1: CAST SERVICE HIGHLIGHT

Process Analysis & Redesign
The redesign of key operational activities to increase operating performance, improve service quality and strengthen cost management 

For leading edge organizations, the drive for achieving process excellence is never-ending. Client needs range from minor process improvements, such as tweaking one small process in a high volume operation, to full scope process reengineering and even outsourcing. High performing financial services organizations continually evaluate process redesign opportunities. 

Factors Driving the Need for Reengineering

• New technology installed around 'old' processes
• Desire to optimize new technology implementation
• Increased emphasis on improving the 'customer experience'
• Marginally successful integration of previously acquired processes and technology
• Requirements for improved expense control
• Need to integrate new business lines and products leveraging existing infrastructure
• Need to realign operational capabilities to support new products and services

Why CAST for Process Analysis and Redesign

• Extensive experience in detail process design
• Financial services industry process ‘best practices’ database
• Proven tools to support measurement and monitoring of activities and capacity
• Fact-based approach to quantification of existing practices and the impact of changes
• Proven capacity management tools and techniques
• Demonstrated project management experience
• Industry-specific end-to-end functional expertise in most financial services operations

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

2: AMERICAN BANKER - A Sweeter Customer Experience

Bank Technology News   June 2010

By Sara Lepro

Cool. Hip. Fresh. These words are rarely used to describe traditional retail banking. But that's how some experts have referred to Mango Financial Inc., a start-up targeting underbanked consumers. The company is raising eyebrows with its sleek, colorful flagship store in Austin, a plan to build similar outlets around the country, and a paid-membership model designed to encourage customers to use Mango over the long term. The new institution is also leveraging mobile phone technology and SMS to enhance its appeal.

Mango was founded by Bertrand and Roy Sosa, the brothers who started NetSpend Corp., now a leader in the prepaid debit card business. Unlike NetSpend, Green Dot Corp. and other prepaid marketers, which distribute their cards through partnerships with retailers, Mango is focused on building its own physical presence. It plans to open about 10 more stores over the next 12 months in large metropolitan markets. The idea is to appeal to consumers who have little experience with traditional banking by offering services that meet their immediate financial needs- prepaid cards, money transfers and bill payment-in a welcoming environment.

"They are clearly trying to differentiate themselves by just rethinking the conventional unbanked relationship," says John Grund, a partner at First Annapolis Consulting. "The more you can treat the unbanked like the banked in terms of service and prestige, or just status, the better it is."

Another of the Sosas' portfolio companies, MPOWER Mobile Inc., has designed software that lets Mango customers send money and check balances through text messages. Mango is using the service to attract customers. To accept money transmitted by a Mango client via text message, a person must have a Mango card.

"As we get retail customers, they are going to help us through their phones to introduce new customers into the system, which is something that everybody in banking should be doing, by the way, but they're not," Bertrand Sosa says.

With its bright yellow and orange furnishings and open floor plan, Mango's Austin store, which opened earlier this spring, stands out not only from typical banking offices but also from many inner-city financial outlets, where bulletproof glass is the norm.

"It's like a cross between an Apple store and a yogurt shop," says Jennifer Tescher, director of the Center for Financial Services Innovation, a nonprofit affiliate of Chicago's ShoreBank Corp. "It's definitely not like being in a bank branch, and it's definitely not like being at a check casher."

Mango's target customers are 25 to 35, make less than $60,000 a year and regularly use check cashers. The company is also trying to attract Hispanic customers, with signage in both English and Spanish.

"We're looking at someone that has had a bank account before but maybe that bank account is just an entry-level checking account and has experienced heavy check-bouncing activity," Bertrand Sosa says.

Consumers who pay a one-time fee of $10 to become lifetime members can load checks on to the Mango MasterCard card for free and send international money transfers for $5. Nonmembers pay a one percent check load fee and $10 for international money transfers. Cardholders must load at least $500 a month to their cards to bypass a monthly fee. The $181 million-asset Horizon Bank in Austin issues the Mango card. Bill payment at Mango costs $1 for members and nonmembers. Most other services, like direct deposit and online card-to-card and bank account transfers, are free.

Aside from the memberships, the Sosas are hoping to foster long-term relationships with customers through other companies funded by their venture capital fund, MPOWER Ventures. One such company, Gratio Capital, is set to launch a mutual fund for the underbanked that will eventually be offered in Mango stores.

Mango's success will depend in large part on the ability to expand its stores, Grund said, which is a costly undertaking. "It could be a potentially expensive build-out."

And customer retention is a challenge for all prepaid providers, said Bryan Derman, a partner at Glenbrook Partners LLC, a consulting firm in Menlo Park, Calif. "You'll hear people say the average life of a [general-purpose, reloadable] card is seven months," he said.

Then again, "most people are getting their prepaid cards off the rack at a retail store," Derman said. "But a chance to meet the company itself and get a real person to explain the product to you, I would guess that would be valued by the people opening these accounts, because in many cases it's the first formal account that many of them have had."

-American Banker reporter Marissa Fajt contributed to this story

3: AMERICAN BANKER - Customer Reviews Drive Growth

Bank Technology News   June 2010

By Michael Sisk

The idea of creating online forums where customers can share comments on products and services has always been tantalizing and scary for financial institutions. Tantalizing because customer reviews are usually trusted, they can generate buzz, drive adoption, and they're free. Scary because customers might say something bad about a product, or the bank, or they might say something obscene or something that runs afoul of regulators.

"This is not for the faint of heart," says Rhonda Crawford, vp digital media and innovation at USAA, one of the first American banks to brave the truth and post customer reviews online. Crawford notes that an institution has to be confident that its products can stand the scrutiny this kind of forum opens them up to.

As scary as that may be, as people become more comfortable sharing information and making decisions online, FIs may soon feel competitive pressure to create these forums. Tom O'Neill, director of site innovation at LendingTree, says the trend is clear. "Customers expect to read other consumers' reviews of products and services, and it can be great from a viral marketing perspective. In the future, those FIs that don't put this information on the site will be at a disadvantage."

For years LendingTree collected reviews and rated lenders on a five-point scale in categories such as service and fees. But they didn't share the actual comments publicly. Last year, however, LendingTree hired Austin-based Bazaarvoice to handle its consumer-generated ratings and reviews and make those reviews available for all to read. It went live in July of 2009 and only a few months later the company calculated that consumers that read reviews were 83 percent more likely to pursue a loan than those who did not. There are 100 to 150 new posts per month.

What sold LendingTree on Bazaarvoice, O'Neiil says, is its "moderation process." Bazaarvoice works closely with each FI (CIBC, USAA, America First Credit Union are customers) to create the rules of the discussion (e.g., no cursing, performance promises, bashing of competitors) and then runs each consumer post through a four-stage review process (two technology screens and two human screens). This process keeps the discussion on target, safe for the institution and helpful for customers who don't need to wade through useless rants to get pertinent information.

While customer reviews are most often seen in the retail environment-other Bazaarvoice customers include Best Buy, Costco, Dell and Macy's-Marc Ostryniec, vp of manufacturing design at Bazaarvoice, says that customer reviews are a good fit for financial products and services because customers are very engaged with these and are likely to have valuable opinions and information to share.

The biggest hurdle with any potential client is convincing them that Bazaarvoice's moderation process will work. "The internal knee-jerk reaction is always 'No way!'' Ostryniec says. To convince them, Bazaarvoice explains the four-step screening process and assures them that all the human screens are conducted by native speakers. "We don't offshore this, there's too much subtlety of language."

If the institution agrees to move forward, there's a content hold period during which no comments are displayed to the public, but the FI can review the comments Bazaarvoice would have allowed. The company usually wins them over, says Ostryniec, and USAA is a case in point. At first the company reviewed everything that Bazaarvoice approved. But in short order it became so comfortable with the process that today it only reviews what has been rejected. USAA estimates that the introduction of ratings and reviews led to 16,000 additional products and policies across its five main products lines in the first year.

Besides ratings and reviews, Bazaarvoice also offers "ask and answer forums" where experts or customers can weigh in (LendingTree is planning to add this feature this summer) and a "stories" module where customers can tell tales about how well or badly a product or service performed.

Brad Strothkamp, principal analyst, e-business/e-commerce at Forrester, says Bazaarvoice is the clear leader in the financial services space, where connecting people to reviewers within their social networks has enormous potential. Financial products and services often come through personal recommendation already, he says, "so this technology fits in with how people make decisions anyway. I think this is very interesting."

4: AMERICAN BANKER - Dimon Parries Discontent on Mortgages with Conciliatory Tone

Proposal to strip Dimon of chairmanship fails

American Banker    Wednesday, May 19, 2010

By Matt Monks

A year ago, Jamie Dimon received a virtual hero's welcome at JPMorgan Chase & Co.'s shareholder meeting, winning praise for deftly steering the company through the financial crisis.

