#SVB – Federal Financial Analytics

18 09, 2023

FedFin on: Large-IDI Resolution Plans

Arezou Rafikian2023-09-19T18:09:58-04:00September 18th, 2023|The Vault|

Although a pending FDIC/FRB proposal imposes a raft of new requirements for resolution plans from IDIs with over $100 billion in assets, the FDIC has also issued a freestanding proposal doing the same, also setting information-filing standards for IDIs below $100 billion but above $50 billion. Aspects of the resolution-plan filing standards for large covered IDIs (CIDIs) echo and in some cases allow reliance on aspects of the joint rule with the Fed, but the FDIC notes that this rule is, as required by the Dodd-Frank Act, focused on financial stability. Its own IDI resolution rules now and as proposed instead address how the FDIC is to meet its own statutory requirements (e.g., least-cost resolution). The NPR mandates many new planning or filing requirements to achieve its goals, most notably adding new severability standards that may require new inter-affiliate or -branch firewalls that reduce operating efficiencies and, when it comes to broker-dealer or other entities, lead to indirect resolution requirements not mandated by functional regulators.

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15 09, 2023

LIVINGWILL23

Eliza Allen2023-09-15T15:52:05-04:00September 15th, 2023|1- Financial Services Management|

Large-IDI Resolution Plans

Although a pending FDIC/FRB proposal imposes a raft of new requirements for resolution plans from IDIs with over $100 billion in assets, the FDIC has also issued a freestanding proposal doing the same, also setting information-filing standards for IDIs below $100 billion but above $50 billion. Aspects of the resolution-plan filing standards for large covered IDIs (CIDIs) echo and in some cases allow reliance on aspects of the joint rule with the Fed, but the FDIC notes that this rule is, as required by the Dodd-Frank Act, focused on financial stability. Its own IDI resolution rules now and as proposed instead address how the FDIC is to meet its own statutory requirements (e.g., least-cost resolution). The NPR mandates many new planning or filing requirements to achieve its goals, most notably adding new severability standards that may require new inter-affiliate or -branch firewalls that reduce operating efficiencies and, when it comes to broker-dealer or other entities, lead to indirect resolution requirements not mandated by functional regulators. The proposal also tightens enforcement policy, most notably increasing the criteria by which a resolution plan will be judged “credible” and thus the extent to which a CIDI will be subject to monetary penalties or even allowed to operate as is.

LIVINGWILL23.pdf…

8 09, 2023

Al091123

Eliza Allen2023-09-08T16:03:06-04:00September 8th, 2023|3- This Week|

We’re Flummoxed

FedFin’s in-depth analyses continue to plumb the strategic import of the post-SVB regulatory rewrite U.S. agencies have initiated and are determined to finish no matter industry and Congressional concern. As with our impact assessment of the capital proposal (see FSM Report CAPITAL230), our resolution-standard analyses look at key strategic points in what the agencies say they are doing and then also at what they leave out, what seems not to make as much sense as the agencies suggest, and where the sanguine impact analyses that always accompany these proposals may be at fault.

Al091123.pdf…

5 09, 2023

DAILY090523

Eliza Allen2023-09-05T17:16:52-04:00September 5th, 2023|2- Daily Briefing|

FSB Considers Resolution Construct Revamp

In addition to calling for full and consistent implementation of the Basel III framework, the FSB head’s letter to the G20 today stresses that this year’s bank failures challenge long-held views about deposit stickiness and the speed of bank runs, leading international standard-setters now to consider unspecified policy changes to the resolution construct.

BIS Study: Fed, FDIC Reassurances Offset Bank Run Risk

Contributing to analysis of viral runs and how to stop them, a new paper from BIS staff concludes that public communication from the Fed on banking system stability and from the FDIC on deposit insurance during crises can mitigate systemwide run risk, while similar statements from political figures such as President Biden are less effective.

IMF: Money Laundering Undermines Financial Stability

The IMF yesterday published a blog post on money laundering’s financial-stability impact, concluding that cross-border illicit payments result in equity-price declines, higher CDS costs, elevated perceived credit risk, and declines in deposits for the individual banks involved. The blog also states that there is a contagion dynamic as a result of spillover effects between targeted banks and other banks within the region.

