BPInsights: May 31, 2019


Give Banks Credit For Robust Contingent Liquidity Arrangements

In this blog post, BPI argues that banks should be allowed to hold liquid assets sufficient to meet their liquidity needs after 30 days of stress rather than their peak need over 30 days of stress, provided that they have collateral pledged to the Fed’s discount window that is sufficient to cover the difference. Banks that elect this option would be equally resilient to runs and yet able to provide more credit to businesses and households.

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5 Stories Driving the Week

1. McWilliams: Agencies Hoping to Put out CRA Proposal in Next Few Months

Federal Deposit Insurance Corporation Chairman Jelena McWilliams said on May 29 that bank regulators plan to have a draft proposal to update the Community Reinvestment Act in the coming weeks and release a formal proposal as soon as a couple of months after that, Politico reported.


2. House Financial Services Committee to Hold Shell Company Legislation Markup

The House Financial Services Committee will hold a markup on the “Corporate Transparency Act,” H.R. 2513, to address illicit activity through shell corporations. The legislation has bipartisan support and will provide important information to law enforcement and financial institutions performing due diligence, while only requiring minimal information from small business owners. For additional resources, visit here and here.


3. CFPB Releases Rulemaking Agenda

On May 22, the Consumer Financial Protection Bureau published its Spring 2019 Rulemaking Agenda, which outlines the agency’s anticipated regulatory focus over the next year. Of particular note, the CFPB intends to engage in pre-rule activities early next year on a rule that would require financial institutions to report certain information related to credit applications from women- and minority-owned small businesses. The agenda also includes rulemakings steming from the S. 2155 legislation, as well as the CFPB’s continuing rulemaking efforts, including two proposals related to its reconsideration of the Bureau’s 2017 payday lending rule.


4. House Subcommittee Holds Hearing on Leveraged Lending

The House Financial Services Subcommittee on Consumer Protection and Financial Institutions will hold a hearing titled, “Emerging Threats to Stability: Considering the Systemic Risk of Leveraged Lending,” on June 4 at 2 pm. There recently has been misplaced controversy over the risk from leverage lending. Federal Reserve Chairman Jerome Powell has said that the leveraged lending market doesn’t represent a current threat to the financial system.


5. BPI President Greg Baer to Speak to Women in Housing and Finance

BPI’s President & CEO Greg Baer will speak to Women in Housing and Finance luncheon on June 3 where he will discuss bank examinations and improvements to the enforcement regime.


In Case You Missed It

Agencies Issue Final Rule on the Treatment of Certain Municipal Obligations as High-Quality Liquid Assets

On May 30, the federal banking agencies issued a final rule on the treatment of municipal securities as high-quality liquid assets (HQLA) for the purposes of the Liquidity Coverage Ratio (LCR). The final rule adopts without changes the interim final rule released in August 2018, which treats liquid and readily-marketable, investment-grade municipal obligations as Level 2B HQLA in accordance with the Economic Growth Regulatory Reform and Consumer Protection Act. The final rule will be effective 30 days after publication in the Federal Register.

FSB Raises Concern Over Decline in Correspondent Banking

The Financial Stability Board (FSB) released a progress report on May 29 on its correspondent banking action plan. The FSB reports the number of correspondent banks declined by 3.4 percent in 2018, though at a slightly slowed rate compared to 2017. The FSB further indicates that there is growing evidence that national authorities are clarifying correspondent banking expectations, in line with Financial Action Task Force and Basel Committee on Banking Supervision guidance. Further, the FSB said that public sector technical assistance still requires ongoing coordination, but industry initiatives are gaining traction and there is more openness to innovative approaches.

New York Federal Reserve Officials to Depart

The Federal Reserve Bank of New York announced the departure of two top officials. Simon Potter, executive vice president and head of the Markets Group, and Richard Dzina, executive vice president and head of the Financial Services Group, will be leaving from their roles effective June 1.


6/3/2019 —Quarles Speech on LIBOR Transition

6/4/2019 —Powell Speaks at Monetary Policy Conference

6/4/2019 —House Financial Services Committee Holds Ex-Im Hearing

6/4/2019  —House Subcommittee Holds Hearing on Leveraged Lending

6/4/2019  —SIFMA and BPI Host Prudential Regulation Conference

6/5/2019 —Senate Banking Hearing for Fed, SEC Nominees

6/11/2019 —House Subcommittee Hearing on Student Loans

6/11/2019 —House Financial Services Committee Holds Markup

11/19/2019 – 11/21/2019  —The Clearing House + BPI 2019 Annual Conference