#Warner

2 01, 2024

AI4

2024-01-02T10:14:03-05:00January 2nd, 2024|1- Financial Services Management|

AI Financial Risk, Rules

Bipartisan Senate legislation has been introduced to press FSOC to do more than highlight artificial intelligence (AI) as a potential threat to financial stability.  The measure instead requires the Council to undertake a rapid study of AI’s financial stability risk and report to Congress on conclusions that must then be advanced through FSOC designation and federal-agency action.  The bill also gives the SEC more authority to address at least some of the risks its chairman has identified that may be posed by predictive analytics, including AI.  New AI-related stress testing would also be likely.

AI4.pdf

22 12, 2023

DAILY122223

2023-12-29T10:01:49-05:00December 22nd, 2023|2- Daily Briefing|

President Imposes Sweeping Secondary Sanctions

Responding to ongoing evidence that sanctions are not working as hoped despite recent Treasury assurances they are, the President today issued a sweeping executive order and Treasury laid out secondary sanctions for financial institutions found to facilitate Russian Federation finances related to its “war machine.”  We will shortly provide clients with an in-depth analysis of these actions which pose significant threats to dollar-clearing access for financial institutions that have so far been largely outside the reach of existing sanctions.

Treasury Requests Feedback for Financial Inclusion Strategy

Following a statutory directive, Treasury today issued an RFI to develop a national strategy for financial inclusion.  We will shortly provide clients with an in-depth report on the RFI.  Noting significant disparities in banking-system access for LMI, low-wealth, Black, and Hispanic households as well as discrepancies in rates of stock and business ownership between white, Black, and Hispanic households, the RFI invites recommendations for policy, government programs, financial products, technology, and other tools and market infrastructure.

Brown Prioritizes Housing, ILC Bill, AI in 2024

The Senate Banking Committee today released its policy outlook entering 2024 prioritizing affordable housing, enacting the ILC-powers bill (see FSM Report ILC17), and AI financial-sector policy (likely here picking up the Warner-Kennedy bill we will shortly assess in depth).

Daily122223.pdf

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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 …

14 11, 2023

REFORM229

2023-11-14T15:57:18-05:00November 14th, 2023|5- Client Report|

Capital Proposal Gets Bipartisan Bashing in Senate Banking

Today’s Senate Banking hearing with top bank regulators showcased broad bipartisan concern over the interagency capital proposal (see FSM Report CAPITAL230).  Although Chairman Brown (D-OH), Sen. Warren (D-MA), and Sen. John Fetterman (D-PA) staunchly defended the proposal on countercyclicality grounds, other senators on both sides of the aisle sounded the alarm over its impact on credit availability, small-business lending, and shadow-bank migration.  FRB Vice Chair Barr repeatedly defended his agency’s analysis while emphasizing openness to comment, also highlighting that the proposal relates primarily to non-credit activity and would apply to only 37 banks.  Some Republicans also raised concerns over other recent rulemakings, with Sen. Britt (R-AL) asking Vice Chair Barr if the agencies would consider a comment deadline extension for the LTD proposal (see FSM Report TLAC9).  Although Mr. Barr stated that the rule is far simpler than the capital proposal, he also said the agencies would consider a similar extension.  FDIC Chairman Gruenberg drew bipartisan ire over reports of FDIC widespread harassment, with Republicans seizing the occasion to criticize Mr. Gruenberg’s leadership.  Grilled by Sen. Tillis (R-NC) about reports of a Fed leak of confidential supervisory information, Mr. Barr only said that he is deeply concerned.  Separately, Chairman Brown emphasized unfinished work on bank executive accountability and urged Congress to pass the RECOUP Act (see FSM Report COMPENSATION37), which passed the Committee nearly unanimously in July.

REFORM229.pdf

26 10, 2023

DAILY102623

2023-10-26T16:48:48-04:00October 26th, 2023|2- Daily Briefing|

Senate Banking Focuses on Rapid-Fire Administration Action to Sanction Iran, Curb Hamas, Govern Crypto

Today’s Senate Banking Hearing on Illicit Finance and Terrorism showcased continued bipartisan support for stronger Iranian sanctions as well as for secondary sanctions on traditional financial institutions and cryptoasset firms facilitating terrorism.  In addition to highlighting their bipartisan measure targeting DeFi-related money laundering and sanctions evasion, Sens. Reed (D-RI) and Warner (D-VA) noted that they are working on a bill that would apply secondary sanctions on banks and DeFi entities that transact with foreign parties that facilitate terrorist financing.

