McKernan Presses for Active Review of Asset-Manager Passivity
FDIC Director McKernan today reiterated his prior recommendation that the banking agencies review the stakes of large asset managers in banking organizations to ensure that they are truly passive. Mr. McKernan is a former staffer for retired-Sen. Toomey (R-PA), who raised this concern towards the end of 2021 out of fears that asset-management ESG demands are unduly influencing banks.
CFPB Small-Business Reporting Reg Remains
In conjunction with his expected veto last night of legislation that would have overturned the CFPB’s small-business reporting rule, President Biden indicated that the Bureau’s rule is central to CRA implementation and would bring transparency to small-business lending.
FSB, IOSCO Try Get-Tough Approach to OEF Illiquidity
As promised, the FSB and IOSCO today finalized recommendations designed to enhance OEF resilience.
HFSC GOP Demands CFPB Nonbank Delay, Clarification
HFSC Chairman McHenry (R-NC) and nineteen Committee Republicans sent a letter to CFPB Director Chopra urging the Bureau to extend by thirty days the comment deadline for its proposal to supervise large nonbank payment providers (see FSM Report PAYMENT27).
FERC Passive-Ownership Inquiry Poses Challenges to Funds, Banks
The Federal Energy Regulatory Commission has opened another avenue scrutinizing the extent to which large asset managers may control the companies in which they invest.
FDIC Approves Significantly Revised Sign, Advertising Standards
The FDIC Board today unanimously approved a final rule modernizing requirements for use of the FDIC’s official sign and clarifying what constitutes misrepresentation and misuse of the FDIC’s name or logo.
Waters Blasts ICE/BKI Merger
Although HFSC Chair Waters (D-CA) frequently opposes large-bank mergers, her stand today against the ICE/Black Knight deal is the first time we can recall her taking a public stand on a transaction before the Federal Trade Commission (outside HFSC’s jurisdiction).
Toomey Sets Agenda for GOP Fed Reform
Among his parting shots, Senate Banking Ranking Member Toomey (R-PA) yesterday introduced legislation to reform the Federal Reserve System.
Toomey Also Tries to Set Stablecoin Agenda
In another effort to set the terms of debate before he departs, Senate Banking Ranking Member Toomey (R-PA) also introduced a new version of his initial stablecoin legislation (see FSM Report CRYPTO27).
Warren Doubts Zelle’s Fraud Policy Changes
Continuing her campaign against Zelle fraud, Sen. Warren (D-MA) today sent a letter to the CEO of Zelle’s parent company demanding a briefing on pending efforts to compensate consumers for fraudulent transfers.
CFPB Cites ARM Risks, Rewards
The CFPB today issued a consumer alert describing the risks associated with various mortgage products during a period of rising interest rates.
Project Hamilton Ducks CBDC-Feasibility Decision
The Federal Reserve Bank of Boston today announced the completion of its Project Hamilton work with MIT on a U.S. CBDC.
Fed to Reconsider Key Bank-Control Criteria
Although the banking agencies today reiterated that their policy is not generally to require reporting of loans to potentially controlling principal-fund complexes or banks that meet passivity requirements, the Fed will now reconsider relevant rules in this sector.
FinCEN Advances Beneficial-Ownership Privacy Constraints
Following its finalization of the beneficial ownership reporting rule, FinCEN today issued a notice of proposed rulemaking that would clarify how beneficial ownership information (BOI) must be acquired, used, and stored. The proposal limits BOI access to only federal national security agencies, law enforcement authorities with a court order, financial institutions with customer due diligence requirements, and certain foreign and Treasury officials, all of which are subject to stringent security protocols aligned with the scope of the information request.
Chopra Defends Nonbank Repeat-Offender Registry, Confirms Zelle Watch-and-Wait
Today’s Senate Banking hearing repeated much of what HFSC and Director Chopra said yesterday (see Client Report CONSUMER45), with Democrats lauding the Bureau and Republicans condemning it for politicization, poor administrative process, and an unconstitutional construct. Ranking Member Toomey (R-PA) grilled Director Chopra on the Bureau’s new proposal requiring certain nonbank financial firms to report enforcement actions, asking him what he would do if a nonbank said it was compliant with a consent order and the CFPB disagreed.
