#stablecoin

3 05, 2024

Al050624

2024-05-03T16:41:51-04:00May 3rd, 2024|3- This Week|

Can Congress Do Anything?

Seemingly not.  Last week, one of the most promising bills so far – a federal stablecoin construct – sputtered and died.  Resurrection is possible, especially in the lame-duck, but we find it dispiriting that a bipartisan bill that almost every key policy-maker thinks urgent is nonetheless doomed in regular order, let alone in the hail-Mary attempted last week via a must-pass bill.  The legislation cannot advance without compromise between HFSC Chair McHenry (R-NC) and Ranking Member Waters (D-CA) and, even if the tantalizingly-close agreement between them materializes after more than two years of negotiations, it still has to get to the House floor – possible – and then advance in the Senate – even harder.

Al050624.pdf

17 04, 2024

DAILY041724

2024-04-17T17:36:07-04:00April 17th, 2024|2- Daily Briefing|

Global Regulators Tackle NBFI Margining, Collateral Transformation

As it has long promised, the FSB today issued a consultation on standards designed to buttress derivatives, commodity, and securities-financing markets under stress through more stringent margining and collateral requirements.

Basel Head Says Go Slow re AI Risk, Supervisory Models

Basel’s Secretary General, Pablo Hernández de Cos, today focused on AI’s risk-reward profile in the banking sector, concluding that it raises a series of profound questions global regulators must work cooperatively to address.

Lummis, Gillibrand Begin Senate Stablecoin Debate

As long anticipated, Sens. Lummis (R-WY) and Gillibrand (D-NY) today introduced a significantly revised version of their 2022 Bill (see FSM Report CRYPTO28) laying out U.S. stablecoin standards.

FIO Subpoena Power Faces Rollback

At HFSC’s mark-up today, the committee began with Rep. Fitzgerald’s (R-WI) Insurance Data Protection Act, H.R. 5335, which would repeal the Federal Insurance Office’s authority to subpoena insurance companies for data collection.

HFSC Likely to Pass RegTech Bill

At HFSC’s extended mark-up today, the committee turned to H.R. 7437, a bipartisan bill that would require federal banking regulators to regularly review and report to Congress on their use of technology to ensure they’re equipped to address threats to the financial system.

HFSC Set to Pass AOCI Recognition, Systemic-Risk Designation Study Measures

Continuing our coverage of today’s mark-up, HFSC was generally supportive of the two bills on the agenda from Democrats, H.R. 4206 from Rep. Sherman (D-CA) requiring large banks with available for sale securities to mark to market …

29 02, 2024

DAILY022924

2024-02-29T16:41:41-05:00February 29th, 2024|2- Daily Briefing|

FSB Says Swiss Standards, Not Its Own, Led to CS Chaos

The FSB today released the review of Swiss GSIB regulation announced after Credit Suisse’s failure.

Basel Tackles Private Credit, GSIB Window-Dressing

The Basel Committee today again pressed nations – clearly here focusing on the U.S. – to finalize the end-game rules as quickly as possible.

FinCEN Releases New AML/CFT Hit List

FinCEN today emphasized that the new FATF report has revised countries where strategic AML and CFT measures are deficient, warning U.S. banks to take this into account – i.e., to ensure appropriate de-risking.

CFPB Targets Bank Comparison-Shopping Posts

The CFPB today loosed another attack on bank marketing practices, arguing that key facts are omitted  from credit-card and financial-product descriptions obscuring back-end fees.

Bipartisan HFSC Votes to Repeal SAB 121

At today’s abbreviated markup, HFSC took up H.J. Res. 109, which would repeal the SEC’s Staff Accounting Bulletin 121 requiring banks to keep custody cryptoassets on balance sheet (see FSM Report CUSTODY5).

HFSC Approves Secret Service Cybercrime Bill

As HFSC’s markup continued today, the committee turned to Rep. Fitzgerald’s (R-WI) bipartisan H.R. 7156 expanding Secret Service investigative authorities over cybercrime.

