CHARLOTTE, N.C. and DENVER — Bank of America N.A. and First Data Corp. announced today the formation of a new company that will deliver next-generation payments solutions to merchants ranging from small business to commercial and corporate clients worldwide.

Banc of America Merchant Services, LLC will provide clients with the most comprehensive suite of innovative payments solutions including credit, debit and prepaid cards to merchant loyalty, check and eCommerce payments, the companies said.

Thomas Bell, chief strategy officer and president of First Data's financial services business, was named chief executive officer of Banc of America Merchant Services.

"The combination of First Data's world-class technology and industry experience with the power of Bank of America's brand and branch referral channel will enhance Banc of America Merchant Services' position as an efficient and innovative player in the payments market," Bell said.

Merchant clients also will benefit from new service offerings including loyalty and prepaid programs, along with mobile commerce and check solutions that will drive return traffic to their stores and provide their consumers with the security, convenience and rewards they have come to expect.

"For our clients, the most important transaction they have occurs the moment their customer pays them for what they do. This alliance provides stronger payments acceptance capabilities as well as enhanced business-reporting tools and a better experience for their customers," said Catherine P. Bessant, president of Bank of America's Global Product Solutions group. "The formation of this new company underscores our full commitment to the merchant services business."

For merchants seeking to expand their offerings in the fast-growing virtual marketplace, Banc of America Merchant Services will offer the scalability, integrated capabilities and deep understanding of the transactional process to deliver industry leading eCommerce solutions.

"The First Data, Bank of America alliance will create a payments company with more than 70 years of combined merchant experience," said Michael Capellas, chairman and CEO of First Data. "Together, we will help clients keep pace with the dynamic virtual marketplace by delivering secure, scalable and reliable payment processing and the broadest set of innovative payments solutions at highly competitive prices."

Bank of America will contribute approximately 240,000 merchant relationships and First Data will contribute approximately 140,000 merchant relationships to the new company. Following a transition period, First Data will provide the merchant processing and related services. The combined entity will process over one billion transactions per month.

Banc of America Merchant Services will be approximately 46.5 percent owned by Bank of America and 48.5 percent by First Data, with the remaining stake held by Rockmount Investments, LLC, an investment vehicle controlled by a third party investor.

Financial impacts from the transaction will be discussed when Bank of America releases second-quarter earnings on July 17. First Data will discuss financial impacts of the alliance on their next quarterly results call in August.

Bank of America Merrill Lynch acted as financial advisor and Wachtell, Lipton, Rosen & Katz acted as legal advisor to Bank of America. Sutherland Asbill & Brennan and Perkins Coie acted as legal advisors to First Data.

AMERICAN BANKER - Big Banks Refuse to Yield on Their Deposit Pricing

It seemed like a perfectly good contrarian theory.

Driven by a demand for deposits, and bolstered by funding from the Troubled Asset Relief Program, the 19 largest banking companies in the country would break with tradition and pay higher-than-average interest on certificates of deposit and money market accounts.

But then Market Rates Insight, a research firm in San Anselmo, Calif., ran the numbers and found it wasn't true. Score one for the big guys' perceived stability over smaller competitors' higher rates, experts say.

According to the firm's report, the national average rate for a one-year CD was 1.2% for the top 19 banks, compared with an average rate of 1.62% for 1,300 other banks, during the Jan. 16-May 26 period. For money market accounts up to $100,000, the top 19 banks' national average was 0.53%, compared with 0.78% for the other banks.

"There was a notion that those 19 banks can afford to offer higher rates because they received Tarp money, but it was not supported by our analysis," said Dan Geller, executive vice president at Market Rates Insight. "Possibly customers are willing to trade a little bit on rate for some type of assurance that the top 19 banks are in the category of 'too big to fail.'"

For the rest of the country's banks, competing against perceptions about security among that "too big too fail" category may prove challenging, Geller said. However, there are opportunities for smaller banks to compete by touting the local angle, and of course, on price to attract rate-sensitive customers.

"But the question then becomes, how much annual percentage yield variance does it take to sway a customer to overcome this perception that one bank is more stable than another — is it 10, 25 or 50 basis points?" Geller said.

Steve Turner, a managing director at Novantas in New York, said that some may have initially thought the top banks receiving Tarp money were overly stressed and needed to offer higher rates to attract more customers, but media reports throughout the winter and spring proved that strong banking companies like JPMorgan Chase & Co. and State Street Corp. were forced to take the capital and were not that stressed at all.

Though the top 19 banks were stress-tested, the government's results were published in May, and likely did not affect the rates charged by these banks during MRI's study, consultants said.

Big banks might also have been able to offer lower rates on their deposit products because their advertising budgets are larger, and they can flood the market with more ads in newspapers, radio and TV that capture the attention of more people, Geller said.

Not all deposit pricing consultants were surprised that the largest banks continued to offer lower-than-average rates, despite the fact that they received the most substantial capital from the government.

"Banks don't pay a higher rate because they can afford it; it would be because they would have to, because they didn't have any other source of funding," said Aaron Fine, a partner in the retail and business banking practice at Oliver Wyman Group, a New York management consulting unit of Marsh & McLennan Cos.

Larger banks typically can draw in more low-cost deposits in checking accounts, from both retail customers and commercial customers, than smaller banks can, Fine said.

Consequently, many smaller banks have to pay up for deposits to be able to fund their loans.

However, that may not be a problem for many smaller banks, because they can charge more for loans, said Tom Brogan, a research director at TowerGroup Inc., an independent research firm owned by MasterCard Inc.

"Larger banks, particularly those focused on commercial lending, have smaller margins because large commercial borrowers normally can negotiate lower rates, versus smaller banks with smaller business customers," Brogan said. "Therefore, larger banks try to fund their loans with less pricey deposits to maintain their spreads, whereas many smaller banks can afford to pay higher deposit rates."

Not all smaller banks pay up for deposits, said Bert Ely, a banking consultant in Alexandria, Va. Those who remain profitable and aren't hurting for funds want to keep deposit costs down as much as possible, so margins won't be squeezed further.

Novantas' Turner agreed, adding that these banks typically prefer to offer "relationship" products such as checking and savings accounts and online bill pay to create stickier customers.

"They are focusing on building long-term ties to those customers, so when we get through this stressed environment, people will stay with them and expand their business," Turner said.

AMERICAN BANKER - FDIC Role, Succession Mysteries of Citi Shuffle

The latest management upheaval at Citigroup Inc. surely was intended to mark the beginning of the end of an extremely uncertain period, and in some ways it did that.

For those seeking the executive team that could put the company on the road to recovery, Citi beefed up talent Thursday, particularly when it comes to running the U.S. banking business. It promoted Edward "Ned" Kelly 3rd to vice chairman and hired industry veteran Eugene M. McQuade to run the commercial bank.

But the moves also sparked conflicting speculation about their roles, particularly Kelly's, and complicated the succession picture, analysts said. And given reports of Federal Deposit Insurance Corp. pressure to shake up management, many outsiders could not help but wonder whether the shuffle was good business or something to please the government.

"Hopefully this is more than volatility," said Marshall Front, the chairman of Front Barnett Associates Inc., a Chicago investment firm that owns Citi shares. "Hopefully they are getting their act together and putting together a viable team. They still have a lot of work to do."

Turnover has become familiar at Citi, where 60% of the $2 trillion-asset company's top executives from 2006 are no longer there. Controller and chief accounting officer James Gerspach, by succeeding Kelly as chief financial officer, becomes the fifth executive to hold that post in the past five years.

A Citi spokesman said he would not discuss specific reasons for the changes and that company executives would not be available to comment. Citi said in a press release that Kelly, 56, would "work closely" with CEO Vikram Pandit "to drive the execution of Citi's strategic and operational priorities," which primarily comprise the unwinding of noncore assets and efforts to improve core operating businesses grouped into a unit known as Citicorp.

Kelly, a lawyer turned investment banker and a former CEO of Mercantile Bankshares in Baltimore, joined Citi in February 2008 and became its CFO just four months ago when the widely admired Gary Crittenden was made chairman of Citi Holdings, a repository for noncore assets the company is seeking to sell or wind down.

Citigroup said Thursday that Crittenden had left and would move to Utah for family reasons. Huntsman Gay Global Capital LLC, a California private-equity firm, later said he would become a managing director in its Salt Lake City office.

Stuart Plesser, an analyst at the Standard & Poor's equity research division, said the extent of the government's hand in the changes was unclear.

It is possible that Citi or regulators decided Kelly's talents should be used more broadly, he said. "Are they thinking he's more useful outside of the trenches?" he said in an interview. "I don't understand that really, but it's obviously a very complex and tough job, and maybe they're thinking his vision is put to better use outside of that."

Front, the investor, said he did not see the changes as a positive for Kelly, who is seen by outsiders as a logical successor to Pandit if bigger changes come. Front said it seemed as though Kelly had reverted to a role he had held before becoming CFO — and "suddenly he has a competitor with a lot of experience," in McQuade.

Frank Barkocy, the director of research at Mendon Capital Advisors, disagreed. "I don't see it as a diminished role" for Kelly, he said. "I think the strategic area … takes on greater importance as we move forward with this company."

Citi's ranks have swelled this year with former top bank executives.

McQuade, 60, was the president and chief operating officer of FleetBoston Financial Corp. when it was sold to Bank of America Corp. in 2004.

After a stint at Freddie Mac, where he was considered the heir apparent for the CEO post, he joined Merrill Lynch & Co. in February 2008 only to leave after the investment bank was sold to B of A.

This year Citi added the former U.S. Bancorp chief executive Jerry Grundhofer and former Bank of Hawaii Corp. CEO Michael O'Neill to its board.

Jason Goldberg, an analyst at Barclays PLC's Barclays Capital, wrote in a note to clients that the recent additions "bring significant experience" to the company. McQuade, in particular, "has an extensive banking background, something regulators have said Citi's management has lacked."

The FDIC has reportedly been keen on Citi's making changes, and weeks ago reports surfaced that Sheila Bair, the agency's chairman, was concerned about top executives' level of commercial banking experience.

"They've been in the penalty box because they really couldn't take on additional businesses," Front said. "Hopefully, over time, McQuade will help strengthen and unify the Citibank business and participate in some other decisions on divestitures and allocations of capital."

