Cybersecurity Standards For Large Financial Institutions, Oil Prices At 1-Yr Highs
October 19, 2016
The Federal Deposit Insurance Corporation and Office of Comptroller of the Currency issued proposals for cybersecurity standards for banks; Housing starts fell for the second consecutive month in September; U.S. crude oil inventories fell by 5.2 million barrels, pushing prices to one-year highs after the sixth decline in seven weeks; The Kingdom of Saudi Arabia issues largest-ever debt issuance by an emerging market sovereign.
- The Federal Deposit Insurance Corporation and Office of Comptroller of the Currency issued proposals on Wednesday to implement enhanced cybersecurity standards for banks and other financial institutions holding at least $50bn in assets. The rules aim to cover how banks and other financial institutions create strategies to prevent cybersecurity, minimize and gauge their risk of being hacked, and respond to an attack. Regulators drew the $50bn-threshold from the Dodd-Frank financial reform law, which identifies institutions of that size as “sector critical” in the financial services industry. The guidelines include systems for securing virtual clearing or settlement of five-percent of the value of transactions in federal funds, foreign exchange, commercial paper, agency securities, and corporate debt. The measures could require covered firms to create internal cyber risk management departments and mandate that institutions measure risk of operating their existing technology amid present and future threats. [The Hill]
Economic Indicators & News
- Housing starts fell for the second consecutive month in September, though permits rose 6.3% from the prior month, as momentum in real estate demand remains robust. The pace of new residential construction declined 9.0% in September to an annualized rate of 1.047 million units, though the drop was led primarily due to lower starts for multifamily structures. Single-family starts rose 8.1% over the August level. Meanwhile, new permits were issued at a rate 8.5% above the year-ago level, which indicates that builders are responding to rising prices and steady buyer demand. Regionally, starts were the highest in the Northeast, followed by the West and South while they contracted in the Midwest. The market consensus was for 1.180 million starts last month. [Census]
- U.S. crude oil inventories fell by 5.2 million barrels in the week through October 14, according to the Energy Information Administration, pushing prices to one-year highs after the sixth decline in seven weeks. Brent crude futures were up 2.7% to $53.05 while West Texas Intermediate (WTI) gained 2.9% to $51.75 a barrel. Distillate stockpiles, which include diesel and heating oil, decreased by 1.2 million barrels, though gasoline stocks were up by 2.5 million barrels, versus consensus expectations for a 1.3 million-barrel drop. U.S. refinery utilization rates dropped to 85% last week to reach their lowest level since April 2013. Recent moderation in energy markets is indicative of market restraint as global producers attempt to rebalance forces of supply and demand to achieve price normalization. Consensus was for a 2.7 million-barrel build in crude oil inventories last week. [CNBC]
- The Kingdom of Saudi Arabia has accessed global bond markets for the first time, issuing $17.5bn over five years in the largest-ever debt issuance by an emerging market sovereign. Strong investor demand propelled the size of the issuance, which will be priced at 140bps over similar-maturity U.S. treasury bills and 40bps above a recent five-year issue by Qatar. The deal was vastly over-subscribed with orders for $67bn of the debt, which enabled the kingdom to increased the sum issued from the planned $10-15bn sale. Saudi officials completed a roadshow last week, citing the country’s young population, experienced government technocrats, and vision for an economic transformation that would increase non-oil revenue. U.S.-based Citigroup and J.P. Morgan Chase led the sale along with British bank HSBC. [FT]