As came out into the open last week, FSOC will finally turn to rewriting the Trump era rewrite of the Obama Administration’s FSOC protocols regarding systemic financial institutions and activities. Could the SIFI reaper be coming for Fannie and Freddie? We doubt it, but then again…
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KC-Fed: Data Aggregation Requires Rules Before Mass Adoption
The Kansas City Fed yesterday released a briefing on data aggregators concluding that they can improve the efficiency and quality of consumer financial services if proper regulation protecting data security and privacy is enacted.
SEC Prioritizes Enforcement, Disclosure, Working-Families and Systemic Risk
The SEC’s new strategic plan through 2026 speaks to Chairman Gensler’s focus on fairness, economic opportunity, and enforcement. Specifics are sparse, but the plan puts the agency’s enforcement policy in the context of protecting “working families” especially when it comes to enforcement in areas such as cryptoassets.
FSI Report: Bigtech, Third Party Vendors Pose Operational Risk
The BIS Financial Stability Institute today released a study examining operational resiliency through a macroprudential lens, offering recommendations on how to address systemic risks presented by critical third-party service providers and bigtech.
FSB, IMF Close One Data-Gap Project, Open Next Phase
In a joint report today, the FSB and the IMF reported progress on closing financial data gaps, closing the second phase of the Data Gaps Initiative called for by the G20 in 2009. The project identified these gaps in the wake of the financial crisis, with phase two specifically addressing increasing data collection on financial stability risks and interconnections, as well as enhancing communication of financial statistics. The organizations state that data gaps have closed considerably on financial soundness indicators, G-SIFIs, non-bank intermediation, and other financial stability risks.
IMF Staff Assess Green CBDC Options
A new IMF paper concludes that Proof of Work-based DLT applications should not define any payment system transformation prioritizing reduced energy consumption, including CBDC. Although CBDC could be designed to be more energy efficient than the current payment system, the ultimate energy efficiencies and environmental benefits of CBDC will depend on the design priorities of the issuing central bank.
BIS Officials Caution re “Green Bubbles”
In an article today, top BIS officials highlighted the potential risk of “green bubbles” and stressed the limits of the financial industry’s ability to reduce climate risk. The article states that the financial sector faces the same misalignment of incentives as other industries, with the current generation bearing the costs of a green transition that will mainly benefit future generations.
HFSC re FSOC: SIFIs, Climate, Stablecoins, Lots More
Looking ahead to tomorrow’s HFSC hearing with Secretary Yellen, the Democratic staff memo suggests that this session will track much of what occurred yesterday at Senate Banking (see Client Report FSOC26): i.e., discussion of the need for stablecoin legislation, the role of SIFI designation, and the overall risks presented by higher inflation, Russia, China, and climate change.
Basel Plans Wholesale Review of Post-GFC Regulatory Regime
The head of the Basel Committee, Pablo Hernández de Cos, today announced a full-scale evaluation of the Basel III construct set for release later this year. The report will evaluate complexity, regulatory interactions and systemic-risk dynamics, focusing on capital, liquidity, leverage, and macroprudential elements of the Basel III reforms. The report will also evaluate resilience and financial-activity behavioral incentives.
FSB Plans Commodity, Climate, Crypto Agenda
In remarks today, FSB head Klaas Knot reiterated ongoing concern about commodity markets and continuing financial-market resilience despite stress absorption since Russia first invaded Ukraine. Mr. Knot is also concerned that some banks are generally over-leveraged and those with prime brokers may be at particular risk.
Flood Gates Open on CFPB Bigtech Policy
The Federal Register today includes the CFPB’s notice regarding its bigtech orders, with comment now due December 6. The short comment deadline reflects the speed with which the Bureau is pursuing bigtech data; the October 21 orders require companies to submit data by December 15.
Markey, Merkley Bill Seeks End to Big Bank Brown Finance
Sens. Markey (D-MA) and Merkley (D-OR) have introduced legislation to force the FRB to mandate that banks with greater than $50 billion in assets and all nonbank SIFIs submit plans describing how they will cut their financing for fossil fuel emissions by fifty percent by 2030 and then do so completely by 2050.
Fed Staff Study Ratifies GSIB Scoring; We’re Not So Sure
Late last week, the Fed published a new staff note using a novel approach – high-frequency stock trading – to identify SIFIs. Looking to determine if one firm’s negative stock return creates market-wide contagion risk in a short time period, the study finds that the eight U.S. designated GSIBs demonstrate this systemic market correlation.
USPS Experiments with New Banking Services
Following an American Prospect story today, a number of news sources have confirmed that the U.S. Postal Service has launched a pilot postal-banking proof of concept.
Warren Demands Still More Retribution for Fed Trading Practices
Based in part on news today that Vice Chairman Clarida also engaged in trading some believe has the appearance of impropriety, Sen. Warren (D-MA) has expanded her campaign demanding not just a Federal Reserve inquiry, but now also an SEC investigation.
Fed Plans Single-Day Implementation for ISO 20022 in 2023
The FRB today issued notice that Reserve Banks will adopt the ISO 20022 message format for the Fedwire Funds Service.
Gensler’s Next Grilling
Ahead of its hearing with SEC Chair Gensler tomorrow, HFSC’s majority staff memo indicates that the session will cover the full SEC agenda.