Archive for the ‘Federal Reserve’ Category

The results are in from the Federal Reserve’s 2012 Comprehensive Capital Analysis and Review (CCAR) and 15 of the 19 banks required to submit to the exam passed the stress test that included…

  • An adverse scenario of 13% unemployment.
  • A 50% drop in equity markets.
  • 21% decline in housing prices.

Most banks were expected to pass the Federal Reserve’s latest “stress tests,” which measure their ability to withstand another downturn. But that doesn’t mean they’ll make the grade with investing pros.

Four large banks failed the stress test.


The worst performance came from Ally, formerly the finance arm of General Motors known as GMAC: its tier one ratio fell to just 2.5 percent in the test from the actual 8.0 percent level reported in the third quarter of last year.


Citigroup — Failed the stress test with 4.9% capital ratio in something of a surprise. Fed rejected the firm’s proposal to increase capital return, which the bank plans to resubmit later in 2012, but did not object to it maintaining its dividend at current levels.


SunTrust Banks — Failed stress test with 4.8% capital ratio.


MetLife — Failed the stress test despite 5.1% minimum capital ratio, due to measure of risk-weighted capital. CEO Steven Kandarian said company is “deeply disappointed,” and that the Fed’s bank-based methodology is not a proper gauge of the financial strength of an insurer.

Some of the bigger banks that passed…

Wells Fargo

Wells Fargo –Passed stress test with 6% capital ratio, and added a 10-cent dividend to its previously announced first-quarter payout of 12 cents, an additional 83% that ups the firm’s quarterly dividend to 22 cents per share.

JP Morgan Chase

JPMorgan Chase — Passed stress test with 5.4% capital ratio under stressed scenario, including proposed capital actions through 2013. Increased its dividend 20% to 30 cents per share, from 25 cents, authorized a $15 billion stock buyback.

Topping that list of concerns is the European crisis. The balance sheets of American banks may be healthier than their counterparts on the continent, but they’re still not immune to the troubles there.

It’s not just European debt that investors are worried about, says Rodney Johnson, the president of HS Dent: Banks still aren’t being fully transparent about the value of other assets on their balance sheets. They are not “marking to market,” which means they’re not reporting the current market value of assets like mortgage-backed securities. “If you’re not marking your securities to market, then I don’t know what they’re worth, and I don’t believe you when you tell me what they’re worth,” he says. Johnson doesn’t own any large financial stocks. This applies to the Credit Union Corporates who still have massive exposure to mortgage-backed securities.

Investors may be better off at smaller banks, advisers say. Small banks are not exposed to risk from credit-default swaps.Small banks also have shortcomings, Johnson says. They make a lot of commercial real estate loans, some of which were written with sub-prime-like problematic terms, he says.

Banks and Credit Unions not “Marking to Market”, what is the real value of the asset? Your thoughts?


It started as a Facebook event page on Tuesday, and now it’s grown into a national movement. Saturday (Nov. 5) was Bank Transfer Day (BTD), a deadline activists set for transferring funds from for-profit banking institutions into not-for-profit credit unions closer to home.

Bank Transfer Day

Bank Transfer Day

Organized by Kristin Christian, her Bank Transfer Day Facebook page has attracted more than 81,900 RSVPs for the event since Tuesday (Nov. 1). Why? Kristen Christian wrote on the Bank Transfer Day Facebook page’s FAQ:

Facebook Page for Bank Transfer Day

“I started this because I felt like many of you do. I was tired — tired of the fee increases, tired of not being able to access my money when I need to, tired of them using what little money I have to oppress my brothers & sisters. So I stood up. I’ve been shocked at how many people have stood up alongside me. With each person who RSVPs to this event, my heart swells. Me closing my account all on my lonesome wouldn’t have made a difference to these fat cats. But each of YOU standing up with me… they can’t drown out the noise we’ll make.”

What’s the result of these social media-fueled protests? According to the Credit Union National Association, “at least 650,000 consumers across the nation have joined credit unions in the past four weeks.” That mass influx of credit union customers was further ignited on Sept. 29, when Bank of America announced it would begin charging consumers a $5-per-month fee for debit cards. Bank of America has since retracted that rate hike because of the public outcry. November 5th has come and gone. What’s your assessment?

  • Two years ago it took 15 banks to control 50% of the asset’s in this country. Today…5 banks control 50% of the assets, while the remaining 7500 banks and 7400 credit unions control the remaining 50%.
  • The number of Credit Unions across this country continue in decline. Once peaked at 23,866 in 1969. Over the past 5 years we’ve lost over 1,000 Credit Unions. Credit Unions like banks, the big just keep getting bigger.
  • Membership among Credit Unions with less than $100 million in assets has declined according to the recent CUNA Profile. So, it will be interesting to see what asset class of Credit Union benefited from this movement.
  • In researching this issue with CUNA, here is their statement.  The growth is particularly noticeable at larger credit unions–those with $100 million or more in assets, CUNA President/CEO Bill Cheney said.  They account for about 20% of all credit unions, but serve about 80% of credit union members.

Banks hold $12,284,305 in assets according to the Federal Reserve Bank while Credit Unions hold $954,757 according to CUNA.

Total Bank & Credit Union Assets 2011

Total Bank & Credit Union Assets 2011

The beneficiary of this movement seems to be the big Credit Unions. Hopefully the small banks, and small credit unions can step up their Social Media Marketing to take advantage of this opportunity.

What do you think will happen as a result of this movement?

After months of banter between bankers and retailers, both agree to dislike the new Federal Reserve cap on debit card swipe fees.

Swipe Fees

Last week, the Fed voted to cap the fees at 21 cents per transaction, up from an earlier proposed cap of 12 cents. Banks and credit unions say the cap is still too low to cover the cost of maintaining debit card networks. Retailers say the new cap is too high, particularly for small businesses with tight profit margins. The fee cap will take effect Oct. 1.

According to industry sources.

  • It will cost banks and credit unions approximately $10 Billion.
  • Free checking will continue to dwindle. Down 11% over the past year.
  • You will be required to have a higher minimum balance to avoid fees.
  • In September, Bank of America will start charging a $5 fee for lost debit cards.
  • On July 29, U.S. Bank will increase its annual fee for individual retirement accounts to $30 from $10.
  • Other banks are charging fees for everything from paper statements to talking to a customer-service rep.

Only 38% of bank branches complied with a simple request for a schedule of fees required by the Truth in Savings Act.

If you are charged with fees you deem unreasonable, by all means raise your concerns, you may get it waived. However, be sure that you have read all the fine print, including your monthly statements or any other correspondence.

As with any regulation assessed to banks, retailers or credit unions they are in business to make money. When government laws are passed to limit income, creativity and redistribution of new fees will be created on the part of banks, and credit unions to replace lost revenue. As regulation becomes more onerous, it will accelerate mergers and failures of institutions not strong enough to survive. Hence the big get bigger…and Too Big To Fail comes into play.