Comment Deadline Extended For Controversial DSIB-Resolution Standards
Reflecting continuing controversy, the Federal Reserve Board and FDIC today announced that they will extend by one month the comment deadline for their ANPR on large bank resolvability standards. The former deadline was December 23; the new deadline is January 23.
Glimmers of 2023 Policy Emerge in HFSC FTX Autopsy
As anticipated, today’s HFSC session fixated on the intricacies of FTX’s bankruptcy and former CEO Sam Bankman-Fried’s arrest. Incoming Chairman McHenry (R-NC) supported the need for extensive regulation and new law but stressed separating the promise of crypto innovation from fraud committed by bad actors and again slammed the SEC’s strategy of “regulation by enforcement.”
FDIC Again Targets False Advertising, Logo Usage
Moving beyond its last effort at ending misrepresentation of deposit-insurance status (see FSM Report DEPOSITINSURANCE112), the FDIC Board today voted unanimously to issue for public comment a proposed modernization of how the FDIC logo is to be displayed and expand on prior efforts to block crypto firms from implying that they are insured. We will soon provide clients with an in-depth analysis of the NPR, which also follows a CFPB circular (see FSM Report DEPOSITINSURANCE113) on FDIC insurance status misrepresentations in May.
Gruenberg, FDIC Nominees Set for Confirmation
As anticipated, Senate Banking today confirmed the Administration’s slate of FDIC directors, positioning them for approval before adjournment and thus giving the agency a full board for the first time in years. Acting Chairman Gruenberg was approved 13-11, with Sen. Toomey (R-PA) voting for him despite strong objections likely to ensure final action this year on the entire slate.
Toomey Gets His Fed Payment-Access Transparency
As we noted (see FSM Report PAYMENT25), Sen. Pat Toomey (R-PA) strongly objects to the Fed’s latest payment-system access policy. As a result, he sought and yesterday won inclusion of language in the NDAA that forces considerably more transparency than the Fed was otherwise willing to contemplate despite assurances that its final rule was indeed “transparent.”
FSB Suspends G-SII Designation
The FSB today announced it would discontinue its annual identification of global systemically important insurers (G-SIIs), instead opting only to publish a list of insurers subject to resolution planning and resolvability assessments in its Annual Resolution Report. As noted yesterday, the FSB’s 2022 Resolution Report lays out a series of significant concerns about G-SII resolvability, especially when it comes to intra-group exposures. It continues to work on ways to shutter large insurers without either adverse impact on policyholders or taxpayers.
Warren, Toomey Fed Transparency Bill Reaches all Financial Regulators
Heightening bipartisan calls for Fed transparency, Ranking Member Toomey (R-PA) and Sen. Warren (D-MA) today introduced legislation designed to ensure the Fed’s accountability to Congress. The measure unites Sen. Warren’s longstanding complaints about the Fed insider-trading scandals with the dissatisfaction Sen. Toomey expressed regarding master-account decisions most recently in the legislation on a new database detailed in a FedFin alert this morning.
Master-Account Transparency
Although the Fed characterized its final payment-system access guidelines as “transparent,” FedFin’s analysis and other assessments concluded that the Federal Reserve Banks retained considerable discretion to pick and choose those granted master accounts and there would be no ready way to identify which institutions had or lost this essential status for any provider of retail or wholesale deposit-taking services or their equivalent. The Board is now seeking to counter criticism with a revision to the guideline obliging Reserve Banks to create a quarterly list of institutions holding or ceasing to hold master-account privileges.
Toomey Calls for More Fed Transparency
Sen. Toomey (R-PA) continued Republican demands for still more Fed transparency, sharply criticizing the Fed’s Friday proposal to provide some transparency into which institutions are granted master accounts.
