ECB’s Governing Council lifts current waiver of minimum credit rating requirements for marketable instruments issued or guaranteed by the Hellenic Republic
Suspension is in line with existing Eurosystem rules, since it is currently not possible to assume a successful conclusion of the programme review
Suspension has no impact on counterparty status of Greek financial institutions
Liquidity needs of affected Eurosystem counterparties can be satisfied by the relevant national central bank, in line with Eurosystem rules
The Governing Council of the European Central Bank (ECB) today decided to lift the waiver affecting marketable debt instruments issued or fully guaranteed by the Hellenic Republic. The waiver allowed these instruments to be used in Eurosystem monetary policy operations despite the fact that they did not fulfil minimum credit rating requirements. The Governing Council decision is based on the fact that it is currently not possible to assume a successful conclusion of the programme review and is in line with existing Eurosystem rules.
This decision does not bear consequences for the counterparty status of Greek financial institutions in monetary policy operations. Liquidity needs of Eurosystem counterparties, for counterparties that do not have sufficient alternative collateral, can be satisfied by the relevant national central bank, by means of emergency liquidity assistance (ELA) within the existing Eurosystem rules.
The instruments in question will cease to be eligible as collateral as of the maturity of the current main refinancing operation (11 February 2015).
WASHINGTON – The Financial Stability Oversight Council (Council) today announced that it voted to adopt certain changes and formalize certain practices relating to its process for reviewing nonbank financial companies for potential designation. The Council’s designation authority under Title I of the Dodd-Frank Wall Street Reform and Consumer Protection Act enables the Council to identify and respond to risks that individual nonbank financial companies could pose to U.S. financial stability. Nonbank financial companies that are designated by the Council are subject to consolidated supervision by the Board of Governors of the Federal Reserve System and enhanced prudential standards.
“The changes adopted today represent an important step for the Council that will increase the transparency of our designations process and strengthen the Council overall,” said Treasury Secretary Jacob J. Lew, Chairperson of the Council. “The Council has the unique and critical mission of identifying and responding to risks to U.S. financial stability. It is a young organization that, as it grows and matures, must continue to be flexible and adjust its processes as needed to fulfill its mandate.”
The changes adopted today fall into three categories:
1) Engagement with companies under consideration by the Council: The Council will inform companies earlier when they come under review, and provide additional opportunities for companies and their regulators to engage with the Council and staff, without compromising the Council’s ability to conduct its work.
2) Transparency to the broader public regarding the designations process: The Council will make available to the public more information about its designations work, while continuing to protect sensitive, nonpublic information.
3) Engagement during the Council’s annual reevaluations of designations: These changes create a clearer and more robust process for the Council’s annual reviews of its designations. This process will enable more engagement between designated companies and the Council and staff, with ample opportunity for companies to present information and to understand the Council’s analysis.
The vote today follows a presentation and discussion of each of the specific proposals at the Council’s public meeting in January. Staff of Council member agencies engaged in extensive outreach to stakeholders throughout the fall of 2014 regarding the Council’s designations process. Based on that outreach, staff identified changes to the designations process that would enable earlier engagement with companies under review and increase transparency to the public, without compromising the Council’s ability to conduct its work and protect confidential company information. These changes will increase the strength of the Council and its designations process.
The Council’s new supplemental guidance is effective immediately. In the future, the Council may consider other proposals for changes to the designations process that strengthen the Council’s ability to identify and address potential risks to financial stability. For additional information on these changes, see the following documents:
Supplemental Procedures Relating to Nonbank Financial Company Determinations [LINK]
Frequently Asked Questions on Nonbank Designations (updated February 4, 2015) [LINK]
In addition to adopting the supplemental procedures described above, the Council voted to extend the deadline on its notice seeking public comment regarding potential risks to U.S. financial stability from asset management products and activities. Members of the public are encouraged to submit comments, and all comments provided to the Council will be available on www.regulations.gov. The deadline, which was extended by 30 days, is now March 25, 2015.
WASHINGTON – In order to help retirees manage their savings and ensure they have a stream of regular income throughout retirement, the U.S. Department of the Treasury and the Internal Revenue Service issued guidance today designed to expand the use of income annuities in 401(k) plans. The guidance (Notice 2014-66) makes clear that plan sponsors can include deferred income annuities in target date funds used as a default investment, in a manner that complies with plan qualification rules. This option is voluntary for plan sponsors and participants.
“As boomers approach retirement and life expectancies increase, income annuities can be an important planning tool for a secure retirement,” said J. Mark Iwry, Senior Advisor to the Secretary of the Treasury and Deputy Assistant Secretary for Retirement and Health Policy. “Treasury is working to expand the availability of retirement income options for working families. By encouraging the use of income annuities, today’s guidance can help retirees protect themselves from outliving their savings.”
Many employer-sponsored 401(k) plans offer so-called target date funds as a default investment for participants who do not affirmatively elect a different investment. Target date funds get their name from the fact that their allocation of investments shifts gradually from equities to fixed income as participants approach an intended target retirement year.
A deferred income annuity provides an income stream that generally continues throughout an individual’s life but is not intended to begin until some time after it is purchased. This can provide a cost-effective solution for retirees willing to use part of their savings to protect against outliving the rest of their assets, and can also help them avoid overcompensating by unnecessarily limiting their spending in retirement.
Today’s guidance provides plan sponsors an additional option to make it easier for employees to consider using lifetime income. Instead of having to devote all of their account balance to annuities, employees use a portion of their savings to purchase guaranteed income for life while retaining other savings in other investments.
Under today’s guidance, a target date fund may include annuities allowing payments, beginning either immediately after retirement or at a later time, as part of its fixed income investments, even if the funds containing the annuities are limited to employees over a specified age. The guidance makes clear that plans have the option to offer target date funds that include such annuity contracts either as a default or as a regular investment alternative.
In an accompanying letter, the Department of Labor today confirmed that target date funds serving as default investment alternatives may include annuities among their fixed income investments. The letter also describes how ERISA fiduciary standards can be satisfied when a plan sponsor appoints an investment manager that selects the annuity contracts and annuity provider to pay the lifetime income.
In July, the Treasury Department and IRS issued final rules on the use of longevity annuities – a type of deferred income annuity that begins at an advanced age – in 401(k) plans and IRAs as part of a broader coordinated effort with the Department of Labor to encourage lifetime income and enhance retirement security. Today’s guidance is another step reflecting the continuing commitment of the Administration to work in a variety of ways to further bolster retirement security and saving.
On Monday, Treasury and the Center for Strategic and International Studies (CSIS) co-hosted a symposium entitled “TFI@10: The Evolution of Treasury’s National Security Role,” on the role of financial tools in advancing U.S. national security. This symposium marked the 10th anniversary of the Treasury Department’s Office of Terrorism and Financial Intelligence (TFI) and convened senior Administration officials, former government and Congressional leaders, foreign policy experts, and representatives from the private sector and media for discussions on the use of financial levers and the importance of upholding financial transparency, protecting the U.S. financial system, and using financial intelligence in achieving national security interests and advancing foreign policy objectives.
In his opening remarks, Secretary Jacob J. Lew reviewed how the U.S. government had shifted its approach to national security after the events of September 11 to focus on the importance of disrupting the finances and funding operations of terrorist organizations. He outlined the Department’s role in strengthening this new national security strategy and its work over the last decade.
“TFI has opened up a new battlefield for the United States, one that enables us to go after those who wish us harm without putting our troops in harm’s way or using lethal force. Without a doubt, their accomplishments have made our country, and our world, safer.” said Secretary Lew. “And this administration has been particularly creative and innovative in using this approach – both because of the changing international landscape and our determination to use all the tools at our disposal to advance our strategic interests.”
Keynote speakers and panelists covered a breadth of issues, including TFI’s important work over the past decade in disrupting and dismantling the financial networks of terrorists and drug traffickers, the evolution of financial tools in securing national security, efforts to uphold financial transparency, and the role of financial intelligence. Key excerpts are included below:
Tom Donilon, Distinguished Fellow at the Council on Foreign Relations and Former National Security Adviser
“Treasury is at the table and has been at the table for addressing some of our most important security issues, national security issues – whether it be the terrorist threat, or it be the North Korea challenge, or the non-proliferation challenge in Iran… a really important point… goes to the point of the strength of being at the center of the world financial system here in terms of our ability to do these things. In many ways, even our unilateral steps become multilateral steps… it is way beyond, as the Treasury Secretary says, way beyond trade limitations, trade embargoes, quite targeted and exceedingly effective.”
White House Chief of Staff Denis McDonough
“The threats we face obviously, as you’ve been discussing and living, are increasingly complex. It’s our job to stay at least one step ahead of them. That means using every tool at our disposal, every element of our national power to protect ourselves and our allies, and to stop bad actors of all kinds, whether they’re political regimes, terrorist networks, or solitary extremists. We have to be innovative and adaptive, always willing to consider new ideas and revise our approach as needed… Ten years ago when this unit was created, the notion of using financial tools to stop terrorism and international crimes was still pretty new, and frankly, it was seen as an issue of defense. Today, it’s a core asset of our national security and it has us on offense.”
Stephen Hadley, Chairman of the Board, U.S. Institute of Peace and former National Security Adviser
“I think the sanctions were one of a series of tools in terms of diplomatic isolation, in terms of things directed at their [Iran] program. I think it’s been a very successful, coordinated, policy of pressure. I think it did bring them[Iran] to the table. ”
Neal Wolin, Former Deputy Secretary of the Treasury
“The global financial system of which the U.S. sort of stands right in the center, I think, depends importantly for its robustness and strength on making sure that the illicit flows are kept to minimum, are not present. That the kinds of integrity principles, which really stand at the foundation of what TFI does are well-observed. And so apart from all of the national security implications, it is critically important for the world’s economy and for the world’s financial system that these kinds illicit activities… have a light shone on them and their activity be scrutinized, and to whatever extent possible, eliminated.”
Under Secretary for Terrorism and Financial Intelligence David S. Cohen presided over the event and concluded the symposium with remarks highlighting the challenges ahead. He stated, “today’s conversation also has illuminated some of the key challenges that we will face in the future as we continue to employ – and increasingly rely upon – financial measures to help achieve our core foreign policy and national security goals…First is the challenge posed by the changing nature of the terrorist financing…Second is the challenge to the international community’s ability to impose targeted, conduct-based financial sanctions…Third, is the challenge to financial transparency posed by new technologies, including new payment methods, such as mobile banking, and new methods of payment, such as virtual currencies…Fourth, we will face the ongoing challenge of balancing our need for timely, accurate, and specific financial intelligence with legitimate demands for privacy, both by American citizens and foreigners.”
This news is courtesy of www.treasury.gov
MS. GAVIRIA: Hello, everyone. I’m Angela Gaviria with the IMF’s Communications Department. Welcome to this conference call on Greece. Here with me is an IMF official, who will make some points and then take your questions.
IMF OFFICIAL: Yes. Thank you. And welcome. I want to focus on explaining to you the process that is now ongoing and the role of the IMF in this regard. Those of you who have been following us closely, and particularly the discussions we’ve had in the last couple of months, will not find that I’m saying anything that is new, but let me nevertheless repeat where we are.
Let me start from the point that, again, as we’ve said before, the IMF can only support a program that is comprehensive. What do we mean? We mean a program that ensures medium-term sustainability. There’s nothing new to that; every time the IMF goes to the Board, we need to ensure our Board that there is sustainability in the medium-term context.
And this is nothing special for Greece. It’s a criterion we apply to all members, to all releases of IMF money, and we will, of course, also apply this in this case. What we have also said is that the Greek situation is very difficult. In order to ensure that sustainability, that medium-term sustainability, there’s a need for difficult decisions on both sides and by both sides. I mean, difficult decisions in Greece regarding reforms, and difficult decisions for Greece’s European partners about debt relief.
So, for it to –and we have used the phrase many times– for it to add up, one needs difficult decisions, and you should not be under the illusion that just one side of it can fix the problem. Greece will not be in a medium-term sustainable position just on debt relief, and on the other hand, yet Greece cannot get into a medium-term sustainable position just on reforms of its own. It needs to be a combination of these two sets of issues. What is clear is that it will take some time before the two sides are ready to take these decisions, it was made clear at the meeting of European leaders a few weeks ago that they were not ready to consider the debt operation before the fall.
They said that at the time of the first review of the ESM program they wanted to see implementation of the policies before they are willing to discuss debt relief in the necessary details. And I think it’s also clear from discussions on the part of the Greek authorities that some of the necessary decisions regarding particular fiscal structural reforms will only be taken in the coming months.
So I think everybody understands that the IMF can only be in at that time when these decisions on these two sides are taken. There’s nothing new here, nothing new on deciding to suddenly have a two-stage approach. It’s always been clear that the IMF will only come in once these conditions are in place. So, let me stop here; and I’ll take your questions.
QUESTIONER: Thanks for doing this. One quick, just technical question, and then another, perhaps, more substantive one. When you are talking about — in terms of sustainability, I just want to confirm, you are talking about debt sustainability. Correct? And then secondly, can you be more precise in terms of what you mean the IMF cannot support a program until medium-term sustainability is in place? By that do you mean you will not take a program to the Board for approval? Or, are you saying that you don’t think the Board will approve it without that in place? Can you elaborate on that? Thanks.
IMF OFFICIAL: Yes to the first question. I’m talking about medium-term debt sustainability, but you cannot have medium-term debt sustainability while other parts of the program are not sustainable. So, it’s the overall program that needs to be sustainable, but this indeed comes down to a test of whether the debt is sustainable.
On the second question, yes, management will clearly not want to submit to the Board, and I’m sure the Board will not want to approve, a program that does not meet the normal criteria for access to the Fund’s resources, and the normal criteria is that there is medium-term sustainability. So, this is the answer.
QUESTIONER: A quick follow. Is another one of your conditions that it be fully financed for 12 months? Is that also a condition?
IMF OFFICIAL: Yes. As always, programs have to be fully financed. We need to have adequate financing assurances, and the way you operationalize this is that we need concrete assurances for the first 12 months, that’s the normal practice for the IMF.
QUESTIONER: I was wondering if you could be more precise about what you expect from the Europeans. Do you expect like a formal commitment to reduce the debt and what is the scale that you are looking at? And also can you also give some clarification on, I mean, does it mean that the former debt program of the IMF that was running until 2016, is dead? I mean, can you clarify that? Thank you.
IMF OFFICIAL: There has been no detailed discussion yet about how this debt relief is going to be provided. There’s a menu of options, but there’s essentially an agreement; we accept that that discussion will take place in stage 2, and I think that the Greek authorities have accepted that also because it’s in the communiqué from the recent Leaders’ meeting. So that’s the conversation that we will have in the next couple of months, but there has not been a detailed conversation about debt yet.
Yes, there is a request for a new program, a new multi-year program. And why? We had a program, and we currently have to replace the program that expires by the end of March. The criteria of the IMF when approving a program is always that the program has to meet its objectives by the end of the program period. The current program is off-track and it will only be able to reach the objectives by the end of the program period, so we need to recalibrate the program and get an essentially longer time to reach the objectives, and this is why we have a longer program now under consideration.
QUESTIONER: If I could just follow up quickly. Can you be more precise? Are you expecting a formal commitment from the Europeans to join them on this new bailout? Can you be more precise?
