1: CAST SERVICE HIGHLIGHT

Fee Revenue Optimization
Results-driven revenue optimization analysis and execution 

A persistent challenge within the financial service industry is the continued need to create top line revenue growth. The need for revenue generation becomes more acute as industry leaders become aware, once again, of the overall strategic limitations of cost cutting and expense control. Lack of organic growth has contributed to pressures to grow both through acquisition and by broadening into new service offerings. These sometimes disruptive growth tactics can obscure opportunities to improve revenue growth.

Revenue Inhibitors

• Lack of cultural emphasis on revenue generation
• Primary focus on cost cutting
• Conflicting and inconsistent alignment of existing products
• Misunderstood customer behavior and preferences
• Inadequate process and controls for collecting fees
• Limited understanding of competitor revenue-related 'learnings' and trends

Why CAST for Fee Revenue Enhancement

• Database of proven revenue enhancement practices
• Fact-based, rigorous analysis  
• Extensive cross industry experience
• In-depth revenue knowledge:
  • Retail banking
  • Commercial banking
  • Mortgage banking
  • Trust
  • Brokerage securities
  • Insurance
• Results oriented culture
• Collaborative/team approach

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

2: AMERICAN BANKER - Bank Channel Growing in Life Insurance Sales

Like manufacturers seeking multiple distribution avenues, many life insurance companies have been looking for further sales channels. The bank channel, for one, has been gaining traction.

Joan Cleveland, a senior vice president of business development at Prudential Financial's individual life insurance division, said that, since the Newark, N.J., company started selling life insurance through banks a little more than a year ago, it has focused on middle-market consumers who have "really been underserved by the life insurance industry."

To make its life insurance products consumer-friendly and bank channel-friendly, Prudential created a simple product designed to be easy to sell. This term insurance product is less expensive and provides a death benefit for a specific period: 10, 20 or 30 years. Prudential, like other life insurance companies that sell through banks, also streamlined the process, making application forms shorter, bringing the application process online and offering real-time underwriting.

Prudential has kept the bank channel from competing with its sales agents by differentiating the products the two sell. The life insurance sold through banks is only available up to $250,000 and is "priced for convenience," Cleveland said. At that price no in-depth needs analysis, such as customers would get if they met with a Prudential sales agent, is conducted.

"It's a different product and a different customer base," she said. "The customer is a little bit younger than general Prudential life insurance policyholders, and they are on a budget, so they are buying a slightly smaller amount of coverage."

New York Life Insurance Co., on the other hand, has eschewed the "more-is-better" sales strategy, avoiding the bank channel altogether, though it means giving up potential revenue. The company has made a strategic decision that its career agents are its strength, and how it provides value.

Mark Pfaff, the executive vice president in charge of U.S. life insurance and agency sales at New York Life, would not concede that the company's avoidance of the bank channel is a "missed opportunity." But Ken Kehrer, the founder of financial services and research company Kehrer-Limra, is not so sure.

"Presumably, they are forgoing sales," Kehrer said. "And banks are better positioned than agents these days to capture middle-market-customer life insurance sales. Life insurance agents are focusing more and more, at the larger insurance companies, on selling life insurance to wealthier people and business owners, leaving people like you and me out of the picture."

Last week, Kehrer-Limra released its Bank Life Sales Report for the third quarter, which showed flat total individual life sales nationally in the quarter and sales down 11% in the year's first nine months, compared to the year-earlier periods. Yet banks raked in 59% more in new life insurance premiums in the quarter, bringing their life sales growth to 32% for the first nine months.

Bank-sales gains in percentage terms can appear outsized because they start from a smaller base; bank sales make up only 2% of overall life insurance sales.

Pfaff noted that New York Life's career agents had a strong year too, with new sales up 23% compared to a year earlier.

He also said that the type of life insurance sales made through banks is different. The more profitable sale is the recurring premium, in which the customer buys a policy and pays the same premium year after year. The other type is the single-premium product, which calls for payment of a lump sum.

About 90% of sales through the bank channel are of single-premium products, Kehrer said.

Nonetheless, Kehrer said he believes dependence on sales agents poses challenges: The number of life insurance agents is shrinking, and the ones who remain are getting older. The solution, he said, is to find alternative distribution channels as companies have done by selling through banks, stock brokerages, on the Internet and through workplace marketing.

"New York Life is paying much less attention than other companies," Kehrer said. "They are a very successful company, but could they also do more by having more middle-market sales? Probably."

"In the long run, if the agent sales force is shrinking, the population is growing and we tend to get wealthier every year, it seems like you are missing opportunities if you stick with a shrinking distribution force," he said. "It doesn't mean you can't be successful at it, but the question is: Would you be more successful if you did both?"

3: AMERICAN BANKER - Banks Urged to Plan for Rate Rise

WASHINGTON — Bankers cannot wait for interest rates to start rising before deciding how they plan to handle it, regulators, executives and others said Friday at a conference devoted to interest rate risk.

With the ultra-low rates due to rise in the near future, participants at a Federal Deposit Insurance Corp. symposium said banks need to plan now for the changing environment.

"Don't wait for the tide to go out to see how your balance sheets and your earnings … hold up to higher interest rates," said Edward Krei, a managing director at the Baker Group, an Oklahoma City investment firm.

As the federal funds rate has hovered near zero for over a year, regulators have warned that some banks — after utilizing the cheap funding and holding on to long-term assets — may be unprepared when rates normalize.

"Some firms have capitalized on" the low rates "by increasingly using shorter-term funding for longer-term assets — I'm afraid that the risks of this business model will become all too clear when interest rates rise, or the yield curve flattens," said FDIC Chairman Sheila Bair.

Three weeks after an interagency advisory on interest rate risk management, the conference was another step by the regulators to highlight the issue.

"It is important now for institutions to have in place sound practices to measure, monitor and control this risk," Federal Reserve Board Vice Chairman Donald Kohn, who declined to give a rate outlook, said at the outset of the conference. "They must not become distracted from this critical task by their efforts to deal with credit problems, nor can they think that assuming greater interest rate risk is a sound strategy for compensating for losses they are taking on their loan portfolio."

Panelists, including other bankers, recommended strategies for mitigating interest rate risk, including an emphasis on core depositors, hedging instruments such as interest rate derivatives and tasking a committee to focus on the duration mix of assets and liabilities.

"If you don't have an" asset-liability-committee "process, you're not going to manage interest rate risk," said Howard Atkins, the chief financial officer at Wells Fargo & Co.

Responding to a question, Christopher Spoth, the senior deputy director in the FDIC supervision division, said interest rate swaps — which can provide institutions with future income to offset losses tied to higher interest rates — can be "appealing" for community institutions, as long as they are used properly.

"It's clearly incumbent on the board of directors and the ALCO committee to truly understand how their derivative instrument works," Spoth said.

But numerous speakers talked about the difficulty in predicting the direction of interest rates. Still, they said, that is no excuse for inaction.

"What do you do when you don't know? Paralysis is not the answer," said Mohamed El-Erian, the chief executive of Pacific Investment Management Co.

4: AMERICAN BANKER - Column: Retail Banks Losing Grip on Customers

Two generations ago, retail banks and credit unions served as a financial anchor for the average consumer. They had everything under one roof — payments, savings and credit — and the personnel to help consumers knit those products and services together in different combinations as their needs changed.

Over the past 20 years, a range of companies have been steadily making a grab for businesses that had once been the purview of banks.

First to go was credit. Thanks in part to the ascendance of national credit bureaus, consumers can select from a smorgasbord of credit products offered by national "monoline" providers, and marketed and distributed in myriad new ways. The odds are pretty slim that a consumer's primary credit card is issued by the same bank where she keeps her checking account.

Savings products are also available elsewhere now. Many middle-class consumers look to employer-provided 401(k)s as preferred places for building nest eggs. The savviest ones are finding higher CD rates online than at their local bank branch.

Banks are still the primary payments providers, but their role is diminishing. Prepaid cards and PayPal are but two examples of products that enable consumers to bypass traditional bank accounts, and many college-age users are showing that checks are largely dispensable.

Banks' core business lines have been picked off by others, but what about the business of relationships?

The vast majority of households still claim to have a primary financial institution relationship, but a growing number of households do not, according to Nielsen's Market Audit, a national survey of financial behavior. Once a relatively stable number, the percentage of households claiming no primary institutional relationship has nearly doubled since 2004, to 11%.

A growing number of underbanked consumers view their favorite retailer as their bank of choice.

Retailers have long offered credit products as a way to generate more store sales. Now, mass merchandisers, grocers and other national chains are expanding their suite of payments products. They are offering bill-payment services, money transfers, prepaid debit cards and prepaid reloads, leveraging their more convenient physical presence and hours of operation.

As more prepaid card providers add FDIC-insured savings accounts to their products, retailers will be able to offer savings, too.

Meanwhile, the financially savvy set is turning to new online players to better understand and manage their money. Banks are fighting back, either by private-labeling third-party account aggregation platforms or by building their own. In a few cases, such as Bank of America's My Portfolio service, banks are even enabling customers to pull in data from accounts they hold at other financial institutions. But most banks are well behind their nonbank competitors.

