Top of the Agenda
Federal Reserve Finalizes Tailoring Rules for Domestic, Foreign Banks
On October 10, the Federal Reserve finalized rules that will tailor the post-crisis Dodd-Frank Act prudential standards applicable to large U.S. and foreign banks, implementing last year’s Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155). The final rules establish a “framework that sorts banks with $100 billion or more in total assets into four different categories based on several factors, including asset size, cross-jurisdictional activity, reliance on short-term wholesale funding, nonbank assets, and off-balance sheet exposure.” The final rules will apply liquidity requirements for the U.S. intermediate holding company (IHC) of a foreign bank based on the risk profile of the IHC, rather than on the bank’s combined U.S. operations (CUSO). BPI had submitted extensive comment letters on both the domestic and foreign bank proposals.
“The Federal Reserve has implemented faithfully the tailoring mandated by S. 2155, which leaves in place all core post-crisis reforms. The next step is equally important: to ensure that the examination process is aligned with the new regulatory framework and not allowed to reimpose the same old requirements,” BPI President and CEO Greg Baer said in a statement.
5 Stories Driving the Week
1. Scrutiny Continues of Facebook’s Libra with Lawmaker and Industry Concerns
Facebook Chairman and CEO Mark Zuckerberg will testify before the House Financial Services Committee on October 23. In July, Committee Chairman Maxine Waters (D-CA) requested a moratorium on the implementation of Facebook’s Libra digital currency initiative until critical financial regulatory questions were addressed and held an oversight hearing in July with Calibra CEO David Marcus. On October 8, Senator Sherrod Brown (D-OH), Senate Banking Committee Ranking Member, and Senator Brian Schatz (D-HI) sent letters to the CEOs of Visa, MasterCard and Stripe to urge the companies to consider the risks of backing Facebook’s Libra. “Facebook is currently struggling to tackle massive issues, such as privacy violations, disinformation, election interference, discrimination, and fraud, and it has not demonstrated an ability to bring those failures under control,” the Senators wrote. They urged the companies to “consider Facebook’s inability to manage current risks from its core business lines when making a decision about whether to proceed with Libra.” The Senators’ letter follows PayPal Holdings Inc. withdrawal from the Libra Association in a statement on October 4. In addition, the Wall Street Journal reported that European Union will introduce legislation aimed at preventing Libra’s from “undermining Europe’s single currency and being used as a money-laundering tool.”
2. Federal Reserve Approves Volcker Rule Reforms
In Case You Missed It
BPI’s Bill Nelson Discusses Repo Market Stress, Fed Operating System and Prospects for Standing Repo Facility
On October 7, BPI’s Chief Economist Bill Nelson joined the Mercatus Center’s “Macro Musings” podcast to discusses the causes of the recent turmoil in money markets, the contributing role of regulations, and the implications for the Fed’s operations including the prospect of opening a standing repo facility. On a standing repo facility, Nelson said, it “may be a good immediate solution, but it also highlights the fact that the way things are currently arranged, the Fed kind of has to be the counterparty to all. It has to be the market-maker of first resort.” He also discussed the post-crisis regulatory regime and applauded regulators’ recent review of those regulations. “It’s inconceivable that all of those things would have been done and done exactly right,” Nelson said.
BPI Comments on BEA’s Benchmark Survey on Operations of US Operations of Foreign Affiliates
On October 7, BPI submitted a comment letter to the Bureau of Economic Analysis regarding proposed changes to the 2019 BE-10, Benchmark Survey of U.S. Direct Investment Abroad. The BE-10, Benchmark Survey is a mandatory survey conducted once every five years by the BEA to secure current economic data on the operations of U.S. parent companies and their foreign affiliates. All U.S. persons that own, either directly or indirectly, 10 percent or more of the voting securities of an incorporated foreign business enterprise or an equivalent interest in an unincorporated foreign business enterprise are required to complete the survey. BPI’s letter encourages the BEA to provide a number of clarifications of proposed changes and added questions, specifically those related to sales of selected services recognized as “prevalent in the digital economy.”
- 10/16/2019 — House Financial Services CFPB Semi-Annual Hearing
- 10/16/2019 — House Financial Services Subcommittee TRIA Reauthorization Hearing
- 10/17/2019 — Senate Banking CFPB Semi-Annual Testimony
- 10/17/2019 — House Financial Services Subcommittee Hearing on Stock Buybacks
- 10/17/2019 — House Financial Services Subcommittee Hearing on Diversity Workforce Practices
- 10/18/2019 — FDIC Consumer Research Symposium
- 10/18/2019 — House Task Force on AI Hearing on Cloud Computing
- 11/19/2019 — 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.
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