News Archive

News

Supreme Court Rules in CFPB’s Favor 

May 21, 2024

On May 16,
the Supreme Court ruled that the Consumer Financial Protection Board’s (CFPB’s) funding mechanism is constitutional.

  • Specifically, the Court found that CFPB funding through the Federal Reserve (rather than annual appropriations by Congress) is valid under the U.S. Constitution’s appropriations clause in CFPB v. Community Financial Services Association of America.
  • In any given fiscal year, the CFPB can utilize a maximum of 12% of the Fed’s total operating expenses as reported in 2009 and adjusted for inflation. However, Bloomberg reports that the CFPB is getting close to its funding cap.

Why it matters: As reported by Bloomberg, this ruling “ends legal threats to the CFPB’s very existence that have percolated through the courts since Congress created the agency in the 2010 Dodd-Frank Act.”

Market participants believe that this ruling clears the way for a more aggressive CFPB, which has been relatively subdued with only four public enforcement cases in 2024.

What’s next: Litigation related to rules that were on pause will likely start moving forward, including:

  • 1071 Reporting: The small business lending data collection rule has been on hold since last October. Under the final rule, lenders have to collect and report loan application and origination data to small businesses, which, according to the CFPB, includes CRE mortgages;
  • Credit card late fee cap, which was paused in early May.

However, before these rules can be implemented, the CFPB will have to ask the courts for existing injunctions to be lifted. As reported by Bloomberg, “industry group plaintiffs that sued to block the rules will have the chance to ask for fresh injunctions on substantive grounds.”

Please contact Sairah Burki (sburki@crefc.org) or David McCarthy (dmccarthy@crefc.org) with questions.

Contact 

Sairah Burki
Managing Director, Head of Regulatory
Affairs & Sustainability
703.201.4294
sburki@crefc.org

David McCarthy
Managing Director, Chief Lobbyist, 
Head of Legislative Affairs
202.448.0855
dmccarthy@crefc.org
powerful regulator
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.
Supreme Court Rules in CFPB’s Favor
May 21, 2024
On May 16, the Supreme Court ruled that the Consumer Financial Protection Board’s (CFPB’s) funding mechanism is constitutional.

News

Presidential Campaigns Agree to Debate … With More Rules

May 21, 2024

In national news
… the Presidents have agreed to debate!

Within minutes of each other on Wednesday, both Presidential campaigns announced that they had agreed to debate, but notably are doing so on their own terms.

  • This will be the first time a debate has occurred outside the purview of the Presidential Commission on Debates, since its formation in 1987.

The first debate will occur on June 27 and will be hosted by CNN in Atlanta, GA.

A debate this early in the year is extremely unusual as neither President Joe Biden nor former President Donald Trump has officially accepted their party’s nomination.

A few conditions were agreed to by both campaigns to hold the debates:

  • No audience will be present. This has been viewed as a win for the Biden campaign, as Trump feeds off of audience reactions.
  • Microphones will be cut off if a candidate speaks out of turn.
  • Any candidates invited must earn 15% in at least four major national polls beginning in mid-March and running through June 20. This likely takes third-party Robert F. Kennedy Jr. out of debate contention as he has consistently polled in the high, single digits as of late.
  • The debates are notably early to ensure that they occur before the start of mail-in and early voting.

The second debate is scheduled for September 10 and will be hosted by ABC. The location of the second debate is still to be determined.

You can read more about debate planning intrigue here.

Contact James Montfort (Jmonfort@crefc.org) with any questions.

Contact 

James Montford
Manager, Government Relations
202.448.0857
jmontfort@crefc.org 

a microphone with exclamation points
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.
Presidential Campaigns Agree to Debate … With More Rules
May 21, 2024
In national news… the Presidents have agreed to debate!

News

Banking Regulators on the Hill: Gruenberg and Basel Dominate

May 21, 2024

Last week, financial regulators from the Fed, FDIC, and OCC testified before the House Financial Services Committee (HFSC) and the Senate Banking Committee (SBC).

Why it matters: As we previewed last week, the hearing comes amidst turmoil within FDIC leadership and potential revisions to the Basel Endgame proposal. Regulators briefly mentioned monitoring CRE in their opening remarks but did not engage in detailed discussions on the topic during the hearing.

