Fed to Consider Tougher Rules for Midsize Banks After SVB, Signature Failures; Inflation Cools but Still High

Fed to Consider Tougher Rules for Midsize Banks After SVB, Signature Failures; Inflation Cools but Still High By James Christie

Good day. The Federal Reserve is rethinking a number of its own rules related to midsize banks following the collapse of Silicon Valley Bank and Signature Bank, potentially extending restrictions that currently only apply to the biggest Wall Street firms. Meanwhile, U.S. inflation may have eased a bit, but Tuesday's consumer-price index release showed price pressures persisted in many corners of the economy. The February report underscored the urgency of the Fed's inflation fight, with several economists saying they thought it made officials more likely to raise rates next week by a quarter percentage point as long as the banking sector didn't appear to come under additional stress ahead of its rate decision.

Now on to today's news and analysis.

Top News Fed to Consider Tougher Rules for Midsize Banks After Failures

A raft of tougher capital and liquidity requirements are under review for midsize banks, as well as steps to beef up annual "stress tests" that assess banks' ability to weather a hypothetical recession, according to a person familiar with the latest thinking among U.S. regulators. The rules could target firms with between $100 billion to $250 billion in assets, which at present escape some of the toughest requirements.

Justice Department, SEC Investigating Silicon Valley Bank's Collapse

The Justice Department and the Securities and Exchange Commission are investigating the collapse of Silicon Valley Bank, according to people familiar with the matter, after the lender was taken over by regulators last week.

Biden's SVB Challenge: Prevent Financial Panic, Avoid Backlash Lawmakers Split on Tighter Rules After Silicon Valley Bank Failure Regional Bank Chaos Clouds Outlook for Markets Social-Media Postings Amplify Anxiety Over SVB Collapse Are Taxpayers on the Hook for SVB and Signature Bank Deposits? Real-Estate Investor Run on Signature Bank Helped Fuel Its Demise First Republic Rallies in Volatile Trading U.S. Inflation Cooled in February as Fed Confronts Bank Failures

Inflation eased in February but remained stubbornly high , presenting a challenge for the Federal Reserve as it confronts how to slow the economy with higher interest rates at the same time it moves to stem banking problems. The consumer-price index, a closely watched inflation gauge, rose 6% in February from a year earlier, down from a 6.4% gain the prior month, the Labor Department said. It was the smallest increase since September 2021. When excluding volatile food and energy costs, prices advanced a slightly slower 5.5%. Economists view so-called core prices as a better indicator of future inflation.

U.S. Economy February Retail Sales to Show if Consumers Pulled Back

A report on February retail sales, set to be released at at 8:30 a.m. ET, will show whether Americans pulled back on spending after a strong start to the year, aided by unseasonably warm weather and a strong labor market.

Americans Lost a Record $10.3 Billion to Online Scammers Last Year

Americans lost more than $10 billion to online scammers last year, the Federal Bureau of Investigation said, the highest level since it began tracking losses in 2000. The FBI also logged more than 800,000 complaints in 2022.

Key Developments Around the World China's Central Bank Keeps Key Policy Rates Unchanged

China's central bank kept its key policy rates unchanged , suggesting a hold on benchmark lending rates later this month. The People's Bank of China injected 481 billion yuan ($70 billion) worth of liquidity into the banking system.

China's Economy Rebounds, Spurred by Consumption

Sanctions on Russian Oil Are Crimping Moscow's Income, IEA Says

Russia's oil export revenues have roughly halved while its oil exports have remained largely unchanged, suggesting Western sanctions are taking effect and cutting Moscow's income without restricting global oil flows, the IEA said.

Weaker Western Oil Demand Seen Countering Chinese Appetite

OPEC left its forecasts for global oil-demand growth this year steady as growing optimism about Chinese demand for crude was countered by concerns about the economic picture in the U.S. and Europe.

U.K. Prime Minister Tries Free-Market Recipe to Fix Britain's Woes

Rishi Sunak is trying to do what none of his recent predecessors have pulled off: Move the U.K. beyond Brexit, shore up the country's rickety public services and sell the country as a profitable destination for business.

The Party Is Ending for French Retirees

The golden age of French pensions is coming to an end, one way or another, in an extreme example of the demographic stress afflicting the retirement systems of advanced economies throughout the world.

