#tailoring – Page 3 – Federal Financial Analytics

11 04, 2023

DAILY041123

Eliza Allen2023-04-11T16:56:01-04:00April 11th, 2023|2- Daily Briefing|

FRB-NY Finds Still Sticker Deposit Rates, Tougher Fed Policy Transmission

A new post from Federal Reserve Bank of New York staff concludes that, even as deposit funding declines, banks remain liquid due to less rate-sensitive sources such as time deposits and FHLB advances. As we noted when assessing a prior FRB-NY deposit post, these analyses go beyond conventional deposit-flight and unfair-competition arguments to show the complexity of funding-market behavior during periods of rising interest rates. The latest post brings the prior study through the end of 2022, showing continuing lags between the fed funds rate and interest-bearing deposit rates through the fourth quarter.

Chopra Wants Expanded FDIC Coverage, Payment-System Guardrails, Comp Reform

In remarks today, CFPB Director Chopra called for tailoring DIF assessments to protect community banks and to expand coverage to payroll and certain other accounts. He also said that current law may give regulators the tools needed to deal with viral runs via systemic designations for certain payment systems and/or providers. He did not explain how this would be accomplished in practice (e.g., mandatory speed bumps, etc.).

Daily041123.pdf…

11 04, 2023

FedFin Assessment: Top Brainard, Gruenberg Regulatory Rewrites

Arezou Rafikian2023-04-11T16:52:14-04:00April 11th, 2023|The Vault|

In this report, we drill down on prior forecasts (see Client Report REFORM219) of near-term regulatory action to identify the revisions sure to be prioritized as NEC Director Brainard and FDIC Chairman Gruenberg seek to reverse rules finalized over their objections when they were in the minority. Ms. Brainard does not have a direct role dictating what the Fed will do given central-bank independence, but she has a good deal of influence as evidenced most recently by the White House action list. Acting Comptroller Hsu was not casting formal votes over these years, but he was an influential staff leader in this area and clearly has his own list – see for example his efforts on bank merger and resolution policy (see FSM Report RESOLVE48). We expect he will concur with Vice Chairman Barr and Mr. Gruenberg if they all advance the rewrites to the tailoring rules to which Ms. Brainard and Mr. Gruenberg so strongly objected….

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

11 04, 2023

REFORM220

Eliza Allen2023-04-11T10:41:47-04:00April 11th, 2023|5- Client Report|

FedFin Assessment: Top Brainard, Gruenberg Regulatory Rewrites

In this report, we drill down on prior forecasts (see Client Report REFORM219) of near-term regulatory action to identify the revisions sure to be prioritized as NEC Director Brainard and FDIC Chairman Gruenberg seek to reverse rules finalized over their objections when they were in the minority. Ms. Brainard does not have a direct role dictating what the Fed will do given central-bank independence, but she has a good deal of influence as evidenced most recently by the White House action list. Acting Comptroller Hsu was not casting formal votes over these years, but he was an influential staff leader in this area and clearly has his own list – see for example his efforts on bank merger and resolution policy (see FSM Report RESOLVE48). We expect he will concur with Vice Chairman Barr and Mr. Gruenberg if they all advance the rewrites to the tailoring rules to which Ms. Brainard and Mr. Gruenberg so strongly objected.

REFORM220.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…

20 03, 2023

Karen Petrou: Three Fast, Urgent Fixes to U.S. Bank Supervision and One Major Change to End Bailouts

Eliza Allen2023-03-20T11:35:24-04:00March 20th, 2023|The Vault|

In the wake of recent bank failures, much has rightly been said about how supervisors failed to act even though warning claxons blared. Nothing that happened to Silvergate, SVB, or Signature is due to forces beyond supervisory control, but there are deep, structural weaknesses in how banks have long been supervised. How long? I went back to my 2001 Senate Banking testimony about what was then the largest-ever failure to find that many of the lessons that should have been learned never sunk in.

Given that this hearing was in 2001, a good deal of what I said about bank capital requirements was about Basel I and is thus long out of date. However, one key point isn’t: the capital triggers used to spark prompt corrective action (PCA) were and are an unduly-simplistic way to identify the need for rapid supervisory intervention.

Silvergate, SVB, and Signature were all “well” capitalized right up to the brink of collapse because each of the banks in its own way arbitraged the capital rules to enormous – and obvious – advantage. Nothing in law or rule bars bank supervisors from stepping in well before PCA ratios sink but nothing seems to stir supervisors to do so. 1991’s PCA requirements were an important advance at the time, but it was outdated only a decade later. Now, it’s a dangerous supervisory distraction.

What else noted in 2001 remains an urgent fix? Over two decades ago, I urged the FDIC to reinstate the high-growth early-warning system it …

20 03, 2023

M032023

Eliza Allen2023-03-20T11:35:13-04:00March 20th, 2023|6- Client Memo|

Three Fast, Urgent Fixes to U.S. Bank Supervision and One Major Change to End Bailouts

In the wake of recent bank failures, much has rightly been said about how supervisors failed to act even though warning claxons blared. Nothing that happened to Silvergate, SVB, or Signature is due to forces beyond supervisory control, but there are deep, structural weaknesses in how banks have long been supervised. How long? I went back to my 2001 Senate Banking testimony about what was then the largest-ever failure to find that many of the lessons that should have been learned never sunk in.

m032023.pdf…

17 03, 2023

FedFin Assessment: Future of U.S. Bank Capital, Liquidity, Structural Regulation

Eliza Allen2023-03-17T16:50:38-04:00March 17th, 2023|The Vault|

In this report, we continue our policy postmortem of SVB/SBNY and, now, so much more. Prior reports have assessed the overall political context (see Client Report RESOLVE49) and likely changes to FDIC insurance (see Client Report DEPOSITINSURANCE118), with a forthcoming Petrou op-ed in Barron’s focusing on specific ways to reform federal deposit insurance to protect only the innocent. In this report, we look at some key regulatory changes likely as the banking agencies reevaluate the regional-bank capital, liquidity, and the IDI/BHC construct. As noted in our initial assessment and thereafter, we do not expect meaningful legislative action on the Warren, et. al. bill to repeal “tailoring” requirements, but we do expect bipartisan political pressure not just for supervisory accountability (see another forthcoming report), but also regulatory revisions.

