#treasury-market – Page 2 – Federal Financial Analytics

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

Arezou Rafikian2022-11-22T15:02:46-05:00November 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

…

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 …

23 08, 2022

DAILY082322

Eliza Allen2023-01-04T10:40:24-05:00August 23rd, 2022|2- Daily Briefing|

Life Insurers Depend on FHLB Advances for Stress Liquidity, Long-Term Funding

Reflecting longstanding fears about life-insurance run-risk (see Client Report SYSTEMIC92), a new research note from the Federal Reserve finds that life insurers were quick to establish liquidity buffers when Covid hit in 2020, largely doing so via FHLB advances and interest-rate derivative margins.

JEC Financial Inclusion Report Calls for Postal Banking, Crypto Regulation

The Joint Economic Committee yesterday afternoon released a report on the barriers that people of color and low-income communities face accessing financial services, concluding that traditional banks discriminate, new nonbank offerings may prove predatory, and policy solutions are essential.

OFR: Lower-Risk Hedge Funds Lead to Higher Treasury-Market Stress

A new OFR working paper finds that changes in aggregate hedge fund exposures are related to Treasury yield changes in economically and statistically significant ways, with managed futures and multi-strategy funds having the highest impact on Treasury prices.

FHFA Advances Equity Campaign with New Committee

Building on its equitable housing campaign, FHFA today announced an advisory committee on affordable, equitable, and sustainable housing. It will provide analysis focused on Fannie, Freddie, and the FHLBs in areas such as the barriers to and need for regulatory or policy changes to expand affordable, equitable, and sustainable housing.

Daily082322.pdf…

23 06, 2022

DAILY062322

Eliza Allen2023-01-25T15:46:26-05:00June 23rd, 2022|2- Daily Briefing|

Treasury Tries Transparency

Treasury and its inter-agency working group today advanced its earlier findings (see Client Report TMARKET2) with a public consultation on data transparency.

House Ag Subcommittee Advances CFTC Digital-Asset Authority

Advancing proposals to give the CFTC jurisdiction over aspects of the crypto market as proposed in the Lummis-Gillibrand bill (see FSM Report CRYPTO28), the House Agriculture Subcommittee on Commodity Exchanges, Energy, and Credit today advanced statutory changes that not only give the CFTC this authority, but also expand the committee’s jurisdiction.

OCC Targets Macro Risks

The OCC today released its latest analysis of risks to federally-chartered institutions, reiterating longstanding operational-risk concerns now heightened by the challenges facing banks seeking to retain or hire specialized personnel.

House Republicans Craft New Data-Privacy Regime

HFSC Ranking Member McHenry (R-NC) and panel Republicans today released a draft bill establishing consumer-data privacy rights with an eye on emerging financial providers and products.

Daily062322.pdf…

11 05, 2022

DAILY051122

Eliza Allen2023-02-21T15:33:13-05:00May 11th, 2022|2- Daily Briefing|

HFSC re FSOC: SIFIs, Climate, Stablecoins, Lots More

Looking ahead to tomorrow’s HFSC hearing with Secretary Yellen, the Democratic staff memo suggests that this session will track much of what occurred yesterday at Senate Banking (see Client Report FSOC26): i.e., discussion of the need for stablecoin legislation, the role of SIFI designation, and the overall risks presented by higher inflation, Russia, China, and climate change.

Basel Plans Wholesale Review of Post-GFC Regulatory Regime

The head of the Basel Committee, Pablo Hernández de Cos, today announced a full-scale evaluation of the Basel III construct set for release later this year. The report will evaluate complexity, regulatory interactions and systemic-risk dynamics, focusing on capital, liquidity, leverage, and macroprudential elements of the Basel III reforms. The report will also evaluate resilience and financial-activity behavioral incentives.

FSB Plans Commodity, Climate, Crypto Agenda

In remarks today, FSB head Klaas Knot reiterated ongoing concern about commodity markets and continuing financial-market resilience despite stress absorption since Russia first invaded Ukraine. Mr. Knot is also concerned that some banks are generally over-leveraged and those with prime brokers may be at particular risk.

Daily051122.pdf…