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The financial crisis exposed a number of critical weaknesses across the largest banks and highlighted that many BHCs had a limited ability to effectively identify, measure, and control their risks, and to assess their capital needs. CCAR Review 2015, March 2015, Board of Governors, Federal Reserve Stress testing has been…

Low interest rates equals strong currency? The idea of borrowing on an uncovered basis in a low interest rate foreign currency has been around for many years. The Swiss franc in the 1980s, the Japanese yen in the 1990s and more recently, Hungarian consumers taking out mortgages denominated in euros.…

Comparing and Contrasting CCAR and DFAST The Federal Reserve System’s (the Fed) regulatory responsibilities include the oversight of bank holding companies (BHCs), savings and loan holding companies, state member banks, and systemically important nonbank financial institutions (SIFIs). The Fed has reacted to some of the negative outcomes associated with the…

The Federal Reserve Tools: Past and Present Pundits all seem to agree that, later this year, the Federal Reserve will finally raise rates. Some seem to think that will occur in June while others believe it will be September. Regardless of when it happens, now would be a good time…

We thought it might be helpful to update our municipal bond market view from last year with our “crystal ball” for 2014. First, we will examine the overall market for any changes and insights to the future. Next, we will review two issues that have essentially been resolved. Lastly, we…

Encountering a New Standard “That did not go too well” said Barry, my investment expert friend as we left the testing center. He was an extremely intelligent financial expert who would later become well-known for uncovering an infamous financial fraud. But on this day, he correctly anticipated that he had…

Two Sides of the Same Coin Let’s imagine you play a game of Roulette at a Casino. You stand at the table and see there are two blocks, one red and one black. You ask the dealer and she explains to you that this game pays out even odds, in…

GSE History Affordable housing has been a goal of the US Government since the Depression. Fannie Mae and Freddie Mac (the government-sponsored enterprises, or GSEs) were created to lower the cost of, and make financing more available for, Americans to purchase a home. The GSEs developed a secondary market for…

As part of the on-going Dodd-Frank Act rules and regulation implementation, section 619, more commonly known as the Volcker Rule (Rule), was finalized in December 2013 with a few tweaks during the first quarter of 2014.[i]The main undertow of the Rule is to prohibit, “[a] banking entity and nonbank financial…

What were the Reasons for the Subprime/Credit Crunch in 2008? There have been a plethora of reasons given by the media for what created the subprime/credit crunch crises. However, in speaking with people within the industry, as well as friends and family, it appears not everyone understands the various reasons…

Collateralized loan obligations (“CLOs”) are structured financial transactions where certain types of loans, usually highly leveraged syndicated commercial credits, are pooled together and transferred to a trust entity called a special purpose vehicle (“SPV”). The commercial credits are usually loans issued by financial institutions that are funding high-risk ventures such…

Detecting Early Warning Signs Appreciating that volatilities and uncertainties in our financial markets are accelerating, the ability to anticipate problems in individual issuers/borrowers is a highly valued skill. The effectiveness of how we can best spot the numerous red flags, and subsequently, how we interpret them, will be the determinate…