Plesser said that Citi must continue to focus on shrinking rather than growing, duties that appear to have been handed over to Kelly. "They've got to start to sell [their bad assets] and move them off the balance sheet," he said. "They can't sit there forever."

AMERICAN BANKER - In Rush for New Agency, Key Details Up in the Air

WASHINGTON — Practical questions about how the Obama administration's proposed consumer financial protection agency would work are largely being ignored as lawmakers rush to pass a bill and the banking industry refuses to engage on the issue.

The House Financial Services Committee has scheduled back-to-back hearings, briefings and votes on regulatory reform for virtually every weekday the rest of the month, and it appears determined to pass the consumer protection legislation before Congress' August recess.

But several crucial issues about how the agency would function have yet to be detailed or even discussed, including how it would ensure that all entities offering financial products would be regulated, resolve conflicts between itself and banking regulators, define the "standard" products that must be offered and guarantee litigation risk does not choke off access to credit.

Even some prominent Democrats are wondering whether the debate is moving too quickly.

"You are coming up with wonderful questions that really there are no answers to," said Rep. Paul Kanjorski, the No. 2 Democrat on the committee, in an interview last week. "People have got to realize that all of these issues are just too important to put deadlines on them and that if we do that we are apt to exacerbate the likelihood of the same problems. These are huge and intertwined relationships. … So I'm for going, 'Whoa, slow down a little bit.' "

Many co-sponsors of the legislation, which panel Chairman Barney Frank introduced based on a draft by the Treasury Department, still appear to be trying to figure out exactly how the new agency would work.

At the same time, the banking industry has largely abandoned any attempt to confront operational problems posed by the new agency, instead focusing on a probably futile effort to stop the bill altogether. Lobbyists privately said they do not want to offer constructive feedback on the bill because doing so could ease its passage.

Hanging in the balance is an agency that appears to be a centerpiece of the Obama administration's efforts to reform the financial system's regulation and prevent a recurrence of the current crisis.

What is clear is that, at least in the House, little time will be available to work out operational details. Frank has set an ambitious series of deadlines for the bill, including a vote on the legislation by the end of July. The Senate may give itself more time. Though Senate Banking Committee Chairman Chris Dodd has set a Tuesday hearing on the consumer protection agency, he has yet to introduce a bill and has said he will wait until the House acts.

Frank offered a few details last week on his legislation but made it clear some issues are still being worked out.

LINK TO ARTICLE: http://www.ccg-catalyst.com/424/in-rush-for-new-agency,-key-details-up-in-the-air.html

AMERICAN BANKER - Infographic: Opposing Forces

Growth in deposits is outpacing lending in quarterly data

AMERICAN BANKER - Lawmakers' Raking in the Fee Income

Among bank holding companies, Citigroup Inc. remains the industry leader in generating insurance revenue, but rivals Wells Fargo & Co. and Bank of America Corp. are closing the gap.

According to data compiled by Michael White Associates of Radnor, Pa., and the American Bankers Insurance Association, Citi earned $3.2 billion in insurance-related income in 2008, down 9 percent from a year earlier but still significantly more than any of its competitors. Wells held on to the No. 2 position in the top 50 rankings, reporting insurance income of $1.83 billion, up nearly 20 percent from a year earlier, thanks in large part to its acquisition of Wachovia Corp.

The biggest mover in the latest rankings was BofA. Though it only jumped two notches, from No. 5 to No. 3, its insurance income nearly tripled from a year earlier, to $1.82 billion. BofA beefed up its insurance operations when it bought Countrywide Financial and absorbed the mortgage giant's Balboa Insurance Group, said Michael White, who consults banks on insurance issues.

Citi, Wells and BofA were among seven holdovers from the prior year's top 10. The others were BB&T Corp., HSBC North America Holdings Inc., JPMorgan Chase & Co., and Regions Financial Corp.

The three newcomers to the top 10 were BancorpSouth Inc., SunTrust Banks Inc., and Huntington Bancshares Inc.

The rankings are based on data reported to the Federal Reserve Board by bank holding companies with at least $500 million of consolidated assets. They do not include MetLife because the insurance giant "does not engage in significant banking activities," according to White.

While community and regional bank holding companies made significant strides in generating insurance brokerage income, the bank brokerage market is still dominated by large institutions.

According to data compiled by Michael White Associates and Prudential Financial Inc., 10 institutions accounted for 93.7 percent of the banking industry's insurance income in 2008. However, while that group saw a 4.2 percent decline in brokerage income from the prior year, to $11.07 billion, institutions with less than $10 billion of assets reported a 6.3 percent increase, to nearly $731 million. Within that group, institutions with $1 billion to $10 billion of assets performed best, achieving 8.4 percent growth in brokerage income, according to White.

At Wells, brokerage income increased 25.4 percent year-over-year and accounted for nearly 10 percent of its total noninterest income. Citi's brokerage income fell by more than 40 percent, while BofA's increased 36 percent, to $432 million.

Sixty-five of the top 100 bank holding companies in insurance brokerage income reported income gains in 2008, White said.

Among the top 10 (other than Citi, whose figures were skewed by its hefty annual loss) BancorpSouth generated the most brokerage income as a total of fee income.

The $87 million it earned from brokerage fees totaled 30.4 percent of its overall fee income in 2008. Other bank holding companies in the top 25 with a double-digit ratio of brokerage income to fee income were: BB&T, Eastern Bank Corp., Associated Banc-Corp, Old National Bancorp, Cullen/Frost Bankers Inc., Trustmark Corp. and Johnson Financial Group Inc.

Overall, bank holding companies' total insurance income, which includes fees from brokerage and underwriting activities, increased 7.2 percent year-over-year, to almost $10.9 billion. Nearly 67 percent of 880 bank holding companies earned at least some insurance-related revenue in 2008. Including MetLife, total insurance income fell 2.6 percent year-over-year, to $42.5 billion.

AMERICAN BANKER - Merchants Pull Consumers Into Interchange Tug-of-War

A sustained tide of consumer anger about all types of bank fees is adding momentum to the long-running merchant campaign against interchange.

Merchants have been trying for several years to make the fees they pay for accepting credit and debit cards a consumer issue. In print ads, posters at gas pumps and signs at checkout counters, they equated interchange with late fees and other charges paid by cardholders.

Now, an effort to collect customer signatures at 7-Eleven Inc. stores has taken consumer involvement in this business-to-business dispute to a new level. The petition, which 7-Eleven said has already garnered roughly 1 million signatures, channels consumer resentment over credit card late fees, rising interest rates, credit line cutbacks, and other types of bank fees, like overdraft protection fees.

Merchants "smell a lot of blood in the water with the way people feel about credit card companies … and they're going to use it for their own purposes," said Davia Temin, the chief executive of the marketing firm Temin & Co.

Gerri Detweiler, a credit adviser at the lead generator Credit.com Inc., agreed that "the time is probably right now more than ever" for a campaign like 7-Eleven's. "A lot of people are just fed up with credit card companies in general and they're willing to sign anything" that purports to "get back their money," she said.

Retailer trade groups like the Merchants Payments Coalition contend that interchange fees drive up costs for all consumers, even those paying with cash, because merchants must raise their prices to compensate. That argument has reached lawmakers, who are currently debating a handful of bills that would regulate interchange. It also has some support from consumer groups.

Ed Mierzwinski, the consumer program director for the U.S. Public Interest Research Group, said interchange is a consumer issue "in some respects: everybody pays more at the store and more at the pump, including people who pay with cash." His group has not formally endorsed any of the bills currently in Congress, but "generally we agree with the merchants' position … that interchange is an abuse of the antitrust laws."

The payments networks call the merchants' argument misleading. "The ongoing interchange debate is a business dispute between retailers and financial institutions," a spokesman for Visa Inc. said. "Consumers are unwittingly signing petitions that would effectively hurt them in the end. The reality is that a group of large retailers are leading a campaign to shift their cost of doing business directly onto consumers' shoulders." Consumers would face higher annual fees and reduced benefits were interchange payments to be reduced, the payments networks say.

(Concern for the cardholder aside, significant sums are at stake for both sides: the Merchants Payments Coalition claims that its members — about 100 national, international and state organizations, collectively representing about 2.7 million stores — paid $48 billion in interchange fees last year, while according to Cards&Payments' 2009 Bankcard Profitability Study, the networks' issuing banks get almost 19% of their annual card revenues from such fees.)

The credit card reform legislation that President Obama signed in May puts restrictions on what issuers can charge consumers, but not on what banks or processors can charge merchants. A proposed amendment would have made it easier for merchants to offer discounts to those who pay with cash. But it was reduced to a study on interchange in the final law.

Legislation introduced last month in both chambers of Congress would let merchants strike collective-bargaining agreements with banks when setting interchange rates. A few weeks later 7-Eleven started its petition to "Stop Unfair Credit Card Fees." (CardLine, a SourceMedia Inc. publication, reported the campaign Monday.)

Temin said such petitions will likely get policymakers' attention, because "they have to listen. Lawmakers are responsive to the public. Whether this will win the day, I don't know. Whether people actually know what they're signing, I don't know. But they will certainly affect the debate."

She and others said the networks have been losing the public relations battle.

"You've got to applaud the merchant lobby for being far more aggressive in framing the issue," said Eric Grover, a former Visa executive and the principal of the consulting firm Intrepid Ventures.

He suggested that the networks, through their issuing partners, could inform consumers about their position on interchange through fliers or messages printed on cardholders' monthly statements. "You're sending out tens of millions of statements every month, you've got a fixed cost there, you routinely put fliers in there to promote products … you've got a direct channel of communication with consumers" and can make the case that cardholder fees could increase, or their rewards could decrease, if interchange were regulated, Grover said.

But Temin cautioned that, in the current environment of hostility toward bank fees, such a strategy could backfire. Direct marketing to cardholders could "whip up" consumers even more and move the interchange debate from "bubbling on the edge of people's perception to right in the middle of it," she said.

AMERICAN BANKER - Small Business Finds Other Remote Deposit Capture Providers

Virtually all large and mid-tier banks offer remote deposit capture to corporate customers, but the industry has been slow to offer these services to the small business segment, leaving an opening for competitors such as scanner manufacturers and independent sales firms.

"Banks are not giving out the sales and marketing effort," says Bob Meara, senior analyst at Celent.