Sweeping CFPB Fee Restrictions Now Effective
The Federal Register today includes the CFPB’s circular on Unanticipated Overdraft Fee Assessment Practices and a bulletin now effective on Unfair Returned Deposited Item Fee Assessment Practices.
CFPB Advances Bigtech Market Power Campaign
Continuing its campaign against bigtech’s market power, the Federal Register today includes the CFPB’s notice and request for comment on what fees bigtech payment operators levy on users for violations of acceptable use policies and whether their policies include provisions to restrict user platform access.
Fed Staff Paper Tries To Gauge Social Welfare Impact Of Liquidity, Capital Regs
A new Fed staff study attempts to lay out the social costs and benefits of large-bank liquidity and capital regulation.
Warren Continues Campaign Against Wells Fargo, Zelle
Sen. Warren (D-MA) today continued her campaign against Zelle by sending letters to its parent company and Wells Fargo, taking particular aim at what she deems the latter’s failure to provide adequate claims and reimbursement data and labelling responses to previous letters “insulting.”
Warren Denounces Fed “Culture of Corruption”
Sen. Warren (D-MA) today also continued her campaign against Chairman Powell, sending him a letter alleging “another set of egregious and embarrassing ethics breaches.”
Big Banks Pressed on Sluggish, Inequitable Deposit-Rate Hikes
Advancing an initiative with political “legs,” Sen. Jack Reed (D-RI) has demanded answers from the nation’s largest banks on why small-deposit rates have barely budged even as the Fed sharply hiked interest rates now reflected in higher loan costs.
FRB-NY Official Details Wholesale CBDC Prototype
Remarks today from a senior FRB-NY official, Michelle Neal, continued the Fed’s ambivalent stand on a CBDC (see FSM Report CBDC10).
Fed Fixes Advanced-Approach Glitches
The FRB is proposing to implement three changes to Regulation Q data collection/disclosure rules governing advanced-approach capital adequacy at BHCs, SLHCs, and state member banks.
Fed to Name Master-Account Names
Reflecting ongoing concerns on Capitol Hill, the Fed is proposing to make what our analysis suggests were opaque payment-system access guidelines (see FSM Report PAYMENT24) “a bit more transparent.”
Toomey Presses for SLR Rewrite
Ranking Senate Banking Member Toomey (R-PA) today released his letter to Chairman Powell cautioning the central bank not to handle any Treasury-market liquidity events with new backstop facilities.
Waters Adds To Fed’s Political Woes
In a letter today, HFSC Chairwoman Waters (D-CA) joined Sens. Warren (D-MA), Brown (D-OH), and Hickenlooper (D-CO) in sharply criticizing the recent Fed “super-sized” rate hike.
Fed Worry Level Goes Up
The Federal Reserve likely hoped for the torpor of a Friday afternoon to quell frightened replies to the latest financial-stability report released today.
BIS Announces Successful Multi-CBDC Platform Pilot
Following their retail crypto pilot last week, the BIS announced a successful pilot blockchain ledger – dubbed the mBridge Ledger – connecting twenty commercial banks in China, Hong Kong, Thailand, and the UAE via a multi-CBDC common platform. Both domestic and foreign commercial banks are permitted to directly hold and transact in CBDCs on the platform to ensure seamless cross-border payments. To protect monetary sovereignty, the platform allows governments to flexibly control CBDC issuance and redemption, transaction currencies and amounts, and visibility into usage.
With President at His Side, Chopra Sanctions Overdraft, Deposit Fees
President Biden today took aim at junk fees, slamming them in general even as he praised the CFPB’s initiative today sharply to limit “surprise” overdraft and deposit fees. The agency did so by issuing a circular on unanticipated overdraft fee assessment practices and a bulletin on Returned Deposited Item Fee Assessment Practices, again using its non-regulatory tools to enact new policy and set stringent enforcement standards. We will shortly provide clients with in-depth analyses of each release.