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News Scan Dec 2013

Credit Card News, Economy News, Banking Industry News - Dec 2013
  • The Office of Financial Research's latest annual report highlights a number of improvements in its measurement of systemic risk but stops well short of providing a forward-looking assessment of emerging risks.
  • The Financial Stability Monitor prototype provides a current-year snapshot of the health of the financial sector along five key areas: macroeconomic; market; credit; funding and liquidity; and contagion risk.
  • The OFR takes a bold step to quantify these risks using state-of-the-art metrics and models.
  • The results for 2013 suggest overall risk to the financial sector has not changed much from 2012 and is what would be viewed as moderate risk on OFR's scale.
  • To the agency's credit, it acknowledges that the framework is not forward-looking and needs to better incorporate qualitative aspects of market sentiment and risk appetite than it does.
  • It is absolutely necessary that quantitative measures of systemic risks be developed and deployed in such assessments.
  • At the same time there tends to be an overreliance on methods that may not perform well before and during stress events due to data and analytical limitations.
  • For cybersecurity threats, for instance, the risk assessment largely is confined to isolated distributed denial of service attacks.
  • Moreover, REITs account for nearly one-quarter of all repurchase agreement and Fed Funds liabilities, compared to less than 10% in 2010.
  • Another area of concern on OFR's radar is interest rate risk, which appears poised to only get worse over the next 12 months.
  • Overall the OFR's Annual Report underscores major advancements in the detection and measurement of potential threats to the stability of the financial system.
  • Credit cards and signature debit cards are the payment methods most susceptible to fraud, with bogus transactions sharply higher than the fraud rate for PIN debit, ATMs, checks and electronic checks.
  • Among the fraud-prone cards, the risk was highest for online transactions, which had about triple the fraud rate of "card-present" sales at the cash register.
  • It counted 31.1 million estimated bogus transactions totaling $6.1 billion in 2012 across all noncash payments studied -- which include checks, electronic checks and ATM use as well as purchase cards.
  • For general purpose credit cards, there were 3.72 bogus uses per 10,000 "card-present" transactions. Online, the number of fraudulent uses swelled to 11.82 per 10,000 sales.
  • Transactions by PIN debit and ATM card -- assumed by the study to be all card-present transactions -- had the lowest fraud rates of all card transactions, with slightly less than one incidence per 10,000 transactions.
  • By dollar value, only $1 in $1,000 worth of credit card transactions was unauthorized, including attempted fraud that didn't result in losses.
  • The fastest-growing card payment over the three-year period was prepaid card . Looking at both general-purpose and private label cards, prepaid had 9.2 billion transactions in 2012, up from 5.9 billion in 2009.
  • Average credit lines continue to decline across all risk categories, monthly purchase volumes rebounded and cardholders are paying less interest as a percent of outstanding credit card credit.
  • Between the first quarter of 2008 and the second quarter of this year, the share of transactor has increased from 19.6 percent to 28.7 percent of all accounts.
  • The growth in transactors is a positive trend that suggests consumers are doing a better job of managing their credit cards.
  • While there is still much to be learned in the rewards space, the data indicates that a substantial majority of cardholders – across all risk categories – use rewards cards.
  • The report found that nearly 85 percent of super-prime credit card accounts, 75 percent of prime accounts and 57 percent of sub-prime accounts had a rewards program.
  • Clayton said.  “Since rewards cards are associated with higher spending, that’s a boon for both retailers and the broader economy.”