IMF OFFICIAL: I don’t understand what you mean by the question.
QUESTIONER: I mean, do you expect them to come with the terms of the debt release number to join the new bailout?
IMF OFFICIAL: We expect that by the time we go to the Board there is an explicit and concrete agreement between Greece and its European partners on how to provide debt relief. Yes, we expect that by the time we go the Board at stage 2, an explicit and concrete agreement of how to provide debt relief.
QUESTIONER: Thank you very much for doing this. My question is first about the debt relief. You’ve indicated earlier that there will be a point at which maturity extensions no longer are feasible, and there would need to be haircuts basically, which is a no-go for the Europeans. Can you give us some idea when that point would be reached? And given the drastic situation in the Greek finances, is it, maybe, already reached? And then another, the Greek government has said that in order to basically calm the internal opposition, there will be no additional reform negotiated with the renewed Troika. Is that acceptable to the IMF as long as Greece does everything that it has agreed to so far here in the Brussels summit? Thank you.
IMF OFFICIAL: On the first question, I will refer you to our updated DSA that was released a couple of weeks ago. Our views have not changed since then. We have a mission in the field that just started discussions, actually the mission chief is only arriving today. And so we have no reason to change our views since that DSA.
That DSA said that there’s a menu of options. If we’re going to reach the point where that menu of options will narrow, well, let’s see what these discussions that have just got underway will produce. I don’t have any other views than reflected in the DSA. On the second part of the question, I have not heard the authorities put it like the way you put it. I have heard the authorities say — or I’ve seen press reports, I’ve never heard it from them — I’ve seen press reports questioning the need for further measures before the ESM approval of a new program, so in stage one. That I have seen in press reports, but I have not had any – as I said, we have a mission in the field today so I do not know what the authorities’ view and it’s best to ask them directly. But that’s a different issue. What are the conditions for the ESM to disburse at stage one is really between Europe and the Greek authorities. We come in at stage two.
QUESTIONER: In excerpts from the minutes of the Board meeting yesterday that were published in the Financial Times, the German representative seemed to express dismay that the IMF would not be going along, would not be following the process in parallel with them. And so if it’s really the case that — so it made it sound like it was a live issue at that meeting. If that’s not the case and your decision to wait for stage two was made some time ago, could you confirm who made that decision and when it was made?
The second question: Does this make for a substantive change in the IMF’s role in the current negotiations, the current talks in Europe? Because it sounds like on some level this just might be procedural of whether you reach a staff agreement when your negotiators could be involved in helping shape whatever deal is going to be arrived at. So does this make for a substantive change in what your people will be doing in Brussels and Athens in the coming weeks? Thanks.
IMF OFFICIAL: On the first part of it, I am not going to comment on who said what at the Board. Let me make very clear that the Fund, our Managing Director, myself, we’ve been talking about this to our partners and to the public and we have always made very clear what are the conditions for the Fund. It’s a comprehensive program. There’s nothing new — I mean, go and look at the Mr. Blanchard’s two recent blog posts. They’re very explicit about that.
They were posted before the summit and I can assure you that at the recent summit and Eurogroup meeting there was no misunderstanding about what is the role of the Fund and when we can come in. There is nothing new here. That was also accepted yesterday and understood at the Board.
Now in terms of — you say there’s a change in the role of the Fund. It is not correct. We are not just an observer; we’re not sitting in the sidelines. We are participating actively and fully in the policy discussions in the coming weeks. But there is a clear understanding among all of us that these policy discussions will not include at this stage, will not pertain at this stage to a number of issues — policy issues — that are critical for a medium-term program. So there’s no expectation that all the issues that would need to be covered for us to have a credible package on the table, would all be settled in the next couple of weeks. So this is another way of saying that part one will be completed while a number of policy issues are still outstanding, we are fully involved in these discussions and I can’t see how we are an observer on the sidelines on anything like that.
QUESTIONER: When does the IMF expect Greece’s arrears to be cleared, and is that a prerequisite for getting involved in any new program? And the second is that given that Greece (inaudible) conditions in the earlier bailouts, including a very aggressive fiscal tightening and actually moved considerably further away from debt sustainability rather than towards it. Shouldn’t there be questions asked about whether the IMF should ever have gotten involved in these bailouts in the first place?
IMF OFFICIAL: On the first point, arrears were cleared a long time ago, several weeks ago.
QUESTIONER: Okay. Sorry. All right. Apologies.
IMF OFFICIAL: So the situation is evolving. And that leads me to the next question also. We are always happy to revisit whether we can do things differently and should have done things differently.
I can assure you that we learn as we go along and evolving circumstances and whatever experience we have will be embodied in any new discussions that we have. And this is of course one of the reasons why we say this requires difficult decisions on both sides.
QUESTIONER: Thank you. I would like confirmation that the new IMF program which has been requested by the Greek government will have the same end period and the same horizon with the ESM program, meaning 2018.
IMF OFFICIAL: There has been no discussion on the exact duration of this program. But my understanding would be that it would sort of broadly coincide with the duration of the ESM program. But I have to admit that those discussions have not taken place yet.
QUESTIONER: Yesterday you briefed the Board. Can you tell us what the Board decided and if they decided to support the mission and the involvement in the third program?
IMF OFFICIAL: Formally what happened was that the Managing Director informed the Board that she has decided to authorize staff to open discussions on a new program that could be supported under the exceptional access policy. So the Board accepted that staff opens discussions on the option and see whether we can get agreement on a credible program that we can support. So that is formally what happened, that the Board accepts that we start these discussions.
MS. GAVIRIA: Well, thank you all. We’ll end this conference call here.
The Financial Stability Board (FSB) has today issued for public consultation policy proposals consisting of a set of principles and a detailed term sheet on the adequacy of loss-absorbing and recapitalisation capacity of global systemically important banks (G-SIBs).
The proposals respond to the call by G20 Leaders at the 2013 St. Petersburg Summit to develop proposals by end-2014. They were developed by the FSB in consultation with the Basel Committee on Banking Supervision (BCBS) and will, once finalised, form a new minimum standard for “total loss-absorbing capacity” (TLAC). The new TLAC standard should provide home and host authorities with confidence that G-SIBs have sufficient capacity to absorb losses, both before and during resolution, and enable resolution authorities to implement a resolution strategy that minimises any impact on financial stability and ensures the continuity of critical economic functions.
By strengthening the credibility of authorities’ commitments to resolve G-SIBs without exposing taxpayers to loss, TLAC in conjunction with other measures should act to remove the implicit public subsidy from which G-SIBs currently benefit when they issue debt and incentivise creditors to better monitor G-SIBs’ risk-taking. It should also help achieve a level playing field internationally, reducing G-SIBs’ funding cost advantage and ensuring they compete on a more equal footing within their home and foreign markets.
TLAC adequacy will need to take account of individual G-SIBs’ recovery and resolution plans, their systemic footprints, business models, risk profiles and organisational structures. The principles and term sheet therefore provide guidance for home and host authorities on how to determine a firm-specific Pillar 2 TLAC requirement in addition to the common Pillar 1 TLAC minimum. The calibration and composition of firm-specific TLAC requirements should be determined in consultation with Crisis Management Groups and subject to review in the FSB’s Resolvability Assessment Process (RAP).
In early 2015, the FSB will, with the participation of the BCBS and the Bank for International Settlements (BIS), undertake comprehensive impact assessment studies to inform the calibration of the Pillar 1 element of the TLAC requirement for all G-SIBs. The TLAC proposals will be finalised by the time of the next G20 Leaders’ Summit in 2015 taking account of the results of this consultation and of the impact assessments.
Mark Carney, Chair of the FSB, said: “Agreement on proposals for a common international standard on total loss-absorbing capacity for G-SIBs is a watershed in ending “too big to fail” for banks. Once implemented, these agreements will play important roles in enabling globally systemic banks to be resolved without recourse to public subsidy and without disruption to the wider financial system.”
At the Seoul Summit in 2010, the G20 Leaders endorsed the FSB policy framework for reducing the moral hazard of SIFIs which set out the FSB’s agenda for addressing the risks arising from global systemically-important financial institutions (G-SIFIs). It consisted of requirements for assessing the systemic importance of institutions, for additional going-concern loss absorbency, for increased supervisory intensity, for more effective resolution and for stronger financial market infrastructure.
The FSB’s report to the G20 on Progress and Next Steps Towards “Ending Too Big To Fail” of September 2013 set out the further actions required from the G20, the FSB and other international bodies to complete the policy initiative to end “too-big-to-fail”. It identified the need to develop a proposal on the adequacy of loss-absorbing capacity in resolution as one of the important outstanding issues to be addressed in the initiative.
The FSB was established to coordinate at the international level the work of national financial authorities and international standard setting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSB also conducts outreach with 65 other jurisdictions through its six regional consultative groups.
The FSB is chaired by Mark Carney, Governor of the Bank of England. Its Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.
The 2014 U.S. Article IV highlighted five broad themes to both strengthen the recovery and improve the long-term outlook: raising productivity growth and labor participation, confronting poverty, keeping public debt on a sustained downward path, managing the exit from zero policy rates, and securing a safer financial system. To achieve these goals and fortify the country’s economic future the policy focus should be to undertake more proactive labor market policies that lower long-term unemployment and raise participation; increase the minimum wage while strengthening the Earned Income Tax Credit; invest in infrastructure; improve the tax structure and raise revenues; fundamentally reform social security; and lower the growth of health care costs.
Growth and Poverty Reduction
1.Near-term growth and jobs. In the early part of this year, as a harsh winter conspired with other factors (including inventory drawdown, a still-struggling housing market, and slower external demand), momentum faded in the U.S economy. Recent data, however, suggest a meaningful rebound in activity is now underway and growth for the remainder of this year and 2015 should well exceed potential. This renewed dynamism, however, provides only a partial offset to the weak first quarter and so growth is now projected at 2 percent for 2014, rising to 3 percent in 2015. As the economy strengthens, the current account deficit is expected to slowly widen with an increased demand for imports only partially offset by fiscal consolidation and the improvements in the trade balance that are linked to rising self-sufficiency in energy. Despite the cyclically-adjusted current account being somewhat on the weaker side, the U.S. external position appears broadly consistent with medium-term fundamentals and desirable policies. Job growth has been healthy but labor markets are weaker than is implied by the headline unemployment number: long-term unemployment is high, labor force participation is well below what can be explained by demographic factors, and wages are stagnant. With better growth prospects, the U.S. should see steady progress in job creation. However, headline unemployment is expected to decline only slowly—in part because improving prospects will draw discouraged workers back into the labor force—and long-term unemployment will take time to fall to historic levels.
2. Longer-run growth. Potential growth is forecast to average around 2 percent for the next several years, below both historic averages and the outlook assessed at the last Article IV consultation. A combination of factors is at work in lowering longer-run growth including the effects of population aging and more modest prospects for productivity growth. This puts a significant premium on taking immediate steps to raise productivity, encourage innovation, augment human and physical capital, and increase labor force participation. Such measures should involve investments in infrastructure and education, improving the tax system, and active labor market policies. They may also include reaching agreement on a broad, skills-based approach to immigration reform (to expand the labor force, raise average labor productivity, and support medium-term fiscal adjustment) as well as fully capitalizing on the gains from rising U.S. energy independence while protecting the environment (including by removing existing restrictions on U.S. oil exports). No single measure will be sufficient and a manifold solution will certainly be required. There is no shortage of good ideas currently under public debate and so the challenge ahead is to forge political agreement on specific legislation.
3. Poverty. The latest data showed almost 50 million Americans living in poverty (as measured by the Census Bureau’s supplemental poverty measure) and the official poverty rate has been stuck above 15 percent despite the ongoing recovery. Reducing poverty will require, first and foremost, a much more robust return to growth and job creation. However, other policies have a role to play. The recent expansion of Medicaid and the increase in health insurance coverage have been concrete steps whose effect on poverty and health outcomes should become more evident over time. An expansion of the Earned Income Tax Credit—to apply to households without children, to older workers, and to low income youth—would be another effective tool to raise living standards for the very poor. Similarly, the government should make permanent the various extensions of the EITC and the improvements in the Child Tax Credit that are due to expire in 2017. Finally, given its current low level (compared both to U.S. history and international standards), the minimum wage should be increased. This would help raise incomes for millions of working poor and would have strong complementarities with the suggested improvements in the EITC, working in tandem to ensure a meaningful increase in after-tax earnings for the nation’s poorest households.
Macroeconomic and Financial Policies
4. The macroeconomic policy mix. Given the substantial economic slack in the economy, there is a strong case to provide continued policy support. Ideally, steps should be taken to approve and implement a credible medium-term fiscal consolidation plan so as to provide the flexibility for more near-term fiscal support to the economy. Such fiscal support should be designed with a heavy focus toward encouraging longer-term gains to productivity, the capital stock, and labor supply. Helping to kick-start growth and job creation in this way would allow for an earlier withdrawal of exceptional monetary stimulus which, in turn, would alleviate the potential risks to both domestic and international financial stability posed by the protracted period of exceptionally low policy rates. This would be the best policy mix from an economic perspective but, regrettably, political agreement on such an approach remains elusive.
5. Monetary policy stance. The Fed currently has to contend with multiple areas of uncertainty: the degree of slack remaining in U.S. labor markets; the extent to which this slack will translate into future wage and price inflation; and the transmission to the real economy of a future move upwards in policy rates. These substantive ambiguities make the outlook for U.S. monetary policy particularly uncertain, as the Fed has repeatedly communicated. This incertitude stands in contrast to the narrow range of market views on the path for future policy rates as well as the current historically low pricing of asset price volatility. At the same time, longer-term treasury yields and the term premia have been compressed to very low levels. This sets up the risk, even with a successful and well-communicated increase in interest rates, for significant swings in market flows and prices in the months ahead. If such volatility were to unfold, it would have implications that would reach far beyond U.S. borders, potentially straining those countries with weaker fundamentals which could then have second round effects for U.S. growth. Under the staff’s baseline, the economy is expected to reach full employment only by end-2017 and inflationary pressures are expected to remain muted. If true, policy rates could afford to stay at zero for longer than the mid-2015 date currently foreseen by markets. Policy would, however, have to remain cognizant of financial stability risks, particularly those that are inherently difficult to contain through available regulatory and supervisory tools. If inflation were to rise more rapidly than expected and the economy was still well below full employment, tolerating a modest, temporary rise of inflation above the longer-term goal could be consistent with the Fed’s balanced approach as long as inflation expectations remain anchored and financial stability risks were low.
6. Federal Reserve communication. The Fed has made important and substantive efforts to increase transparency and has adopted an adaptable approach to communication. The recent shift to qualitative forward guidance provides the Fed with greater flexibility but puts an even higher premium on clear and systematic communication to guide expectations, particularly given the potential adverse consequences of miscommunication for international markets. Enhancing the Fed’s communication toolkit would be a natural evolution that could help temper the likelihood of market volatility along the exit path. This could include scheduling press conferences by the Fed Chair after each FOMC meeting (to provide a more frequent, structured environment to explain the committee’s evolving thinking). It could also involve publishing a quarterly monetary policy report, that is endorsed by the FOMC and which conveys more detail about the majority view of the FOMC on the outlook, policies, and the nature of uncertainties around the baseline. Such a report may also convey dissenting views on the FOMC as well as broader information on how the FOMC thinks about policy reactions in plausible, non-baseline scenarios. Finally, the FOMC could provide greater clarity about how financial stability considerations figure into its monetary policy calculus.