Dimon faced a markedly chillier reception Tuesday, however, surviving a shareholder proposal to strip him of his chairmanship while hundreds of distraught homeowners chanted "foreclose Chase" outside the New York banking giant's yearly gathering.

Populist anger and discussion of potentially painful regulatory reforms cast a pall over the nearly three-hour event.

It was disrupted early on as one heckler -- a housing activist named Bruce Marks -- was escorted from the building saying, "I'm a shareholder," after complaining that the lender isn't doing enough to help modify underwater mortgages.

The scene was in stark contrast to JPMorgan Chase's somewhat light-hearted meeting the year before, when some of the most pressing concerns Dimon addressed were from retired employees upset about losing access to the company cafeteria.

Tuesday's meeting wasn't so buoyant. Security guards in dark suits prowled the back of the jam-packed, 400-capacity room, and two uniformed police officers stood outside the doors as shareholders like Kathleen Wilverding implored the company's top executives for help in modifying their home loans.

"I'm not asking for a handout," Wilverding said. "I don't want to lose my home."

Dimon, who stood behind a lectern in a dark blue suit and tie for the entire session, told Wilverding and a handful of others in attendance who are struggling under unwieldy mortgage payments that the company had people on hand to address their concerns.

"When it comes to homeowners. We have to do it one by one. Do they live there? Can they afford to pay it? Is it the right thing to do?" Dimon said. "We have experts here. They will go through your situation -- what can and can't be done -- directly, openly and honestly."

Wilverding and about 11 other struggling homeowners attended the meeting, led by Marks, the chief executive of Neighborhood Assistance Corp. of America.

Dimon addressed a slew of other shareholder concerns during the meeting, which drew more people than expected, forcing some shareholders to watch the proceedings on television in another room.

He held on to both his chairman and chief executive titles after shareholders rejected a proposal backed by the California Public Employees' Retirement System to split the roles. The proposal was supported by 33.9% of shareholders.

Dimon reiterated previous statements that the company would like to raise its quarterly dividend -- which it cut to a nickel per share in the midst of the recession -- to 30% to 40% of earnings as soon as it is evident that the economic recovery has taken hold.

He also addressed the toxic political environment for banks.

Dimon -- who said that JPMorgan Chase had spent nearly $1 billion on legal fees and $7 million on lobbying last year -- alluded to reports that his vocal opposition to some of the most stringent reforms proposed for the banking industry was not making him any fans in Washington.

Evelyn Davis, the activist shareholder, asked Dimon if he was still "President Obama's favorite banker," a title that has followed him around since a profile in The New York Times last summer described him as perhaps the most credible banker in the country. Last week, reports suggested that Bank of America Corp. CEO Brian Moynihan may have assumed that role.

"I heard he has a new one," Dimon said. "I don't know who his favorite banker is."

A shareholder named Ida Gordon asked Dimon how the company could be affected by regulations stemming from what she described as the "demonization" and "vulgarization" of banks.

Dimon -- who said he supports common-sense reforms -- said new regulations of the fees banks generate from credit cards, debit cards and derivatives could take sizable toll on the company's profits. Its credit card business could lose $700 million and the retail bank, $300 million, he said.

"We don't really know yet what the derivative … rules will do," Dimon said. "Those are the ones we know about. I don't think that's small. All put together, these will add up to well over a billion and a half, two billion dollars."

Though protestors created the biggest stir at the meeting, some shareholders stood by Dimon.

Victor Salomone said he supported Dimon's drawing a large paycheck as long as the company is performing. He also had little sympathy for shareholders using the meeting to air "their personal problems."

Another shareholder, whose name was inaudible, said he felt "good and comfortable" to have Dimon at the helm.

"I like that feeling," he said.

In his opening comments, Dimon said JPMorgan Chase has been doing its part to mend the economy.

"I want to assure you, as a firm, that we have tried to do everything in our power to help…every day of this crisis," Dimon said.

5: AMERICAN BANKER - Gift Card Gap?

US Banker    June 2010

By Glen Fest

All agree the new rules for prepaid gift cards are just common sense.

But implementing the required changes will be a challenge, and many worry the short time frame for doing so could hurt sales just as the busy holiday season starts to get underway.

The rules limit the fees collected on dormant cards and require better disclosure of the fees and expiration dates.

Though the changes are part of last year's Credit Card Accountability, Responsibility and Disclosure Act, the deadline for complying had been left open initially. Then in March the Federal Reserve Board decided on Aug. 22 as the effective date.

"The industry was hoping they could keep the old plastic on the shelf until January because of the holiday season coming up," says Judith Rinearson, a partner at law firm Bryan Cave, who represents the Network Branded Prepaid Card Association and Retail Gift Card Association. Instead, "everyone is scrambling," she says.

Prepaid players such as American Express and Green Dot Corp. prepped for the regulations by dropping fees, adding disclosures or making changes to the expiration dates on their gift cards. Still, many in the industry are worried about upfront costs that issuers are likely to pass on to consumers--which ultimately could dampen sales.

They also anticipate a possible shortage of prepaid cards for sale to consumers, because issuers are going to have to replace cards sitting on retailers' shelves that won't pass the Fed's muster after August.

That's a massive amount of cards to change out. "I would say hundreds of millions," says Ralph Calvano, senior vice president and general manager for prepaid solutions at Fidelity National Information Services, a technology vendor.

Under the new regulations, fees for inactive or dormant cards are barred in the first year after purchase, and allowed only on a limited basis afterwards. Cards cannot expire for at least five years, and expiration dates among other disclosures must be printed on the cards.

The existing cards won't do since they not only lack the disclosures, but the old expiration dates and fees are embedded in the mag-stripe.

By the NBPCA's estimate, more than 90 percent of prepaid gift cards are drained of funds within a month after they are purchased. But the regulations are specifically targeting those dormant gift cards that consumer groups argued were eaten up by monthly maintenance fees and had hard-to-find expiration dates.

The gift-card market is vast--and growing quickly. According to Mercator Advisory Group, the number of branded gift cards issued in 2008--the latest data available-jumped 54 percent from the year earlier, to 7.77 billion.

Open-loop cards are the most impacted by the new rules. Often branded by Visa, MasterCard, Discover or Amex, these gift cards can be used anywhere their regular credit cards are accepted.

Closed-loop cards, which are good only at one retailer or group of retailers, largely are unaffected, because most don't have expiration dates or fees, according to Rinearson.

The new rules don't apply to branded payroll, insurance or government benefit cards. Also excluded are the reloadable, branded, prepaid cards that retailers sell--though the Fed requires that they now be displayed apart from the branded gift cards.

John Barbella, senior vice president of the payment solutions group at the $2 billion-asset Bancorp Bank in Wilmington, Del., says the main challenge for prepaid issuers like his company is coordinating with all touch points in the gift-card loop--distributors, card associations and retailers--to account for the whereabouts of the stock that needs to be replaced.

"We're going to have to work closely with our program managers," who, in turn, must coordinate with many thousands of retail stores to change out the cards, Barbella says. "We are also working on behalf of the associations to gain approvals on what the cards need to look like."

Rinearson says manufacturers are having trouble including all the necessary disclosures of terms and conditions on the cards. "The rewards cards have to have the words 'promotional rewards card' on the front--it can't be a sticker," she says. And if a card expires in less than seven years, then there also has to be a disclosure on the card's face explaining that the "card expires, but the funds do not," says Rinearson.

The front of the card also needs to have a phone number to call for a replacement card. (Never mind that, if a card is lost, having the number on it is unlikely to be helpful at that point.)

"We are still very early on trying to figure out how this is going to play out," says Rinearson. "I'm talking to a lot of issuers, and we're trying to figure out how to squeeze out the data and fit everything in."

Prepaid gift cards are a low-margin, high-volume business. So replacing the stock only further challenges a business model in which issuers charged fees on dormant cards to help offset upfront costs. Those monthly maintenance or inactivity charges helped supplement a lower cost to purchase the card--usually between $4 and $6.

A higher initial cost might turn off consumers. "I think there's a price sensitivity that would have them say, 'I'm not going to pay more than 'X' for this card,' " says Barbella, who does not know what that breaking point might be. "I don't think they are going to pay $14.95, but they seem to have no problem paying $5.95."

Despite such concerns, industry trade groups supported the changes, saying many players already do much of what the Fed aims to accomplish. NBPCA president Kirsten Trusko conceded that the new rules are "tough but fair and reasonable" in a comment letter on the issue this past fall.

But besides the impact on fees and stock replacement logistics, the industry is struggling with other loose ends, such as conflicts between the new Fed rules and state laws.

For example, card companies have to follow state escheat laws that revert abandoned property to public coffers after a certain period--often three years. If the Fed requires cards to be active for five years, how do banks and issuers comply with both the federal regulations and state laws?

"What do you do with escheat? The rules are not in sync," says Calvano.

The Fed also was unclear about how banks and issuers should contend with state laws that are more restrictive on fees (some states disallow any fees, even after a year). "The regulations indicate that the Fed is going to be the entity that makes that determination," says Rinearson. "They haven't yet."