The trend may be beneficial for sophisticated consumers who can choose well among a wide array of products and services and link them together effectively. But for the average consumer, the complexity of the current landscape can be daunting without an institutional guide.

The growing consumer mistrust of banks could further erode the role banks have historically played as the hub of consumers' financial lives.

Whoever can reconstitute this role — online, via cell phone or at the brick-and-mortar strip mall — will become a magnet for consumers. And they will exert, through the institutional context they provide, critical influence over the financial choices consumers make.

Jennifer Tescher is the director of the Center for Financial Services Innovation, an affiliate of ShoreBank Corp. in Chicago. Corey Stone is a CFSI Fellow. CFSI receives funding from Bank of America

5: AMERICAN BANKER - Geithner Backs Plan for Taxes, Limits on Growth

WASHINGTON — Treasury Secretary Tim Geithner used a hearing on the bailout of American International Group Wednesday to repeatedly endorse President Obama's plan to impose a 15 basis-point tax on large banks and restrict their growth and activities.

Although many observers have questioned whether those proposals contradicted Geithner's own views, the Treasury secretary left little doubt that he backed the ideas. "If you join with the president in adopting his proposed financial responsibility fee, American taxpayers will not have to pay one cent for the actions we took in AIG or the actions we took with the authority Congress gave the administration to stabilize this financial crisis," Geithner said.

Rep. Patrick McHenry, R-N.C., argued that Geithner had changed his mind, noting that he has previously opposed a return to the Glass-Steagall Act of 1933, which established walls between the banking, securities and insurance industries. McHenry said that the so-called Volcker Rule, which would ban banks from proprietary trading, marked a return to the Depression-era law.

"How do you reconcile that belief against a Glass-Steagall roll back with this rule?" McHenry said.

But Geithner said that the Volcker Rule was not the same as Glass-Steagall, much of which was repealed in the 1999 Gramm-Leach-Bliley Act. "Does [the Volcker Rule] dial back some of the Gramm-Leach reforms? Yes but it is not what people typically think of Glass-Steagall," Geithner said.

Among other things, Geithner said, the Volcker Rule would not ban banks from underwriting securities, which was a major provision of Glass-Steagall. More details on the Volcker Rule and the bank tax are expected next week when the administration releases the budget. President Obama is also expected to give both another plug Wednesday evening during his State of the Union address.

But Geithner spent much of the hearing on the defensive, as a bipartisan group of lawmakers blasted him for more than two hours on his involvement with the bailout of AIG. Lawmakers claimed that the Federal Reserve Bank of New York, which Geithner ran until early last year when he was confirmed as Treasury secretary, pushed AIG not to disclose paying $62 billion to AIG counterparties. "We have come not to praise but to bury Caesar — and you are Caesar today," Rep. Paul Kanjorksi, D-Pa., told Geithner during the hearing.

The House Oversight and Government Reform hearing on the government's rescue of AIG came after the committee obtained more than 250,000 pages of documents from the New York Fed on its handling of the bailout and after months of intense criticism of the action. Geithner defended himself by saying he was not involved in the decision to not disclose the payments because he had recused himself after being nominated for the Treasury job. But lawmakers said they simply did not believe that.

"Many Americans, including members of this committee have a hard time believing that Secretary Geithner entered an absolute cone of silence on the day that his nomination was announced," said Rep. Darrell Issa, the panel's lead Republican, who also said he has "lost confidence" in the secretary.

Committee Chairman Edolphus Towns said the failure of disclosure has created an "air of suspicion and distrust among the American people."

Geithner said the decision to pay AIG counterparties 100 cents on the dollar was the only option to avoid the company being downgraded and collapsing but lawmakers did not believe him.

"I believe these were lame excuses, either you were in charge and did the wrong thing or you participated in the wrong thing," said Rep. John Mica, R-Fla. "Why shouldn't we ask for your resignation from secretary of Treasury?"

In a heated, often shouting exchange, Rep. Stephen Lynch, D-Mass., also blasted Geithner. "You had every opportunity to weigh in for the American people and you didn't," he said. "It's inexcusable and it makes me doubt your commitment to the American people."

Still, some Democrats came to the secretary's defense.

"I don't know what anybody else would have done," said Rep. Elijah Cummings, D-Md. "I don't think we had a choice or you had a choice so let me say I think we did the right thing there."

6: AMERICAN BANKER - New Regions CEO Chained to the Past

O.B. Grayson Hall has his work cut out for him as the incoming chief executive of struggling Regions Financial Corp.

Hall is to succeed C. Dowd Ritter on March 31, but he drew the spotlight early as Ritter turned over most of the fourth-quarter results conference call Tuesday to the current chief operating officer. Though Hall vowed no major change in strategy, he did outline a three-part plan for returning to profitability.

Recovering from three straight quarters of losses hinges on addressing continued credit issues, controlling costs and adding "discipline around loan and deposit pricing," Hall said. And judging by its quarterly results, the $142.3 billion-asset Birmingham, Ala., company and its incoming CEO face an uphill journey on most of those tasks, analysts said.

"They have made a gallant effort, but the overhang from credit is still there," said Marty Mosby, an analyst at First Horizon National Corp.'s FTN Equity Capital.

Regions struggled on several fronts in reporting a $543 million loss for the quarter, 44% deeper than in the previous quarter. It was far less than the eye-popping $6.2 billion hit the company took a year earlier after absorbing a big goodwill impairment charge and a hefty dose of chargeoffs.

Analysts said many of Hall's challenges, including credit quality and the lack of easy cost-cutting targets, stem from Regions' 2005 acquisition of its Birmingham competitor AmSouth Bancorp. This deal gave it a heavy exposure to the troubled Florida market and required major cost-cutting soon after the closing.

Regions continues to grapple with deteriorating credit quality as problems shift from residential to commercial real estate. Its loan-loss provision rose 15% from the third quarter and 2.5% from a year earlier, to $1.18 billion. At $692 million, net chargeoffs edged up 1.7% from the third quarter, though they were down 13% from a year earlier.

Regions' problem loans kept rising at a time when a number of regionals, such as Fifth Third Bancorp and Comerica, Inc., said they are nearing a peak in bad assets. Its nonperforming assets grew 7.6% from a quarter earlier, to $4.41 billion, and were nearly triple those of a year earlier.

Greg Ketron, an analyst at Citigroup Inc., warned that, in addition to a "significantly" expanded loan-loss reserve, consumer loans remained a problem for Regions as accruing restructured loans rose 14% from the third quarter, to $1.6 billion.

Hall warned that nonperforming assets may not peak or decline at Regions until midyear. "Credit-related costs, while remaining elevated, should begin to decline in 2010 given our proactive stance toward credit loss recognition and prudent reserve build," he said.

Chief Risk Officer William Wells tried to highlight positives, noting that nonperforming-asset growth decelerated in the fourth quarter and telling analysts that the market for distressed commercial properties is improving. "We are seeing more buyers come into the market looking at income-producing properties," he said, estimating that the pool of buyers had tripled in the last year, helping valuations.

Regions harnessed noninterest expenses, off 1.9% from the third quarter and 4.2% from a year earlier, excluding the 2008 goodwill charge of $1.2 billion. The company cut 2,300 jobs in 2009, including 500 during the fourth quarter.

Hall said more job cuts are to be expected this year, though he did not specify a number. The company also plans to close 121 branches this quarter.

Mosby said it will become increasingly difficult for Regions to cut costs in a way that will not harm revenue down the line. "They are now getting into the tough decisions about markets and the overall size of their franchise," he said.

Regions continued to see revenue shrink in its balance sheet during the fourth quarter. Revenue from loans fell 6.3% from the third quarter and 26% from a year earlier, to $981 million. Service charges on deposit accounts fell 0.3% from a quarter earlier and ticked up 3.8% from a year earlier, to $299 million.

Regions Chief Financial Officer Irene Esteves outlined steps taken to position the company's balance sheet for an expected "modest" rise in interest rates by yearend. It took a $96 million hit during the fourth quarter after selling $1.3 billion in investment securities. Regions will let a hedge expire in the third quarter, she said, which will make the company more sensitive to a rise in rates.

Hall said Regions has adopted rate floors for new variable-rate loans and that only 12% of the company's business loans are priced at the minimum.

"My only hope is that the change you see is incremental improvement over the next several quarters … and more-aggressive action to return" to profitability, Hall said. "We plan on increasing intensity and focus on those issues."

7: AMERICAN BANKER - Obama Plan Could Mean Huge FDIC Premiums

WASHINGTON — The Obama administration proposed Monday to raise the required level of reserves at the Federal Deposit Insurance Corp. to more than $80 billion — a move that would require banks to pony up a huge amount of money.

In its proposed 2011 budget, the White House, citing the insolvency of the Deposit Insurance Fund, said that allowing the ratio of reserves to insured deposits to fluctuate in a range of 1.15% to 1.5% has proven "inadequate to handle the unexpected risks and losses that come with a downturn in the economy."