One factor holding back banks is the complex logistics of RDC, which can discourage banks from aggressively selling the product to small businesses. Institutions are required to install and maintain scanning equipment onsite, and decide whether they should charge for the equipment or provide it for free. Between the equipment, maintenance and transaction fees, the industry is still struggling to settle upon a widely accepted revenue model. As such, many banks only provide RDC to a limited number of key customers to avoid losing those customers, rather than deploying the service as a means to expand customer base or geographic footprint, two of the potential benefits most often cited by suppliers when the technology was first developed.

"The average bank isn't very aggressive about signing up more RDC customers," says David Foss, president of ProfitStars, a division of Jack Henry that provides RDC software. While banks are the gateway to about 70 percent of the 27,000 merchants Jack Henry currently supports with RDC, Foss says that within three years the majority of customers will come through the ISO channel.

The hesitation is opening the door for non-bank players, particularly those with a long history of selling office hardware to small businesses. Epson, a provider of printers, terminals and kiosk products, began developing its RDC strategy about 18 months ago with the introduction of a line of check scanners. In quick succession, it got a number of RDC software providers, including Goldleaf, Metavante, NetDeposit and Wausau Financial, to certify the scanner.

Epson is targeting up to 100 of the largest ISOs nationally to sell its RDC solution, says Tom Kettell, strategic business manager, emerging markets, at Epson America Inc. "We believe it's the only way we're really going to penetrate the small business market because a lot of financial institutions are not geared up for it."

Postal meter specialist Pitney Bowes also sees an opportunity in RDC. It announced in May it would partner with Jack Henry to provide an RDC solution that includes installing and supporting the hardware. Providing maintenance for customer hardware is a core competency of Pitney Bowes, and removes the burden of the task form banks.

Rather than circumvent banks, Pitney will target banks with mutual small business customers and sell the product via partnerships. This partnership approach is atypical to the usual ISO tactic of selling directly to a merchant, a strategy that requires software providers like Jack Henry to find a sponsor bank. Having banks already on board would be attractive perk for the software firm. "We'd rather not be in the middle of doing underwriting and finding a sponsor bank," Foss says.

Another participant, the film company Kodak, is tapping its scanning and imaging expertise to also enter the RDC market. Last October it initiated a formal effort to reach out to small business customers through a turnkey RDC service offered in conjunction with CFC Technology Corp. In this model, potential customers choose which bank to work with from a list of participating institutions (Kodak and CFC officials did not say how many banks are on the list.) "This is a direct marketing effort to the small business community," says George Santos, business development manager, document imaging at Kodak. He added, "This is an opportunity for us to refer business to the banks."

An additional approach could come from the banks themselves. Chicago-based American Chartered Bank, a $3 billion asset institution with about 550 small business RDC customers, is looking into offering an RDC service that would work with the scanners that small companies and consumers already own. "If you could use existing hardware, you could provide a very low-cost solution," says Bill McGuckin, second vp, treasury management, adding could eventually lead to offering the product for free.

Regardless of the strategy, there would appear to be a large marketplace for RDC - Celent estimates that only about one-third of the small business market is currently using the technology. But those looks can be deceiving, since prices will eventually go down as more players enter the market. "It will be a whole new ballgame," says Celent's Meara, who suggests ISOs may be squeezed as intermediaries when prices fall.

AMERICAN BANKER - The Dollars and Sense of Going Mobile

Banks that latched onto mobile banking a few years ago were more interested in first-mover advantage than profitability.

But the squeeze on IT budgets, along with the growing popularity of banking services on smart phones, is shifting bankers' attitudes. Bankers needing to replace shrinking revenue don't have forever to wait for mobile banking's benefits to materialize — and with the rapid maturation of services and offerings, feel they don't have to. Now, when talking to their service providers about mobile banking, the conversation begins and ends with return on investment.

A year or so ago, "you may have been having a strategic conversation with a financial institution," says Calvin Grimes, a product manager for Fiserv's Mobile Money solution. "Now that discussion will change to something more tactical."

Vendors still tout the advantages for early adopters. Mobile-based payments are expected to take off within the next few years as more and more phones are outfitted with contactless chips, and banks that have a base of mobile customers in place would be best positioned to profit from the payments evolution. There's also the coolness factor; banks that offer mobile banking are more likely to win over Gen-Y customers.

But providers like Fiserv are starting to come to the table with metrics showing that banks of all sizes can realize substantial early gains in mobile deployment. At a recent mobile-commerce conference, Fiserv touted that a mid-tier bank can earn $1 million annual profit within three years primarily by migrating customers from branches and call centers — and that doesn't include mobile transactional services.

Drew Sievers, co-founder and CEO of mFoundry, also says banks are getting tangible returns. Besides reducing call center volume from habitual "balance checkers," mFoundry has counted "5 to 10 percent" of the average bank's mobile user base as new customers. "It's also proving to be quite sticky, and particularly true for folks who set up bill payments on the mobile phone," says Sievers, whose client roster includes Citibank, BB&T, PNC Financial Services Group, and Zions Bancorporation.

Whether vendor claims resonate with banks remains an open question, given the low rate of adoption so far. According to a survey this year by research firm Aite Group, only about 600 U.S. banks are expected to offer mobile banking by year's end. Marc DeCastro, research manager for consumer banking and credit practice at Financial Insights, says many bankers are skeptical about a quick return on investment and are instead basing decisions on whether they will fall behind the competition if they don't offer mobile banking.

The rapid adoption of smart phones is also changing bankers' mindset about return on investment. Bankers are asking providers to showcase the impact that mobile services will have on other delivery channels, such as branch and call centers, as these mobile services move into the mainstream.

Grimes acknowledge that he is encountering skepticism among bank clients. "Obviously, financial institutions are challenging any ROI statements out there," says Grimes. "But we at least start to take this position to the market around how things need to work and what your target should be."

Fiserv, in a mobile-commerce study with platform partner Mobile Commerce (M-Com), calculated that a mid-tier bank with 250,000 customers would see escalating profits of $165,000 to $2.4 million through the fifth year of a mobile services deployment — amounting to an annualized $1.3 million ROI.

The savings in that model come through a 51-percent cost reduction in migrating consumers from higher-cost channels; 29 percent improvement in customer retention; and a 20 percent drop in costs for process automation (such as using text alerts for customer notifications). "Institutions can tap into mobile's potential to help them achieve the organization's broader strategic goals around cost reduction, right-channeling, and deposit gathering," the report states.

Fiserv says its numbers came from third-party research on customer service costs at branches, as well as real-world statistics culled from New Zealand-based M-Com's experience in introducing mobile services at banks in its home country and across Asia (a region far ahead of the U.S. in mobile banking and payment adoption rates). By replacing a $4 per interaction cost for a consumer branch visit with a mobile interaction costing a few pennies, it would only take a reduction of a couple of teller transactions to fully pay for a full year of a customer's mobile activity, according to Grimes.

M-Com, a late entrant to the U.S. mobile banking market last year, contends that banks in the U.S. could also see a faster return on investment if they marketed mobile banking to all of their customers, not just those already enrolled in online banking. "None of the U.S. banks to date offer mobile banking to the offline base, which to us is mind-blowing," says M-Com marketing director Serge Van Dam. "The U.S. is really the anomaly."

TowerGroup analyst Charul Vyas agrees, noting in a recent five-year forecast on mobile banking that "U.S. banks will need to expand their thinking about mobile banking beyond 'online-banking lite' and start to view mobility as its own powerful and compelling delivery channel." She notes one of M-Com's bank clients in New Zealand attracted up to 40 percent of its offline deposit customers to mobile services by promoting adoption outside the Web site.

TowerGroup estimates that 27 percent of U.S. mobile banking users will be exclusive, non-Web banking users by 2013.

USAA Bank in San Antonio is among institutions looking at mobility in its own right, rather than a cousin to online activity. It recently debuted an Apple iPhone application for its globally dispersed military customers that handles their banking, investment and insurance accounts. "We certainly put pen to paper and did a ROI around this," says Jeff Dennes, USAA's executive director of mobile and money movement. "It wasn't so much that we were going to get 'X' million dollars worth of benefit, as much as it was we have a very mobile membership, and it was another way for them to access their accounts and activity and keep up with their financial lives."

Mobile banking usage has already expanded rapidly — more than six-fold in 2008 — and 7.5 million households will be enrolled in mobile banking by the end of 2009. TowerGroup projects that, by 2013, banks will have 53 million active mobile users (plus a total of 108 million total enrollees), which will require banks to start planning mobile services as an "integral component" of is channel delivery lineup. While bank deployment outside the major tiers is still nascent, an Aite Group survey earlier this year reported that 59 percent of the nation's largest institutions would likely purchase or replace their mobile banking application this year.

And for community banks, the numbers are expected to grow as well. In its biennial technology survey from June 2008, the Independent Community Bankers of America found 30 percent of small banks planned to up their spending. "That number is going to be closer to 40 percent" in 2009, says Cary Whaley, the ICBA's director of payments and technology policy. "What they are looking for is a different way to reach customers and add customer convenience… not looking to displace cash or wallets, but give consumers 24/7 access."

AMERICAN BANKER - The Future of the Bank Branch

Washington Mutual’s experiment in futuristic branch design-at a cost of $1 billion-has come to an ignominious end. The new owner, JPMorgan Chase, considers the open floor-plan design confusing to customers and lacking in privacy, so it’s ripping out all 900 and replacing the free standing stations and cash-dispensing machines with teller windows complete with bullet-proof glass. Charles Sharf, who runs the Chase unit of J.P. Morgan has bluntly said that traditional branches are “superior in every way. They might be boring, but they’re practical.”

Banks have been experimenting with branch design for 30 years now, but WaMu’s Occasio branches (which in Latin means favorable opportunity) were still a significant leap. By creating teller pods stationed in the middle of the branch, and using cash recyclers, tellers were free to greet customers as they came in the door and create a more retail feel to the bank experience. Curving floor plans, softer color schemes, and quirky touches like selling teller “action figures” wearing WaMu insignias sent a message that this was a different kind of bank.

Now, with the collapse of WaMu and a chastened industry eager to earn back the public’s respect, some argue that WaMu’s unconventional branch design represented the kind of flamboyant experimentation that got banking into such trouble. “Customers want knowledgeable friendly bankers in an environment that’s convenient and reassuring,” says Tom Kelly, a Chase spokesman. “Customers aren’t interested in lingering; they want to do their business and go.” So, in the end, is Chase’s traditional branch design more appropriate for the serious-business of banking?

