1: CAST SERVICE HIGHLIGHT

Workforce Management & Staff Modeling
Effectively manage work force productivity and resource levels

Proactively managing productivity, service delivery, staff levels and related costs are essential components in optimizing shareholder value. In recent years, campaigns to 'cut costs at all costs' have led to inefficient and arbitrary staff reductions, hampering overall productivity and negatively impacting service levels. Such efforts are typically not sustainable.  As a result, areas of excess cost and substandard service levels have persisted in most organizations. 

Factors influencing staff and productivity management             

• Inefficiencies from merging disparate operations, technologies and staffing practices
• Limited understanding of the implications of newly installed technologies
• Inefficiencies resulting from arbitrary, across the board staff reductions
• Inadequate performance metrics
• Lack of tools for objectively monitoring and managing productivity
• Perception that managing staff levels and productivity is an occasional, emergency activity

Why CAST for Work Force Management and Staff Modeling 

• 18 years experience reengineering operational areas in banking, insurance and capital markets
• Proven approach to developing work force management standards and performance metrics
• Comprehensive staffing models
• Demonstrated expertise in organizational design
• Established implementation tools and techniques
• Proven tools for monitoring and measuring benefit
  
  If you would like additional information, please contact Tom Vleisides at (213) 614-8066 ext. 244 or email tvleisides@castconsultants.com.

2: AMERICAN BANKER - The Top 10 People of 2009

This year's Innovators ranking includes 10 individuals who have done their part to push the industry forward with their thought leadership and progressive strategies in areas ranging from payments, to fraud detection to social media and personal financial management tools.

1. Secil Watson, Wells Fargo

It'd be easy to understand if Innovation were sidelined at Wells Fargo this year, given the recession and the massive IT project facing the bank - integrating Wachovia's 3,300 branches and customers in 21 states. But under Secil Watson's watch, online innovation continues unabated.

2., 3., & 4. Aaron Patzer, William Azaroff, Jeff Carter

Great minds feed off each other. With this in mind, BTN asked Nos. 2, 3 and 4 Innovators to discuss what they're up to, and what they see as the most innovative areas of financial services

5. Jeff Dennes, USAA

USAA's customers are early adopters by necessity, leading military lives that often place them both thousands of miles from home and light years ahead of the banking tech curve. The institution would be in trouble if it didn't understand how to match those needs to its IT choices, a task that partly falls on the shoulders of Jeff Dennes, executive director of mobile for USAA and one of the leaders of a eye-catching mobile deployment this year that suggests USAA is indeed in tune with its customers.

6. Joseph Ferra, Fidelity

Joseph Ferra rattled off the same three words - discoverability...accessibility...and usability...at least three separate times during a twenty-minute phone conversation, much like a coach whittling a complex playbook to its bare essentials. The game in this case, wireless financial management, is only in its opening minutes as institutions and users alike sift through myriad device and tech options available in the nascent channel.

7. Brendan Pickering, HSBC

Brendan Pickering's a road warrior whose weapon of choice is standards. The head of group fraud technology for London's HSBC Holdings typically visits about a dozen countries yearly to consolidate and standardizing the $402 billion institution's 80-nation fraud battle. "We're a huge group," says Pickering, who's been in his position for the past four years. "I can't sit in an ivory tower and do this."

8. Josh Peirez, Mastercard

Josh Peirez's first year as MasterCard's group executive for innovative platforms has been spent championing payments advancements that make users champions of their own spending destiny, a move that's well tuned to a marketplace that's jittery about debt.

9. Denis-Martin Monty, ING Retirement Services

Denis-Martin Monty spends a lot of time thinking about retirement while he's on the job, though mostly it's the retirement of other people. That's what's made the quick success of www.INGcompareme.com, a portal that allows people to view the personal finance and retirement planning habits of peers, so gratifying to the six-year veteran of the institution.

10. Dominic Venturo, U.S. Bancorp

Dominic Venturo, chief innovation officer at US Bancorp, runs a bit of a skunkworks operation at the Minneapolis-based bank. Charged with evaluating emerging technologies for their long-term potential, as well as shepherding some products into production and beyond, Venturo and his team are waist deep in forging the future of retail payments.

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3: AMERICAN BANKER - The Top 10 Companies and Technologies of 2009

Bank Technology News  |  December 2009

This year's Innovators ranking includes 10 companies and technologies that have stepped up with innovative solutions that meet pressing needs facing the financial services industry.

1. mFoundry, Starbucks Card Mobile

One of the most significant recent innovations in mobile payments was announced in September when mFoundry teamed up with Starbucks to introduce an iPhone app called Starbucks Card Mobile. The Starbucks program, which is being field tested at 16 Starbucks locations in Seattle and Northern California, utilizes a 2D bar code system from mFoundry which enables latte drinkers and other customers of the Seattle-based chain to pay for their orders using mobile phones at the point of sale.

2. IBM, ZTICK

There seems to be no online banking security regimen that's completely impervious to penetration by fraudsters, with attacks on business accounts and ACH fraud the latest vector to fall prey to massive compromise. IBM's ZTIC (Zone Trusted Information Channel) hardware security device offers respite from the type of man-in-the-middle and man-in-the-browser attacks that are currently plaguing business banking accounts.

3. PNC, Virtual Wallet

It's not often that a new banking product changes the way consumers talk about money. But it's even rarer that an offering changes the way banks talk about money. That's what PNC Financial Services Corp. did with its Virtual Wallet and Virtual Wallet Student online personal financial management tools.

4. Conexxus, REO Optimizer

The one-two punch of economic crisis coupled with housing slump has burdened banks with a larger responsibility for managing the distressed properties that are quickly starting to crowd their books. With REO Optimizer, Conexxus hopes to alleviate some of the burden.

5. ClairMail, Triple-play integration"

ClairMail has pioneered the mobile banking triple play by offering messaging, mobile Web and client applications on an integrated platform. Using the latest Smartphone technologies, the Novato, CA-based company fuses all three modes into a single, intuitive 'smart client' interface which provides mobile banking customers with an integrated user experience.

6. Oracle, Revelus Market Risk

One lesson from the financial crisis is that risk - in all its guises - is terribly difficult to grasp fully but the consequences for not doing so can be severe. At large financial institutions in particular it's vital to have a holistic view of all kinds of risk across different operational units and different geographies in order to remain within internally set risk parameters and to comply with stepped up regulatory rules. In the wake of these market pressures, Oracle launched its latest version of Reveleus Market Risk in January, part of Oracle Financial Services Analytical Applications.

7. Fundtech, Global PAYplus-Services Platform

Bank of America wants to bring the same customer service that FedEx offers for packages - tracking, pricing options, delivery choices, alerts, and online signatures - to the world of payments. It's no small aspiration. At most banks the payments data necessary for this level of customer interaction are trapped in the back office and can't be pushed out to where customers can use it. To change that, BofA has tapped Fundtech's Global PAYplus-Services Platform.

8. CECA, Digital Signature Project

Paper is expensive to handle and banks have long hoped for its elimination. But for many reasons - legal uncertainties, lack of technology standards, and mistrust by consumers - the "wet" signature has persisted, holding back the migration of paper documents to electronic form. However, the logjam may soon end. The Confederacion Espanola de Cajas de Ahorros (CECA, or The Spanish Confederation of Savings Banks) has rolled out its "Firma Digitalizada" project, a.k.a. Digitalized Signature for Financial Sector Branches, which is quickly exceeding its goals for 2009.

9. Fiserv, UChoose Rewards

Fiserv's UChoose Rewards program lets small financial institutions punch above their weight and compete with the large national banks in an area of growing importance to consumers: debit and credit card loyalty programs.

10. Bling Nation

Bling Nation Ltd. has a simple yet elegant way for community banks and credit unions to process retail merchant transactions. Instead of pushing retail debit or credit processing out to Visa or MasterCard networks to process purchases made at a restaurant or a clothing store, Bling Nation offers a wireless payment system where consumers can use their cell phones as secured mobile wallets.

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4: AMERICAN BANKER - Bernanke Opposes Big-Bank Breakups

American Banker  |  Tuesday, November 17, 2009

Federal Reserve Board Chairman Ben Bernanke on Monday rejected calls to break up large depository institutions, either on the basis of their size or the products they offer.

At a speech sponsored by the Economic Club of New York, Bernanke dismissed a recommendation by Bank of England Governor Mervyn King to break up large banks. Bernanke argued that simply making banks smaller would do little to ensure they did not pose risks to the financial system.

"I don't think simply making banks smaller would do it because banks can still be systemically critical even if they are somewhat smaller, if they are heavily interconnected with other banks, if they provide critical services to the financial industry or if risk of various sorts go across a whole range of things," he said.

Bernanke also said commercial banking activities should not be split off from proprietary trading, an idea endorsed by Paul Volcker, the head of the president's Economic Recovery Advisory Board. But Bernanke did say that regulators ought to be able to scale back activities on a case-by-case basis as regulatory reform proposals pending in Congress would allow.

"I do think there would be circumstances on which a supervisor or a regulator would force an institution to cut back on these kinds of activities," he said. "I find it difficult to draw a bright line" because some investment banking activities complement commercial banking and customer-related activities.