FDIC and Gruenberg Focus: The majority of the hearings revolved around FDIC Chair Gruenberg and the results of an independent investigation that found pervasive sexual harassment and workplace misconduct at the FDIC. Note: Gruenberg announced yesterday that he will resign upon confirmation of a successor.

  • Republicans called for Gruenberg to step down. Some Democrats harshly criticized him, but most stopped short of calling for his resignation, including HFSC Ranking Member Maxine Waters (D-CA) and SBC Chairman Sherrod Brown (D-OH).
  • Sen. Elizabeth Warren (D-MA) contended that Chair Gruenberg’s resignation would “do nothing to improve the toxic culture at the FDIC,” adding that Republicans calling for his resignation are engaged in a “purely political exercise.”
  • Despite these calls, Gruenberg reiterated his commitment to implementing changes at the FDIC, stating that he is working on overhauling the agency’s culture and processes for addressing workplace misconduct.
  • There are political and policy reasons to keep Gruenberg in place. Without him, the FDIC would lose the majority of Biden appointees and would be unlikely to pass proposals like the Basel Endgame.

What they’re saying: Lawmakers also discussed the Basel III Endgame proposal, inquiring mostly about its implementation and potential modifications.

  • Additionally, Members delved into other recent regulatory actions, including the Fed’s long-term debt proposal and last Friday’s Financial Stability Oversight Council (FSOC) report on nonbank mortgage servicers.

Basel Endgame

  • Chairman Patrick McHenry (R-NC) asked Fed Vice Chair Michael Barr to commit to re-proposing the Basel III rule for notice and comment.
  • Barr responded that the Fed “has not made a decision on process yet” and is mostly focused on “getting the substance right.” Barr indicated in responses to several lawmakers that the Fed is considering “broad and material changes” across all three areas of the proposal, including operational, credit, and market risk.
  • Sen. Mike Rounds (R-SD) argued that broad and material changes would trigger the need for a withdrawal/re-proposal under the Administrative Procedures Act.
  • In both hearings, Barr assured lawmakers the Fed will comply with the law and the Administrative Procedures Act. He reiterated they will turn to the question of an appropriate process once the substance of the proposal is determined.
  • Sen. Mark Warner (D-VA) echoed Sen. Rounds’ concerns, highlighting that much of the opposition to the Basel III proposal stemmed from the lack of evidence-based documentation regarding the cumulative effects of the proposed rule changes. He urged Vice Chair Barr to make these impact estimates public, particularly those related to credit availability.
  • Reps. Brad Sherman (D-CA) and Sean Casten (D-IL) questioned the proposal’s treatment of clean energy tax credits. Rep. Casten specifically asked if regulators support revising the risk weights for tax equity. Chair Gruenberg confirmed the issue received heightened attention and agencies are still reviewing comments.
  • Rep. Ritchie Torres (D-NY) asked Barr if he agreed with Fed Chair Powell’s statement made during a March hearing that the level of capital in the U.S. banking system is “about right.” Barr affirmed the overall banking system is sound and resilient, and noted the Basel III proposal is designed to correct specific weaknesses in the system.

Other topics included rising insurance costs, the regional bank long-term debt proposal, and FSOC’s recent recommendation on nonbank residential mortgage servicers.

  • Sen. Tina Smith (D-MN) addressed the increase in home insurance rates linked to severe weather events caused by climate change. She inquired about the Federal Reserve's efforts in collaboration with financial institutions to manage these risks. Vice Chair Barr responded that the Fed is actively monitoring how major banks are addressing these risks and that conducting exercises with them to gain deeper insights.
  • On the FSOC nonbank mortgage report, Rep. French Hill (R-AR) contended that Dodd Frank has driven the mortgage servicing business away from regulated institutions and toward the nonbank sector. Comptroller Hsu responded to Rep. Bill Foster’s (R-IL) questions on risk that disruptions to services in the nonbank mortgage sector could be severe and negatively impact many people. Rep. Bill Foster (R-IL) expressed concerns about the potential severe disruptions to the nonbank mortgage sector and their negative impact on many people's financial well-being. The discussion around the Basel III Endgame proposal highlights the ongoing scrutiny and potential revisions in regulatory frameworks to ensure the stability and resilience of the banking system amidst evolving market dynamics and policy considerations.

