#Senate Banking – Page 2 – Federal Financial Analytics

12 01, 2024

DAILY011224

Eliza Allen2024-01-12T15:31:11-05:00January 12th, 2024|2- Daily Briefing|

Emmer, HFSC GOP Reintroduce FSOC Oversight Measure

Following a hearing earlier this week at which GOP Members reiterated longstanding FSOC criticism, House Majority Whip Emmer (R-MN) has reintroduced legislation along with ten other HFSC Republicans to bring FSOC under congressional appropriations.

HFSC Bipartisan AI Task Force Already Divided on Key Priorities

Reflecting growing concern about AI’s risks (see Client Report FSOC29), HFSC Chairman McHenry (R-NC) and Ranking Member Waters (D-CA) yesterday announced the creation of a bipartisan AI Working Group to be led by Digital Assets Subcommittee Chairman Hill (R-AR) and Ranking Member Lynch (D-MA).

House Passes Measures to Check Chinese Economic Power

The House today passed several bills addressing the role of China in IMF and World Bank policy and a renewed attempt to limit what many Members of Congress consider Chinese currency manipulation (H. R. 839).

The Fed Becomes a Big Loser

The Federal Reserve System today released its preliminary FY23 financial results, the first look into the System’s operating condition above and beyond its significant mark-to-market losses.

Daily011224.pdf…

2 01, 2024

AI4

Eliza Allen2024-01-02T10:14:03-05:00January 2nd, 2024|1- Financial Services Management|

AI Financial Risk, Rules

Bipartisan Senate legislation has been introduced to press FSOC to do more than highlight artificial intelligence (AI) as a potential threat to financial stability. The measure instead requires the Council to undertake a rapid study of AI’s financial stability risk and report to Congress on conclusions that must then be advanced through FSOC designation and federal-agency action. The bill also gives the SEC more authority to address at least some of the risks its chairman has identified that may be posed by predictive analytics, including AI. New AI-related stress testing would also be likely.

AI4.pdf…

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).

Daily122223.pdf

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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 …

13 12, 2023

DAILY121323

Eliza Allen2023-12-13T16:50:12-05:00December 13th, 2023|2- Daily Briefing|

HFSC Oversight Subcomm Revisits Iran Sanctions

Today’s HFSC Oversight Subcommittee hearing focused on the Biden Administration’s recent efforts to limit terrorist funding from Iran. Chairman Huizenga (R-MI) questioned the need for the November 14^th renewal of a waiver that allows Iraq to pay Iran for electricity, calling for increased pressure on Iran following Hamas’s October 7^th attack.

SEC Sets Out Treasury Central-Clearing Construct

As anticipated, the SEC this morning voted 4-1 to mandate central clearing for Treasury securities used in many repo and reverse-repo transactions, modifying the proposal in key respects still unsatisfactory to Commissioner Peirce. The rule addresses continuing concerns about Treasury-market fragility, in part by reducing the number of highly-leveraged hedge-fund transactions.

GAO Reaches Equivocal Verdict on Digital-Asset Crypto Evasion Risk

Addressing Congressional concerns such as those in the Warren-Marshall crypto-compliance bill, the GAO today issued a report finding that digital assets pose risk to U.S. sanction implementation and enforcement despite mitigating factors that may reduce certain risks.

Brown Presses Bank CEOs on Servicemember Rights

A week after the GSIB CEOs came before the Senate Banking Committee (see Client Report GSIB23), Banking Committee Chair Brown (D-OH) today sent a letter to the CEOs of the four largest consumer banks encouraging them to ensure that active-duty servicemembers obtain all the financial benefits to which they are entitled.

Daily121323.pdf…

7 12, 2023

DAILY120723

Eliza Allen2023-12-07T16:42:01-05:00December 7th, 2023|2- Daily Briefing|

BIS: CCP Collateral Holdings Pose Systemic Risk

A new BIS study looks at the risk that the transformation of OTC markets to centrally-cleared ones has in turn transformed markets based in part on know-your-counterparty into those dependent principally on collateral backing margin positions – an inherently more fragile market structure.

White House Presses FHLB Affordable-Housing Action

In remarks today, National Economic Advisor Lael Brainard not only highlighted the Biden Administration’s actions to address housing affordability, but also mentioned plans for new financing programs.

Ambitious CFPB Regulatory Plans Come Into View

The CFPB’s fall 2023 regulatory agenda provides status updates for several significant rulemaking items.

Basel to Set IRR, Window-Dressing, Crypto Standards

The Basel Committee’s year-end meeting advanced plans to address interest-rate risk (IRR) with a concrete agreement to issue a new consultation later this month updating current global IRR standards (see FSM Report IRR7).

BIS Points to MMF Risk When Rates Rise

Another new BIS paper concludes that the record size of MMFs poses significant threat to dollar-funding market stability.