6: AMERICAN BANKER - How Durbin's Interchange Provision Could Shake Up...

...Reg Reform Bill

American Banker    Monday, May 17, 2010

By Joe Adler and Stacy Kaper

WASHINGTON -- In two weeks of Senate debate over regulatory reform, a provision that has nothing to do with the financial crisis may have stirred the most emotion.

The overwhelming 64-to-33 passage of an amendment to let the government regulate interchange fees on debit cards was a major blow to an industry that had successfully fought off such restrictions for years.

In the aftermath, new questions arose, including whether lawmakers would go further to unroll the interchange system, how tough regulators would be in implementing new regulations and whether banks and credit unions had any chance to get rid of -- or water down -- the provision before enactment. "When something this big wins by this much, part of it will stay in the bill, that's very clear," said Ed Mierzwinski, the consumer program director with the U.S. Public Interest Research Group, which supported the amendment.

The provision, included as an amendment by Sen. Richard Durbin, D-Ill., would require the Federal Reserve Board to write restrictions on the ability of card networks and issuers to set debit card swipe fees for merchants, although banks with assets of less than $10 billion would be exempt. It would also let retailers prohibit card use for transactions below a certain amount and give customers incentives for using card networks with lower fees than others.

Large and small banks as well as credit unions strongly opposed the amendment, saying it amounted to price controls and too much power in the hands of retailers. But their objections came despite multiple attempts by Durbin to appease them. Those included raising the exemption threshold from $1 billion to exclude more institutions, and inserting last-minute language to further clarify that merchants cannot encourage the use of certain issuers.

Some observers said the concessions won by financial institutions in the amendment already hurt their chances to fight it further.

"They exempted the smaller banks from this, so I think that helped neutralize their arguments," said Andy Laperriere, the managing director of International Strategy and Investment. "Even though they lobbied against it, their argument wasn't as strong."

The amendment may also have political ramifications for the bill, as the powerful credit union lobby vowed to oppose the legislation.

"I guess this is the straw that broke the camel's back, so to speak, where we are not going to be able to support the bill if it does this," said Fred Becker, the chief executive of the National Association of Federal Credit Unions.

Like community bank representatives, Becker said that the exception for smaller institutions was well intended but ineffective. If large banks are forced to cut their interchange fees, smaller institutions will have to follow suit.

"The ultimate impact would end up being the same on the smaller credit unions, because they would be driven to match the price," Becker said. "To put it bluntly, money doesn't grow on trees. If you take a credit union, although it can run in the red one year, or maybe a couple years, it can't run in the red long-term and continue to exist. Nonprofit does not mean charity."

Patrick Keefe, a spokesman for the Credit Union National Association, which had remained neutral on reg reform until the amendment, said, "Including this means we must now oppose the bill."

But community bank representatives, while continuing to oppose the amendment, had not yet turned against the overall legislation, saying only that they hoped the measure would be removed when the House and Senate meet to work out differences between the bills. (The House bill, which passed in December, does not address interchange fees.)

"A bill like this has a lot of momentum," said Steve Verdier, a senior vice president at the Independent Community Bankers of America. "Sitting here on Friday morning, I don't see a kill-the-bill option. Part of the reason is I think we're going to see a conference committee, and a conference committee has the ability to give members of Congress a chance to take a deep breath about what they're doing and consider the consequences."

But it was unclear if opponents would be able to remove the amendment at a later stage.

"This is going to be a big fight. I think some version of this will stay in a final bill," Mierzwinski said. "There is no way the merchants will give this up."

For their part, retailers said banks and credit unions cannot back up their arguments against the amendment, and are just resisting any reforms on the fee system. "The Durbin amendment makes 100% clear that it is not allowing differentiation between bank issuers of cards," a lobbyist for merchant groups said. "They're concerned about the 'camel's nose under the tent' idea that if you do anything on interchange it will lead to doing more on interchange."

To be sure, the amendment is narrower than it could have been. By only giving the Fed power to regulate debit cards, the measure addresses the inequity in charging fees for electronic check payments, while regular checks do not carry such added costs. "Debit cards are the most egregious example of this problem," the lobbyist said. "It's taking what we can get."

But others suggested the amendment could be a first step toward broader reforms, which would include credit card interchange fees. "There's no question that our industry has for years felt that the credit card interchange market is completely dysfunctional. That is going to have to be addressed, but our focus right now is on the debit cards payments system," said Mallory Duncan, the senior vice president and general counsel of the National Retail Federation.

Others also posed questions about how the Fed would respond to the mandate to set restrictions. Under the amendment, the Fed would need to ensure debit interchange costs are "reasonable and proportional" to the costs stemming from processing the payments. The central bank would need to establish the standards no later than nine months after enactment. Under the measure, the Fed essentially would have to determine if the fees for electronic checking -- as opposed to normal check clearing -- make sense.

Oliver Ireland, a former Fed lawyer and now a partner at Morrison Foerster, said given that the Fed has recently responded forcefully to the will of Congress in imposing stricter rules on credit cards and overdraft fee programs, it would likely clamp down as directed on debit interchange fees in this case. With "what the Fed has been doing in the penalty fee area for payment cards or with credit cards where there is similar language... they are likely to write a rule that is pretty constraining on debit card interchange," he said.

7: AMERICAN BANKER - Opt In Starts With Reaching Out

US Banker  June 2010

By Matthew de Paula

Teche Bank in Franklin, La., is way ahead of many others in preparing for the new rules on overdraft fees.

Back in February, the $760 million-asset bank mailed customers its first notice, discussing how they would have to opt in to continue receiving overdraft coverage on debit-card and ATM transactions, a service for which it charges $26.25.

Several weeks later, employees started chatting with everyone who walked in about the upcoming change. "That is the key to the whole thing-the teller staff," says Ross Little Jr., the chief retail officer.

The result of Teche's diligence: Of its 30,000 customers with debit cards, 86 percent have responded to the overdraft offer. And of those who responded, nearly all--96 percent--have opted in.

With the majority of the responses, the bank asked in person or by phone, Little says.

The Fed's new overdraft rule is an amendment to the Electronic Funds Transfer Act, or Regulation E. It requires new customers to opt in by July 1 if they want overdraft coverage; existing customers must opt in by Aug. 15. Banks are concerned that, if the opt-in rate is low, they could lose millions of dollars in fee income and alienate customers by declining transactions that they currently let go through.

Teche's simple marketing strategy of contacting customers early and often, with an emphasis on communicating face to face-whether at the teller line, new accounts desk or anywhere else-is so effective that others, like Green Bank in Greenville, Tenn., sought its advice when starting their own program.

Targeting customers who use overdraft the most is another useful tactic, says Alan Friesen, president and chief executive at the consulting firm Haberfeld Associates, which works with Teche and Green. "You're really winnowing down your customer base. Half of your overdraft revenue is going to be driven by about 3.5 percent of them."

Friesen says high opt-in rates are achievable because the vast majority of customers who never incur an overdraft fee don't mind agreeing to the service, just in case, and the rest generally appreciate having it.

The $2.7 billion-asset Green has between $8 million and $10 million of revenue at risk if customers don't opt in, says Frank Snyder, senior vice president and retail bank manager. The bank started its outreach in April. "We've worked hard at scripting and trainings. All of the bank employees need to know and understand Reg E. It's very confusing."

So far Green, which charges $31.95 for paid overdrafts on debit and ATM transactions, has contacted 41 percent of its 94,000 checking account holders; 93.7 percent have opted in. Green also began sending mailers and a newsletter in May.

Moebs Services, a consulting firm that tracks industry statistics, says debit card and ATM overdrafts accounted for $19.4 billion of the $37.1 billion in total insufficient funds and overdraft fee income in 2009. Michael Moebs, the firm's CEO, expects a relatively small drop in total overdraft fee income for 2010--he projects it at $35 billion--and sees it rebounding to $40 billion in 2011.

His bullish outlook is fueled in part by the fact that the heaviest users of overdraft already seem eager to opt in. Moebs defines heavy overdraft users as those with more than 10 overdrafts a year. These customers comprise 6 percent to 9 percent of the nation's 130 million checking account holders.

Perhaps counterintuitively, banks that choose to lower overdraft fees will come out ahead of those who raise them, Moebs says. "We have one client who last year dropped their overdraft price from $24 to $12. They had a 16 percent increase in revenue for the year and they just started it at Labor Day." Two other institutions showed similar results after lowering their fees.

One reason for this is that lower fees make banks more competitive with payday lenders. Moebs says the median price per overdraft at banks and credit unions nationwide is $27, while payday lenders charge an average of $17.25 for a $100 cash advance.

Still, convincing banks to lower overdraft fees could be a tough sell. In a March survey, 57 percent of banks and credit unions told Moebs they intend to raise their fees in response to Reg E changes; only 18 percent said they would lower their fees.

Fee hikes reflect "a very traditional viewpoint" in the industry, Moebs says. "They believe in overdraft as a penalty; they do not view it as a benefit." 

