#SEC – 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 …

14 09, 2023

DAILY091423

Eliza Allen2023-09-14T16:47:09-04:00September 14th, 2023|2- Daily Briefing|

IOSCO Proposes Leveraged Loan, CLO Best Practices

IOSCO today released a consultation report proposing best practices for leveraged loans and CLOs that address origination and refinancing, EBITDA and documentation transparency, aligning interests from loan origination to end investors, managing conflicts of interest throughout the intermediation chain, and disclosures.

Durbin, Marshall Press Credit-Card Interchange Bill

Reiterating concerns expressed last month and comments yesterday on the Senate floor, Senate Whip and Judiciary Chairman Durbin (D-IL) and Sen. Marshall (R-KS) were joined this time by Sen. Welch (D-VT) and four House Members calling on Visa and Mastercard to reverse planned fee hikes.

GAO Presses for FSOC Power to Regulate, Not Just Designate

The GAO today issued a report recommending that Congress consider legislation allowing FSOC to compel regulatory action, arguing that this would better accomplish the Council’s mission because FSOC currently has limited power to respond to systemic risk.

HFSC GOP Highlight CBDC Privacy Concerns

As anticipated, HFSC Digital Assets GOP Members continued their staunch opposition to a U.S. CBDC, with Subcommittee Chairman Hill (R-AR) and Majority Whip Emmer (R-MN) asserting that private innovation can modernize payments without the risk of government surveillance.

Brown Doubles Down on Opposition to House Crypto Bill

Making it still more clear that he is not supportive of pending House cryptoasset legislation, Senate Banking Chairman Brown (D-OH) today sent a letter to Treasury Secretary Yellen, SEC Chairman Gensler, and CFTC Chairman Benham asking for views on where new authority may be needed.

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13 09, 2023

DAILY091323

Eliza Allen2023-09-13T16:46:21-04:00September 13th, 2023|2- Daily Briefing|

GOP Plans Still More Nails in CBDC Congressional Coffin

The memo for tomorrow’s HFSC CBDC hearing leaves no doubt as to continuing staunch GOP opposition, with Majority Whip Emmer (R-MN) reintroducing legislation barring the Fed from issuing a CBDC to individuals or using it to implement monetary policy.

FSI: Contingent Capital Fails as TLAC

Reinforcing the decision by U.S. agencies not to allow CoCo to serve as TLAC (see FSM Report TLAC9), a new BIS staff brief concludes that the current regulatory framework for Additional Tier 1 (AT1) bonds may not be fit for purpose, encouraging regulators to rethink CoCo as well as to consider heightening disclosure standards.

Gensler Emphasizes Prime Broker, Crypto, AI Risks

SEC Chairman Gensler today highlighted his ongoing worries about prime brokers, reiterating leverage and systemic-risk concerns.

Chopra Suggests Bank Merger Rewrite in Works

CFPB Director Chopra today reiterated the Bureau’s priorities, stating that the current bank merger review process lacks analytical rigor which will soon be addressed in ways he did not specify.

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12 09, 2023

DAILY091223

Eliza Allen2023-09-12T17:19:22-04:00September 12th, 2023|2- Daily Briefing|

GHOS Presses Basel Action on Lessons Learned

Basel’s group of Governors and Heads of Supervision (GHOS) met yesterday, listing strong bank risk management and governance arrangements, effective supervision, and the need for a robust regulatory framework as the primary lessons it learned from this year’s banking turmoil. GHOS also pressed its members to finalize their Basel III reforms, noting that most plan to implement them by the end of 2024.

Gensler Takes Swing-Pricing, AI Fire

At today’s Senate Banking hearing with SEC Chairman Gensler, Democrats largely defended the pace and scope of recent SEC work while Republicans criticized the agency for rulemakings they said were ideologically driven and inadequately analyzed. Chairman Brown (D-OH) applauded the SEC’s crypto enforcement actions and encouraged it to examine broker and investment adviser use of AI. Ranking Member Scott (R-SC) and several other Republicans sharply criticized Mr. Gensler for what they said was his lack of transparency and responsiveness to congressional inquiries.

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15 08, 2023

DAILY081523

Eliza Allen2023-08-15T16:28:12-04:00August 15th, 2023|2- Daily Briefing|

HFSC GOP Accuses SEC, FINRA of Crypto-Bill Sabotage

Accusing the SEC of preempting HFSC Republicans’ crypto legislative efforts via FINRA, HFSC Chairman McHenry (R-NC) and 22 other Committee Republicans today sent letters to SEC Chairman Gensler and FINRA CEO Robert Cook arguing that the timing of Prometheum Ember Capital LLC’s approval to operate as a special purpose broker-dealer (SPBD) was calculated to show that the SEC’s current crypto regulatory powers are sufficient. The letters highlight that Prometheum is unable to perform clearing or settlement services and has yet to serve any customers, also noting what are said to be the company’s close ties to the Chinese Communist Party.

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28 07, 2023

DAILY072823

Eliza Allen2023-07-28T17:09:55-04:00July 28th, 2023|2- Daily Briefing|

FSOC Considers Nonbank Systemic Risk, Credit-Based LIBOR Replacements

At today’s FSOC meeting, participants as usual said nothing about the closed-door agenda, which notably featured more discussion of the systemic risk that may be posed by nonbank mortgage servicers. Different agencies presented their work to address this risk, which was also flagged when FSOC finalized its new approach to identifying systemic risk (see FSM Report SYSTEMIC95). Whether FSOC as a whole is satisfied with FHFA and Ginnie actions and even if these agencies think their work to date suffices will determine the extent to which FSOC intervenes, but the session reinforced the systemic importance accorded to nonbank mortgage firms and the potential for additional action.

