#SLR

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16 11, 2022

REFORM215

2022-11-22T15:02:46-05:00November 16th, 2022|5- Client Report|

HFSC Session Brings Crypto Action to Fore, “Holistic” Capital Under Scrutiny

HFSC today largely focused bank regulators on the same range of questions posed at yesterday’s Senate Banking session (see Client Report REFORM214).  However, Chairwoman Waters (D-CA) emphasized the importance of federal legislation in sharp contrast to Chairman Brown (D-OH), also announcing a hearing in December on FTX.  Ranking Member McHenry (R-NC), who will become HFSC chairman in the next Congress, concurred with the chairwoman’s views on the need for digital-finance statutory reform.  However, he took strong issue with inter-agency policy with regard to new capital rules, merger restrictions, and third-party relationship constraints.  Republican members also targeted Vice Chairman Barr’s holistic capital review, arguing that banks are currently well capitalized and that additional standards would hamper lending.  Mr. Barr indicated that an SLR rewrite is part of the holistic review but not immediately necessary to quell Treasury-market volatility or illiquidity.  As discussed in more detail below, regulators promised banking-sector crypto rules at least as stringent as Basel’s proposal.

REFORM215.pdf

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15 11, 2022

REFORM214

2022-11-22T15:27:38-05:00November 15th, 2022|5- Client Report|

Crypto, Deposit Rates, Capital Top Senate Discussion

At today’s Senate Banking oversight hearing with the banking agencies, Chairman Brown (D-OH) generally applauded the work of regulators, emphasizing the need for tough standards, like-kind rules for bigtech companies, and an inquiry into why depositor interest rates lag Fed rate hikes along lines posed earlier by Sen. Reed (D-RI).  FDIC Acting Chairman Gruenberg concurred, criticizing banks for sluggish rates.  Ranking Member Toomey (R-PA) reiterated his longstanding complaints about regulators straying outside their mission in areas such as climate change.  He also called for SLR relief to reduce Treasury-market risk and opposed pending large-bank resolution guidance (see FSM Report LIVINGWILL19) on grounds that it is unnecessary.

REFORM214.pdf

14 11, 2022

FedFin on: Treasury Inches Closer to All-to-All Trading

2022-11-14T16:01:03-05:00November 14th, 2022|The Vault|

Building on our initial assessment, this report goes in-depth into the Treasury assessment of the market for its obligations and reforms necessary to avert another dash for cash.  Although the Federal Reserve, which participated in this study along with other agencies, indicated in 2020 it will review the supplemental leverage ratio (SLR) to…

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14 11, 2022

TMARKET3

2022-11-14T15:46:49-05:00November 14th, 2022|5- Client Report|

Treasury Inches Closer to All-to-All Trading

Building on our initial assessment, this report goes in-depth into the Treasury assessment of the market for its obligations and reforms necessary to avert another dash for cash.  Although the Federal Reserve, which participated in this study along with other agencies, indicated in 2020 it will review the supplemental leverage ratio (SLR) to enhance bond-market liquidity, it has yet to do so and no mention is made of any such reform in this report.  To be sure, this is only a Treasury report that does not necessarily reflect the views of these other agencies, but the Fed and Treasury usually work closely on matters such as this and it seems unlikely that the matter would go unmentioned if plans were under way to revise the SLR.  The 2022 report builds on the inter-agency working group’s 2021 analysis (see Client Report TMARKET2) but still does not reach firm conclusions or lay out specific recommendations suitable for near-term action.  However, work is in fact under way at the SEC, which has proposed a new central-clearing mechanism for Treasury obligations that, if finalized, would create at least some of the infrastructure necessary for the all-to-all trading this report now explores in greater detail.  Next steps for Treasury-market reform will be discussed at a conference later this week.

TMARKET3.pdf

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