Getting the answer right to this question is important for the industry as it emerges from the current crisis. Branches are expensive to operate, and Bob Meara, a senior analyst at Celent says they’re getting less profitable all the time as branch traffic ebbs and more transactions move to the Web and other channels. At most banks, says Ron Shevlin, a senior analyst at Aite, people go to branches to resolve problems they can’t resolve elsewhere, or because they have privacy concerns using the Internet, or just out of habit-and this is not a profitable business model. “For most bank transactions, what’s convenient for the customer, and cheap for the bank, is not the branch.” To turn this around, he says, banks must find a way to make the bank branch the channel of choice for certain customer interactions, not just the default choice for problem resolution and Luddites.

 In fact, some bankers are thinking along these lines, and they repeat a similar mantra: innovative branch design and technology must encourage engagement with employees, not to discourage human interaction. Executives at Barclays, Umpqua, Key Bank and TD Bank, to name a few, view the branch as the channel of choice to build customer relationships. “The biggest thing in banking is the relationship, and you can’t do that online,” says Lani Hayward, evp of creative strategies at Umpqua Bank. “You can make mistake after mistake after mistake, and the customer will stay with you if they believe you’ll take care of them.”

Viewed in the light of building customer relationships, Chase’s move to dismantle the Occasio branches makes sense. Jeffry Pilcher, president of ICONiQ, a financial brand consultancy, says “Everyone in the financial industry is looking for a single blueprint, and it doesn’t work; it depends on who you are serving, what products you are offering, where you are located and what competition you face.” In Chase’s case, the bank has two important businesses that WaMu didn’t, business banking and private banking. “Both of these require people to sit down. These are private, consultative relationships. Occasio’s were built for cash transactions. It’s was not a sit down, it was get in and get out. They wanted to build a lot of branches, collect deposits, and use those deposits to serve their mortgage operation.”

Thus, according to Pilcher, it is a mistake to characterize Chase’s decision to dismantle the Occasio branches as a retro move by a stuffy bank unwilling to try new ways to reach the customers. Chase’s business strategy is fundamentally different than WaMu’s. It needs efficient teller lines for quick transactions, but also privacy for customers to sit down with investment reps. Likewise, it is a mistake to characterize WaMu’s branch design as a failure because the bank failed. “People get the wrong idea that this is some kind of cosmetic thing; there’s a strategy behind it,” he says, and for WaMu it was to gather deposits for its mortgage arm.

Despite WaMu’s high profile demise, some banks have pushed unconventional branch design even further-so far that actual transactions aren’t even possible; the sole goal is relationship building. ING Direct is an online bank, but management realized the bank needed some physical presence to reassure the public the bank was more than a billboard. So execs devised the ING café, which look like Starbucks; people can go have coffee, smoothies, use a free-wireless connection, and learn about ING if they choose. But the eight “branches” have no transactional ability whatsoever; people still must sign up and do transactions online. For example, the ING café in Chicago had “Bike to Work Week Specials” in mid-June. “Every bicyclist that rides to the ING DIRECT Café during Bike to Work Week will be treated to a free bike valet, beverage and tune up. While you’re there, ask a Café Associate about other simple ways to save your money.”

Meanwhile, Umpqua Bank, which uses its branches more conventionally to collect deposits and transact business, is also dedicated to innovative design and technology. Umpqua decided in the late 1990s to “sell products and services like retailers and create a customer experience,” says Hayward.  She says banks can be more than a “transactional place.” Like ING DIRECT, Umpqua’s neighborhood stores-not branches-are designed to feel more like cafés and serve as a place for the neighborhood to connect with community information.

In addition to bank products, stores feature electronic bulletin boards that provide community information, and neighborhood calendars, as well as access to computer cafés called MyBooth that are equipped with community and online resources. The stores also incorporate enhanced banking automation technologies, including cash recyclers that maximize space and improve store efficiency and security. Umpqua’s neighborhood stores also feature an interactive Discover Wall that allows customers to print and takeaway only the materials they want. 

The bank will soon be rolling out “ask an expert” video conferencing across a dozen branches as well as touch screen technology for product information. These and other technologies are vetted at Umpqua’s Innovation Lab in Portland, which opened in late 2007. “Our intention is to innovate because we have to,” says Hayward. “But it can’t be technology for technologies sake; it needs to be about the customer experience.”

To judge the success of its branch strategy, Umpqua compares itself to peers. According to a Harland Clarke survey earlier this year, Umpqua’s average deposit relationship and loan relationship are $27,700 and $39,200, rwespectively, versus the industry average for its peer group of $17,800 and $22,900, respectively. Also, Umpqua’s average of 3.8 accounts per household is better than its peer group’s 3.4 accounts per household. Internally, Umpqua tracks products per household as part of its Return on Quality program, and has found the scores consistently and significantly higher in its new/remodeled next generation branches.

When Deanna Oppenheimer, Barclays CEO of U.K. retail banks, arrived four years ago the entire network of 1,700 branches needed an upgrade. “We decided that rather than just change the carpet and paint the walls, let’s create the next generation of bank branch,” she says. Like Umpqua’s Hayward, she views technology as a way to “enable a customer experience, not replace it.” Barclays used a warehouse in Northhampton to build out prototype branches to see what worked and what didn’t, and ended up with a modular design easily deployed across the network.

Also like Umpqua, Barclays uses a flagship branch, in Piccadilly, as a quasi lab. Among the many high-tech touches in the branch was the first bank deployment in the world using Microsoft’s Surface technology, which allows users to grab digital content on a screen with their hands and navigate information about products and services with simple gestures and touches. The Surface technology is a 30-inch screen built into a table top. Customers and a bank employee sit across from each other and move through the digital content together by touching and swiping the screen.

The Piccadilly branch took inspiration from retail stores such as Nike and Apple to redesign the space and engage the customer. One of the first aspects visitors see at the branch is “Being: London”, an interactive, evolving installation representing London and what people in the capital are doing and talking about. A large video wall graphically represents London using content from blogs and customer interest. Personal consoles let people contribute to the installation and find information such as restaurant reviews, theatre openings and museum hours from Time Out, a guide to the goings on in London. Outside of operating hours, the front of the branch is transformed into the “Night Life” screen. The installation picks up the images of passers-by using face recognition technology and cameras and creates moving silhouettes on the screen together with thought bubbles creating random messages.

Inside the branch, to reduce wait times, employees use hand-held PCs they call “service angels.” With these PCs, they can intercept people waiting in line and conduct certain simple transactions, such as balance inquiries, transfers, and change of addresses. This matchmaker system can also schedule an appointment with a financial advisor and give the person an approximate wait time. They are then free to leave the branch and come back, or explore other information available in the branch.

While refusing divulge company-wide numbers, Barclays says the new branch design has increased market share, and that customer usage of new technologies has steadily increased. Erin Biertzer, head of distribution services at Barclays, is a bit more specific about the results at the Piccadilly branch. In the first few months after the branch opened sales of its Premier Life product-the only product so sold via Surface at the time-increased 50 percent, a gain she attributes largely to the Surface technology.

Ultimately, Oppenheimer and Hayward agree that branch design and technology can only contribute so much to a customer experience. Relationship building requires old-fashioned, face-to-face customer service. “Our greatest asset is the culture, that’s the crux of our success,” Hayward says. “What sets us apart is how we operate and how associates get trained.” Not only are employees educated across products so they can cross sell, she says, they are trained by the Ritz Carlton in service.

In the opinion of Aite’s Shevlin, the need to train employees in relationship building is not a message most banks have absorbed. “The problem most banks have in terms of building relationships will not be solved by branch design.” 

ANNOUNCEMENTS - Wilmington Trust Adds Insurance-Product Expertise

...to Capital Markets Group

Team Opens New Michigan Office, Extends Capabilities in Corporate Client Services Business

WILMINGTON, Del.--(BUSINESS WIRE)--Wilmington Trust, a leading provider of institutional trustee, agency, and administrative services through its Corporate Client Services (CCS) business, announced today that it has hired a team of corporate trust professionals to enhance its ability to provide trust services for insurance products.

The team, whose three members join Wilmington Trust from LaSalle Global Trust Services’ (LaSalle) office in Troy, Michigan, is headed by Bob Bockrath, who assumes leadership of trust administration for the insurance products area within CCS’ Capital Markets Group. Mr. Bockrath was with LaSalle for five years and Comerica Bank for 14 years before that. He is joined by Bob Donaldson and Melissa Marion, both of whom worked with Mr. Bockrath at LaSalle and Comerica. The team will establish a new Wilmington Trust office in Birmingham, Michigan.

With its new team, Wilmington Trust will provide trustee and agency services such as maintaining custody of insurance policies and collateral documents, servicing and cash-flow management of insurance-related loans, and making payments to investors in insurance-related securitizations, including premium finance deals and contingent capital transactions. In the insurance arena, Wilmington Trust already provides services for group insurance trusts, insurance escrows and statutory deposits, capital surplus notes, Regulation 114 and reinsurance trusts, XXX securitizations, and catastrophe (CAT) bonds.

“With this group now part of our larger CCS team, we can provide an expanded range of corporate trust services to insurance clients,” said Bill Farrell, executive vice president of Wilmington Trust and head of CCS. “Bob and his team will help us meet the needs of a growing base of clients and continue our momentum in the CCS business.”

BANKINSURANCE.COM - Beneficial Financial Discontinuing...

...Its Life Insurance and Annuity Lines

BANKINSURANCE.COM – NEWS IN BRIEF - JULY 6 - 12, 2009

Salt Lake City-based Beneficial Financial Group, a subsidiary of Deseret Management Corporation, announced it will discontinue issuing new life insurance and annuity policies and will no longer accept applications for these products as of August 31, 2009.  Beneficial Financial President and CEO Kent Cannon said, “Beneficial’s relatively small size puts the company at a competitive disadvantage compared to larger insurers with their broader array of products.”  Beneficial has focused on selling individual universal life, whole life and deferred and indexed annuities, and at the end of the first quarter, held $3.4 billion in statutory assets, including $445 million in adjusted capital and surplus.  At year-end 2008, Beneficial reported a net loss of $239.7 million.

BANKINSURANCE.COM - Court Names Lead Plaintiffes In Class Action Suit...

