#Signature – Page 4 – Federal Financial Analytics

18 04, 2023

DAILY041823

Eliza Allen2023-04-18T17:03:30-04:00April 18th, 2023|2- Daily Briefing|

FRB-NY Finds NBFIs a Source of Systemic Risk Over the Centuries

Reflecting renewed interest in “narrow banks,” the Federal Reserve Bank of New York blog posted evidence of systemic risk from nonbanks in the absence of any banks at all.

Stablecoin Compromise Faces Steep Challenges

As noted yesterday, HFSC’s Digital Asset Subcommittee is set for a Wednesday hearing clearly intended to lay the groundwork for near-term action on Chairman McHenry’s (R-NC) longstanding goal of enacting stablecoin legislation.

Despite Failures, DIF Restoration Ahead Of Schedule

At the FDIC Board’s meeting today, FDIC staff said that – while the timing for restoring the DIF to its 1.35% statutory minimum remains uncertain – the DIF could reach its statutory minimum ahead of time and by 2024.

Bowman Remains Staunch CBDC Skeptic

Reiterating that any U.S. CBDC requires Congressional approval, Gov. Bowman today also reiterated her longstanding skepticism to any such instrument.

CFPB Plans Timing Study to Buttress Junk-Fee Regs

The Federal Register today includes a CFPB comment request on its “Junk Fees Timing Study,” which would be part of a series of online lab experiments testing differences in consumer choices across different information presentations.

Warren, Reed Demand OFR Use Subpoenas To Obtain Systemic Data

Sens. Warren (D-MA) and Reed (D-RI) today urged OFR Acting Director Martin to fill data gaps around financial stability risks posed by climate change, cryptocurrencies, and repo markets.

Daily041823.pdf…

17 04, 2023

M041723

Eliza Allen2023-04-17T12:01:55-04:00April 17th, 2023|6- Client Memo|

Why FDIC Privatization Isn’t a Pipe Dream

As night follows day, so proposals to privatize the FDIC have again followed bank failures. While debate over deposit-insurance privatization was, is, and will be an ideological tug of war between free-market conservatives and government safety-net progressives, it’s nonetheless an important option that warrants careful analysis as the FDIC yet again faces huge losses, banks are charged crippling and procyclical premiums, and talk turns to still more federal coverage at still greater risk not just to insured banks, but also to taxpayers. Pure FDIC privatization remains impossible, but target risk transfers warrant careful, but quick consideration.

M041723.pdf…

17 04, 2023

Karen Petrou: Why FDIC Privatization Isn’t a Pipe Dream

Eliza Allen2023-04-17T12:02:05-04:00April 17th, 2023|The Vault|

As night follows day, so proposals to privatize the FDIC have again followed bank failures. While debate over deposit-insurance privatization was, is, and will be an ideological tug of war between free-market conservatives and government safety-net progressives, it’s nonetheless an important option that warrants careful analysis as the FDIC yet again faces huge losses, banks are charged crippling and procyclical premiums, and talk turns to still more federal coverage at still greater risk not just to insured banks, but also to taxpayers. Pure FDIC privatization remains impossible, but target risk transfers warrant careful, but quick consideration.

Privatization was last seriously discussed when Congress rewrote FDIC coverage in 2006. This was a halcyon time when the FDIC was so sanguine about all the rules put in place after the S&L and bank crises that its 2007 study confidently predicted that systemic risk was a thing of the past, uninsured deposits would never again be covered, and the Deposit Insurance Fund more than sufficed for any systemic situation.

Of course, the great financial crisis that began later that same year put the lie to all this happy talk. Privatization proposals now aren’t anywhere near as happy nor do they repeat past assertions that, with FDIC privatization, the nation could also dispense with bank regulation. Instead, and for good reason, talk has now returned to private options because, without them, moral hazard seems sure to be embedded in a financial system that is still more shadowy.

A modern rethink of FDIC privatization must …

13 04, 2023

GSE-041323

Eliza Allen2023-04-13T14:11:50-04:00April 13th, 2023|4- GSE Activity Report|

Another Basel Buzzsaw

As we noted earlier today, global regulators are rethinking their 2015 decision not to require an express capital charge for interest-rate risk, a shift with significant implications for the role of U.S. banks as mortgage lenders and investors. It will take if the U.S. decides on an express capital charge, but near-term developments promise immediate fixes to interest-rate and duration risk with significant strategic impact.

GSE-041323.pdf…

3 04, 2023

REFORM219

Eliza Allen2023-04-03T11:07:12-04:00April 3rd, 2023|5- Client Report|

FedFin Forecast: Probable Changes to Bank Supervision, Regulation, Law

With Thursday’s White House announcement, we know that the Administration will do its best to support Fed and FDIC efforts to color recent events as a failure of Republican-led rulemaking, not also one of agency supervisory acumen, speed, and even competence. So far, key Democrats are instead pursuing a two-track strategy: complaining mightily about Trump-era rules but also joining with Republicans to cite an array of supervisory lapses they want quickly remediated by new standards, new rules, and – if need be – also by new law. Indeed, on Friday, Democrats made it clear that they want considerably more from the Administration than the fixes on which the agencies prefer to focus. Given how much is in motion and how much could advance, this report details FedFin’s forecast for near-term action in each of these arenas, focusing on matters with broad industry impact rather than specific SVB/Signature- enforcement issues. We thus provide forecast for immediate supervisory actions, those Congress will demand, new rules (tailoring and beyond), and the few legislative initiatives we believe have a reasonable chance of passage and Presidential approval.

