BPInsights: April 19,2019

BPInsights: April 19,2019


Good Times Do Not Call for a Countercyclical Capital Buffer

Over the past year, we have frequently heard the argument that the countercyclical capital buffer (CCyB), an additional capital requirement that the Federal Reserve can impose on the largest banks, should be increased because we are currently in “good times.” Large banks already hold extra capital to prepare for a crisis in the form of the conservation capital buffer. Raising the CCyB during the good times to act as a “rainy day fund” is a fundamental misunderstanding of the CCyB and a violation of the Fed’s own policy.



Federal Reserve Holds Board Meeting on Control Rules Proposal

The Federal Reserve Board will hold an open meeting on April 23 at 1:30 pm to consider a proposal to revise the Board’s control rules. If a firm has a controlling influence over a banking organization, it becomes subject to the Fed’s and regulations.

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CFPB Director Kraninger Outlines Bureau Priorities

In April 17 remarks, Consumer Financial Protection Bureau (CFPB) Director Kathleen Kraninger outlined her priorities for the CFPB’s regulatory, supervisory, and enforcement activities under her leadership. The remarks highlighted her focus on the importance of using the agency’s authorities to prevent consumer harm and to largely engage in doing so through the supervision, rather than enforcement, process. As part of her remarks, she announced that the CFPB would hold a series of symposia on a variety of consumer protection topics. On April 18, she announced the first symposium series event on defining the “abusiveness” standard under the Dodd Frank Act’s unfair, deceptive, or abusive acts or practices (UDAAP) standard. The symposia series will also include topics ranging from behavioral law and economics, small business loan data collection, disparate impact and the Equal Credit Opportunity Act, cost-benefit analysis, and consumer authorized financial data sharing.

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BPI, FACT Coalition Host “Ending Anonymous Shell Companies” Panel Discussion

On April 12, BPI and the FACT Coalition hosted a panel discussion on “Ending Anonymous Shell Companies” on Capitol Hill to raise awareness around the issue of anonymous shell companies. The panel was moderated by Greg Baer, BPI President and CEO, and included a broad group of stakeholders in law enforcement and public policy, including Clay Fuller, a fellow at the American Enterprise Institute; Chip Poncy, Senior Advisor at the Center on Economic and Financial Power Foundation for Defense of Democracies and President and Co-Founder of the Financial Integrity Network; Bob Rodgers, President and CEO of Street Grace; Tim Richardson, Senior Legislative Liaison, Fraternal Order of Police; and Elizabeth Rosenberg, Senior Fellow at the Center for a New American Security. Topics discussed included the law enforcement need to end anonymous shell companies, privacy considerations for such a change, and possible structures for a single federal registry.

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FDIC Issues ANPR on Changes to IDI Resolution Plan Rule

On April 16, the Federal Deposit Insurance Corporation (FDIC) issued an advanced notice of proposed rulemaking (ANPR) requesting comment on changes to its “IDI Rule,” which requires insured depository institutions with $50 billion or more in assets to submit annual resolution plans. The ANPR requests comments on various proposed approaches for revising the IDI Rule, including: (i) the creation of tiered resolution planning requirements based on institution size, complexity, and other factors; (ii) revisions to the frequency and required content of plan submissions, including elimination of plan submissions for smaller and less complex IDIs; and (iii) improvements to the process for periodic engagement between the FDIC and institutions on resolution-related matters. The ANPR also requests feedback on whether to revise the IDI Rule’s current $50 billion asset size threshold. A number of these approaches would align with the biannual or triennial submissions proposed in the interagency NPR on 165(d) resolution planning requirements that, along with the interagency tailoring proposal for foreign banking organizations, the FDIC also approved on April 16th.

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SEC Commissioner to Depart Agency

Robert Jackson, the only Democratic member of the Securities and Exchange Commission, is expected to leave the agency in the months ahead and return to New York University School of Law, according to media reports. Jackson’s term expires June 5th, but he can remain through December 2020. According to New York University School of Law, Jackson plans to teach in the fall 2019 semester.

