Finance

The Federal Housing Finance Agency's report on the system at 100 years old signals major shifts in both policy and structure are on the horizon.

In her first remarks since the release of a sweeping report on the banks, Federal Housing Finance Agency Director Sandra Thompson urges them to strengthen underwriting and communication with their members' regulators.

The Federal Reserve's vice chair for supervision noted that so-called basis trades by hedge funds are highly leveraged and use minimal haircuts. He added that much of this activity is concentrated among just a few funds.

Share prices climbed sharply amid increased optimism about the outlook for interest rates. Regional banks that got hammered earlier this year were among the biggest winners.

The 10 largest U.S. banks based on most assets had combined total earnings of more than $40 billion in the third quarter of 2023.

But high costs and any downturn in the economy could weigh on lenders and their commercial borrowers in coming months, economists caution.

In its biannual report on supervision and regulation, the Federal Reserve Board noted an uptick in governance issues with large banks. Regional and community banks, meanwhile, were plagued by IT problems and risk management struggles.

Federal Housing Finance Agency Director Sandra Thompson is pushing for a quick launch of pilot programs at the 11 Federal Home Loan banks to help underserved communities after its report this week prescribed major reforms to the system.

Changes being considered by the Federal Housing Finance Agency would make liquidity more expensive and complicated to obtain. But first, those reforms will have to overcome the political power of a wide range of financial institutions that benefit from the status quo.

Officials are looking into the banking giant's anti-money laundering measures with clients outside the U.S.