8: AMERICAN BANKER - Prescription for Risk Management: Question Everything

US Banker  June 2010

By Glen Fest



The prescription for risk management sounds easy enough: Stay diverse, stay capitalized and stay in compliance. But the execution is so complex that an industry blueprint for achieving those goals remains elusive.

Banks struggle with identifying risk across operations and product lines, tasking the right individuals, whether directors or executives, with monitoring each potential trouble spot regularly, and creating systems to keep it all in check.

Exacerbating the usual challenges is the uncertainty of far-reaching regulatory changes in issues such as capital or compensation practices. This has many seeking balance between their business needs and a nearly paralyzing caution.

"We ran a survey last year, where 85 percent of chief financial officers and chief risk officers said they lack that alignment between the company's strategy and their risk appetite," says Chris Thompson, a senior executive for finance and performance management with Accenture. "You can't have that gap."

Fresh from a devastating financial crisis--and mindful of examiners' increased scrutiny of risk--directors and executives largely remain reticent about pursuing new opportunities that ultimately could make for a stronger and more profitable bank. So the race is on to resolve the dilemmas they find in establishing a better risk management culture, one that allows for confidently protecting-and growing-the business. Here's a look at six key questions before them.

What is an appropriate risk appetite?

The fear of losses from excessive leverage and concentration contributed to a retreat from lending at many banks. But that doesn't mean they are necessarily averting risk.

The lack of a defined risk appetite that is communicated to all employees is a risk in itself, leaving many banks with troubling blind spots, according to a recent study of 19 global financial firms by the consulting firm Oliver Wyman and the Risk Management Association.

What drives risk appetite, in the absence of a written plan, are ad hoc decisions, the study warns. This plagued many banks during the height of easy credit and continues to be an issue now.

A separate study by the technology provider SAS found that 40 percent of financial services firms still do not have risk strategies in place.

Mark Twerdock, KPMG's advisory partner for bank and finance, strongly recommends hammering out a formal framework. "In the past I would say most banks had a known risk appetite, but it was never articulated on paper what boundaries, thresholds and tolerances that board and management all agreed to," he says.

Problem banks often have weaknesses like failing to engage their full executive teams in risk management and "chronically" investing too little in data analytics for monitoring enterprise risk, according to the Oliver Wyman/RMA study.

Philipp Wackerback, a senior associate in Booz & Co.'s banking practice, says other banks should avoid these pitfalls. A risk-appetite framework needs to include shareholder and management expectations for key performance indicators such as revenue or return on equity.

He advises using these indicators to produce peer-group comparisons and calculate what the bank needs to do--and how much risk it would have to take on--to achieve a particular goal. One question to resolve: "What risk do I need to set as the bank in order to come up with a certain ROE target?" says Wackerback.

Then apply the results to how the bank operates and deliver the risk message throughout the organization.

"It's the alignment of strategy, risk and capital allocation," says Wackerback. "You need to operationalize it for risk categories so people on the business side know what to do, where the limits and the tolerances are."

How is a risk culture built?

Coaches emphasize there's no "I" in "team" to foster better squad chemistry. But emphasizing the individual is a way banks can encourage their teams to think about how isolated actions reverberate as risk elsewhere in the organization.

At KeyCorp, promoting the "I" in risk management under its chief risk officer, Chuck Hyle, has been elevated to an evangelical mission. In its recent annual report, it declared risk management will become part of "our DNA at all levels of the company."

To that end, Key has regular meetings to train staff on the interrelated risks that run across credit, operations, liquidity and markets. In October alone, it hosted 11 town hall meetings for 2,000 Cleveland-area employees.

As Key suggests, a risk-culture transformation has to start at the top. And communication both from executive suite down, and from staff up, is critical.

Bill Githens, the chief executive of the RMA, says one of the major post-crisis changes at institutions has been creating new reporting channels to funnel key information to boards. Often a risk committee of high-level employees--department heads and managers--must file reports directly to the board.

Bob Rose, the chief credit officer at Brookline Bank in Massachusetts, says CROs are bringing along their quants and IT operations experts to explain quantifiable risk data to directors, or "explain the fundamentals of a CDO."

In some cases, boards themselves also need to be strengthened, either with new members or more education to ensure they ask the right questions."There are a lot of discussions around whether boards have the right--or sufficient--risk expertise," says Githens.

A stronger risk culture is a preoccupation for large and small banks alike. Last year Fred Gennari, a former Citigroup auditor working at Paragon Commercial Bank in Raleigh, N.C., suggested forming a risk management committee to Michael Story, its chief operating officer. It didn't seem pressing enough for a $1.3 billion- asset bank, with no securities, derivatives, insurance or bond desks to worry about, Story says.

But Gennari, who headed quality assurance of audits at Citi, convinced Paragon executives there were still risks to monitor in the day-to-day business-asset quality, interest-rate management, even reputation and security issues. "The fact is, we all have these same fundamental risks in our industry," says Story.

There's a common feature among many banks that have survived the financial crisis: humility. These institutions realize that a keen business strategy may have played no more a role in their endurance than the circumstances of fortuitous geography or demographics. "Even banks that are in pretty good shape are really stepping bank to assess, 'Were we smart, or just lucky?'" says Konrad Alt, managing director of Promontory Financial Group.

What's holding up enterprise risk management?

After Fifth Third Bancorp in Cincinnati reported a 19 percent drop in net income for the first quarter of 2008, its credit risk team studied hypothetical loss scenarios that it faced for the remainder of that year and 2009.The results were sobering: The $113 billion-asset company would need $3 billion in capital and expense reductions.

It cut dividends, sold more than half its credit-card processing business and issued $1 billion of preferred stock.

Fifth Third's CRO Mary Tuuk says, "It was all done on the basis of our own stress-testing," more than a year before the Treasury Department's own stress-testing exercise that ordered 10 of the nation's 19 largest banks to raise capital. Had it not been so aggressive early on, Fifth Third's required capital infusion would have been $2.6 billion, rather than the $1.1 billion that the government ordered.

Such internal stress-testing is a challenge for many banks because of the poor state of enterprise risk management across the industry, analysts say. In the SAS survey, less than half of respondents were confident they understood the interaction of risk across business lines. And only 39 percent of banks and insurers said they are "effectively" aggregating data for risk management reporting.

This shortcoming undermines not only risk-based strategy, but also the ability to contend with growing external compliance demands. Bank regulators want more details on risk management procedures. The New York Stock Exchange requires listing firms to share risk assessment policies, and Standard & Poor's factors risk management capabilities into its credit ratings. In December, the Securities and Exchange Commission began requiring disclosures on a board's involvement in risk oversight.

All this heightens the pressure to have fresh information at the executive level. Evaluating data from two or three months earlier is a waste of time, KPMG's Twerdock says. "Quite frankly eight to 10 weeks can be a problem" in spotting emerging risk scenarios, he says.

Management support for risk programs also has room for improvement. In a survey from the Society of Actuaries and other groups at the 2010 Enterprise Risk Management Symposium, only 47 percent of the risk experts (at both bank and nonbank organizations) felt that senior leadership was on board with a holistic risk framework. Nearly half didn't think their disclosures to external shareholders convey a real understanding of a company's risks; and more than 40 percent reported negligible or nonexistent involvement in enterprise risk initiatives by their board.

Who leads risk management?

The job of a chief risk officer has come a long way in the last three or four years, says Rose, who had been the CRO at Sovereign Bank before joining Brookline.

Before the crisis, growth trumped risk as a priority. "The pressure to do business over and over again was so huge, that [the risk officer] was a voice that wasn't as respected and followed," he says. "Today, they are being paid attention to."

There are also more of them. Since 2006, the percentage of publicly traded financial institutions with a CRO on the management team has swelled from 40 percent to 71 percent, according to the consulting firm Grant Thornton. The increase coincided with the growth of risk management committees--now at more than one-third of institutions--that report directly to the board and work independently of management and the audit committee, says Bailey Jordan, a business advisory partner at Grant Thornton.

The more senior roles for risk officers and the growing abundance of risk committees are an outgrowth of risk management's complexity and shareholder demand for greater oversight of previously unfettered management ambition. "If I was the chief credit officer, I would welcome this risk committee," says Jordan, because then a single individual is not faced with "taking on the CEO" alone.

Many, like Fifth Third's Tuuk, have the authority to meet with directors independently. This has allowed Tuuk and the credit committee to escape business-line pressure, such as in 2008 when Fifth Third curbed commercial and consumer lending and strengthened underwriting. "It works both ways, and gives the board more direct access into the risk management of the company," says Tuuk.

Regulators are leaning on risk officers more too. Rose notes that regulators, pushed by the Federal Reserve's proposed guidelines on incentive compensation practices, have asked some risk officers to "opine" on the plans at their banks.