Daily090523.pdf…

9 08, 2023

FINTECH32

Eliza Allen2023-08-09T15:04:49-04:00August 9th, 2023|1- Financial Services Management|

Novel-Activity Supervision

FRB Vice Chairman Barr’s assessment of SVB’s failure included a commitment to pay additional supervisory attention to “novel” activities. New supervisory “information” from the Federal Reserve now acts on this conclusion, creating what is described as a new supervisory program and stating explicitly that the Board will assess certain BHC and state member bank tech-focused activities. The standards by which this is done are not made clear even though all but the stablecoin activities cited here are under way in varying forms at state member banks and BHCs.

FINTECH32.pdf…

25 07, 2023

DAILY072523

Eliza Allen2023-07-25T17:18:26-04:00July 25th, 2023|2- Daily Briefing|

Key Democrat Takes On Fed Rate Hikes

Ahead of today’s FOMC meeting, Joint Economic Committee Chair Heinrich (D-NV) yesterday sent a letter to Fed Chair Powell cautioning against additional policy tightening.

Second HFSC Markup Targets Stablecoins, Regulatory Restrictions, ESG

Thursday’s HFSC has now added another day to its mark-up calendar this week, moving the stablecoin and ESG bills to Thursday doubtless in order to avoid an endurance contest before the August recess and still meet Chairman McHenry’s (R-NC) commitments.

Senate GOP Tries to Block Capital Rewrite

Just days before the banking agencies take up new capital rules, Senate Banking Ranking Member Scott (R-SC) and ten other committee Republicans sent a letter to Chairman Powell demanding greater transparency and prior consultation.

Waters Presses FHFA for FHLB Reform

Following FHFA listening sessions and in anticipation of a final report this September on the FHLB system, HFSC Ranking Member Waters (D-CA) late yesterday sent a letter to FHFA Director Thompson laying out a series of recommendations to significantly reform the system.

Ag Committees Slam SEC Custody Proposal

In a letter to SEC Chairman Gensler released today, Senate Agriculture Committee Ranking Member Boozman (R-AR) and Chairwoman Stabenow (D-MI) along with House Ag. Committee Chairman Thompson (R-PA) and Ranking Member Scott (D-GA) raised strong objections to what they called serious flaws in the SEC’s proposed custody rule (see FSM Report CUSTODY5).

Warren, Scott Renew Fed-Ethics Campaign

Continuing their bipartisan campaign against the Fed, Sens. Warren (D-MA) and Scott (R-FL) yesterday sent a letter…

10 07, 2023

DAILY071023

Eliza Allen2023-07-10T16:43:24-04:00July 10th, 2023|2- Daily Briefing|

HFSC Lays Out Its ESG Priorities

The majority staff memo ahead of Wednesday’s HFSC hearing on ESG follows the outline anticipated last week and that laid out in the GOP agenda for ESG-related action (see Client Report ESG4).

OCC Concurs On Capital, Tries For The Merger Middle

Acting Comptroller Hsu today confirmed our assessment of Vice Chair Barr’s comments earlier today (see Client Report CAPITAL228) that the three banking agencies are aligned on the new capital construct to be shortly released for public comment.

Barr, Foster Demand Delay to Capital Rewrite

Anticipating Vice Chair Barr’s remarks this morning detailing near-term capital policy changes (see Client Report CAPITAL228), HFSC Financial Institutions Subcommittee Chair Barr (R-KY) and Ranking Member Foster (D-IL) sent a letter late Friday demanding that he appear before the Subcommittee to present the conclusions of his capital review and upcoming Basel III implementation plans prior to public release, asking also for details and likely outcomes for industry consolidation.

House Republicans Keep Spotlight On FRB-SF

Continuing the GOP’s attack on the San Francisco Fed’s supervision of SVB in the wake of what many believe are “woke” priorities, House Oversight Committee Chairman Comer (R-KY) was joined today by Financial Services Subcommittee Chairwoman McClain (R-MI) in sending a letter to FRB Chairman Powell taking serious issue with the Federal Reserve Bank of San Francisco and the Fed for what they describe as SVB-related transparency and communication failures.

