Following the UN’s COP26 climate-risk summit, the Basel Committee has proposed high-level principles guiding risk management and supervision related to both physical and transition climate risk.
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Basel Proposes Global Climate-risk Management, Supervision Principles
As anticipated, the Basel Committee today proposed climate-risk management and supervision principles sure to guide both the Fed and OCC, even in just proposed form, as the U.S. agencies finalize near-term U.S. guidance in this high-priority arena.
FRB-NY Staff: U.S. Banks Now Even More Resilient
A new post from the Federal Reserve Bank of New York’s blog assesses bank resilience through the pandemic, concluding that large banks are even more resilient now than before thanks to post-2008 rules and post-2020 market backstops.
HFSC Republicans Condition CBDC on Stablecoin, Private Sector
HFSC Republicans have now laid out their principles for any U.S. CBDC, demanding that any Fed-issued CBDC maintain the U.S. Dollar’s reserve currency status and the U.S. payment system’s preeminence.
Senate GOP Tackles USPS Banking Pilot Program
Senate Banking Ranking Member Toomey (R-PA) today described postal banking as about the worst possible idea. Joined by other Republicans, Mr. Toomey wrote to the Postmaster General, questioning USPS authority to offer its recent pilot and challenging its mission-relevance.
CFPB Plans HMDA-Data Do-Over
Reflecting the President’s executive order on racial equity, the CFPB has now accelerated its fair-lending efforts with a request for views on how best to retool HMDA to better prevent mortgage discrimination.
FRB Presidents: Fund-Access, Financial-Literacy Improvements Needed
At today’s racism and the economy virtual event hosted by the Minneapolis Fed, FRB Atlanta President Bostic highlighted work by his Reserve Bank’s Special Committee on Payments Inclusion to show the Fed’s dedication in this …
Fed Acknowledge Climate Threat, Avoids Near-Term Commitments
The Federal Reserve today supported the most recent NGFS statement on global central-bank climate initiatives, emphasizing that the global statement allows each central bank to tailor its climate-risk efforts to its mandate and that the Fed’s mandate circumscribes efforts it recognizes to be of great importance.
Omarova Nomination Clears Formal Hurdle
Late yesterday, the White House officially nominated Saule Omarova as the next Comptroller of the Currency. As previously noted, we view this appointment to be part of a larger political negotiation over Jay Powell’s second term and the broader slate of Fed nominees.
Comment Date Set for FHFA Capital-Disclosure Proposal
The Federal Register today includes FHFA’s proposed capital-disclosure regime for Fannie and Freddie, with comment now due January 3. As previously noted, the proposed disclosures would better align the GSEs’ releases with those mandated for large banks, requiring transparency regarding standardized approach, operational, market, and leverage capital requirements.
OCC Climate Guidance Imminent
In his statement today supporting the NGFS Glasgow Declaration (see our earlier alert), Acting Comptroller Hsu expands on his comments about FSOC’s climate-risk report (see Client Report GREEN11).
Powell: Fed No Longer Contemplating SLR Rewrite
While FRB Chair Powell’s press conference today largely focused on the economy and monetary policy, he was also asked if the Fed still plans to seek comment on ways the SLR could be adjusted to increase Treasury-market liquidity.
McWilliams Positions Herself as Crypto Liberal Among Agency Skeptics
In remarks posted this morning, FDIC Chair McWilliams provided an update on the inter-agency “crypto sprint.” Ms. McWilliams made it clear that her intent is not to prohibit bank crypto activities but instead to govern them, announcing that a series of policy statements will be issued in “coming months.”
U.S. Adds Voice to Health/Finance G20 Construct
The U.S. Treasury has now joined other G20 finance ministers in calling for a new forum coordinating health and finance policy. The proposal was sparked by an earlier report from former government officials such as Larry Summers based on the need to ensure that all national and global resources are prepositioned to prevent the next pandemic.
Global Regulators Tackle Margining, CCP Resilience
Advancing an FSB priority most recently emphasized in the Board’s forward-looking plan, the Basel Committee, IOSCO, and the Committee on Payment and Market Infrastructures today invited comment on additional margining standards addressing problems identified in the March 2020 COVID crisis.
