The years immediately following the financial crisis were extremely challenging ones for the financial services industry. For the last few years, most bank IT budgets have been monopolized by regulatory compliance, matters related to running the bank, and cost-cutting initiatives, with little to no focus on growth. Further, many of the growth initiatives banks planned for 2011 were put on a back burner or never came to fruition. Despite this, banks continued to see the value of technology and to invest in IT during even the most challenging times. Most institutions enjoyed a small increase in IT spending — about 3% … Continue Reading →

The Wall Street Journal reported yesterday that subprime mortgages, a distressed sector of the securitized debt market, have been smartly rallying in value since late 2011, as measured by the 2006 AAA slice of the ABX index. Currently, the index stands at about 50% — almost twice the value at its all-time low in early 2009. Does this mean that the party is getting started again? Well, it depends on your perspective. Analyzing securitized debt is not for the faint-hearted, even if it is on the most senior tranche, as the index level of the 2006 AAA ABX index can … Continue Reading →

Last week, the Canadian Securities Administrators (CSA) opened for comment the latest in its series of consultation papers on the regulation of over-the-counter (OTC) derivatives. CP 91-404 explores issues, considers alternative solutions, and sets out proposals for the segregation and portability of customer accounts and collateral associated with OTC derivatives transactions cleared through a central counterparty (CCP). The protection of customers’ collateral is an important topic; indeed, Aite Group wrote about account segregation (as well as CCPs) in Top 10 Trends in Institutional Securities & Investments, 2012. We have come to expect the CSA’s Derivatives Committee to explain complex matters clearly and develop regulatory … Continue Reading →

On Wednesday, February 15, Aite Group’s Wholesale Banking team will host a webinar discussion about key trends featured in our analysis of top 10 wholesale banking expectations in this Year of the Dragon. Ambition and innovation are two components often associated with the year in astrology, and Aite Group sees these as strong themes for planned wholesale banking initiatives in the year to come. Our team’s goal for this webinar is to to engage participants in a discussion about the trends and initiatives that are emerging in 2012, and to provide actionable advice on what these trends mean and how … Continue Reading →

Friday’s news that North Carolina-based BB&T would acquire Roseland, New Jersey-based The Crump Group for US$570 million signals a further heating of the already warm space of insurance-distribution M&A. Already the nation’s second-largest bank-owned insurance broker, BB&T Insurance Services will become the largest independent U.S. wholesale distributor of life insurance and a strong number two in wholesale P&C insurance after acquiring Crump. Bank insurance has been something of a sleepy domain in the United States, which has never seen “successful” bancassurance behemoths like ING or Fortis (whoops!) take root. All of Sanford Weill’s wiles could not keep the banking and … Continue Reading →

Prudential Financial yesterday announced a multistate settlement concerning death-benefits-matching. Like other insurers, Prudential had come under pressure from regulators for failing to do all it could to determine whether the insureds on its life insurance policies remained among the living or had died, the latter of which would necessitate the paying out of a death benefit. At the same time, Prudential’s annuities lines of business, which were able to stop paying out annuities when the annuitant passed away, worked very hard to stay on top of that data point. I have argued in the past that, in the absence of … Continue Reading →

January 31, 2012 has come and gone, and the Federal Insurance Office (FIO) Report on insurance industry modernization — clearly mandated by Dodd-Frank to have been delivered to the U.S. Congress no later than that date — is now officially late. Although the report may just be another in a string of late Dodd-Frank deliverables, could its delay indicate something more foreboding than a blown bureaucratic deadline? As I have articulated in detail in prior blog posts on this subject (“FIO Report to Congress: The Moment of Truth Approaches” and “The U.S. Federal Insurance Office: McRaith Takes the Reins”), numerous large and … Continue Reading →

The European Commission is not happy with the Volcker Rule, a provision found in the Dodd-Frank Act  that seeks to limit banks from taking on proprietary trading risks that can imperil client deposits — deposits which in the extreme might require further federal bailouts. The overall intent of the rule is to lower the probability of systemic risk so that banks won’t be able, in effect, to take on risky assets with an implicit federal put. But how can one systematically determine when a transaction is proprietary or market-making for the benefit of customers in nature? King Solomon’s dividing-the-baby dilemma … Continue Reading →

Credit Suisse bankers might not love their employer, but Main Street might. The company has segregated some 800 derivatives risk items to securitize a bond paying 5% to 6.5% to its bankers, in lieu of cash compensation, for at least four years and for as long as nine years. With the U.S. 10-year treasury sitting around 2%, this doesn’t seem like such a bad deal for the bankers. First, the optics: Those Wall Street bankers are finally taking on some responsibility for what they create. Main Street hasn’t had too much to celebrate lately, but can this mean that Wall … Continue Reading →

Everyone heading to Wikipedia on January 18 to get the latest factoid on Pippa Middleton had an unpleasant surprise.  In protest of another PIPA, the proposed U.S. Senate legislation known as the Protect IP Act, and the companion bill in the House, the Stop Online Piracy Act (SOPA), Wikipedia and a host of other online sites shut down for 24 hours.  These bills are designed to stem online piracy, and would give the U.S. Justice Department the ability censor foreign sites that harbor pirated material. The bills would also require payments providers, online advertisers, and ISPs to cut ties with the offending sites.  The challenge is that … Continue Reading →