Lawmakers should consider "a level above 1.5% in order to maintain positive fund balances during future downturns," the budget said.

The proposal appeared to be a trial balloon, and some sources made note of the fact that the administration did not ask lawmakers to act but merely said "it may be appropriate" for Congress to consider raising the reserve level.

Other observers said the administration may only be suggesting that the current 1.5% cap be removed because it requires the FDIC to return funds to the industry.

Either interpretation made industry representatives nervous, though they conceded that the FDIC had been underfunded before the financial crisis.

"There is a sense that it would have been obviously better to have more money in the Deposit Insurance Fund before this crisis," said James Chessen, the chief economist for the American Bankers Association.

But Chessen warned against building the fund too high and said the White House appeared to be just trying to raise the reserve level to help offset the federal deficit.

"My fear is that" policymakers "would use this as just another tax on all banks," he said.

The industry would oppose raising the level to 1.5% and also objects to removing a cap on the FDIC's ability to charge premiums. "It's critically important that whatever range is discussed that there be some limitations on the FDIC's ability to raise more money," Chessen said.

Camden Fine, the chief executive of the Independent Community Bankers of America, warned that any attempt to increase the reserve fund would take money away from banks' lending potential.

"All it would do is negatively impact lending and the recovery," said Fine. "It would just further depress earnings of the banks during a time when banks are struggling to make earnings."

He argued that banks already pay enough in premiums — and are likely to pay high assessments for years to come.

"Right now the FDIC projects it will take eight years just to get back to 1.15%. That's paying 15 to 17 cents" per $100 of domestic deposits "on the assessment, which is a very high assessment historically," he said.

It is unclear where the FDIC will come down on the proposal. The agency supports removing the 1.5% cap but has not commented on whether reserves should be that high.

The FDIC's current system was the product of a sweeping reform bill passed in 2006, intended then to give the agency more leeway to build up reserves in good times.

Under current law, the FDIC must keep the reserve ratio between 1.15% and 1.50% and set an informal target within that range to guide its policy. (The current target is 1.25%). If the ratio exceeds 1.35%, the agency must begin issuing rebates to the industry.

The limits authorized in the 2006 legislation were seen at the time as an improvement on how the agency had previously set premiums.

Before this law, the FDIC had a hard target of 1.25%. If the reserve ratio fell below that level, steep premiums must be charged industrywide.

But as long as the ratio stayed above 1.25%, the FDIC was largely powerless to increase rates. During the decade through 2006, when the industry was largely stable, 95% of banks paid no premiums.

But even the revised system has been sharply criticized. By the time the bill passed, the FDIC had little time to build reserves before the financial crisis hit.

Once it did, the rapid pace of failures quickly drained the funds that had been collected. As of Sept. 30, the DIF had an $8.2 billion deficit.

Some observers said the administration's proposal recognizes that the FDIC perhaps should have been able to charge premiums during that time to prepare for a downturn and avoid the need to charge heavy premiums when banks are already facing formidable challenges.

"Have you ever heard of an insurance company telling someone: 'You're such a good driver that we're not going to require you to pay any insurance premiums for the year?' " said James Barth, a finance professor at Auburn University and a fellow at the Milken Institute.

Karen Shaw Petrou, the managing partner of Federal Financial Analytics Inc., said she hoped the Obama proposal is a sign that the deposit insurance system will be revamped further.

"I hope it's an early indication that the FDIC will look at a more actuarially reasonable way to set the" designated reserve ratio, she said.

8: AMERICAN BANKER - Tax Aims at Big Banks But Could Hit Others

Like any public policy, the Obama administration's proposed bank tax will likely yield some unexpected outcomes.

The administration's 15-basis-point tax would be levied against bank assets minus Tier 1 capital and domestic deposits, so the large banks affected could soften the blow by increasing deposits. That, in turn, could drive up funding costs for smaller banks that rely more heavily on deposits for liquidity.

"There are unintended consequences of this tax that affect the entire industry, not just banks above $50 billion," said Jim Chessen, the chief economist for the American Bankers Association. "There will be a tremendous focus on deposit funding with this kind of tax. … It has ramifications for all institutions that use deposits to fund themselves."

Bob Clarke, a senior partner at Bracewell & Giuliani LLP, agreed.

"That's the obvious way, to do more of your funding through deposits," he said. "It could drive up the cost of the funding for everybody else, because the money-center banks would be paying more. So the community banks would have to match what the big banks are paying for deposits."

Large banks could also cut back on advances from the Federal Home Loan banks.

"Some traditional commercial banks use a lot of home loan bank financing, and now they will rely less on that," said Kip Weissman, a partner at Luse Gorman.

Building equity is another way to reduce the impact. Kevin Jacques, a former Treasury official who now chairs the finance department at Baldwin-Wallace College in Cleveland, noted that the industry's weakest players were forced to increase equity capital as part of last spring's stress tests.

"There is a bias that helps the banks that really got into trouble," Jacques said. "If you had to raise Tier 1 capital, you are going to have a smaller tax bill."

The administration's plan identifies the deposits being exempted as those that are assessed by the Federal Deposit Insurance Corp.

The idea is the government does not want to tax the same liabilities twice. If banks are paying insurance premiums on a deposit, they shouldn't pay a tax, too. That led many sources to assume the administration's plan focuses on "insured deposits," but the FDIC actually assesses premiums against a bank's domestic deposits, a somewhat higher figure than insured deposits.

Some sources said large banks seeking to avid the tax would face some offsetting costs if they decide to beef up domestic deposits.

"To build up deposits quickly to replace wholesale funding, you'd have to do it most likely through brokered deposits, and brokered deposits tend to be more expensive than wholesale sources, so that's a partial offset," said Jaret Seiberg, a political analyst at Concept Capital. "There could be regulatory hurdles to loading up on brokered deposits. … I'm not saying [regulators] would stop it. I'm saying this is one of the hurdles out there that needs to be resolved."

Former FDIC Chairman Bill Isaac said a bank would also have to consider the premiums it would pay on those added deposits. "Deposits carry a tax, so you need to do the math," he said.

Robert DeYoung, a professor at the University of Kansas, agreed.

"If you have to raise deposits in a hurry, you have to pay a premium," DeYoung said. "You have to start by assuming that the liability structure that they have is the cheapest one for them, and to change it is going to be expensive."

As proposed by the president, the tax would be levied against roughly 50 financial companies, including 20 to 27 U.S. commercial banks with assets of more than $50 billion. Investment banks and insurance companies as well as the U.S. units of foreign banks make up the balance of targeted firms.

The administration has said it wants to raise roughly $90 billion over 10 years — and said the 10 largest firms would contribute 60% of this total — to cover losses expected from government programs put in place to stabilize the financial system.

The administration plans to provide more detail on Feb. 1 when it releases its budget for fiscal 2011. Congress would have to approve the idea, and most sources reached Tuesday said they expect Congress to make some changes. Lawmakers may raise the bar on bank participation, limiting the tax to companies with assets of $100 billion. Congress also might include the car companies or Fannie Mae and Freddie Mac.

The President has said he would like to have the tax in place by June 30, and sources said it would likely be determined on a quarterly basis. The administration is assuming the tax would be deductible, but its final form will be determined by Congress.

Populist anger is giving the idea momentum, and the tax is expected to pass the House. Both Ways and Means and the Financial Services committees are expected to vet the plan.

Odds of passage are longer in the Senate, where the proposal would also have to get through two committees, Banking and Finance.

A wild card was the special election Tuesday in Massachusetts to succeed Sen. Ted Kennedy, who died Aug. 25.

Over the weekend, Republican challenger Scott Brown criticized the White House bank tax, saying at a rally that it would be passed on to consumers. But his Democratic opponent, Martha Coakley, supports the tax. And in his weekly address Saturday, President Obama sharply criticized the banks for opposing the plan.

"If Scott Brown comes out and wins this, it may suggest the bank tax is not as politically potent that people thought last week," said Brian Gardner, a political analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc. "Even though we are living in a populist age, there are some limits to populism,"

With the tax only being proposed Jan. 14 and the details still forthcoming many institutions are still weighing the best strategy to fight it, or lessen its sting.

But industry trade groups have been vocal in their opposition. "We think it's bad, so everybody should be carved out," said Scott Talbott, the senior vice president of government affairs at the Financial Services Roundtable.

The Securities Industry and Financial Markets Association is arguing that the tax is unconstitutional, because it singles out and punishes a specific industry. The New York Times reported the group has hired Carter G. Phillips of Sidley Austin to study the plan's constitutionality.

Interestingly, community bankers — who agree the large banks could become more threatening competitors for deposits because of this tax — also oppose it.

"I think it is an outrageous tax," said James D'Agostino, the chairman and chief executive of the $1.5 billion-asset Encore Bancshares Inc. in Houston. "It is a penalty tax on a specific industry, and it is unparalleled in our history as a country."

