July 24 – The Electronic Payments Association President and CEO Janet O. Estep has been named as a member of the steering committee of the Federal Reserve’s Faster Payments Task Force.
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July 3 – Federal Reserve Chair Janet L. Yellen addressed monetary policy and financial stability at the 2014 Michel Camdessus Central Banking Lecture, International Monetary Fund, Washington, D.C. Below are her comments.
Aug 1 – Financial Services Committee Ranking Member Maxine Waters, joined by 37 of her fellow Democrats, delivered a letter urging President Obama to nominate Janet Yellen, current vice chairman of the Board of Governors of the Federal Reserve System, to replace Ben Bernanke as chairman of the Federal Reserve when his term expires.
October 21 – Federal Reserve Vice Chair Janet L. Yellen gave a presentation titled, “The Outlook for the U.S. Economy and Economic Policy” at the Annual Meeting of the Financial Management Association International. Her comments follow:
New Fed rule lowers risk of taxpayer bailouts.
By Bill Poquette
A foolproof resolution strategy for too-big-to-fail financial institutions is not topmost on most community bankers’ wish list. But it figured in the presidential campaigns and more recently has been in the news for other reasons.
Last month, the FDIC and the Federal Reserve Board announced that four systemically important domestic banking institutions — Bank of America, Bank of New York Mellon, JP Morgan Chase and State Street — adequately remediated deficiencies in their 2015 resolution plans. However a fifth big bank — Wells Fargo — did not adequately remedy all of its deficiencies and will be subject to restrictions on certain activities until the deficiencies are remedied.
Two days later, the Fed adopted a final rule it said would strengthen the ability of government authorities to resolve in an orderly way — without any support from taxpayer-provided capital — the domestic firms identified as global systemically important banks and the U.S. operations of foreign GSIBs operating in the United States. These institutions will be required to meet a new long-term debt requirement and a new “total loss-absorbing capacity,” or TLAC, requirement.
A bankruptcy or statutory orderly resolution process imposes the losses of a failed GSIB on investors rather than taxpayers as the critical operations of the firm continue to function, the Fed noted. Requiring a GSIB to maintain sufficient amounts of long-term debt, which can be converted to equity during resolution, would help achieve this objective by providing a source of private capital to support the firm’s critical operations during resolution.
“The rule is guided by common sense principles: bank shareholders and debt investors should place their own money at risk so depositors and taxpayers are well protected, and the biggest banks must bear the costs that come with their size,” Fed Chair Janet L. Yellen said.
And Gov. Daniel K. Tarullo commented, “The long-term debt required by this proposal would survive the disappearance of a bank’s equity and resultant failure, and would be available for conversion into new equity.”
The Clearing House, owned by the largest U.S. banks, welcomed the Federal Reserve’s final total loss absorbing capacity rule, saying it “has effectively ended too big to fail.”
The American Bankers Association didn’t go that far, but released this statement by President and CEO Rob Nichols: “Today’s final rule caps the dramatic regulatory changes that have been made to reinforce our nation’s policy that no bank should be too big to fail. The TLAC resources — combined with higher capital and liquidity requirements, stress testing, recovery and resolution planning — ensure that the system is better prepared to withstand shocks and has a viable framework in place to handle them.”
Does the Fed’s latest move really mark the end of too big to fail as we know it? Apparently not until Jan. 1, 2019, at least, the date by which the GSIBs are required to comply.
Meanwhile, the new Congress may inherit the House Financial Services Committee’s CHOICE Act, among whose proposed regulatory reforms is the end of taxpayer-funded bailouts of large banks. And then there is the Minneapolis Plan, the brain-child of Neel Kashkari, president of the Minneapolis Fed. The ambitious four-step plan – released on Nov. 16, 2016, with a 60-day comment period — is designed to minimize the risk of financial crises and bailouts to less than 10 percent, according to the bank.
For sure we’ll be hearing about too big to fail for some time — let’s hope not because of another financial crisis.
Bill Poquette is editor-in-chief of BankNews.
By Toni Lapp
November 9 – Now that the dust has settled in the wake of one of the most vitriolic presidential campaigns in modern history, bankers want to know what to expect from President-elect Donald Trump. (more…)
October 19 – NACHA —The Electronic Payments Association®, the trustee and rule maker of the ACH Network, has announced Treasury Software as its Preferred Partner for ACH enablement and integration. The Preferred Partner Program identifies leading providers and innovators that work with NACHA to better advocate for and educate the industry on technology and best practices in support of the ACH Network and ACH payments.
October 10 – NACHA —The Electronic Payments Association, the trustee and rule maker of the ACH Network, has recognized the work that the North American Banking Company and the Independent Community Bankers of America have done to create efficient, innovative services for financial institutions and their customers across the country. NACHA has long advocated for and supported innovation on the ACH Network that leverages the value of the Network’s ubiquity and reach. The “All Payments App” that the North American Banking Company and the Independent Community Bankers of America revealed as part of the Federal Reserve Faster Payments Task Force proposal process demonstrates how innovation continues on the ACH Network.
August 29 – The case for an increase in the federal funds rate has strengthened recent months, Federal Reserve Chair Janet Yellen believes. However, in a much-anticipated speech last Friday (Aug. 26) during the monetary policy symposium sponsored by the Federal Reserve Bank of Kansas City in Jackson Hole, Wyo., she offered no more clues as to when the Federal Open Market Committee will make the move. (more…)
The debate goes on over risk and concentration in TBTF banks.
By Bill Poquette
More than five years ago, the Dodd-Frank Act was passed requiring “orderly resolution” plans touted as assurance there would be no more taxpayer bailouts of huge banks long considered too big to fail. Yet, doubts linger. These doubts were refueled early this year when the newly named president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, delivered a speech at the Brookings Institution in Washington, D.C., announcing a bank initiative to end too big to fail.