...Against Bank of America

BANKINSURANCE.COM – NEWS IN BRIEF - JULY 13 - 19,2009

U.S. District Courtfor the Southern District of New York Judge Denny Chin has named the LeadPlaintiffs in the class action lawsuit against Bank of America: State TeachersRetirement System of Ohio, Ohio Public Employees Retirement System, TeacherRetirement System of Texas, Stichting Pensioenfonds Zorg en Welzijn, andFajarde AP-Fonden.  The lawsuit alleges that Bank of America madematerially untrue statements and failed to disclose material information inconnection with its acquisition of Merrill Lynch.  Ohio Attorney General RichCordray said, “We now will protect the rights of Bank of America investors,including those of the five funds that will serve as Lead Plaintiff and thepublic employees and teachers who depend on them in this extraordinarilyimportant case.”

BANKINSURANCE.COM - Financial Advisors' Income Expected to Rise in 2009

BANKINSURANCE.COM – NEWS IN BRIEF - JULY 13 - 19, 2009

Financial advisors will earn, on average, $215,345 in 2009, up from $195,394 in 2008, according to the College for Financial Planning’s 2009 Survey of Trends in Financial Planning.  Interpersonal skills and client referrals are the key drivers for success, according to the survey of hundreds of financial advisors, but 49% said education was key, up from 38% in 2008.  More than half (56%) said they received most of their compensation from fees, and 80% said they provide their clients with financial plans, 36% of which are written and comprehensive and 46% of which are written or unwritten modular plans.  Ben Waldert, Director of Cerulli Associates, which conducted the survey, said, “As people watch their retirement savings or child’s college fund shrink, they are increasingly asking advisors for solutions to help live their lives, rather than simply grow their stock investments.”

BANKINSURANCE.COM - Huntington Bancshares Sub Launches...

...Independent Advisor Channel

BANKINSURANCE.COM – NEWS IN BRIEF - JULY 13 - 19, 2009

Columbus, Ohio-based Huntington Investment Company, a subsidiary of $52 billion-asset Huntington Bancshares, has launched an Independent Advisor Channel and is recruiting “successful advisors” to fill its ranks.  Huntington Private Financial Group Senior Vice President Don Benhase said, “As consumers recover from the recession, advice is more critical than ever.”

BANKINSURANCE.COM - Jury: Greenberg Did Not Break Law When He Sold AIG Shares

BANKINSURANCE.COM – NEWS IN BRIEF - JULY 13 - 19, 2009

A federal jury in the U.S. District Court in Manhattan ruled last week that former American International Group (AIG) and current Starr International CEO Maurice “Hank” Greenberg did not breach a trust with AIG to fund an executive retirement plan and did not unlawfully sell his AIG shares.  AIG had alleged that Greenberg and Starr International had done both and had sued Starr to “recover” $4.3 billion in the proceeds from the stock sales and to acquire another 185 million in AIG shares from Starr.

BANKINSURANCE.COM - Older Americans’ Application for Life Insurance

...Continue to Climb

BANKINSURANCE.COM – NEWS IN BRIEF - JULY 13 - 19,2009

U.S. applicationsfor individually underwritten life insurance continued their long-term climb inJune among individuals aged 60 and older, up 11.6% over June 2008, according tothe MIB Life Index.  Applications among individuals aged 0-44, however,slid 4%, while applications among individuals aged 45-59 rose 0.4% to producean overall 0.8% decline in June applications compared to a year ago.  Forthe first quarter combined applications slipped 1.5% compared to first quarter2008, Braintree, MA-based MIB Group said.

BANKINSURANCE.COM - Proposed Senate Bill Seeks to Clarify...

...Who Regulates Certain Annuity and Insurance Policies

BANKINSURANCE.COM – NEWS IN BRIEF - JULY 6 - 12, 2009

U.S. Senators BenNelson (D-NE), Saxby Chambliss (R-GA), Tom Harkin (D-IA), and Sam Brownback(R-KS) have introduced into the Senate S.B. 1389, a companion bill to theMeeks-Price Bill H.R. 2733.  Both bills seek to clarify the exemption ofcertain annuity and insurance policies from federal regulation under theSecurities Act of 1933 and undercut the Securities and Exchange Commission’s(SEC) recent decision to reclassify most fixed indexed annuities as securitiesto be regulated by the SEC.  Coalition for Indexed Products (Coalition)spokesman Jim Poolman said, “Senator Nelson and his colleagues understand thatfixed indexed annuities are insurance, not securities, and the SEC’s new rulewill only put a roadblock between these products and the middle classhouseholds that need them.”  The Coalition is comprised of eight insurancecompany systems and their subsidiaries that issue indexed annuities.  Theyinclude Allianz Life Insurance Company of North America, American EquityInvestment Life Insurance Company, American Investors Life Insurance Company(an Aviva USA Corporation company), Aviva Life and Annuity Company, Aviva Lifeand Annuity Company of New York, Conseco Insurance Company, EquiTrust LifeInsurance Company, Life Insurance Company of the Southwest (a National LifeGroup company), Midland National Life Insurance Company, North American Companyfor Life and Health Insurance, OM Financial Life Insurance Company (an OldMutual company), and OM Financial Life Insurance Company of New York.

BANKINSURANCE.COM - Supreme Court Rules

OCC Does Not Have Sole Enforcement Powers Over National Banks

BANKINSURANCE.COM – NEWS IN BRIEF - JULY 6 - 12, 2009

The U.S. SupremeCourt ruled five to four last week in Cuomo v. Clearing House Association thatthe Office of the Comptroller of the Currency (OCC) does not have soleenforcement powers over national banks.   Although states have novisitorial powers or the right to subpoena and examine national bank records,the court said, they do have authority to enforce non-pre-empted state andapplicable laws concerning them.  Justice Antonin Scalia, who wrote themajority opinion said, “The Comptroller was not unreasonable in interpreting theNational Bank Act’s prohibition on state exercise of visitorial powers toinclude ‘conducting examinations [and] inspecting or requiring the productionof books or records of national banks’; but exceeded the bounds of reasonableinterpretation by prohibiting the states from ‘prosecuting enforcement actions’against national banks.”  The Supreme Court upheld an injunction againstthe New York Attorney General’s subpoena of national banks that seekinginformation to determine if they had engaged in discriminatory practices, the AmericanBankers reports.

BANKINSURANCE.COM - U.S. Corporate Pension Plans' Funded Status Declines

BANKINSURANCE.COM – NEWS IN BRIEF - JULY 13 - 19,2009

The funded statusof typical U.S. corporate pension plans slid 5.7% in June, as falling yields onlong Aa corporate bonds drove liabilities higher.  Assets increased 0.3%,and liabilities grew 7.6%, pushing the funding ratio up 5.2%, according to theBNY Mellon Pension Liability Index, compiled by Boston-based BNY Mellon AssetManagement, a subsidiary of The Bank of New York Mellon Corp.  BNY MellonPension Services Executive Director Peter Austin said, “The long-anticipateddecline in long Aa corporate bond yields that began in March accelerated inJune, finishing the month at 6.28% vs. 6.85% at the end of May.”  Headded, “Many [pension plan] sponsors are choosing to increase allocations tolong-term investment grade corporate bonds, which are generally a moreeffective way to hedge funding and accounting liability risk.”

BANKINSURANCE.COM - Wachovia Insurance Renamed

Wells Fargo Insurance Services USA

BANKINSURANCE.COM – NEWS IN BRIEF - JULY 6 - 12, 2009

San Francisco-based, $1.3 trillion-asset Wells Fargo & Co. announced that Wachovia Insurance Services has been renamed Wells Fargo Insurance Services USA, Inc. and will become a direct subsidiary of Wells Fargo Insurance Services in 2010.  The combined companies’ 7,500 insurance professionals offer life, property-casualty, benefits and international insurance and operate from 200 offices in 37 states.

In 2008, Wells Fargo & Co. reported $1.6 billion in insurance brokerage income, which comprised 9.8% of its noninterest income.  The company ranked first in insurance brokerage earnings among all U.S. bank holding companies (BHCs) engaged in significant banking activities, according to the Michael White-Prudential Bank Insurance Fee Income Report.  
(These figures do not include results of Wachovia Corporation, which Wells Fargo bought on December 31, 2008, because neither Wachovia nor Wells Fargo filed income statement figures for Wachovia for year-end 2008.)

BANKINSURANCE.COM - Wells Fargo Extends Brand...

...To Investment Banking and Securities

BANKINSURANCE.COM – NEWS IN BRIEF - JULY 13 - 19, 2009

SanFrancisco-based, $1.3 trillion-asset Wells Fargo & Co. announced itsinvestment banking and capital markets businesses will operate under the WellsFargo Securities brand, expanding the unit into two business lines: InvestmentBanking & Capital Markets and the Securities & Investment Group. Eastdill Secured, Wells Fargo’s real estate and capital markets servicesprovider, however, will continue to operate under its own name.  WellsFargo President and CEO John Stumpf said, “We have an enormous opportunity tobecome one of the top customer-focused investment banks in the country. Clearly, one of the great benefits of the Wachovia merger was the stronginvestment and capital markets platform that we gained.”

In 2008, Wells Fargo & Co. reported $332 millionin investment banking, advisory and underwriting income, which comprised 2.0%of its noninterest income.  The company ranked ninth in investmentbanking, advisory and underwriting earnings among all U.S. bank holdingcompanies (BHCs) engaged in significant banking activities), according to the MWA Fee Income Ratings Report. (These figures do not include results of Wachovia Corporation, which WellsFargo bought on December 31, 2008, because neither Wachovia nor WellsFargo filed income statement figures for Wachovia for year-end 2008.)

K@W - Caught in the Middle

Rising Unemployment Takes Its Toll on Older Managers

U.S. recessions since the oil crisis in the early 1970s each had their own special causes and victims, but they also had something in common: They were over relatively quickly. The current downturn, however, is deeper and already longer than any since World War II. This spells trouble for one especially vulnerable group -- managers in their 40s and early 50s. What can they do when the industry they made their career in downsizes or goes bust? And how should they go about picking themselves up and getting back into the game? Wharton faculty and employment counselors weigh in.

