C NEWS
C.1 230319 Silicon Valley Bank
Tooze
One of the underlying frailties of the global banking system right now, are the unrealized losses on bonds incurred by banks as a result of central banks hiking interest rates to combat inflation. As interest rates have gone up, bond prices have gone down. This is bad news, if billions in depositor-withdrawals force you to sell the bonds thus “realizing” the loss. But, if you are not in dire straights, if you are not selling off your portfolio in fire sales, where do you run if the financial world seems to be falling apart (again)? The safe place to run to is … yup … government bonds. They are safe. The market is liquid. Plus, they are cheap right now!
So, a crisis that was triggered in part by bond prices going down, led investors to run into bonds and drive prices back up. A panglossian friend of the markets might say that this is the self-equilibrating invisible hand at work. This is not how it felt last week.
C.2 211118 OCC Nominee fight
The Prospect
“She does not see banks as the clients of the OCC.”
After several months, President Biden has finally chosen a nominee to head the Office of the Comptroller of the Currency (OCC), a key financial regulatory post. It’s Saule Omarova, a Cornell professor and critic of financial overreach.
Omarova immediately faced a flood of criticism from the banking industry, described as “radical” and “Biden’s most polarizing pick for a top financial regulatory job.”
Thus far, Omarova has been primarily condemned for musing in an academic paper last year about how individual bank accounts at the Federal Reserve could replace private deposits. The U.S. Chamber of Commerce on Tuesday announced their “strong opposition” to Omarova for precisely this reason.
THE CHOICE OF OMAROVA breaks sharply with precedent for the traditionally bank-friendly office. Established by Abraham Lincoln as a branch of the Treasury in 1863, the OCC is the main regulator for federally chartered banks, overseeing roughly two-thirds of total assets in the U.S. banking system. The agency is self-financed through the inspection fees it charges the banks it oversees, a funding mechanism critics of deregulation have identified as a conflict of interest.
The history of the OCC over the past half-century gives those critics abundant evidence that the agency operates as a bank advocate masquerading as a prudent regulator.
The Prospect (2021) Wall Street’s Attacks on Biden Nominee Are a Red Herring
C.3 210421 GFANZ: Low Carbon Banking
Banks and financial institutions with more than $70tn assets have pledged to cut their greenhouse gas emissions and ensure their investment portfolios align with the science on the climate.
In the initiative, chaired by Mark Carney, the former governor of the Bank of England, 160 companies, including 43 banks from 23 countries, will set targets to cut the carbon content of their assets by 2030, in line with an overall goal of net zero emissions by 2050.
The forum, the Glasgow Financial Alliance for Net Zero, aims to encourage the financial sector to divert investment towards low-carbon infrastructure and technologies, and to discourage high-carbon investments, ahead of Cop26, the vital UN climate talks to be hosted by the UK in Glasgow this November.
Janet Yellen, the US Treasury secretary, and John Kerry, the US special presidential envoy for climate, are backing the alliance.
GFANZ [will be] the gold standard for net zero commitments in the financial sector. The alliance would not allow banks to “greenwash” their commitments.
However, since the signing of the Paris agreement in 2015 banks have poured at least $3.8tn into fossil fuel financing.
The financial system is fuelling environmental breakdown on a catastrophic scale, and what we really need is for central banks to play their roles as regulators and take concrete action to prevent all of the firms they oversee from making investments that are incompatible with governments’ climate targets.
Banks signing up to GFANZ would be required to show “credible plans” for reducing their investment in high-carbon assets, but would not face a deadline for exiting fossil fuel investment. Advertisement
Officials said there would be no blanket requirements for companies to stop financing coal, for instance, and banks would be allowed to make their own judgments on the carbon content of their portfolios, on a case by case basis.
C.4 210406 Biodiversity and Financial Stability
NGFS and INSPIRE launch a joint research project on ‘Biodiversity and Financial Stability’
A growing number of central banks and supervisors have recognised the need to extend their focus from climate change to the challenges of addressing the implications of broader nature-related risks and the conservation of nature and biodiversity. Doing this will involve understanding the impact of finance on the provision of key ecosystem services as well as the consequences of biodiversity loss for financial stability.
Companies are highly dependent on the services that ecosystems provide, but may at the same time have a harmful impact on the environment. The financial risks that stem from a loss in biodiversity are a serious threat to the financial sector that urgently require better understanding by policy makers and regulators to which the new NGFS/INSPIRE Study Group will provide an important contribution.