Cindy Blankenship, vice chairman of the $300 million-asset Greater Southwest Bancshares Inc. in Grapevine, Texas, said she worries that what is starting out as a tax on large banks will be extended to community banks.

"I am all for a big-bank tax, but you can have amendments and changes and it can become a very slippery slope," she said. "As this tax policy evolves, we need to make sure it doesn't have unintended consequences on Main Street banks like mine."

9: AMERICAN BANKER - Underbanked, Untapped: Big Market in Small Business

When Sue Rexford decides to open a banking account for her new venture, Bodhi Tree Therapeutic Massage. she will look for a financial company that can provide two things: convenience and low fees.

"Those are the key factors," said Rexford, a licensed massage therapist who opened Bodhi Tree in South Orange, N.J., in September.

In setting those criteria Rexford is a typical small-business owner. Industry experts and analysts say branch proximity, attractive account rates and fees are among the top concerns cited by small-business owners considering opening new bank accounts.

But Rexford is atypical for a self-employed entrepreneur in planning to open a business banking account at all. Among the nearly 26 million small firms in the United States, about two-thirds do not have business bank accounts, according to a Javelin Strategy and Research report released last year.

The bulk of these firms tend to be "overlooked and underserved" by most banks, Javelin found.

Small companies usually "hide in the consumer banking platforms," according to the Pleasanton, Calif., consulting firm. That means they pay lower account maintenance fees now, but likely will not get specialized services they'll need as they grow, including corporate credit cards, payroll/invoice management, remote deposit capture and specialized commercial lending.

"Banks need to refine their strategies so that they are recognizing this market and helping small businesses," said Mary Monahan, a managing partner and research director at Javelin.

By successfully marketing to and serving this untapped banking segment, she said, financial companies can generate more revenue, while helping these firms better compete in their markets.

Pushing small businesses into more debit and credit card transactions is also a smart move, according to recent research by Aite Group LLC.

"Small businesses have long fallen into a middle ground between retail and commercial banking," said Judson Murchie, an analyst with the Boston consulting firm.

"While small businesses often mimic the personal banking habits of their owners, much of their payment behavior reflects their nature as a business, resulting in high check volumes," he said. The increasing conversion of small-business check use to other payment vehicles is one of several reasons small-business credit cards are primed for growth.

For example, if small-business credit card spending increased from its current 4% market share to 14%, Aite Group estimates that interchange revenues from small-business credit card use would increase more than 300%, to over $10 billion a year.

Of the nearly $5 trillion that small businesses spend as a segment annually, only about 4% of that amount is charged on a small-business credit card, according to Aite Group.

Capital One Financial Corp., a consumer credit card powerhouse, sees opportunity in the underbanked small-business marketplace. "I think there is a mass-market, small-business segment," said Bob Kottler, an executive vice president for Capital One's small-business unit. He defines a small business as one with fewer than five employees and annual revenue of $250,000.

To encourage these firms to open small-business accounts, in May the McLean, Va., company began allowing customers to combine their business checking account and credit card rewards with those earned on their personal Capital One accounts.

Capital One also has found it is important to offer streamlined online banking to the mass-market end of small businesses that resemble the company's consumer offerings, Kottler said. "We offer a very similar online banking experience both for their personal business and their small business," he said. "Then as they grow and need more sophisticated products, we'll migrate them up to a place where they can get that."

Kottler said the reason underbanked small-business owners may hide in the consumer banking platforms is their fear that they'll get lost in a big bank's business banking division. "It's fascinating to me the amount of marketing we need to do to convince our small-business customers that they're important to us," he said.

Other financial companies are pursuing other strategies to attract small-business customers.

Bank of America Corp. is using social networking to reach underbanked small businesses. The Charlotte company sponsors a Web site called "Small Business Online Community," which it launched in October 2007. It is a free forum where small-business owners can network and find services from a base of established users, regardless of whether they are bank customers.

"We felt like it was important that small-business owners feel like they have opportunities to collaborate with each other and don't feel like they're being sold stuff," said John Durrant, a senior vice president of small-business banking at B of A.

The site, which has more than 50,000 registered users, contacts posters "only if they request it," according to Durrant.

For more traditional banking products, B of A started offering small-business customers its Business Fundamentals package in late 2008, which Durrant said includes a standard business demand deposit account that's free if the owner also uses a debit card at least once a month. "Business Fundamentals was one way we decided to go after encouraging customers to move from a check-based payment system to online," Durrant said.

Other banks are also stepping up their efforts. The U.S. arm of Toronto-Dominion Bank has doubled its advertising targeting small-business owners in the last year, said Jay DesMarteau, the bank's small-business sales and distribution strategy manager. He would not give specific ad spending figures but did say 30,000 to 40,000 small firms were using the bank's free BusinessDirect online banking services and that it expects that number to double in the next 12 months.

TD also provides incentives to employees who route customers into business accounts and offers a dedicated relationship manager to every small-business customer.

"The need really has to be there," DesMarteau said. "The small business is going to need those services, and the only thing you can do is make them aware of that."

10: AMERICAN BANKER - White House Policy May Life Banks' Annuity Sales

In trying to help the middle class save for retirement, President Obama may also have given a boost to the annuities business.

On Monday, the White House said it plans to promote "the availability of annuities and other forms of guaranteed lifetime income, which transform savings into guaranteed future income, reducing the risks that retirees will outlive their savings or that their living standards will be eroded by investment losses or inflation."

Analysts applauded the initiative and said it could significantly increase annuity assets this year and beyond. Carmen Effron of C F Effron Co. LLC in Weston, Conn., called it a "stamp of approval" for the annuity industry.

"Any time you get the government behind a program, it is an enormous boost for business," she said. "Think about what happened with IRAs and HSAs when the government supported them. Any time the government takes an interest in a financial product, there is an influx of information and publicity. People are going to be talking annuities, and this creates a tremendous opportunities for individual annuity carriers."

Cathy Weatherford, the president and chief executive officer of the Insured Retirement Institute, said that in the past two years she has been advocating this type of measure because the "value of a guarantee has never been greater."

"The dependable, guaranteed stream of retirement income that annuities provide to people later in life is being noticed at the highest levels," she said. "We are pleased that President Obama and Vice President Biden today called for increasing the awareness of guaranteed lifetime income, by 'promoting the availability of annuities.' "

Effron said the details of the government's plan to promote annuities would be crucial. At the very least, she said, she expects the government to draft educational material to inform people about the differences between fixed and variable annuities.

"The reality is, it would really surprise me if the government pinpointed particular companies to buy from," Effron said. "But they might — [as] they did with HSAs — put together a 'preferred' group of insurance companies that meet their standards."

The new support for annuities could boost sales through banks and other channels.

Income earned from the sale of annuities at bank holding companies rose 2.5%, to $2 billion, in the first three quarters of last year compared to a year earlier.

The Michael White-ABIA Bank Annuity Fee Income Report that was released last week said third-quarter annuity commissions rose 12.9%, to $669.8 million, from the previous quarter.

The report, compiled by the Michael White Associates consulting firm and sponsored by the American Bankers Insurance Association, measures and benchmarks the banking industry's performance in generating annuity fee income.

It is based on data from all 7,319 commercial and Federal Deposit Insurance Corp.-supervised banks and 922 top-tier bank holding companies operating on Sept. 30.

Another proposal announced by the Obama administration Monday would encourage middle-class retirement savings by expanding the "Saver's Credit" to families earning up to $85,000.

The income limit has been $53,000 for married couples filing jointly.

Eligible taxpayers would be enabled to take a credit of up to $1,000, or $2,000 for joint filers, for contributions to a qualified IRA, 401(k) or certain other retirement plans.

The administration said that it also plans to match 50% of the first $1,000 contribution by families with less than $65,000 in annual income.

The White House also wants to enhance transparency in 401(k) plans in an effort to make individual investors more aware of program fees and investment performance.

It would do so by requiring that plan documents be made clearer and easier to understand.

Another proposal would require that plan documents report, prominently on quarterly statements, all fees charged against a worker's 401(k) account.

The proposal would also require that plan participants be given information on risk, return and investment objectives before contributing to the plan.

11: ANNOUNCEMENTS - AXA to Voluntarily Delist from NYSE

AXA today announced its intention to voluntarily delist its American Depositary Shares (“ADS”) from the New York Stock Exchange (“NYSE”) and to voluntarily deregister with the U.S. Securities and Exchange Commission (“SEC”).

LINK TO FULL ARTICLE: http://www.prnewswire.com/news-releases/axa-intends-to-voluntarily-delist-from-the-nyse-and-deregister-with-the-sec-to-focus-trading-on-euronext-paris-82598402.html  

12: ANNOUCEMENTS - Bank of America Becomes First Mortgage Servicer to Sign Contract

...for Home Affordable Second-Lien Modification Program

Nation's Largest Servicer Ready to Go upon Release of Federal Guidelines

Bank of America announced that it is the first mortgage servicer to sign an agreement formally committing to participation in the pending second-lien component of the federal government's Home Affordable Modification Program (HAMP). The formal action follows a verbal commitment to the program made by Bank of America's Chief Executive Officer Brian Moynihan during a meeting with Treasury Secretary Timothy Geithner earlier this month.