FSB Head Ratchets Up Stablecoin Systemic Worries

In remarks today, FSB Chair Klaas Knot discussed market developments in cryptoassets, suggesting that renewed market interest in stablecoins by bigtechs and financial institutions could have systemic implications.

Daily022924.pdf

28 02, 2024

DAILY022824

2024-02-29T11:26:05-05:00February 28th, 2024|2- Daily Briefing|

HFSC Dems Press for New Bank-Merger Policy

Although she issued a statement strongly opposed to the CapOne/Discover merger after it was announced, HFSC Ranking Member Waters (D-CA) today led a letter instead focusing on the need for the banking agencies and DOJ to quickly issue updated merger policies.

US Standards Complicate Transborder Personal-Financial Data Flows

The President plans later today to issue an executive order banning the transfer of sensitive data to “countries of concern” and certain persons subject to their jurisdiction.

Fed Worries About Regional-Bank Risk

Anna Kovner, Director of Financial Stability Policy Research at the New York Fed, today outlined four sources of systemic risk that worry the central bank even though the Fed still sees risks as manageable according to the analyses released last October (see Client Report SYSTEMIC97).

Daily022824.pdf

29 01, 2024

DAILY012924

2024-01-29T16:36:27-05:00January 29th, 2024|2- Daily Briefing|

White House Advances AI Governance, Government Adoption

Following the President’s AI executive order (see Client Report AI3), the White House today released an update following a steering-group meeting.

BIS Study Examines Stablecoin Run-Risk

A new BIS study supports pending U.S. legislation and possible rules related to stablecoin reserve assets and run-risk, finding that transparency increases stablecoin stability when reserve assets are of high quality, but decreases stability when reserves are perceived to be low quality or when there are low transaction costs to convert to fiat.

Hsu Sets Course to New OCC Merger Policy with No Fed Companion in Sight

In remarks today emphasizing the need for a more transparent bank-merger process, Acting Comptroller Hsu announced that the OCC will today release an NPR eliminating the possibility that merger applications will be approved solely by the passage of time.

Warren Starts the New Year with Political Pressure on Fed Policy

Reiterating concerns about high interest rates, Sen. Warren (D-MA) along with Sens. Hickenlooper (D-CO), Rosen (D-NV) and Whitehouse (D-RI) today sent a letter to Chair Powell calling on him to reverse rate hikes, citing its impact on the current affordable housing crisis.

Daily012924.pdf

29 01, 2024

M012924

2024-01-29T15:16:08-05:00January 29th, 2024|6- Client Memo|

The Risks New Capital Rules Can’t Cure

Part one of my end-game assessment was last week’s memo laying out the growing odds that the agencies will be forced to issue a new proposal which hopefully makes better sense than the current one.  Part two here points out how the agencies have so tightly wrapped themselves around the capital rule’s axle that they are unable to see how many even more critical challenges are going unaddressed.  Risks overlooked are often risks even the toughest capital rules cannot contain because the cost of new capital rules actually contributes to the arbitrage and risk-migration accelerating the pace of systemic-risk transformation.  This is a negative feedback loop if ever there were one.

m012924.pdf

29 01, 2024

Karen Petrou: The Risks New Capital Rules Can’t Cure

2024-01-29T09:29:45-05:00January 29th, 2024|The Vault|

Part one of my end-game assessment was last week’s memo laying out the growing odds that the agencies will be forced to issue a new proposal which hopefully makes better sense than the current one.  Part two here points out how the agencies have so tightly wrapped themselves around the capital rule’s axle that they are unable to see how many even more critical challenges are going unaddressed.  Risks overlooked are often risks even the toughest capital rules cannot contain because the cost of new capital rules actually contributes to the arbitrage and risk-migration accelerating the pace of systemic-risk transformation.  This is a negative feedback loop if ever there were one.

The new capital rules will be outdated by the time they are finalized because financial institutions of all persuasions will take advantage of every bit of regulatory-arbitrage opportunity within and across borders.  That the banking agencies and FSOC aren’t even thinking about how this might happen makes it still more likely that they will.  This is not to say that no changes to capital rules are warranted.  Some changes are overdue, but capital rules crafted in a vacuum will not stand up to real-world circumstance.

