#Vance – Federal Financial Analytics

20 07, 2023

FedFin on: Senate Banking Kicks Deposit-Insurance Reform Down the Road

Arezou Rafikian2023-07-21T17:03:13-04:00July 20th, 2023|The Vault|

In the wake of today’s Senate Banking deposit-insurance reform hearing, it seems certain that there will be no legislation in the near term and most likely in this Congress to increase FDIC-insurance thresholds. Although the FDIC recommended a new approach to transaction accounts in its policy review following recent bank failures (see Client Report DEPOSITINSURANCE119), Senators on both sides of the aisle demurred. Chairman Brown (D-OH) made it clear that any change in FDIC-coverage limits is conditioned on final, tougher bank regulations, essentially telling banks that successfully opposing new rules means keeping FDIC coverage as is….

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

20 07, 2023

DEPOSITINSURANCE121

Eliza Allen2023-07-20T15:16:53-04:00July 20th, 2023|5- Client Report|

Senate Banking Kicks Deposit-Insurance Reform Down the Road

In the wake of today’s Senate Banking deposit-insurance reform hearing, it seems certain that there will be no legislation in the near term and most likely in this Congress to increase FDIC-insurance thresholds. Although the FDIC recommended a new approach to transaction accounts in its policy review following recent bank failures (see Client Report DEPOSITINSURANCE119), Senators on both sides of the aisle demurred. Chairman Brown (D-OH) made it clear that any change in FDIC-coverage limits is conditioned on final, tougher bank regulations, essentially telling banks that successfully opposing new rules means keeping FDIC coverage as is. Ranking Member Scott (R-SC) is no fan of new rules, but he also said that review of FDIC coverage should only follow significant improvements in bank supervision likely in his view to moot the need for higher deposit protection. Sen. Scott was also emphatic that higher thresholds would need to come with higher premiums that could adversely affect bank competitiveness and credit availability. Undeterred, Sen. Vance (R-OH) has introduced legislation to end deposit-insurance coverage limits for community banks. Senators on both sides of the aisle focused instead on ensuring community-bank relief from pending special assessments (see FSM Report DEPOSITINSURANCE120) and, for Sen. Warren (D-MA), urging higher premiums for “TBTF” banks.

DEPOSITINSURANCE121.pdf…

14 07, 2023

DAILY071423

Eliza Allen2023-07-14T16:23:06-04:00July 14th, 2023|2- Daily Briefing|

HFSC ESG Efforts Tackle Insurance Risk Pricing

Today’s HFSC Subcommittee hearing on ESG’s housing and insurance market impacts focused almost entirely on insurance. Chairwoman De la Cruz (R-TX) argued that ESG regulations drive up home costs and distort insurance and homebuilding markets, while Ranking Member Cleaver (D-MO) asserted that climate risk is material to insurance costs, calling for long-term housing resiliency solutions.

HFSC Republicans Target Bank Supervisors

The HFSC memo ahead of next week’s hearing looking at the political independence of the banking agencies makes it clear that top agency supervisors will principally be grilled on climate-risk initiatives. However, bills on which the session will set a record would require prior Congressional notice prior to action on any initiative advocated by the FSOC or an executive order.

Senate GOP Targets “ESG” Lending, Ideological Bias

Sens. Vance (R-OH), Lummis (R-WY) and Marshall (R-KS) yesterday introduced legislation that would bar regulators from taking action against any regulated entity based on fears of reputational risk and establish a Treasury special IG tasked with collecting tips on regulatory misconduct with a focus on ideological bias. The IG would be responsible for investigating allegations of misconduct by the FDIC, NCUA, Fed, OCC, SEC, CFTC, FHFA, and CFPB, offering recommendations or submitting quarterly reports to Congress on the nature and number of complaints.

Daily071423.pdf…

10 07, 2023

M071023

Eliza Allen2023-07-10T14:18:21-04:00July 10th, 2023|6- Client Memo|

The Bankruptcy of Bank-Merger Policy

On Wednesday, a Senate Banking subcommittee will consider bank-merger policy, surely providing a platform for its chair, Sen. Warren’s pronounced views opposing all but the smallest bank mergers and maybe not even those. Many other senators are not as adamant, but even pro-business Republicans – see J.D. Vance – think bank mergers beyond the itty-bitty are at best problematic. The politics of this debate is obvious; the substance not so much. As with many other questions, bank-merger policy is best set with a keen understanding of recent, objective research and what it actually says about concentration as it occurs outside the gaze of those fearful only of still bigger big banks.

M071023.pdf…

10 07, 2023

Karen Petrou: The Bankruptcy of Bank-Merger Policy

Eliza Allen2023-07-10T14:18:07-04:00July 10th, 2023|The Vault|

On Wednesday, a Senate Banking subcommittee will consider bank-merger policy, surely providing a platform for its chair, Sen. Warren’s pronounced views opposing all but the smallest bank mergers and maybe not even those. Many other senators are not as adamant, but even pro-business Republicans – see J.D. Vance – think bank mergers beyond the itty-bitty are at best problematic. The politics of this debate is obvious; the substance not so much. As with many other questions, bank-merger policy is best set with a keen understanding of recent, objective research and what it actually says about concentration as it occurs outside the gaze of those fearful only of still bigger big banks.