Saudi Crown Prince Test Drives Nonaligned Foreign Policy

Flush with cash from an oil boom, Saudi Crown Prince Mohammed bin Salman is making foreign-policy and business moves that test whether it is possible not to take sides in the rivalries between the U.S. and Russia and China.

Financial Regulation Roundup Tether Becomes Unlikely Crypto Winner in Banking Crisis

Traders are relying on tether more than ever now that Circle Internet Financial's USD Coin has broken from its peg and New York regulators have shut down new U.S. issuance of the world's third-largest stablecoin, Binance USD.

Credit Suisse Finds Material Weaknesses in Financial Reporting

Credit Suisse Group AG said it had found material weaknesses in its financial reporting over the past two years because of ineffective internal controls, the latest setback in its efforts to move past a series of costly blunders.

Watchdog Calls on FCC to Probe Questionable Stockholdings

A government-watchdog group called on U.S. ethics officials to investigate whether the FCC complied with financial-conflict rules when it permitted several top officials to own stocks in apparent violation of the agency's own rules.

Forward Guidance Wednesday (all times ET)

8:15 a.m.: Canada housing starts for February

8:30 a.m.: U.S. producer-price index for February; U.S. retail sales for February

10 a.m.: U.S. business inventories for January; NAHB/Wells Fargo Housing Market Index for March

Thursday

8:30 a.m.: U.S. housing starts for February; U.S. import and export price indexes for February; U.S. weekly jobless claims

9:15 a.m.: European Central Bank rate decision

9:45 a.m.: European Central Bank rate decision press conference

11:15 a.m.: ECB Podcast with Lagarde presenting latest monetary policy decisions

Research Fed Likely to Lift Rates Three More Times as Prices Remain Hot

The Federal Reserve remains likely to raise interest rates by 25 basis points at each of its next three meetings, with a terminal rate of 5.25%-5.5% to be reached in June, Bank of America economists write in a research note about February's consumer-price index data. "Services inflation remains inconsistent with the Fed's [2%] target, and while there is increased uncertainty due to the recent news in the banking sector, the Fed still needs to do more to cool off the economy and labor market," they write.

-Paulo Trevisani

U.K. Labor Market Data Cools Chances of BOE Rate Rise

The Bank of England can breathe a sigh of relief after U.K. labor-market data showed wage growth easing, Ashley Webb, U.K. economist at Capital Economics, writes in a note. The monthly rate of overall earnings growth eased in January, meaning the growth in average total pay including bonuses in the three months to January eased from 6.0% to 5.7%, Mr. Webb writes. With the collapse of U.S. lenders including Silicon Valley Bank over the weekend amid tightened financial conditions, the risks to Capital Economics' forecast that the BOE will raise interest rates next week from 4% to 4.25% are now shifting to the downside, he adds.

-Edward Frankl

Risk Management, Supervision Failures Appear to Have Sunk Banks

The failures of Silicon Valley Bank and Signature Bank appear to be rooted in a "failure of management and supervision," rather than regulatory shortcomings, a banking trade group said. The Washington, D.C.-based Bank Policy Institute said the banks had "idiosyncratic business models"and also failed to manage interest rate risk. Dealing with that risk is "more art than science" and not subject to prescribed regulatory formulas, BPI said in a statement . SVB was a member of the group.

-Richard Vanderford

Commentary Fed's Tightening Plans Collide With SVB Fallout

The collapses of Silicon Valley Bank and Signature Bank give Federal Reserve policy makers two good reasons to hold off on raising rates at their meeting next week, Justin Lahart writes.

A Eulogy for Silicon Valley Bank

The repercussions of the failure of Silicon Valley Bank are enormous, Ken Wilcox, a former SVB chief executive, writes in The Wall Street Journal . Mr. Wilcox writes that "even if the depositors are made whole, startups may die for want of credit. Thousands of employees may lose their jobs. Many may lose confidence in our banking sector and ultimately in our economy. It may even diminish America's technological pre-eminence and thus its position in the world."

Mr. Wilcox is a former CEO of Silicon Valley Bank and author of "Leading Through Culture."

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03-15-23 0715ET