LINK TO ARTICLE: http://knowledge.wharton.upenn.edu/article/2278.cfm 

Reproduced with permission from Knowledge@Wharton (http://knowledge.wharton.upenn.edu), the online research and business analysis journal of the Wharton School of the University of Pennsylvania. All materials copyright of the Wharton School of the University of Pennsylvania. http://knowledge.wharton.upenn.edu

K@W - More Savings, Less Plastic

Consumer Credit After The Crisis

The harsh economic downturn that has chastened credit-happy consumers, along with increased scrutiny by regulators, will force card issuers to rethink their business models as the economy begins to recover, according to Wharton faculty and credit industry analysts.

LINK TO ARTICLE: http://knowledge.wharton.upenn.edu/article/2281.cfm 

Reproduced with permission from Knowledge@Wharton (http://knowledge.wharton.upenn.edu), the online research and business analysis journal of the Wharton School of the University of Pennsylvania. All materials copyright of the Wharton School of the University of Pennsylvania. http://knowledge.wharton.upenn.edu

M&A - Wells Fargo and Wachovia Investment Banking and...

...Capital Markets Businesses Branded asWells Fargo Securities

Wells Fargo & Company (NYSE: WFC) todayannounced that its investment banking and capital markets businesses formerlyoperating under the Wachovia Securities and certain Wells Fargo brands will nowoperate under the brand Wells Fargo Securities.

The new Wells Fargo Securities brand will bring togetherthe firm’s market-leading businesses in debt and equity underwriting, mergersand acquisitions, loan syndications, debt and equity sales and trading,tax-exempt products, research and economics, and certain hedging products suchas equity derivatives.

As part of the brand change, Barrington Associates, WellsFargo’s middle market mergers and acquisitions advisory division, will begin tooperate exclusively under the Wells Fargo Securities brand. Eastdil Secured,Wells Fargo’s provider of real estate capital markets services, will continueto operate under its existing name and will offer securities products throughWells Fargo Securities.

“We have an enormous opportunity to become one of the topcustomer-focused investment banks in the country by focusing on the basics andon those businesses that directly serve our customers,” said Wells Fargo &Company’s President and Chief Executive Officer John Stumpf. “Clearly one ofthe great benefits of the Wachovia merger was the strong investment banking andcapital markets platform that we gained. We plan to build on those strengths togrow and invest in the business as we continue to satisfy all of our customers’financial needs.”

Wells Fargo Securities combines strong relationships andindustry knowledge with superior capital markets and advisory capabilities. Thebrand includes two business lines – Investment Banking and Capital Markets,co-led by Rob Engel and Jonathan Weiss, and the Securities and InvestmentGroup, led by John Shrewsberry – which serve both middle market and large U.S.corporate and institutional clients. Both businesses report to Tim Sloan, headof Wholesale Banking’s Commercial, Real Estate and Specialized FinancialServices group.

“The Wells Fargo Securities brand brings togetherWachovia’s market-leading investment banking businesses and Wells Fargo’s nicheexpertise to form a powerful investment banking and capital markets platform,”said Sloan. “We’re combining the top-rated customer service of both Wachoviaand Wells Fargo with the strength of one of the nation’s largest banks and aset of investment banking products and services that are focused exclusively onthe needs of our customers.”

MISCELLANEOUS - Lump-Sum Distributions

How Many,What Size, Where Do They Go?

Some 16.2million workers had taken a lump-sum distribution from an employment-basedretirement plan as of 2006. The average amount of these distributions was$32,219 and the median (mid-point) amount was $10,000, according to a studyreleased today by the nonpartisan Employee Benefit Research Institute (EBRI).

The studyexamines workers’ decisions to a take a lump-sum distribution from anemployment-based retirement plan when changing jobs, while remaining in thelabor force. It also compares the standard of living of individuals age 55 orolder with that of those in their early 50s, after making a lump-sum decision.The study, in the July EBRI Notes, is available at www.ebri.org.

As thestudy points out, what individuals chose to do with a lump-sum distribution canhave a significant impact on how much (if any) assets they have at retirement,depending on whether they “roll over” the assets into another tax-advantagedsavings account (such as an individual retirement account, or IRA), or spendthe money on consumption. Through 2006, almost half (47.3 percent) of thosetaking a lump-sum distribution used at least some portion of the money fortax-qualified savings, while 16.9 percent used at least some portion of it forconsumption.

The othermost prevalent uses were buying a home, paying off debt, or starting a business.The research shows that at least some portion of a lump-sum distribution ismore likely to go for tax qualified savings if the distribution is larger, therecipient is older, male, or white.

Here aresome of the other points in the study:

• Almost half of these lump-sum distributions were for less than $10,000, and 22.7 percent were received from 2004 through 2006.
• Just over 55 percent went to individuals age 40 or younger, 83.7 percent were received by whites, and 53.9 percent went to females.
• Recipients ages 61–64 had the highest lump-sum distribution average amount of any age category. The average distribution was significantly higher for males than for females.

The studyalso compares the standard of living of individuals age 55 or older with the standardthey maintained when they were in their early 50s for those who took a lump sumversus those who did not.  This allowsfor an assessment of how the current “near elderly” and elderly have faredafter making a lump-sum decision.

Asignificantly higher percentage of those who spent their lump-sum distributionsentirely reported their standard of living as being much worse than wasreported by those who had rolled over their entire distribution (11.8 percentcompared with 4.3 percent), the study finds. This may be because those whospent their lump-sum distributions did not plan for retirement and consequentlyare worse off in old age, or because spending the lump-sum distribution leftthese individuals without resources they needed to maintain their standard ofliving in older age, the study says.

While thepercentage who reported being much worse was relatively small, the consequencesof spending lump-sum distributions highlight the fact that those who took alump-sum distribution and spent it entirely were almost three times more likelyto describe their standard of living as being much worse than was reported byall of those age 55 or older who rolled over their assets, the study adds.

MISCELLANEOUS - MetLife to Combine Institutional and Individual...

...Business Segments to Form an Integrated U.S. Business Organization

NEW YORK--(BUSINESS WIRE)--MetLife, Inc. (NYSE: MET) announced today that it is combining its Institutional and Individual Businesses, as well as its Auto & Home unit, into a single U.S. Business organization. This is a major outcome of the company’s strategic review, which was launched two years ago to capitalize on growth opportunities in the changing marketplace. Combining the segments will enhance MetLife’s product design and distribution capabilities, streamline its decision making processes and drive profitable growth.

“With this realignment, we are recognizing that we can better serve both employee benefit plan sponsors and individual customers through a single, integrated organization, while preserving our unique franchises,” said C. Robert Henrikson, chairman, president & chief executive officer of MetLife, Inc. “Employers are increasingly shifting decision making about personal financial and retirement planning to employees. At the same time, both institutions and individuals recognize more than ever the importance of expertise, a strong balance sheet and trustworthiness in an insurance and financial services provider. This new structure will enable us to further strengthen our industry leadership.”

“Our Institutional and Individual Businesses have always been complementary, but by bringing them together we will increase our speed in delivering new products and solutions to the market, better leverage our distribution channels, enhance efficiencies, and expand services to our customers. A unified U.S. Business organization creates a stronger growth platform and builds on our financial strength and our strong brand,” said Henrikson.

William J. Mullaney, who has served as president of MetLife’s Institutional Business since January 2007, has been named president of the U.S. Business organization. In previous roles at MetLife, Mullaney was president of MetLife Auto & Home, served as senior vice president for claims and customer service at Auto & Home and was responsible for MetLife’s voluntary benefits business.

“We look forward to integrating our businesses, which will broaden opportunities for our associates and our distribution channels,” added Henrikson. “While seamless to our customers, these structural changes will enable us to provide the insurance and retirement products and services best designed to help customers address their challenges.”

The changes announced today will be effective August 1, 2009. The integration of the business segments is expected to proceed through the second half of 2009 and be completed in 2010.

MISCELLANEOUS - New Union Bank Division to Assist...

...U.S. Companies In Their Global Expansion

Union Bank, N.A., has created a new division designed todeliver sophisticated financial products and services to the overseassubsidiaries of U.S. multinational corporations. The global businesscoordination unit will partner with the extensive international network ofUnion Bank's parent company, The Bank of Tokyo-Mitsubishi UFJ, Ltd., to provideglobal cash management, in-country senior debt, offshore investment counsel,and other financial services unique to U.S-based companies seeking to expandbusiness operations virtually anywhere in the world.

"This represents a game-changing global strategy forUnion Bank clients, and an opportunity for us to broaden our reachinternationally," said Senior Vice President Bob Garrett, who will headthe new unit. "By partnering with BTMU, our customers will gain access tothe expertise of bankers who are knowledgeable in international finance and whohave a broad-based understanding of the specialized products unique to U.S.-basedcompanies that have a desire to grow their overseas operations."

BTMU is among the 10 largest banks in the world todaywith approximately $2.1 trillion in total assets at March 31, 2009. Theyoperate more than 400 offices in 40 countries.

"Several countries in Asia are among the fastestgrowing economies in the world," said Garrett. "An increasing numberof Union Bank's large corporate clients are interested in broadening theirreach into Asia and require financial advisors who understand both the uniquecharacteristics of global finance, as well as the cultural, political andregional sensitivities on the ground."

Garrett has more than 20 years experience in thefinancial services industry, most recently as the head of Union Bank'scorporate lending operations in San Jose and in San Francisco, where he will bebased. For more information on Union Bank’s new global business coordinationunit, please call 415-705-7160.

MISCELLANEOUS - Phantom Demand: Payday Lenders Create

...Their Own Demand with Loan Terms that Generate Rapid Re-Borrowing

A fullthree quarters of the payday industry’s loan volume is generated by borrowers who, after repaying one payday loan, must take out another before their next paycheck, new Center for Responsible Lending research shows.

Paydaychurning - repeat borrowing of what payday lenders market as a short-term loanof a few hundred dollars - has been well documented. But the Center for Responsible lending’s new report goes further by verifying for the first time how quickly most payday customers must turn around and re-borrow after repaying a previous payday loan. Among the over 80 percent of payday borrowers who conduct multiple transactions in a year:

• Half of repeat loans are opened at the borrower’s first opportunity, immediately or after a 24-hour waiting period, depending on state rules.
• 87% of repeat loans are opened within two weeks, or generally before their next payday.
• Only 6 percent of subsequent payday loans are taken out longer than a month after a previous loan was paid off.
  

