KBRA Analytics Releases The Bank Treasury Newsletter, the Bank Treasury Chart Deck, and Bank Talk: The After-Show

KBRA Analytics releases this month’s edition of The Bank Treasury Newsletter, the Bank Treasury Chart Deck, and Bank Talk: The After-Show.

This month’s newsletter examines the effects of rate volatility on the new LIBOR-alternative benchmarks, including term SOFR, Ameribor, and the Bloomberg Short-Term Bank Yield (BSBY) index. Their respective rates increased over the first few weeks since Russia’s invasion of Ukraine and in anticipation of the Fed’s first rate hike, but by different amounts. Bank treasurers and other market participants pay little attention to the subtle differences in these benchmarks that explain why the 1-month BSBY rate increased more than the Ameribor rate, or why the rate on a 1-month constant maturity T-bill increased less than a 1-month term Secured Overnight Financing Rate (SOFR), even though they are both risk-free rates. The newsletter contends that the recent volatility in the front end of the yield curve is a good argument for why bank treasurers should pay attention to these differences.

The article also discusses how bank treasurers are still inclined to maintain asset sensitivity on their balance sheets, seeking to preserve their options to invest later for longer, when the interest rate and economic landscape comes into clearer view. For now, they are continuing to invest excess deposits in short-term securities, or they are depositing them at the Fed. This helps them avoid too much volatility in accumulated other comprehensive income, without having to instead lock up more bonds in held-to-maturity accounts. Finally, the newsletter compares the converging growth rates between loans and deposits, and examines how the widening gap between deposits and loans appears to have stabilized at a record $7 trillion.

The Bank Treasury Chart Deck looks at some of the data from the Central Bank of the Russian Federation to analyze its so-called “fortress balance sheet.” It also incorporates data from the U.S. Bureau of Economic Analysis to offer a rough estimate of the disentanglement in trade relations involved in severing economic and financial relations Russia as a consequence of its invading Ukraine. The deck, using data from the Bank for International Settlements, covers the volume of oil imports and the use of SWIFT by Russian banks for international payment between financial institutions. The piece later examines the distribution of the liability side of the Fed’s balance sheet as it stood on the eve of its first rate hike since December 2018. This includes slides analyzing bank reserves, the reverse repo facility, and currency in circulation.

In this month’s edition of Bank Talk: The After-Show, Van and Ethan review the state of the bank regulatory landscape and how the trajectory for U.S. bank supervision remains uncertain. Ethan covers a broad list of topics that are in bureaucratic limbo, from fintech bank charters, cryptocurrency, and a central bank digital currency that the Fed would issue in lieu of paper currency, to capital relief for the largest banks, sitting with half of the $3.8 trillion in reserves that the rules require them to capitalize. They also discuss many other regulations that are long overdue to be updated that require senior direction. But as Ethan points out, many of the senior positions at the bank regulators and other financial regulators remain officially unfilled. Many candidates have either not been nominated or are nominated but not yet confirmed. Others have been nominated, but rejected by the Senate, or have withdrawn their candidacy with no new candidate yet nominated.

Click below to view the reports:

• The Bank Treasury Newsletter Chart Deck: March 2022
• Bank Talk: The After-Show: March 2022
• The Bank Treasury Newsletter: March 2022

About KBRA Analytics

KBRA Analytics, LLC (KBRA Analytics) is our premier product platform for high quality data and advanced analytics. Our seasoned teams of industry specialists across each product provide unparalleled insight creating a foundation of deeper analysis and rapid discovery for users. KBRA Analytics is an affiliate of Kroll Bond Rating Agency, LLC (KBRA). KBRA is a full-service credit rating agency registered in the U.S., designated to provide structured finance ratings in Canada, and with credit rating affiliates registered in the EU and UK.

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