The bottom line: While Vice Chair Barr declined to commit to a Basel re-proposal, he did continue to telegraph material changes to the proposal.

Contact David McCarthy (dmccarthy@crefc.org) and Sairah Burki (sburki@crefc.org) with questions. 

Contact 

Sairah Burki
Managing Director, Head of Regulatory
Affairs & Sustainability
703.201.4294
sburki@crefc.org

David McCarthy
Managing Director, Chief Lobbyist, 
Head of Legislative Affairs
202.448.0855
dmccarthy@crefc.org
magnifying glass examining money
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.
Banking Regulators on the Hill: Gruenberg and Basel Dominate
May 21, 2024
Last week, financial regulators from the Fed, FDIC, and OCC testified before the House Financial Services Committee (HFSC) and the Senate Banking Committee (SBC).

News

FDIC’s Gruenberg Will Resign Upon Confirmation of Successor

May 21, 2024

Despite weathering two days of congressional hearings (more on that in the next story), embattled Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg announced he will step down once a successor is confirmed.

Why it matters: The FDIC and Gruenberg have both come under fire for the agency’s toxic workplace. But, Gruenberg on the FDIC board allows President Biden to have a board majority; without him, the regulator may not be able to pass key proposals.

On Monday morning, Senate Banking Chairman Brown released a statement calling on President Biden to immediately nominate a new FDIC chair and for the Senate to swiftly act on the nomination.

  • Brown threaded the needle in calling for Gruenberg’s ouster via a replacement. He did not outright call for a resignation.
  • Later on Monday, Gruenberg announced his intent to resign upon confirmation of a successor.

Confirming a replacement before dumping Gruenberg could solve the issue of Dems being a vote down on the FDIC Board, but a nomination and confirmation will be no easy feat in the closely divided Senate.

  • Democrats hold a 51-49 majority, but a few Democratic senators have expressed opposition to the Basel proposal, which could prove a litmus test for a nominee.
  • Nominations are not necessarily swift in the financial realm. The leadership post for the Office of the Comptroller of the Currency (OCC) has been vacant for the entire Biden Administration, though Michael Hsu has been serving as Acting Comptroller.
  • Unlike the OCC, Biden cannot fill Gruenberg’s spot with an acting FDIC Director.

This is a developing story. Read on for more coverage of last week’s hearing.

Contact David McCarthy (dmccarthy@crefc.org) and Sairah Burki (sburki@crefc.org) with questions. 

Contact 

Sairah Burki
Managing Director, Head of Regulatory
Affairs & Sustainability
703.201.4294
sburki@crefc.org

David McCarthy
Managing Director, Chief Lobbyist, 
Head of Legislative Affairs
202.448.0855
dmccarthy@crefc.org
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.
FDIC’s Gruenberg Will Resign Upon Confirmation of Successor
May 21, 2024
Despite weathering two days of congressional hearings (more on that in the next story), embattled Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg announced he will step down once a successor is confirmed.

News

2024 Presidential Polling Reveals Shifts in Swing States

May 14, 2024

There have been some noticeable shifts in polling for the 2024 presidential election over the last two months. This week, we analyze recent polls for swing states as well as some “stretch” states both campaigns are eager to win.

What’s Happening: Swing State Swings

The “swing-state” chart below provides snapshot of where the race stood in key states on March 1, prior to the president’s State of the Union address and the Stormy Daniels hush money trial in New York, and where it stands on May 10.

Note: The impact of the trial on polling is yet to be fully realized.

Swing State Graph

Source: https://www.realclearpolling.com/

Go Deeper: In every state except Pennsylvania, former President Donald Trump has lost ground since March 1. The three states where Trump appears to have lost the most ground are Nevada, Georgia, and Michigan. Despite these shifts, Trump still leads the polls in these states, while North Carolina remains hotly contested.