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Income Inequality and Last Week’s Big Bank Hearing

Wage inequality was repeatedly raised at last week’s bank CEO hearing, but banks are not the leading culprit. Of the about one hundred people in finance included on the 2018 Forbes 400, not one of the banking CEOs that testified appear on the list. In a rational world, those who care about income inequality would be smiling on the banking industry as a place where good jobs are plentiful on both an absolute and relative basis, and where the fruits of labor are shared broadly.

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BPI Testifies on Agencies’ Use of Guidance

On April 30 at 10 am, BPI President and CEO Greg Baer will testify at a Senate Banking, Housing, and Urban Affairs Committee hearing on “Guidance, Supervisory Expectations and the Rule of Law: How do the Banking Agencies Regulate and Supervise Institutions?” In an effort to address any potential legal uncertainty from examiners’ reliance on guidance, policy statements, and similar communications as the basis for supervisory mandates, BPI and the American Bankers Association in November 2018 took the rare step of petitioning the banking agencies and the CFPB for a formal rulemaking regarding the use of supervisory guidance.

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FDIC Hosts Fintech and Banking Conference

On April 24, the Federal Deposit Insurance Corporation (FDIC) and Duke University’s Fuqua School of Business and Innovation and Entrepreneurship Initiative will host the Fintech and the Future of Banking conference in Arlington, VA. FDIC Chairman Jelena McWilliams and Treasury Secretary Steven Mnuchin will deliver remarks about the role of financial technology and innovation in banking.

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NYU and BPI Host Household Finance Conference

The New York University Salomon Center for the Study of Financial Institutions and BPI will host a “Conference on Household Finance” on April 26 in New York.

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House Committee Holds Housing Hearing

The House Financial Services Committee will hold a hearing on April 30 at 10 am entitled, “Housing in America: Assessing the Infrastructure Needs of America’s Housing Stock.”

House Subcommittee Holds Payday Lending Hearing

On April 30 at 2 pm, the House Financial Services Subcommittee on Consumer Protection and Financial Institutions will convene a hearing entitled, “Ending Debt Traps in the Payday and Small Dollar Credit Industry.”

House Subcommittee Holds Lending Discrimination Hearing

On May 1 at 10 am, the House Financial Services Subcommittee on Oversight and Investigations will hold a hearing on discrimination in the automobile lending and insurance industries.

House Diversity Subcommitee Holds Hearing

The House Financial Services Subcommittee on Diversity and Inclusion will hold a hearing on May 1 at 2 pm entitled, “Good for the Bottom Line: A Review of the Business Case for Diversity and Inclusion.”

Senate Banking Committee Holds Hearing on Data Privacy

The Senate Banking, Housing, and Urban Affairs Committee holds a hearing on May 7 at 10 am on “Privacy Rights and Data Collection in Digital Economy.”

House Subcommittee Holds Hearing on Minority Homeownership

The House Financial Services Subcommittee on Housing, Community Development and Insurance will convene a hearing on May 8 at 10 am on barriers to minority homeownership.

House Financial Services Committee Holds Markup

The House Financial Services Committee will convene for a markup on May 8 at 2 pm. On May 9 at 10 am, the committee will convene for a continuation of the May 8 markup.

Senate Banking Committee Holds Regulators Hearing

The Senate Banking Committee holds a hearing on May 15 at 9:30 am with financial regulators. Witnesses include Comptroller of the Currency Joseph Otting, Federal Reserve Vice Chair for Supervision Randal Quarles, Federal Deposit Insurance Corporation Chairman Jelena McWilliams, and National Credit Union Administration Chairman Rodney Hood.

House Subcommittee Holds Hearing on Worker Rights

The House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets will convene a hearing on May 15 at 10 am entitled, “Promoting Economic Growth: A Review of Proposals to Strengthen the Rights and Protections for Workers.”

