- Top Lines
The Senate passed a House-approved bill late Thursday evening to suspend the nation’s debt limit through January 1, 2025. President Joe Biden is expected to sign the bill on Friday and address the nation at 7 pm ET. The White House issued a statement thanking Leader Schumer and Leader McConnell for quickly passing the debt limit bill. Treasury Secretary Janet Yellen’s statement on the bipartisan passage of the bill to suspend the debt limit can be found here.
The Commodity Futures Trading Commission (CFTC) released on its website a forthcoming advance notice of proposed rulemaking (ANPRM) to identify areas of emerging risk for swap dealers and futures commission merchants with respect to risk management program governance, enumerated risks in the risk management program regulations, periodic risk exposure reporting by swap dealers and futures commission merchants, and other risk. Commissioner Christy Goldsmith Romero released a statement regarding the ANPRM that calls for exploration into novel risk such as technology risk, including digital assets and smart contracts; cyber risk; affiliate risk; risk related to the segregation of customer property and safeguarding counterparty collateral in the digital asset space; and climate-related financial risk. Comments will be due 60 days after the ANPRM is published in the Federal Register.
- Weekly Wrap Up
Staff of the CFTC Division of Clearing and Risk (DCR) released an advisory for derivatives clearing organizations (DCOs) and DCO applicants regarding digital asset-related risks that these entities should consider when expanding their business lines, clearing models, and services to include digital assets. The advisory provides that the DCR will be placing emphasis on the potential risks and DCO core principles related to system safeguards, physical settlement procedures, and conflicts of interest. The advisory also notes that DCR staff is available to assist with any questions as it continues to focus on maintaining safe and sound, orderly, and fairly competitive clearing systems, while promoting responsible innovation. Commissioner Kristin Johnson issued a statement supporting the staff advisory and calling for the Commission to issue an ANPRM focused on digital asset related risk for DCOs.
The Office of Financial Research (OFR), which supports the Financial Stability Oversight Council (FSOC), published a blog and a brief, reporting that an OFR data analysis showed high growth and high concentration in the digital asset market. The publications also discuss data gaps that remain with respect to the oversight of digital-asset intermediaries and financial stability risks that may emerge from them.
The Consumer Financial Protection Bureau (CFPB) ordered installment lender OneMain Financial to pay $20 million in redress and penalties for failing to refund interest charged to 25,000 customers who canceled purchases within a purported “full refund period,” and for deceiving borrowers about needing to purchase add-on products to receive a loan. OneMain will pay $10 million in refunds to consumers, and an additional $10 million penalty to the CFPB’s victims relief fund.
The Federal Deposit Insurance Corporation (FDIC) reported that insured institutions reported a net income of $79.8 billion in the first quarter of 2023. The FDIC also reported that net income increased from the prior quarter, led by higher noninterest income; the net interest margin declined quarter over quarter to 3.31 percent; unrealized losses on securities declined for a second consecutive quarter; loan balances declined modestly from last quarter but grew from one year ago; total deposits declined for a fourth consecutive quarter; asset quality metrics remained favorable despite modest deterioration; and community banks reported lower net income from the prior quarter.
The House of Representatives passed four pieces of financial services legislation aimed at facilitating capital formation by strengthening public markets, helping small businesses and entrepreneurs, and creating opportunities for investors. The bills include H.R. 2792, the Small Entity Update Act; H.R. 2795, the Enhancing Multi-Class Share Disclosures Act; H.R. 2796, the Promoting Opportunities for Non-Traditional Capital Formation Act; and H.R. 2797, the Equal Opportunity for All Investors Act.
The Board of Governors of the Federal Reserve (FRB), CFPB, FDIC, Federal Housing Finance Agency (FHFA), National Credit Union Administration (NCUA), and Office of the Comptroller of the Currency (OCC) jointly requested public comment on a proposed rule for quality control standards for automated valuation models. The proposed rule is designed to ensure the credibility and integrity of models used in real estate valuations. In particular, the proposed rule would implement quality control standards for automated valuation models (AVMs) used by mortgage originators and secondary market issuers in valuing real estate collateral securing mortgage loans.
The Federal Trade Commission (FTC) finalized a consent order settling charges that Mastercard used illegal business tactics to force merchants to route debit card payments through its payment network. Under the FTC’s order, Mastercard will have to start providing competing networks with customer account information the networks need to process debit payments. This reverses a tactic Mastercard allegedly had been using to prevent merchants from using competing networks to process certain ecommerce debit payments. The FTC alleged that practice violated provisions of the 2010 Dodd-Frank Act known as the Durbin Amendment and its implementing rule, Regulation II (eye-eye).