  • Nevada: Democratic presidential candidates have carried Nevada since 2008. Other than in 2016, the state has voted for the winning candidate since 1980. While Democrats won with a 2.4% margin in the previous two cycles, that margin was not as close as it was in some other swing states. If President Biden is in trouble here on election day, it will likely be a big night for Republicans.
  • Georgia: President Biden won Georgia by 11,779 votes. If Trump can flip this state back to his column in 2024, its 16 electoral college votes will offer him multiple paths to winning back the White House.
  • Michigan: Michigan has voted with the winner of the presidential election since 2008. Among the historical “Blue Wall States” of Pennsylvania, Michigan, and Wisconsin, Biden has performed best in Michigan with a 2.8% margin of victory. Biden was ahead of Trump in the polls by about 1% in Michigan until last October when Trump overtook him just as the Israel-Hamas war started.
  • The Blue Wall States are all within the standard 3% margin of error when it comes to polling results. If Trump’s strength is overstated by the polls, then a Biden win becomes more likely even if Trump carries the other four swing states.
  • North Carolina While viewed as always just out of reach for the Democrats, North Carolina is the most likely to flip out of any on the list above. President Obama last won it in 2008, but it has since been reliably, though narrowly, Republican. Yet, the sub-4% margins give Democrats hope at the possibility of flipping its 16 electoral votes.

Expanding the Map

In every cycle, there is inevitably a period in which campaigns talk about expanding the map to new swing states and, typically, the press follows suit as is the case here in a recent article from Roll Call.

The four states below have been on each party’s radar to flip for a few election cycles, as polling sometimes demonstrates unexpected campaign strength or weakness. Former President Trump is currently polling about 4% to 6% ahead of the vote count he received in 2020 in each of these states.

Stretch State Graph

  • Minnesota: In the leadup to the 2020 election, Trump targeted Minnesota as a swing state due to Clinton’s narrow 2.5% victory. However, it landed squarely back in the blue column with Biden winning it by 7% in 2020. Recent polling may keep it in the news cycle, but don’t expect Minnesota to flip. The state has voted Democratic every presidential election since 1976.
  • Virginia: A previous GOP stronghold, Virginia has been reliably Democratic since 2008. With the Blue counties in Northern Virginia trending even more Democratic, a flip here is more difficult but would likely usher in President Trump. Biden won the state by a commanding 10%, compared to Clinton’s 5.3%.
  • Texas: Over the past decade, Texas voters have been steadily trending towards Democrats, but it has remained out of reach enough to be branded a battleground state. However, the vote margin here will be closely watched for 2028 and beyond, due to its growing population and whopping 40 electoral votes.
  • Florida: The once perennial swing state famously decided the 2000 election and has voted with the winner of the election in every cycle since 1976 except in 1992 and 2020. Florida’s rightward shift was well demonstrated in 2022, and it is the only battleground state where Trump improved his vote share from 2016. If this state flips, a second term for Biden would be a near guarantee. With abortion access on the ballot, Democrats may see a pick-up opportunity, but a flip here is unlikely.

Yes, but: The election will likely come down to the seven expected swing states mentioned in the first chart, but the four “stretch" states will play a key role.

The Bottom Line: Biden’s poor standing in the South and Sunbelt states cannot be understated. If he doesn’t improve in Nevada, Arizona, Georgia, and North Carolina, and Trump sweeps all of them. Biden will have to hold on to Pennsylvania, Michigan, and Wisconsin to have any chance to secure a second term.

Contact James Montfort (Jmonfort@crefc.org) with any questions.

Contact 

James Montford
Manager, Government Relations
202.448.0857
jmontfort@crefc.org 

Illustration of Minnesota, Vermont, Connecticut, Michigan
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.
2024 Presidential Polling Reveals Shifts in Swing States
May 14, 2024
There have been some noticeable shifts in polling for the 2024 presidential election over the last two months.