Don Borge, a director at the consulting firm LECG, advises banks to make sure risk management responsibility is solely vested in senior officers--and not in the CEO or CRO alone. With CEOs setting the tone for risk culture and reputational protection, risk management is a façade, he says. Even a CRO is just one cog of the business strategy that is the purview of the CEO and senior management.

"Handing off full responsibility for the bank's enterprise risk management is the wrong reason to have a CRO," says Borge (see related op-ed, page 38). "The result is likely to be an expensive compliance bureaucracy that creates a false sense of security."

How can risk be scored?

Superior Bank in Birmingham, Ala., has what it calls its "heat map." Laid out in an Excel spreadsheet, it's a typical four-quadrant graph, where at any given moment the $3 billion-asset bank rates the risk status of its position in areas like operations, legal, compliance, liquidity or interest rates. Any risk factor falling into the top right is treated like a next-shoe-to-drop. "We tell the board, 'This is what should keep you awake at night,'" says Barbara Medley, Superior's CRO.

Not surprisingly, the chief concern of risk officials is managing troubled assets--or those heading that way. Brookline's Rose says that audit and risk committees, stung by surprises like out-of-state commercial real estate developments or derivatives exposure, are more carefully examining investment and lending portfolios and breaking them down by geography and other factors. Rose says hedges and derivatives have to be justified, and all the information needs to be included in a risk appetite framework.

Yet, some bank committees have limited experience at recognizing risk when they see it. That's why Rose, an RMA board member who leads the trade group's enterprise risk managementcommittees, is helping to develop benchmarks for banks to rate their risk exposure.

"There's no reason you couldn't develop an outline of issues and points and rate yourself on how do we stack up," says Rose.

What should dominate any self-examination, of course, is lending. More than ever, banks must mitigate risk in a fast-changing environment where new factors to consider keep coming up--such as well--heeled mortgage customers who choose to strategically default due to underwater home values. This is leading more banks, even small ones, to invest in credit-risk management tools. Instead of just considering a customer's propensity to pay or credit history, banks can use the technology to gauge how external events might affect a loan.

At Investors Community Bank in Manitowoc, Wis., senior credit analyst Scott Schroeter has new Web-based executive analysis software from WebEquity that tracks his primarily agricultural commercial client base. "If milk prices went down $4," Schroeter says, "we could see how that affects our loans, and which loans move from acceptable risk to ones to watch."

What about reputational risk?

Give it up for Goldman Sachs--even its investor relations team has a Babe Ruth--like knack for calling shots. In a securities filing issued months before fraud charges were levied by the SEC, Goldman told shareholders that adverse publicity could be a significant regulatory and legal risk factor for the company this year-a new addition to its usual list of risks.

The prudence turned to prophecy when Goldman shares tumbled 14 percent the day the SEC filed suit, based on allegations of Goldman structuring and marketing risky mortgage-backed securities without disclosing ties to hedge fund kingpin John Paulson. He had helped choose the loans in the securities and made separate investments that would pay off handsomely if the securities tanked--which they did.

Public and Congressional anger over Wall Street's business practices and billion-dollar bonuses had already underscored the "vampire squid" image of Goldman. The outrage helped shape key regulatory proposals this year--and partly inspired the proposal of a financial crisis responsibility fee--that could severely impact the bottom line at all banks.

Was there any way of combating the daily barrage of bad press? Goldman, according to a crisis communications firm, apparently didn't even try. "Unfortunately Goldman Sachs has not, until recently, worked hard at creating goodwill," says Davia Temin, president of Temin & Co. "Main Street, populist legislators, and those who do not know them first-hand have largely been ignored."

In contrast, consider Citigroup, which last fall introduced a marketing campaign to address its role in the financial crisis, economic stabilization, small-business lending and community development. Some of its ads featured CEO Vikram Pandit. "Citi's ad campaign is good. It's saying a lot of the right things and talking person-to-person," says Temin. Though it's difficult to say definitively whether the ads made a difference, there are fewer public diatribes against Citi these days.

It's more than what the CEO says, though, that can speak for an organization. In today's rapid-fire, social media tapestry, an errant email, Tweet, or blog can mean significant public relations damage.

Another risk arises from bank employees engaging online. Banks can be held legally responsible for libel and slander, says Ken Goldstein, the worldwide media liability manager for Chubb. Misappropriation of copyrighted material also can result from inappropriate posts to a bank-sponsored Facebook or Twitter account.

At Chubb, even the simplest 140-word Tweet has to be vetted by legal and public relations departments.

9: AMERICAN BANKER - White House Focuses on Five Regulatory Reform Priorities

American Banker    Friday, May 28, 2010

By Cheyenne Hopkins

The Obama administration continued to push its priorities Thursday on what provisions should be included in the final regulatory reform bill.

Neal Wolin, Treasury deputy secretary, said the administration was focused on several things, including subjecting retail brokers to a fiduciary duty, preventing auto dealers from being exempted from consumer protection and ensuring the so-called Volcker Rule is part of the final bill.

"As conferees begin the process of reconciling the remaining differences in the two bills, we will continue to fight for the strongest financial reform bill possible," Wolin at a speech before the Financial Industry Regulatory Authority's conference in Baltimore. "And we will oppose any attempts by particular interests to use the conference process as an opportunity to weaken the final bill."

He said the administration will work to include the Volcker Rule's ban of proprietary trading and limit on the size of financial firms. The Volcker Rule is part of the Senate bill but not explicitly included in the House.

Wolin also said that the administration will seek to maintain safeguards to prevent resolution authority being used unless necessary but also maintain flexibility to act in a time of crisis.

In an interview on CNBC before the speech, Wolin once again dodged taking a position on a provision in the Senate bill that would force banks to spin off their derivatives business. "We want to make sure dealers are well regulated, that we have transparency, central clearing and so forth," he said.

10: AMERICAN BANKER - You're Punting Too Much, Mr. Geithner

American Banker     Thursday, May 20, 2010

By Alex Sanchez

Tim Geithner is the secretary of the Treasury of the United States. He is the architect of the president's plan for financial regulatory reform. He is the former president of the Federal Reserve Bank of New York and many claimed he had the "right stuff" to become the nation's Treasury secretary.

Earlier this month, he told the congressional commission investigating the 2008 financial meltdown what I have been saying this past year: The shadow banking industry needs to be regulated.

Geithner said "the failure to provide legal authority to constrain risk in this parallel financial system" was a principal cause of the financial crisis. He said the emergency response to the run that started in this shadow banking system -- a massive injection of liquidity into the banking system by the Federal Reserve -- was necessary to avert even greater economic calamity. "But if our regulatory and supervisory systems had had the tools and authorities to prevent risks from accumulating in unregulated sectors of the financial system in the first place, such a large emergency response would not have been necessary."

Geithner also said the financial reform proposals now before Congress, if approved, would stiffen regulation and make the system safer by subjecting all financial firms to stronger capital levels and more conservative leverage requirements.

Mr. Secretary, I agree with you, sir! The shadow banking industry needs to be regulated. But the financial reform bill you and President Obama have lobbied for fails to do this, and, contrary to what you claim, it will not prevent future financial meltdowns.

There is broad agreement on the primary issues that reform efforts must focus on, including ending the concept that any one institution is "too big to fail" and closing regulatory gaps that allowed securities firms and other nonbanks to create huge problems for the economy. The legislation pending in Congress takes some positive steps toward addressing these matters. But it also stops short in several areas and goes overboard in others.

Then there is the issue of uneven enforcement of the rules. The proposed Consumer Financial Protection Agency rules would apply to banks and nonbanks, but enforcement against these nonbanks -- many of which contributed greatly to the economic crisis -- would be weak or nonexistent in many cases. Unlike the banking industry, a strong infrastructure for examination and enforcement of rules does not exist for nonbanks.

Mr. Secretary, the bill you and the president are pushing so hard for will punt most of the enforcement of these rules to the states. Well, most states do not have the funds to hire examiners for nonbanks. How does that protect consumers from mortgage brokers or other financial entities outside of the traditional banking industry that made a disproportionate share of toxic loans?

President Obama himself said that 94% of high-cost, toxic mortgages came from these shadow banks.

Let's talk about the elephant in the room that this Congress does not want to look at, talk to or address: Fannie Mae and Freddie Mac. You can't solve the financial crisis without tackling the problems of these government-sponsored enterprises. Fannie Mae reported a loss of $11.5 billion in the first quarter and said it would need $8.4 billion more in taxpayer money. Freddie Mac reported a first-quarter loss of $8 billion and requested $10.6 billion more in government funding. Reports show that the GSEs have now cost taxpayers $145 billion. Mr. Secretary, we need to reform Fannie and Freddie, but Senator Dodd's financial reform bill fails to do that.

Geithner should also explain to the American public why not even one head rolled at the SEC because of the Madoff and Stanford Ponzi scandals and schemes that cost consumers billions of dollars. Where was the SEC? Asleep at the wheel, that's where!