LINK TO FULL ARTICLE: http://news.moneycentral.msn.com/ticker/article.aspx?symbol=US:BAC&feed=PR&date=20100126&id=11060362

13: BANKINSURANCE.COM - 2009 Sees 13% Hike in Applications For Individually

Underwritten Life Insurance

NEWS IN BRIEF - JANUARY 25 - 31, 2010

14: BANKINSURANCE.COM - 3Q BHC Annuity Fee Income Rises 12.9% Over 2Q

NEWS IN BRIEF - JANUARY 25 - 31, 2010

Annuity fee income generated by U.S. BHCs rose 4% in the third quarter to $669.8 million, up from $644.2 million in third quarter 2008, according to the Michael White-ABIA Bank Annuity Fee Income Report.  The 12.9% jump in third quarter earnings over second quarter earnings of $593.1 million helped drive annuity earnings up 2.5% in the first three quarters to $2 billion compared to $1.95 billion in the first three quarters of 2008.

Just over 42% of BHCs sold annuities in the first three quarters, led by BHCs with over $10 billion in assets (71.4%), while short of 35% of BHCs with $500 million to $1 billion in assets sold annuities.  BHCs with over $10 billion in assets saw their annuity earnings rise 3.5% to $1.89 billion to comprise 94.6% of total BHC annuity earnings.  In contrast, annuity fee income fell 12.2% among BHCs with $1 billion to $10 billion in assets to $91.4 million, down from $104.2 million, and annuity earnings among BHCs with $500 million to $1 billion dropped 18% to $16.7 million, down from $20.4 million.

San Francisco-based, $1.23 trillion-asset Wells Fargo & Co. ranked first in annuity fee income among all U.S. BHCs, despite reporting a 17.6% drop in these earnings to $504 million compared to $612 million during the same three-quarter period in 2008.  New York City-based, $2.04 trillion-asset JPMorgan Chase ranked second, showing a 3.73% slide in annuity fee income to $258 million.  Charlotte, NC-based $2.25 trillion-asset Bank of American Corp. ranked third, as annuity fee income, reflecting the Merrill Lynch acquisition, jumped 84.2% to $203.2 million.  New York City-based, $767.3 billion-asset Morgan Stanley ($168 million) and Pittsburgh, PA-based, $271 billion-asset PNC Financial Services Group ($98.9 million) ranked fourth and fifth, respectively, with PNC reporting a 99% jump in annuity earnings, helped by its acquisition of National City Corp., the Michael White-ABIA Bank Annuity Fee Income Report shows.

Among the top 10 BHC fee income earners, annuity revenue fell among five and achieved the highest growth (235.7%) at Birmingham, AL-based, $140 billion-asset Regions Financial, where $71.2 million in annuity earnings comprised 2.57% of the company’s noninterest income, the largest percentage among the top 10 earners, the White-ABIA Report reveals.


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

15: BANKINSURANCE.COM - AXA Retirement Planning Curriculum Approved

...for Credit in 49 States

NEWS IN BRIEF - JANUARY 18 - 24, 2010

New York City-based AXA Distributors, the wholesale annuity distribution unit of AXA Equitable Life Insurance Company, has created a retirement income planning curriculum for financial professionals.  The curriculum has been approved in 49 states for continuing professional education credit and includes a step-by-step guidebook that describes the mechanics of Social Security and Medicare, IRA planning strategies, available technology platforms, practice management and marketing techniques.  AXA Distributors Vice President Kelly Lavigne said, “After the challenging markets of the last two years, many clients and prospects are seeking retirement income planning expertise to help them rebuild assets and sustain their retirement dreams.”

16: BANKINSURANCE.COM - Affluent Americans Awakened by Financial Crisis

NEWS IN BRIEF - JANUARY 18 - 24, 2010

About 9 in 10 Americans (88%) with at least $500,000 in investable assets believe it is more important than ever to live within their means, according to a PNC Wealth Management survey.  Half of this group is re-evaluating its priorities; 47% are discussing money management with their children; 42% say the recession has had a negative impact on their family budget, and they have cut their spending on non-essential goods, PNC Wealth Management found.

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

17: BANKINSURANCE.COM - Banks' Fixed Annuity Sales Fall

NEWS IN BRIEF - JANUARY 25 - 31, 2010

18: BANKINSURANCE.COM - Consumer Demand Sparks Agent Recruitment...

...at Northwestern Mutual

NEWS IN BRIEF - JANUARY 18 - 24, 2010

19: BANKINSURANCE.COM - CRC Asks Bank CEOs to Donate...

..."Bloated Bonuses" to "Job Creation"

NEWS IN BRIEF - JANUARY 18 - 24, 2010

The California Reinvestment Coalition (CRC) has delivered letters to the CEOs of those banks which it said together hold 60% of deposits in California: San Francisco-based, $1.23 trillion-asset Wells Fargo & Co., Charlotte, NC-based, $2.25 trillion-asset Bank of America Corp., New York City-based, $1.89 trillion-asset Citigroup Inc., and New York City-based, $2.04 trillion-asset JPMorgan Chase & Co..  In the letters the coalition asked each CEO to tithe 10% of his executive compensation to “a ‘Main Street Stimulus’ for job recovery.”  CRC Executive Director Alan Fisher said, “Since the public had to give banks such a generous gift, we propose that top bank executives give back from their bloated bonuses to help create the jobs our economy desperately needs.”  San Francisco-based CRC is comprised of more than 275 of California’s nonprofit organizations and public agencies and says it “advocates for the right of low-income communities and communities of color to have fair and equal access to banking and other financial services.”

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

20: BANKINSURANCE.COM - FDIC Proposes Rule...

...Tying Employee Compensation to Insurance Assessments

NEWS IN BRIEF - JANUARY 18 - 24, 2010

The Federal Deposit Insurance Corporation (FDIC) has issued an Advance Notice of Proposed Rulemaking (ANPR) on Employee Compensation and is seeking comments on the ways the risk-based deposit insurance assessment system can be changed to account for employer compensation.  The FDIC has determined that assessments need to be in line with “risks inherent in the design of certain compensation programs.”  In this way, companies that incentivize risk will pay for the cost of insuring that risk by paying higher assessment fees into the Deposit Insurance Fund (DIF).  The FDIC said it “seeks to provide incentives for institutions to adopt compensation programs that better align employees’ interests with the long-term interests of the firm and its stakeholders, including the FDIC.”  To read the ANPR, click here.  Comments on the ANPR are due 30 days after its publication in the Federal Register.


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

21: BANKINSURANCE.COM - Insurance Agents Protest

...New York's Proposed Compensation Disclosure Regs

NEWS IN BRIEF - JANUARY 25 - 31, 2010

Glenmont, NY-based Professional Insurance Agents of New York State (PIANY) has submitted its written comments to the New York State Insurance Department (NYSID) in response to the latter’s published draft producer compensation disclosure regulation: Conduct, Trustworthiness and Competence of Insurance Producers, Especially Relating to Compensation Arrangements with Insurers.  In its response, PIANY argued the NYSID’s plan to mandate disclosure “is neither supported by real and actual experiences of consumers nor is it required by law, since commissions are being paid from the companies to the producers and not to the policyholders.”   In addition, PIANY said, “since the Legislature has not chosen to mandate disclosure of consumer compensation, the department has no authority to impose one by regulatory fiat.”  As a bottom line item, PIANY noted, “the cost of compliance is disproportionate to any purported benefit provided the purchaser.”  PIANY went on to point out vagaries in the draft regulation and the need to clarify terms, intent and application.  Overall, PIANY opposes the draft regulation.  To read PIANY’s comments on NYSID’s draft producer compensation disclosure regulation, click here.

22: BANKSINSURANCE.COM - Life Insurers See Modest to Flat Year Ahead

NEWS IN BRIEF - JANUARY 18 - 24, 2010

Most life insurers are predicting that growth in sales, premium and profitability in 2010 will be modest to flat compared to 2009, according to a recent LOMA Resource magazine survey.  Variable product guarantees, battered investment portfolios and exceptionally low interest rates are expected to be drags on profits.  In addition, consumers are expected to seek low-cost coverage and be more cautious about purchasing variable products.  In order to drive profits, insurers are looking at faster processing technologies, automated underwriting, smart phones, wireless tools, workforce virtualization and voice-over-Internet communications.  LIMRA, LOMA and LL Global President and CEO Robert Kerzner said, “The environment will remain difficult – some companies will thrive while others will struggle.”  He predicts that highly capitalized companies will seek to increase their market through mergers and acquisitions in 2010.


