#treasury-market – Federal Financial Analytics

20 03, 2023

FedFin on: The Collateral Damage of the Banking Crisis

Eliza Allen2023-03-20T14:30:07-04:00March 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

Eliza Allen2023-03-20T13:51:11-04:00March 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…

19 12, 2022

FedFin on: FSOC Targets Usual Suspects but Also Points to Big-BHC, Nonbank Mortgage Systemic Risk

Arezou Rafikian2023-01-03T15:56:33-05:00December 19th, 2022|The Vault|

As promised, this FedFin report provides an in-depth analysis of FSOC’s 2022 annual report, focusing on findings with near-term policy implications. As always, the report is lengthy and includes many observations and market details that provide insight into Treasury and member-agency-staff thought. Much in it reiterates concerns about short-term funding markets, CCPs, and….

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

19 12, 2022

FSOC28

Eliza Allen2022-12-19T13:00:38-05:00December 19th, 2022|5- Client Report|

FSOC Targets Usual Suspects but Also Points to Big-BHC, Nonbank Mortgage Systemic Risk

As promised, this FedFin report provides an in-depth analysis of FSOC’s 2022 annual report, focusing on findings with near-term policy implications. As always, the report is lengthy and includes many observations and market details that provide insight into Treasury and member-agency-staff thought. Much in it reiterates concerns about short-term funding markets, CCPs, and investment funds (with FSOC for the first time urging regulators to look not only at MMFs and OEFs, but also at collective investment vehicles). As previously noted, the report is relatively sanguine about digital-asset systemic risk but, also reiterates findings in FSOC’s report (see Client Report CRYPTO33) demanding rapid action on a raft of reforms in this high-risk sector. What surprised us is the discussion of large BHCs, which departs from longstanding Fed and FSOC comfort in the post-GFC regulatory regime for this sector.

FSOC28.pdf…

16 11, 2022

DAILY111622

Eliza Allen2022-11-16T17:14:29-05:00November 16th, 2022|2- Daily Briefing|

Treasury Calls for Tough Fintech and Bank-Partnership Protection, Prudential Standards

Treasury has completed a long-pending study of the extent to which nonbank fintechs compete with banks and how this affects financial stability and consumer protection. We will shortly provide clients with an in-depth analysis of this report, for which Karen Petrou was extensively interviewed as now noted publicly in the appendix. The report was ordered by the Secretary in compliance with President Biden’s competition order (see Client Report MERGER6), finding that nonbank fintechs directly compete with banks and thus may reduce current concentration levels, sure to influence the inter-agency bank-merger policy that remains to be finalized.

Williams Presses for NBFI Standards

In remarks today, FRB-NY President John Williams said that the central bank should not adjust monetary policy to address the price-stability challenges of volatile Treasury markets and that financial-stability questions have generally been well-addressed as evident in the sound U.S. banking system. Noting recent findings in the latest staff report (see Client Report TMARKET3), Mr. Williams also called for structural changes to NBFIs along lines also laid out by the FSB (see Client Report NBFI2), arguing that MMFs and other NBFIs must be a market source of strength, not of vulnerability requiring rescue beyond the Fed’s new standing facility.

G20 Blesses FSB, Basel Work Plans

In addition to top-priority concerns such as Ukraine, the G-20 Leader’s Declaration today tackled the usual financial-policy agenda, supporting the FSB’s recent NBFI report (see Client …

16 11, 2022

REFORM215

William Cross2022-11-22T15:02:46-05:00November 16th, 2022|5- Client Report|

HFSC Session Brings Crypto Action to Fore, “Holistic” Capital Under Scrutiny

HFSC today largely focused bank regulators on the same range of questions posed at yesterday’s Senate Banking session (see Client Report REFORM214). However, Chairwoman Waters (D-CA) emphasized the importance of federal legislation in sharp contrast to Chairman Brown (D-OH), also announcing a hearing in December on FTX. Ranking Member McHenry (R-NC), who will become HFSC chairman in the next Congress, concurred with the chairwoman’s views on the need for digital-finance statutory reform. However, he took strong issue with inter-agency policy with regard to new capital rules, merger restrictions, and third-party relationship constraints. Republican members also targeted Vice Chairman Barr’s holistic capital review, arguing that banks are currently well capitalized and that additional standards would hamper lending. Mr. Barr indicated that an SLR rewrite is part of the holistic review but not immediately necessary to quell Treasury-market volatility or illiquidity. As discussed in more detail below, regulators promised banking-sector crypto rules at least as stringent as Basel’s proposal.