While the Senate has approved an amendment giving more authority to the SEC to regulate the rating agencies, this is the same SEC that was asleep at the wheel before. Do you have confidence the SEC can do the job? The ratings agencies already have some oversight, but have you ever read, heard or seen concern by anyone at the SEC about the role of the rating agencies as one of the main causes of the financial crisis? No!

Secretary Geithner, while I agree with you that the "shadow banking industry" needs to be regulated, the bill you have pushed for falls way short in achieving that goal. It will only add more regulations and red tape to traditional banks on Main Street, thereby negatively impacting our customers.

In fact, the bill being debated in Congress raises the question "Where's the beef?" when it comes to regulating the shadow banking industry.

11: ANNOUNCEMENTS - Citi Launches Suite of Services to Assist Clients...

...with New Money Market Fund Regulations

NEW YORK--(BUSINESS WIRE)--Citi’s Global Transaction Services today announced that its Investor Services business is launching a complete range of services designed specifically to help fund clients comply with new money market rules put forth by the Securities and Exchange Commission. In particular, the new offerings help funds with the implementation and monitoring of liquidity, maturity and credit quality limits as well as reporting and disclosure requirements as required by the new amendments to the Rule 2a-7 regulations.

LINK TO FULL ARTICLE: http://www.businesswire.com/news/home/20100525006271/en/Citi-Launches-Suite-Services-Assist-Clients-Money

12: ANNOUNCEMENTS - DTCC Recognized With Early Adopter Accomplishments Award...

...For Replacement Processing Service

May 25, 2010 -- The Depository Trust & Clearing Corporation (DTCC) announced today, from the ACORD LOMA Insurance Systems Forum in Las Vegas, Nevada, that it has been recognized with an "Early Adopter" award for its Replacement Processing service, a new system that will help insurance carriers and their distributors when investors want to transfer -- or, as it is called in the industry, "replace" -- their insurance holdings.

LINK TO FULL ARTICLE: http://www.dtcc.com/news/press/releases/2010/dtcc_recognized_award.php

13: ANNOUNCEMENTS - MetLife Helps Consumers Get the Straight Story on Life Insurance

- 10 Simple Tips Everyone Should Know To Get the Right Amount of Protection for their Families -

NEW YORK--(BUSINESS WIRE)--MetLife announced today a new life insurance needs assessment tool and simple tips that mark the beginning of a major initiative to change the way Americans think about and purchase life insurance. MetLife’s new online tool – the Life Insurance Needs Calculator – provides clear guidance for how much life insurance consumers really need and, importantly, how much it will cost. Ten Simple Life Insurance Tips will make it easier for them get started. By removing purchase barriers and simplifying the life insurance purchase process, Americans will be better able to easily and affordably protect their families.

14: BANKINSURANCE.COM - American Adults Believe Accounting Firms First, Then Banks

NEWS IN BRIEF - MAY 24 - 30, 2010

When it comes to statements regarding financial matters, American adults find accounting firms most believable (67%), followed by banks (62%), investment firms (55%), health insurers (51%), mortgage companies (49%), government regulators (47%), and credit card companies (36%).  Generationally, 72% of individuals aged 18-33 find banks believable, and 60% of individuals aged 34-45 and 65 and older believe bankers, but only 55% of individuals aged 45-64 are inclined to believe banks, according to a Harris Interactive online survey of 2,755 American adults conducted in April.

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

15: BANKINSURANCE.COM - First Quarter U.S. Annuity Sales Drop 27% Year-Over-Year

NEWS IN BRIEF - MAY 24 - 30, 2010

U.S. annuity sales in the first quarter dropped 27% to $47.4 billion, down from $64.4 billion in first quarter 2009, as fixed annuity sales tumbled 52% to $16 billion, down from $34 billion, dwarfing the 3% rise in variable annuity sales to $31.4 billion, up from $30.4 billion a year ago, according to data supplied to the Insured Retirement Institute (IRI) by Chicago, IL-based Morningstar, Inc. and Evanston, IL-based Beacon Research.

Among fixed annuities, book value annuities retained their number one position, despite a 64.3% skid in sales to $6.85 billion, down from $19.19 billion in first quarter 2009.  Indexed annuities ranked second, sliding 4.8% to $6.74 billion, down from $7.08 billion; income annuities ranked third, slipping 5.7% to $1.83 billion, down from $1.94 billion, and market value adjusted annuities ranked last, tumbling 79.8% to $1.32 billion, down from $6.55 billion.  Beacon Research President and CEO Jeremy Alexander said, "A year ago, fixed annuity sales hit a record high because of the flight to safety and strong fixed annuity rate advantage.  It's not surprising that year-over-year results were down substantially."

Among variable annuities, equity products accounted for 48.6% of sales, followed by fixed accounts (21.1%), allocation (15.7%), bonds (11.7%) and money market-based variable annuities (2.8%).  Morningstar Director of Insurance Solutions Frank O'Connor said variable annuity sales reflect "the VA investor's desire for higher returns in a low rate environment coupled with a willingness to exchange a percentage of those potential returns for the protection offered by those benefits."

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

16: BANKINSURANCE.COM - Fixed Annuity Sales Fall at U.S. Banks in 2009

NEWS IN BRIEF - MAY 24 - 30, 2010

Sales of fixed annuities by U.S. banks and other depository institutions fell 7.5% in 2009 to $32.99 billion, down from $35.68 billion in 2008, as fixed rate annuity sales dropped 13.2%, enough to counter a doubling of indexed annuity sales and a 44% jump in sales of income annuities, according to an American Bankers Insurance Association (ABIA) report compiled by Evanston, IL-based Beacon Research.  Throughout the year, sales fell quarter-to-quarter, moving from $10.95 billion in the first quarter to $8.7 billion, $7.25 billion and $6.09 billion in the second, third and fourth quarters, respectively.  Ultimately, fourth quarter 2009 bank fixed annuity sales of $6.09 billion were down 43% compared to fourth quarter 2008 sales of $10.66 billion.  Beacon Research President and CEO Jeremy Alexander said, "When credit spreads widen, fixed annuities will have an improved rate advantage, and sales to bank customers will improve because underlying demand for conservative investments remains strong."

Book value annuities remained the number one bank annuity product in 2009, and Houston, TX-based Western National Life continued as the top annuity provider in the bank channel, followed by Pacific Life, New York Life, AEGON/Transamerica, Jackson National Life, Protective Life, W&S Financial Group, Lincoln Financial, Principal Financial and Hartford Life, according to Beacon.

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

17: BANKINSURANCE.COM - Great American Advisors' Reps and Accounts to Move...

...to Lincoln Investment

NEWS IN BRIEF - MAY 24 - 30, 2010

Cincinnati-based Great American Financial Resources, Inc. (GAFRI) has forged an agreement with Wyncote, PA-based Lincoln Investment whereby the registered representatives and customer accounts of Great American Advisors (GAA), GAFRI's independent broker/dealer, will move to Lincoln Financial.  GAA will continue to operate as a registered broker-dealer in order to service Great American Financial Resources' variable annuity and retirement plan businesses, but it will no longer provide independent representatives with retail brokerage services.  Lincoln Investment CEO Ed Forst said, "GAA reps will benefit from Lincoln's fee-based advisory platform, field-driven technology and one of the foremost mutual fund platforms in the retirement plans marketplace."  The transfer is expected to be completed in the third quarter, pending regulatory approval.

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

18: BANKINSURANCE.COM - Indexed Annuity and Life Sales Decline In First Quarter

NEWS IN BRIEF - MAY 24 - 30, 2010

First quarter sales of indexed annuities in the U.S. slid 3.9% to $6.8 billion, down from $7.08 billion in first quarter 2009, according to AnnuitySpecs.com Indexed Sales & Market Report.  Minneapolis, MN-based Allianz Life remained the number one indexed annuity provider with a 20% market share, followed by West Des Moines, IA-based American Equity, Lansing, MI-based Jackson National and Des Moines, IA-based ING.  Among banks and wirehouses, Jackson National retained its preferred position.

Sales of indexed life insurance were also down, falling 9.3% to $143 million, down from $157.7 million in first quarter 2009.  in this market, Des Moines, IA-based Aviva ranked first with a 20% market share, followed by Newport Beach, CA-based Pacific Life, Montpelier, VT-based National Life Group, Cedar Rapids, IA-based AEGON Companies and St. Paul, MN-based Minnesota Life.  Among all companies, the average policy premiums totaled $5,724, according to the report.  AnuitySpecs.com President and CEO Sheryl Moore said, "Sales in 2009 set records in the indexed annuity industry.  Last year was the second-highest year ever for indexed universal life sales.  It is always hard to top sales levels when the benchmark is set that high."

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

19: BANKINSURANCE.COM - Prudential PLC May Sell Asian Businesses...

...to Complete AIG Asia Deal

NEWS IN BRIEF - MAY 24 - 30, 2010

Prudential PLC is reportedly considering selling business in Vietnam, Korea, and Taiwan and one or two joint ventures in China in order to raise the $1 billion necessary to satisfy regulators that it has the capital needed to go ahead with its planned $35.5 billion acquisition of American International Group's Asian life insurance business, Reuters reports.