BIS Survey: Most Central Banks Considering CBDCs

The BIS …

6 07, 2023

DAILY070623

Eliza Allen2023-07-06T16:55:22-04:00July 6th, 2023|2- Daily Briefing|

Basel Redesigns Global Bank-Supervision Construct

As promised at its last meeting, the Basel Committee today released a public consultation on revisions to its 2012 core supervisory principles (see FSM Report REFORM92).

Accommodative CRE Policy Goes Live

Publication in the Federal Register today makes effective a finalized policy statement issued by the banking agencies and NCUA late last week on how financial institutions are to handle troubled commercial real estate (CRE) loans.

Senate Dems Demand CFPB Voice-Cloning Action

Following his letter to large bank CEOs regarding AI fraud, Chairman Brown (D-OH) along with Sens. Menendez (D-NJ), Reed (D-RI), and Smith (D-MN) today sent a letter to Director Chopra urging action against AI-related financial scams.

FSB Turns to GSIB Resolvability

The FSB’s plenary today announced that recent events have spurred it to assess the resolvability of GSIBs and other large banks, providing neither timeline nor focus for this work.

FRB-NY Study Advances Wholesale Digital Currency

Although making clear that it sets no new policy nor endorses any CBDC action, the Federal Reserve Bank of New York’s Innovation Center published a DLT proof-of-concept finding that shared ledgers can effectively support both wholesale domestic interbank and cross-border payments.

Daily070623.pdf…

30 06, 2023

DAILY063023

Eliza Allen2023-06-30T16:31:38-04:00June 30th, 2023|2- Daily Briefing|

Warren Blasts Goldman Over SVB Dual Role

Raising an issue that could lead to broad demands for internal firewalls, Sen. Warren (D-MA) today sent a letter to the CEO of Goldman Sachs demanding more information about the bank’s dual role advising and buying financial instruments from SVB. The senator raises concerns that this caused conflicts of interest and accuses the bank of using “accounting tricks” that were very costly to the DIF.

Key House Member Posits China Sanctions For Hong Kong Banking Activities

Joined by two U.K. MPs, House Select Committee on the CCP Chairman Mike Gallagher (R-WI) today sent a letter to HSBC’s CEO raising concerns with what he says was the bank’s decision as well as that of other unnamed banks to block Mandatory Provident Fund withdrawal requests for Hong Kong residents with British National (overseas) passports. Firing what may be a first shot into the broader battle of how global banks manage their relations with China, the letter highlights instructions to the fund’s trustee institutions – which include HSBC – from the Hong Kong Mandatory Provident Fund Authority to disregard BN(O) passports.

Daily063023.pdf…

29 06, 2023

DAILY062923

Eliza Allen2023-06-29T17:22:46-04:00June 29th, 2023|2- Daily Briefing|

Powell Stands by Big-Bank Reg Rewrite

In remarks today, Chair Powell echoed Vice Chair Barr’s “humble” comments yesterday about the need to anticipate additional risks despite banking-system resilience, noting that rules and supervision require review. Building on the Fed’s internal SVB review (see Client Report REFORM218), Mr. Powell suggested that the Fed had succumbed to the “natural tendency” to fight the last war and needs now to update its standards to address new risks.

FTC Finalizes Tough New Guidance On Deceptive Reviews And Endorsements

The FTC today finalized an updated version of its Endorsement Guides, setting new standards for the advertising and endorsement behavior that may constitute unfair or deceptive practices. These include implementation of a Consumer Review Fairness Act ban on standardized contract provisions penalizing consumers for negative reviews, a practice the CFPB last year called “gag” clauses that are banned under this law.

Banking Agencies Encourage Banks To Go Easy On CRE Borrowers

The banking agencies and NCUA today finalized changes to troubled-loan standards in a policy statement that is substantially similar to last year’s proposal.

Daily062923.pdf…