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Banks that make the most money, and the least, on credit card loans

January 30, 2015 Comments off

Banks that make the most money, and the least, on credit card loans
Source: CreditCards.com

The most lucrative card companies are ones you probably never heard of — but whose cards you just might carry.

Store-card issuers Comenity Bank and Synchrony Financial, formerly called GE Capital, reaped the most interest and fees from their cardholders among 12 major card issuers, an analysis by CreditCards.com found.

Banks that issue credit cards are enjoying high profits these days, buoyed by low defaults and cheap funding costs. But some card banks are better off than others, thanks to cardholders who shell out more interest and fees. Creditcards.com analyzed financial reports filed by 1,300 U.S. banks to see who made the most — and the least — from their card business in 2013.

The analysis found a wide spread in card income — with some big banks collecting three times as much from cardholders as their competitors. The industry generated an average yield of 12.4 cents on each dollar of card balances last year, before losses and other costs. Among the top dozen issuers, yields ranged from a high of 28.4 cents to a low of 8.4 cents per dollar of card loans.

January 2015 Quarterly Report to Congress on the Status of TARP

January 29, 2015 Comments off

January 2015 Quarterly Report to Congress on the Status of TARP (PDF)
Source: Special Inspector General for the Troubled Asset Relief Program

Long-lasting recovery from the financial crisis requires important efforts on many fronts, including investigating and preventing fraud, waste, and abuse related to the Government’s rescue efforts. Fraud prevention and law enforcement is at the heart of the Office of the Special Inspector General for the Troubled Asset Relief Program’s (‘SIGTARP”) audits, general oversight, and investigations. Uncovering and combating bailout-related crime is neither fast, nor easy, but it is necessary for justice, accountability, deterrence, and lasting recovery. SIGTARP has ramped up our law enforcement efforts to uncover and combat bailout-related crime. In the last two years:
• The number of defendants charged with a crime SIGTARP investigated nearly doubled to 222;
• We supported prosecutors at 6 trials including 5 criminal fraud schemes investigated by SIGTARP;
• The number of defendants convicted of a crime investigated by SIGTARP nearly doubled to 160;
• The number of defendants we investigated who were sentenced to prison increased 160% to 91;
• Prison sentences for crime investigated by SIGTARP are nearly double the national average for white collar crime, reflecting the complexity and seriousness of the criminal schemes; and
• SIGTARP investigations have already brought back $1.258 billion to the Government and $224 million to other victims, a nearly eightfold increase since 2012.

SIGTARP has much more to do in the fight against bailout-related crime – crime that is opportunistic in the most reprehensible way. We expect an escalation in results from SIGTARP investigations:
• 45 convicted defendants investigated by SIGTARP await sentencing by a court; and
• 61 defendants already charged with a crime investigated by SIGTARP await trial.

Phishing in Smooth Waters: The State of Banking Certificates in the US

January 26, 2015 Comments off

Phishing in Smooth Waters: The State of Banking Certificates in the US
Source: Social Science Research Network

A critical component of the solution to online masquerade attacks, in which criminals create false web pages to obtain financial information, is the hierarchy of public key certificates. Masquerade attacks include phishing, pharming, and man-in-the-middle attacks. Public key certificates ideally authenticate the website to the person, before the person authenticates to the website. Public key certificates are typically issued by certificate authorities (CAs).

Banks are the most common target of phishing attacks, so we implemented an empirical study of certificates for depository institutions insured by the Federal Depository Insurance Corporation (FDIC) and compared them to general purpose, non-banking certificates. Our study of websites of FDIC-insured banks found that the current configuration fails to support website authentication. The most common failure is an absence of certificates, meaning that a false certificate would be the only valid-named certificate for that institution. Certificates with incorrect names, incorrectly structured certificates, and shared certificates all plague online banking. The vast majority of banks, especially smaller banks, apparently lack the expertise, support, or incentive to implement certificates correctly.

We document the current state of bank certificates. We compare these with general-purpose certificates (e.g., the top one million websites). We survey the various proposals for the certificate market writ large, including pinning and notaries. We identify how those fit and fail to fit the unique problem of banking certificates. We close with policy and technical recommendations to alter the use of certificates so that these can be a valid basis for consumer trust.

