#treasury-market

6 02, 2024

DAILY020624

2024-02-06T16:33:54-05:00February 6th, 2024|2- Daily Briefing|

Agencies Begin Pro Forma Reg Review Likely to Take on New Urgency

The FRB, FDIC, and OCC today released the first of the requisite ten-year request for comment on the extent to which existing rules are outdated or unduly burdensome.  We will shortly provide clients with an in-depth analysis of the request if it goes beyond the nominal inquiries in the past that led to little meaningful regulatory reform.

Senate GOP Turns to FHFA, FHLB on “Woke” Standards

Criticizing what they call the FHFA’s and FHLBs “politically contentious social agendas,” Senate Banking Republicans Hagerty (R-TN), Tillis (R-NC), Britt (R-AL), and Vance (R-OH) sent a letter to FHFA Director Thompson late yesterday arguing that several FHLB pilot programs are “racially discriminatory” and defy congressional intent.  They also argue that the pilot programs highlight a potential gap in FHFA oversight because the final rule governing Fannie and Freddie pilot programs does not also apply to the FHLBs.

SEC Finalizes Contentious Treasury-Market Registration Standards

The SEC today voted 3-2 to approve a revised version of an earlier proposal subjecting certain hedge funds and other Treasury-market participants to registration and SRO regulation, thus reducing their competitive advantages vis-à-vis banks in the secondary-dealer arena.  The new approach uses a qualitative test based on the extent to which a covered entity acts as a market-maker as well as Treasury investor.

Daily020624.pdf

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 …

13 12, 2023

DAILY121323

2023-12-13T16:50:12-05:00December 13th, 2023|2- Daily Briefing|

HFSC Oversight Subcomm Revisits Iran Sanctions

Today’s HFSC Oversight Subcommittee hearing focused on the Biden Administration’s recent efforts to limit terrorist funding from Iran.  Chairman Huizenga (R-MI) questioned the need for the November 14th renewal of a waiver that allows Iraq to pay Iran for electricity, calling for increased pressure on Iran following Hamas’s October 7th attack.

SEC Sets Out Treasury Central-Clearing Construct

As anticipated, the SEC this morning voted 4-1 to mandate central clearing for Treasury securities used in many repo and reverse-repo transactions, modifying the proposal in key respects still unsatisfactory to Commissioner Peirce.  The rule addresses continuing concerns about Treasury-market fragility, in part by reducing the number of highly-leveraged hedge-fund transactions.

GAO Reaches Equivocal Verdict on Digital-Asset Crypto Evasion Risk

Addressing Congressional concerns such as those in the Warren-Marshall crypto-compliance bill, the GAO today issued a report finding that digital assets pose risk to U.S. sanction implementation and enforcement despite mitigating factors that may reduce certain risks.

Brown Presses Bank CEOs on Servicemember Rights

A week after the GSIB CEOs came before the Senate Banking Committee (see Client Report GSIB23), Banking Committee Chair Brown (D-OH) today sent a letter to the CEOs of the four largest consumer banks encouraging them to ensure that active-duty servicemembers obtain all the financial benefits to which they are entitled.

Daily121323.pdf

11 10, 2023

DAILY101123

2023-10-11T16:47:36-04:00October 11th, 2023|2- Daily Briefing|

Bowman Targets U.S. Leverage Ratio, NBFIs

In remarks during the Morocco IMF/Bank meeting today, FRB Gov. Bowman contrasted U.S. bank resilience with the IMF’s findings yesterday on potential vulnerabilities as rates rise and macroeconomic conditions soften.

FSB Reiterates Stability Concerns

The FSB’s latest work plan reiterates all it most recently said to the G20.

CFPB Barrels Down on “Basic” Banking Fees

In conjunction with a new White-House junk-fee initiative, the CFPB today issued “guidance” – i.e., essentially a final rule – banning large banks and credit unions from collecting “unreasonable” fees for what the Bureau considers reasonable and “basic” account information.

SEC Throws Wrench into TLAC Standards

As we noted yesterday, the FSB’s assessment of the global resolution framework’s effectiveness found significant glitches it urges national regulators quickly to address via standards such as those now pending in the U.S. to bring smaller banking organizations into the resolution-planning regime (see FSM Report LIVINGWILL23).

OFR Study: Short-Selling Does Not Harm Financial Stability

OFR today released a model-based study that finds no evidence that short-selling adversely affects financial stability.

Daily101123.pdf

29 09, 2023

M092923

2023-09-29T11:41:36-04:00September 29th, 2023|6- Client Memo|

How a Shut-Down Stokes Systemic Risk

Although there’s been some talk of what a government shut-down does to the SEC, there’s lots, lots more to worry about.  Risks are out there, risks that should be taken very, very seriously by the Members of Congress who seem to think that more chaos stokes their political fortunes.  Perhaps it does, but it could well do a lot of damage to their finances, not to mention those of all the voters who might well bear a reasonable grudge.