Rather than breaking up institutions, Bernanke said, reforms should create disincentives to becoming too large and should expand on the government's ability to resolve large institutions.

Addressing the ability to prevent the next crisis, Bernanke said predicting asset bubbles is extremely difficult.

"It is inherently extraordinarily difficult to know whether an asset price is in line with its fundamental value or not... The problem still arises that identifying those misalignments [is] very difficult and knowing how much to move your interest rate tool and how to avoid bringing the rest of economy down remains very, very challenging."

His solution? "A macro prudential systemwide regulatory system that will give us the best possible chance to try to identify emerging risk, including asset price misalignments, and try to restrain that risk," he said.

"So I do think the best approach here, if at all possible, is to use supervisory regulatory guidance to restrain undue risk-taking and to make sure the system is resilient in case [of] an asset-price bubble burst."

5: AMERICAN BANKER - B of A Succession Takes Spotlight at Deal Hearing

WASHINGTON — At a congressional hearing Tuesday probing Bank of America Corp.'s deal for Merrill Lynch & Co. Inc., one question loomed: who will succeed Ken Lewis at the helm of the Charlotte giant?

Testifying before the House Oversight Committee, B of A directors Charles Gifford and Thomas May refused to say whether Brian Moynihan, the bank's president of global consumer, small-business and card services, would be named to the top job.

"I'm trying to figure out if this is the guy that we are going to face when we are trying to deal with Bank of America, where we've got $45 billion invested," asked Rep. Elijah Cummings, D-Md., referring to investments the government has made in B of A through the Troubled Asset Relief Program. "I'm just trying to figure out, is this the face that we are going to be facing? I'm not asking for your decision, just whether he's one of your top candidates."

Sitting next to the directors, Moynihan kept quiet as Gifford struggled with a response.

"He is a very talented executive at Bank of America," Gifford said.

The exchange highlighted the evolution of the congressional investigation, which initially centered on whether government officials forced B of A into the Merrill deal but seemed to lose much of its focus by Tuesday — the committee's fourth hearing on the matter.

Lawmakers questioned B of A officials on everything from executive compensation to when the bank would repay Tarp funds and how much it currently charges credit card customers.

The officials were pressed on why B of A fired its general counsel, Timothy Mayopoulos, nine days after he told executives that the bank had a weak case for invoking a "material adverse change" clause that could dissolve the merger amid growing losses at Merrill.

Mayopoulos, also testifying at Tuesday's hearing, said he was surprised by his dismissal and had no clue why it happened. "I was stunned," he told the committee. "I had never been fired from any job, and I had never heard of the general counsel of a major company being summarily dismissed for no apparent reason and with no explanation."

Lawmakers also expressed suspicion after Moynihan, who initially succeeded Mayopoulos, reported directly to Lewis. Mayopoulos never reported to the chief executive and was fired by his boss, B of A's chief risk officer.

"Do you think reporting directly to the CEO can affect the general counsel position?" Rep. Diane Watson, D-Calif., asked Mayopoulos.

"I think it can affect the general counsel position," he responded.

Moynihan said that before he assumed the general counsel's role, he already reported directly to Lewis so the move "was not a change in my reporting relationship."

Moynihan said he believed the bank had a case to walk away from Merrill. He told the committee he was unsure why Mayopoulos was terminated, but said the bank needed to trim its executive ranks in light of the economic turmoil.

"I do believe he was capable of doing the job," Moynihan said, adding that he did not think Mayopoulos was fired because he disagreed with B of A's read of its case. "I have no knowledge that that had anything to do with it."

Other lawmakers left the hearing unconvinced.

"I want to make an observation with regard to Mr. Mayopoulos," said Rep. Edolphus Towns, the New York Democrat who chairs the oversight panel. "He doesn't know why he was fired. His boss, Mr. Moynihan, says he doesn't know why he was fired. In fact, no one seems to know."

Towns continued: "Either it was divine intervention or someone didn't like his legal advice," he said. "I'm leaning toward the last one. It looks to me like Ken Lewis and others at the company weren't about to tolerate someone who might get in the way."

Fed Chairman Ben Bernanke, former Treasury Secretary Henry Paulson and Lewis, who is set to retire at yearend, have already testified before the committee on their role in the Merrill deal. Bernanke denied pressuring Lewis to complete the deal but Paulson unapologetically told the committee in July that he threatened to fire Lewis and the B of A board if the bank did not close on Merrill.

"I was attempting to send a very strong message to Ken Lewis in terms of how strongly the Fed and Treasury viewed this matter," Paulson said.

Lawmakers still spent much of Tuesday's hearing debating whether the government forced B of A into the deal against its will and ultimately at a cost of $20 billion to taxpayers. Moynihan said he did not feel that the bank was "pressured" by the government. Gifford would not use the word "pressure" but said "it is fairest to say that the government pushed us hard to do this deal."

Republicans pressed Towns to hold another hearing that would include testimony from Treasury Secretary Tim Geithner. In a brief interview after the hearing, Towns indicated that he did not plan to hold further hearings and would not call on Geithner to testify.

"Geithner was definitely" involved in the discussion of government aid to save the deal, Towns said. "But he was not one of the big decision makers here."

6: AMERICAN BANKER - Smart-Safe Deposits Could Open New Markets to Banks

Smart safes, offering merchants deposit credit for cash that has not even left the store, are helping banks crack new markets.

These safes, which are linked to banks' networks and keep track of how much money has been deposited, have become an important element of some financial companies' retail payments services, attracting new customers and increasing revenue from existing clients.

Payments executives compare the safes to remote deposit capture, saying both technologies let banks serve customers outside the institution's footprint. In some cases they are bundling the two to handle clients' checks and cash.

Fifth Third Bancorp began testing the technology in 2007 and now has nearly 100 customers using its Remote Currency Manager safes at 3,000 sites, said Jeff Ficke, a senior vice president and treasury management director at the Cincinnati banking company.

The company pitches clients on a "triple play" of payments services, including card processing, remote check capture and the smart safes.

Ficke said the safes have made the service stand out from using cash couriers. "Provisional deposits are key," he said. "When we added our piece in, that really changed the value proposition."

Target markets include consumer businesses that handle lots of cash: quick-service restaurants, convenience stores, specialty retailers including automotive after-market and apparel, insurance agencies and government offices like motor vehicle departments.

The merchant can save on courier services because it needs cash pickup only once or twice a week rather than daily, and the safe reduces the risk of robbery or other cash loss.

The combination of three factors — provisional credit for deposits in the smart safe, improved risk management and more efficient operations — makes the business case, Ficke said.

Two Fifth Third clients are Buffets Inc., an Eagan, Minn., restaurant operator, and the Atlanta restaurant chain Wendy's/Arby's Group Inc.

Randy Colvin, a vice president at Fifth Third and the manager of its Remote Currency Manager product, said Buffets now processes 100% of its deposits through Fifth Third's various payments services. "A lot of their franchisees are out of our footprint, and we handle all their receivables," he said, and about 75% of all Remote Currency Manager deposits come from out of Fifth Thirds footprint.

Ficke said the smart safes fit into Fifth Third's overall retail payments strategy. "We are one of the few financial organizations that take a holistic approach to their receivables management," he said. Handling cash, checks and cards "is going to take us to the next level of growth."

Fifth Third is not alone, however; other banking companies are also offering smart safes to merchants.

JPMorgan Chase & Co. has gone live with a couple of clients in the last few months, said Joseph P. Stark, the executive director of coin and currency serivces in the New York company's treasury services unit. Both are fast-food chains, but he would not name them.

"It has just started to get traction with the banks this year," Stark said, and the banking company has many other merchant clients that might be interested in smart safes. "We have thousands and thousands of other clients for whom we are providing other services but not necessarily cash services."

Its treasury services unit works with all three major national armored courier companies and sells the service in a consultative approach to corporate clients, Stark said. "We have been watching the market for several years. We have reached a tipping point of client interest."

Financial companies began testing the smart-safe concept about two years ago. The safes typically contain a bill acceptor that can recognize the notes' denominations, and they are linked electronically to a bank's systems. Merchants receive deposit credit when the money is inserted into the safe, though a courier may not deliver the currency to a branch until several days later.

Sterling Financial Corp., an $11.9 billion-asset banking company in Spokane, Wash., has 150 to 200 smart-safe customers, mostly retailers and grocery stores, with some casinos, said Michele S. Bisconer, the manager of the automated clearing house and cash vault departments at Sterling Savings Bank.

Sterling works with the courier Garda World Security Corp. to manage customers' currency and with Garda's partner, Bluepoint Solutions Inc., to capture checks, she said.

"In our Northern California area, we could not be competitive in that marketplace until we opened that vault with Garda," Bisconer said. "In Northern California, we couldn't even offer next-day deposits before partnering with Garda."

Sterling, which introduced the service in January, is now able to offer same-day deposits for cash vault customers, she said.

"It has really allowed us to compete in any geographic location that we choose to now," Bisconer said, "and offer an effective, cost-competitive product to our customers. I believe the product gives us an edge over competitors."

