Anyone who has been around for a while knows that too much of a good thing can, in the end, be a bad thing. What is true of everyday life also holds true in banking, according to one regulatory veteran who has expressed concern at the low rate of bank failures in the United States over the 18-month span just ended. In fact, where one might have expected perhaps ten collapses over that period (to go by historical averages for non-crisis eras), there have only been four, all of them concerning small-scale operations. Thomas Hoenig, once vice-chairman of the Federal Deposit Insurance Corporation (FDIC), observed recently that "it's in the good times, when things seem very calm and when there are no bank failures, that the bad loans are made". The last time US banking experienced such a run was not long before the 2008 crash. Currently serving regulators are naturally less forthright than Mr Hoenig: according to the Wall Street Journal, "officials at the Federal Reserve say overall risks in the financial system are moderate, [although] they are keeping a close watch on debt among nonfinancial firms, which is close to a record high relative to gross domestic product".
Has Goldman Sachs taken enough care to cover potential losses from its 'main street' business? The firm's consumer banking operations, which include Marcus, the high-profile brand launched in 2016, have been going great guns, not only in its domestic market but also in Britain, leading investors to ask for more information than has been forthcoming in the group's normal run of reports. Now, aligning itself with retail competitors, Goldman is promising to provide more numbers : for now, it seems that 2.4 percent of the overall firm's revenues in the year ending 30 September can be attributed to its consumer business, underlining the fact that, whatever the optics, the vast majority of revenues still come from its traditional specialisations.
Rival financial services titan JPMorgan Chase meanwhile has reportedly confirmed news of a rise in the annual fee (from $450 to $550) for its Sapphire Reserve credit card. The change is set to be phased in over the coming three months, starting shortly for new cardholders, with an implementation delay until April for those renewing their cards. At the same time, a new rewards offer is entering the mix: from Monday, Sapphire Reserve credit cardholders can look forward to ten rewards points for every dollar spent using Lyft's ride-hailing service.
From London comes news that credit card debts in the United Kingdom have fallen for the first time since mid-2013, with borrowers repaying some £100m ($131m) in November. According to the latest figures from the Bank of England, unsecured consumer lending dropped to 5.7 percent, from 6.1 percent the month before. The development comes in the wake of new consumer indebtedness regulations, as detailed in the latest market update published this month by Verisk Financial Research. Jason McNutt of Verisk Financial noted that, "following the credit card banks' implementation of the new regulations regarding customers in persistent debt, along with ongoing remediation efforts, customer repayment rates have risen above historical trends by as much as one percent of statement balance".
The Future, from jet packs to Brexit, is developing a pesky habit of not arriving when promised: now the dawning of the Open Banking era in Australia has been delayed by six months, thanks to a New Year's decision by regulators in Canberra. The commissioner of the Australian Competition & Consumer Commission (ACCC), Sarah Court, reiterated that the ACCC was "committed to delivering it only after we are confident the system is resilient, user friendly and properly tested. Robust privacy protection and information security are core features of the [new regime] and establishing appropriate regulatory settings and IT infrastructure cannot be rushed". As things stand, it will now be the first day of July when the country's big banks will begin opening up streams of permissioned customer account data to accredited third-parties. No such delay in South Korea though, where Open Banking has commenced after a short trial period: the ecosystem of fintechs and banks already counts over 50 participating firms.
To end, links to some other stories of interest this week...
China: Tencent and UnionPay to merge QR systems
India: Private competitors criticise waiver move
Singapore: Applications flow in for digital banking licences
US: California Consumer Privacy Act now in effect
US: New Citi appointment spotlights retail banking strategy
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