The CFPB published an issue spotlight on digital payment apps heavily used by consumers and businesses. The analysis finds that funds stored on these apps may not be safe in the event of financial distress, since the funds may not be held in accounts with federal deposit insurance coverage. The CFPB also issued a consumer advisory for customers holding funds in these apps and how they can make sure their funds remain safe.
The CFPB published an issue spotlight on digital payment apps heavily used by consumers and businesses. The analysis finds that funds stored on these apps may not be safe in the event of financial distress, since the funds may not be held in accounts with federal deposit insurance coverage. The CFPB also issued a consumer advisory for customers holding funds in these apps and how they can make sure their funds remain safe.
The Federal Housing Administration (FHA) posted a draft of Mortgagee Letter (ML), Payment Supplement Partial Claim, on its Single Family Housing Drafting Table (Drafting Table) for public feedback. The draft ML proposes a new loss mitigation option ‒ the Payment Supplement Partial Claim ‒ to assist struggling borrowers that are delinquent on their mortgage payments and are unable to obtain a significant payment reduction with other available loss mitigation options.
The Federal Reserve Board announced a consent order against Silvergate Capital Corporation and Silvergate Bank, both of La Jolla, California, to facilitate the voluntary self-liquidation that Silvergate announced on March 8, 2023. The Federal Reserve’s order ensures Silvergate will implement its previously announced plan for winding down the bank’s operations in a manner that protects the bank’s depositors and the Deposit Insurance Fund. Silvergate is also prohibited from making capital distributions, dissipating cash assets, and engaging in certain other activities without regulatory approval.
The European Union formally signed its Markets in Crypto Assets (MiCA) regulation into law on May 31, taking the EU closer to becoming the first major jurisdiction in the world with tailored rules for the sector. The law was signed by the European Parliament President Roberta Metsola and Swedish Rural Affairs Minister Peter Kullgren, alongside a separate anti-money laundering law that requires crypto providers to verify their customers’ identity when they transfer funds.
The Federal Reserve Bank of New York announced that Mihaela Nistor has been named Chief Risk Officer and Head of the Risk Group. In this role, she will also be a member of the Bank’s Executive Committee. Ms. Nistor will join the New York Fed in June 2023.
Administrator Isabella Casillas Guzman, head of the Small Business Administration (SBA), opened a window for new applications for Small Business Lending Company (SBLC) licenses for the first time in over 40 years. New applicants may apply between June 1, 2023, and July 31, 2023.
OFR Director James Martin published a “From the Director” blog post about the OFR’s role in developing standards for emerging technologies within President Biden’s recently released National Standards Strategy for Critical and Emerging Technology.
Federal Reserve Governor Michelle Bowman delivered remarks at a Fed Listens Event on Transitioning to the Post-Pandemic Economy. Governor Bowman discussed the effects of the pandemic experience on the U.S. economy and challenges in the labor and housing markets.
Federal Reserve Governor Philip Jefferson delivered remarks on Financial Stability and the U.S. Economy. Governor Jefferson discussed the Federal Reserve’s approach toward financial stability, the U.S. financial system and economic outlook, and ongoing regulatory capital initiatives.
The House Committee on Financial Services held a hearing examining recent activities at the FHFA.
The House Committee on Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions held a hearing discussing international financial institutions (IFIs) and their place within the economic competition of the United States and China.
- ICYMI
The U.S. Department of the Treasury (Treasury) announced the formal launch of the Cloud Executive Steering Group (CESG), a public-private partnership dedicated to bolstering regulatory and private sector cooperation. First announced as part of Treasury’s Financial Services Sector’s Adoption of Cloud Services report released in February, the multi-pronged follow-up effort aims to ensure that Treasury, financial federal regulators, and the financial sector work together to address challenges associated with the increasing trend of cloud adoption identified in the report. CESG will report to the Financial Stability Oversight Council (FSOC), Financial and Banking Information Infrastructure Committee (FBIIC), and the Financial Services Sector Coordinating Council (FSSCC).
The Biden-Harris administration announced new steps intended to advance responsible artificial intelligence research, development, and deployment. The announcements include: an updated roadmap to focus federal investments in AI research and development (R&D); a new request for public input on critical AI issues; and a new report on the risks and opportunities related to AI in education.
Need to catch up on what happened last week? Check out our May 26 newsletter here.