Shedding Light on Shadow Banking

January 20, 2015 Comments off

Shedding Light on Shadow Banking
Source: International Monetary Fund

In this paper, we develop an alternative approach to estimate the size of the shadow banking system, using official data reported to the IMF complemented by other data sources. We base our alternative approach on the expansion of the noncore liabilities concept developed in recent literature to encompass all noncore liabilities of both bank and nonbank financial institutions. As opposed to existing measures of shadow banking, our newly developed measures capture nontraditional funding raised by traditional banks. We apply the new approach to 26 jurisdictions and analyze the results over a twelve-year span. We find that noncore liabilities are procyclical and display more volatility than core liabilities for most jurisdictions in the sample. We also compare our measures to existing measures, such as the measure developed by the Financial Stability Board. Our approach can be replicated over time using internationally-comparable data and thus may serve as an operational tool for IMF surveillance and policy analysis.

CRS — The Effectiveness of the Community Reinvestment Act (January 7, 2015)

January 16, 2015 Comments off

The Effectiveness of the Community Reinvestment Act (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

The Community Reinvestment Act (CRA; P.L. 95-128, 12 U.S.C. §§ 2901-2908) addresses how banking institutions meet credit needs in low- and moderate-income (LMI) neighborhoods. The federal banking regulatory agencies—the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC)—currently implement the CRA. The regulators conduct examinations to evaluate how banks are fulfilling the objectives of the CRA and issue performance ratings. Having a satisfactory or better CRA rating is desirable when banks request to merge with other banking institutions.

Congressional concerns regarding the CRA stem from various perceptions of its effectiveness. Some contend that the CRA creates incentives for banks to make loans to unqualified borrowers likely to have repayment problems, which can translate into losses for lenders. Others are concerned that the CRA is not generating sufficient incentives to increase credit availability to qualified LMI borrowers, which may impede economic recovery for some following the 2007- 2009 recession.

ICBA Data Breach Toolkit

January 5, 2015 Comments off

ICBA Data Breach Toolkit
Source: Independent Community Bankers of America

Who Should Use This Toolkit:
Front-Line Marketing, Communications and Product Contacts at Issuing Financial Institutions

Purpose:
Protect cardholder trust in payments by providing a practical guide to managing communications after a data compromise at a third party.

Description:
To more effectively combat a public relations crisis with a breach of card security, ICBA and Visa have teamed up to bring a special communications toolkit to community banks. This comprehensive communications guide gives community banks the means of communicating with card customers and the media within 24 hours of a data compromise. Having this contingency plan in place can make all the difference in a data breach episode.

Toolkit Includes:
A brochure on communications best practices following a data breach, as well as customizable template materials like cardholder letters, statement inserts, FAQs, and media statements. Click on the documents below to download each PDF.

New From the GAO

December 19, 2014 Comments off

New GAO Reports
Source: Government Accountability Office

1. Fair Labor Standards Act: Extending Protections to Home Care Workers. GAO-15-12, December 17.
http://www.gao.gov/products/GAO-15-12
Highlights – http://www.gao.gov/assets/670/667603.pdf

2. Federal Emergency Management Agency: Opportunities Exist to Strengthen Oversight of Administrative Costs for Major Disasters. GAO-15-65, December 17.
http://www.gao.gov/products/GAO-15-65
Highlights – http://www.gao.gov/assets/670/667607.pdf

3. Department of Homeland Security: Continued Action Needed to Strengthen Management of Administratively Uncontrollable Overtime. GAO-15-95, December 17.
http://www.gao.gov/products/GAO-15-95
Highlights – http://www.gao.gov/assets/670/667618.pdf

4. Tax-Exempt Organizations: Better Compliance Indicators and Data, and More Collaboration with State Regulators Would Strengthen Oversight of Charitable Organizations. GAO-15-164, December 17.
http://www.gao.gov/products/GAO-15-164
Highlights – http://www.gao.gov/assets/670/667596.pdf

5.   State and Local Governments’ Fiscal Outlook: 2014 Update. GAO-15-224SP, December 17.
http://www.gao.gov/products/GAO-15-224SP
Podcast: http://www.gao.gov/multimedia/podcasts/667597

6.   Dodd-Frank Regulations: Regulators’ Analytical and Coordination Efforts. GAO-15-81, December 18.
http://www.gao.gov/products/GAO-15-81
Highlights – http://www.gao.gov/assets/670/667634.pdf

7.   Electronic Submissions in Federal Procurement: Implementation by the Army Corps of Engineers and Department of the Interior’s Bureau of Reclamation. GAO-15-253R, December 18.
http://www.gao.gov/products/GAO-15-253R

8.   Federal Food Safety Oversight: Additional Actions Needed to Improve Planning and Collaboration. GAO-15-180, December 18.
http://www.gao.gov/products/GAO-15-180
Highlights –  http://www.gao.gov/assets/670/667657.pdf

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