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News Scan Nov 2012

Credit Card News, Economy News, Banking Industry News - Nov 2012
Nov 2012

More Banks Farm Out Broker-Dealer Ops

Source: Americanbanker Category: Banking Industry News
  • Community banks are no longer the only financial firms looking to outsource broker-dealer services, as more midsize banks are considering vendors.
  • Midsize banks are vetting such services for different reasons than those of small banks, which have been intent on mining for revenue.
  • For bigger banks, the rationale centers on cutting operations and compliance costs.
  • Zions Bancorp and Regions Financial recently announced partnerships with PrimeVest Financial Services to expand their wealth management and insurance operations.
  • Like Regions, a growing number of midsize banks are seeking out vendors to obtain the scale in information technology and compliance to support hiring more advisors.
  • That could mean more competition, particularly for the community banks that are already outsourcing those functions.
  • Banks with existing programs are looking at "how to mitigate the risk and are engaging third-party providers as opposed to carrying that in a Camels rating.
  • Outsourcing trend has long been en vogue among community banks, many of which found it impossible to develop fee-generating businesses in-house.
  • While heightened regulation on investment services is increasing a reliance on outsourcing, leaders at community banks say they are concerned that such a shift will lead regulators to focus even more on the ins and outs of vendor relationships.
  • Regulators have been cautioning banks about third-party relationships.
Nov 2012
  • Consumer confidence rose to a four-and-a-half-year high in November as consumers became more optimistic about the outlook for the economy.
  • Index of consumer attitudes rose to 73.7 up from an upwardly revised 73.1 the month before; its highest since February 2008. October was originally reported as 72.2.
  • Over the past few months, consumers have grown increasingly more upbeat about the current and expected state of the job market, and this turnaround in sentiment is helping to boost confidence.
  • The expectations index rose to 85.1 from 84.0, while the present situation index edged slightly lower to 56.6 from 56.7.
  • Consumers' labor market assessment was little changed in November. The "jobs hard to get" index was flat at 38.8 percent, while the "jobs plentiful" rose to 11.2 percent from 10.4 percent.
Nov 2012

The IRS Gives Mortgage Technology a Boost

Source: Americanbanker Category: Banking Industry News
  • On January 7, 2013, the IRS will begin accepting electronically-signed 4506-T and 4506-EZ documents, or the income verification forms that are part of the processing of almost every mortgage and loan modification.
  • This will be a real boon for lenders and for consumers; this has been a real bottleneck.
  • IRS forms 4506-EZ and 4506-T are requests for transcripts of tax returns, and are used to vet a borrower's ability to pay off a loan, as well as to protect from fraud.
  • The transcripts verify the income information that has already been submitted to the lender. The forms cover any type of loan, but are normally used for mortgages.
  • Through its Income Verification Express Service (IVES) the IRS charges $2 per transcript, and lenders often hire third-party vendors to handle the IVES income verification process.
  • The new IRS rule won't necessarily lead to the development of new technology, but will allow existing electronic signature technology to be used to execute income verification, and open the door to broader use of electronic signatures to transmit documents between borrowers and lenders, which can speed processing since the parties don't have to be in the same location to sign documents.
  • Mortgage lenders and technology companies had lobbied the IRS to allow electronic signatures for income verification, since the inability to do so have caused some lenders to avoid using electronic signatures for any mortgage documents.
Nov 2012
  • Visa announced a new solution in its information products line up to help issuers reduce the risk of eCommerce fraud using real-time, risk-based transaction analysis.
  • Visa Consumer Authentication Service authenticates the consumer prior to the authorization process, adding a powerful layer of protection against fraud.
  • As the consumer begins the online checkout process, the solution performs a real-time risk assessment of the transaction based on numerous inputs including device and transaction information and historical spending patterns.
  • The result is that issuers can complete lower-risk eCommerce transactions without requiring consumers to go through the extra step of entering their passwords or other verification.
  • The solution minimizes disruption and abandonment at the point of purchase, while also helping issuers and merchants reduce fraud losses.
  • The Visa Consumer Authentication Service supports Verified by Visa and is available in all Visa Inc. markets immediately.
Nov 2012
  • Retail sales fell in October for the first time in three months as superstorm Sandy slammed the brakes on automobile purchases, suggesting spending lost momentum early in the fourth quarter.
  • Retail sales dipped 0.3 percent after a 1.3 percent increase in September. Part of the drop in sales was payback after two straight months of solid gains. It could also be a sign of hesitation among consumers facing the prospect of higher taxes next year. Even excluding autos, retail sales were flat last month.
  • Car makers blamed Sandy, the monster storm that lashed the densely populated East Coast and caused up to $50 billion in damage, for the abrupt pullback in sales last month.
  • Motor vehicle sales declined 1.5 percent, the largest fall since August last year, after increasing 1.7 percent in September. Excluding autos, retail sales were unchanged last month after advancing 1.2 percent in September.
Nov 2012

2012 gift card survey

Source: Creditcards Category: Debit Card News
  • As America's gift card market continues to grow to the tune of $9 billion from 2011 to 2012 issuers continue to innovate and adapt to consumer demand.
  • This year, the 2012 survey of 63 gift cards revealed that in order to keep customers shopping, more than half of the cards surveyed allow you reload the card with more money, and more than half also offer an electronic or digital gift card option.
  • And, as in previous years, the open-loop cards (those issued by banks or credit card companies that can be redeemed anywhere) continue to have higher purchasing fees than closed-loop cards (those cards that can only be used to buy products or services from the issuing retailer).
Nov 2012
  • This "Black Friday," the traditional prime holiday shopping day, nearly half of rewards card holders are not planning to hit stores or online retailers according to the latest Capital One Rewards Barometer.
  • However, that doesn't necessarily mean holiday shopping budgets are down as more than half of rewards card holders' (58 percent) budgets remain the same as last year and 14 percent are planning to spend more this year.
  • Credit card rewards can help supplement these holiday budgets, yet only 18 percent are taking advantage of redeeming rewards for gifts.
  • Women with 23 percent reporting that they now use rewards to offset essential expenses like gas and groceries. Further, this holiday season, more women plan on spending less than the prior year in comparison to men (24 percent vs. 18 percent).
  • Interestingly, nearly 80 percent of respondents haven't even tried to redeem for holiday travel this year, with many saying that they thought it was too much of a hassle (28 percent) or they didn't have enough time to plan (29 percent).
Nov 2012