This rapid, widespread re-borrowing indicates that most payday borrowers are not able to both repay one of these loans and clear a monthly billing cycle before having to borrow again. In essence, the bulk of payday loan demand comes from borrowers who are taking out a payday loan to repay a payday loan. 

“Ourreport, Phantom Demand, shows that it’s very common for payday borrowers totake out their next payday loan on the very first day on which state regulations allow,” said Leslie Parrish, senior researcher at the Center for Responsible Lending and co-author of the report. “Rather than serving as abridge to get a borrower past a financial emergency to their next payday, the data clearly shows payday loans work more like a shovel into deeper debt.”

Payday lenders generate loan volume by making a payday loan due in full on payday and charging a sizeable fee—now nearly $60 for an average $350 loan. This virtually guarantees that low-income customers will experience a shortfall before their next paycheck and need to come right back in the store to take a new loan. This churning accounts for 76 percent of total loan volume, and for $20 billion of the industry’s $27 billion in annual loan originations.

The 59 million churned loans per year by the national payday lending industry cost borrowers $3.5 billion in fees.

“This is money that could be used for other things – savings for an emergency, paying off other debt,” said Parrish. “So it’s really a huge loss for these families who are taking out a payday loan.”

Paydaylenders in over 30 states have convinced lawmakers to allow them to charge triple-digit interest rates on their loans, often as an exception to much more reasonable rates on other consumer loans, because they claim there is a heavy demand for their short-term product, and that low-income families have fewother options.

MISCELLANEOUS - Re-Directed IRA's Could Be Answer to Prayers

Non-traditional investment options is turning heads, says the Westward Fund

SCOTTSDALE, Ariz.--(BUSINESS WIRE)--The stock market continues to decline, leaving hundreds of thousands in the lurch, questioning the very integrity of the institution. Is the stock market a viable investment option in today’s economy? Or, is there a better, more stable, way to provide for one’s retirement? Many are answering “Yes” as they discover how to use their IRA funds to purchase investment-oriented real estate.

It is a little-known fact that, in 1974, Americans were given the freedom to invest tax-deferred and tax-free retirement funds in real property. The Internal Revenue Code specifies only that you can not invest retirement assets in life insurance and collectibles. This leaves the door wide open to alternate opportunities, including real estate, one of the most secure long-term investments in our financial marketplace. Troy Bohlke, of Westward Fund, states, “Since real estate is a tangible asset, many people are looking to move their money out of the volatile stock market and into tangibles like gold and real estate, at least until the market stabilizes.”

Arizona Acquisitions Group (AAG) and Equity Capital Group (ECG) of Phoenix, Arizona, partnered to form The Westward Fund, a 50M dollar investment fund, in order to capitalize on the unprecedented real estate opportunities in today's depressed market. Due to the surplus of high-quality real estate assets available at substantially lower than normal prices, it only made sense pool our money with investor partners to obtain as much distressed property as possible. Bohlke explains, “We package private equity Real Estate Funds, large and small, as an alternative, yet viable, investment option. Every day, it seems, that more and more people are discovering that they can take advantage of today’s real estate opportunities through their IRA accounts. The greatest demand is foreclosed single family homes because there is a plethora of high quality properties, at shocking prices and built in profits if bought well. The investors like "tangible assets" during these market conditions. Consequently, many investors are shifting their funds over to something they can touch and feel."

We’ve heard for years that Social Security may not adequately cover the retirement of many who have been paying into it. With many other challenges facing a receding U.S. economy, visiting non-traditional investment options now makes sense. “For some investors, stocks and bonds don’t make sense, and they’re just more comfortable in other assets,” says Paul Maxwell, Chief Operations Officer of Trust Administration Services, a custodial firm that handles the paperwork for non-traditional accounts.

The benefits of this new-old investment concept seem to be: 1) that the returns from an IRA real estate investment are tax-deferred, and 2) that unlike stocks and bonds, real estate is a tangible investment, whereby the investor can have a direct affect on its appreciative value.

According to the Investment Company Institute, there are approximately $3.7 trillion invested in IRA’s. Traditional IRA’s are controlled by financial institutions such as banks and financial service companies and contain investments such as stocks and bonds. Mutual funds control about 98% of the retirement industry.

Baby boomers and the wealthier segment of society own the largest portion of this money. A recent national publication, however, suggests that every American should have at least 25% of their retirement invested in real estate. This alone would represent a phenomenal growth rate of 1,150% above the 3.7 trillion dollar’s 2% that is currently invested in real estate.

How do re-directed IRA’s work?

There are three ways to accomplish an IRA purchase of real estate:

1) The real estate can be purchased and owned by the IRA itself. This requires changing the structure of the IRA to a self-directed IRA, where the real property is administered by a custodian or third party.

Self-directed IRA’s are similar to traditional IRA’s, with one fundamental difference. They provide the owner with the freedom to make non-traditional investment choices, such as real estate. Like their more traditional sister IRA’s, funds and investments placed in self-directed IRA’s remain tax-deferred as long as they are not withdrawn.

2) Real estate can be purchased outside of the IRA and owned outright. With this method, the IRA funds the real estate purchase, allowing the owner to take full advantage of the financial and economic benefits of real estate ownership.

3) Shared ownership can be accomplished by purchasing real estate through an LLC. The LLC can purchase land, a commercial building, second residence, condominium, office building, rental property, ranch, etc. If you are leasing an office, the LLC can purchase the building and recover the lease payments.

"The reason only 2% of Americans are taking advantage of the real-estate IRA is a general lack of knowledge that it can be done," says Bohlke. "This is a little-known venue for building security in a retirement fund. The bottom line to buying properties with an IRA is that the investor maintains a level of control over a tangible asset—something not possible by owning company stocks or mutual funds in a volatile market.”

Contacts
Niche Focus Group
Bonni Howard, 480-688-0376
PR, bonni@nichefocusgroups.com

PERSONNEL CHANGES - Citigroup Announces Senior Management Changes

"Our relentless focus on executing against our strategic priorities at Citi continues as we remain focused on rationalizing Citi Holdings, and on Citicorp as our core operating business," Mr. Pandit said. "We are making consistent and substantial progress towards these goals. The senior management changes I am making today will further help in positioning our company for thefuture."

Edward"Ned" Kelly, previously Chief Financial Officer, will take on broader responsibilities for strategy and M&A and will become Vice Chairman ofCitigroup. Mr. Kelly will work closely with Mr. Pandit in order to drive theexecution of Citi's strategic and operational priorities. John Gerspach,previously the Controller and Chief Accounting Officer of Citi, will assume therole of Chief Financial Officer.

Eugene M.McQuade will join Citi as Chief Executive Officer for Citibank, N.A. Mr.McQuade most recently served as Vice Chairman of Merrill Lynch and President of Merrill Lynch Banks (U.S.). Previously, he was the President and ChiefOperating Officer of Freddie Mac and served as President of Bank of America Corporation.

Inaddition, Bill Rhodes has informed the company of his desire to reduce his level of operating responsibility in order to focus more of his time on Citi's international franchise. He will continue as Senior Vice Chairman of Citigroupand Citibank and will step down as Chairman and CEO of Citibank, N.A. Over the last 50 years, Mr. Rhodes has built invaluable international experience and relationships on behalf of the Citi franchise.

Also, Gary Crittenden, Chairman of Citi Holdings, has decided to leave Citi to relocate to Utah to devote more time to his family and other business interests. "We appreciate Gary's contributions in his various roles and wish him and his family all of the best in the next phase of theirlives," Mr. Pandit said.

Background Information:

Ned Kelly: Mr. Kelly has served as Chief FinancialOfficer of Citi since March 2009. Prior to being named CFO, he was Head ofGlobal Banking, Citi Private Bank and President and Chief Executive Officer ofCiti Alternative Investments in Citi's Global Institutional Bank. Mr. Kellyjoined Citi in February 2008 from The Carlyle Group, a private investment firm,where he was a Managing Director. Prior to joining Carlyle in July 2007, he wasa Vice Chairman at The PNC Financial Services Group following PNC's acquisition of MercantileBankshares Corporation in March 2007. He was Chairman, Chief Executive andPresident of Mercantile from March 2003 through March 2007 and Chief Executiveand President from March 2001 to March 2003.

BeforeMercantile, Mr. Kelly was at J.P. Morgan Chase & Co. where he was Managing Director and head of Global Financial Institutions and co-head of Investment Banking Client Management. He joined J.P. Morgan in 1994 as its General Counseland Secretary. In 1996, he became a Managing Director and subsequently ran various parts of J.P. Morgan's investment banking business, including Global Financial Institutions and Latin America. Prior to joining J.P. Morgan, Mr. Kelly was a partner at the law firm of Davis Polk & Wardwell, where he specialized inmatters related to financial institutions. Early in his career, Mr. Kellyserved as a law clerk to Supreme Court Justice William J. Brennan, Jr. and U.S.Court of Appeals Judge Clement F. Haynsworth, Jr.

John Gerspach: Mr. Gerspach was previously theController and Chief Accounting Officer of Citi. He has been with Citi since1990 and has held various CFO and Chief Administrative Officer positions throughout the company. He has experience in both the Global Consumer Group andCiti Markets & Banking, and has worked closely with all of the regions including serving as the CFO/CAO of Latin America. Before joining Citi in 1990, Mr. Gerspach was CFO at Penn Central Industry Group. Previous to that he was Comptroller for theDefense Contracting Group at ITT Corporation. His professional career began at Arthur Andersen & Company.

Eugene M. McQuade: Mr. McQuade was Vice Chairman ofMerrill Lynch and President of Merrill Lynch Banks (U.S.) from February 2008until February 2009. Previously, he was the President and Chief OperatingOfficer of Freddie Mac for three years. Prior to joining Freddie Mac in 2004,Mr. McQuade served as President of Bank of America Corporation. He had beenPresident and Chief Operating Officer at FleetBoston Financial Corporation before helping to bring about the April 2004 merger between FleetBoston andBank of America. He joined Fleet in 1992 and became Chief Financial Officer in 1993, Vice Chairman in 1997 and President and Chief Operating Officer in 2002. Before working at FleetBoston, Mr. McQuade served as the Executive VicePresident and Controller at Manufacturers Hanover Corp., a predecessor of JPMorgan Chase. He began his career at KPMG Peat Marwick in New York.