Michael McSpadden, a senior vice president in Garda's cash logistics group, said the company's smart safe, which Garda calls CashLink, can be connected to both a bank's system and to a retailer's point of sale system for improved financial management.

He would not say how many customers are using CashLink but estimated that smart safes are in use at 20,000 sites industrywide. The market could potentially reach 2 million to 3 million sites, he said.

"It's not at the early adopter stage. It's at the start of the growth stage on the bell curve," McSpadden said. "With the down economy, everybody is trying to save money."

A merchant can buy the device or lease it through Garda or through the bank, he said. "For some banks, it could be an additional revenue source," he added.

Fifth Third has created a dedicated sales team to promote Remote Currency Manager, Ficke said. The team works with corporate clients to study merchants' business practices and identify ways that the smart safe can help them. "We look at the ways they interact with their couriers," he said. "We look at the ways they interact with their banks."

When pursuing a contract, Fifth Third targets three departments in a prospective client's organization: operations, where the issue is the time involved to manage day-to-day cash-handling issues; risk management, where the concerns are robbery, employee theft and lost deposits, and treasury, where the issue is quicker availability of funds for other corporate purposes.

Different executives latch onto the idea at different companies, Ficke said. "Somebody is going to take the lead. They're going to be an innovator."

7: AMERICAN BANKER - Parent Trap: Is RBS Good for Citizens?

Parents sometimes do the most embarrassing things.

Royal Bank of Scotland PLC, the parent company of Citizens Financial Group in Providence, R.I., last year posted the largest corporate loss in U.K. history. It has taken more government bailout money than any other bank in the world. And this month it agreed to hold a yard sale for assets that European regulators insisted the company shed, as a condition for receiving more aid.

The turmoil at RBS has been stunning, even by current industry standards. But problems at the parent company have not thrown Citizens off its game, according to Ellen Alemany, the chairman and chief executive of Citizens and of the broader collection of businesses known as RBS Americas. Citizens is a $153 billion-asset holding company for subsidiaries that run 1,480 branches in 12 states in the Northeast, the Middle Atlantic and the Midwest under the Citizens Bank and Charter One brands.

"It's business as usual," Alemany said in a statement prepared by the company in response to requests for an interview. "We are seeing good growth in the franchise from the first part of the year, and we are focused on developing even deeper relationships with the customers we serve as a super regional bank offering local and global products and services."

Business as usual? Seeing good growth? Is that possible for a business tethered to a company subsisting on 45.5 billion pounds ($75.5 billion) in bailout funds?

Well, yes, said Paul Hirsch, a professor of strategy and organization at Northwestern University's Kellogg School of Management.

The drama in the U.K. no doubt is a distraction for employees of RBS' U.S. businesses, Hirsch said. But Citizens' bankers are hardly alone in dealing with the stresses of working for a weakened corporate parent. Moreover, as a foreign-owned firm, RBS has not garnered the same level of media attention paid to U.S.-based rivals, which gives Citizens a bit of public relations cover when it comes to maintaining the confidence of U.S. retail customers.

"If [Citizens] were the only one in trouble and you didn't have so many other banks going down, it might be more of a problem," Hirsch said. "I would think Bank of America looks stranger to people than RBS because we're closer to it and we're seeing headlines about them every day."

But Citizens' ability to compete remains a concern to those who worry that austerity moves by its owner, on top of mounting credit costs, will undermine the franchise's value.

"They are competitive as long as they're not in effect discharging the people who have the best relationships with their customers, because that's who will preserve the franchise — that's the glue," said Arthur Loomis, president of Northeast Capital & Advisory Inc., an investment banking and consulting firm in Albany, N.Y. "That's how they've been chopping themselves off at the knees, when they've been letting those people go."

Citizens laid off 900 people, mainly in retail banking, in January. In April it announced it would cut another 1,250 positions over two years, some through attrition. But Citizens spokesman Mike Jones said the bulk of the cuts would involve back-office jobs in operational support and other departments that do not interact with customers.

Suzanne Moot, a banking consultant with M&M Associates in Milton, Mass., said Citizens continues to hold its own, particularly in New England, where its roots date to 1871. Citizens became a subsidiary of RBS in 1988 and has since made more than two dozen acquisitions to extend its reach.

"They have good distribution, they have very capable branch and regional people and they have a very reasonable lineup of products," Moot said. "I don't see any reason in the world why they can't be competitive with everybody."

Recent deposit-taking data supports that view. Between June 2008 and June 2009, deposits at RBS Citizens and Citizens Bank of Pennsylvania, the primary components of Citizens Financial, rose 4%, to a combined $103.1 billion.

More recently, the company has been opening about 1,000 accounts a week for customers responding to two rewards-based savings programs launched in the spring, HomeBuyer and CollegeSaver.

Under HomeBuyer, customers who save $100 a month for three years toward the purchase of a home will get $1,000 that can be used for closing costs or principal repayment. Under CollegeSaver, parents who open an account before their child's sixth birthday will receive $1,000 plus interest when the child turns 18, provided that a minimum of $25 has been deposited into the account each month.

Citizens says it also has been taking market share in private student loans and home loans. This year, the company for the first time cracked the top 20 in the mortgage lending business, and it has hired about 100 extra loan officers to help handle the added volume, Jones said. The company also plans to grow in wealth management. It recently hired two senior executives from Bank of America along with 40 relationship managers, and it plans to hire another 40 relationship managers next year.

But life on the other side of the ledger has been a lot tougher.

Citizens' loan book as been shrinking along with the rest of the industry, and credit costs have been climbing. Total assets at the two main Citizens subsidiaries dropped 9% from June 2008 to June 2009, to a combined $155.2 billion, while noncurrent loans and leases more than doubled, to $1.7 billion.

And therein lies the rub for RBS. At the current rate of asset contraction, the longer RBS holds on to Citizens, the greater the risk of erosion in the franchise's value. But divesting Citizens — a move that Loomis estimates would free up $15 billion of capital for RBS and bring in a premium for the deposits — probably makes little sense given current market valuations and the continued desirability of the United States as a destination for foreign bank investment.

"They're sitting on a franchise that may have significant value to them, and then it becomes a capital utilization question," Loomis said.

But British banks "have always viewed growth here to be much better than in Great Britain. The rates of return are better and the risk profile is lower."

8: AMERICAN BANKER - BNY Mellon's Talent Toolkit

Bank Technology News  |  December 2009

Keeping tabs on the hiring, training and performance of BNY Mellon's 44,000 employees in dozens of countries around the world is too important to be left to local custom or interpretation, and too crucial to be sidelined even given the recession.

Sheena Wilson, BNY Mellon's newly-appointed global head of talent strategy, is responsible for a massive technology project to create a global architecture to serve its global talent development strategy, layering several niche tools on top of the bank's PeopleSoft HR system. Supporting a global talent strategy with a global tech platform, or multiple globally available tools, is a trend among big banks these days, analysts say, because it fulfills two imperatives: first, it rationalizes the costs associated with maintaining multiple vendors in each of the primary talent technology silos, and, second, it endeavors to maximize the value the bank gets from its recruiting, succession planning, training, and compensation initiatives.

And that value is significant. Research indicates companies in the intermediate or advanced stages of implementing an integrated talent management strategy have lower turnover and have experienced less downsizing through the current recession, says Josh Bersin, president of talent consultantcy Bersin & Associates. In addition, their revenue per employee is 26 percent higher than companies without an integrated talent strategy.

SumTotal, a learning management systems vendor, says one global bank client estimates that it will save $50 million per year by consolidating its 27 different learning platforms and replacing time-consuming and expensive in-person training with Internet-based curriculum.

BNY Mellon's plan calls for the rollout of three best-of-breed talent management tools. Performance management technology comes from vendor SuccessFactors and handles employee goal setting, self-appraisals, and manager feedback. By the end of 2009, more than 40,000 employees will be using the system. For its continuous learning program, BNY Mellon has contracted with SumTotal; the LMS has also been rolled out in several geographies around the world. The final piece is what the bank calls My Career, a staffing and applicant-tracking platform from Taleo.

The siloed technology approach is not ideal, but even getting the talent management ecosystem down to three or four systems is an achievement for banks that have for years juggled 10 or more local products.

"Utilising a best-of-breed approach is distinctly advantageous when you have a diverse, world-wide business model," Wilson says. "Being able to take the best tools for us as a company and implement them successfully globally was our primary concern."

Bersin estimates the talent management software market will be $2.2 billion by the end of 2009. The leading-edge developments incorporate social networking-type features, says Chris Tratar, senior director of product marketing at Taleo. The holy grail would be an integrated system that holds talent profiles on everyone - from candidates to employees, and includes performance appraisals, training records, compensation and goals and interests.

9: AMERICAN BANKER - Bernie Madoff's It Strategy...

The IT Secrets from the Liar's Lair

Bank Technology News  |  December 2009

Two years ago, IT executive Bob McMahon wondered why his highly-profitable employer, Bernard L. Madoff Investment Services, didn't replace antiquated systems with more modern and efficient off-the-shelf technology. The Madoff systems were expensive to maintain and made it difficult to grow the business by expanding into new classes of securities. McMahon's job: To organize and document projects that would create custom technology for the firm's trading operations.