Agencies Take Action to Enhance Emergency Liquidity, Whitewash Discount Window

As presaged at Chair Powell’s press conference earlier this week, the banking agencies today issued liquidity-planning guidance designed both to ensure adequate preparation for acute liquidity stress and take the stigma off discount-window draws. The guidance deals only with liquidity planning and thus does not alter the treatment of discount-window funding for purposes of the LCR, admonishing banks to take account of the hard lessons of the March bank failures and prepare for runs and other extreme-stress scenarios.

Daily072823.pdf…

26 07, 2023

DAILY072623

Eliza Allen2023-07-26T16:37:20-04:00July 26th, 2023|2- Daily Briefing|

Senate Democrats Stand Firm On “Junk Fee” Campaign

Today’s lightly-attended Senate Banking Financial Institutions Subcommittee hearing on banking and consumer fees showcased broad Democratic alignment with the Administration’s “junk fees” campaign and persistent Republican aversion to this effort as well as to the CFPB.

CFPB Flags UDAAP, Other Problematic Practices for Enforcement

The CFPB’s latest supervisory report not only details recent actions and priorities, but also expressly stipulates that certain activities identified in the course of supervision that have yet to be addressed by formal agency action are UDAAP.

SEC Targets AI Advice

Acting as anticipated following Gary Gensler’s fiery talk last week about AI risk, the SEC today voted 3-2 to propose new rules curtailing what it believes to be broker dealer and investment-adviser conflicts of interest due to predictive analytics.

Crypto-Jurisdiction Bill to Advance; Stablecoin Measure Likely to do so Tomorrow

Chairman McHenry (R-NC) and Ranking Member Waters (D-CA) announced at today’s HFSC markup that bipartisan negotiations on the committee’s stablecoin bill continue and despite the absence of any breakthrough.

DOJ Officials Seeks Merger Answers

In remarks today, Policy Director David Lawrence of DOJ’s Antitrust Division went beyond new, draft DOJ/FTC merger guidelines (see FSM Report MERGER12) to lay out questions on which the agencies particularly seek answers.

Powell Stresses Bank Discount Window Readiness

FRB Chairman Powell’s press conference today focused almost entirely on monetary policy, but the chair agreed that the discount window performed badly during the recent crisis and that banks need to …

24 07, 2023

DAILY072423

Eliza Allen2023-07-24T17:00:47-04:00July 24th, 2023|2- Daily Briefing|

FDIC Clamps Down On Uninsured Deposit Reporting

Likely reacting to mid-size bank accusations that large banks are under-counting uninsured deposits, the FDIC today posted a financial institution letter highlighting that some financial institutions have incorrectly estimated uninsured deposits on their Call Reports.

Fed Archegos Order Lays Out Broader FBO Issues

Joining the U.K.’s record-breaking order, the Federal Reserve added $268.5 million to the $387 million fine imposed on Credit Suisse for governance and numerous other risk-manage failings related to its $5.5 billion Archegos loss. The Fed’s order is an important reminder that FBO branches may be held to full account for failings tolerated at the time by U.S. or home-country regulators (who today also joined in this enforcement action).

GAO Anticipating Mark-Ups, Calls for Stablecoin, Crypto Spot Market Legislation

Ahead of HFSC’s mark-up, GAO today released a report sure to be cited as it calls for statutory change to address regulatory gaps in stablecoins and spot markets. It notes that the lack of stablecoin reserve, disclosure, and redemption requirements may pose consumer-protection and financial-stability risks.

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21 07, 2023

DAILY072123

Eliza Allen2023-07-21T17:06:34-04:00July 21st, 2023|2- Daily Briefing|

GOP’s Crypto Bills Still Face Significant Partisan Problems

HFSC is now set for a Wednesday mark-up of two controversial crypto bills, one with shared jurisdiction with the Agriculture Committee governing regulatory jurisdiction and the other setting federal standards for payment stablecoins.

Senior GOP Senator Proposes Sweeping FRB Reform

Going beyond bipartisan legislation with Sen. Warren (D-MA) to redesign Fed governance to increase political accountability, Sen. Scott (R-FL) on his own has introduced a legislative package that would sharply contract the Fed’s monetary-policy and emergency-liquidity authority.

Clawback Bill Faces Tuberville Blockade

Reinforcing his stand against the executive-compensation clawback bill reported 21-2 by Senate Banking (see FSM Report COMPENSATION37), Sen. Tommy Tuberville (R-AL) today posted an op-ed laying out his reasoning.

Daily072123.pdf…

19 07, 2023

DAILY071923

Eliza Allen2023-07-19T16:57:05-04:00July 19th, 2023|2- Daily Briefing|

FTC/DOJ Propose Sweeping M&A Rewrite

Following an extensive inquiry into a new U.S. merger construct, the Department of Justice and Federal Trade Commission today released a draft formal policy statement that would codify issues previously raised in areas such as a transaction’s implications for workers.

White House Leaves Bank “Junk Fee” Attack As Is

Acting on President Biden’s competition executive order (see Client Report MERGER6), the White House today announced a slate of actions aimed at lowering consumer costs and promoting competition.

Bipartisan Senators Introduce New DeFi-AML/Sanctions Framework

Senator Reed (D-RI) yesterday introduced legislation along with Sens. Warner (D-VA), Rounds (R-SD), and Romney (R-UT) targeting DeFi-related money laundering and sanctions evasion.

Dems Reintroduce Bill Requiring Instant Consumer Deposit Access

Sens. Van Hollen (D-MD) and Warren (D-MA) and Reps. Pressley (D-MA) and Lynch (D-MA) have reintroduced the Payments Modernization Act, which requires financial institutions to recognize deposited funds in real-time and clarifies the moot point of whether the Fed has existing authority to build a real-time payments system.

Daily071923.pdf…