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15 11, 2022

DAILY111522

2022-11-15T17:28:46-05:00November 15th, 2022|2- Daily Briefing|

Recognizing Early Stage, FSB Still Slams Climate Stress Scenario Analytics

In collaboration with the Network for Greening the Financial System (NGFS), the FSB today concluded that risk exposures and vulnerabilities may be underestimated under current climate-stress scenarios because metrics fail to capture second-round effects, potential climate non-linearities, risk-management costs and externalities, and asset-price corrections triggered by transition shocks.  Further, while orderly scenarios do not yield severe impacts, disorderly scenarios and scenarios involving no financial system transition accompanied by high medium- to long-term physical risks correlate with significant GDP and financial losses.  As a result, the FSB determines that, although the impact of climate risk is concentrated in certain sectors and currently contained from a domestic financial perspective, tail risks may pose notable resilience threats.

FRBNY Launches CBDC Feasibility Project

Advancing more of the U.S. CBDC infrastructure, the Federal Reserve Bank of New York today announced that its Innovation Center (NYIC) will engage in a proof-of concept project testing the technical, legal, and business feasibility of distributed ledger technology to settle financial institution liabilities through transfer of central bank liabilities.  Work includes collaboration between NYIC and private sector organizations and will harness simulated data to explore the feasibility of central bank wholesale and commercial digital money interoperating on a shared multi-entity distributed ledger, but will not advance policy outcomes or signal imminent Federal Reserve CBDC adoption or design specifications.

Daily111522.pdf

3 11, 2022

DAILY110322

2022-11-03T17:15:32-04:00November 3rd, 2022|2- Daily Briefing|

Gruenberg Backs Bank On

In remarks late yesterday, FDIC Acting Chairman Gruenberg pointed to the importance of Bank On accounts to retain previously un- or under-banked households brought into the system following large government payments early in the pandemic.

ECB Presses Climate-Risk Capital Regs

Moving far ahead of the Fed, the ECB has announced strict plans to ensure that EU banks not only improve governance and express climate-risk stress testing, but also hold sufficient internal-capital allocations for physical and transition risk.

Data Standard-Setters to Come Under CFPB Regs

In remarks late yesterday updating the CFPB’s open-banking rulemaking efforts, Director Chopra indicated that the new consumer-data rules (see forthcoming in-depth FedFin report) will also address   how best to set public and private-sector standards to ensure industry-wide fairness and access to critical infrastructure.

IMF Climate-Risk Priorities Include GSIB Buffers

The IMF’s Deputy Managing Director Bo Li today set priorities for central banks and bank regulators addressing financial-system climate resilience.

Daily110322.pdf

30 09, 2022

DAILY093022

2022-10-03T13:40:26-04:00September 30th, 2022|2- Daily Briefing|

Brainard Acknowledges Risk But Sticks to Policy Guns

Responding to acute concerns that Fed policy will shatter global financial stability, Fed Vice Chair Brainard today emphasized her longstanding and once-isolated view that monetary policy must consider financial stability.

Global Standard-Setters Turn to Clearing Margin, Liquidity

The Basel Committee, IOSCO, and CPMI issued the first substantive response to the FSB’s decision to target margining practices following its review of the 2020 financial crisis and the need to address nonbank financial intermediation (see Client Report NBFI).

HFSC Republicans Denounce Beneficial Ownership Rule

HFSC Ranking Member McHenry (R-NC) and Rep. Luetkemeyer (R-MO) released a statement today sharply criticizing FinCEN’s beneficial ownership final rule as overly broad and complex.

Basel Concludes High Capital Compatible with Sustained Profitability

The Basel Committee today released its latest report on bank capitalization, finding that profitability remains robust despite capital ratios increasing to the highest level since the beginning of the exercise in 2012.

Bowman Comes Out Swinging on New, Costly Big-Bank Rules

Following a speech earlier this week largely siding with banks on merger policy, FRB Gov. Bowman today agreed with assertions from bank CEOs (see Client Report REFORM213) and others that the largest U.S. banks are now well capitalized as judged by ratios and effective stress testing.

FRB/FDIC Turn to Regional Resolvability

The Fed and FDIC today announced that they will shortly propose resolution guidance for most regional banks.

Daily093022.pdf

29 09, 2022

DAILY092922

2022-09-29T16:56:43-04:00September 29th, 2022|2- Daily Briefing|

Beneficial Ownership Standards Released at Long Last

After a long delay and Congressional demands, FinCEN finalized its beneficial ownership rule today, mandating both domestic and foreign firms doing business in the US to report any individuals with substantial control or ownership interests.

Climate Scenario Analyses Begin

As initially promised by Chairman Powell (see Client Report FEDERALRESERVE67 and Michael Barr, the FRB today announced that it will pilot climate scenario analysis exercises involving Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo.  The pilot, which will begin early next year and conclude in late 2023, will require the banks to analyze the impact of certain climate-related stress scenarios on their portfolios.

FSB Continues to Review Climate Financial Stability Risks

In a speech today, FSB Chair Klaas Knot reiterated key needs in addressing climate-related financial stability risks.  These needs include filling gaps in climate data, integrating climate risk into broader financial stability surveillance, and assessing whether a dedicated macroprudential policy approach is appropriate.

Daily092922.pdf

22 09, 2022

REFORM213

2022-10-12T17:04:04-04:00September 22nd, 2022|5- Client Report|

Senate Republicans Tackle Woke Banking; Democrats Turn Again to Zelle, Fees

Senate Banking’s hearing with big-bank CEOs proved much more combative than HFSC’s session yesterday (see Client Report REFORM212).  From the outset, Republican Senators condemned what they characterized as serious threats of banking politicization around social and cultural issues, with Ranking Member Toomey (R-PA) predicting a Republican counter-offensive should his party regain control.  He also said that the Fed’s decision to join other central banks and supervisors in implementing climate scenario analysis is a precursor to regulatory edicts pressuring banks to divest from energy companies.  Republicans also emphasized that high regulatory-capital requirements have undue macroeconomic effects.  As predicted, Democratic focused extensively on Zelle and bank fees.

REFORM213.pdf

22 09, 2022

REFORM212

2022-10-12T17:06:54-04:00September 22nd, 2022|5- Client Report|

HFSC Goes Easy on CEOs

At today’s big-bank oversight HFSC hearing, Committee Democrats focused on each bank’s progress on social issues, such as internal diversity, unionization, and historic roles in financing slavery.  Although Chairwoman Waters (D-CA) called for more restrictive merger-approval criteria in her opening statement, Democrats largely left the issue untouched.  Ranking Member McHenry (R-NC) framed the hearing as political “theater,” focusing on discrediting capital increases.  Committee Republicans also asked CEOs about inflation, fiscal policy, and gun merchant codes.  Chairwoman Waters concluded this marathon session by chastising the CEOs for failing fully to answer the questions she posed ahead of the hearing and demanding that they do so in five legislative days.

REFORM212.pdf

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