The collective book reports issued by the Federal Reserve in its semi-annual systemic forecast and the FSOC’s annual reports are remarkably backward-looking.  Focused more on not saying anything too frightening and bolstering ongoing initiatives, these tomes have long been and sadly still are poor auguries of risks to come perhaps all too soon.

Even …

17 01, 2024

DAILY011724

2024-01-17T16:21:16-05:00January 17th, 2024|2- Daily Briefing|

CFPB Tries to Bring Overdraft Fees Under New Benchmark

Arguing that overdraft fees are a big-bank “junk-fee harvesting machine,” CFPB Director Chopra today released a long-awaited proposal to cap fees to what the agency considers a reasonable threshold.

Bowman Expands Basel Critique, Key Dem Now Points to Problems

In remarks today, FRB Gov. Bowman did not go quite as far as her colleague Chris Waller yesterday, but she nonetheless urged that the end-game rules be re-proposed after comments are taken into account.

Senate Banking GOP Again Urges Capital Proposal Withdrawal

Senate Banking Ranking Member Scott (R-SC) along with all Committee Republicans late yesterday sent a letter to FRB Chair Powell, FDIC Chairman Gruenberg, and Acting Comptroller Hsu once again calling on the regulators to withdraw the capital proposal (see FSM Report CAPITAL230).

Biden, Brown Praise CFPB Overdraft Proposal

Following the CFPB’s announcement of its proposed rule regarding overdraft fees today, President Biden again denounced “junk fees” as “exploitation,” and included the CFPB’s proposal in his administration’s efforts to lower costs for American consumers.

FRB/FDIC Provide Limited-Time Resolution-Plan Filing Flexibility

Reflecting a problem we identified in our assessment of the resolution-plan proposal (see FSM Report LIVINGWILL22), the FRB and FDIC today extended the resolution plan submission deadline for categories II and III banks from July 1, 2024 to March 31, 2025.

Global Regulators Turn to OTC-Derivative Margin Improvement

Following yesterday’s release with the CPMI focused on CCPs and clearing members, the Basel Committee and IOSCO today …

15 12, 2023

DAILY121523

2023-12-15T17:31:25-05:00December 15th, 2023|2- Daily Briefing|

Crypto Measures Await Next Session

As anticipated, HFSC Chair McHenry (R-NC) was able to fend off concerted efforts by Sens. Brown (D-OH) and Warren (D-MA) to add the Warren-Marshall crypto bill to the National Defense Authorization Act.

FSOC to Target Hedge Funds, Nonbank Mortgage Companies

The readout from Treasury on yesterday’s FSOC meeting provides insight into the Council’s executive session suggesting significant near-term systemic action regarding hedge funds.

FSB Plans Broad Rewrite of Public Backstops, GSIFI Resolvability, Operational Readiness

The FSB’s 2023 Resolution Report today advises banks and public sector authorities to be prepared to access public sector funding in resolution, with the Board planning to review whether existing public sector backstops are adequate to meet potential failure scenarios.

Brown Renews Bipartisan Quest to Constrain Nonbank Banks

Advancing the big-tech concerns he most recently voiced before GSIB CEOs (see Client Report GSIB23), Senate Banking Chairman Brown (D-OH) has introduced S. 3538, bipartisan legislation to impose bank regulation on non-bank parent companies of insured depository institutions.

DOJ Targets Fraudulent Microtransactions

Cracking down on unauthorized bank account charges, the DOJ today announced multiple actions against “sham” companies alleged to have used misrepresentations or unauthorized charges to steal money from consumers’ financial accounts.

CRS Warns Credit Card Act Could Result In Risky Retailer Payment Networks

The CRS this week issued a report analyzing the Durbin-Marshall Credit Card Competition Act, S.1838 (see FSM Report INTERCHANGE10), projecting that fee caps will have a greater impact on transaction fees than competition, with …

14 12, 2023

DAILY121423

2023-12-15T17:22:54-05:00December 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 …

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