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

23: BANKINSURANCE.COM - New Trend? Affluent Investors Favor IRAs

Over Employer-Sponsored Retirement Plans

NEWS IN BRIEF - JANUARY 25 - 31, 2010

24: BANKINSURANCE.COM - Obama Pushes Congress for Bank Reform

NEWS IN BRIEF - JANUARY 25 - 31, 2010

U.S. President Barak Obama announced on January 21 that he will ask Congress to enact legislation prohibiting banks from engaging in proprietary trading and owning, investing in or sponsoring hedge and private equity funds.  In addition, he said he would ask Congress to enact legislation that would cap each bank’s share of the total market of nondeposit liabilities.  Obama said, "My resolve to reform the system is only strengthened when I see a return to old practices at some of the very firms fighting reform, and when I see record profits at some of the very firms claiming they cannot lend more to small businesses, cannot keep credit card rates low and cannot refund taxpayers for the bailout."

25: BANKINSURANCE.COM - Pacific Life IDs Women as...

"The Most Underserved Life Insurance Market"

NEWS IN BRIEF - JANUARY 25 - 31, 2010

Women control about half the $14 trillion in U.S. private wealth, live nearly five years longer than men and need approximately $2 trillion in life insurance, according to Newport Beach-based Pacific Life.  Yet, Pacific Life Marketing Services Vice President Alyce Peterson said, “Whether they are business owners, corporate executives or simply affluent, women are the most underserved life insurance market.”  To access What Women Need to Know About Retirement, the independent study on which Pacific Life based its findings, click here.


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

26: BANKINSURANCE.COM - Pelosi Slams Insurers

NEWS IN BRIEF - JANUARY 18 - 24, 2010

Speaker of the House of Representatives Nancy Pelosi accused U.S. insurance companies last week of funneling between $10 and $20 million through the U.S. Chamber of Commerce to fund deceptive ads opposing health insurance reform.  In a press release issued on January 12, Pelosi said, “This duplicity is not surprising coming from an industry that has used every method to try to kill health insurance reform that would save lives, save money, save jobs and save Medicare.”  Insurers, Pelosi said, want to “maintain a health insurance system of high costs, limited access and arbitrary cut-offs for American consumers.”


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

27: BANKINSURANCE.COM - SEC Chairman Schapiro Points Commission

...to Lack of Regulatory Authority

NEWS IN BRIEF - JANUARY 18 - 24, 2010

Security and Exchange Commission (SEC) Chairman Mary Schapiro told the Financial Crisis Inquiry Commission last week that the financial crisis “resulted from many interconnected and mutually reinforcing causes.”  Mortgage securitization encouraged weaker underwriting standards and reliance on credit rating agencies.  Because markets were viewed as always self-correcting, weaker standards and regulatory gaps increased.   Complex, illiquid and not easily understood financial products like derivatives proliferated.  Compensation incentives encouraged significant risk taking.  Companies that marketed or purchased complex financial products failed to appropriately oversee and manage risks, and the regulators had no authority to monitor and reduce risks that flowed outside their regulatory domains. To read her entire testimony and recommendations, click here.

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

28: BANKINSURANCE.COM - State AGs Oppose Senate Health Care Bill as Unconstitutional

NEWS IN BRIEF - JANUARY 18 - 24, 2010

The Attorneys General (AGs) of Alabama, Colorado, Florida, Idaho, Michigan, North Dakota, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas, Virginia and American Samoa have stated their opposition to the Senate Health Care Bill H.R. on Constitutional grounds.  The attorneys general describe the bill’s special treatment of Nebraska as a state whose residents will share in the health insurance plan but never have to pay the cost of underwriting the medical mandates in the plan as “arbitrary and capricious,” not for the general welfare of all states and, therefore, unconstitutional.  In a letter to Speaker of the House Nancy Pelosi and Senate Majority Leader Henry Reid, the attorneys general said, “As legal officers of our states we are contemplating a legal challenge to this provision and we ask you to take action to render this challenge unnecessary by striking that provision.”  The AGs said the Nebraska exemption was the price supporters of the bill were willing to pay Nebraska Senator Ben Nelson for his crucial 60th vote in favor of the Senate bill.  To read the letter in its entirety, click here.

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

29: BANKINSURANCE.COM - Study Says Insurers' Investments Improved 4.7%

...in the First Three Quarters of 2009

NEWS IN BRIEF - JANUARY 25 - 31, 2010

30: BANKINSURANCE.COM - The Unregulated Shadow Banking System...

...Fueled Financial Crisis, Bair Tells Commission 

NEWS IN BRIEF - JANUARY 18 - 24, 2010

Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair said in testimony before the Financial Crisis Inquiry Commission last week that products and practices that originated in the shadow banking system not regulated by the FDIC fueled the financial crisis.  Adding “more regulation upon insured banks,” she said, “will simply provide more incentives for financial activity to be conducted in less-regulated venues and exacerbate the regulatory arbitrage that fed the crisis.”  To read her entire testimony, which includes her proposed solutions, click here.

31: BANKINSURANCE.COM - Wells Fargo to Merge, Reorganize and Liquidate Funds

NEWS IN BRIEF - JANUARY 18 - 24, 2010

San Francisco-based, $1.23 trillion-asset Wells Fargo & Co. subsidiary Wells Fargo Funds Management plans to merge, reorganize and liquidate various funds currently held under Wells Fargo Advantage Funds and Evergreen Investment Management Company.  In the move designed to eliminate product overlap, 27 Evergreen Funds will be reorganized into new Wells Fargo Advantage Funds, 53 mutual funds from both fund families will merge and 4 Evergreen Funds and 1 Wells Fargo Advantage fund will be liquidated.  Evergreen portfolio managers will continue their roles as part of Wells Capital Management.  The reorganization requires shareholder approval.

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

32: K@W - Global Real Estate: Ready for a Rebound?

The global real estate community is breathing easier than it was a year ago, judging by the sentiments of participants at a recent Knowledge@Wharton global real estate forum titled, "The Road to Recovery: Investing in the Global Real Estate Rebound." Held at the New York Stock Exchange on December 11, in conjunction with Interconnect Events, the forum focused on the developed world's challenges in freeing up private capital and finding opportunities in distressed real estate assets, among other topics. According to some speakers and panelists, opportunities that receded in the West in the wake of the financial crisis can still be found in emerging markets, although the barriers to entry remain high.

LINK TO FULL ARTICLE: http://knowledge.wharton.upenn.edu/article/2413.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

33: K@W - Seeing Red: What Are the Costs of China's Currency Policy?

In the depths of the recession, many critics of China's currency policy -- which keeps the yuan artificially low in value -- held their tongues. After all, that policy allowed other countries, especially the United States, to borrow from China the vast sums they needed to stimulate their economies. But now that the world economy is improving, some are resuming the call for China to let the yuan gain strength, and eventually to float freely -- as the dollar, euro and yen do -- allowing other nations to better compete with China's exports. What is the best currency policy? Are China's interests really at odds with those of the rest of the world? Wharton faculty and other experts weigh in.

LINK TO FULL ARTICLE: http://knowledge.wharton.upenn.edu/article/2414.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

34: M&A - American Express Completes Acquisition of Revolution Money

American Express Company today announced that it has completed the acquisition of Revolution Money Inc., a next-generation payments platform launched by Revolution LLC in 2007. American Express paid approximately $300 million cash for the acquisition.

35: M&A - U.S. Bank Completes Purchase

...of Nevada Banking Operations from BB&T Corporation

U.S. Bancorp announced today that it has completed the purchase of approximately $850 million in deposits and certain branch locations of BB&T Corporation's Nevada banking operations. This acquisition includes the deposits of branches located in the Las Vegas-Paradise market, Reno-Sparks market and the Northern Nevada markets of Carson City, Fallon and Gardnerville Ranchos, that BB&T had acquired from the Federal Deposit Insurance Corporation (FDIC) as receiver for Colonial Bank.

36: MISCELLANEOUS - Bank Economists Expect Sustained Economic Recovery in 2010

The economy is on a sustainable recovery path and job growth will return this year, according to the Economic Advisory Committee of the American Bankers Association.  High unemployment and restrained consumer spending, however, will be major impediments to more rapid economic growth. 

"We're on the cusp of private industry job creation, which will gain momentum throughout the year," said Stuart Hoffman, committee chairman and chief economist, PNC Financial Services, Inc., Pittsburgh.

37: MISCELLANEOUS - Banks Are Forming and Folding Captives Across Domiciles

OLDWICK, N.J.--(BUSINESS WIRE)--Banks and other financial institutions are both consolidating their captive insurance companies and launching new captives in a range of domiciles, according to regulators and industry observers in this week’s BestWeek U.S./Canada.

“been a big draw for some of the best and the brightest talent out in the marketplace because we as an industry haven’t told our best story...if you look over the last 12 to 18 months [you'll see] how incredibly resilient we’ve been in a time of economic crisis”

LINK TO FULL ARTICLE: http://newsblaze.com/story/2010012212531500001.bw/topstory.html

38: MISCELLANEOUS - Bernanke Confirmation Advances in Crucial Vote

Ben Bernanke has cleared a crucial hurdle in the Senate that assures his confirmation to a second term as chairman of the Federal Reserve.

The Senate voted Thursday to overcome a filibuster that would have doomed his nomination. The Senate will now move to a final confirmation vote.

