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The Institutional Risk Analyst

© 2003-2024 | Whalen Global Advisors LLC  All Rights Reserved in All Media |  ISSN 2692-1812 

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Comments on Basel III Endgame

January 3, 2024 | In this issue of The Institutional Risk Analyst, we provide our comments on the Basel III Endgame ("B3E") proposal from the Fed and other prudential regulators. Suffice to say that the B3E proposal reads like a bad comic book for banks and the US economy.


“This proposal reflects a view of financial risks facing US banks that is decades out of date and ignores the public record regarding recent bank failures,” notes WGA Chairman Christopher Whalen. “Specifically, the current proposal continues the historical focus of Basel on credit risk and gives too little weight to market risk."  


We also discuss the Risk Based Capital rule proposed by Ginnie Mae and how this ill-considered initiative may combine with Basel III to hurt the housing sector and especially government-insured loans, servicing and MBS. Happy thought: If a Republican wins the White House in November, the Ginnie Mae RBC rule may never take effect.


Our letter concludes:


"While the proposed risk weights for 1-4 family loans in this proposal are clearly too high, the Board and other regulators need to take another look at the market risk weights for conventional and government MBS. These securities are all government insured to some degree against credit loss, yet the peculiar market attributes of MBS make these assets problematic for many banks. The market volatility that makes mortgage servicing assets (MSAs) appear risky makes MBS very dangerous as a matter of fact. This proposal largely ignores the very real risk from MBS and instead mistakenly demonizes whole loans and MSAs."


The full text of the comment letter and related charts may be downloaded using the link below. As always, please send your comments and questions to us at info@theinstitutionalriskanalyst.com or on X at @rcwhalen. We post replies to many reader questions on X.

 

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Little Christmas, January 6, 2024!



The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

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