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

20: BANKINSURANCE.COM - Senators Reject Glass-Steagall Amendment...

...but Pass Financial Reform Bill

NEWS IN BRIEF - MAY 24 - 30, 2010

Senators rejected an amendment (S.A. 3884) introduced in its debate on the Senate Financial Reform Bill (S. 3217) by Senators McCain and Cantwell that would have reinstated the Glass-Steagall barriers between the insurance, banking and securities businesses lifted by the Gramm-Leach-Bliley Act of 1999.  American Council of Life Insurers (ACLI) President Frank Keating commended the decision and said, "The authority of depository institutions to sell insurance … or to underwrite insurance through an affiliate … has never been identified as allowing systemically risky activities that should be restricted."  He added that if the amendment were to be included in the final bill, the result would be "widespread disruption to the distribution of these insurance products to the detriment of insurance consumers," NU Online reports.

The U.S. Senate voted 59-39 to approve the S. 3217 legislation on May 19.  The legislation, since renamed H. 4173, now moves to the House and Senate conference committee.  To read comments on what the Bill contains and what the Independent Community Bankers Association (ICBA) hopes it may yet include or delete, click here.

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

21: BANKINSURANCE.COM - Title Insurance Premiums Slide In 2009

NEWS IN BRIEF - MAY 17 - 23, 2010

U.S. title insurance premiums written in 2009 declined 4.5% to $9.6 billion, down from $10 billion in 2008, and down 43.2% from 2005 when premiums written reached $16.9 billion, the highest level ever recorded, according to the American Land Title Association (ALTA).  Alaska reported the largest increase in title insurance premiums written (up 26.3% to $38 million), followed by Wisconsin (17.6% to $120 million), Montana (15% to $52 million), Oregon (14.8% to $189 million), and Hawaii (14.4% to $65 million).  But California remained at the top of the market with $1.5 billion in title insurance premiums written, up 8.4% from $1.4 billion in 2008.  Texas followed despite a 17.6% drop in premiums to $1 billion.  Florida (down 23.8% to $700 million), New York (down 22.7% to $585 million) and Pennsylvania (up 9.7% to $446 million) rounded out the top five.  Refinances, driven by federal restructuring programs, accounted for 65% of mortgage originations and title insurance written last year ALTA said.  ALTA CEO Kurt Pfotenhauer predicted, "The refinance market is expected to retract significantly in 2010 while the purchase market is predicted to remain flat."  To read ALTA's 2009 Market Share Analysis, click here.

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

22: BANKINSURANCE.COM - U.S. BOLI Assets Inch Up In 2009

NEWS IN BRIEF - MAY 24 - 30, 2010

U.S. bank-owned life insurance (BOLI) assets rose 0.6% in 2009 to $134.6 billion, up from $133.8 billion in 2008, as bank holding companies (BHCs) increased their BOLI holdings just short of 1% to $124.8 billion, according to the Michael White-Meyer Chatfield BOLI Holdings Report.  Adding to the industry total were stand-alone banks, which increased their BOLI assets 2.4% to $2.38 billion, and savings associations, which contributed $7.38 billion in BOLI holdings, though they were down 5.0% from 2008.  BHCs with $1 billion to $10 billion in assets reported the greatest incidence of BOLI ownership (84.1%) followed by BHCs with more than $10 billion in assets (80.5%).

Among all BHCs the mean of BOLI assets as a percent of total capital rose to 13.73%, up from 13.37% in 2008, with BHCs with $500 million to $1 billion in assets showing the highest ratio (14.62%), followed by BHCs with assets between $1 billion and $10 billion (13.04%), and BHCs with over $10 billion in assets (12.54%), the report sponsored by Meyer-Chatfield shows.  The mean for each group fell well within federal guidelines for prudence, which recommend that BOLI aggregate cash surrender value not exceed 25% of total bank capital, i.e., Tier 1 capital or the sum of Tier 1 capital and the allowance for loan and lease losses.  For more on the Michael White-Meyer-Chatfield BOLI Holdings Report, click here.

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

23: K@W - Crisis, Contagion and Bailouts: What's Next for the European Union?

In the run-up to this week's announcement of the European Union's $960 billion stabilization plan, Wharton management professors Mauro Guillén and Saikat Chaudhuri, and Jean Salmona, founder and chairman of the editorial board of ParisTech Review, participated in an interview with Knowledge@Wharton on likely outcomes from the financial crisis facing Greece, some of its sister countries and the European Monetary Union more generally. How did events spin so out of control? How will the politics of the crisis affect the Eurozone's economic performance? Guillén, Chaudhuri and Salmona addressed these and other questions on May 7, just before the huge financial support package was announced.

LINK TO FULL ARTICLE: http://knowledge.wharton.upenn.edu/article/2489.cfm  

24: K@W - 'Not a Positive Signal':

The Economic Impact of Arizona's New Immigration Law

Arizona's controversial new immigration law reflects a sharp political response to long-simmering conflict over immigration policy in a nation that takes pride in its history as a society built with the help of people from many lands. Wharton faculty say the timing of the legislation is in part a reaction to stress brought on by the economic downturn, even as declining demand for labor has slowed immigration into the United States. They and others debate the economic effects of the legislation on employers, employees and future immigration policy.

LINK TO FULL ARTICLE: http://knowledge.wharton.upenn.edu/article/2485.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 

25: M&A - Goldman Sachs Seeks Stake In Firm Acquiring Minnesota Bank

A small Minnesota bank might provide an opportunity for a Goldman Sachs Group Inc.-related firm to invest in banks across the country.

Goldman (NYSE: GS) is seeking a 24.9 percent stake in SKBHC Holdings -- a Corona del Mar, Calif.-based investment firm that in turn is seeking to fully acquire Starbuck, Minn.-based Starbuck Bancshares Inc., the holding company of The First National Bank of Starbuck.

LINK TO FULL ARTICLE: http://twincities.bizjournals.com/twincities/stories/2010/05/24/daily32.html

26: MISCELLANEOUS - AIG Plans Sale of Consumer Finance Unit

American International Group Inc (AIG) is looking to sell its American General Finance consumer finance unit, the Financial Times reported on Wednesday, citing people close to the situation.

Those people told the FT that AIG has hired Bank of America Merrill Lynch to restructure and sell the consumer finance unit, in an effort to raise funds and to divest a non-core business.

AIG Spokesman Mark Herr declined to comment on Wednesday. A spokeswoman for Bank of America Merrill Lynch could not immediately be reached.

27: MISCELLANEOUS - Lehman Sues JPMorgan For Billions In Damages

NEW YORK (Reuters) - Lehman Brothers Holdings Inc (LEHMQ.PK) on Wednesday sued JPMorgan Chase & Co (JPM.N), accusing the second-largest U.S. bank of illegally siphoning billions of dollars of desperately-needed assets in the days leading up to its record bankruptcy.

LINK TO FULL ARTICLE: http://www.reuters.com/article/idUSTRE64P6J720100526?type=globalMarketsNews

28: MISCELLANEOUS - One Year Later: State Of Ohio And Huntington Bank Partnership...

...Generates $465 Million In Loans To More Than 2,000 Ohio Businesses

COLUMBUS, Ohio -- In its first year, more than 2,000 Ohio businesses have received $465 million in new loans through a public-private lending partnership between the State of Ohio and Huntington Bank.

Ohio Governor Ted Strickland began this collaboration in May 2009 with Huntington President and CEO Steve Steinour to overcome one of the most significant impediments to business growth -- access to working capital. The three-year Ohio Huntington Business Loan Program, which includes a variety of state and federal loan programs, kicked off at a time when credit was difficult to find for many small businesses across the country.

29: MISCELLANEOUS - WaMu Shareholders Want To Investigate JPMorgan

(Reuters) - Shareholders of bankrupt Washington Mutual Inc (WAMUQ.PK) asked a federal judge for permission to investigate JPMorgan Chase & Co (JPM.N) for its role in the failure of Washington Mutual Bank, according to court documents filed on Tuesday.

LINK TO FULL ARTICLE: http://www.reuters.com/article/idUSTRE64O68720100525 

30: PERSONNEL CHANGES - BNY Mellon Appoints Lawrence Hughes as Head...

...of Wealth Management Unit

BNY Mellon has appointed Lawrence Hughes as chief executive officer of BNY Mellon Wealth Management.  Mr. Hughes will report to Robert P. Kelly, chairman and chief executive officer of BNY Mellon.

LINK TO FULL ARTICLE: http://www.prnewswire.com/news-releases/bny-mellon-appoints-lawrence-hughes-as-head-of-wealth-management-unit-93961049.html

31: PERSONNEL CHANGES - BNY Mellon Shareowner Services Appoints Lennie Kaufman...

...Manager of Transfer Agent Services in the Central U.S.