News

FDIC Chair Gruenberg’s Fate

May 14, 2024

On May 7
, a report commissioned by a special committee of the Federal Deposit Insurance Corp. (FDIC) and performed by law firm Cleary Gottlieb issued a scathing indictment of the FDIC’s culture:

“Far too many FDIC employees…have suffered from sexual harassment, discrimination, and other forms of interpersonal misconduct for far too long. We find that aspects of the FDIC's culture and structure— including a lack of accountability, fear of retaliation, a patriarchal, hierarchic, insular and risk-averse culture, power imbalances, insufficiently clear guidance and reporting channels, inadequate recordkeeping, and an investigative process that lacks credibility internally — have contributed as root causes to the conditions that have allowed for this type of workplace misconduct to occur."

The report also highlighted FDIC Chairman Gruenberg’s behavior as cause for concern, noting that some employees experienced “deeply unsettling exchanges during which he was extremely “harsh” or “aggressive”: 

“While we do not find Chairman Gruenberg’s conduct to be a root cause of the sexual harassment and discrimination in the agency or the long-standing workplace culture issues identified in our review, we do recognize that, as a number of FDIC employees put it in talking about Chairman Gruenberg, culture “starts at the top.” 

Report background: Following reporting by the Wall Street Journal in November 2023 of the FDIC’s “toxic and misogynistic” culture:

  • The House Financial Services Committee and the House Oversight and Accountability Committee opened investigations into the FDIC’s culture.
  • The FDIC Office of Inspector General began to examine the “leadership climate at the agency with regard to harassment and inappropriate behavior.”
  • The FDIC Board announced the establishment of the Special Review Committee, co-chaired by two non-management Board members, to oversee an independent third-party review of the FDIC’s workplace culture.
  • In December 11, 2023, the Special Review Committee appointed Cleary Gottlieb as the third-party reviewer.

Following the report’s issuance, according to American Banker, Gruenberg apologized and said that “as Chairman, I am ultimately responsible for everything that happens at our agency, including our workplace culture.” He added that the FDIC “will spare no effort to create a workplace where every employee feels safe, valued, and respected.”

What they’re saying: Several Republican members of Congress have called for Gruenberg’s resignation. Rep. Bill Foster from Illinois is the only Democrat thus far urging Gruenberg to resign.

Democrats on key finance committees, including Sen. Elizabeth Warren, Sen. Sherrod Brown, and Rep. Maxine Waters, have indicated their confidence in Gruenberg’s ability to implement change at the FDIC and noted that problems at the agency pre-dated his tenure.

According to Axios, White House spokesperson Karine Jean-Pierre did not say whether President Biden had confidence in Gruenberg, but that the chair "apologized and has committed to the [report's] recommendations."

The bottom line: Gruenberg’s current position as FDIC chair is critical as the Biden Administration seeks to finalize regulations, including the proposed bank capital requirements, that require an FDIC vote. If he were to step down, the FDIC board would be evenly split between Republicans and Democrats.

What’s next: Gruenberg, as well as Federal Reserve Vice Chairman for Supervision Michael Barr and acting Comptroller of the Currency Michael Hsu, will be testifying in front of the House Financial Services Committee and the Senate Banking Committee next week for regularly scheduled oversight hearings.

All eyes will be on his performance at these hearings and the level of support he receives from Democratic members of Congress.

Please contact Sairah Burki (sburki@crefc.org) with any questions.
 

Contact 

Sairah Burki
Managing Director, Head of Regulatory
Affairs & Sustainability
703.201.4294
sburki@crefc.org
questions
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.
FDIC Chair Gruenberg’s Fate
May 14, 2024
On May 7, a report commissioned by a special committee of the Federal Deposit Insurance Corp. (FDIC) and performed by law firm Cleary Gottlieb issued a scathing indictment of the FDIC’s culture.

News

Loan Officer Survey: CRE Focus 

May 14, 2024

Last week the Federal Reserve released the results of its April 2024 Senior Loan Officer Opinion Survey, which tracks lending standards and demand for commercial and consumer lending.

Why it matters: The quarterly covers over 80 banks and specifically tracks underwriting quality and demand for various types of CRE loans. The following summary is excerpted from the Fed press release with reformatting and editing for clarity.

The survey describes the results in “net share,” which are the percentage differences between the fraction of banks that reported tightening standards or strong demand versus weaker standards and weaker demand.