LINK TO FULL ARTICLE: http://www.weau.com/home/headlines/82972722.html

39: MISCELLANEOUS - Businesses Whose Employees Text or Place ...

Business-Related Calls While Driving Could Be Found Vicariously Liable

Enforcing a clear “electronics usage policy” could help avoid distracted driving accidents and liabilities

SCHAUMBURG, Ill.--(BUSINESS WIRE)--"Distracted driving" may have been Webster's Dictionary's "Word of the Year" for 2009, but in 2010, businesses that provide their employees with mobile devices should keep a related phrase in mind: "vicarious liability."

LINK TO FULL ARTICLE: http://eon.businesswire.com/portal/site/eon/permalink/?ndmViewId=news_view&newsId=20100125006487&newsLang=en

40: MISCELLANEOUS - Death From Space: What An Asteroid Could Do

A report released on Friday finds the United States is doing little to defend the planet against potentially devastating asteroids.

Up to 90 percent of the really big and obvious threats are being found, but smaller objects can also wreak vast destruction. Here are some facts about things that can hit the planet:

* Near-Earth Objects are asteroids, comets or really big pieces of them that may wander close to Earth.

* Like the moon and Mars, which are covered in craters, the Earth is also frequently bombarded. But erosion, the movement of continents, the oceans and even forests obscure them over time.

* The National Academies report says it is highly probable that the next destructive impact will be something less than 50 meters (164 feet) across. This happens about once every 1,000 years.

* The last one hit over Tunguska, in Siberia, in 1908, flattening forests. If one hit a populated area today, it would wreak destruction akin to a severe hurricane or tornado.

* Objects one kilometer (just over half a mile) across hit the Earth about once in a million years. Something this big could damage a large region or cause enormous tsunamis if it hit an ocean.

* Objects 3 miles or larger could kick up enough dust to cause global damage for years, perhaps decades of cold and dark conditions, and could cause mass extinctions. "Luckily such events are exceedingly rare, the last known being about 65 million years ago," the report reads.

* About 6,200 near-Earth asteroids are known, the largest being 1036 Ganymed, which is 20 miles across.

* About 500 to 1,000 asteroids are 1 km or wider.

* Smaller objects, five to 10 meters (16 to 32 feet) across hit the atmosphere about once a year, usually exploding with the force of a nuclear bomb in the upper atmosphere and causing no damage on Earth.

* Your own chance of dying in a large cosmic impact is 1 in 40,000, not because it is likely but because such an impact would kill so many people that it raises the odds. In comparison, your own risk of dying in a flood is 1 in 30,000, while the risk of death from a motor vehicle accident is 1 in 100.

41: MISCELLANEOUS - New York Life Taps Ibbotson to Offer a Unique Asset ...

... Allocation Model That Factors in the Missing Link of Human Capital

Holistic Approach Allows Clients to Evaluate Their Total Economic Wealth, Make Informed Choices

NEW YORK--(BUSINESS WIRE)--New York Life Insurance Company has tapped Ibbotson Associates to help develop Lifetime Wealth Strategies, a set of tools to help registered representatives account for their clients’ total economic wealth and optimize their portfolios by making insurance and investment decisions together. These tools put the appropriate questions in plain language and provide clients with the answers they need.

LINK TO FULL ARTICLE: http://www.newyorklife.com/nyl/v/index.jsp?contentId=122279&vgnextoid=829c4f5c42766210VgnVCM100000ac841cacRCRD

42: MISCELLANEOUS - Sheila Bair: Causes and Current State of the Financial Crisis

Chairman Angelides, Vice Chairman Thomas and Commissioners, I appreciate the opportunity to testify on behalf of the Federal Deposit Insurance Corporation (FDIC) on the causes and current state of the financial crisis—the most severe financial crisis and the longest and deepest economic recession since the Great Depression.

The last major financial crisis—the thrift and banking crisis of the 1980s—resulted in enactment of two laws designed to improve the financial regulatory system: The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA). Combined, FIRREA and FDICIA significantly strengthened bank regulation, and provided banks strong incentives to operate at higher capital levels with less risk, but these regulations have also created incentives for financial services to grow outside of the regulated sector.

LINK TO FULL STATEMENT: http://www.fdic.gov/news/news/speeches/chairman/spjan1410.html

43: MISCELLANEOUS - The Top Five Economic Threats to America in 2010

The Free Enterprise Nation Introduces New Initiatives on Capitol Hill to Protect Small, Mid-sized Businesses and their Employees from Government Excess

TAMPA, Fla.--(BUSINESS WIRE)--The Free Enterprise Nation (FEN) released a list of the top five threats facing free enterprise in the New Year. FEN is a research, education and advocacy organization that champions the cause of businesses and employees in the private sector.

“Never before has free enterprise in America been more threatened,” said James MacDougald, president of The Free Enterprise Nation. “The combination of unbridled and unsustainable levels of government spending, increased taxation and regulation, and governmental interference into fundamental individual rights, has created a ‘perfect storm’ that threatens every worker and every business in the private sector.”

This month, FEN is launching a legislative tour to educate lawmakers about the threats to free enterprise and encourage the sponsorship of legislation to protect American businesses and their employees.

Top Five Threats:

1. Hidden Cost of Government

The massive cost of government entitlement programs and the cost of their own employee compensation and benefits are hidden from taxpayers. Currently, individual citizens must rely on investigative reporters and/or the Freedom of Information Act to discover the level of pay and benefits they provide to public sector employees, and what the true costs and liabilities of these entitlements, pay, and benefits are. FEN will lobby for, and encourage taxpayers to demand, that Congress and every other tax-supported entity enact a Taxpayer Disclosure Act that will require full disclosure of government expenditures including salary and benefits, and the unfunded liabilities associated with these benefits. These disclosures would be required to meet the same actuarial and accounting standards that apply to employers in the private sector.

2. Social Security Crisis

In the next 15 years, an estimated 77 million baby boomers will become eligible for Social Security. Unless immediate changes are made, Social Security will become essentially bankrupt, while most public sector workers retire with a government guaranteed pension plan. In 2010, FEN will seek congressional sponsorship for a bill to guarantee the solvency of Social Security so that free enterprise workers can depend on Social Security to be available when they retire.

3. Government-Coerced Unionization

In 2009, President Barack Obama issued Executive Orders that can require unionization of service or construction contractors in order to receive government contracts. The federal government has also enabled the forced “unionization” of independent contractors under artificially contrived “employer/employee” arrangements. Congress is currently considering the “Employee Free Choice Act” which, if passed, would allow coercion and would eliminate the secret ballot from union elections. FEN opposes all of these measures as being detrimental to a free enterprise economy and will support legislation to oppose any and all of the above measures.

4. Pending Health Care “Reform” Legislation

The costs of the current health care reform would place an unprecedented financial burden on individual taxpayers, entrepreneurs and small businesses. If enacted, the current legislation would add another level of unsustainable debt while programs such as Medicare, Medicaid and Social Security are nearly bankrupt. FEN does not believe Congress has the constitutional authority to make any American buy insurance or abridge the rights of free choice and self-determination of businesses or for the individual private sector worker.

5. Unrestrained Spending, Debt and Taxes

Unrestrained and unsustainable levels of government spending have created historic levels of government debt. To cope with the new levels of debt, governments are raising existing taxes and seeking revenue from new taxes, including proposed “Cap and Trade” tax policies. FEN will promote tax decreases and significant reduction in government spending as the most vital economic “stimulus” needed by our free enterprise economy.

To coincide with the release of the top five threats, FEN has launched new capabilities on its Web site, TheFreeEnterpriseNation.org. The site includes what may be the largest database of government spending and waste ever made available to the public; explanatory position papers on each of the five major threats to our economy; as well as specific initiatives that FEN is taking to address them. “We the private sector, the backbone of our economy, have joined together to speak with one very loud voice… so loud that elected officials must listen,” said MacDougald. “Government must be restored to its proper constitutional role and allow free enterprise to flourish. We can’t let our own government destroy the American dream.”

44: MISCELLANEOUS - Wells Fargo to Rebrand its Texas Wachovia Branches in July

Wells Fargo & Co. said it plans to convert its Wachovia Corp. branches in Texas to the Wells Fargo name in July, and will add 161 rebranded retail locations to its network in the process.

Once the transition is made, Wells Fargo is expected to have more than 700 retail locations and a thousand ATMs across the state. 

The company also said it will consolidate 79 Wachovia and Wells Fargo branches statewide, including 37 in the Dallas-Fort Worth area. Specific locations to be closed were not immediately available, but most are within a mile or less of each other.

Despite the consolidation, Wells Fargo said it does not anticipate any job cuts at the retail level.  Wachovia Corp. and Wells Fargo merged on Dec. 31, 2008.

45: PERSONNEL CHANGES - Andy Will Joins Marshall & Ilsley Corporation...