7. Financial stability risks. Over the past few years, much has been done to reduce financial system risks: the banks are stronger, corporate balance sheets are healthy, overall leverage is contained, and the regulatory framework has been greatly improved. Nevertheless, the prolonged period of very low interest rates continues to raise financial stability concerns, particularly related to activities in the so-called “shadow” banks and in other nonbank intermediaries including:
• The growing amount of maturity and liquidity transformation that is taking place through mutual funds or exchange traded funds, particularly those investing in credit instruments;
• The ongoing weakening of underwriting standards in some areas, particularly those linked to lending to leveraged corporations with higher credit risks;
• The volume of flows that is searching for returns and flowing into higher credit risk and longer duration assets;
• The uncertain leverage and risks that are embedded in securities lending undertaken by large financial institutions;
• The fragmented oversight of the insurance sector, data gaps, and the lack of a consolidated picture of insurance companies’ global activities and risks;
• A decline in broker-dealer involvement in market making activity, potentially hampering the functioning of markets and price discovery at times of market stress.
Some broad combination of these pockets of evolving vulnerabilities—set against a backdrop of a rise in short-term interest rates or an unwinding of currently compressed risk and term premia—could prove disruptive. In particular, a tail risk where there was a precipitous attempt by investors to exit certain markets—perhaps exacerbated by outflows from ETFs and mutual funds as well as near-term market illiquidity—could trigger an abrupt and self-reinforcing re-pricing of a range of financial assets. This, in turn, could have damaging implications for U.S. growth (through wealth effects, difficulties in rolling over or accessing new financing, and strains in the corporate sector) and negative knock-on effects internationally.
8. Regulatory action. Steps that could be taken to tackle these risks and lessen the likelihood of negative spillovers to the global economy include further supervisory scrutiny on underwriting standards, higher risk weights and tighter limits on large exposures to certain assets (such as leveraged loans or high yield bonds), and stronger prudential norms for the holding of securitized loans (such as CLOs) by regulated entities. Addressing the remaining vulnerabilities of the money market funds and of the tri-party repo market also remains a priority. In addition, the U.S. should continue to implement measures that allow for the orderly resolution of too-important-to-fail financial institutions, including through deepening the cooperation with other jurisdictions to manage the resolution of institutions with a significant cross-border presence. The insurance sector warrants particular attention and would benefit from stronger and more uniform capital adequacy and solvency oversight standards, refinement and harmonization of stress testing exercises, greater efforts to close data gaps, further designation of systemically important firms, and a larger federal role in insurance regulation and oversight. The U.S. should also continue to play a lead role in advancing the global regulatory reform agenda, ensuring common practices across countries, and limiting the opportunities for regulatory arbitrage while remaining attuned to the spillover implications of regulatory changes on the international financial system.
9. Housing finance. Limited availability of mortgage financing is a pressing constraint on economic growth. Conservative lending standards are being driven by a range of factors that include persistent anxiety about potential “put-back” risks (i.e., where Fannie Mae or Freddie Mac require mortgage originators to repurchase loans because of discrepancies in underwriting or documentation); litigation and reputational risks to lenders; a tighter regulatory environment and supervisory scrutiny; and uncertainty about the future structure of the mortgage industry. Policy efforts have been made to lessen the impact of some of these factors including by establishing a “safe harbor” for Qualified Mortgages that meet a clear set of minimum standards and by clarifying the conditions for put-backs. However, the recovery of mortgage lending to lower credit rated borrowers is likely to be a slow process. Legislative reforms that clarify the future role of government in housing finance would help. The end objective should be a system where there is:
• A substantial first-loss risk borne by private capital (rather than taxpayers);
• An explicit public backstop that is limited to catastrophic credit losses with risk-based guarantee fees;
• A role for regulatory agencies in setting underwriting standards;
• A common platform for securitization; and
• A clear delineation and transparent accounting of those public interventions in the housing market that are intended to promote social objectives.
While reaching agreement on legislation will be hard, in anticipation of broader legislative reform many of these objectives can still be realized in the medium term through administrative action including by expanding the use of market transactions to transfer first-loss risks from the agencies to private investors; moving gradually to higher and more risk-based guarantee fees; steadily building up capital within the agencies while reducing their role in housing finance; and establishing a single securitization platform.
10. Near-term fiscal policy. The difficulty of finding political common ground on fiscal policy has been very evident over the past few years with negative consequences for both the U.S. and global economy. The Bipartisan Budget Act, enacted in December 2013, and the subsequent raising of the debt ceiling were important steps to reduce fiscal risks and improve both the pace and distribution of near-term deficit reduction. Going forward, even in the absence of a fully articulated medium-term consolidation plan, there is room to build on this progress through the identification of targeted areas to expand the near-term budget envelope, funded by offsetting savings in future years. Specific near-term measures that should be supported—many of which were in the Administration’s budget proposal—include:
• Front-loaded infrastructure spending. Additional investment is urgently needed to upgrade the quality of infrastructure in the U.S., particularly for surface transportation. Most pressing is the need to provide clarity on future financing of the Highway Trust Fund. However, this should be viewed only as a first step. Action is also needed to achieve a sustained increase in both Federal and State spending on infrastructure paid for by savings in entitlement programs, additional revenues, and an expansion of financing sources (including innovations such as the America Fast Forward Bond).
• Changes in the tax system. Itemized deductions for the individual income tax—including the mortgage interest deduction—should be either limited or gradually eliminated. The Federal gas tax should be significantly increased. The tax system could also be used more effectively to incentivize private innovation such as by reinstating and making permanent the Research and Experimentation tax credit that expired at end-2013. In addition, consideration should be given to offering time-bound tax credits or wage subsidies to employers who hire the long-term unemployed.
•Education spending. Educational outcomes could be raised by a reorientation of spending to prioritize early childhood education (including universal pre-K) and to give more support to science, technology, engineering and math programs.
11. Medium-term consolidation. Recent years have seen a rapid reduction in the fiscal deficit. Nevertheless, the general government debt is still not on a sustainable longer-term path and is likely to begin rising again by 2018. There is a pressing need to reach political agreement on a credible and detailed medium-term fiscal consolidation path. To meet the Administration’s goal of ensuring that debt is placed on a downward trajectory, staff believe that a general government primary surplus of 1¼ percent of GDP by 2023 will be needed. This adjustment will need to include measures to:
• Control health care costs. Some progress has already been made in taming the fiscal pressures from rising health care costs—in part through implementation of the Affordable Care Act—but more is needed. This should involve better coordination of services for those with chronic conditions; greater cost sharing with beneficiaries; and limiting tax breaks for higher cost, employer-provided health plans.
• Strengthen social security finances. Addressing the expected depletion of the social security trust fund will require fundamental reform that further raises the retirement age in a gradual manner (perhaps with a link to future life expectancy), increases the ceiling on taxable earnings for social security, and indexes benefits and tax provisions to chained CPI.
• Improve the tax structure and raise revenues. In addition to the near-term tax measures described above, a broad reform of corporate taxes is long overdue and should lower the marginal rate, simplify the system, eliminate a range of exclusions and deductions, and limit base erosion and profit shifting by multinational firms. In addition, the U.S. should introduce a broad-based carbon tax and move toward the introduction of a Federal-level VAT.
12. Institutional fiscal reforms. The recent experience of debt ceiling brinkmanship and the government shut down once again illustrates the potential economic damage from political discord linked to fiscal policies. There is a risk that, in the Spring of 2015, many of these issues will come to the fore once more. While not a panacea, some change to budget procedures could have a lasting effect in lessening such fiscal policy uncertainty. Useful measures could include reaching bipartisan agreement on a clear, simple medium-term fiscal objective (with an integrated view of all budget functions and numerical targets for the debt and deficit); adopting carefully-designed mechanisms to trigger revenue or spending adjustments if targets are breached; an automatic process that would raise the debt ceiling once agreement is reached on the broad budget parameters; and shifting to a budget cycle where annual spending levels are agreed for a two year period (but with the possibility for supplemental budget resolutions during that two year window under clearly specified conditions).
13. In conclusion, the agenda ahead is long and challenging and will take many years to accomplish. Concerted progress will serve to raise long-run growth prospects, lessen poverty, put fiscal finances on a sustainable footing, and reduce financial stability risks. All of which will be advantageous for the U.S. and for the world economy.
This is courtesy of www.imf.org
Geneva, Switzerland, – Over 40 heads of state and government, as well as 2,500 other leaders from business and society will convene at the 45th World Economic Forum Annual Meeting, from 21 to 24 January 2015 in Davos-Klosters, Switzerland, to discuss The New Global Context.
This context consists of 10 global challenges affecting the world today: environment and resource scarcity; employment skills and human capital; gender parity; long-term investing, infrastructure and development; food security and agriculture; international trade and investment; future of the internet; global crime and anti-corruption; social inclusion; and future of financial systems. Current affairs, such as the escalating geopolitical conflicts, pandemics, diverging growth and the new energy context are on the agenda as well.
“The World Economic Forum serves the international community as a platform for public-private cooperation,” said Klaus Schwab, Founder and Executive Chairman of the World Economic Forum. “Such cooperation, to address the challenges we all face, is more vital than ever before. But it requires mutual trust. My hope is that the Annual Meeting serves as the starting point for a renaissance of global trust.”
Ahmet Davutoğlu, Prime Minister of Turkey, Béji Caïd Essebsi, President of Tunisia, François Hollande, President of France, Li Keqiang, Prime Minister of the People’s Republic of China, Angela Merkel, Federal Chancellor of Germany, John Kerry, US Secretary of State, Muhammad Nawaz Sharif, Prime Minister of Pakistan, Matteo Renzi, Prime Minister of Italy, Simonetta Sommaruga, President of the Swiss Confederation, and Jacob Zuma, President of South Africa, will be among the key government representatives present.
Participants also include more than 1,500 business leaders from the Forum’s 1,000 Member companies, 300 public figures as well as recognized leaders from other Forum communities, including Social Entrepreneurs, Global Shapers, Young Global Leaders and Technology Pioneers. Representatives from international organizations and civil society, as well as religious leaders, cultural leaders, academia and the media will also participate.
The full programme consists of over 280 sessions out of which over 100 sessions will be live webcast. The themes include:
Crisis & Cooperation
Resolving geopolitical crises: With conflicts continuing to destabilize Ukraine, the Middle East and other parts of the world, what can the international community do to help bring about a lasting peace? Registered participants include Abdel Fatah El Sisi, President of Egypt, H.M. King Abdullah II Ibn Al Hussein, King of the Hashemite Kingdom of Jordan, Haïdar Al Abadi, Prime Minister of Iraq, Masoud Barzani, President of the Kurdistan Region, Iraq, Petro Poroshenko, President of Ukraine.
Repercussions of climate change: As the world prepares for another round of post-Kyoto climate negotiations, what are the chances for success at the climate meeting in Paris? And how can the private sector contribute?
Registered participants include Christiana Figueres, Executive Secretary, United Nations Framework Convention on Climate Change, Ollanta Moises Humala Tasso, President of Peru, and Al Gore, Vice-President of the United States (1993-2001); Chairman and Co-Founder, Generation Investment Management, USA
Pandemics and health: As the outbreak of Ebola has shown, combating the spread of viruses is still a worldwide priority. At the same time, non-communicable diseases such as diabetes are becoming the world’s biggest silent killer. What can the world do to ensure global health going forward? Registered participants include Kofi Annan, Chairman, Kofi Annan Foundation, Switzerland; Secretary-General, United Nations (1997-2006), Margaret Chan, Director-General, World Health Organization (WHO), Geneva, Alpha Condé, President of Guinea, Ibrahim Boubacar Keita, President of the Republic of Mali, and Peter Piot, Director, London School of Hygiene and Tropical Medicine; Executive Director, UNAIDS (1994-2008).
Growth & Stability
Diverging growth and monetary policies: As expansionary monetary policy in one part of the world comes to an end, central banks policies in other parts of the world are further incentivizing the growth and employment, with mixed results. What will 2015 bring in terms of growth and monetary policies around the world? Registered participants include Christine Lagarde, Managing Director, International Monetary Fund (IMF), and the Governors of the Central Banks of Brazil, Canada, England, France, Italy, Japan, Mexico and Switzerland.
The new energy context: As energy prices are dropping to five-year lows, what are the short- and long-term effects on the world? What does it mean for growth in emerging economies and the impact on climate change? Registered participants include Khalid Al Falih, President and Chief Executive Officer, Saudi Aramco, Mary Barra, Chief Executive Officer, General Motors Company, Abdalla Salem El Badri, Secretary-General, Organization of the Petroleum Exporting Countries (OPEC), Emilio Lozoya, Chief Executive Officer, Petroleos Mexicanos (PEMEX), and Patrick Pouyanné, Chief Executive Officer and President of the Executive Committee, Total, President and Chief Executive Officer.
Innovation & Industry
Future of technology: As technology expands to virtually all aspects of the economy, how does it affect our lives? What good can technology do for the world? And what is the right balance between competition and innovation in the technology industry? Registered participants include Jack Ma Yun, Executive Chairman, Alibaba Group, Marissa Mayer, President and Chief Executive Officer, Yahoo, Satya Nadella¸ Chief Executive Officer, Microsoft Corporation, Sheryl Sandberg, Chief Operating Officer and Member of the Board, Facebook Inc., Eric Schmidt, Executive Chairman, Google, USA, and Jimmy Wales, Founder and Chair Emeritus, Board of Trustees, Wikimedia Foundation.
Society & Security
Income inequality and the development agenda: While many countries are still struggling to reinvigorate growth, the discussion in other countries revolves around the redistribution of wealth. How can we incorporate the needs of developing nations, struggling western economies, and the equality and parity questions? Registered participants include Roberto Azevêdo, Director-General, World Trade Organization (WTO), Bill Gates, Co-Chair, Bill & Melinda Gates Foundation, Melinda Gates, Co-Chair, Bill & Melinda Gates Foundation, Angel Gurría, Secretary-General, Organisation for Economic Co-Operation and Development (OECD), Phumzile Mlambo-Ngcuka, Undersecretary-General and Executive Director, United Nations Entity for Gender Equality and the Empowerment of Women (UN WOMEN), and Guy Ryder, Director-General, International Labour Organization (ILO).
The Co-Chairs of the Annual Meeting 2015 are: Hari S. Bhartia, Co-Chairman and Founder, Jubilant Bhartia Group, India; Winnie Byanyima, Executive Director, Oxfam International, United Kingdom; Katherine Garrett-Cox, Chief Executive Officer and Chief Investment Officer, Alliance Trust, United Kingdom; Young Global Leader Alumnus; Jim Yong Kim, President, The World Bank, Washington DC; Eric Schmidt, Executive Chairman, Google, USA; and Roberto Egydio Setubal, Chief Executive Officer and Vice-Chairman of the Board of Directors, Itaú Unibanco, Brazil.
The World Economic Forum is an international institution committed to improving the state of the world through public-private cooperation in the spirit of global citizenship. It engages with business, political, academic and other leaders of society to shape global, regional and industry agendas.