On Dec. 11, 2008, he got his answer.

That day, Bernie Madoff was arrested and charged with stealing tens of billions of his clients' money over decades. McMahon realized if "technologists" had replaced the proprietary systems with more modern and open computers, they would have invariably found the absence of data on countless stock trades that supposedly took place. In a sense, the preservation of old computer technology helped Madoff successfully go undetected for years until his massive Ponzi scheme collapsed that day.

Over the past six weeks, Securities Industry News, a sister publication of Bank Technology News, has dug into and beyond the court records to construct an extensive picture of how Madoff actually operated: The systems and technology he and underlings used to create - or fake - the most detailed set of customer accounts underlying a fraud in the history of the securities industry.

Included are details of a declaration filed Oct. 16 on behalf of the court-appointed trustee, Irving Picard, investigating the case, and information filed in court when two IT employees were arrested in mid-November. The documents, and subsequent interviews, describe how the real and the fake trading floors worked, and why the securities investors believed they owned are never going to be declared "missing." The answer: Because they never existed in the first place.

LEGITIMATE AND ILLEGITIMATE

"I asked myself how Bernie could have hidden and maintained this for so long. A lot of it was because he had proprietary and legacy systems. And he relied on IT people he hired and paid," to not upset the status quo, says McMahon.

As a project manager, he always felt like an odd duck at Bernard L. Madoff Investment Services (BLMIS), an outfit which seemed to lack standards and procedures routine at former employers of his such as the International Securities Exchange and CheckFree Investment Services (now Fiserv, Inc.). Little was documented and the company seemed to be overwhelmed keeping the older systems from breaking down.

"I immediately recognized there was massive institutional chaos in the way the place was managed. No one found value in participating in project management meetings or in writing things down. There was no documentation," says McMahon, today an operational performance consultant for Standard & Poors.

McMahon lasted less than a year at Madoff's firm. He was hired in February 2007, by long-time BLMIS chief information officer Elizabeth Weintraub. She died in September of that year. Differences over updating the systems and formalizing procedures with Weintraub's two successors led to his dismissal the following January, by McMahon's account.

Nader Ibrahim, who was on the support desk from 2000 to 2003, confirmed that the atmosphere in the BLMIS IT department was often tense and unusual.

"We did not have titles, which was definitely suspicious to me. We all knew who each other worked for, but nobody knew what the other person was doing," he said. "Everything was on a need-to-know basis. There was a lot of secrecy."

But the real secret about Madoff's purported trading for thousands of investment advisory clients, investigators say, is that it never happened.

To be fair, it's not as if Madoff didn't have a real trading floor. Madoff's legitimate market-making business was located on the 19th floor of 885 Third Ave., in New York, using one IBM Application System/400 computer, known within the firm as "House 5.'' BLMIS' information technology operation was located on the 18th floor, where McMahon had his cube and was supposed to organize and document projects involving custom technology for the trading operation.

What was on the 17th floor? The fake trading floor where a second IBM AS/400 known internally as "House 17" processed historical price information on securities allegedly bought for clients. The end result was phony trade confirmations and wholly manufactured-but official-looking-statements for 4,903 investment advisory clients.

OPEN AND CLOSED

Madoff's legitimate traders used a mix of green-screen and "M2" Windows-based desktop computers. These ran in-house trading software referred to as MISS, which McMahon recalled standing for something like "Madoff Investment Systems and Services." The internally-named and developed M2s ran MISS as a Windows application and were used by younger traders who wanted familiar software instead of the rigid green screen system, developed around 1985, where only text appeared on screen and instructions were in almost cryptic codes entered into command lines.

Support for House 5 was almost like that of a large investment bank's support of its trading operations. Nothing was too good, in theory, for the Madoff trading operation on the 19th floor. Even if it was not necessary.

"Madoff did not buy anything off the shelf. The IT team was doing proprietary software development. Maybe J.P. Morgan Chase needs all this heavy technology, but a hedge fund with 120 people doesn't have to be in systems development," says McMahon, adding that a similarly-sized firm might have a half dozen IT people. Both McMahon and Ibrahim pegged the number of people actively supporting technology at BLMIS at between 40 and 50.

But large staff and support for House 5 has not thrown off investigators. Court-appointed trustee Irving Picard, who is charged with liquidating Madoff's remaining assets, has instead focused on "House 17,'' where the daily administration of the Ponzi scheme was executed.

Picard hired an investigator, Joseph Looby, an accounting forensics expert who probably knows the most about the technology that aided Madoff in stealing client funds other than former members of Madoff's staff. Looby is an expert in electronic fraud and senior managing partner with FTI Consulting Inc. in New York.

Looby's 20-page declaration on Picard's behalf with the U.S. Bankruptcy Court for Southern District of New York on Oct. 16 amounts to the deepest examination yet of the foundational technology behind Madoff's fraud. The declaration seeks to deny paying Madoff's victims based on their last statements, dated Nov. 30, 2008, because the values stated were based on investments that were allegedly never bought or sold (see graphic at right).

Reached in his Times Square office, Looby, like Picard, said he could not elaborate on his examination of "House 17. But in the declaration, he reported that "House 5" supported Madoff's market-making operation and was networked to third parties outside the firm that would logically support a trading operation. One, for example, was the depository and clearing firm Depository Trust & Clearing Corp. (DTCC).

"[House 5] was an AS/400, consistent with a legitimate securities trading business," Looby wrote. In the declaration, he often compares House 5's legitimacy to House 17's illegitimacy.

House 17, for reasons that are now obvious, was shut off to anyone but Madoff's former chief finance officer and right-hand-man Frank DiPascali Jr. as well as his alleged accomplices. That list now includes Jerome O'Hara, 46, and George Perez, 43, who have both been charged in civil and criminal complaints with helping DiPascali create the phoney statements that supported the Ponzi scheme. O'Hara and Perez face 30 years in prison and more than $5 million in fines if convicted. DiPascali sits in a New York jail awaiting sentencing after pleading guilty to 10 felony counts on Aug. 11. He faces 125 years and his sentencing is scheduled for May 2010. In the interim, investigators are hoping to get his cooperation to implicate others.

"They want to squeeze him for more than what he's giving now so he can avoid 125 years in prison," says Erin Arvedlund, author of "Too Good to be True: The Rise and Fall of Bernie Madoff." The former reporter for Barron's in a widely-cited 2001 story challenged Madoff's implausible if not impossible returns and asked why hundreds of millions in uncollected commissions were left on the table. It appears now there were no trades made, from which to derive commissions. "[House 17] was a closed system, separate and distinct from any computer system utilized by the other BLMIS business units; consistent with one designed to mass produce fictitious customer statements," according to Looby's declaration. House 17's expressed purpose was to maintain phony records and crank out millions of phony IRS 1099s on capital gains and dividends, trade confirmations, management reports and customer statements. "The AS/400 was like a giant Selectric typewriter. When you're making up numbers like that, you're using your computer as a typewriter," says computer consultant Judith Hurwitz, president of Hurwitz & Associates in Newton, Mass.

ON THE HOUSE

House 17 held 4,659 active accounts overseen by DiPascali where Madoff purportedly executed a "split strike conversion" strategy on large cap stocks. In basic terms, it's a "collar," putting a floor and a ceiling on returns. A floor on potential losses is created by purchasing a put on a stock. The sale of a call then puts a ceiling on the returns. The "split" in "strike" prices is considered a "vacation trade.'' The trader doesn't worry about what happens until the expiration dates on the put or call options arrive.

The strategy was allegedly applied for the thousands of customers on "baskets" of large cap stocks. According to the faked BLMIS statements, these accounts typically yielded 11 to 17 percent returns annually.

Another 244 "non-split strike" accounts produced phony returns in excess of 100 percent and were managed by BLMIS employees other than DiPascali.

The "non-split strike" accounts included many "long time" Madoff customers and feeder funds such as those operated by Stanley Chais or Jeffry Picower and against whom Picard has filed civil suits to reclaim billions in profits alleged to be illegal. Picower of Palm Beach was found dead in his pool Oct. 25. Chais maintains he's innocent.

In the declaration, Looby repeatedly asserts that no securities were ever bought for BLMIS investment advisory customers. Proceeds sent in by clients for that purpose were "instead primarily used to make distributions to or payments on behalf of, other investors as well as withdrawals and payments to Madoff family members and employees," the declaration states.

Here's how it worked: BLMIS employees fed the AS/400 constantly with stock data, enough to support trades that would satisfy the expectations promised to Madoff's thousands of eventual victims. To support the fantasy returns, so-called "baskets" of S&P100 stocks would be bought and sold, on behalf of clients. Looby did not specify the typical size of a basket, but they were proportional to the proceeds a client had remitted to BLMIS. "If a basket was $400,000 and a customer had $800,000 available, two baskets of securities and options would be purportedly "purchased" for the account," Looby wrote. The types of stocks can be seen in a Madoff statement. Proceeds from purported basket sales existed only on "House 17" and on the paper it put out, which indicated the funds were put into safe U.S. Treasury bonds. Meanwhile, funds remitted by clients were being diverted to a JPMorgan Chase & Co. bank account known as "703."