BNY Mellon Shareowner Services, the equity administration business of BNY Mellon, today announced the appointment of Lennie Kaufman as manager of transfer agent services in the central United States.  

LINK TO FULL ARTICLE: http://www.prnewswire.com/news-releases/bny-mellon-shareowner-services-appoints-lennie-kaufman-manager-of-transfer-agent-services-in-the-central-us-95011189.html

32: PERSONNEL CHANGES - Jeff Heslop Named SEC Chief Operating Officer

The Securities and Exchange Commission today announced that Jeff Heslop has been named the agency's first-ever Chief Operating Officer (COO) for information technology, financial reporting, and records management.

LINK TO FULL ARTICLE: http://www.sec.gov/news/press/2010/2010-91.htm

33: PERSONNEL CHANGES - Union Bank CEO to Assume New Position at Parent Company;

Will be Succeeded by Former Vice-Chairman as President and CEO

Effective on July 28, Masaaki (Masa) Tanaka will leave his current position as President and CEO of Union Bank to become CEO for the Americas for the Bank of Tokyo-Mitsubishi UFJ (BTMU) while remaining as a director of UnionBanCal and Union Bank. He will be succeeded as President and CEO of Union Bank by Masashi Oka, who formerly served as a Vice Chairman.

LINK TOFULL ARTICLE: http://www.businesswire.com/news/home/20100518005596/en/CORRECTING-REPLACING-Union-Bank-CEO-Assume-Position

34: REGULATORY - ABA Sends Letter to Geithner Raising Concern...

...Over Increasing Regulatory Burden For Traditional Banks

The American Bankers Association sent a letter today to Treasury Secretary Timothy Geithner maintaining that the regulatory burden faced by traditional banks is reaching a "breaking point," and calling on the administration to address the situation.

LINK TO FULL ARTICLE: http://www.aba.com/Pressrss/052610RegBurdenTraditionalBanks.htm

35: REGULATORY - Big Bank Lobbyists Fighting Financial Reform Outnumber...

...Pro-Reform Lobbyists by 11-1

New Public Citizen Report Shows Firepower Wall Street Is Bringing to Capitol Hill

WASHINGTON, D.C. - Wall Street is pulling out the stops to get a financial reform bill that changes as little as possible.

Since the beginning of 2009, nearly 1,000 lobbyists have worked on at least one of nine key bills designed to rewrite the rules governing derivatives, a new Public Citizen report shows.

Report is available here: http://www.citizen.org/documents/DerivativesLobbyistsReport.pdf 

36: REGULATORY - Federal Reserve Announces Clarifications to Regulation E...

...and Regulation DD Final Rules Pertaining to Over Draft Services

The Federal Reserve Board on Friday announced final clarifications to aspects of its November 2009 final rule under Regulation E (Electronic Fund Transfers) and its December 2008 final rule under Regulation DD (Truth in Savings) pertaining to overdraft services.

LINK TO FULL ARTICLE: http://www.federalreserve.gov/newsevents/press/bcreg/20100528a.htm

37: REGULATORY - FTC Extends Enforcement Deadline for Identity Theft Red Flags Rule

At the request of several Members of Congress, the Federal Trade Commission is further delaying enforcement of the "Red Flags" Rule through December 31, 2010, while Congress considers legislation that would affect the scope of entities covered by the Rule. Today's announcement and the release of an Enforcement Policy Statement do not affect other federal agencies' enforcement of the original November 1, 2008 deadline for institutions subject to their oversight to be in compliance.

LINK TO FULL ARTICLE: http://www.ftc.gov/opa/2009/10/redflags.shtm

38: REGULATORY - Senate Stands Up for American Families and Small Business...

...with Historic Financial Reform Bill

Statement from Michael Calhoun, President of CRL

The economic crisis in our country has been deep and its impact devastating. Today, the U.S. Senate responded boldly by passing the Restoring American Financial Stability Act of 2010 (S.3217), which protects families and small businesses from unfair financial practices and guards against regulatory lapses like those that led to the largest taxpayer--funded bailout in U.S. history.

39: REGULATORY - USA Today Editorial: Our View On Financial Reform:

Bank Bill Doesn't Guarantee Safety, But It's A Good Start

Ever since the financial horror show of 2008, the challenge facing policymakers has been to make America safe from a repeat performance.

Would the banking reform measure approved by the Senate last week, on what passes for a bipartisan vote these days, guarantee that? No. But it would significantly reduce the odds, assuming it can be shepherded through to completion despite lobbyists' persistent attempts to weaken it.

40: REPORTS - BOLI Assets Reach Nearly $135 Billion in 2009

According to Report Issued by Michael White and Meyer-Chatfield

FOR IMMEDIATE RELEASE – Radnor, PA, and Jenkintown, PA, May 20, 2010 -- Bank-owned life insurance (BOLI) assets reached $134.6 billion in 2009, according to the 2010 edition of the Michael White-Meyer-Chatfield Bank- Owned Life Insurance (BOLI) Holdings Report™.  The 2009 total reflected a 0.6% increase from $133.8 billion in 2008 BOLI assets held by large bank holding companies (BHCs), stand-alone banks and savings associations. BOLI is used to recover costs of employee benefits and offset the liabilities of retirement benefits, helping banks to keep up with the rising benefit costs.

41: REPORTS - CFO Survey Reveals Companies Agree...

...That Successful Process Execution Positively Impacted Company Performance

Genpact-Sponsored Survey Shows That Senior Finance Executives Around the World Are More Focused on Improving Efficiencies and Effectiveness in Core Areas of Business, Spurred By Recession

NEW YORK--(BUSINESS WIRE)--Genpact Limited (NYSE: G), a global leader in business process and technology management, found in a recent study of more than 150 senior finance executives that corporations were able to effectively impact business performance during the economic downturn by focusing on excellent process execution – a trend that is expected to continue as businesses emerge from the recession. The Genpact-sponsored survey titled, “Going Beyond Process Efficiency to Process Effectiveness: The CFO’s Role in Standardizing Global Processes and Improving Business Outcomes,” was conducted in the first quarter of 2010 by CFO Research Services, a division of CFO Publishing LLC.

42: REPORTS - FICO Survey Indicates Credit Supply Unlikely to Meet Consumer Demand

In a sign of economic improvement, 52 percent of bankers surveyed expect consumers to seek more credit, but 92 percent expect lending standards to hold steady or get tougher

MINNEAPOLIS--(BUSINESS WIRE)--FICO (NYSE:FICO), the leading provider of analytics and decision management technology, today announced the results of a survey conducted on its behalf by the Professional Risk Managers' International Association (PRMIA) asking bank risk professionals to predict trends in consumer credit.

LINK TO FULL ARTICLE: http://www.businesswire.com/news/home/20100519006769/en/FICO-Survey-Credit-Supply-Meet-Consumer-Demand

43: REPORTS - TABB Group Says Confidence Level in US Equity Market Structure is...

...Highly Polarized Across the Marketplace since the May 6 Market Crash

• Research Firm Surveys Wall Street Sentiment Ahead of June 2 SEC Roundtable
• Participants Do Not Believe Current Market Structure Strongly Supports an Orderly Market
• "Industry Barometer" Examines Buy Side and Sell Side Opinions Covering High Frequency Trading, Co-Location, Trade-At Rule, Depth of Book Trade-Through, Stub Quotes and Large Trader Reporting Rule

NEW YORK--(BUSINESS WIRE)--With the Securities and Exchange Commission roundtable discussion on market structure scheduled for Wednesday, June 2 in Washington, D.C., TABB Group today issued results of an "Industry Barometer" survey conducted the week of May 13 to gauge current opinion on market structure and how to improve it in the aftermath of the May 6 market crash.

44: RETIREMENT - MetLife Retirement Readiness Index Study Indicates Pre-Retirees...

...and Retirees Lag on Planning: A Smooth Transition, Successful Retirement at Stake

WESTPORT, Conn.--(BUSINESS WIRE)--The newly released "MetLife Retirement Readiness Index: Are Americans Prepared for the Transition?" indicates that pre-retirees can learn valuable lessons from retirees on making retirement decisions and completing a series of 15 specific career tasks to help smooth the transition to retirement. The study is accompanied by a "Retirement Readiness Workbook" that is available free to the public to help them assess their own preparation.

LINK TO FULL ARTICLE: http://www.businesswire.com/news/home/20100519005257/en/MetLife-Retirement-Readiness-Index-Study-Pre-Retirees-Retirees

45: RETIREMENT - Retirementology: The New Language of Retirement Planning

“A superb introduction to the necessary financial planning no American over 40 can afford to ignore” (Publishers Weekly1)

DENVER--(BUSINESS WIRE)--In his new book, Retirementology: Rethinking the American Dream in a New Economy, Dr. Gregory Salsbury merges investor psychology with retirement planning in the midst of a once-in-a-generation financial crisis. Available today from FT Press, Retirementology presents an entirely new way of thinking about how we should spend, save, borrow and invest in the post-meltdown era.

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