OCC Warns Banks of AI Risk, Possible Supervisory Action

Reflecting growing Congressional, regulatory, and industry concerns over AI, today’s OCC semiannual risk assessment for federal banks states that national banks should be mindful of AI risks as these fall under current supervisory procedures.

Senate GOP Goes for Gruenberg’s Jugular

Despite efforts by the FDIC to reassure critics about its independent investigation, Senate Banking Republicans today fired off a ferocious letter demanding that FDIC Chair Gruenberg immediately resign …

4 12, 2023

M120423

Eliza Allen2023-12-04T11:03:03-05:00December 4th, 2023|6- Client Memo|

Why Curbing Banks Won’t Curtail Private Credit

Last Wednesday, Sens. Brown and Reed wrote to the banking agencies pressing them to cut the cords they believe unduly bind big banks to private-credit companies. The IMF and Bank of England have also pointed to systemic-risk worries in this sector, as have I. Still, FSOC is certainly silent and perhaps even sanguine. This is likely because FSOC is all too often nothing more than the “book-report club” Rohit Chopra described, but it’s also because it plans to use its new systemic-risk standards to govern nonbanks outside the regulatory perimeter by way of cutting the banking-system connections pressed by the senators. Nice thought, but the combination of pending capital rules and the limits of FSOC’s reach means it’s likely to be just thought, not the action needed ahead of the private-credit sector’s fast-rising systemic risk.

m120423.pdf

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4 12, 2023

Karen Petrou: Why Curbing Banks Won’t Curtail Private Credit

Eliza Allen2023-12-04T11:03:15-05:00December 4th, 2023|The Vault|

Last Wednesday, Sens. Brown and Reed wrote to the banking agencies pressing them to cut the cords they believe unduly bind big banks to private-credit companies. The IMF and Bank of England have also pointed to systemic-risk worries in this sector, as have I. Still, FSOC is certainly silent and perhaps even sanguine. This is likely because FSOC is all too often nothing more than the “book-report club” Rohit Chopra described, but it’s also because it plans to use its new systemic-risk standards to govern nonbanks outside the regulatory perimeter by way of cutting the banking-system connections pressed by the senators. Nice thought, but the combination of pending capital rules and the limits of FSOC’s reach means it’s likely to be just thought, not the action needed ahead of the private-credit sector’s fast-rising systemic risk.

One might think that banks would do all they can to curtail private-credit competitors rather than enable them as the senators allege and much recent data substantiate. But big banks back private capital because big banks will do the business they can even when regulators block them from doing the business they want. Jamie Dimon for one isn’t worried that JPMorgan will find itself out in the cold.

Of course, sometimes banks should be forced out of high-risk businesses. There is some business banks shouldn’t do because it’s far too risky for entities with direct and implicit taxpayer backstops. This is surely the case with some of the wildly-leveraged loans private-credit companies …

1 12, 2023

Al120423

Eliza Allen2023-12-01T16:41:48-05:00December 1st, 2023|3- This Week|

Capital Conundrum

Early signals indicate that GSIB CEOs summoned this week before Senate Banking will do their best to use the session to solidify Congressional calls for substantive changes in pending capital rules based on a far more transparent, systematic CB analysis. Signals such as the Brown/Reed letter last week also make it clear that Democrats will push hard for tougher GSIB-specific standards to offset increasingly-likely changes to the capital rules. Democratic advocates of specific changes – i.e., with regard to LMI mortgages and small-business credit – will also use the session to navigate a path between helping regional banks on key points while looking tough on the overall question of big-bank capital. Again, sticking it to GSIBs may be their tactic. Republicans won’t let up against the capital rules, but we suspect they’ll also focus on borrowers and regional banks, side-stepping GSIB surcharges and other top-tier questions wherever possible.

Al120423.pdf…

30 11, 2023

DAILY113023

Eliza Allen2023-11-30T17:02:53-05:00November 30th, 2023|2- Daily Briefing|

FRB-Cleveland Head Calls for Reg Redesign

The head of the Federal Reserve Bank of Cleveland, Loretta Mester, yesterday argued for higher bank capital requirements, including counter-cyclical imposition of a capital buffer during low-risk periods so it can be released under stress based on credit growth under a formula ensuring that the CCyB in fact moves quickly to ease stress.

Brown, Colleagues Stand Behind GSIB Surcharge

Ahead of next week’s hearing with GSIB CEOs, Senate Banking Chairman Brown (D-OH) was joined today by Sens. Warren (D-MA), Fetterman (D-PA), and Reed (D-RI) in a letter to FRB Vice Chair Barr voicing their strong support for the Board’s GSIB surcharge proposal (see FSM Report GSIB22).

IMF: Future of AI’s Impact on Banking Unpredictable

The IMF today released an article focused on AI, concluding that banking has the potential to be the biggest beneficiaries of AI, but also may have the most to lose. The article considers the unpredictable future of AI technology through optimistic and pessimistic scenarios, concluding that AI could better protect assets and markets, but also could be put to various nefarious uses.

Daily113023.pdf…