The complaints against O'Hara and Perez add further rich detail to how Madoff and his accomplices used aging but extensive computer technology to maintain the fraud. They also seem to confirm what common sense suggests about such a massive and enduring fraud: Madoff and DiPascali had to have technical help.

"O'Hara and Perez wrote programs that generated many thousands of pages of fake trade blotters, stock records, Depository Trust Corp. reports and other phantom books and records to substantiate nonexistent trading. They assigned names to many of these programs that began with "SPCL," which is short for "special," according to an SEC press announcement about the civil complaint.

The "special" programs were found on backup tapes, according to an official close to the investigation and who asked not to be identified. He added that the pair has not been cooperating with authorities. The evidence in the complaints is from BLMIS computers and documents, according to the source.

Among 10 fraudulent functions detailed in the criminal complaint, the special programs altered trade details by using "algorithms that produced false and random results;" created "false and fraudulent execution reports;" and "generated false and fraudulent commission reports." The criminal complaint also charges the pair with helping Madoff and DiPascali create misleading reports between 2004-08 to throw off SEC investigators and a European accounting firm hired by a Madoff client.

In 2006, O'Hara and Perez cashed out their BLMIS accounts worth "hundreds of thousands of dollars" and told Madoff they would no longer "generate any more fabricated books and records." O'Hara's handwritten notes from the encounter allegedly say "I won't lie any longer."

However, the "crisis of conscience" did not stop them from asking for a 25 per cent bump in salary and a $60,000 bonus to keep quiet, the complaints allege.

"DiPascali then managed to convince O'Hara and Perez to modify computer programs to he and other 17th floor employees could create the necessary reports," according to the SEC complaint. The reference to "other 17th floor employees" suggests that O'Hara and Perez will not be the last to be charged.

A sharp eye could have detected that funds weren't where they were supposed to be: 2008 customer statements showed funds in a "Fidelity Spartan U.S. Treasury Money Market Fund" that hadn't been offered since 2005. The fabulous returns had lulled BLMIS clients to sleep. While some trading data was input by hand, DiPascali cleverly used "essentially a mail merge program" to replicate the same stock trading information across multiple accounts, according to the declaration.

Stocks in a basket were "priced" after the market closed (i.e., with the knowledge of the prior published price history). Customer statements were then fabricated by BLMIS staff on House 17 which appeared to outsiders to keep track of customer investments and funds in a manner typical of any investment advisor. "BLMIS staff confirmed it, the system facilitated it and consistent returns could not have been achieved without it," Looby's declaration states.

Indeed, the customer statements had been perfected as an instrument in the deception. Madoff investor Ronnie Sue Ambrosino, a former computer analyst who ironically had worked on an AS/400, told Securities Industry News that she never suspected a thing. After all, the Securities and Exchange Commission had given Madoff a clean bill of health on several occasions since 1992 by not digging deeply into his operations or just plain neglect.

"The statements were always perfect, neat and immaculately presented. They came on time and everything was like clockwork," says Ambrosino, 56, a victim and now activist representing a group of about 400 Madoff investors. She bristles when the AS/400 is called old or outdated. "I know the 400 and it's a pretty powerful machine." It was powerful enough to convince investors that whatever proceeds they sent to Madoff were being invested in the stocks cited on their statements. "Key punch operators were provided with the relevant basket information that they manually entered into House 17. The basket trade was then routinely replicated in selected BLMIS split strike customer accounts automatically and proportionally according to each customer's purported net equity," Looby's declaration says.

The situation was largely the same for non-split strike clients except that the purported trades were in single equities, not baskets. "Thousands of documents including customer statements, IA (investment advisory) staff notes, account folders and programs in the AS/400 were reviewed, and these documents confirm the fact that such statements were prepared on an account-by-account basis (i.e. not basket trading)," Looby wrote.

Looby verified that trades between 2002 and 2008 were phantom by cross-checking with various clearing houses such as DTCC, Clearstream Banking S.A. in Luxembourg, the Chicago Board of Options Exchange (CBOE) and four other clearing firms. He also compared the cleared trades on the AS/400 "House 5" and "99.9 percent" of the fake trades on "House 17" did not match. The only connection he found is what looked like a small portion of a single client's trades, which were directed by the client and recorded on House 5.

Madoff employees monitored the "baskets" for split strike accounts in an Excel spreadsheet to make sure "the prices chosen after-the-fact obtained returns that were neither too high or low."

However, such monitoring was far from perfect. Looby cited several examples where daily trading volumes at BLMIS exceeded the entire daily volume for several stocks.

For instance, Madoff reported the purchase of 17.8 million shares of Exxon Mobil on Oct. 16, 2002. This amounted to 131 percent of the company's trading volume for that day. BLMIS's actual Exxon Mobil holdings that October were verified by the DTCC at 5,730 shares. Similar discrepancies for Amgen, Microsoft and Hewlett Packard were found on Nov. 30, 2008, the date for the final batch of BLMIS customer statements, as it turned out.

BLMIS data for options puts and calls was even more blatantly unreal. On Oct. 11, 2002, Looby found that BLMIS "applied an imaginary basket to 279 accounts with a volume of 82,959 OEX (S&P 100 options) calls and 82,959 puts." That amounted to 13 times the OEX volume at the CBOE that day.

MORE TO COME?

Many following the case speculate that other criminal defendants will be named. A spokeswoman for the U.S. Attorney for the Southern District of New York declined comment. However, it's possible that others beyond the first five will eventually be hauled into criminal court. Picard has already tightened the noose in civil court, attempting to reclaim billions from Madoff family members and close associates.

Recent legal documents in the case tangentially and directly implicate others. A 264-page lawsuit filed by investor Jay Wexler on Oct. 20 accuses Bernard Madoff's assistant and recruiter Annette Bongiorno and her staff with researching stock and options data "to generate tickets showing fictitious trades." No response from Bongiorno could be obtained or found by press time.

In his expansive lawsuit for which he demands a jury trial, Wexler identifies 19 defendants including banks, auditors, former feeder funds, several Madoff family members and associates, former BLMIS employees and even an insurance company.

Looby's declaration has several references to unnamed accomplices that would seem to dovetail with Wexler's accusations. "To create the illusion that these stocks had been purchased or sold, BLMIS employees would use the AS/400 and its software programs to fabricate customer statements."

Prosecutors have a mountain of evidence and they have leverage with the 52-year-old DiPascali. "We know he did not do it alone," says Arvedlund, the author. And he has expressed a willingness to help.

His confession in court Aug. 11 began "...I helped Bernie Madoff, and other people, carry out the fraud that hurt thousands of people." At the end of his confession and just prior to pleading to be released on bail, he said: "I hope my help will bring some small measure of comfort to those who have been harmed. I apologize for this catastrophe..."

Prosecutors argued for DiPascali's release so he could help them sort through the AS/400 and 6,000 boxes of evidence that occupy a half a floor in a New York building. They failed and he was sent to jail to await sentencing.

As for Bernie Madoff, the fraud's chief architect, he's not talking and could take his secrets to his grave. "Boy, that would be a shame," says Arvedlund.

10: AMERICAN BANKER - Payments: The Lever of Bank Profitability

US Banker  |  December 2009

The global financial crisis has made all of us revisit the basics of banking. A better understanding of the importance of payments to a bank's overall health can help bankers manage customers' behavior for greater long-term profit.

Since the very beginning of deposit banking three centuries ago, people have kept surplus money in accounts, like checking accounts, that provided immediate access to their funds even when less liquid accounts like CDs, notes and bonds offered far better interest rates. Customers are paying the bank the difference between what they are earning in liquid accounts and what they could earn elsewhere, for the ability to quickly access their funds. This liquidity premium accounted for fully one-third of bank revenues in 2007. And when various service fees, and the premium for credit card loans and overdraft coverage are added in, the business of providing consumers with the banking infrastructure to make payments of various kinds accounted for 65% of revenue.

While these industry-wide numbers remain remarkably consistent over time, there is substantial variation among individual banks in the percentage of their total revenues that are payments related, from a low of 43 percent to a high of 75 percent among the top 12 U.S. banks. This variation is significant, because we have found that in normal market conditions banks with both a high percentage of their revenues related to payments, and a high profit margin on those revenues, tend to be more highly valued by the market over time. Investors tend to value stable, low-risk income streams over other sources of bank revenues

Further, our analysis shows that there is great variation among banks in their payments profit margins, just as in the extent of their payments-related income. Although U.S. banks with assets of more than $1 billion achieved a profit margin of 35 percent, that average includes institutions with margins as high as 48 percent and as low as 6 percent, reflecting different combinations of business mix, economies of scale, and the degree to which the banks have focused on optimizing their payments franchise.

The wide range among banks in the two factors that correlate with good market performance - the percentage of payments-related business and the profitability of that business - means that for most banks there is an enormous opportunity for improvement. In our work with banks over the years we have found that the most successful payments banks do three very important things. First, they manage core banking business - deposit taking, lending and payments - by integrating previously free-standing lines of business like credit and debit cards into an overarching retail organization.