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

17 03, 2023

REFORM216

Eliza Allen2023-03-17T14:27:00-04:00March 17th, 2023|5- Client Report|

FedFin Assessment: Future of U.S. Bank Capital, Liquidity, Structural Regulation

In this report, we continue our policy postmortem of SVB/SBNY and, now, so much more. Prior reports have assessed the overall political context (see Client Report RESOLVE49) and likely changes to FDIC insurance (see Client Report DEPOSITINSURANCE118), with a forthcoming Petrou op-ed in Barron’s focusing on specific ways to reform federal deposit insurance to protect only the innocent. In this report, we look at some key regulatory changes likely as the banking agencies reevaluate the regional-bank capital, liquidity, and the IDI/BHC construct. As noted in our initial assessment and thereafter, we do not expect meaningful legislative action on the Warren, et. al. bill to repeal “tailoring” requirements, but we do expect bipartisan political pressure not just for supervisory accountability (see another forthcoming report), but also regulatory revisions. While Republicans strongly opposed tougher capital rules when Chairman Powell appeared before them just last week (see Client Report FEDERALRESERVE73), we expect them now only to make token statements of concern about any changes that do not adversely affect smaller banking organizations. In addition to looking at specific regulatory rewrites, this report assesses timing, noting in particular how the pending end-game rules could serve as the vehicle for changes the agencies hope to muster quickly in order to minimize demands for structural change to their own powers.

REFORM216.pdf…

15 03, 2023

DAILY031523

Eliza Allen2023-03-15T16:58:30-04:00March 15th, 2023|2- Daily Briefing|

Waters Reiterates ICE/BKI Opposition

HFSC Ranking Member Waters (D-CA) released a statement today applauding the FTC’s move to block Intercontinental Exchange from acquiring the mortgage software company Black Knight.

Progressives Press For Tailoring Redo

Cementing prior denouncements of 2018 Dodd-Frank “rollbacks” into legislative action, 17 Democratic senators and 31 House Members today took direct aim at Trump-era banking policy by introducing legislation that would repeal Title IV of the Economic Growth, Regulatory Relief, and Consumer Protection Act.

Bowman Presses Small-Bank Mergers, Climate Caution, Third-Party Guardrails

In remarks today, FRB Governor Bowman noted that delays in merger reviews cause significant operational and reputational risks and suggested considering all competitors when evaluating a small bank merger’s competitive effect to reduce delays.

New CFPB RFI Brings Data Brokers Under Scrutiny

Ahead of a planned rulemaking, the CFPB today released an RFI seeking comments on the business practices of data brokers, focusing on new business models to determine if certain practices fall under the scope of FCRA.

Warren, Blumenthal Call on DOJ, SEC to Investigate SVB

Although media reports indicate that an investigation is already under way, Sens. Warren (D-MA) and Blumenthal (D-CT) sent a letter today to Attorney General Garland and SEC Chairman Gensler urging them to investigate senior SVB officials if they are not already doing so.

FHFA Delays New DTI-Based Upfront Fee

Following an announcement this January that FHFA would implement changes to Fannie and Freddie’s single-family pricing framework, Director Thompson today announced that the Agency will delay the effective …

14 03, 2023

DAILY031423

Eliza Allen2023-03-14T16:55:33-04:00March 14th, 2023|2- Daily Briefing|

JEC Chairman Heaps SVB Blame on Trump-Era Rollbacks

Echoing Democratic statements made earlier in the day, JEC Chairman-Designate Heinrich (D-NM) released a statement late yesterday blaming the Trump Administration’s 2018 regulatory “rollbacks” for SVB’s failure, noting that the committee warned in 2018 that the rollbacks would result in SVB being subject to “nearly none” of Dodd-Frank’s enhanced regulations.

Warren Lambasts Powell on SVB Inquiry

Expanding her attack against FRB Chairman Powell, Sen. Warren (D-MA) today demanded that he recuse himself from the SVB investigation announced just yesterday. She states that Mr. Powell’s actions allowed “big banks” like SVB to “load up” on risky assets, saying that Vice Chairman Barr needs complete independence.

Treasury Official Announces Coming DeFi Risk Report

In remarks yesterday, Assistant Secretary for Treasury’s Office of Terrorist Financing and Financial Crimes Elizabeth Rosenberg announced that her team will shortly be releasing a risk assessment on DeFi. She notes interest in any legitimate DeFi use cases, also saying that DeFi may nonetheless facilitate illicit finance.

FDIC Warns Bridge-Bank Counterparties

Reflecting the unusual nature of the two bridge banks the FDIC has established for SVB and Signature, the agency was compelled today to issue a warning that financial institutions are required to comply with their obligations to these FDIC-owned institutions to the extent previously required of the failed banks.

Daily031423.pdf…