SBNY – Federal Financial Analytics

18 05, 2023

REFORM226

William Cross2023-05-18T16:16:02-04:00May 18th, 2023|5- Client Report|

Federal Regulators Lose Ground as Senate Banking Reviews Recent Failures

Describing the CEOs’ statements at his last hearing as “the dog-ate-my-homework” excuses for grievous failings, Senate Banking Committee Chairman Brown (D-OH) also attacked Republicans for placing blame on monetary policy, not the culture of supervisory laxity he details with various quotes from Trump Administration officials. Still, the panel’s legislative agenda seems limited to the executive-clawback measure we projected as the most likely outcome immediately after the mid-March failures (see Client Report REFORM218). Sen. John Kennedy (R-LA) countered that Vice Chairman Barr’s attribution of blame to Randy Quarles is the Fed coming up with a similarly-lame excuse for its recent failings.

REFORM226.pdf…

15 05, 2023

DEPOSITINSURANCE120

Max Camateros-Mann2023-05-15T12:46:44-04:00May 15th, 2023|1- Financial Services Management|

DIF Special Assessment

As the law requires and the FDIC Chairman promised after SVB and Signature Bank were declared systemic, the FDIC has now proposed a special assessment to compensate the Deposit Insurance Fund (DIF) for the cost of backing the two banks’ uninsured deposits. The FDIC has proposed to do so via an assessment covering IDIs with uninsured-deposit holdings above $5 billion. This thus exempts most smaller banks, with the FDIC adopting this approach on grounds that it justly penalizes IDIs that benefited the most from these systemic rescues. The new assessment would be applied over at least eight quarters beginning in January of 2024, with the FDIC’s analysis persuading it that the capital and income costs of this targeted approach are sustainable at covered insured depository institutions (IDIs).

DEPOSITINSURANCE120.pdf…

5 05, 2023

Al050823

Max Camateros-Mann2023-05-05T16:59:58-04:00May 5th, 2023|3- This Week|

Weekend Warriors

As we finalize this update, we along with everyone else focused on the financial market is back on weekend watch for large regional-bank resolutions. What Congress does in response to the failures so far seems clear, but changing events could redefine our current view that no substantive legislation will address anything about recent failures other than give the FDIC additional clawback authority along the lines discussed at last week’s Senate Banking hearing. And even that isn’t clear given the breadth of Sen. Warren’s bill (see FSM Report COMPENSATION35) and questions Republicans have about it no matter the GOP cosponsors Sen. Warren enlisted.

Al050823.pdf…

1 05, 2023

FedFin Analysis: GAO Slams FRB, FDIC Supervision

Arezou Rafikian2023-05-03T15:37:21-04:00May 1st, 2023|The Vault|

Following our analyses of the Fed’s report on SVB (see Client Report REFORM221) and the FDIC’s on SBNY (see Client Report REFORM222), we turn now to one from the General Accountability Office sure to have at least as much impact on bipartisan consideration of what needs next to be done to govern regional banks. HFSC Chairman McHenry (R-NC) has already cited the GAO report in his rebuttal to those from the banking agencies, and it may well have tempered Senate Banking Chairman Brown’s (D-OH) support of a focus solely on new law and rule.

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

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1 05, 2023

REFORM222

Max Camateros-Mann2023-05-01T15:18:42-04:00May 1st, 2023|5- Client Report|

FedFin Assessment: FDIC Blames Signature Governance, Clarifies Failure Scenario

In this report, we build on our assessment earlier today of the Fed’s SVB autopsy (see Client Report REFORM221) with an assessment of the FDIC’s self-review of Signature’s failure. As noted on Friday, the FDIC confines this report to Signature’s supervision; a separate report will address policy recommendations. Although the analysis has some findings in common with the Fed’s SVB assessment with regard to matters such as supervisors’ failure to keep up with a fast-growing bank, the FDIC principally focuses on key risk indicators at the bank rather than supervisory shortcomings.

REFORM222.pdf…

3 04, 2023

M040323

Max Camateros-Mann2023-04-03T11:46:10-04:00April 3rd, 2023|6- Client Memo|

Reflections Following My Fourth Financial Crisis

Sometimes markets change slowly as innovation or regulation transforms winners and losers. But sometimes – think now – markets undergo radical franchise-value paradigm shifts as critical structural flaws expose mortal systemic vulnerabilities. The SVB crisis is actually the fourth radical franchise-value shift I’ve seen in my financial-services career. As a result, this memo looks back at lessons learned the very hard way and then forward to constructive actions to minimize the chances of doing this all over again even sooner than before.

M040323.pdf…

3 04, 2023

Al040323

Max Camateros-Mann2023-04-03T11:02:55-04:00April 3rd, 2023|3- This Week|

Ready for a Recess?

We certainly are after the last three weeks! But, while Congress may be away until the middle of April, the FRB and FDIC will be hard at work writing reports that, for all their promised rigor, are likely to target specific failings at individual offices for the “idiosyncratic” risks and super-bad management that the agencies believe were largely the reason for SVB, Signature, and Silvergate’s demise. Following the White House’s lead, the agencies in concert with the OCC will also lay the groundwork for rapid-fire action on a raft of rules as soon as these reports are released.

Al040323.pdf…

29 03, 2023

REFORM218

Max Camateros-Mann2023-03-29T17:27:51-04:00March 29th, 2023|5- Client Report|

HFSC Focuses on Supervision, Clawbacks, Process, New Resolution and Run-Risk Options

Today’s HFSC hearing on recent bank failures was more partisan than yesterday’s Senate Banking session (see Client Report REFORM217). Still, there were significant areas of agreement evidenced not only through the marathon hearing, but also at its end, when Chairman McHenry (R-NC) and Ranking Member Waters (D-CA) agreed that they are frustrated with the regulators’ testimony, want more supervisory accountability, and will demand reforms once promised internal investigations are concluded. Several new issues were brought out today, including why the FedWire closing times precluded liquidity support that might have sustained SVB liquidity, whether TLAC should be required at banks of all sizes, tactics to quell viral runs, and whether tough new rules will cover mid-sized banks and/or community institutions.

REFORM218.pdf…