Incorporated as a not-for-profit foundation in 1971 and headquartered in Geneva, Switzerland, the Forum is independent, impartial and not tied to any interests. It cooperates closely with all leading international organizations (www.weforum.org).
Middle class families today bear too much of the tax burden because of unfair loopholes that are only available to the wealthy and big corporations. In his State of the Union address, the President will outline his plan to simplify our complex tax code for individuals, make it fairer by eliminating some of the biggest loopholes, and use the savings to responsibly pay for the investments we need to help middle class families get ahead and grow the economy.
The President will put forward reforms that include eliminating the biggest loophole that lets the wealthiest avoid paying their fair share of taxes:
Close the trust fund loophole – the single largest capital gains tax loophole – to ensure the wealthiest Americans pay their fair share on inherited assets. Hundreds of billions of dollars escape capital gains taxation each year because of the “stepped-up” basis loophole that lets the wealthy pass appreciated assets onto their heirs tax-free.
Raise the top capital gains and dividend rate back to the rate under President Reagan. The President’s plan would increase the total capital gains and dividends rates for high-income households to 28 percent.
Reform financial sector taxation to make it more costly for the biggest financial firms to finance their activities with excessive borrowing. The President will propose a fee on large, highly-leveraged financial institutions to discourage excessive borrowing.
By ensuring those at the top pay their fair share in taxes, the President’s plan responsibly pays for investments we need to help middle class families get ahead, like his recent proposal to make two years of community college free for every student willing to do the work. The savings will pay for additional reforms that will help the paychecks of middle-class and working families go further to cover the cost of child care, college, and a secure retirement:
Provide a new, simple tax credit to two-earner families. The President will propose a new $500 second earner credit to help cover the additional costs faced by families in which both spouses work — benefiting 24 million couples.
Streamline child care tax incentives to give middle-class families with young children a tax cut of up to $3,000 per child. The President’s proposal would streamline and dramatically expand child care tax benefits, helping 5.1 million families cover child care costs for 6.7 million children. The proposal will complement major new investments in the President’s Budget to improve child care quality, access, and affordability for working families.
Simplify, consolidate, and expand education tax benefits to improve college affordability. The President’s plan will consolidate six overlapping education provisions into just two, while improving the American Opportunity Tax Credit to provide more students up to $2,500 each year over five years as they work toward a college degree – cutting taxes for 8.5 million families and students and simplifying taxes for the more than 25 million families and students that claim education tax benefits.
Make it easy and automatic for workers to save for retirement. The President will put forward a retirement tax reform plan that gives 30 million additional workers the opportunity to easily save for retirement through their employer.
These new policies build on longstanding proposals to extend important tax credit improvements for working families, expand the Earned Income Tax Credit, provide quality preschool for all four-year-olds, and raise revenue to reduce the deficit by curbing inefficient tax breaks that primarily benefit the wealthy. In addition, the President has put forward a framework for fixing the business tax system on a revenue- neutral basis and using the transition revenue to pay for investments in infrastructure.
Eliminating the Biggest Loopholes that let the Wealthiest Avoid Paying Their Fair Share of Taxes and Reforming Financial Sector Taxation
Reforming the Taxation of Capital Gains
Rather than make it easier for middle-class families to make ends meet, our tax system has changed over time in ways that make it easier for the wealthy to avoid paying their fair share. Though President Obama restored top tax rates on the highest income Americans to their levels under President Clinton, high-income tax rates remain historically low, especially on capital income. Capital income taxes are also much lower than tax rates on income from work, which explains how the highest-income 400 taxpayers in 2012 – who obtained 68 percent of their income from capital gains – paid income tax at an effective rate of 17 percent, even though the top marginal income tax rate was 35 percent.
The problem is that the U.S. capital income tax system is too broken to address this unfairness just by raising tax rates. Current rules let substantial capital gains income escape tax altogether. Raising the capital gains rate without also addressing these loopholes would encourage wealthy individuals to take further advantage of the opportunities the current system provides to defer and avoid tax.
The largest capital gains loophole – perhaps the largest single loophole in the entire individual income tax code – is a provision known as “stepped-up basis.” Stepped-up basis refers to the fact that capital gains on assets held until death are never subject to income taxes. Not only do bequests to heirs go untaxed, but the “tax basis” of inherited assets used to compute the gain if they are later sold is immediately increased (“stepped-up”) to the value at the date of death – making the capital gain income forever exempt from taxes. For example, suppose an individual leaves stock worth $50 million to an heir, who immediately sells it. When purchased, the stock was worth $10 million, so the capital gain is $40 million. However, the heir’s basis in the stock is “stepped up” to the $50 million gain when he inherited it – so no income tax is due on the sale, or ever due on the $40 million of gain. Each year, hundreds of billions in capital gains avoid tax as a result of stepped-up basis.
The President’s proposal would close the stepped-up basis loophole by treating bequests and gifts other than to charitable organizations as realization events, like other cases where assets change hands. It would also increase the total top capital gains and dividend rate to 28 percent – the rate under President Reagan. (The top rate applies to couples with incomes over about $500,000.) It would:
Almost exclusively impact the top 1 percent. 99 percent of the impact of the President’s capital gains reform proposal (including eliminating stepped-up basis and raising the capital gains rate) would be on the top 1 percent, and more than 80 percent on the top 0.1 percent (those with incomes over $2 million). Under the President’s proposal, wealthy people would still get a preferential rate on their income from investments, but they would no longer be able to accumulate extra wealth by paying no capital gains tax whatsoever.
Address a basic unfairness in the tax system. Most middle-class retirees spend down their assets during retirement, which means they owe income taxes on whatever capital gains they’ve accrued. But the wealthy can often afford to hold onto assets until death – which is what lets them use the stepped-up basis loophole to avoid ever having to pay tax on capital gains. 
Unlock capital for productive investment. By letting very wealthy investors make their capital gains disappear at death, stepped-up basis creates strong “lock-in” incentives to hold assets for generations, even when resources could be reinvested more productively elsewhere. The proposal would sharply reduce these incentives, making it a pro-growth way to raise revenue.
Protect the middle-class and small businesses. To ensure that it would impose neither tax nor compliance burdens on middle-class families, the President’s proposal includes the following protections:
For couples, no tax would be due until the death of the second spouse.
Capital gains of up to $200,000 per couple ($100,000 per individual) could still be bequeathed free of tax. Note that, since capital gains generally represent only a fraction of an asset’s value, this exemption would allow couples to bequeath more than $200,000 without owing taxes. The exemption would be automatically portable between spouses.
In addition to the basic exemption, couples would have an additional $500,000 exemption for personal residences ($250,000 per individual). This exemption would also be automatically portable between spouses.
Tangible personal property other than expensive art and similar collectibles (e.g. bequests or gifts of clothing, furniture, and small family heirlooms) would be tax-exempt. In addition to avoiding any tax burden on these transfers, this exclusion would prevent families from having to value and report them.
As a result of these provisions, only a tiny minority of small businesses could possibly be affected by the repeal of stepped-up basis. However, the President’s proposal also includes extra protections that ensure no small family-owned business would ever have to be sold for tax reasons:
No tax would be due on inherited small, family-owned and operated businesses – unless and until the business was sold.
Any closely-held business would have the option to pay tax on gains over 15 years.
Imposing a Fee on Large Financial Institutions
The President’s proposal would make it more costly for the largest financial firms to finance their activities by borrowing heavily. Specifically, the President’s proposal would impose a 7 basis point fee on the liabilities of large U.S. financial firms: the roughly 100 firms in the nation with assets over $50 billion. The President’s proposal would attach a cost to leverage for the largest financial firms, leading them to make decisions more consistent with the economy-wide effects of their actions, which would in turn help reduce the probability of major defaults that can have widespread economic costs. This approach is broadly consistent with a proposal from former Ways and Means Chairman Camp’s tax reform plan that would have imposed an excise tax on large financial firms.
Reforming the Tax System to Better Support and Reward Work
Creating a New “Second Earner Credit” for Married Couples Where Both Spouses Work
Two-earner couples can face high penalties for working. When both spouses work, the family incurs additional costs in the form of commuting costs, professional expenses, child care, and, increasingly, elder care. When layered on top of other costs, including federal and state taxes, these work-related costs can contribute to a sense that work isn’t worth it, especially for parents of young children and couples caring for aging parents. While women, including married women, are increasingly family breadwinners, the fact remains that they are still much more likely to be the ones who withdraw from the labor force in these circumstances, taking a toll on their future job options and earnings, and hurting our overall economic growth.
Building on Congressional proposals from members of both parties, the President is proposing to address these challenges with a new second earner credit that recognizes the additional costs faced by families in which both spouses work. A total of 24 million couples would benefit from this proposal, which would provide a new, simple second earner credit of up to $500. Families would claim a credit equal to 5 percent of the first $10,000 of earnings for the lower-earning spouse in a married couple, and the maximum credit would be available to families with incomes up to $120,000, with a partial credit available up to $210,000. 80 percent of two-earner married couples would benefit from the new credit.
Expanding the EITC for Workers without Children and Noncustodial Parents
The President’s plan to help working families get ahead incorporates his proposed childless worker EITC expansion, reducing poverty and hardship for 13.2 million low-income workers struggling to make ends meet while promoting employment. The President’s proposal would double the EITC for workers without qualifying children, increase the income level at which the credit phases out, and make it available to workers age 21 and older. Ways and Means Committee Chairman Ryan has endorsed the President’s proposed expansion, while other members of Congress have put forward similar proposals.
The President also continues to propose making permanent improvements to the EITC and CTC that augment wages for 16 million families with 29 million children each year. These improvements provide additional benefits to low-income working parents, families with three or more children, and married families, but are currently scheduled to expire at the end of 2017. Allowing these benefits to expire would result in a roughly $1,700 tax increase for a full-time minimum wage worker with two children. Research has consistently shown that the helping low-wage working families through the EITC and CTC not only boosts parents’ employment rates and reduces poverty, but has positive longer-term effects on children, including improved health and educational outcomes.
Making Child Care, Education, and Retirement Tax Benefits Work for Middle-Class Families
Simplifying and Expanding Child Care Tax Benefits
With the cost of infant and toddler care rivaling the cost of college in many states, the average child care tax benefit of $550 falls well short of what is needed to provide meaningful help to working families. The Child and Dependent Care Tax Credit and child care flexible spending accounts are also unnecessarily complex, often requiring significant paperwork and advanced planning for families to receive the full benefits.
The President’s tax proposal would streamline child care tax benefits and triple the maximum child care credit for middle class families with young children, increasing it to $3,000 per child. The President’s child care tax proposals would benefit 5.1 million families, helping them cover child care costs for 6.7 million children (including 3.5 million children under 5), through the following reforms:
Triple the maximum Child and Dependent Care Tax Credit (CDCTC) for families with children under 5, increasing it to $3,000 per child. Families with young children face the highest child care costs. Under the President’s proposal, they could claim a 50 percent credit for up to $6,000 of expenses per child under 5 – covering up to half the cost of child care for preschool age children.
Make the full credit available to most middle-class families. Under current law, almost no families qualify for the maximum CDCTC. The President’s proposal would make the maximum credit – for young children, older children, and elderly or disabled dependents – available to families with incomes up to $120,000, meaning that most middle-class families could easily determine how much help they can get.
Eliminate complex child care flexible spending accounts and reinvest the savings in the improved CDCTC. The President’s proposal would replace the current system of complex and duplicative incentives with one generous and simple child care tax benefit. 
The President’s child care tax proposal will complement major new investments in the President’s Budget to improve child care quality, access, and affordability for working families.
Consolidating and Improving Education Tax Incentives
While the creation of the American Opportunity Tax Credit in 2009 made college more affordable for millions of students and their families, our system of tax incentives for higher education is complex, and families are sometimes unable to take full advantage of these benefits. In fact, the Government Accountability Office (GAO) found that 27 percent of families who claimed one tax benefit would have been better off claiming another, while 14 percent of eligible families failed to claim any benefit at all.
Building on bipartisan reform proposals, the President’s education tax reform plan would simplify, consolidate, and better target tax-based financial aid. The President’s plan would cut taxes for 8.5 million families and students, simplify taxes for the more than 25 million families and students that claim education tax benefits, and provide students working toward a college degree with up to $2,500 of assistance each year for five years. These education tax reforms would complement the President’s other proposals to make college more affordable, including continuing historic increases in the Pell scholarship program and making a quality community college education free for responsible students. Together, these proposals would benefit students, families, and the broader economy by helping more students earn a postsecondary credential. The President’s education tax reform plan would:
Simplify, consolidate, and better target tax benefits through an improved AOTC
Consolidate duplicative and less effective education benefits into a permanent, improved AOTC. Under current law, the AOTC is scheduled to expire after 2017 and revert to the less generous Hope tax credit. Under the President’s plan, the AOTC would be a permanent feature of the tax code, so that students in school today would not have to worry that these benefits will expire before they graduate; the credit would also grow with inflation. The Lifetime Learning Credit and the tuition and fees deduction would be consolidated into the more generous AOTC.
Increase the refundable portion of the AOTC to $1,500. The President’s plan adopts Congressional proposals – from members of both parties – to increase the refundable portion of the AOTC so that more working families and students can qualify. Like legislation that passed the House in 2014, the President’s plan would increase the refundable portion from a maximum of $1,000, or 40 percent of the total AOTC benefit, to a flat maximum of $1,500.
Expand AOTC eligibility for non-traditional students. Currently, students must be at least half-time to qualify for the AOTC, and families can claim the credit for no more than four years. Under the President’s plan, part- time students would be eligible for a $1,250 AOTC (up to $750 refundable) and all eligible students would be able to claim the AOTC for up to five years.
Make it easier for students and families to apply for tax credits
Improve information reporting. The proposal would require colleges and universities to provide students with the tuition and fee information needed to claim the AOTC.
Simplify taxes for approximately 9 million Pell Grant recipients. Currently, eligible families leave tens of millions of dollars of AOTC credits on the table because the rules related to Pell Grants and the AOTC are so complicated. Like bipartisan Congressional proposals, the President’s plan would exempt Pell Grants from taxation and the AOTC calculation, making it easier for Pell recipients to claim the tax benefits already available to them.
Better target and simplify tax relief for student debt and college savings
Eliminate tax on student loan debt forgiveness under Pay-As-You-Earn (PAYE) and other income-based repayment plans. The President has worked to make student debt affordable for struggling borrowers by offering PAYE: an income-based repayment plan that lets borrowers limit student loan payments to no more than 10 percent of their discretionary income and qualify for forgiveness after 20 years of repayments. The Department of Education is currently amending its rules to extend this option to all direct student loan borrowers. However, under current law, PAYE participants who qualify for debt forgiveness after 20 years could face a large tax bill – likely a surprise to most borrowers, and for others a concern in choosing PAYE. The President’s plan would continue to propose to exempt student loan forgiveness from taxation.
Repeal the complicated student loan interest deduction for new borrowers. The student loan interest deduction is complicated – so much so that many eligible borrowers fail to claim it – and provides very limited assistance ($100 on average) to a broad group of borrowers, rather than targeting more meaningful assistance to those borrowers struggling to afford their student loan payments. The President’s plan would retain the student loan interest deduction for current borrowers. But for new borrowers, his plan would repeal this complicated tax break and instead provide more generous and more targeted tax relief through the improved AOTC while students are in school and through PAYE once they graduate.
