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In a speech delivered Friday morning at a forum hosted by the European Central Bank in Frankfurt, Germany, Fed Vice Chair for Supervision Michael Barr said the failure of Silicon Valley Bank "changed everyone's perception of the possible speed of bank runs" and exposed weaknesses in emergency funding systems that are still being evaluated today.
"What occurred in two or three weeks or, in some cases, many months in previous episodes may, in the modern era, now occur in hours," Barr said. "These issues are top of mind as we review and consider future adjustments to the way in which we should supervise and regulate liquidity risk."
As a result, Barr said, the Fed is weighing whether adjustments are needed for the regulatory frameworks designed to help banks insure themselves against losses. These include the liquidity coverage and net stable funding ratios, which are designed to ensure banks can fund themselves through 30 days of deposit outflows.
"These requirements may not, on their own, be sufficient to stem a rapid run," Barr said. "The speed of bank runs and the impediments to rapidly raising liquidity in private markets that may be needed in hours rather than days suggest it may be necessary to re-examine our requirements, including with respect to self-insurance standards and to discount window preparedness."
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Ranking Member Tim Scott (R-S.C.) is leading fellow Banking Committee Republicans in calling on Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg to provide detailed information regarding the recent allegations of a toxic workplace culture, including allegations of sexual harassment and mistreatment of employees, and to resign as Chairman and Board Member. Senators Thom Tillis (R-N.C.), Cynthia Lummis (R-Wyo.), Kevin Cramer (R-N.D.), and Steve Daines (R-Mont.) joined the Ranking Member in the letter to Gruenberg.
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The culture of an organization is set from the top. As such, we have significant concerns with your ability to continue leading the FDIC as it seeks to clean up its public image and provide much-needed changes to its workplace culture to return the FDIC to working order. Given the importance of the role of the FDIC in maintaining stability and public confidence in the nation's financial system,6 we call on you to step down as Chairman and Board Member and allow someone with more credibility to address the hostile workplace culture at the FDIC to which you have contributed.
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The Special Committee of the Federal Deposit Insurance Corporation (FDIC) Board of Directors established to oversee an independent third-party review of the agency’s workplace culture issued the following statement today:
“The Special Committee has appointed the law firm of Cleary Gottlieb Steen & Hamilton LLP to conduct an independent review into allegations of sexual harassment and interpersonal misconduct, as well as issues relating to the workplace culture at the FDIC. The team at Cleary Gottlieb will be led by Joon H. Kim, the former Acting U.S Attorney for the Southern District of New York, Jennifer Kennedy Park, and Abena Mainoo.
“This team at Cleary Gottlieb has conducted numerous investigations into workplace misconduct and hostile work culture, including being appointed by the New York State Attorney General’s Office to conduct an independent investigation into allegations of sexual harassment and other related misconduct involving the former New York Governor Andrew Cuomo and the New York State Executive Chamber."
“The Special Committee is committed to an independent and thorough review,” said committee co-chair Michael J. Hsu. “There is no question that the Cleary Gottlieb team has both the experience and the expertise to lead this review.”
... Current notable attorneys include ... a former FDIC general counsel ...
The Basel Committee on Banking Supervision today published a consultative document ...
The Committee welcomes comments on the proposed amendments to the IRRBB standard, which should be submitted here by 28 March 2024. All submissions will be published on the BIS website unless a respondent specifically requests confidential treatment.
Because central bank interest rate policies stoke inflation, and inflation has outsized negative effects on the poor and middle classes, fiat monetary systems are immoral:
https://www.pmbug.com/threads/the-immorality-of-central-bank-fiat-monetary-systems.6423/
Nations should adopt gold as unpegged legal tender for a just and equitable monetary system:
https://www.pmbug.com/threads/gold-as-unpegged-legal-tender.5705/
Thank you.
Banc of California, Inc. (Banc of California) has announced the completion of its transformational merger with PacWest Bancorp (PacWest), pursuant to which PacWest has merged into Banc of California, and as of December 1, 2023, Banc of California, N.A. will have merged into Pacific Western Bank.
The combined bank will operate under the Banc of California name and brand. Concurrent with the completion of the merger, Banc of California also completed its $400 million equity raise from affiliates of funds managed by Warburg Pincus LLC and certain investment vehicles sponsored, managed or advised by Centerbridge Partners, L.P. and its affiliates.
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In connection with the merger, Banc of California, N.A. and Pacific Western Bank have sold approximately $1.9 billion in assets as part of the previously disclosed balance sheet repositioning strategy, which includes additional asset sales expected to be completed through the end of the first quarter of 2024.
As of the merger closing date, Pacific Western Bank has sold approximately $1.5 billion of its securities portfolio, which included agency commercial mortgage-backed securities, agency collateralized mortgage obligations (CMO), treasury bonds, municipal bonds and corporate bonds. As of the merger closing date, Banc of California, N.A. has sold approximately $447.4 million of its securities portfolio, which included agency mortgage-backed securities, CMOs and municipal bonds. In addition, the previously announced forward sale of Banc of California’s $1.8 billion single-family residential mortgage portfolio (SFR Portfolio) is expected to close on or about December 1, 2023. The proceeds from the securities sales and the SFR Portfolio sale, as well as proceeds from additional balance sheet repositioning sales to come, are expected to be utilized primarily for the repayment of the combined bank’s wholesale borrowings and higher cost funding.
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The European Central Bank has asked some banks to closely monitor activity on social media to detect a worsening in sentiment which could lead to a deposit run, two banking executives with knowledge of the request told Reuters.
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In response to the ECB's requests which were specific to certain banks in the region, a major European lender has arranged for a team to signal significant volumes of negative posts to the bank's treasury, which will in turn assess any impact on deposits, one of the two executives said.
While early detection might not stop a bank run, regulators and banks are eager not to be caught off guard, according to the people familiar with the regulators' thinking.
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Federal Reserve Board releases the hypothetical scenarios for its annual stress test
I mentioned it in the interest rate thread, but the "hypothetical scenarios" they are testing are likely harbingers of the Fed's inclination to raise rates this year.
In the end, they can just credit the banks with the required amounts. Digits on a screen and all that. I assume that they'd rather do that than see the whole system hit the wall. They may even nationalise those that they save to quell bailout protests. What a perfect setup to then bring in a CBDC which would threaten the banking model anyway. Maybe a banking crash is desirable to the back room plotters. Your guess is as good as mine!
The $1 billion-plus injection that New York Community Bank announced Wednesday is the latest example of private equity players coming to the need of a wounded American lender.
Led by $450 million from ex-Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital, a group of private investors are plowing fresh funds into NYCB. The move soothed concerns about the bank’s finances, as its shares closed higher on Wednesday after a steep decline earlier in the day.
That cash infusion follows last year’s acquisition of PacWest by Banc of California, which was anchored by $400 million from Warburg Pincus and Centerbridge Partners. A January merger between FirstSun Capital and HomeStreet also tapped $175 million from Wellington Management.
Speed and discretion are key to these deals, according to advisors to several recent transactions and external experts. While selling stock into public markets could theoretically be a cheaper source of capital, it’s simply not available to most banks right now.
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