Current account deficit smallest in four years

Source: Reuters Category: Banking Industry News
  • The U.S. current account deficit was the smallest in four years in the third quarter as exports increased and more income was earned abroad.
  • The current account gap, which measures the flow of goods, services and investments into and out of the country, narrowed to $94.8 billion.
  • That was the smallest since the third quarter of 2009 and was an improvement from a revised shortfall of $96.6 billion in the second quarter.
  • The shortfall on the current account has shrunk from a peak of 6.2 percent of GDP in the fourth quarter of 2005, in part because of a significant increase in the volume of oil exports.
  • In the third quarter, exports of goods and services increased 0.6 percent to $765.1 billion, while imports rose 0.4 percent.
  • The surplus on income increased to $60.0 billion from $56.0 billion in the second quarter. Net unilateral transfers decreased to $34.1 billion from $34.5 billion.
  • Industrial production recorded its largest increase in a year in November as mining and utilities output rebounded strongly.
  • Industrial output increased 1.1 percent last month as auto production swung into higher gear.
  • Production at the nation's mines, factories and power plants had edged up 0.1 percent in October.
  • Manufacturing output, which accounts for three quarters of industrial production, rose 0.6 percent last month, increasing for a fourth straight month.
  • Industrial capacity utilization - a measure of how fully firms are using their resources - was 1.2 percentage points below its long-run average.
  • A new study by the U.S. Consumer Financial Protection Bureau supports the charge that financial companies use arbitration clauses to muzzle customers who think they were ripped off.
  • While tens of millions of consumers are covered by arbitration requirements, only about 300 a year actually filed arbitration claims against companies during the three-year period of 2010 through 2012.
  • Among the preliminary study's findings: 52 percent of balances at major credit card issuers were covered by mandatory arbitration clauses, compared to 31 percent at smaller banks -- and just 2.5 percent at credit unions.
  • Arbitration clauses are even harder to read than other parts of the credit card contract, by grade level of readability.
  • About nine of 10 arbitration clauses ban consumers from filing class arbitration as well as court filings.
  • The most frequent claims in arbitration other than debt collection involved credit reporting issues or interest rates and charges.
  • Almost no consumers filed arbitration for amounts under $1,000. The average amount involved in debt disputes was more than $13,000, while claims for other issues averaged more than $38,000.
  • The study noted that courts have increasingly supported arbitration clauses in recent years, and the requirements have become more common in consumer financial contracts.
  • The banking industry's reputation took a major hit in the wake of the financial crisis.
  • Customer satisfaction with retail banks climbed to 78 on a 100-point scale this year, up 1.3% from last year.
  • The increasing popularity of online banking has helped restore the industry's appeal.
  • Customers gave bank websites a rating of 85 "for their ability to provide satisfying experiences for those of us who like to do our banking online to manage accounts, pay bills, and check balances.
  • Online banking has also had a less obvious effect on customer satisfaction, according.
  • While customer satisfaction improved across the banking industry, regional and community banks made the biggest gains.
  • Smaller banks defined here as all banks except for the four largest received a score of 83, a 5% increase from 2012.
  • Free checking accounts, fewer fees and the "personal touch" of customer service all gave smaller banks an edge over the biggest companies.
  • The nation's four biggest banks also made strides in customer satisfaction, climbing 4% to a score of 73. JPMorgan Chase emerged at the top of the pack with a rating of 76, up 3% from a year ago.
  • Credit unions surpassed banks both large and small in customer satisfaction. Customers gave credit unions a score of 85 up 3.7% from the previous year.
  • Credit union membership has surged in recent years as customers seek out free checking accounts and lower interest rates on loans, according to the report.
  • U.S. states' tax revenue growth probably peaked earlier this year as preliminary figures for the second half of 2013 have softened significantly.
  • State tax revenues rose 9 percent in the second quarter from a year before, according to the latest State Revenue Report from the Nelson.
  • Early third-quarter figures from 47 states, however, suggested that revenue gains have slowed to 6.1 percent from a year earlier.
  • The public policy research arm of the State University of New York. Personal income tax collections grew by 5.3 percent and sales tax collections increased by 5.6 percent.
  • Gains in the first half of the year were led by Western states, with the Far West notching a second-quarter revenue gain of 14.9 percent, the report said. Much of that was attributed to California's increase of 21.2 percent.
  • Many consumers aren't aware their unpaid debts could haunt their survivors, according to a November 2013 survey.
  • They online survey (which polled 1,004 adults) found that nearly one-third of respondents hadn't given any thought to what would happen to their debts if they unexpectedly passed away.
  • When asked what they guessed would happen, 10 percent said credit card debts would be forgiven, and twice as many said student loan debt would be forgiven.
  • What actually happens is that the creditor will get what it can from the deceased's estate or, worse, come after a co-signer if there is one.
  • So how many co-signers could find them in this unfortunate position? Just under one-fourth of survey respondents said they had co-signed loans for others and most of those had co-signed for family.
  • U.S. private sector economic activity bounced back in November, lifted by expansion in the services sector.
  • Index - a weighted average of its manufacturing and services indexes - rose to 56.2 last month from 49.6 in October. The "flash" or preliminary reading came in slightly higher at 57.1.
  • Despite the rebound in private sector activity, the pace of growth in hiring for both the services sector and the total private sector slowed slightly in November.
  • At 52.4 for both services and the composite, it was the lowest reading since March.
  • The final PMI data on employment are weaker than the earlier flash estimate, and are running at a level consistent with private sector non-farm payroll growth of approximately 150,000.
  • Given recent cuts to government payrolls, total non-farm payroll growth could have weakened to 140,000.
  • The October index was 54.6, down from 55.8 in September. It was the monthly index's fifth straight decrease and its lowest mark since January.
  • The shutdown, which lasted 16 days in October, caused delays in processing U.S. Small Business Administration loans and verifying income for mortgage originations.
  • Consumer loan applications fell in October to a sub-index reading of 49.7, marking its first decline in consecutive months since the index began in June 2012.
  • Approvals for consumer loans also fell for the second straight month, to a 49.4 reading. A summer spike in long-term interest rates dampened refinancings.
  • Commercial lending continues to expand, though at a slower pace. The reading for applications was 53.4, while approvals came in at 52.8.
  • Pricing trends for commercial loans were less favorable for banks; October's 49.8 reading indicated that rates on new originations were lower than those from a month earlier.
  • Bankers are relying on increased commercial lending to counter downward pressure on yields and net interest margins. Still, some bankers stress that the most creditworthy prospects are not applying for loans.