Limit upside-down education savings incentives and consolidate them into a single benefit. The President’s plan would consolidate education savings incentives into one vehicle and redirect the savings into the better targeted AOTC. Specifically, the President’s plan will roll back expanded tax cuts for 529 education savings plans that were enacted in 2001 for new contributions, and – like Chairman Camp’s tax reform plan – repeal tax incentives going forward for the much smaller Coverdell education savings program.
Reforming Retirement Tax Incentives and Expanding Savings Opportunities
Americans face a daunting array of choices when it comes to retirement savings. While some workers are automatically enrolled in a retirement savings plan by their employer (with an option to opt out), others have to open an account, manage contributions, and research and select investments on their own. Meanwhile, tax loopholes have allowed some high-income Americans to accumulate tens of millions of dollars in tax-preferred accounts that were intended to help workers save for a secure retirement, not to provide tax shelters for the wealthiest few.
The President’s retirement tax reform proposals would dramatically expand access to employer-based retirement savings options, whether a new “auto-IRA,” 401(k), or other employer plan. These proposals would give 30 million additional workers access to a workplace savings opportunity and would complement the President’s actions over the past year to make saving for retirement easier by creating the simple, risk-free, and low-cost “myRA” starter savings vehicle. The President’s reforms to make the system more robust for middle-class workers would be paid for by closing retirement tax loopholes for the wealthy. The President’s retirement tax reform plan would:
Automatically enroll Americans without access to a workplace retirement plan in an IRA. Under the proposal, every employer with more than 10 employees that does not currently offer a retirement plan would be required to automatically enroll their workers in an IRA. Auto-IRAs would let workers opt out of saving if they choose but would also let them start saving without sorting through a host of complex options. Auto-IRA proposals have been endorsed by independent scholars across the ideological spectrum, including those affiliated with AARP, the Brookings Institution and the Heritage Foundation.
Provide tax cuts for auto-IRA adoption, as well as for businesses that choose to offer employer plans or switch to auto-enrollment. To minimize the burden on small businesses, the President’s auto-IRA proposal would provide any employer with 100 or fewer employees who offers an auto-IRA a $3,000 tax credit. The President also proposes to triple the existing “start up” credit, so small employers who newly offer a retirement plan would receive a $4,500 tax credit – more than enough to offset administrative expenses. And because auto- enrollment is the most effective way to ensure workers with access to a plan participate, small employers who already offer a plan and add auto-enrollment would get an additional $1,500 tax credit.
Ensure long-term, part-time workers can contribute to their employer’s retirement plan. Only 37 percent of part-time workers have access to a workplace retirement plan. That’s partly because employers offering retirement plans are allowed to exclude employees who work less than 1,000 hours per year, no matter how long they’ve worked for the employer. The President proposes to expand access for part-time workers by requiring employers who offer plans to permit employees who have worked for the employer for at least 500 hours per year for 3 years or more to make voluntary contributions to the plan.
Prevent wealthy individuals from using loopholes to accumulate huge amounts of tax-favored retirement benefits. Tax-preferred retirement plans are intended to help working families save for retirement. But loopholes in the tax system have let some wealthy individuals convert tax-preferred retirement accounts into tax shelters, including 300 extraordinarily wealthy individuals who have accumulated more than $25 million each in IRAs. The President’s plan would prohibit contributions to and accruals of additional benefits in tax-preferred retirement plans and IRAs once balances are about $3.4 million, enough to provide an annual income of $210,000 in retirement.
ZURICH and WARREN, NEW JERSEY — JULY 1, 2015 — ACE Limited (NYSE: ACE) and The Chubb Corporation (NYSE: CB) announced today that the Boards of Directors of both companies have unanimously approved a definitive agreement under which ACE will acquire Chubb. Under the terms of the transaction, Chubb shareholders will receive $62.93 per share in cash and 0.6019 shares of ACE stock. Based on the closing price of ACE stock on June 30, 2015, the total value is approximately $124.13 per Chubb share, or $28.3 billion in the aggregate. This is the equivalent of $125.87 per Chubb share using ACE’s 20-day volume weighted average share price for the period ending June 30, 2015.
Upon closing of the transaction, ACE shareholders will own 70% of the combined company, and Chubb shareholders will own 30%. The consideration represents an approximately 30% premium to Chubb’s
closing price of $95.14 on June 30, 2015.
Together, ACE and Chubb will create a global leader in commercial and personal property and casualty (P&C) insurance, with enhanced growth and earning power and an exceptional balance of products as a result of greater diversification and a product mix with reduced exposure to the P&C industry pricing cycle. The combined company will remain a growth company with complementary products, distribution, and customer segments, a shared commitment to underwriting discipline and outstanding
claims service, and substantially increased data to drive new, profitable growth opportunities in both developed and developing markets around the world. The combination will create efficiencies that will provide flexibility for the company to invest in people, technology, products and distribution as well as improve the company’s competitive profile. Additionally, the balance sheet’s size and strength will elevate the combined company into the elite group of global P&C insurers. As of December 31, 2014, on an aggregate basis, the combined company had total shareholders’ equity of nearly $46 billion and cash, investments and other assets of $150 billion.
Growth and Earning Power of the Combination
“We are thrilled to announce the acquisition of Chubb, a venerable company with a great brand,” said Evan G. Greenberg, Chairman and CEO of ACE Limited. “This transaction advances our strategy in a meaningful way and represents an outstanding opportunity to create significant value over a reasonable period of time for both ACE and Chubb shareholders. We are combining two great underwriting companies that are highly complementary. We will make each other better and create a unique company in a class of its own that has greater growth and earning power than the sum of the two companies separately.”
John D. Finnegan, Chairman, President and CEO of Chubb, said, “This is a compelling transaction for all Chubb and ACE stakeholders. The combination brings together two highly respected and successful companies with complementary capabilities, assets and geographic footprints. We are confident that it will deliver strong value to Chubb shareholders, including an immediate premium and participation in the future growth and profitability of a well-positioned combined company. We are pleased that the
combined company will adopt the Chubb brand and view this as an affirmation that both companies share a commitment to the attributes of quality and service the brand represents. We look forward to working together as we create a best-in-class global franchise in P&C insurance.”
Complementary Presence and Capabilities
In the United States commercial lines business, ACE provides a broad range of products and services for industrial commercial, multinational and upper middle market companies with distribution substantially through a major brokerage presence. Chubb is primarily a middle-market commercial, specialty and surety insurer with a broad product portfolio and a major agency presence. In personal insurance, Chubb is a leading provider of personal lines coverage to high net worth customers in the U.S. while ACE has been increasingly focused on these customers as well.
Outside the U.S., ACE is a premier commercial insurer with a presence in 54 countries and a broad product, customer and distribution capability. Chubb’s operations in 25 countries will complement and deepen ACE’s presence. ACE has a leading market position in global accident and health (A&H) and both companies offer complementary personal lines offerings in Canada, Europe, Asia and Latin America. The combined company will have a leading position in professional lines globally with broad product
offerings for all sizes of commercial customers.
“We will be well balanced with greater presence and capabilities in product areas that have less exposure to the commercial P&C cycle,” continued Mr. Greenberg. “We have complementary product strengths – where one of us is not present, the other is. Where one of us is strong, the other is even stronger. Where there is overlap in product, generally one of us is more present at the large end of the corporate market while the other is serving the smaller or mid-market segment. The data and insight
we will gain from our respective skills and experience will allow us to do so much more. For example, Chubb will enhance ACE’s ability to serve the upper middle market, while ACE will provide more products to serve Chubb’s middle market clients, and our combined strengths will enable us to pursue the small and micro markets globally.
“Finally, we will benefit from each other’s complementary cultures, including a shared passion for underwriting discipline and outstanding claims service. Operating under the Chubb name, with sustained long-term underwriting profit and a larger invested asset base that will benefit from rising interest rates, we will take advantage of the growth opportunities and significant efficiencies to be gained between us. Together, we will grow more substantially and at a faster rate, producing greater earnings, than we could achieve as two separate companies. We look forward to welcoming the talented Chubb employees and their customers and distribution partners to the ACE family.”
Attractive Shareholder Returns
It is expected that the transaction will be immediately accretive to earnings per share and book value, and by year three, the transaction will be accretive to EPS on a double-digit basis and will be accretive to ROE. It is anticipated that the ROI will exceed ACE’s cost of capital within two years, result in a doubledigit return by year three, and tangible book value per share will return to its current level in three years.
Management, Board of Directors, Name and Headquarters
Upon completion of the transaction, the combined company will be led by Mr. Greenberg as Chairman and Chief Executive Officer. Mr. Finnegan has agreed to serve as Executive Vice Chairman for External Affairs of North America and will assist with integration. The company’s Board will be expanded from 14 directors to 18 directors with the addition of four independent directors from Chubb’s current Board.
Chubb will continue to operate under its name while the combined company transitions to operate under the Chubb name globally. The combined company will remain a Swiss company with principal offices in Zurich. Chubb’s headquarters in Warren, New Jersey, will house a substantial portion of the headquarters function for the combined company’s North American Division. ACE will continue to maintain a significant presence in Philadelphia, where its current North American Division headquarters
is based.
Financing, Efficiencies, Closing and Approvals
ACE intends to finance the cash portion of the transaction through a combination of $9 billion of ACE and Chubb excess cash plus $5.3 billion of senior notes with a range of maturities to be determined. ACE intends to target a debt-to-total capital ratio of approximately 20% following the acquisition, within the guidelines for the company’s ratings.
By the third year after closing, the company expects to realize annual expense savings of approximately $650 million pre-tax where both companies overlap. The company also expects to achieve meaningful growth that will result in substantial additional revenue. By year five, earnings accretion is expected to be balanced between revenue and expense-related synergies. The efficiencies created will provide greater flexibility for the company to invest in people, technology, product and distribution.
The transaction is expected to close during the first quarter of 2016, subject to approval by ACE and Chubb shareholders, the expiration or termination of the applicable waiting period under the Hart-ScottRodino
About ACE Group
ACE Group is one of the world’s largest multiline property and casualty insurers. With operations in 54 countries, ACE provides commercial and personal property and casualty insurance, personal accident and supplemental health insurance, reinsurance and life insurance to a diverse group of clients. ACE Limited, the parent company of ACE Group, is listed on the New York Stock Exchange (NYSE: ACE) and is a component of the S&P 500 index. Additional information can be found at: www.acegroup.com.
About Chubb
Since 1882, members of the Chubb Group of Insurance Companies have provided property and casualty insurance products to customers around the globe. These products are offered through a worldwide network of independent agents and brokers. The Chubb Group of Insurance Companies is known for financial strength, underwriting and loss-control expertise, tailoring products for the needs of high-networth individuals and commercial customers in niche markets and select industry segments, and
outstanding claim service.
The Chubb Group of Insurance Companies is the marketing term used to describe several separately incorporated insurance companies under the common ownership of The Chubb Corporation. The Chubb Corporation is listed on the New York Stock Exchange (NYSE: CB) and, together with its subsidiaries, employs approximately 10,300 people throughout North America, Europe, Latin America, Asia and Australia. For more information regarding The Chubb Corporation, including a listing of the insurers in the Chubb Group of Insurance Companies, visit www.chubb.com.
Reports of Africa’s economic demise have been greatly exaggerated. Yes, small pockets of insecurity exist and raise popular fears in the media, but the continent’s economy has never been more stable, diversified, linked, open, resilient and welcoming than it is now, at regional, national and local levels.
Investors seek safe havens for their money to grow, said Bronwyn Nielsen, Senior Anchor and Executive Director, CNBC Africa, South Africa, but en route to business pages, they read news about Ebola outbreaks, violent elections, Boko Haram terrorists and Al-Shabaab militants. Yet painting an entire continent with a single brush of instability doesn’t appear to deter foreign direct investment.
"Foreign direct investment is full steam ahead. There may be pockets of insecurity – external influences, border incursions – but the thing is to build the agriculture sector, for that is the root cause of growth and stability. As we continue to get value for crops, invest in local processing, create jobs locally, we strike at the heart of the cause of the issue," said John G. Coumantaros, Chairman, Flour Mills of Nigeria, Nigeria.
“Once you’re in Africa, you’re in it; you don’t withdraw,” said Sunil Bharti Mittal, Founder and Chairman, Bharti Enterprises, India. Mittal is investing more than $1 billion in 17 countries on the continent. “Upticks of threats in the media are scary, but the reality on the ground is not the same.”
Nor are plunging prices in oil and metals chasing off investors as they once had. Yes, growth is slower. But no nation is facing recession, as had happened in past commodity busts. Why not? Because economies have, wisely and deliberately, diversified, said Oscar Onyema, Chief Executive Officer, Nigerian Stock Exchange (NSE), Nigeria; Global Agenda Council on the Future of Financing & Capital. Crude oil today accounts for a smaller portion of Nigeria’s GDP, offset by the fast-growing entertainment, agriculture, telecommunications and financial sectors.
Coumantaros noted: "By 2050, Nigeria will be as big as the US. Salt, sugar, rice, palm oil, cassava, they're all strong. You wish to import things? You must start to grow it and process it locally. We can't focus on cities and leave the rest of the country behind.”
Diversified economies are also becoming more resilient to shocks as they seek to ease off foreign aid. In 2013 European donors temporarily suspended overseas assistance to Rwanda. The silver lining was that it forced the country to build capacity, seek more reliable revenue, and reduce its exposure to and dependency on bilateral and multilateral programmes. “We began transitioning from development aid to investment aid, concentrating on what attracts aid and people to do business in or with Rwanda in the first place, said Paul Kagame, President of the Republic of Rwanda.
Africa’s economies are also more integrated both within and between nations. Regional free-trade associations are playing a strong role in levelling and lowering barriers to entry, equitably distributing the flow of goods and services. Due to non-tariff barriers, it used to take 22 days to move a container from Mombasa to Kigali. Cross-border discussions identified and resolved issues, and today it takes six days. That provides a classic example of “collective leadership” that responds to political crises, said Jacob G. Zuma, President of South Africa, adding that the challenge is to overcome the colonial legacy where countries did not connect with each other as they do now. “We recognize that African problems demand African solutions.”
All parties strongly agreed that government must invest in infrastructure as a top priority, as doing so would yield immense social, economic and security dividends. On a related note, governments should encourage the free flow of people across borders, showing political will to ease visa restrictions that will ensure broad labour pools. Finally, countries are increasingly in a position where they can demand conditions – such as local processing and manufacturing – on investors, rather than simply allow exports from rural areas to cities, or extraction from the continent to overseas industries. Forging these linkages will ensure broader equity, and fuel growth even further.
After falling for five consecutive months, real gross domestic product rose 0.5% in June. The increase in June was broad based, led by mining, quarrying, and oil and gas extraction and, to a lesser extent, wholesale trade, the finance and insurance sector as well as arts and entertainment.
Following five consecutive monthly declines, the output of goods-producing industries advanced 0.9% in June, primarily as a result of an increase in mining, quarrying, and oil and gas extraction. Manufacturing, the agriculture and forestry sector and utilities were also up. In contrast, construction was down.