Pension Cuts Loom at More Small Banks

Source: Americanbanker Category: Banking Industry News
  • For bankers who are turning over every stone possible to cut costs, here's another idea: shut down your old-fashioned pension plans.
  • Large banks like Bank of America and SunTrust Banks have frozen pensions, halting the accrual of additional benefits for the employees who participate in the plans. A community bank followed suit last month, when $2 billion-asset Rockville Financial of Connecticut froze its pension.
  • The number of companies that still offer pensions continues to fall nationwide as employers look to cut costs. Instead, companies are leaning on defined-contribution plans.
  • Pensions have "been declining steadily for years. The main problem with traditional defined benefit pensions is that "the company is responsible for pension benefits that may be 40 to 50 years in the future.
  • That situation leaves the company exposed to risks outside its control, such as the performance of the stock and bond markets. By shifting to a 401(k) plan, the risks "will be borne by the employee" instead of the company.
  • Other community banks that have frozen pensions in the past two years include $1.1 billion-asset Eastern Virginia Bankshares and $8.4 billion-asset National Penn Bancshares.
Nov 2012
  • U.S. consumer credit expanded at a solid pace in September in a hopeful sign for household spending, although Americans appeared to use their credit cards more sparingly. Consumer credit grew $11.36 billion in September.
  • So far this year, overall consumer credit has expanded in eight of nine months.
  • The cooler growth in overall consumer credit reflected a contraction in revolving credit, which mostly measures credit-card use. That category dropped $2.90 billion in September.
  • Growth in revolving credit has been choppier than overall consumer lending. The decline in September marked the third drop in four months for revolving credit.
  • Credit data can be tricky to interpret because cutting back on debt is not always a sign of pessimism.
  • People might be relying less on credit card debt to buy things because they are earning more money.
Nov 2012

U.S. Likely to Miss Basel III Deadline

Source: Americanbanker Category: Banking Industry News
  • Regulators are expected to miss a global deadline to finalize Basel III capital and liquidity requirements by yearend.
  • Already well into the fourth quarter and facing more than a thousand comment letters from financial institutions.
  • The banking agencies simply don't have enough time to sort through a host of issues raised about their June proposal, observers said.
  • Regulators have yet to even answer some of the most basic questions for the industry.
  • All three banking regulators – the Federal Reserve Board, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency – have done extensive outreach with the industry to educate them about the proposal, including conference calls and meetings.
  • Observers said their approach may indicate early optimism that they could make relatively few changes in an attempt to finalize the rule on time.
  • Even with so many extra issues now in play, the January deadline set by global regulators was probably always unrealistic, especially given the other rules agencies had to complete under the Dodd-Frank Act.
Nov 2012
  • Community banks are geared up to spend more on technology next year, according to a study conducted in September.
  • In the survey of 105 bank executives at institutions with $5 billion or less in assets, 60 percent said they would increase capital spending over the next year with information technology (50 percent).
  • New products or services (34 percent), and acquisition of a business (23 percent) the top areas of investment.
  • Mobile banking and payments (26 percent) and cloud technology (23 percent) were identified as the most important IT-related projects for community banks in the next year.
  • Fifty-one percent of community banking leaders said they were slightly concerned or not concerned at all that their bank may be vulnerable to a cyberattacks, while 14 percent were extremely concerned and 33 percent were moderately concerned.
  • Among non-IT concerns, almost half the community bankers (47 percent) said regulatory and legislative pressures are the most significant barrier to growth over the next year.
  • And 35 percent said regulatory compliance costs were having the greatest negative impact on financial performance.
Nov 2012
  • The pace of growth in the U.S. services sector slowed modestly in October, though a measure of employment improved to its highest in seven months, underscoring expectations the economic recovery will remain modest.
  • The Institute for Supply Management, services index eased to 54.2 last month from 55.1 in September.
  • The forward-looking new orders gauge fell to 54.8 from 57.7, but the measure of employment rose to its highest since March at 54.9 from 51.1.
  • The vast services sector has fared better than its manufacturing counterpart, which contracted during the summer. Still, this was the first time since June that the rate of growth in services firms has cooled.
  • While manufacturing has begun to grow again, the services sector is expected to remain stronger as it feels less of an impact from weaker exports.
  • Taken together, the two reports point to an economy that is growing at around a 2 percent pace.
Nov 2012
  • The U.S. unemployment rate probably rose in October as employers stepped up hiring only slightly, underscoring President Barack Obama's vulnerability in next week's presidential election.
  • Employers likely added 125,000 jobs to their payrolls last month. That would be up from 114,000 in September, but would fall short of what is needed to quickly cut the jobless rate.
  • U.S. manufacturers are seen shedding 4,000 jobs in October, which would be the third straight monthly decline.
  • With the overall pace of job growth still subdued, average hourly earnings are expected to rise a tepid 0.2 percent. The average workweek is seen holding steady at 34.5 hours.
  • October's projected payroll additions, if sustained, might be just enough to slowly bring down the unemployment rate.