STATE GOVERNMENT RELATIONS
Senate Bill 2 – Taxation of Pass Through Entities
Author: Sen. Scott Baldwin, R-Hamilton County
Latest action: The bill passed the House on third reading, 98-0, on Feb. 20. The bill was subsequently signed into law by the governor on Feb. 22.
Senate Bill 261 – Economic Development Districts
Author: Sen. Brian Buchanan, R-Boone, Clinton, Hendricks and Montgomery counties
Latest action: The bill was heard in the Senate Committee on Tax and Fiscal Policy on Feb. 21. It was held and no vote was taken.
Senate Bill 452 – Consumer Credit and Financial Institutions
Author: Sen. Eric Bassler, R-Daviess, Greene, Knox, Martin, Owen and Sullivan counties
Latest action: The bill passed the Senate on third reading, 49-0. The bill now awaits consideration by the House.
Senate Bill 242 – DNR Best Floodplain Mapping Data
Author: Sen. Jean Leising, R-Decatur, Fayette, Franklin, Jennings, Ripley, Rush and Shelby counties
Latest action: The bill passed the Senate on third reading, 40-5. The bill now awaits consideration by the House.
Senate Bill 5 – Consumer Data Protection
Author: Sen. Liz Brown, R-Allen County
Latest action: The bill passed the Senate on third reading, 49-0. The bill now awaits consideration by the House.
FEDERAL GOVERNMENT RELATIONS
FOMC Minutes: Most Members Favored a Lower Rate Increase
Nearly every member of the Federal Open Market Committee agreed to raise the federal funds rate by 25 basis points at the committee’s most recent meeting at the end of January, according to FOMC minutes released Tuesday. The increase was lower than the 50- and 75-point increases FOMC members had approved during several of their prior meetings. However, the minutes showed that committee members and staff still see inflation risk remaining elevated, with members anticipating that further rate hikes will be necessary before inflation returns to the Federal Reserve’s 2% target range.
During the meeting, several participants noted that recent economic indicators pointed to modest growth in spending and production, but that job gains have remained robust with low unemployment, according to the minutes. Some participants believed that recent economic data signaled a somewhat higher chance of continued subdued economic growth, although others said that the probability of the economy entering a recession in 2023 remained elevated.
Most FOMC members viewed a 25 basis-point increase as giving them room to better assess the economy’s progress toward reaching the committee’s goals, according to the minutes. A few favored a larger 50-point increase, saying it would more quickly bring the target range close to the levels they believed would achieve a sufficiently restrictive policy stance.
Republican Leaders Pen Letter in Opposition to SEC Climate Disclosures Proposal
Ranking Member of the Senate Banking Committee Tim Scott, R-S.C., House Financial Services Committee Chairman Patrick McHenry, R-N.C., and the Chairman of the Subcommittee on Oversight and Investigations, Bill Huizenga, R-Mich., wrote to Securities and Exchange Commission Chairman Gary Gensler requesting information related to the SEC proposed climate disclosure rule.
The Republican leaders challenged the agency’s statutory authority, and noted that if enacted, it would unnecessarily harm consumers, workers and the U.S. economy. The SEC “cannot simply create new interpretations of existing law to justify far-reaching policy changes that Congress never intended,” the letter reads in part. “Congress did not intend for the SEC to be an arbiter of business strategies, much less the determining body for climate policies.”
The SEC proposal would require registrants to include certain climate-related disclosures in their registration statements and periodic reports about governance of climate-related risks, relevant risk management processes, direct and indirect greenhouse gas emissions, and more.
Report on Cross-Border Settlements Could Influence CBDC Debate
The Bank for International Settlements (BIS) issued a report to help central banks extend operating hours for real-time gross settlement systems (RTGS) to reduce delays in cross-border payments settlement.
The report from BIS’s Committee on Payments and Market Infrastructures says extending and aligning RTGS operating hours could speed up cross-border payments, especially between jurisdictions with significant time zone differences. It could also improve liquidity management, reduce settlement risk, enhance performance, and facilitate cheaper and more transparent cross-border payments in line with G20 targets, the report says.
Slow and inefficient cross-border payments are frequently cited as a justification for a U.S. central bank digital currency and stablecoins, so the evolution of traditional RTGS systems could play a role in the potential development of CBDCs and other digital assets.
Regulators: Banks That Offer Crypto Deposits Must Mitigate Risks
Banking regulators Thursday issued a joint statement reminding financial institutions of their risk management obligations should they offer depository services for cryptoassets. In the statement, the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency indicated that banks are neither prohibited nor discouraged from providing banking services that are permitted by law or regulation. However, “certain sources of funding from cryptoasset-related entities may pose heightened liquidity risks to banking organizations due to the unpredictability of the scale and timing of deposit inflows and outflows,” they said.
The risks highlighted by the agencies include the potential volatility of deposits placed by a cryptoasset-related entity that are for the benefit of that entity’s customers. “Such deposits can be susceptible to large and rapid inflows as well as outflows, when end customers react to cryptoasset-sector-related market events, media reports and uncertainty,” they said. Deposits that constitute stablecoin-related reserves are another risk as they are “susceptible to large and rapid outflows stemming from, for example, unanticipated stablecoin redemptions or dislocations in cryptoasset markets.”
According to the agencies, effective practices to manage liquidity risks include:
- Understanding the drivers of the potential behavior of deposits from cryptoasset-related entities;
- Assessing potential concentration or interconnectedness across deposits from cryptoasset-related entities and the associated liquidity risks;
- Incorporating the liquidity risks or funding volatility associated with cryptoasset-related deposits into contingency funding planning; and
- Performing robust due diligence and ongoing monitoring of cryptoasset-related entities that establish deposit accounts.
“In addition, banking organizations are required to comply with applicable laws and regulations,” they said.