  • The summary describes the net share with the following ranges: “unchanged” less than or equal to 5%; “modest” greater than 5% and less than or equal to 10%; “moderate” greater than 10% and less than or equal to 20%; “significant” greater than 20% and less than 50%; and “major” greater than or equal to 50%.

By the numbers: The Fed highlighted the following key takeaways for CRE, which include 1) construction and land development loans; 2) multifamily loans; and 3) nonfarm nonresidential loans.

  • Tightening Standards: Over the first quarter, significant net shares of banks reported tightening standards for all types of CRE loans. Such tightening was more widely reported by “other banks” than by “large banks.”
  • Weaker Demand: Meanwhile, a moderate net share of banks reported weaker demand for construction and land development loans, while significant net shares of banks reported weaker demand for loans secured by nonfarm nonresidential and multifamily residential properties.
  • Foreign Bank Branches: Similar to domestic banks, a significant net share of foreign banks reported tighter standards for CRE loans. However, in contrast to domestic banks, a modest net share of foreign banks reported stronger demand for CRE loans over the first quarter.

Go deeper: The survey also details various aspects of bank credit policies for CRE loans.

  • Tighter All Around: Banks reported having tightened all the terms surveyed for each CRE loan type.
  • Widening Spreads: The most widely reported change in terms, cited by major net shares of banks across all CRE loan types, was the widening of interest rate spreads on loans over the cost of funds.
  • Smaller Amounts: Significant net shares of banks reported tightening maximum loan sizes, lowering loan-to-value ratios, increasing debt service coverage ratios, and shortening interest-only payment periods for all CRE loan types.
  • Shorter Maturities: Significant net shares of banks also reported tightening the maximum loan maturity for nonfarm nonresidential and multifamily loans, and a moderate net share of banks reported doing so for construction and land development loans.
  • Reduced Market Areas: Significant net shares of banks reported reducing the market areas served for nonfarm nonresidential and construction and land development loans, while a moderate net share of banks reported doing so for multifamily loans. Foreign banks reported tightening across almost all terms for each CRE loan type.

What they’re saying: Almost all banks said tightening of credit policies on CRE loans over the past year was tied to less favorable or more uncertain outlooks for CRE market rents, vacancy rates, and property prices.

  • Major net shares of other banks cited a reduced tolerance for risk, increased concerns about the effects of regulatory changes or supervisory actions, and a less favorable or more uncertain outlook for delinquency rates on mortgages backed by CRE properties.
  • The most frequently cited reasons for weaker demand were an increase in the general level of interest rates, a decrease in customer acquisition or development of properties, and a less favorable or more uncertain customer outlook for rental demand.

Yes, but: Of the smaller but sizable share of banks that reported stronger demand, the most frequently cited reasons for stronger demand, as reported by significant net shares of banks, were

  • An increase in customer acquisition or development of properties,
  • A shift in customer borrowing to respondent banks from other banks and non-bank sources, and
  • A decrease in internally generated funds by customers.

Contact David McCarthy (dmccarthy@crefc.org) with questions.

Contact  

David McCarthy
Managing Director, Chief Lobbyist, 
Head of Legislative Affairs
202.448.0855
dmccarthy@crefc.org
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.
Loan Officer Survey: CRE Focus
May 14, 2024
Last week the Federal Reserve released the results of its April 2024 Senior Loan Officer Opinion Survey, which tracks lending standards and demand for commercial and consumer lending.

News

Fed Summarizes Bank Pilot Climate Scenario Analysis Exercise  

May 14, 2024

On May 9,
the Federal Reserve (Fed) released a summary of the 2023 pilot climate scenario analysis it conducted with Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase; Morgan Stanley, and Wells Fargo. The summary did not provide details about individual banks.

The pilot exercise aimed to understand large banks’ climate risk-management practices and enhance their ability to estimate, monitor, and manage climate-related financial risks.

It comprised two separate and independent modules, a physical risk module and a transition risk module:

  • The physical risk module focused on estimating the effect of specific scenarios on residential and commercial real estate loan portfolios over a one-year horizon in 2023. (All banks assessed the impact of a severe hurricane in the Northeast region on their residential and commercial real estate portfolios.)
  • The transition risk module focused on estimating the effect of specific scenarios on corporate and CRE loan portfolios over a 10-year horizon from 2023–32.