The output of service-producing industries increased 0.3% in June, following no growth in May. Gains were notable in wholesale trade, the finance and insurance sector, the arts and entertainment sector and the public sector (education, health and public administration combined). On the other hand, retail trade was unchanged and administrative services edged down.
Mining, quarrying, and oil and gas extraction expands
Following seven consecutive monthly contractions, mining, quarrying, and oil and gas extraction expanded 3.1% in June.
Oil and gas extraction grew 3.9% in June, after declining 3.5% in April and 0.5% in May. The increase in June was mainly the result of a 9.4% gain in non-conventional oil extraction. Non-conventional oil extraction rebounded in June from maintenance shutdowns and production difficulties in April and May. Conventional oil and gas extraction was unchanged in June.
Chart 2 Chart 2: Oil and gas extraction expands in June
Oil and gas extraction expands in June
Chart 2: Oil and gas extraction expands in June
Mining and quarrying (excluding oil and gas extraction) increased 2.6% in June. Metal ore, coal and non-metallic mineral mining all advanced in June.
Support activities for mining and oil and gas extraction decreased 2.7%, after rising 4.6% in April and 1.9% in May.
Wholesale trade rises while retail trade is unchanged
Following a 1.6% increase in April and a 1.1% decline in May, wholesale trade rose 1.0% in June. Increases were notable in wholesaling of personal and household goods, motor vehicles and parts, machinery, equipment and parts as well as building materials and supplies. Conversely, activities at miscellaneous wholesalers, which include agricultural supplies, were down.
Retail trade was unchanged in June, after increasing 0.4% in May. There was increased activity at electronics and appliance stores as well as food and beverage stores in June. On the other hand, declines were posted at building materials and garden equipment and supplies dealers and at clothing and clothing accessories stores.
The finance and insurance sector expands
The finance and insurance sector expanded 0.7% in June, mainly as a result of increases in banking services and, to a lesser extent, financial investment services. In contrast, insurance services were down.
The arts and entertainment sector increases
The arts and entertainment sector increased 6.4% in June, mainly as a result of the FIFA Women’s Soccer World Cup that was hosted by Canada.
Manufacturing output grows
Following a 1.6% contraction in May, manufacturing output grew 0.4% in June.
Non-durable goods manufacturing advanced 0.9% in June, primarily because of increases in the manufacturing of chemical, food and textile, clothing and leather products. In contrast, decreases were posted in petroleum and coal product manufacturing, plastic and rubber product manufacturing and, to a lesser degree, beverage and tobacco manufacturing.
Durable-goods manufacturing was unchanged in June. Notable decreases were recorded in fabricated metal products, machinery, and primary metal manufacturing. On the other hand, miscellaneous manufacturing, computer and electronic product manufacturing, as well as wood product and non-metallic mineral products manufacturing were up.
Construction declines
Construction fell 0.6% in June. Residential and non-residential building and repair construction were down in June, while engineering construction edged up.
The output of real estate agents and brokers declined in June, after rising for four consecutive months.
Other industries
The public sector (education, health and public administration combined) edged up 0.1% in June. Increases in education services outweighed declines in public administration.
Utilities edged up 0.1% in June, after declining for three consecutive months. Natural gas distribution was up in June, while electricity generation, transmission and distribution was down.
Five federal agencies on Tuesday issued final rules developed jointly to implement section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Volcker Rule”).
The final rules prohibit insured depository institutions and companies affiliated with insured depository institutions (“banking entities”) from engaging in short-term proprietary trading of certain securities, derivatives, commodity futures and options on these instruments, for their own account. The final rules also impose limits on banking entities’ investments in, and other relationships with, hedge funds or private equity funds.
Like the Dodd-Frank Act, the final rules provide exemptions for certain activities, including market making, underwriting, hedging, trading in government obligations, insurance company activities, and organizing and offering hedge funds or private equity funds. The final rules also clarify that certain activities are not prohibited, including acting as agent, broker, or custodian.
The compliance requirements under the final rules vary based on the size of the banking entity and the scope of activities conducted. Banking entities with significant trading operations will be required to establish a detailed compliance program and their CEOs will be required to attest that the program is reasonably designed to achieve compliance with the final rule. Independent testing and analysis of an institution’s compliance program will also be required. The final rules reduce the burden on smaller, less-complex institutions by limiting their compliance and reporting requirements. Additionally, a banking entity that does not engage in covered trading activities will not need to establish a compliance program.
The Federal Reserve Board announced on Tuesday that banking organizations covered by section 619 will be required to fully conform their activities and investments by July 21, 2015.
This Press Release is courtesy Commodities Futures Trading Commission
NEW YORK– American International Group, Inc. (NYSE:AIG) announced today that it has agreed to acquire a controlling stake in NSM Insurance Group, a leading U.S. managing general agent and insurance program administrator, from ABRY Partners and NSM management. Terms of the deal were not disclosed. The transaction is expected to close within the next 30 days.
NSM Insurance Group is a recognized leader in insurance programs administration, well known for its unique development and implementation of programs for a broad range of niche customer segments. NSM has been managing certain insurance programs for AIG for more than 15 years and will continue to do so, while continuing to manage third party programs. AIG’s investment was executed through a non-operating holding company, NSM Investments, Inc.
AIG’s stake in NSM furthers its strategic goal of diversifying its product offerings and provides its customers greater access to unique insurance programs.
“NSM’s track record, highly innovative approach to program structuring, and strong reputation enhances AIG’s ability to deliver the comprehensive products and services customers need to successfully manage risk,” said Robert Schimek, AIG Senior Vice President and CEO of the Americas. “We look forward to working with the exceptional management team at NSM to further grow this important business.”
NSM Insurance Group is managed by a strong team with decades of proven leadership in distribution and program management. The company is located in Conshohocken, Pennsylvania, and employs 300 people across nine regional offices.
“We are pleased to partner with AIG,” said Geof McKernan, CEO, NSM Insurance Group. “AIG brings to NSM strong financial backing and A+ rated paper which will power our acquisitions and internal growth plans. Ultimately, AIG’s investment enables us to continue to be an entrepreneurial organization and to seek new opportunities and programs.”
American International Group, Inc. (AIG) is a leading global insurance organization serving customers in more than 100 countries and jurisdictions. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.
Additional information about AIG can be found at www.aig.com | YouTube: www.youtube.com/aig | Twitter: @AIG_LatestNews | LinkedIn: http://www.linkedin.com/company/aig
AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds.
NEW YORK– American International Group, Inc. (NYSE:AIG) today announced that it has agreed to acquire Ageas Protect Limited from Ageas Group, the Belgium-based international insurer. Total transaction consideration is £181 million (approximately USD $305 million), subject to closing adjustments. The transaction is expected to close in the fourth quarter of 2014, pending regulatory approval.
Ageas Protect is a leading provider of life protection products in the UK, offering term life, critical illness, and income protection coverage to consumers. It was launched in July 2008 and today has a 4.8% share of new protection business across the UK market, and an 8.4% share of the important UK Independent Financial Advisor (“IFA”) channel. The company produced premiums of £91.8 million in 2013, employs approximately 220 people in the UK, and has over 300,000 customers in the UK, Channel Islands, and Isle of Man.
“UK life protection is an attractive market for AIG,” said Kevin Hogan, Chief Executive Officer of Global Consumer Insurance, AIG. “We are excited about the prospect of enhancing AIG’s significant presence and existing insurance offerings in the UK, and we are committed to the management team, employees, and distributors who have made Ageas Protect the strong company it is today.”
Ageas Protect will become part of AIG’s Global Consumer business, which in the UK offers personal accident, health, and travel insurance coverage to consumers, as well as customized insurance solutions for high net worth individuals through AIG Private Client Group.
American International Group, Inc. (AIG) is a leading international insurance organization serving customers in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.
Additional information about AIG can be found at www.aig.com | YouTube: www.youtube.com/aig |Twitter: @AIGInsurance | LinkedIn: http://www.linkedin.com/company/aig |
AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds.
HOUSTON– American International Group, Inc. (NYSE:AIG) today announced the launch of AG Asset ProtectorSM, a suite of riders for a life product that provides financial security to customers. AG Asset Protector consists of two innovative riders that allow policy holders to access their death benefit while they are still living: the Accelerated Access SolutionSM in the event of a chronic illness, and the Lifestyle Income SolutionSM that offers customers more financial control during uncertain economic times and affordable protection against outliving retirement income.
“AIG is transforming the way people think about life insurance,” said James A. Mallon, President, Life Insurance, AIG Global Consumer Insurance. “Think of our new AG Asset Protector as ‘life insurance you don’t have to die to use.’ This innovative protection solution complements our diverse portfolio of offerings, and makes it possible for consumers to use life insurance benefits while they are still living to meet life’s challenges.”
AG Asset Protector is AIG’s latest product in the company’s string of initiatives to better understand the changing landscape of retirement and mindset of retirees. A major component of this work includes AIG’s Retirement Reset Study, an in-depth survey of Americans ages 55 and older conducted in 2012. The study found that the rising costs of health care and inflation are among the top concerns of Americans on the brink of retirement, and also reported that 80% of respondents have subsequently taken a more cautious approach to their financial situation and investing.
The features and benefits offered by AG Asset Protector provide protection against the excessive costs of dealing with chronic illnesses and conditions as well as the fear of outliving retirement income, giving policy holders the option to receive living benefits from their life insurance policy.
“AG Asset Protector offers unmatched solutions for retirees, and builds on AIG’s reputation for providing customers with unparalleled financial security,” said John Deremo, Executive Vice President and Chief Distribution Officer, Life Insurance, AIG Financial Distributors. “Americans are living longer, but with increased longevity also comes concern about financial distress due to illness or a shortfall in retirement income. AG Asset Protector gives clients peace of mind and helps protect their dreams so they can focus on their goals to live longer and retire stronger.”
This Press Release is courtesy of www.aig.com
NEW YORK– American International Group, Inc. (NYSE:AIG) today announced the completion of its previously agreed acquisition of Ageas Protect Limited, a leading provider of term life, critical illness, and income protection coverage to over 350,000 consumers in the UK, Channel Islands and Isle of Man. AIG’s agreement to acquire Ageas Protect was announced in August 2014.
AIG has been present in the UK insurance market for over 50 years and is known for its expertise in underwriting, distribution and marketing, as well as for its network of strong commercial relationships.
Ageas Protect is recognised in the industry for product innovation, the effective use of technology and high quality service. AIG believes that the acquisition will enhance its Consumer Insurance business and strengthen its capability in the UK, where it already offers personal accident, health and travel insurance coverage to consumers, as well as customized insurance solutions for high net worth individuals through AIG Private Client Group.
“We are excited by this opportunity to strengthen AIG’s presence in the UK life protection market and look forward to working with the management, employees and distributors who have done such a great job in growing Ageas Protect into a leading market presence in such a short time,” said Kevin Hogan, AIG Chief Executive Officer of Consumer Insurance. “The acquisition of Ageas Protect helps drive the continued expansion of AIG’s Consumer portfolio of insurance solutions designed to meet consumer needs for financial and retirement security. By building on shared values such as product innovation and service excellence, we will ensure that AIG becomes the most valued insurer to even more consumers in the UK and everywhere we do business.”
American International Group, Inc. (AIG) is a leading international insurance organization serving customers in more than 130 countries. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.
Additional information about AIG can be found at www.aig.com | YouTube: www.youtube.com/aig | Twitter: @AIG_LatestNews | LinkedIn: http://www.linkedin.com/company/aig
AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds.
NEW YORK- American International Group, Inc.’s (AIG) Commercial Insurance division today announced the introduction of Celebrity Product RecallResponse®, a new insurance product designed to help customers respond to risks from a celebrity endorser’s public fall from grace, scandal, or unexpected death.
Provided through AIG’s Lexington Insurance Company, the largest domestic excess and surplus lines carrier in the U.S., Celebrity Product RecallResponse covers certain costs incurred by companies to recall product(s) bearing a celebrity endorser’s name and image. The insurance is triggered by significant news media coverage of an endorser’s actual or alleged criminal act or other distasteful conduct that results in (or is likely to result in) public contempt for the individual and a significant adverse impact on a company’s product.
Coverage includes costs associated with removing products and packaging from the marketplace, including their transportation, disposal, or destruction. The coverage also reimburses companies for the removal of marketing and advertising materials bearing the celebrity’s image.
“Celebrity Product RecallResponse was developed expressly to address exposures companies take on when they associate with well-known individuals to promote their brands,” said Jeremy Johnson, President and CEO of Lexington Insurance Company. “In this age of social media and instant news, reports of indiscretions by celebrities or high profile athletes can spread worldwide instantly, with swift, adverse implications for products or brands associated with the individual.”
Available with standalone policy limits up to $5 million, or by endorsement with limits up to $1 million, the coverage is designed to provide protection for companies of many sizes, including start-ups, small and mid-sized businesses that are engaging a celebrity endorser.
Customers also have access to AIG’s RiskTool Advantage® to help them assess exposure and prepare and execute a recall plan.
American International Group, Inc. (AIG) is a leading international insurance organization serving customers in more than 130 countries. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.
AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds.
NEW YORK- American International Group, Inc. (NYSE:AIG) has launched a new product for the fast-growing global crowdfunding investment industry. This is the first new insurance product developed specifically to protect investors on equity crowdfunding platforms against issuer fraud.
Crowdfunding platforms enable innovators to bring their ideas to life and also give retail investors the opportunity to provide capital for start-ups and growth stage companies around the world. Historically, only high net worth individuals and institutional investors such as venture capital funds and private equity firms were offered these opportunities.
“As a sector still in its infancy, equity crowdfunding platforms are only as strong as the confidence they instill in their investors,” said Lex Baugh, President of Liability and Financial Lines. “This new product will help provide that confidence and help to support this asset class as it matures.”
Crowdfunding Fidelity protects individual investors against the theft of issuer assets by issuer directors, officers, or general employees which cause a direct loss to the individual investor.
By subscribing to this innovative new product, crowdfunding platforms will enhance the value they can offer investors by offering protection against issuer fraud. Although there have been limited instances of fraud in this sector so far, this new product helps to build investor trust in this emerging sector by working closely with the platforms to ensure underlying issuer trustworthiness.
The coverage is currently available to platforms in the UK and Canada. As other countries finalize regulations for companies to raise capital, this policy can be customized to local needs of equity-based crowdfunding platforms.
Eureeca, an equity crowdfunding platform registered in the UK and based in Dubai, is the first platform to purchase the coverage and make this protection against issuer fraud available to investors. AIG engaged with Eureeca to gain a deeper understanding of the industry’s risk exposures, ensuring that the product was designed specifically to address these needs. Eureeca launched in 2013 and focuses on providing deals from the Middle East, Europe, and Southeast Asia.
“Crowdfunding Fidelity is a great example of how AIG learns together with the industries and clients it serves to better meet their strategic needs. We are looking forward to building similar relationships with other platforms across the world and to expanding our offering to this sector,” said Mr. Baugh.
Chris Thomas, Co-Chief Executive Officer and Founder of Eureeca said, “The new power of the crowd and the desire to democratize investing throughout the world can unleash great partnerships. The success of the ecosystem depends on collaboration between all stakeholders. AIG has demonstrated its commitment to being a valued insurer to this new industry by engaging the crowdfunding space at such an early stage.”
