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Capital rules.

The Fed, led by Chair Jerome Powell, has pushed through a historic run of rate increases over the past year. Photo: Nathan Howard | Bloomberg News

Wall Street banks are facing one of the biggest regulatory overhauls since the financial crisis. The Fed’s Michael Barr proposed lowering the threshold for new capital requirements to $100 billion from $700 billion, and wants more standardization in risk assessments. The top regulator said financial firms must set aside more cash to act as a cushion to protect against losses. Barr was also one of three Fed officials calling for more tightening this year, saying “We still have a bit of work to do.”

‘The rules will make money-market funds more resilient, liquid and transparent,’ says SEC Chair Gary Gensler. Photo: Al Drago | Bloomberg News

SEC scraps contentious pricing proposal in final money market fund reforms

The US Securities and Exchange Commission on Wednesday finalized rules aimed at increasing the resilience of the $5.5 trillion money market fund industry, but scrapped a proposed new pricing model that had been strongly opposed by asset managers. The SEC's decision not to impose "swing pricing" represents a major victory for asset managers. (Reuters | Jul 12) see also SEC's money-fund reforms seen curbing potential funding risks (Bloomberg Markets | Jul 13)

Hedge fund Treasury trade that blew up attracts BOE concern

A leveraged trade in US Treasury futures that has regained popularity with hedge funds poses a risk to global financial stability, according to the Bank of England. Known as the basis trade, the strategy typically involves exploiting small price differences between cash bonds and futures, and is attracting scrutiny from US regulators. On Wednesday, the BOE added its voice, saying the risks associated with these trades have mostly not been tackled by regulators. (Bloomberg Economics | Jul 12)

Historic rate increases leave some on Wall Street wanting more

The Federal Reserve has raised interest rates at the fastest pace since the 1980s. Some on Wall Street think there’s still further to go. One popular Wall Street gauge suggests that financial conditions are doing less to cool the economy than they were earlier this year. Goldman economists argue that an economic index newly published by the Fed overestimates how much previous rate increases will start to pull down growth in the months ahead. (The Wall Street Journal | Jul 12) see also Five takeaways from US CPI report for June (Bloomberg Economics - Inflation & Prices | Jul 12)

Fed's QT ghosts haunt Powell bid to shrink balance sheet

Tucked away in hours of congressional testimony by Federal Reserve Chair Jerome Powell last month was an admission that the central bank was blindsided by the impact of shrinking its balance sheet four years ago. While Powell assured lawmakers the Fed is committed to avoiding a repeat of 2019 — when the repo market, a key part of US financial plumbing, seized up. (Bloomberg Markets | Jul 10)

Top US bank watchdog outlines tougher rules for larger lenders

A top US banking regulator has announced tougher capital rules for a broader range of lenders in a bid to shore up a financial system rattled by the failure of several regional banks earlier this year. Michael Barr, vice-chair for supervision at the Federal Reserve, on Monday unveiled regulatory changes for institutions with $100bn or more in assets, proposing harsher capital standards that will require banks to stow away additional capital that can be used to absorb any losses. (Financial Times | Jul 10)

Deutsche Bank. Photo: Jason Alden | Bloomberg

Banks suffer data breach in MOVEit hack

Deutsche Bank AG, Commerzbank AG, and ING Groep NV are among dozens of companies worldwide whose client data were compromised when a criminal hacking group exploited a security flaw in a file transfer tool. The software flaw has since been patched, the banks said. see also More fixes for MOVEit (CISA)

— Bloomberg Technology | Cybersecurity

White House fleshes out plan and timeline for new cyber rules

The US published its plan for implementing its National Cybersecurity Strategy. The 57-page plan, which was described as a “living document,” provides expected completion dates for initiatives outlined in March. The plan also specifies where federal agencies will take the lead, and where consultation with the private sector is expected. Final requirements for incident reporting are expected in late 2025.

— The Wall Street Journal

Encryption faces legal threats around the globe

Privacy advocates have a stacked agenda this summer as they fight legislative proposals in three key markets that threaten the security of encrypted messaging services. Policymakers in the US, the UK, and the European Union are considering children's online safety bills that aim to provide law enforcement with a backdoor into encrypted services like WhatsApp and Signal.

— Axios

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Generative artificial intelligence like OpenAI’s ChatGPT is already used across politics to write drafts of fundraising emails, speeches, and other work. Illustration: 731 | Getty Images

AI is making politics easier, cheaper, and a lot more dangerous

It’s a jarring political advertisement: Images of a Chinese attack on Taiwan lead into scenes of looted banks and armed soldiers enforcing martial law in San Francisco. A narrator insinuates that it’s all happening under President Joe Biden’s watch. Those visuals in the Republican National Committee’s ad aren’t real, and the scenarios are pretty obviously fictional. But thanks to the handiwork of artificial intelligence, the images look like real life.

— Bloomberg Politics

Sex, drugs, and spreadsheets: Dr. Glazer treats Wall Street's addiction surge

When titans of finance get addicted to drugs and alcohol, they sometimes end up on the couch of Dr. Sam Glazer, who treats the Wall Street set for substance abuse and other mental illnesses. Demand for services like his has ballooned since the pandemic. Most are traders, fund managers, investment bankers, and corporate lawyers. Almost all are men who are afraid to tell their employers about their ailments, much less ask for medical leaves.

— The Wall Street Journal

Getting locked out of your digital life is bad. Here's how to avoid it

Cybercrime isn't going away, and passwords are the main target for hackers. Using two-factor authentication is vital but not enough. A warning to those feeling secure with two-factor authentication: If you lose or break your phone, you could lose access to your authenticator app’s essential codes… and the online accounts they’re supposed to protect. 

— The Wall Street Journal