According to the Fed:

“The exercise highlighted data gaps and modeling challenges that arise when estimating the financial impact of highly complex and uncertain risks over various time horizons.” 

Specifically, the Fed found that participants:

  • Had significantly different approaches to the exercise due to different business models, views on risk, access to data, and prior participation in climate scenario analysis exercises in foreign jurisdictions;
  • Used existing credit models to estimate the impact of climate-related risks on credit risk parameters, with some banks suggesting that models could be enhanced to better capture climate transmission channels and associated impacts;
  • Faced data challenges, including gaps related to real estate exposures, insurance, obligors’ transition risk management, and infrastructure;
  • Noted the importance of understanding insurance market dynamics when modeling the impact of physical risk hazards on credit exposures; and
  • Worked with third-party vendors, with some noting that the lack of historical data and the proprietary nature of vendor models inhibited their ability to independently assess model performance.

When the Fed announced the pilot exercise in 2022, Republican lawmakers expressed concern that regulators might try to use climate analyses to direct banks toward or away from specific activities.

However, the report stated that:

“The pilot CSA exercise was exploratory in nature and does not have consequences for bank capital or supervisory implications. The Federal Reserve neither prohibits nor discourages financial institutions from providing banking services to customers of any specific class or type, as permitted by law or regulation. The decision regarding whether to make a loan or to open, close, or maintain an account rests with the financial institution, so long as the financial institution complies with applicable laws and regulations.”

Please contact Sairah Burki (sburki@crefc.org) with any questions. 

Contact 

Sairah Burki
Managing Director, Head of Regulatory
Affairs & Sustainability
703.201.4294
sburki@crefc.org
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.
Fed Summarizes Bank Pilot Climate Scenario Analysis Exercise
May 14, 2024
On May 9, the Federal Reserve (Fed) released a summary of the 2023 pilot climate scenario analysis it conducted with Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase; Morgan Stanley, and Wells Fargo.

News

Congressional Outlook 

May 14, 2024

With the election seasons heating up and must-pass items dwindling, Congress will focus on hearings, messaging bills, and legislation to set up for the post-election lame duck session and 2025. Here’s what’s on tap for this week related to financial services.

Oversight of Regulators. The House Financial Services and Senate Banking Committees will convene hearings this week focused on the oversight of financial regulators.

  • Witnesses will include Fed Vice Chair Michael Barr, FDIC Chair Martin Gruenberg, and OCC Comptroller Michael Hsu. Gruenberg has reportedly been setting up one-on-one meetings with HFSC and SBC Members as he prepares to testify in the wake of a third-party report on misconduct at his agency.

SEC Legislation. The House Financial Services Committee is expected to vote soon on Republican legislation that would fence in SEC regulations.

  • One of the bills, introduced by Rep. Barry Loudermilk (R-GA) would overrule an SEC requirement that securities exchanges provide investors’ personal data as part of CAT reporting except when it’s related to an investigation.
  • Another bill that is not yet finalized, led by Reps. Young Kim (R-CA) and Ann Wagner (R-MO), would direct the agency to perform cost-benefit analyses of its rules and review them every five years.

Banking Legislation. The HFSC also plans to vote next week on GOP legislation that would ease regulations on banks.

CFTC’s Johnson to Treasury Role. The White House is poised to nominate Kristin Johnson, a Democratic commissioner at the CFTC, to fill a top role at the U.S. Treasury Department overseeing banks. If confirmed, the role as assistant secretary for financial institutions would put Johnson in a senior policy position at Treasury.

Contact David McCarthy (dmccarthy@crefc.org) with questions.

Contact 

David McCarthy
Managing Director, Chief Lobbyist, 
Head of Legislative Affairs
202.448.0855
dmccarthy@crefc.org
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Congressional Outlook
May 14, 2024
With the election seasons heating up and must-pass items dwindling, Congress will focus on hearings, messaging bills, and legislation to set up for the post-election lame duck session and 2025.

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