Bipartisan Small-Business Leadership Opens New End-Game Front

Opening a new front of Congressional concern about the capital proposal’s credit impacts, House Small Business Economic Growth Subcommittee Chairman Meuser (R-PA) along with Ranking Member Landsman (D-OH) and two others today sent a letter to FRB Chairman Powell and Vice Chair Barr “imploring” them to commission a comprehensive review of the capital proposal’s effects on small business lending.  They also ask that all the agencies counteract any negative repercussions of the proposal, noting that this might entail significantly easing capital requirements.

Daily102623.pdf

12 09, 2023

DAILY091223

2023-09-12T17:19:22-04:00September 12th, 2023|2- Daily Briefing|

GHOS Presses Basel Action on Lessons Learned

Basel’s group of Governors and Heads of Supervision (GHOS) met yesterday, listing strong bank risk management and governance arrangements, effective supervision, and the need for a robust regulatory framework as the primary lessons it learned from this year’s banking turmoil.  GHOS also pressed its members to finalize their Basel III reforms, noting that most plan to implement them by the end of 2024.

Gensler Takes Swing-Pricing, AI Fire

At today’s Senate Banking hearing with SEC Chairman Gensler, Democrats largely defended the pace and scope of recent SEC work while Republicans criticized the agency for rulemakings they said were ideologically driven and inadequately analyzed.  Chairman Brown (D-OH) applauded the SEC’s crypto enforcement actions and encouraged it to examine broker and investment adviser use of AI.  Ranking Member Scott (R-SC) and several other Republicans sharply criticized Mr. Gensler for what they said was his lack of transparency and responsiveness to congressional inquiries.

Daily091223.pdf

20 07, 2023

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

2023-07-21T17:03:13-04:00July 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

2023-07-20T15:16:53-04:00July 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

19 07, 2023

DAILY071923

2023-07-19T16:57:05-04:00July 19th, 2023|2- Daily Briefing|

FTC/DOJ Propose Sweeping M&A Rewrite

Following an extensive inquiry into a new U.S. merger construct, the Department of Justice and Federal Trade Commission today released a draft formal policy statement that would codify issues previously raised in areas such as a transaction’s implications for workers.

White House Leaves Bank “Junk Fee” Attack As Is

Acting on President Biden’s competition executive order (see Client Report MERGER6), the White House today announced a slate of actions aimed at lowering consumer costs and promoting competition.

Bipartisan Senators Introduce New DeFi-AML/Sanctions Framework

Senator Reed (D-RI) yesterday introduced legislation along with Sens. Warner (D-VA), Rounds (R-SD), and Romney (R-UT) targeting DeFi-related money laundering and sanctions evasion.

Dems Reintroduce Bill Requiring Instant Consumer Deposit Access

Sens. Van Hollen (D-MD) and Warren (D-MA) and Reps. Pressley (D-MA) and Lynch (D-MA) have reintroduced the Payments Modernization Act, which requires financial institutions to recognize deposited funds in real-time and clarifies the moot point of whether the Fed has existing authority to build a real-time payments system.

Daily071923.pdf

20 03, 2023

FedFin Analysis: Possible Cures for a Viral Run

2023-03-20T16:12:34-04:00March 20th, 2023|The Vault|

Among the most vexing issues in the wake of SVB’s failure is the extent to which social media may have led to the first “viral run,” a run akin to the meme-stock volatility that lead the SEC and others to fear a new form of “flash-crash” risk.  In this report, we assess current policy options related to deposit runs resulting from social media, an issue cited frequently by HFSC Chairman McHenry (R-NC) as a top priority as he begins work on post-SVB financial standards.  We note some remedies – e.g., a ban on deposit-related communication were they permissible under various constitutional and statutory free-speech edicts.

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

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