That there is undue market power in a financialized economy that brings a raft of woes is all too clear. I thus hoped that Assistant Attorney General Kanter’s remarks last month would be a meaningful update of the Department of Justice’s anachronistic 1995 policy. It helped, but only a bit because Mr. Kanter focused principally on enforcement, leaving “broader” questions solely to the banking agencies.

They in turn have long promised a transparent merger policy, but it’s still deal-by-deal, case-by-case, crisis-by-crisis. More than a few mid-sized banks will wither away as deliberations continue because the sheer uncertainty and delays of most bank mergers undermine their economic value, particularly at a time of high interest rates, slow or no growth, tough new rules, and withering competition.

Recent antitrust research does not substantiate easy, blanket assertions about the benefits or …

16 06, 2023

Daily061623

Eliza Allen2023-06-16T16:49:58-04:00June 16th, 2023|2- Daily Briefing|

Waller Separates Monetary, Stability Policy

FRB Gov. Waller today defended recent rate hikes against criticism that they undermine financial stability, noting that monetary and stability policy are inter-related but must generally be addressed with different tools.

Brown-Scott Clawback Bill Adds Enforcement Teeth

In his first legislative mark-up since assuming the chairmanship in 2021, Banking Committee Chairman Brown (D-OH) will convene voting next Wednesday on compromise compensation-reform legislation on which he and Ranking Member Scott (R-SC) have agreed.

Hsu Warns of Tokenized-Settlement, AI Risk

Acting Comptroller Hsu’s speech today highlights both the benefits and risks of tokenization and AI, urging parallel development of new technologies and essential controls.

Democrats Try Again To Mandate TILA, CFPB Small-Business Authority

Banking Committee member Sen. Menendez (D-NJ) yesterday introduced legislation (S. 2021) along with Small Business Committee Ranking Member Velazquez (D-NY) (H.R. 4192) to extend TILA protections to small business lending, also giving the CFPB authority in this sector.

Fed Fears Little Systemic Risk

The financial-stability discussion in today’s report from the Federal Reserve ahead of next week’s hearings generally reiterates conclusions from the most recent Fed financial-stability report (see Client Report SYSTEMIC96): banks are generally sound and resilient and, despite MMF worries, most other vulnerabilities are of only moderate systemic concern.

Fed’s Long-Awaited Master-Account Database Goes Live

Conceding to a long-resisted and now statutory demand (see FSM Report PAYMENT25), the Federal Reserve today published the first database detailing who has or seeks access to Reserve Bank master accounts and services.…

7 06, 2023

DAILY060723

Eliza Allen2023-06-07T16:50:58-04:00June 7th, 2023|2- Daily Briefing|

Basel Advances Supervisory Rewrite, Wants Quick End To End-Game

The Basel Committee’s release today of its latest meeting confirms that global regulators plan to revise 2012’s core supervisory principles (see FSM Report REFORM92) in light of recent events, releasing a consultation next month. Work is also under way to update the 2022 crypto standards (see FSM Report CRYPTO37) to address permissionless blockchains and stablecoins.

HFSC Urges Careful Use of China Sanctions

At today’s HFSC National Security Subcommittee hearing on maintaining the dollar’s global dominance, Subcommittee Chairman Luetkemeyer (R-MO) and Reps. Petterson (D-CO) and Kim (R-CA) argued that the sanctions that would follow an invasion of Taiwan need to be used carefully to avoid unintended harm to the dollar’s global status.

Durbin Leads Renewed Charge For Credit-Card Network Choice

As anticipated, Senate Judiciary Committee Chairman Durbin (D-IL) along with Sens. Welch (D-VT), Marshall (R-KS), and Vance (R-OH) today reintroduced legislation to extend routing-system requirements to credit cards. The bill, which has also been reintroduced in the House by Reps. Gooden (R-TX) and Lofgren (D-CA), slightly revises last year’s measure (see FSM Report INTERCHANGE10) by addressing security and operational risks associated with unaffiliated network routing requirements.

Daily060723.pdf…

1 06, 2023

Daily060123

Eliza Allen2023-06-01T16:58:53-04:00June 1st, 2023|2- Daily Briefing|

BIS Head Presses for New-Age, Tough Bank Supervision

BIS General Manager Carstens today absolved central banks in general and the Fed by clear inference from fault in recent bank failures by way of recent interest-rate hikes. Noting also that the Basel III construct is very resilient in design and should have prevented these collapses and then the secondary systemic risk that resulted around the world, Mr. Carstens points instead to failures by bank senior management and directors to execute basic risk-management obligations.

Exec-Comp Clawback Bill Takes Shape

With additional GOP support now also on the Banking Committee, Sen. Warren (D-MA) today introduced a revised version of the earlier, also-bipartisan bill on executive-compensation clawbacks following mid-March bank failures (see FSM Report COMPENSATION35). The new bill covers only banks with assets above $10 billion and direct and indirect compensation over three years, a change from the prior bill’s attempt to capture all compensation.

CFPB Sounds P2P Alarm

Building on its 2022 deposit-insurance representations circular (see FSM Report DEPOSITINSURANCE113), the CFPB today released an issue spotlight warning consumers that funds are at risk with payment apps such as Venmo. The FDIC is heightening pressure on nonbanks that gather funds which consumers may confuse with insured deposits (see FSM Report DEPOSITINSURANCE117), but doing so for payment apps is far more challenging because funds move quickly in and out of insured accounts.

Daily060123.pdf…