...as Senior Vice President, Director of Deposits

Marshall & Ilsley Corporation (M&I) today announced that Andy Will is joining M&I as senior vice president, director of deposits, a newly created position. He will be responsible for M&I's retail bank deposits including profitability and growth; monitoring and establishing pricing models; and developing and managing deposit products.

Will has 30 years of experience in the financial services industry. He has held senior positions with Norwest Bank, Wells Fargo, and most recently Keycorp in Cleveland, Ohio, where he served as executive vice president/division manager of Consumer, Private Banking, and Business Banking Product Management.

46: PERSONNEL CHANGES - J.P. Morgan Hires Frank Troise...

...as Global Head of Electronic Client Solutions

J.P. Morgan announced today that Frank Troise will join the investment bank as Global Head of Equities Electronic Client Solutions where he will oversee the electronic trading business including product management, distribution, direct market access, algorithmic trading, electronic liquidity management and market structure. He will be based in New York and report to Carlos Hernandez, Head of Global Equities.

Mr. Troise was previously the Head of Equities Electronic Trading Product at Barclays Capital. His responsibilities included global product management for the electronic trading of equities and listed options. Prior to Barclays Capital, Mr. Troise worked at Lehman Brothers from 2005 to 2008 and at ITG Inc. from 1997 to 2005.

47: PERSONNEL CHANGES - WestLB Mellon Asset Management Appoints New CEO

Volker Kurr To Lead Joint Venture Investment Manager

BNY Mellon and WestLB AG have jointly announced the appointment of Volker Kurr as CEO of their joint venture investment management business, WestLB Mellon Asset Management KAG. Kurr succeeds Kevin Birch following his retirement in 2009.

Kurr joins from UBS Global Asset Management where he was Head of Institutional and Wholesale Business Development. Prior to joining UBS, Kurr worked at Cominvest Asset Management where he was a member of the Managing Board focusing on institutional business development. His previous experience includes working at SEB Asset Management, one of Germany's leading asset management companies, where he was Head of Sales and Global Product Development.

48: REGULATORY - Obama Divides Davos with Proposal to Curb Size of Banks

U.S. President Barack Obama's plan to impose new rules on bank size and risk dominated talk among bankers on the first day of the World Economic Forum in Davos, Switzerland, as executives said big banks are essential and rules should be coordinated globally.

LINK TO FULL ARTICLE: http://www.bloomberg.com/apps/news?pid=20601074&sid=aWECXpQWsQSI

49: REGULATORY - Obama Proposes Limits on Banks' Size, Investments

Following are five key points about U.S. President Barack Obama's proposal for limiting financial risk-taking by big banks.

The proposals, which require congressional approval, could force banks to shed businesses that provide big profit but also create big risks.

* Banks or financial institutions that own banks could not own, invest in or sponsor hedge funds or private equity funds.

* Caps or limits would be set on the relative size of banks, taking into consideration not only deposits but also non-deposit funding sources. Deposits already are capped to prevent too much risk being concentrated in a particular bank but other forms of funding are not.

* Banks could not engage in proprietary trading for their own accounts, although a White House official said they could make proprietary trades as part of their market-making business.

* In Congress, there is likely to be resistance from Republicans who oppose government limits on private firms and from financial industry lobbyists whom Obama already has derided. "So if these folks want a fight, it's a fight I'm ready to have," Obama said.

* Obama refers to proposed limits on banks' activities as the "Volcker Rule" after former Federal Reserve Chairman Paul Volcker, who now heads a White House advisory board and has called for restoring the distinction between banks that take deposits and make loans and those that engage in capital markets and investment banking activities.

A legal division between banks' commercial activities and investment banking existed until 1999, when the Depression-era Glass-Steagall Act was repealed.

50: REPORT- 3Q Bank Annuity Fee Income Up 12.9% Over Previous Quarter

FOR IMMEDIATE RELEASE – Radnor, PA, and Washington, DC, January 20, 2010 – Income earned from the sale of annuities at bank holding companies (BHCs) rose 2.5% to $2.00 billion in the first three quarters of 2009, up from $1.95 billion in the first three quarters of 2008, according to the Michael White-ABIA Bank Annuity Fee Income Report™.  Third-quarter annuity commissions, however, rose to $669.8 million, up 12.9% from $593.1 million in second quarter 2009 and up 4.0% from $644.2 million earned in third quarter 2008.

Compiled by Michael White Associates (MWA) and sponsored by American Bankers Insurance Association (ABIA), the report measures and benchmarks the banking industry’s performance in generating annuity fee income. It is based on data from all 7,319 commercial and FDIC-supervised banks and 922 large top-tier bank holding companies operating on September 30, 2009.

LINK TO FULL REPORT: http://www.bankinsurance.com/about/press-releases/2010-01-20-PR-Bank-Annuity-FIR-3Q-09.pdf

51: REPORT - Basel Committee Publishes Assessment Methodology...

...for Compensation Practices

The Basel Committee on Banking Supervision today issued Compensation Principles and Standards Assessment Methodology. The Methodology seeks to foster supervisory approaches that are effective in promoting sound compensation practices at banks and help support a level playing field.

Mr Fernando Vargas, Chairman of the Basel Committee's Task Force on Remuneration and Associate Director General of Banking Supervision at Bank of Spain, explained that "the Methodology provides a comprehensive set of tools for supervisors to assess compensation practices in an effective and consistent manner."

The Methodology will help supervisors assess a firm's compliance with the Financial Stability Board's "Principles for Sound Compensation Practices" and related implementation standards. This will contribute to ongoing implementation of the Principles and Standards, including the FSB’s current thematic review of national and firm implementation. Consistent with the FSB "Principles for Sound Compensation Practices", the Methodology is structured based on the following themes:

1.       Effective governance of compensation

2.       Effective alignment of compensation with prudent risk taking, and

3.       Effective supervisory oversight and engagement by stakeholders.

52: REPORT - Fidelity Displace as the Top Distributor and Mutual Fund Provider

CAMBRIDGE, Mass.--(BUSINESS WIRE)--As the result of significant shifts in brand perceptions, household penetration, as well as changes in investor loyalty, Fidelity Investments has forfeited its position as both the number one distributor and mutual fund provider to key rivals Charles Schwab and Vanguard. These results are included in Cogent Research’s recently released 2010 Investor Brandscape™ report.

LINK TO FULL ARTICLE: http://www.marketwatch.com/story/fidelity-displaced-as-the-top-distributor-and-mutual-fund-provider-according-to-2010-investor-study-2010-01-21

53: REPORT - Participants Using 401(k) Help Offered Through ...

Their Employer Have Higher Returns

Joint Research by Hewitt Associates and Financial Engines of More than 400,000 Retirement Plan Participants Shows Those Using Help Are Better Off

LINCOLNSHIRE, Ill. & PALO ALTO, Calif.--(BUSINESS WIRE)--401(k) plan participants using professional investment help provided by their employer—such as target date funds, managed accounts and online advice—experience better returns on their retirement investments than those who do not, according to a joint study from Hewitt Associates and Financial Engines titled Help in Defined Contribution Plans: Is it Working and for Whom? The study also found that a participant’s age is the key predictor of the type of help used, with younger, less-tenured participants more likely to use target date funds and older, more-tenured participants more likely to use managed accounts.

LINK TO FULL ARTICLE: http://www.401khelpcenter.com/press_2010/pr_hewitt_012510.html

54: REPORT - Third Quarter Bank Annuity Fee Income Up 12.9% Over Second Quarter 2009

Income earned from the sale of annuities at bank holding companies (BHCs) rose 2.5% to $2.00 billion in the first three quarters of 2009, up from $1.95 billion in the first three quarters of 2008, according to the Michael White-ABIA Bank Annuity Fee Income Report™.  Third-quarter annuity commissions, however, rose to $669.8 million, up 12.9% from $593.1 million in second quarter 2009 and up 4.0% from $644.2 million earned in third quarter 2008.

55: STATS - Bank Fixed Anuity Sales Down 24% in 3Q 2009

WASHINGTON – U.S. sales of fixed annuities by banks and other depository institutions decreased by 24 percent compared to third quarter 2008 and 13% from the prior quarter with sales estimated at $7.25 billion in third quarter 2009.

Sales were negatively affected by falling fixed annuity credited rates and their narrowing rate advantage over bank certificates of deposit.   In year-to-date 2009, estimated results were $26.9 billion, 7 percent above YTD 2008. 

LINK TO FULL ARTICLE: http://www.aba.com/Pressrss/011910FixedAnnuitySales.htm

56: STATS - Retirees Polled on 2010 US Economic Outlook

BURLINGAME, Calif.--(BUSINESS WIRE)--A December 2009 survey of 1,030 Medicare-eligible retirees revealed that 32.3% believe the economy in 2010 will get better, 22.9% believe it will get worse, and 31.5% believe it will stay the same. At the same time, 48.2% rate their personal financial situation as “good” or “excellent,” while 46.5 % say it is “fair.” Just 5.3% say their personal financial situation is “fairly bad” or “terrible.”

“Especially for retirees on fixed incomes, rising health care costs can threaten their peace of mind”

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