REFORM219.pdf…

28 03, 2023

FedFin Assessment: Policy Implications of FDIC-Resolution Innovations

Arezou Rafikian2023-04-03T12:48:36-04:00March 28th, 2023|The Vault|

As noted yesterday, the FDIC’s recent rescues have had several unusual features with implications not only for future policy, but also for pending special assessments to replenish the DIF for the $22.5 billion estimated costs to the Deposit Insurance Fund. Analyzed here, new tools – e.g., voluntary liquidation, equity-appreciation rights, lines of credit – have determine the extent to which this estimate holds, how FHLB advances are treated in future resolutions, and the role the FDIC may play in companies that acquire failed IDIs….

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

28 03, 2023

RESOLVE50

Eliza Allen2023-03-28T11:42:40-04:00March 28th, 2023|5- Client Report|

FedFin Assessment: Policy Implications of FDIC-Resolution Innovations

As noted yesterday, the FDIC’s recent rescues have had several unusual features with implications not only for future policy, but also for pending special assessments to replenish the DIF for the $22.5 billion estimated costs to the Deposit Insurance Fund. Analyzed here, new tools – e.g., voluntary liquidation, equity-appreciation rights, lines of credit – have determine the extent to which this estimate holds, how FHLB advances are treated in future resolutions, and the role the FDIC may play in companies that acquire failed IDIs. A forthcoming FedFin report will assess another issue sure to come up at Congressional hearings: why the FDIC and other agencies used these options in concert with a systemic designation protecting uninsured depositors rather than their OLA powers designed to prevent both uninsured-depositor protection and the most recent of the Fed’s facilities backing the banking system.

RESOLVE50.pdf…

27 03, 2023

DAILY032723

Eliza Allen2023-03-27T17:00:51-04:00March 27th, 2023|2- Daily Briefing|

FDIC Adopts New IDI-Resolution Policy

The FDIC’s announcement late yesterday that it had sold portions of SVB to First-Citizens indicate that a provision also in its Signature bridge-bank sale reflect a new FDIC resolution policy: a willingness to take warrants.

Global Authorities Press FX Payment Redesign

The BIS Committee on Payments and Market Infrastructures (CPMI) today issued a final report offering a number of recommendations to central banks to facilitate the adoption of PvP systems. To mitigate regulatory barriers, the report recommends that central banks strengthen regulatory incentives for FX market participants to use PvP arrangements, improve settlement risk exposure reporting, and enact robust settlement finality protection.

Barr Defends Fed, Promises Review

Ahead of what is sure to be two raucous days of Congressional hearings, FRB Vice Chairman Barr’s testimony emphasizes that the Federal Reserve will use “all its tools” to protect banks of all sizes and that all deposits at all banks are safe.

Gruenberg Mounts Vigorous FDIC Defense, Presses For Significant Rule, Premium-Assessment Rewrite

FDIC Chairman Gruenberg’s testimony ahead of Congressional hearings describes the Signature and SVB actions, rebutting bailout assertions on grounds that the banks in fact failed and banks – not taxpayers – will make up any FDIC losses. He also indicates that the FDIC can and will investigate insiders to determine responsibility and pursue penalties if appropriate.

Daily032723.pdf…

24 03, 2023

DAILY032423

Eliza Allen2023-03-24T17:13:54-04:00March 24th, 2023|2- Daily Briefing|

GOP Expands Attack On Fed Supervisory Actions

In yet another letter ahead of next week’s hearings, Senate Banking Ranking Member Scott (R-SC) and all Republican Members of the committee asked Fed Chairman Powell and FRB-SF President Daly a series of questions asserting that SVB’s failure reflects significant supervisory lapses.

FSOC Breaks The Glass

Although there is no formal announcement, FSOC will hold what is clearly an emergency, closed meeting later today per a new media advisory.

Top HFSC Republicans Join SVB-Supervisory Inquest

Following a similar letter from Senate Banking Republicans earlier today, HFSC Subcommittee Chairmans Barr (R-KY) and Huizenga (R-MI) along with Rep. Kim (R-CA) sent yet another letter to Vice Chair Barr and FRB-SF President Daly also demanding detailed supervisory-related information on SVB.

Reserve Banks Promise to Bear Some Sometime Soon

Under ever-growing pressure, all of the Federal Reserve Banks today under the New York Fed’s aegis announced a common transparency policy.

HFSC GOP Targets State Bank Supervisors

Top House Republicans today brought state banking commissions into the SVB and SBNY fray, asking each for extensive details on recent actions and setting the April 6 deadline now evident in all recent GOP requests in this arena.

GOP Leaders Also Demand FSOC Answers

HFSC Subcommittee Chairman Barr (R-KY) and Huizenga (R-MI) today also sent letters to FSOC Chair Yellen and Council of Inspectors General on Financial Oversight Chair Delmar requesting detailed information on meetings surrounding the banking agencies’ March 12 decision to invoke a systemic risk exception for SVB …

24 03, 2023

FedFin Analysis: Whom and What the FDIC and Fed Can Save How

Arezou Rafikian2023-03-24T17:05:38-04:00March 24th, 2023|The Vault|

Recent editorials and other media have often said that the FRB and/or FDIC have powers or taken actions that is not the factual case as we understand it. Members of Congress also appear sometimes willing to make assertions about what agencies can do now even if it is unclear if there is statutory authority to do so. We have provided individual clients with key clarifications, but do so now more generally to support strategic and advocacy decision-making. Of particular importance is the authority the FDIC is said to have or lack related to uninsured deposits; as detailed below, the agency actually has significant authority to do so as well as even to back BHC debt, as long as certain stringent conditions are met. As detailed in FSM Report RESCUE65, Congress limited both the FDIC and Fed in hopes that….

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…