# # #
American International Group, Inc. (AIG) is a leading global insurance organization. Founded in 1919, today we provide a wide range of property casualty insurance, life insurance, retirement products, mortgage insurance and other financial services to customers in more than 100 countries and jurisdictions. Our diverse offerings include products and services that help businesses and individuals protect their assets, manage risks and provide for retirement security. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.
AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds.
NEW YORK— American International Group, Inc. (AIG) today announced that it has expanded excess casualty liability limits for Class 1 railroads in the U.S. and Canada to $1 billion per occurrence. This coverage for catastrophe losses would be in excess of $1.5 billion in underlying limits, and is one of the largest capacities offered to the rail industry by a single insurer.
AIG is responding to the demands of North America’s largest rail companies contending with record rail traffic and the growing number of rail cars carrying potentially hazardous materials, such as crude oil. The Association of American Railroads has reported U.S. rail demand is at a 7-year high. The Association also reported U.S. Class 1 railroads (including the U.S. Class 1 subsidiaries of Canadian railroads) transported more than 407,000 carloads of crude oil in 2013, up from 9,500 carloads in 2008, an increase of nearly 4,300%.
“These expanded limits are another way AIG’s scale and innovation is meeting the needs of our critical infrastructure clients and the customers they serve,” said Russ Johnston, President, Casualty Americas. “The Class 1 railroads are seeing strong growth and a resulting increase in risks they need to cover. AIG is one of the few carriers that can provide customers the large limits and risk expertise to meet this need.”
Derailments are the most common type of accident risk faced by Class 1 railroads in the U.S. and Canada, and they can be caused by a wide range of factors.
“Rail companies need additional coverage to help protect their balance sheets,” said Jeremy Johnson, President & Chief Executive Officer, Lexington Insurance Company. “This billion dollar coverage will help Class 1 railroads address expanding risks while continuing to serve the growing needs of transportation customers in North America.”
The excess coverage is provided by Lexington Insurance Company and other affiliated AIG Companies. Lexington is the largest domestic excess and surplus lines carrier in the U.S.
American International Group, Inc. (AIG) is a leading international insurance organization serving customers in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.
Additional information about AIG can be found at www.aig.com | YouTube: www.youtube.com/aig |Twitter: @AIGInsurance | LinkedIn: http://www.linkedin.com/company/aig |
AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds.
NEW YORK– American International Group, Inc. (AIG) today announced that it has expanded excess casualty liability limits for Class 1 railroads in the U.S. and Canada to $1 billion per occurrence. This coverage for catastrophe losses would be in excess of $1.5 billion in underlying limits, and is one of the largest capacities offered to the rail industry by a single insurer.
AIG is responding to the demands of North America’s largest rail companies contending with record rail traffic and the growing number of rail cars carrying potentially hazardous materials, such as crude oil. The Association of American Railroads has reported U.S. rail demand is at a 7-year high. The Association also reported U.S. Class 1 railroads (including the U.S. Class 1 subsidiaries of Canadian railroads) transported more than 407,000 carloads of crude oil in 2013, up from 9,500 carloads in 2008, an increase of nearly 4,300%.
“These expanded limits are another way AIG’s scale and innovation is meeting the needs of our critical infrastructure clients and the customers they serve,” said Russ Johnston, President, Casualty Americas. “The Class 1 railroads are seeing strong growth and a resulting increase in risks they need to cover. AIG is one of the few carriers that can provide customers the large limits and risk expertise to meet this need.”
Derailments are the most common type of accident risk faced by Class 1 railroads in the U.S. and Canada, and they can be caused by a wide range of factors.
“Rail companies need additional coverage to help protect their balance sheets,” said Jeremy Johnson, President & Chief Executive Officer, Lexington Insurance Company. “This billion dollar coverage will help Class 1 railroads address expanding risks while continuing to serve the growing needs of transportation customers in North America.”
The excess coverage is provided by Lexington Insurance Company and other affiliated AIG Companies. Lexington is the largest domestic excess and surplus lines carrier in the U.S.
American International Group, Inc. (AIG) is a leading international insurance organization serving customers in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.
Additional information about AIG can be found at www.aig.com | YouTube: www.youtube.com/aig |Twitter: @AIGInsurance | LinkedIn: http://www.linkedin.com/company/aig |
AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds.
NEW YORK– American International Group, Inc. (NYSE:AIG) announced today that it has completed the sale of its 100% interest in International Lease Finance Corporation (ILFC) to AerCap Holdings N.V. (NYSE: AER) in exchange for consideration of $3.0 billion of cash and 97,560,976 newly issued AerCap common shares. The total value of the consideration is approximately U.S. $7.6 billion based on AerCap’s closing price per share of $47.01 on May 13, 2014. The AerCap common shares received by AIG represent an approximately 46% stake in AerCap and are subject to transfer restrictions as set forth in the Stockholders’ Agreement and Registration Rights Agreement between AIG and AerCap. The transaction marks the last major disposition of AIG’s non-core assets.
“We are very pleased to have closed on the sale of ILFC,” said Robert H. Benmosche, President and Chief Executive Officer of AIG. “AerCap is a global leader in the aircraft leasing industry, and I believe that this transaction creates a solid partnership for the business and positions it for continued market leadership. However, the aircraft leasing business is not core to our insurance operations, and for this reason we agreed to sell ILFC. I am confident that this sale will have a positive impact on AIG’s liquidity and credit profile, and will enable us to continue to focus on maintaining strong growth and profitability in our insurance operating businesses.”
Concluded Mr. Benmosche, “While the ILFC name will no longer exist, its deep roots and legacy will continue to live on with AerCap. I would also like to especially thank all of the ILFC employees for their leadership and commitment, which have made this deal possible.”
Net cash proceeds to AIG were approximately $2.4 billion after the settlement of intercompany loans, and are available for general corporate purposes. Based on the appreciation of AerCap’s share price since the announcement, in the second quarter of 2014 AIG expects to record a non-operating pre-tax gain of approximately $2.2 billion, which is expected to result in an increase in book value per share of $0.97. AIG will account for its investment in AerCap under the equity method of accounting.
In connection with the transaction, David L. Herzog, AIG Chief Financial Officer, and Mr. Benmosche have joined AerCap’s Board of Directors.
Certain statements in this press release constitute forward-looking statements. These statements are not historical facts but instead represent only AIG’s belief regarding future events, many of which, by their nature, are inherently uncertain and outside AIG’s control. It is possible that actual results will differ, possibly materially, from the anticipated results indicated in these statements. Factors that could cause actual results to differ, possibly materially, from those in the forward-looking statements are discussed throughout AIG’s periodic filings with the SEC pursuant to the Securities Exchange Act of 1934.
American International Group, Inc. (AIG) is a leading international insurance organization serving customers in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.
Additional information about AIG can be found at www.aig.com
NEW YORK– American International Group, Inc. (NYSE:AIG) today announced that it has reached a global resolution of its residential mortgage related disputes with Bank of America. The resolution includes its claims pending in New York and California federal courts related to the creation, offering, and sale of RMBS from which AIG and its subsidiaries suffered losses either directly on their own account or in connection with their participation in AIG’s securities lending program. The resolution also covers AIG’s objections to the $8.5 billion settlement of Countrywide’s mortgage repurchase obligations to various investors, as well as disputes concerning the issuance of mortgage guaranty insurance by AIG’s United Guaranty subsidiaries to Bank of America and Countrywide. Under the terms of the settlement, AIG will receive $650 million in cash plus its pro rata share of whatever amount is ultimately paid out to investors in connection with the Countrywide repurchase settlement. In addition, the parties have agreed, subject to the approval of Fannie Mae, Freddie Mac and certain other mortgage holders, to resolve the outstanding mortgage guaranty claims disputes in accordance with agreed-to claims processes and payment formulae.
“We are very pleased to have this matter resolved,” said Robert H. Benmosche, AIG President and Chief Executive Officer. “Today’s settlement is a just resolution that’s in the best interest of our various stakeholders.”
American International Group, Inc. (AIG) is a leading international insurance organization serving customers in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.
Additional information about AIG can be found at www.aig.com
AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all jurisdictions, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds.
NEW YORK, Jan. 26, 2016 — Ambac Financial Group, Inc. (Nasdaq:AMBC) (“Ambac”), a holding company whose subsidiaries, including Ambac Assurance Corporation (“AAC”), provide financial guarantees and other financial services, today announced that AAC and the Segregated Account of AAC have settled their RMBS-related disputes and litigation against JP Morgan Chase & Co. and certain of its affiliates (collectively “JP Morgan”).
Pursuant to the settlement, JP Morgan will pay AAC $995 million in cash in return for releases of all of AAC’s claims against JP Morgan arising from certain RMBS transactions insured by AAC. AAC has also agreed to withdraw its objections to JP Morgan’s global RMBS settlement with RMBS trustees.
Commenting on today’s announcement, Nader Tavakoli, Ambac’s President and Chief Executive Officer, said, “We are delighted to bring our RMBS-related litigation against JP Morgan to a successful conclusion. Today’s announcement validates our resolve and reinforces our confidence in our remaining RMBS-related cases. This settlement will have a positive impact on our fourth quarter 2015 operating results, as well as our claims paying resources. I want to thank our very capable legal and RMBS teams for their hard work and dedication in achieving this settlement. Today’s announcement is but one example of our proactive efforts to address portfolio losses and enhance value for our stakeholders.”
The financial impact of the settlement and other related information will be described in Ambac’s fourth quarter 2015 earnings release and 2015 Form 10-K filed with the SEC.
About Ambac
Ambac Financial Group, Inc., (“Ambac”), headquartered in New York City, is a holding company whose subsidiaries, including its principal operating subsidiary, Ambac Assurance Corporation (“AAC”), Everspan Financial Guarantee Corp., and Ambac Assurance UK Limited, provide financial guarantees and other financial services to clients in both the public and private sectors globally. AAC, including the Segregated Account of AAC (in rehabilitation), is a guarantor of public finance and structured finance obligations. Ambac is also selectively exploring opportunities involving the acquisition and/or development of new businesses. Ambac‘s common stock trades on the NASDAQ Global Select Market under the symbol “AMBC”. The Amended and Restated Certificate of Incorporation of Ambac contains substantial restrictions on the ability to transfer Ambac’s common stock. Subject to limited exceptions, any attempted transfer of common stock shall be prohibited and void to the extent that, as a result of such transfer (or any series of transfers of which such transfer is a part), any person or group of persons shall become a holder of 5% or more of Ambac’s common stock. Ambac is committed to providing timely and accurate information to the investing public, consistent with our legal and regulatory obligations. To that end, we use our website to convey information about our businesses, including the anticipated release of quarterly financial results, quarterly financial, statistical and business-related information, and the posting of updates to the status of certain primary residential mortgage backed securities litigations. For more information, please go to www.ambac.com.
Universal Studios and American Express today announced an expanded multi-year agreement that brings the strength of Universal’s theme parks and filmed entertainment together with the premier brand of American Express to create exclusive consumer benefits and experiences. The agreement also enables American Express, for the first time, to acquire new Card Members directly through Universal theme parks and web sites.
While American Express and Universal have worked together since 2008, this expanded partnership presents new and innovative marketing opportunities for both companies. The partnership will now include marketing opportunities that leverage Universal Pictures’ retail partners, consumer licensing and digital media platforms on a global basis. American Express now has the first opportunity among payment services providers to participate in product placement and co-promotion on Universal Pictures’ films. Universal and American Express will also work together to offer Universal’s assets, including special holiday and seasonal theme park events, film premieres and VIP screenings of select Universal films, to eligible American Express Card Members and prospects worldwide. The partnership will continue to set the stage for ongoing offers and promotions for anyone holding an American Express Card, ranging from discounts at the theme parks to special once-in-a-lifetime entertainment experiences.
“With this partnership we are maximizing the assets of two iconic brands: American Express, one of the world’s premier payment companies, and Universal Studios, a leading media and destination-based entertainment company,” said Stephanie Sperber, President, Universal Partnerships & Licensing. “The continuation of this alliance provides Universal with an endless range of potential marketing opportunities, of which the consumer is the ultimate beneficiary.”
“The expanded partnership is about membership, providing special access along with exciting on-site and online offers for our Card Members. It also presents a unique opportunity in the marketplace for both our brands,” said Suzan Kereere, Senior Vice President, Merchant Services Americas, American Express. “This is a great example of how a strategic merchant relationship can deliver exceptional benefits and experiences for our joint customers.”
The agreement will offer a wide range of exclusive benefits for Card Members, including:
Select discounts on in-park merchandise, food and beverage purchases made with their American Express Card;
Access to exclusive American Express VIP lounges with the purchase of a Multi-Park ticket or Annual Pass at Universal Orlando Resort and with the purchase of a VIP Experience or Front-of-the-Line Pass at Universal Studios Hollywood; lounges provide guests with a relaxing environment to plan the rest of their day, as well as enjoy complimentary beverages and snacks;
Exclusive experiences including tickets to Universal Pictures’ film premieres, private VIP preview screenings of select Universal films and dedicated viewing areas for some park special events;
Rich incentives & offers for approved new applicants applying for an American Express Card at Universal theme parks and on their websites.
American Express Card Members can visit Universal’s theme park websites or guest services in the parks to learn more about current park offers. Or you can also learn more by visiting: https://www.universalorlando.com/Theme-Park-Tickets/Special-Offers/American-Express.aspx.
Universal Parks & Resorts
Universal Parks & Resorts (UPR), a unit of Comcast Corporation’s NBCUniversal, encompasses today’s most relevant and popular entertainment experiences, creating emotional connections with guests around the world. Each year, millions of guests visit UPR theme parks to experience thrilling, world-famous attractions that use ground-breaking technology that cannot be found anywhere else. Universal Studios is a globally respected and internationally renowned theme park brand. With three-time Academy Award® winner, Steven Spielberg as creative consultant, its theme parks are known for some of most thrilling and technologically advanced “ride-the-movies,” motion picture and television show-based attractions.
NBCUniversal wholly owns Universal Studios Hollywood, which includes Universal CityWalk Hollywood, featuring over 65 retail, dining and entertainment venues. It also owns Universal Orlando Resort, a world-class destination resort featuring two parks (Universal Studios Florida and Universal’s Islands of Adventure), three premier resort hotels, and Universal CityWalk Orlando, a 30-acre dining, shopping and entertainment complex. NBCUniversal also has license agreements with Universal Studios Japan in Osaka, Japan; Port Aventura near Barcelona, Spain; and Universal Studios Singapore at Resorts World Sentosa, Singapore. In addition, UPR has announced a prospective Universal Studios theme park resort near Seoul, South Korea.
Learn more about Universal Orlando Resort and Universal Studios Hollywood at https://www.universalorlando.comand http://www.universalstudioshollywood.com. Connect on Facebook at https://www.facebook.com/UniversalOrlandoResort or https://www.facebook.com/UniversalStudiosHollywood.
Universal Pictures
Universal Pictures is a division of Universal Studios (www.universalstudios.com). Universal Studios is part of NBCUniversal. NBCUniversal is one of the world’s leading media and entertainment companies in the development, production and marketing of entertainment, news and information to a global audience. NBCUniversal owns and operates a valuable portfolio of news and entertainment networks, a premier motion picture company, significant television production operations, a leading television stations group and world-renowned theme parks. NBCUniversal is a subsidiary of Comcast Corporation.
