear” Asset-Seizure Option

Following a 40-0 vote in the House Foreign Affairs Committee, the Senate Foreign Relations Committee today voted 20-1 (Paul, R-KY) for S.2003, legislation giving the White House clear authority to seize frozen Russian assets to assist Ukraine.

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22 12, 2023

DAILY122223

Eliza Allen2023-12-29T10:01:49-05:00December 22nd, 2023|2- Daily Briefing|

President Imposes Sweeping Secondary Sanctions

Responding to ongoing evidence that sanctions are not working as hoped despite recent Treasury assurances they are, the President today issued a sweeping executive order and Treasury laid out secondary sanctions for financial institutions found to facilitate Russian Federation finances related to its “war machine.” We will shortly provide clients with an in-depth analysis of these actions which pose significant threats to dollar-clearing access for financial institutions that have so far been largely outside the reach of existing sanctions.

Treasury Requests Feedback for Financial Inclusion Strategy

Following a statutory directive, Treasury today issued an RFI to develop a national strategy for financial inclusion. We will shortly provide clients with an in-depth report on the RFI. Noting significant disparities in banking-system access for LMI, low-wealth, Black, and Hispanic households as well as discrepancies in rates of stock and business ownership between white, Black, and Hispanic households, the RFI invites recommendations for policy, government programs, financial products, technology, and other tools and market infrastructure.

Brown Prioritizes Housing, ILC Bill, AI in 2024

The Senate Banking Committee today released its policy outlook entering 2024 prioritizing affordable housing, enacting the ILC-powers bill (see FSM Report ILC17), and AI financial-sector policy (likely here picking up the Warner-Kennedy bill we will shortly assess in depth).

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18 12, 2023

Karen Petrou: Why U.S. Soft Power is So Squishy

Arezou Rafikian2023-12-18T09:28:13-05:00December 18th, 2023|The Vault|

Late last week, Treasury issued a super-perky blog post asserting that U.S.-led sanctions will soon subdue Russia’s military might. However, judging by the data Treasury rallies, saying sanctions subdued Russia’s war-making capabilities is akin to a Yorkie’s confidence that it can tackle a Rottweiler. The terrier can indeed get in a few painful nips, but bring the big dog down? It could if sanctions worked. But, they don’t. The more Treasury persuades itself they do, the faster U.S. might dissipates thanks to resolute attacks and internal insouciance.

Why has U.S. soft power gone so squishy? Some problems are of the U.S.’s making, some not, but all pose a significant challenge as the world has again become a very dangerous place for a faltering super-power that not-unreasonably still thinks of itself as the bastion of democracy.

As I noted in a talk last week, one foundation of American might has long been the “Almighty dollar.” As a lot of data make clear, the dollar remains potent, but it’s no longer decisive. Nations come and go as reserve-currency issuers and the U.S. is going because, as I detail, it’s squandered the payment-system, financial-market efficacy, sovereign-obligation impregnability, and unquestioned rule-of-law pillars on which reserve-currency status rests. Enemies wielding currencies they seek to turn into global go-tos combined with the anonymity and evasion power of digital assets don’t help, but the U.S. seems to be doing its damnedest to speed the dollar’s demise not by express action, but rather by unfounded assumptions that, …

18 12, 2023

m121823

Arezou Rafikian2023-12-18T09:26:36-05:00December 18th, 2023|6- Client Memo|

Why U.S. Soft Power is So Squishy

Late last week, Treasury issued a super-perky blog post asserting that U.S.-led sanctions will soon subdue Russia’s military might. However, judging by the data Treasury rallies, saying sanctions subdued Russia’s war-making capabilities is akin to a Yorkie’s confidence that it can tackle a Rottweiler. The terrier can indeed get in a few painful nips, but bring the big dog down? It could if sanctions worked. But, they don’t. The more Treasury persuades itself they do, the faster U.S. might dissipates thanks to resolute attacks and internal insouciance.

m121823.pdf…

14 12, 2023

DAILY121423

Arezou Rafikian2023-12-15T17:22:54-05:00December 14th, 2023|2- Daily Briefing|

Top Senate Democrats Heighten Payment App Scrutiny

Continuing to shift their focus from Zelle to payment-service providers, Senate Banking Chairman Brown (D-OH) along with Sens. Reed (D-RI) and Warren (D-MA) today sent letters to Paypal and CashApp urging them to adopt new scam-reimbursement policies.

Treasury Defends Russian Sanctions, Economic-Warfare Clout

Facing increasing assertions that U.S.-led sanctions are not meaningfully affecting Russia, Treasury today issued a blog stoutly defending sanctions effectiveness.

Reed Presses OFR to Subpoena Shadow-Bank Data

The principal sponsor of the Dodd-Frank provisions creating the Office of Financial Research, Sen. Jack Reed (D-RI), today defended the agency on grounds that it lacks a confirmed director, promising to push the appointment on the floor as quickly as possible.

Basel Targets Stablecoin Reserve-Asset Risk

Moving forward with “targeted” changes to current standards, the Basel Committee today outlined revisions to its crypto standards with significant practical implications.

Liang Disputes Over-Arching Need for New AI Regs

Treasury Under Secretary Liang today argued that AI is not fundamentally different than other financial innovations and is already subject to existing consumer-protection, safety-and-soundness, illicit-finance, and financial-stability guardrails.

FRB-NY Official Highlights AI Promise, Problems, Policy Action

Summarizing a recent Federal Reserve Bank of New York AI conference, the Bank’s chief risk officer, Mihaela Nistor, concluded that AI can now identify GSIB and GSIFI risk due to its ability to detect tail behavior not now captured by relevant models.

Democrats Urge CFPB to Take Second Stand Against Forced Arbitration

Sens. Warren (D-MA) and Sanders (I-VT) were today …

12 12, 2023

DAILY121223

Eliza Allen2023-12-12T17:09:22-05:00December 12th, 2023|2- Daily Briefing|

IMF Calls for Enhanced Climate-Risk Analyses, Stress-Testing

Calling for implementation of the Basel Committee’s climate-related financial risk principles (see FSM Report CLIMATE14), the IMF’s Monetary and Capital Markets Department Director, Tobias Adrian, today pressed central banks to enhance their climate risk analyses and adapt stress-testing frameworks to better reflect climate-financial risk transmission and amplification channels.

Agencies Come Under Still More Workplace-Practice Scrutiny, Political Pressure

As we noted last week, House Republicans are now using ongoing assertions of FDIC workplace dysfunction to attack the OCC.

HFSC Subcomm Considers Sanctions Enforcement

Today’s HFSC National Security Subcommittee hearing focused primarily on critiques of US energy sanctions enforcement related to Russia, Iran, and Venezuela.

House Select Committee Calls on Fed to Stress Test China Risk

The House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party today released a bipartisan report urging Congress to direct the Fed to stress-test U.S. banks for their ability to withstand Chinese market risk, produce classified reports on these assessments, and consider the financial market impact of potential sanctions on Chinese financial firms.

Basel Proposes Modest Fix to IRR Standards, Post-SVB Revisions Await

As anticipated, the Basel Committee today released a consultation revising global interest-rate risk (IRR), standards updating current banking-book standards (see FSM Report IRR7) to toughen the IRR-shock calibration.

McKernan Extends Capital Olive Branch

FDIC Director McKernan today offered an end-game compromise that might actually lead to final rules in 2024 that defer some of the …

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.

Daily112322.pdf…