Second, they have sharpened focus on "the business of payments" by implementing payments councils as well as creating payments czars - executives with the authority to drive common measures, metrics, and strategies across organizational barriers.

Third, they seek to understand total customer value to the bank and tailor offerings, pricing, and service levels accordingly, going far beyond simply aggregating customer data across products and accounts. Many banks, anxious to avoid unnecessary risk, have reverted to taking across-the-board actions to re-price and reduce exposure - actions that not only may prove counterproductive, but also may actually increase their legal and regulatory risk.

Most important is for banks to develop a rigorous procedure for measuring, managing, and then optimizing their payments-driven revenues and margins. Without a shared, statistically accurate understanding of how customer payments behavior affects both sides of the bank balance sheet and income statement - a payments P&L in other words - it is hard for banks to make an integrated payments strategy effective.

The next step is to apply this understanding at the retail level to specific customer segments. For example, heavy cash users are less profitable for banks than otherwise identical customers who use debit cards at the point of sale - not just because of lost interchange revenue on the transactions, but because of lower average account balances and ATM-related expenses. This perspective changes the economic case for targeted incentives to encourage this segment of customers to use their debit cards for purchases.

Relatively modest improvements in payments-driven revenues and costs across thousands or millions of accounts can bring big numbers directly to the bottom line, improving overall profit and market value. In today's environment, payments profitability optimization is one of the best uses of scarce bank resources.

11: AMERICAN BANKER - Tech Spending Forecast: Gloomy

US Banker  |  December 2009

By acquiring Metavante Technologies Inc. and its extensive roster of small and midsize bank clients, Fidelity National Information Services Inc. has attained what is arguably the best view of the entire banking industry's purchasing power.

The view is not very pretty. After weathering a year of poor sales, the Jacksonville, Fla., vendor sees no improvement in information technology spending before the middle of next year. Hammered by bad loans, rising default rates on consumer credit cards, slumping revenue from transaction fees and many other problems, few banks have made tech spending a priority.

"It is what it is; it is going to remain that way for another few quarters, and then hopefully we will move upward from there," Lee Kennedy, the company's vice chairman, told analysts on a conference call in October to discuss Fidelity's third-quarter results, its first since closing the Metavante acquisition. "It is still our thinking as we move through 2010 and get into the second half, potentially, of 2010, we will see some type of an improvement," he said.

The spending slowdown, a result of the protracted economic slump, has even reached community banks, which until recently had largely continued their technology spending as larger rivals retrenched.

In its 2009 IT spending forecast, the research firm Celent had projected both 2009 and 2010 to be flat years for spending, due to both capital constraints and the rising maintenance costs that already comprise three-fourths of the estimated $50.2 billion in tech spending by North American banks this year. Spending on new projects was expected to take the biggest hit, falling from $10.2 billion in 2008 to $8.7 billion this year.

Celent will not have its final 2009 results or a revised 2010 outlook completed until it finishes fourth-quarter polling of bank senior IT executives, but senior analyst Jacob Jegher says he thinks banks will still be reluctant to take on new spending, despite glaring needs for upgrades to cash management, mobile banking and new Web 2.0 online tools like personal financial management. "The likelihood of projects going forward today are much slimmer they have were in the past," he says.

David J. Koning, an analyst at the brokerage firm Robert W. Baird & Co., says that the combined heft of Metavante, which catered mainly to small and midsize banks, and Fidelity, which targets similar customers but also has several major banking companies as clients, gives the post-merger company a unique window on financial companies' budgeting.

He says that Fidelity's revenue was weaker than the market had expected, especially for licensed software.

"Anywhere banks can cut discretionary spending, they're doing it," Koning says.

Fiserv Inc. in Brookfield, Wis., Fidelity's chief rival, sounded a similarly cautious tone at its analyst day conference in September, Koning says. "Everybody's a little cautious. They don't want to promise more than they can deliver."

Fidelity says it expects savings of $60 million to $65 million this year from the Metavante purchase and has already achieved $32 million in combined cost savings year-to-date, including $21 million in the third quarter, according to Mike Hayford, a corporate executive vice president and the chief financial officer.

Both companies had been cutting costs in anticipation of the sale, which was announced in April. For the third quarter, Fidelity reported higher earnings on lower sales, with a 3.8 percent decline in revenues to $850.7 million. The company attributed the decline in part to lower license and professional services revenue.

12: ANNOUNCEMENTS - Chase Website Gives HSA Customers ...

...a Free and Simple Way to Manage Accounts

Customers can now pay bills and contribute directly to their HSA through the secure website

NEW YORK--(BUSINESS WIRE)--Chase announced today new enhancements to its Health Savings Account website, www.chase.com/hsa, which will let customers pay medical expenses and contribute directly to their HSA with just the click of a mouse.

13: ANNOUNCEMENTS - Citi Sells Diners Club North America Business

Citi today announced that it has signed a definitive agreement to sell its Diners Club North America card business to BMO Financial Group (BMO). The deal gives BMO exclusive rights to issue Diners cards in the U.S. and Canada.

Terms of the deal were not disclosed. The sale is anticipated to reduce Citi's assets in Citi Holdings by approximately $1 billion and is not expected to have a material impact on Citi's net income or capital ratios. The transaction is expected to close by March 31, 2010 and is subject to regulatory approvals and customary closing conditions.

The sale of this business is consistent with Citi's strategy to optimize the assets and businesses within Citi Holdings while working to generate long-term profitability and growth from Citicorp, which comprises its core franchise. Citi continues to make progress on its strategy and will continue to pursue opportunities within Citi Holdings that create the most value for stakeholders.

14: ANNOUNCEMENTS - Wells Fargo to Buy Back Auction Rate Securities

Wells Fargo & Company announced today that it will purchase Auction Rate Securities (ARS) nationwide from eligible investors who bought ARS through one of three of its broker-dealer subsidiaries prior to February 13, 2008. Eligible investors will receive additional information regarding the terms of the buyback offer by mail within ninety (90) days.

This announcement was made in conjunction with separate agreements reached with the State of California Attorney General’s office and the North American Securities Administrators Association regarding Wells Fargo’s participation in the auction rate securities (ARS) market. The settlement agreements resolve all active regulatory investigations and enforcement actions concerning Wells Fargo's participation in the ARS market, without Wells Fargo admitting to the allegations in the various investigations and complaints. The company has agreed to pay $1.9 million in fines and expenses.

LINK TO FULL ARTICLE: https://www.wellsfargo.com/press/2009/20091118_ARS

15: BANKINSURANCE.COM - FDIC Reports Insured Institutions' Net Income More Than Trip

NEWS IN BRIEF - NOVEMBER 30 - DECEMBER 6, 2009

The Federal Deposit Insurance Corporation (FDIC) reported that net income earned by FDIC-insured U.S. banks and savings institutions in the third quarter more than tripled to $2.8 billion, up from $879 million in third quarter 2008.  This increase occurred despite a 22% climb in loan loss provisions to $625 billion; a 80.8% jump in net charge offs to $50.8 billion, up from $28.1 billion, and a $34.7 billion increase in noncurrent loans and leases to $366.6 billion, or 4.94% of all loans and leases, the FDIC reports.  Noninterest income topped net interest income in growth, increasing by $4.8 billion or 6.8%, while net interest income rose 4.8% or $4.6 billion, on an average net interest margin of 3.51%.

Fifty institutions failed in the third quarter; 47 were absorbed by mergers and acquisitions, and banks on the “Problem List” grew 32.7% from 416 to 552.  Only three institutions were newly chartered, the smallest quarterly number since World War II.

The FDIC’s Deposit Insurance Fund (DIF) balance fell below zero for the first time since 1992, dropping to a negative $8.2 billion, reflecting the setting aside of $38.9 billion in a contingent loss reserve with a positive balance of $30.7 billion.  The FDIC expects to build the DIF with $45 billion in pre-paid premiums due in December.  FDIC Chairman Sheila Bair said, “Today’s report shows that, while bank and thrift earnings have improved, the effects of the recession continue to be reflected in their financial performance.”  Bair said that if the industry addresses the problems banks face head on, “we will see clear sign of improvement in bank earnings and lending in 2010.”  To read the FDIC’s Quarterly Banking Profile, click here.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

16: BANKINSURANCE.COM - FINRA Adopts NASD's Variable Annuity Rule

NEWS IN BRIEF - NOVEMBER 30 - DECEMBER 6, 2009

The Financial Industry Regulatory Authority (FINRA) has filed a proposed rule change with the Securities and Exchange Commission (SEC) that would transfer NASD Rule 2821 into FINRA Rule 2330 in the Consolidated FINRA Rulebook.  FINRA proposes no substantive changes to the deferred variable annuity rule, which establishes supervisory procedures and compliance standards intended to protect consumers and assure their purchases or sales of variable annuities are suitable.  To read the proposed rule change, click here.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

