The Federal Reserve’s recently released paper on central bank digital currencies confirmed that a CBDC would compete with banks for deposits, according to a members-only staff analysis published by ABA.

“The Fed recognizes that a CBDC will serve as an advantaged competitor to bank deposits, noting that a ‘CBDC would be the safest digital asset available to the general public, with no associated credit or liquidity risk,’” ABA noted. “Because a CBDC would be a liability of the Federal Reserve, any funds held in CBDC would not reside on bank balance sheets or be available as a source of funds for lending back into the economy. The Fed notes that, ‘this substitution effect could reduce the aggregate amount of deposits in the banking system, which could in turn increase bank funding expenses and reduce credit availability or raise credit costs for households and businesses.’”

While the paper claimed not to advance a particular outcome, the Fed demonstrated a clear preference for a “privacy-protected, intermediated, widely available and identity-verified” CBDC, the ABA analysis highlighted. Importantly, the Fed signaled that it does not intend to move forward with a CBDC without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law.” The paper also clarified that the Fed does not currently have the authority to offer direct Fed accounts to individuals.

ABA has previously weighed in on the risks associated with issuing a CBDC, warning that the issuance of a CBDC could compete with bank deposits and limit banks’ ability to power economic growth. ABA is currently reviewing the paper and will provide feedback to the Fed. To provide feedback for ABA’s comments or join the association’s digital asset working group, contact Rob Morgan. Read the staff analysis 

The Securities and Exchange Commission last Thursday reopened a comment period on a proposed rule requiring new disclosures concerning companies’ executive compensation. The rule—which was originally proposed in 2015 but never finalized—would require a reporting company’s proxy statement and other disclosures to include a table showing actual compensation paid to key executives; the company’s annual total shareholder return, as calculated under SEC Regulation S-K; and the annual total shareholder returns of a peer group of companies.

Under the proposed rule, the reporting company would be required to discuss the relationships among the disclosed compensation numbers, its total shareholder return and the comparable peer group information. The disclosures would be required for the past five fiscal years, or three years for smaller companies, which would also be exempt from the peer group comparison requirement. All reporting companies would be subject to the new disclosures, except foreign private issuers and certain specialized entities such as mutual funds. The disclosure requirements would apply to the “named executive officers” for whom compensation information is currently required.

As part of its request for comments, the SEC is also seeking feedback on additional requirements it is considering including: whether registrants should be required to disclose additional performance measures beyond shareholder return and whether pre-tax net income and net income would be useful financial measures, among other things. Comments will be due 30 days after publication in the Federal Register.

This proposal is separate from a joint proposal (not yet adopted) that was issued by six federal financial regulatory agencies in 2016 that would prohibit incentive-based compensation arrangements for executives that could encourage excessive risk-taking behavior, which also included a clawback provision. Read more. For more information, contact ABA’s Justin Underwood.

As Jelena McWilliams prepares to leave office tomorrow after an eventful three and a half years as FDIC chairman, she sat down with the ABA Banking Journal for a conversation on her tenure at the agency. While 2018 wasn’t that long ago, it feels worlds away—in terms of the time-is-a-flat-circle nature of the pandemic, but also in the landscape of bank innovation and racial justice.

In the final part of this two-part interview, McWilliams discusses several policy aspects of her tenure, including:

• Why she abstained from the FSOC vote to issue its report on climate change—and why financial regulators should factor the impact of climate risk supervision on employment into their frameworks.
• How climate risk supervision might affect the safety and soundness of community banks in energy-intensive regions.
• Why she chose not to finalize the OCC’s Community Reinvestment Act rule and why it’s important for regulators to work together on a consensus basis.
• Her hopes for the future of the FDIC’s new Mission-Driven Bank Fund, a project two years in the making to support minority depository institutions and community development financial institutions.
• How the FDIC’s small-dollar loan statement helps address financial inclusion challenges.

Listen to the podcast. Listen to part one.