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ABA Report: Farm Banks Well Positioned for 2015

March 26, 2015 Comments off

ABA Report: Farm Banks Well Positioned for 2015
Source: American Bankers Association

Farm banks significantly increased agricultural lending by 13.6 percent in 2014 and held $94.6 billion in farm loans at the end of the year, according to the American Bankers Association’s annual Farm Bank Performance Report.

Asset quality continued to improve at the nation’s 2,036 farm banks as non-performing loans declined to pre-recession levels. ABA defines farm banks as banks whose ratio of domestic farm loans to total domestic loans is greater than or equal to the industry average.

“The agricultural economy may be faced with headwinds in 2015, but farm banks are well positioned to continue serving the needs of farmers and ranchers across the country,” said Brittany Dengler, ABA senior research manager, economic policy and research. “Banks hold nearly half of all farm loans and will remain an important source of ag credit.”

See also: 10 Financial Tips for America’s Young and Beginning Farmers

Can Islamic Banking Increase Financial Inclusion?

March 23, 2015 Comments off

Can Islamic Banking Increase Financial Inclusion?
Source: International Monetary Fund

The paper analyses existing country-level information on the relationship between the development of Islamic banking and financial inclusion. In Muslim countries—members of the Organization for Islamic Cooperation (OIC)—various indicators of financial inclusion tend to be lower, and the share of excluded individuals citing religious reasons for not using bank accounts is noticeably greater than in other countries; Islamic banking would therefore seem to be an effective avenue for financial inclusion. We found, however, that although physical access to financial services has grown more rapidly in the OIC countries, the use of these services has not increased as quickly. Moreover, regression analyis shows evidence of a positive link to credit to households and to firms for financing investment, but this empirical link remains tentative and relatively weak. The paper explores reasons that this might be the case and suggests several recommendations to enhance the ability of Islamic banking to promote financial inclusion.

Complaints data show which credit cards pay refunds most, least often

March 20, 2015 Comments off

Complaints data show which cards pay refunds most, least often
Source: CreditCards.com

Synchrony Financial, the big store-card issuer behind Wal-Mart, Lowe’s and Amazon cards, among others, gets more complaints at the federal government’s complaint window than its peers.

But it also pays refunds more often when customers grumble, 2014 data show.

CreditCards.com looked at the nearly 14,000 complaints people made about credit cards last year to the U.S. Consumer Financial Protection Bureau — up 6 percent from 2013. Rather than look at what causes complaints, we examined how companies dealt with them — an insight that is unavailable from other sources.

Looking at 12 major card issuers, we found big differences in the way they handle beefs:

  • Per dollar of card balances, Synchrony, formerly GE Capital, was about twice as likely to get a complaint than average among 12 large card issuers. However, it also paid refunds most often, issuing “monetary relief” — refunds or waivers — to more than one-third of grouches. The dollar value of companies’ refunds wasn’t available.
  • American Express, a frequent leader in card satisfaction surveys, shined less brightly in the complaint data. About one in four of its customers was still unhappy after AmEx dealt with their gripe. That was the highest rate of disputed solutions among the group, although TD Bank, Chase and Bank of America had dispute rates almost as high.
  • People in some states are substantially more likely to get refunds than others. More than one-third of complainers in Wyoming and South Dakota got credits, double the rate in West Virginia and Mississippi (see state refund rate chart).

Are the Federal Reserve’s Stress Test Results Predictable?

March 13, 2015 Comments off

Are the Federal Reserve’s Stress Test Results Predictable? (PDF)
Source: U.S. Department of the Treasury, Office of Financial Research

Regulatory stress tests have become a key tool for setting bank capital levels. Publicly disclosed results for four rounds of stress tests suggest that as the stress testing process has evolved, its outcomes have become more predictable and therefore arguably less informative. In particular, projected stress losses in the 2013 and 2014 stress tests are nearly perfectly correlated for bank holding companies that participated in both rounds. We also compare projected losses across different scenarios used in the 2014 stress test and find surprisingly high correlations for outcomes grouped by bank or by loan category, which suggests an opportunity to get more information out of the stress tests through greater diversity in the scenarios used. We discuss potential implications of these patterns for the further development and application of stress testing.

Systemic Importance Indicators for 33 U.S. Bank Holding Companies: An Overview of Recent Data

March 4, 2015 Comments off

Systemic Importance Indicators for 33 U.S. Bank Holding Companies: An Overview of Recent Data (PDF)
Source: Office of Financial Research, U.S. Department of the Treasury

This brief analyzes new data about the nation’s most systemically important bank holding companies — financial institutions whose failure could pose the greatest threat to the international financial system.

The State and Fate of Community Banking

February 26, 2015 Comments off

The State and Fate of Community Banking
Source: Harvard Kennedy School, Mossavar-Rahmani Center for Business & Government

This working paper focuses on the plight of community banks in the United States. It begins by examining different definitions of what constitutes a community bank, and goes on to review what makes these institutions unique and distinguishes them from larger regional or national peers. Our assessment of Federal Deposit Insurance Corporation data finds that community banks service a disproportionately large amount of key segments of the U.S. commercial bank lending market – specifically, agricultural, residential mortgage, and small business loans. However, community banks’ share of U.S. banking assets and lending markets has fallen from over 40 percent in 1994 to around 20 percent today. Interestingly, we find that community banks emerged from the financial crisis with a market share 6 percent lower, but since the second quarter of 2010 – around the time of the passage of the Dodd-Frank Act – their share of U.S. commercial banking assets has declined at a rate almost double that between the second quarters of 2006 and 2010. Particularly troubling is community banks’ declining market share in several key lending markets, their decline in small business lending volume, and the disproportionate losses being realized by particularly small community banks. We review studies on the impact of regulation, consumer trends and other factors on community banks, and examine the consequences of consolidation on U.S. lending markets. We conclude with a discussion of policies that could promote a more competitive and robust banking sector.

Borrower Protection and the Supply of Credit: Evidence from Foreclosure Laws

February 17, 2015 Comments off

Borrower Protection and the Supply of Credit: Evidence from Foreclosure Laws
Source: International Monetary Fund

Laws governing the foreclosure process can have direct consequences on the costs of foreclosure and could therefore affect lending decisions. We exploit the heterogeneity in the judicial requirements across U.S. states to examine their impact on banks’ lending decisions in a sample of urban areas straddling state borders. A key feature of our study is the way it exploits an exogenous cutoff in loan eligibility to GSE guarantees which shift the burden of foreclosure costs onto the GSEs. We find that judicial requirements reduce the supply of credit only for jumbo loans that are ineligible for GSE guarantees. These laws do not affect, however, the relative demand of jumbo loans. Our findings, which also hold using novel nonbinary measures of judicial requirements, illustrate the consequences of foreclosure laws on the supply of mortgage credit. They also shed light on a significant indirect cross-subsidy by the GSEs to borrower-friendly states that has been overlooked thus far.

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