House Advances Open-Source Regulatory Data
The House late yesterday passed 400-19 the Financial Transparency Act (H.R. 2989), legislation reintroduced by Reps. Maloney (D-NY) and McHenry (R-NC) requiring the federal financial regulatory agencies to adopt data collection-and-distribution standards on format, searchability, and transparency.
OCC Stands Firm on LIBOR Transition, Supervisory Priorities
In remarks generally focused on LIBOR transition, Acting Comptroller Hsu today emphasized that the U.S. agencies fully intend to end LIBOR and “zombie LIBOR” as of year-end and that even banks that think …
FSOC Treads Cautious Middle Path on Climate-Risk Action
As we noted yesterday, the Financial Stability Oversight Council has now complied with President Biden’s executive order (see FSM Report GREEN8), compiling an exhaustive assessment of the financial-stability implications of climate risk and what might best be done about it. Other than administrative action in areas such as procurement, the Biden order actually mandated little specific action, a stance dictated not only by the independent charters of key financial agencies, but also Treasury’s hesitancy to press near-term stress tests, capital buffers, or other hard-wire interventions.
Global Central Bankers Tread Wary Path to Green Scenario Analysis
The central-bank group focused on climate risk, the Network for Greening the Financial System (NGFS), today issued its latest assessment of financial scenario-analytic approaches. This will guide the FRB as it advances the big-bank supervisory guidance Gov. Brainard recently signaled, but also reinforce those in the U.S. and elsewhere who fear that climate-risk scenarios need additional development before clear conclusions may be drawn from their results. The type of binding stress tests sought by Democrats (see FSM Report GREEN9) are also a long way off.
FRB-NY Analysis: BHC Exposure to Open-End MMFs Warrants Supervisory Attention
A new blog post from the Federal Reserve Bank of New York tackles an issue left hanging in the FSB’s new MMF-reform options (see FSM Report MMF18): the fire-sale risk posed by open-end funds. Reiterating that open-end MMF spillover risk has increased due to their growth and correlation, new quantification shows a six-fold increase in risk to U.S. BHCs since 1996.
Brainard: Fed to Issue Climate Scenario Analysis Guidance
Confirming Fed Chair Powell’s comments (see Client Report REFORM209), Gov. Brainard today said that the Fed will issue large-bank supervisory guidance on climate scenario analysis without providing timing, whether it will be proposed for comment, or details.
FSB: Varying National Stablecoin Standards Present Arbitrage, Fragmentation Risk
The FSB today updated progress on its high-level recommendations on global stablecoin (GSC) arrangements (see FSM Report CRYPTO14), laying out work to date even as much more needs to be done. As previously noted, we expect the U.S. shortly to ramp up its stablecoin work, following the FSB’s lead but likely gold plating it in several areas.
Cleveland Fed: Bank Consolidation Does Not Lead to Banking Deserts
New research from Cleveland Fed Staff finds that, despite banking-industry consolidation, rural and urban consumers have not experienced decreased banking access measured by the nearest full-service branch.
HFSC Dems Mum on Powell Renomination
In very sharp contrast to the Senate Banking session on Tuesday with Chairman Powell and Secretary Yellen (see Client Report REFORM208), today’s HFSC session was largely devoted to partisan wrangling over monetary policy, the debt ceiling, and the Biden Administration’s overall fiscal policy. Likely complicating Democratic support for Mr. Powell, Ranking Member McHenry (R-NC) strongly endorsed renomination. Significantly, no Democrat spoke on this issue nor did any raise the trading scandal at the Reserve Banks or the Fed’s regulation of very large banks in this or, indeed, any other context.
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Treasury Looks for Ways to Address Insurance Climate Risk
Complying with President Biden’s climate executive order, Treasury’s Federal Insurance Office today released a Request for Information (RFI) to assess existing climate-related issues or gaps in the supervision and regulation of insurers and their impacts on U.S. financial stability.
FRB Staff: Quarter Averaging Obscures Significant LCR Variation
Using confidential supervisory data, new research from FRB Staff concludes that U.S. GSIB daily LCRs experience significantly more variation than suggested by publicly-disclosed average, quarter-end figures.