REFORM215.pdf

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15 11, 2022

REFORM214

Max Camateros-Mann2022-11-22T15:27:38-05:00November 15th, 2022|5- Client Report|

Crypto, Deposit Rates, Capital Top Senate Discussion

At today’s Senate Banking oversight hearing with the banking agencies, Chairman Brown (D-OH) generally applauded the work of regulators, emphasizing the need for tough standards, like-kind rules for bigtech companies, and an inquiry into why depositor interest rates lag Fed rate hikes along lines posed earlier by Sen. Reed (D-RI). FDIC Acting Chairman Gruenberg concurred, criticizing banks for sluggish rates. Ranking Member Toomey (R-PA) reiterated his longstanding complaints about regulators straying outside their mission in areas such as climate change. He also called for SLR relief to reduce Treasury-market risk and opposed pending large-bank resolution guidance (see FSM Report LIVINGWILL19) on grounds that it is unnecessary.

REFORM214.pdf…

14 11, 2022

FedFin on: Treasury Inches Closer to All-to-All Trading

Arezou Rafikian2022-11-14T16:01:03-05:00November 14th, 2022|The Vault|

Building on our initial assessment, this report goes in-depth into the Treasury assessment of the market for its obligations and reforms necessary to avert another dash for cash. Although the Federal Reserve, which participated in this study along with other agencies, indicated in 2020 it will review the supplemental leverage ratio (SLR) to…

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

14 11, 2022

TMARKET3

Eliza Allen2022-11-14T15:46:49-05:00November 14th, 2022|5- Client Report|

Treasury Inches Closer to All-to-All Trading

Building on our initial assessment, this report goes in-depth into the Treasury assessment of the market for its obligations and reforms necessary to avert another dash for cash. Although the Federal Reserve, which participated in this study along with other agencies, indicated in 2020 it will review the supplemental leverage ratio (SLR) to enhance bond-market liquidity, it has yet to do so and no mention is made of any such reform in this report. To be sure, this is only a Treasury report that does not necessarily reflect the views of these other agencies, but the Fed and Treasury usually work closely on matters such as this and it seems unlikely that the matter would go unmentioned if plans were under way to revise the SLR. The 2022 report builds on the inter-agency working group’s 2021 analysis (see Client Report TMARKET2) but still does not reach firm conclusions or lay out specific recommendations suitable for near-term action. However, work is in fact under way at the SEC, which has proposed a new central-clearing mechanism for Treasury obligations that, if finalized, would create at least some of the infrastructure necessary for the all-to-all trading this report now explores in greater detail. Next steps for Treasury-market reform will be discussed at a conference later this week.

TMARKET3.pdf…

10 11, 2022

DAILY111022

Eliza Allen2022-11-10T17:35:13-05:00November 10th, 2022|2- Daily Briefing|

Inter-Agency Treasury-Market Rewrite Progresses

Treasury’s Inter-Agency Working Group on Treasury Market Surveillance (IAWG) today released a progress report on its efforts to guide action to stabilize the Treasury marketplace.

Fed Reg Report Highlights Future Priorities

The Fed today released its semiannual Supervision and Regulation Report, reiterating that banks entered 2022 in historically sound financial shape and outlined its priorities based on the potential risks of changing market conditions.

FSB NBFI Report Highlights Liquidity, Systemic Risk

The FSB today released a progress report on improving the resilience of non-bank financial intermediation (NBFI), recommending a number of enhancements to the current policy toolkit to better mitigate liquidity and financial stability risk.

CFPB Spotlights Cryptoasset Complaints

The CFPB today published a bulletin analyzing cryptoasset complaints the Bureau has received since 2018, observing a large spike in these complaints over the past two years and concluding that fraud, theft, hacks, and scams are widespread problems affecting participants in crypto markets.

CFPB Continues Furnisher Accountability Campaign

The CFPB today continued its campaign for furnisher accountability by issuing a circular upholding the Bureau’s belief that consumer credit reporting agencies and furnishers must conduct a reasonable investigation of non-frivolous consumer disputes and that failure to do so may subject them to CFPB enforcement under the FCRA.

CFPB Modifies Nonbank Financial-Company Standards

The CFPB today acted again by fiat to amend what it calls its procedural rule (see FSM Report CONSUMER41) revising its “dormant” authority and, as we noted in our analysis, creating a sweeping …