House Financial Subcommittee Holds Sanctions Hearing

The House Financial Services Subcommittee on National Security, International Development and Monetary Policy will hold a hearing on May 15 at 2 pm on the use of sanctions in national security and foreign policy.

Financial Regulation Conference with Policymakers

The Antonin Scalia Law School’s Financial Services Regulation Law Concentration will host its first full day public policy conference on the “Smart Regulation and the Future of Financial Services” on May 16. Craig Phillips, Counselor to the Secretary of the Treasury, SEC Commissioner Hester Peirce, and Jeremy Newell, Executive Vice President, General Counsel, and Chief Operating Officer of BPI, are among the speakers.

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House Financial Services Committee Holds Hearing on Prudential Regulators

The House Financial Services Committee will convene a hearing on May 16 at 10 am entitled, “Oversight of Prudential Regulators: Ensuring the Safety, Soundness and Accountability of Megabanks and Other Depository Institutions.”

House Financial Services Committee Holds Hearing on HUD

The House Financial Servicesl Committee will convene a hearing at May 21 at 10 am on oversight of the Department of Housing and Urban Development.

SIFMA and BPI Prudential Regulation Conference

The Securities Industry and Financial Markets Association (SIFMA) and BPI will host the 6th Annual Prudential Regulation Conference on June 4 in Washington DC. This year’s conference will assess how the post-crisis prudential regulatory framework is affecting the capital markets, including market liquidity, capital formation and innovation.

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November 19-21: The Clearing House + BPI 2019 Annual Conference

The Clearing House and BPI will host the 2019 Annual Conference from November 19 to 21. The event provides a forum for the industry’s leaders to examine the changing dynamics of the bank regulatory and payments landscapes with two and half days of high-level keynote speakers, in-depth expert panels, and networking.
The Pierre, New York

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The Sustainability of First-Time Homeownership, Is the Recent Tax Reform Playing a Role in the Decline of Home Sales? & Did Tax Reform Raise the Cost of Owning a Home?

These three posts develop a method for assessing the sustainability of homeownership for first-time buyers and explore the impact of the Tax Cuts and Jobs Act of 2017 (TJCA) on the housing market. Based on the sustainability scorecard developed in the first post, the Federal Housing Administration and Veterans Affairs programs produce lower sustainability rates than loans guaranteed by the Government Sponsored Enterprises, and loans held by banks, and in private-label mortgage-backed securities, controlling for borrower characteristics. In the second and third posts, the authors find evidence consistent with the view that the TCJA contributed to a slowdown in the housing market.

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The Marginal Effect of Government Mortgage Guarantees on Homeownership

Most residential mortgages in the U.S. are guaranteed by the government through the Government Sponsored Entities (GSEs) as well as the Federal Housing Administration. This paper asks whether government mortgage guarantees help promote homeownership. By exploiting the change to the conforming loan limit, results show that increases to the maximum loan size substantially increase government guarantees but have no significant effect on homeownership. This suggests that taxpayer exposure to mortgage market risks could be considerably reduced with a minimal effect on homeownership rates.

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The Effects of Information on Credit Market Competition: Evidence from Credit Cards

This paper uses credit card data to study the effect of credit information on credit market competition. Results indicate that public credit information can reduce incumbents’ market power and therefore improve credit allocation. However, lenders may curtail credit to riskier borrowers if there is no opportunity to make use of the private information they have about such borrowers. This implies that reforms that make credit information public may also reduce the ability of riskier borrowers to obtain credit.

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2019 Small Business Credit Survey: Report on Employer Firms

The Small Business Credit Survey provides information on the financing needs, decisions, and outcomes of small employer firms with less than 500 full- or part-time employees based on survey data collected in the second half of 2018. Overall, the degree of credit constraints faced by small businesses was roughly unchanged relative to previous year’s survey. According to the results of the 2019 survey, nonbank lenders continued to gain market share, despite charging higher interest rates on their loans relative to banks of all sizes.

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