17: BANKINSURANCE.COM - Bank Indexed Annuity Sales Triple in Third Quarter

NEWS IN BRIEF - NOVEMBER 23 - 29, 2009

U.S. indexed annuity sales in the third quarter grew 11.3% to $7.5 billion, up from $6.7 billion in third quarter 2008, with bank sales tripling to comprise 12.3% of all indexed annuity sales, according to AnnuitySpecs.com’s Advantage Index Sales and Market Report.  Among carriers “some companies’ sales are up more than 75%, and others’ sales are down almost 60%,” AnnuitySpecs.com President and CEO Sheryl Moore said.  Minnesota, MN-based Allianz Life ranked as the number one indexed annuity provider, followed by West Des Moines, IA-based American Equity, Radnor, PA-based Lincoln National, Lansing, MI-based Jackson National, and Des Moines, IA-based Aviva.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

18: BANKINSURANCE.COM - Overall Fixed Annuity Sales Drop 21%

NEWS IN BRIEF - NOVEMBER 23-29, 2009

Third-quarter U.S. fixed annuity sales fell 21% to an estimated $21.9 billion, down from $27.7 billion in third quarter 2008 and second quarter 2009, according to Evanston, IL-based Beacon Research’s survey of fixed annuity providers.  Book value products were the most popular fixed annuities sold, but their $9.9 billion in sales reflected a 30% drop from a year ago.  In contrast, indexed annuity sales rose 6% to $7.3 billion to rank second.  Market value adjusted (MVA) annuities ranked third but fell 37% to $2.7 billion, and fixed income annuities ranked fourth, declining 16% to $1.9 billion.  Pacific Life was the number one issuer of book value annuities and the number one provider of fixed annuities to banks.  Allianz led in indexed annuities; ING USA led in MVA sales, and New York Life continued to dominate in fixed income annuity sales, Beacon Research’s Fixed Annuity Premium Study shows.  For more on the report, click.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

19: BANKINSURANCE.COM - Labor Dept. Drops Rule Allowing Direct Investment Advice ...

... to Defined Contribution Pension Plan Participants

NEWS IN BRIEF - NOVEMBER 23-29, 2009

The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) has withdrawn the January 21, 2009 Final Rule under the Employee Retirement Income Security’s Act that implemented the Pension Protection Act exemption that would have allowed mutual fund company representatives to offer direct investment advice to defined contribution plan participants.  The Final Rule was to have taken effect May 17, 2010.  To read the notice withdrawing the Rule, click here.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

20: BANKINSURANCE.COM - Federal Agencies Issue Final Model Privacy Notice Form

NEWS IN BRIEF - NOVEMBER 23-29, 2009

The Federal Deposit Insurance Corporation (FDIC) Board, the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, the Federal Trade Commission, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the U.S. Securities and Exchange Commission have issued their jointly developed Final Model Privacy Notice Form (model form).  The model form is designed to enable financial institutions to succinctly, comprehensibly and in an easy-to-read font notify consumers of their information-sharing practices.  Institutions that use the model form will obtain a “safe harbor” and satisfy disclosure requirements.  To access the Final Model Privacy Notice Form, click here.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

21: BANKINSURANCE.COM - Financially Secure Americans ...

... Conservative & Moderate Risk Takers

NEWS IN BRIEF - NOVEMBER 23-29, 2009

Almost half (49%) of working Americans with at least $500,000 in investable assets describe themselves as tentative or reluctant to invest in the stock market, while 6% characterized themselves as enthusiastic about investing, according to a September survey conducted by PNC Wealth Management, a unit of Pittsburgh, PA-based PNC Financial Services Group.  One-third (34%) say they are more conservative, and 59% describe themselves as balanced or moderate risk takers.  PNC Wealth Management Vice President Thomas Melcher said, “The survey results validate the value of an integrated wealth management model – one that combines estate, financial and tax planning with investment management.”

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

22: BANKINSURANCE.COM - MassMutual Records 76% Jump in Retirement Plan Sales

NEWS IN BRIEF - NOVEMBER 23-29, 2009

Springfield, MA-based MassMutual announced its Retirement Services Division recorded a 76% jump in nonprofit retirement sales plans in the first ten months compared to the same period last year, bolstered by consolidating multiple plans under a single provider.  MassMutual Retirement Services Division Senior Vice President Hugh O’Toole said, “We recently completed the consolidation of $100 million in retirement plan assets from 403(b), 401(a), 457(b) and 457(f) retirement plans for a large healthcare organization with more than 3,200 employees.”

Bank owned life insurance (BOLI) reversed its $247,000 loss a year ago and generated $297,000 in earnings in the quarter.  Trust fees, brokerage and insurance commissions, and BOLI earnings comprised, respectively, 6.9%, 16.4%, and 2.5% of noninterest income, which climbed 51.1% to $11.91 million, up from $7.88 million, helped by $1.21 million in securities gains and $998,000 tied to the company’s FDIC-sponsored acquisition of Elizabeth, IL-based The Elizabeth State Bank.  Net interest income on a 4.06% net interest margin slipped 0.5% to $22.69 million, down from $22.81 million, as loan loss provisions increased by $4.8 million to $11.9 million.  Net income grew 20.7% to $3.5 million, up from $2.9 million a year ago, and Heartland Chairman, President and CEO Lynn Fuller said, “Third quarter results reflect very solid core earnings, aided by an exceptional net interest margin of 4.06%.”

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

23: BANKINSURANCE.COM - FDIC Prepaid Assessments Approved

NEWS IN BRIEF - NOVEMBER 16 - 22, 2009

The Federal Deposit Insurance Corporation (FDIC) Board has approved the Final Rule on Prepaid Assessments, which requires insured institutions to prepay estimated insurance assessments for fourth quarter 2009 and all of years 2010, 2011 and 2112 by December 30, 2009.  Each institution’s assessment rate will be based on its rate in effect on September 30, 2009, generating approximately $45 billion for the FDIC Deposit Insurance Fund, the FDIC estimates.  FDIC Chairman Sheila Bair said, “The comment letters we received over this past month made clear that the FDIC and the industry are of the same mind: we will do whatever it takes to maintain the public’s confidence in insured institutions.”  To read the Final Rule on 12 CFR Part 327, click here.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

24: BANKINSURANCE.COM - Insurance, Trust, Investment & Annuity Fee ...

... Income Down at Hancock Holding

NEWS IN BRIEF - NOVEMBER 16 - 22, 2009

Gulfport, MS-based, $6.8 billion-asset Hancock Holding Company reported third quarter insurance brokerage fee income decreased 7.7% to $3.53 million, down from $3.82 million in third quarter 2008, trust fees declined 7.4% to $4.01 million, and investment and annuity fee income dropped 17.1% to $2.01 million.  Increases in service charges and secondary mortgage sales, however, drove noninterest income up 1.0% to $30.14 million.  Insurance brokerage fee income comprised 11.6% of noninterest income, while trust fees comprised 13.3% and investment and annuity fee income comprised 6.6%.  Net interest income on a 3.86% net interest margin, impacted by a $5.43 million increase in loan loss provisions, slid 4.2% to $47.26 million, down from $49.35 million.  Net income decreased 4.9% to $15.2 million, down from $16 million in third quarter 2008.  Hancock Holding Company President and CEO Carl Chaney said, “Core values have been invaluable in guiding us through the worse financial crisis since the Great Depression.  We are pleased with the third quarter results.”

In 2008,Hancock Holding reported $11.2 million in insurance brokerage income, which comprised 9.1% of its noninterest income.  The company ranked 17^th in insurance brokerage earnings among U.S. bank holding companies (BHCs) with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

25: ANNOUNCEMENTS - Wells Fargo Announces Agreement to Buy Back Auction Rate Securit

Wells Fargo & Company announced today that it will purchase Auction Rate Securities (ARS) nationwide from eligible investors who bought ARS through one of three of its broker-dealer subsidiaries prior to February 13, 2008. Eligible investors will receive additional information regarding the terms of the buyback offer by mail within ninety (90) days.

This announcement was made in conjunction with separate agreements reached with the State of California Attorney General’s office and the North American Securities Administrators Association regarding Wells Fargo’s participation in the auction rate securities (ARS) market. The settlement agreements resolve all active regulatory investigations and enforcement actions concerning Wells Fargo's participation in the ARS market, without Wells Fargo admitting to the allegations in the various investigations and complaints. The company has agreed to pay $1.9 million in fines and expenses.

LINK TO FULL ARTICLE: https://www.wellsfargo.com/press/2009/20091118_ARS

26: K@W - Innovation and Entrepreneurship

Popularity Contests: Why a Company Embraces One Innovative Idea but Shuns Another

Multinational corporations have a lot of good things going for them. They have built up a rich store of knowledge over the years, allowing their subsidiaries to share ideas and best practices in ways that smaller companies can only dream of. They also exploit their vast global reach and on-the-ground knowledge to sniff out new concepts or products being used by rival companies in other parts of the world. But these processes aren't always as successful as they could be. Felipe Monteiro, a Wharton professor of management whose recent research looks at how and when new knowledge gets the thumbs up within firms, explains why.