Bill Rhodes: Mr. Rhodes is the SeniorInternational Officer for Citi. He has specific responsibilities for clientrelationships worldwide, as well as for relationships with governments and other official institutions.

Mr. Rhodes gained a reputation for international financial diplomacy in the 1980s as a result of his leadership in helping manage the external-debt crisis thatinvolved developing nations and their creditors worldwide. During that period and in the 1990s, he headed the advisory committees of international banks thatnegotiated debt-restructuring agreements for Argentina, Brazil, Jamaica, Mexico, Peru, and Uruguay. In 1998, when the Republic of Korea experienced liquidity problems, hechaired the international bank group that negotiated the extension of short-term debt of the Korean banking system. In early 1999, at the request of the government of Brazil, he acted as worldwide coordinatorto help implement the maintenance of trade and inter-bank lines by foreigncommercial banks to Brazil.

Mr. Rhodesis a Director of Banamex; a Director of the Private Export Funding Corporation;First Vice Chairman of the Institute of International Finance; Chairman of the Americas Society and Council of the Americas; Chairman of the U.S.-KoreaBusiness Council; a Director of the U.S.-Russia Business Council; a Director ofthe U.S.-Hong Kong Business Council; Vice Chairman of the National Committee onU.S. - China Relations; a Director of the U.S./China Business Council; a member of South African President Thabo Mbeki's International Advisory Board; a member of the Inter-American Development Bank's Private Sector Advisory Board; amember of the International Policy Committee of the U.S. Chamber of Commerce;and a member of the Board at the Foreign Policy Association. He is also amember of the US-Brazil CEO Forum, a member of the Advisory Council of the Brazilian American Chamber of Commerce, the Council on Foreign Relations, The Group of Thirty, andThe Economic Club of New York.

PRODUCTS - The Bank of New York Mellon Launches...

...Position Eligibility Feature in AccessEdge

The Bank ofNew York Mellon (NYSE: BK), the global leader in asset management and securities servicing, has enhanced its collateral management services forbroker dealers with the launch of Position Eligibility, a new feature deliveredthrough its web portal AccessEdge(SM).

Withincreased risk aversion and more complex credit requirements prevalent in thefinancial markets, finding the right collateral can be a challenging task.Position Eligibility allows broker dealers to pre-screen securities online andto assess whether the securities can be used as collateral in tri-partyfinancing or stock lending transactions.

"PositionEligibility highlights our commitment to enabling our clients to gain maximumvalue from their collateral holdings in a secure and controlled manner,"said Art Certosimo, senior executive vice president and head of Broker-Dealerand Alternative Investment Services. "The Bank of New York Mellon remains at the forefront of proactively looking at ways to help our broker-dealer,institutional investor and hedge fund clients in this changing marketenvironment."

Other keyfunctions of the Position Eligibility feature include the ability to search accounts based on different criteria, and include securities that aren't custodized atThe Bank of New York Mellon. Results can be easily downloaded into an Excel/CSV file format for further analysis.

REGULATORY - Agencies Publish Final Rules and Guidelines...

...to Promote Accurate Reports About Consumers

The federalfinancial regulatory agencies and the Federal Trade Commission yesterdaypublished final rules and guidelines to promote the accuracy and integrity ofinformation furnished to credit bureaus and other consumer reporting agencies,and widely used to determine consumers' eligibility for credit, employment,insurance, and rental housing.

As requiredby the Fair and Accurate Credit Transactions Act, the Board of Governors of theFederal Reserve System, Federal Deposit Insurance Corporation, Federal TradeCommission, National Credit Union Administration, Office of the Comptroller ofthe Currency, and Office of Thrift Supervision are publishing these final rulesand guidelines, with an effective date of July 1, 2010.

Under therules, entities that furnish information about consumers to consumer reportingagencies generally must include a consumer's credit limit in the informationprovided. The federal agencies are also publishing an Advance Notice ofProposed Rulemaking (ANPR) to identify possible additions to the informationthat furnishers must provide to consumer reporting agencies, such as theaccount opening date.

REPORT - Economic Downturn Has Spurred Giving

Grandparents Are Providing $370.7 Billion in Financial Support to Their Grandchildren, According to MetLife Mature Market Institute® Survey

WESTPORT, Conn.--(BUSINESS WIRE)--Almost two-thirds of America’s grandparents have provided financial support to their grandchildren during the last five years, 40% for general purposes and 26% for education, according to the MetLife Mature Market Institute’s QuickPOLL, Grandparents: Generous with Money, Not with Advice. The average amount provided was $8,661, or about $370.7 billion total in the last five years. One-quarter (25%) say the economic downturn has caused them to increase the help they give to their grandchildren.

The 2009 Grandparents Poll revealed that grandparents prefer to help their children and grandchildren while they are alive, rather than leaving a lump sum in a will, an interesting phenomenon.

In addition, the data indicates that those with less income and net worth are giving a higher percentage than they did before the most recent economic downturn – and some of them are feeling the pinch, with more than one in five (22%) overall reporting that their generosity has had a negative impact on their own financial picture.

“The survey points to the universal bond between grandparents and their grandchildren, and the generous nature of grandparents, regardless of asset and income levels,” said Sandra Timmermann, Ed.D, director of the MetLife Mature Market Institute. “Grandparents are more willing than ever to help their grandchildren, even though they may be suffering economically. While they clearly want to make sure their grandchildren are financially secure, only a small percentage of those polled said they have talked to their grandchildren about the importance of hard work, saving for a rainy day and intelligent use of credit.”

Other information learned from the 2009 Grandparents Poll includes the following:

Of the minority who do impart advice to their grandchildren, the most common missives are to save and invest early (85%) and to stay out of debt (75%).

Those grandparents with at least a college degree are more likely to support education (37% vs. 24% of those without a college education).

Nearly half of education supporters (46%) set up a college fund; 26% are paying for pre-college expenses and 24% help with college tuition or loans.

83% are giving cash; in-kind gifts like cars and computers rank second.

Half of those polled (52%) say their children are raising their grandchildren differently than they raised their kids. Of that group, 64% say their kids are more lenient with their children than they were and 55% said the youngest group has fewer household responsibilities.

30% of those polled have encouraged or have spoken to their adult children about life insurance as a way to protect the future of their grandchildren.

The majority (78%) say it’s more important to distribute smaller gifts throughout their lifetimes as needed, rather than leaving a larger sum of money as a legacy at death.

“Like grandparents in earlier generations, today's grandparents want to be involved in their grandchildren's lives. What may be different today is that grandparents are helping their children and grandchildren to meet immediate financial needs,” said Dr. Timmermann. “Grandparents with the financial resources will want to make more long range plans too, assuring that their grandchildren have enough money to fund college tuition and that the family has the financial security should something happen to one or both parents. Grandparents are also in a unique position to provide another valuable legacy, that of helping grandchildren to understand the value of a dollar and the importance of saving money.”

For more information about the MetLife Mature Market Institute, please visit: www.maturemarketinstitute.com. 

REGULATORY - Regulatory Failures Show Clear Need for an Agency...

...Dedicated to Common-Sense Financial Protections for Consumers

A newpolicy brief by the Center for Responsible Lending chronicles the repeatedfailure of federal bank regulators over the years to rein in irresponsible lending practices. Example after example of regulatory delay or inaction demonstrates the need for a stand-alone, independent regulator focused solelyon ensuring basic, common-sense safeguards for consumers. For the full report,please go here.

Here aresome examples of the regulatory lapses documented by CRL in its policy brief, titled"Neglect and Inaction: An Analysis of Federal Banking Regulators' Failureto Enforce Consumer Protections:" 

• The Federal Reserve failed to write rules curbing unfair and deceptive mortgage lending practices for more than a decade after Congress directed it to do so.
• Office of the Comptroller of the Currency (OCC) examiners in 2005 found banks' standards for making mortgages had deteriorated; nonetheless federal bank regulators as a group did not issue guidelines for making or buying subprime loans for another two years, when it was too late to prevent the current fiasco.
• The OCC did not exercise its consumer protection authority to address unfair and deceptive practices for twenty-five years.
• Black and Hispanic communities received a disproportionate share of unfair and deceptive subprime home loans and as a result have suffered a disproportionate share of foreclosures and other financial distress. Even as subprime lending grew and peaked from 2000 to 2006, the Office of Thrift Supervision (OTS) made no referrals to the Justice Department for suspected race and national origin discrimination in mortgage lending.
• CRL believes that these and other failures demonstrate the need for a newly configured regulatory framework, one that includes ONE agency equipped with the powers it needs to provide the common sense safeguards that will benefit consumers and business alike.

The Obamaadministration and several key lawmakers in Congress have called for such anagency, which the White House would call the Consumer Financial ProtectionAgency. For such an agency to succeed, it must be able both to ensure thatconsumer protection rules are written fairly and to vigorously enforce thoserules first-hand, with onsite supervisory authority. 

Federalregulators at the OCC, the OTS and the Federal Reserve now say they understandthat strong, sensible consumer protections are essential to a strong economy.But as the Senate Banking Committee holds a hearing tomorrow to examine theproposal for a new agency, lawmakers must keep in mind the repeated failures ofthe existing regulatory framework to stop numerous abuses. These failures showthat fragmenting consumer protection responsibility among regulators whoseprimary focus is bank safety and soundness just doesn't work. 

The OCC andOTS, which are funded by fees from the banks they charter and regulate, havebeen reluctant to take actions that could cause an institution to switch toanother charter and regulator. This has led to a classic race to the bottom,with each agency coming to view the banks it oversees as customers rather thanentities to be regulated. That has led regulators to not only defend practicesthat hurt consumers, but also intervene to prevent state authorities fromacting to stop such practices.  Even theInspector General of the U.S. Treasury – home to the OCC and the OTS – hasgiven these two regulators failing grades when it comes to ensuring thatfinancial products won't blow up in the hands of consumers who buy them.

Regulators'failure to make consumer protection a priority has caused widespread economicdisruption, at great cost to financially distressed borrowers as well as totaxpayers. From home loans to credit cards to bank overdraft fees, thefinancial services arena is replete with bad practices. Each is a painfulreminder of why America needs to revamp its oversight offinancial services: We must never again forget that strong consumer safeguardsare the underpinning for a safe and sound banking system.

If you would like additional information, please contact Tom Vleisides at (213) 614-8066 ext. 244 or email tvleisides@castconsultants.com.

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