M092923.pdf

29 09, 2023

Karen Petrou: How a Shut-Down Stokes Systemic Risk

2023-09-29T11:41:22-04:00September 29th, 2023|The Vault|

Although there’s been some talk of what a government shut-down does to the SEC, there’s lots, lots more to worry about.  Risks are out there, risks that should be taken very, very seriously by the Members of Congress who seem to think that more chaos stokes their political fortunes.  Perhaps it does, but it could well do a lot of damage to their finances, not to mention those of all the voters who might well bear a reasonable grudge.

Where’s the systemic scary place?  Or, better said, places?  Some are right in front of us; others lurk in the closet waiting to pounce.

What worries me the most in the immediate future is the ability of bad actors to exploit what could be lightly- or even unguarded portals into critical financial market infrastructure.  There are of course many, many bad actors out there with the sophistication and/or state sponsorship quickly to test and then attack critical points in the payment, settlement, and clearing systems and/or the grids on which they rely.

As I discussed on Tuesday, not all providers of critical financial market infrastructure are under the hopefully-eagle eyes of the federal banking agencies which, funded outside federal appropriations, will remain open.  Some fall under the SEC or CFTC, agencies that will be hobbled, and some critical providers are wholly outside the regulatory perimeter.  Even if their nodes of market access seem small, disruption has a bad habit of migrating at lightning speed.  Even if power outages are …

4 08, 2023

DAILY080423

2023-08-04T16:31:03-04:00August 4th, 2023|2- Daily Briefing|

Fed Study: GSIB Leverage Ratios No Cause of Treasury-Market Stress

As regulators prepare to extend the supplementary leverage ratio (SLR) to all large banks (see FSM Report CAPITAL230), a new Fed staff research note concludes that the higher leverage ratio did not undermine dealer-bank capacity.

Warren, Dems Use North Korea Case to Press Crypto AML/Sanctions Bill

Ahead of a hard push next month to add crypto AML and sanction standards to the defense authorization, Sens. Warren (D-MA), Van Hollen (D-MD), and Kaine (D-VA) sent a letter to Treasury Under Secretary for Terrorism and Financial Intelligence Nelson and National Security Advisor Sullivan calling on the Administration to crack down on North Korea’s illicit crypto activity.

Warren, Porter Demand Stricter FDIC Crackdown on Uninsured Deposit Underreporting

Following last week’s FDIC financial institutions letter highlighting that some banks incorrectly estimated uninsured deposits in their Call Reports, Sen. Warren (D-MA) and Rep. Porter (D-CA) late yesterday sent a letter to FDIC Chairman Gruenberg taking serious issue with the agency’s “feeble” response.

Daily080423.pdf

15 05, 2023

DAILY051523

2023-05-15T17:23:44-04:00May 15th, 2023|2- Daily Briefing|

Yellen Highlights Investor – Not Uninsured-Deposit – Runs, Buoys Sector Mergers

In an interview over the weekend, Treasury Secretary Yellen struck a decidedly different tone on bank mergers than voiced in the Administration’s policy prior to recent failures.

Gensler Outlines Top Financial Stability Concerns

In remarks today, SEC Chair Gensler outlined his financial-stability priorities.

Failed-Bank CEOs Defend Themselves, Contest Need For Receivership

Ahead of testimony tomorrow before Senate Banking, the CEOs of SVB and Signature have filed statements defending their actions and those of their colleagues.

FHFA Seeks Views On New Pricing Framework

Following last week’s announcement that it would postpone its controversial decision to retain an upfront fee related to a borrower’s debt-to-income level, the FHFA today released a Request for Input on the Enterprises’ single-family pricing framework as well as the process for setting their upfront guarantee fees.

Barr Stands His Supervisory, Regulatory Ground

Vice Chairman Barr’s testimony for Congressional hearings this week has just been released along with the Board’s 2023 supervision-and-regulation report.

Gruenberg Sticks To His Guns

FDIC Chairman Gruenberg’s Congressional testimony largely recounts prior statements about the condition of the banking system, recent bank failures, the new special-assessment proposal (see FSM Report DEPOSITINSURANCE120), and the agency’s deposit-insurance reform conclusion (see Client Report DEPOSITINSURANCE119).

Daily051523.pdf

20 03, 2023

FedFin on: The Collateral Damage of the Banking Crisis

2023-03-20T14:30:07-04:00March 20th, 2023|The Vault|

In this report, we build on FedFin’s in-depth reports about recent bank failures to detail new risks for all of the innocent bystanders in the U.S. mortgage market along with a not so-innocent bystander:  the Federal Home Loan Banks.  We note also some take-aways FHFA may draw from the crisis with regard to GSE regulation, resolution, and supervision.  In short, things will be different assuming they don’t get worse and then still more of a paradigm shift.

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

20 03, 2023

GSE-032023

2023-03-20T13:51:11-04:00March 20th, 2023|4- GSE Activity Report|

The Collateral Damage Of The Banking Crisis

In this report, we build on FedFin’s in-depth reports about recent bank failures to detail new risks for all of the innocent bystanders in the U.S. mortgage market along with a not so-innocent bystander:  the Federal Home Loan Banks.  We note also some take-aways FHFA may draw from the crisis with regard to GSE regulation, resolution, and supervision.  In short, things will be different assuming they don’t get worse and then still more of a paradigm shift.

GSE-032023.pdf

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