LINK TO FULL ARTICLE: http://knowledge.wharton.upenn.edu/article/2390.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

27: K@W - Workplace Challenges: Managing Layoffs, and Motivating Those Left Behind

The current downturn has left many companies scrambling to manage workplace issues -- ranging from how to avoid a brain drain to how they can provide better value to customers and clients. Employees, for their part, face the challenges that arise from working in a leaner organization that demands increased productivity with fewer resources. Knowledge@Wharton talked about these issues with Peter Cappelli, director of Wharton's Center for Human Resources, and Philip Miscimarra, a partner in the labor and employment practice in the Chicago office of law firm Morgan, Lewis & Bockius and managing director of the Center for Human Resources research advisory group.

LINK TO FULL ARTICLE: http://knowledge.wharton.upenn.edu/article/2389.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

28: M&A - American Express to Acquire Revolution Money ...

...to Develop Next Generation Payment Products

Deal combines state-of-the-art technology platform with leading global brand

American Express Company today announced it has agreed to acquire Revolution Money, a Revolution LLC company.

Revolution Money, launched by AOL Co-founder Steve Case's Revolution LLC in 2007, provides secure payments through an internet based platform. No names or account numbers appear on Revolution cards and transactions are authorized by using a PIN number. The company's online person-to-person payment accounts are FDIC insured and ideally suited for social and instant messaging networks. It also offers a prepaid card linked to those accounts that can be used for offline payments or to withdraw cash from ATMs throughout the United States.

LINK TO FULL ARTICLE: http://home3.americanexpress.com/corp/pc/2009/rm.asp 

29: MISCELLANEOUS - Bank Failures More Costly Than Earlier Wave

Back then, the average failure cost the Federal Deposit Insurance Fund about 10 percent of an institution’s total assets. The figure now: 32 percent.

A similar trend is taking place nationwide, putting a severe strain on the FDIC’s dwindling insurance fund.

Why the huge jump in the cost of failures? Experts say today’s problem banks are less diversified, took more risks and are dealing with a worse economy compared with financial institutions a generation ago.

Most of the banks to fail over the past two years loaded up on loans to home builders and subdivision developers and took on huge losses when the housing market collapsed.

LINK TO FULL ARTICLE: http://www.ajc.com/business/bank-failures-more-costly-218557.html

30: MISCELLANEOUS - Turbulence Ahead - National Review Online: Critical Condition

National Review Online has posted a blog about the Senate health reform debate on Saturday. While Sen. Reid prevailed by winning the 60 votes to move his bill forward, the speeches foreshadow the problems ahead.

Senate Democrats found themselves on the defensive in the debate Saturday over bringing Majority Leader Harry Reid’s health-reform bill up for consideration by the full Senate. While Democrats prevailed by winning the 60 votes to move the measure forward, Saturday’s speeches foreshadow the problems ahead.

Republican senators repeatedly cited a weekend column by Pulitzer Prize–winning reporter David Broder, who has been “writing for months that the acid test for this effort lies less in the publicized fight over the public option or the issue of abortion coverage than in the plausibility of its claim to be fiscally responsible. This is obviously turning out to be the case,” he wrote.

LINK TO FULL ARTICLE: http://healthcare.nationalreview.com/post/?q=MDQ1ZGI3MGMzNTI0ZTRlYTdjNmMyM2I4ZDUxZDZkOTM=

31: MISCELLANEOUS - U.S. Financial Trade Tax Faces Uphill Battle

WASHINGTON (Reuters) - Proposed taxes on financial transactions face an uphill battle in the United States with powerful interests opposed and a lack of support among some key U.S. lawmakers.

Proposals in the U.S. House of Representatives that would impose a 0.25 percent tax on over-the-counter derivatives transactions and stock trades are among ideas being mulled by top lawmakers.

LINK TO FULL ARTICLE: http://in.biz.yahoo.com/091119/137/baum5t.html

32: PERSONNEL CHANGES - Bank of America Global Research Hires Chris Flanagan...

... as Head of U.S. Mortgage and Structured Finance

BofA Merrill Lynch Global Research today announced the hiring of Chris Flanagan as head of U.S. Mortgage and Structured Finance Research. In this role, Flanagan will be responsible for the strategy and development of our research product, analytics and modeling across all U.S. mortgage and structured finance disciplines. Flanagan will report to Michael Maras, head of BofA Merrill Lynch Global Credit Research.

"Chris adds formidable expertise to our U.S. Mortgage and Structured Finance Research franchise and we are delighted to have him on board," said Maras. "His in-depth knowledge in all aspects of asset securitization, mortgages and modeling will enable us to significantly enhance our existing research capabilities and grow our range of innovative products and solutions."

LINK TO FULL ARTICLE: http://sanfrancisco.bizjournals.com/prnewswire/press_releases/New_York/2009/11/20/CL15155

33: PERSONNEL CHANGES - Fannie Mae Names Former Credit Suisse Executive

Fannie Mae (FMN/NYSE) today announced that Jonathan Plutzik has been elected to the Board of Directors, where he will serve on the Compensation and Risk Policy & Capital committees.

Mr. Plutzik worked at Credit Suisse Group for 24 years, where he served in the government and public finance groups before becoming a Global Co-Head of the Financial Institutions Group at Credit Suisse First Boston. He retired as Vice Chairman of Credit Suisse First Boston in 2002.

"We look forward to Jonathan Plutzik's service to the board and to Fannie Mae," said Phil Laskawy, Chairman of the Board. "Jonathan's experience and talents are distinctly suited to advise the company. At CSFB, he managed the investment-banking activities of some of the largest financial companies in the world, and he brings extensive experience working with federal agencies, as well as state and local governments."

Plutzik earned his M.B.A. from the Wharton School at the University of Pennsylvania and his B.A. from Brandeis University.

"Adding a financial executive of Jonathan's caliber to our board makes us a stronger company," said Mike Williams, President and CEO. "I am glad to have the benefit of his counsel as the company continues its mission to provide liquidity to the mortgage market and keep people in their homes."

34: REGULATORY - The Risk of “Unintended Consequences” is the Most Important Issue

... Facing US Equity Markets, Major Institutional Investors Tell TABB Group

Buy-side Traders Call for Caution before Regulation is Enacted and Recommend “No Action” Be Taken on High Frequency Trading

Increased Electronic Trading, Call for Transparency from Brokers and Demand for Greater Customization and Control Cited as Top-of-the-Mind Issues

NEW YORK & LONDON--(BUSINESS WIRE)--As the US equity markets approach 2010, investment banks are putting their houses in order, trading volumes are surging and the floods of balance sheet losses and asset devaluations from 2008 have receded. But the calm after the storm can be deceiving. Buy-side traders tell TABB Group that the risk of “unintended regulatory consequences” is the number one market structure concern facing the US equity markets today.

LINK TO FULL ARTICLE: http://www.tabbgroup.com/PageDetail.aspx?PageID=16&ItemID=851 

35: REPORT - As Credit Woes Ease, Cash Flow and Pension Plan Volatility ...

... Are Among Top Finance Executives’ Concerns, According to Towers Perrin Survey

STAMFORD, Conn.--(BUSINESS WIRE)--While the worst of the financial crisis's impact on their firms may be behind them, most finance executives remain concerned about several financial and risk management issues, most notably cash and cash flow, and defined benefit (DB) pension plan volatility, according to a recent survey conducted by global professional services firm Towers Perrin.

LINK TO FULL ARTICLE: http://www.towersperrin.com/tp/showdctmdoc.jsp?country=global&url=Master_Brand_2/USA/Press_Releases/2009/20091130/2009_11_30.htm

36: REPORT - Bank of America Program Helps 100,000 Subprime, ...

... Option-ARM Borrowers Avoid Foreclosure in First 10 Months of Outreach

10 months after initiating outreach to customers through its National Homeownership Retention Program (NHRP), Bank of America has provided mortgage relief to 100,000 eligible homeowners with certain Countrywide subprime and option-ARM mortgages. According to the bank's most recent quarterly progress report, more than 31,000 eligible customers received assistance in the third quarter - the largest three-month program total so far.

"The NHRP is one of the proprietary foreclosure prevention programs we use in addition to the federal government-sponsored Home Affordable Modification Program (HAMP)," said Jack Schakett, credit loss mitigation strategies executive for Bank of America Home Loans. "Through this and other programs, Bank of America has provided relief through completed and trial modifications to more than 600,000 customers since the beginning of last year."

LINK TO FULL ARTICLE: http://newsroom.bankofamerica.com/index.php?s=43&item=8576

37: REPORT - Marital and Relationship Issues Core Concern for Employees

EAP call analysis points to recession as trigger

NEW YORK, Nov. 19, 2009—Harris, Rothenberg International (HRI), a leading employer and employee resource firm, today released findings of a statistical analysis that point to a drastic increase in marital and relationship issues among those who work in the financial services industry. In addition, the report indicates that the recession likely has driven an upswing in personal stresses – including family, depression and anxiety issues – for employees in finance.

LINK TO FULL ARTICLE: http://behavioralhealthcentral.com/index.php/20091124139603/Latest-News/new-report-marital-and-relationship-issues-core-concern-for-employees-in-financial-services-industry.html

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