About American Express
American Express is a global services company, providing customers with access to products, insights and experiences that enrich lives and build business success.
This news is courtesy of www.americanexpress.com
Today American Express introduced the Amex EveryDay Credit Card, a new no annual fee credit card that puts a twist on the traditional rewards program. The Card will be available by April 2, 2014.
This new kind of credit card from American Express rewards Card Members for how often they use the Card, and not just how much they spend. Use the Card 20 or more times on purchases in a billing period and earn 20% extra Membership Rewards points on all those purchases less returns and credits. *Terms and limitations apply (1)
The Amex EveryDay Credit Card was designed with the multi-tasker in mind, like busy moms juggling family, work and their personal lives. The Card rewards Card Members at the places they already shop, and includes access to the retail protection, security and service expected from American Express. The Card will also come with smart chip technology and a 0% introductory rate on purchases and balance transfers for the first 15 months.(2)
To introduce the Amex EveryDay Credit Card, American Express collaborated with award-winning actress, author and writer Tina Fey, an expert multi-tasker balancing the demands of a young family and a demanding career – in a way that demonstrates the challenges, rewards and humor of everyday moments. In addition to one :60 and two :30 television commercials, Tina Fey will also appear in print advertising shot by photographer Annie Liebowitz.
“Our goal is to be a more inclusive and welcoming brand by building new products for different lifestyles and spending needs, backed by the service and quality that has made American Express so successful,” said Josh Silverman, president, Consumer Products & Services, American Express. “The average American uses their credit or debit card twice a day, and shops most within 20 minutes of their home,” added Silverman. “So we designed a card that doesn’t require you to change your daily ritual – but rewards you for where you already shop.”
Earn Rewards Quickly, Use Rewards Easily with the Amex EveryDay Credit Card:
Earn 2x Membership Rewards points at U.S. supermarkets, on up to $6,000 per year on purchases (then 1x); and 1x points on all other purchases.(3)
Use the Card to make 20 or more purchases in a billing period and earn 20% extra points on all those purchases less returns and credits. Terms and limitations apply.
A digital counter in the Amex Mobile app helps keep track of each qualifying purchase for the bonus, so Card Members always know when they’re close to earning 20% extra Membership Rewards points.
Redeem points for a variety of rewards, including using them towards recent charges with Use Points for Charges(4), redeeming for gift cards or merchandise, using them towards purchases at Amazon.com and Ticketmaster and booking travel at amextravel.com, or transferring them for miles in the frequent flyer programs of 17 different airlines.
About American Express
American Express is a global services company, providing customers with access to products, insights and experiences that enrich lives and build business success. Learn more at americanexpress.com and connect with us on facebook.com/americanexpress, foursquare.com/americanexpress, linkedin.com/company/american-express, twitter.com/americanexpress, and youtube.com/americanexpress.
Key links to products and services: charge and credit cards, business credit cards, travel services, gift cards, prepaid cards, merchant services, business travel, and corporate card.
This Press Release is courtesy of www.americanexpress.com
NEW YORK, American Express today announced the launch of its American Express Token Service, a suite of solutions designed to enable its card-issuing partners, processors, acquirers and merchants to create a safer online and mobile payments environment for consumers.
With American Express Token Service, traditional card account numbers are replaced with unique “tokens,” which can then be used to complete payment transactions online, in a mobile app or in-store with a mobile Near Field Communication (NFC)-enabled device. By using tokens, merchants and digital wallet operators will no longer need to store consumers’ sensitive payment account information in their systems. In addition, tokens can be assigned for use with a specific merchant, transaction type or payment device to provide further protection against fraud.
Based on EMVCo’s Payment Tokenization Specification and Technical Framework published earlier this year, American Express Token Service offers the following features:
a token vault to store and map tokens to card account numbers,
the ability to issue tokens,
lifecycle management services to create, suspend, resume or delete tokens and
additional fraud and risk management services, such as authorization and payment data validation capabilities, for card-issuing financial institutions.
American Express Token Service is available in the U.S., and international rollout is expected to begin in 2015.
“We believe our payments network is a tremendous asset to American Express – one that will allow us to offer our customers new features and technologies to meet their evolving spending needs,” said Paul Fabara, President, Global Banking and Global Network Business, American Express. “As we move ahead, we are excited to bring these new capabilities to our customers and look forward to continuing to serve them.”
American Express also announced that it has developed network specifications for Host Card Emulation (HCE). American Express’ HCE specifications provide its card-issuing partners with additional security options and solutions for payments made with mobile NFC-enabled devices that support Android OS KitKat. With HCE, card issuers use a secure cloud server to store their customers’ card account details, which can be transmitted from the cloud server to an NFC-enabled mobile device and then to a Point-of-Sale terminal in a fast, secure manner. American Express’ HCE specifications are available today globally.
Briefing for press at CARTES SECURE CONNEXIONS
American Express will be present at CARTES SECURE CONNEXIONS in Paris from 4th-6th November, when two executives will be participating in conference sessions.
JJ Kieley, Vice President, Head of Network Commercialization, Global Network Business, American Express, will present “The Future of Connected Commerce” and discuss recent industry developments in contactless and mobile payments. JJ will speak on Tuesday, 4th November at 9:40-10:10 am in Conference Room 1 during the conference track, “mPOS & iBeacons: Always more Innovation for Connected Commerce.”
Karen Czack, Vice President, Global Chip Products, Global Network Business, American Express, will join a panel on the “U.S. EMV Migration” and discuss the current progress and ongoing migration considerations. Karen will speak on Wednesday, 5th November at 11:00-12:30 pm in Conference Room 3 during the conference track, “EMV: Challenges & Benefits.”
About American Express
American Express is a global services company, providing customers with access to products, insights and experiences that enrich lives and build business success. The American Express Global Network Business brings together a diverse community of financial institutions, merchants, business partners and technology providers to build valued customer relationships and business success. Through its global payments network, American Express provides safe, reliable and convenient ways for consumers and businesses to make payments and process transactions online and at millions of merchant locations around the world. The American Express network is also delivering innovative products and capabilities in the online and mobile commerce space, enabling a wide range of payment capabilities and solutions, including chip-enabled and contactless products.
Americans will ring in the new year feeling optimistic about the economy, their personal financial situation and the future of the economy, according to the second installment of the Wells Fargo & Company (NYSE: WFC) “How America Buys and Borrows” survey.
More than three-quarters of Americans (78 percent) expect the economy to stay the same or improve and 81 percent believe their current personal situation is stable or improving. This optimism is reflected in similar levels across all generations, along with an overall desire to learn more about money management with fewer than half (43 percent) of respondents saying they know enough.
“Often when we talk about generations, we talk about how different they are,” said Gary Korotzer, executive vice president with Wells Fargo’s Consumer Credit Solutions group. “What we see in this survey is remarkably similar levels of optimism across the generations, led slightly by Millennials, and a united desire to continue learning how to be better money managers.”
When asked about their view on the current state of the economy, 79 percent of Millennials (ages 18 to 32) say it is stable to strong, which is in line with the 75 percent of Generation X (ages 33 to 48) and 70 percent of Boomers (ages 49 to 65) who say the same thing. In addition, when asked about their expectations for the future of the economy, 85 percent of Millennials expect it to stay the same or get better, which is similar to the 80 percent of Generation X and 74 percent of Boomers with the same perception.
When it comes to personal financial situations, 84 percent of Millennial respondents characterize theirs as stable to strong, similar to the 81 percent of Generation X and 78 percent of Boomers who say the same. Looking ahead, 94 percent of Millennials say they expect their personal financial situations to stay the same or get better with 92 percent of Generation X and 86 percent of Boomers feeling the same way.
Optimism also encompassed the topic of homeownership, with 71 percent of respondents saying they envision being homeowners five years from now.
“These levels of optimism are heartening, as is the desire to continue learning the skills needed to make these positive outcomes a reality,” added Korotzer. “More than three-quarters of respondents said they have an appetite to learn even more, which is encouraging because understanding how to manage money is the foundation of financial stability and success.”
The survey also revealed:
Millennials are most interested in increasing their financial know-how, with 38 percent reporting a desire to learn more – compared to 29 percent of Generation X and 30 percent of Boomers.
In particular, more than half of respondents (56 percent) say they would like to learn more about managing their money, 4 in 10 feel more knowledge would increase their confidence in decision-making and 4 in 10 aren’t fully confident they know enough to make good decisions about borrowing.
According to the survey, when respondents graded their understanding and management of money:
33 percent grade their understanding of personal finances a C, D or F
39 percent grade their understanding of how credit scores work a C, D or F
43 percent grade their understanding of credit and loan products a C, D or F
43 percent grade their understanding of what banks consider when approving a credit product or loan a C, D or F
75 percent of respondents say having a good credit score is important, yet only 54 percent say they are proud of their credit score and 37 percent are concerned about their credit score.
56 percent believe a person’s credit rating is a reflection of how responsible they are with money and 45 percent regularly monitor their credit report.
Half of respondents agree that having some debt is normal. However, one-third say they live debt-free, half say they do not carry a credit card balance and half save for major purchases instead of relying on credit.
Consumers are improving their financial situations. For example:
38 percent report having less debt now than they did two years ago – a slight increase over the 36 percent of respondents saying the same in last year’s survey.
38 percent say that if they lost their jobs, they would be able to get by for at least a few months. In last year’s survey, only 32 percent of respondents indicated this level of preparedness.
31 percent of respondents are saving more today than they were five years ago. In 2013, only 28 percent of respondents responded similarly.
27 percent feel prepared for unexpected expenses and emergencies. In 2013, only 21 percent of respondents felt prepared.
Most respondents (81 percent) reported the need to plan for significant expenses in the next couple of years. The most common expenses mentioned were travel (35 percent), taxes (35 percent) and home improvement (30 percent).
Most prefer to fund their significant expenses with cash savings, instead of credit. Exceptions: specific-purpose loans such as a mortgage, auto, or student and personal loans for the purpose of debt consolidation.
Most feel that there are different kinds of debt, with 52 percent of respondents saying owing money on a mortgage is not the same as owing money on other types of purchases.
Millennials are more likely than older consumers to consider a student loan an investment.
On average, respondents believe their current homes to be worth $311,000 and owe $151,000 on their homes.
Free Tools
Understanding how to responsibly manage finances and credit are important steps to building (or improving) and maintaining a sound financial future. To help its customers succeed financially through life’s various stages, Wells Fargo offers the following complimentary tools:
My Financial Guide, which features articles and videos about money management.
Hands on Banking®, an interactive financial education program for all age groups (available in Spanish at www.elfuturoentusmanos.com).
Wells Fargo’s new Path to Credit video series, designed to illustrate why credit, and understanding it, is important to everyday life.
My FirstHome online, which helps first-time and ready-again buyers prepare for homeownership.
Get College ReadySM, an interactive platform for parents and college-bound students offering free resources and tools to help guide students’ transition into college.
About the How America Buys and Borrows survey
On behalf of Wells Fargo, Ipsos surveyed more than 3,000 American adults ages 18 to 65 in June 2014 online to understand attitudes and perceptions of current economy and personal financial situations. Weighting on age, gender, education, diverse segments and income was applied to the results to achieve a nationally representative population. The “How America Buys and Borrows” survey was first conducted in 2013 and will be conducted annually.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.6 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 8,700 locations, 12,500 ATMs, and the internet (wellsfargo.com), and has offices in 36 countries to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 29 on Fortune’s 2014 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially. Wells Fargo perspectives are also available at Wells Fargo Blogs and Wells Fargo Stories.
Today, 20 December 2019, the Chancellor has announced that Andrew Bailey will become the new Governor of the Bank of England from 16 March 2020. Her Majesty the Queen has approved the appointment.
In order to provide for a smooth transition, the current Governor, Mark Carney, has agreed to now complete his term on 15 March 2020.
Making the announcement the Chancellor said: “When we launched this process, we said we were looking for a leader of international standing with expertise across monetary, economic and regulatory matters. In Andrew Bailey that is who we have appointed.
Andrew was the stand-out candidate in a competitive field. He is the right person to lead the Bank as we forge a new future outside the EU and level-up opportunity across the country.
I also want to take this opportunity to thank Mark Carney for his service as Governor. The intellect, rigour and leadership he brought to the role during a critical time was a significant contribution to the UK economy moving to recovery and growth.”
Accepting the role, Andrew Bailey said: “It is a tremendous honour to be chosen as Governor of the Bank of England and to have the opportunity to serve the people of the United Kingdom, particularly at such a critical time for the nation as we leave the European Union.
The Bank has a very important job and, as Governor, I will continue the work that Mark Carney has done to ensure that it has the public interest at the heart of everything it does. It is important to me that the Bank continues to work for the public by maintaining monetary and financial stability and ensuring that financial institutions are safe and sound.
I am committed to the Bank being an accessible and approachable institution, as well as an open and diverse place to work.
I would like to pay tribute to my colleagues at the Financial Conduct Authority for their support during my time as Chief Executive and the excellent work they do.”
Mark Carney said: “I am delighted to welcome Andrew Bailey back to the Bank as its next Governor.
An extraordinary public servant, Andrew brings unparalleled experience, built over three decades of dedicated service across all policy areas of the Bank, and most recently as CEO of the FCA.
Andrew is widely and deeply respected for his leadership managing the financial crisis, developing the new regulatory frameworks, and supporting financial innovation to better serve UK households and businesses.
Over the years, I benefited greatly from his support and wise counsel. I wish Andrew and the Bank continued success in their work to serve the people of the United Kingdom by maintaining monetary and financial stability.”
MCLEAN, VA- – Freddie Mac (OTCQB: FMCC) Multifamily further reduced taxpayer risk in 2014 by selling the overwhelming majority of credit risk on the mortgages it purchased to private capital investors through its Multifamily K-Deal securitization program. There were 21 Multifamily securities offerings in 2014 for a total transactions volume of $22.4 billion which, in addition to K-Deals, included a small volume of other securities, including the company’s Q- and M-Deals.
2014 Highlights:
Continued to support affordable rental housing through securitization. Approximately 90 percent of the apartment units Freddie Mac finances are affordable to households earning up to the area median income, and most of those loans are securitized.
Issued $21.3 billion in K-Deals in 2014 and securitized almost $93 billion in multifamily loans since the program started in 2009, backing approximately $79 billion in guaranteed certificates and $13.5 billion in unguaranteed certificates.
Introduced and issued $189 million in Q Certificates that are backed by $215 million in multifamily loans not underwritten by Freddie Mac at the time of origination but that meet the company’s current underwriting standards. Q Certificates were introduced this fall.
Issued $683 million in M Certificates backed by $747 million in multifamily loans. M Certificates are fully guaranteed tax-exempt and taxable securities supported by pools of unenhanced tax-exempt and taxable multifamily housing collateral.
Grew the private investor base to more than 140 domestic and international investors. Typical investors are life insurance companies, banks, pension funds, money managers and hedge funds, some of whom assume first loss positions, reducing taxpayer risk.
Inclusion of K-Deals in the Barclays U.S. Aggregate and Global Aggregate bond indices in June.
Quotes from Mitchell Resnick, vice president of Freddie Mac Multifamily Capital Markets:
“The K-Deal program has become the benchmark for Agency CMBS. 2014 was our second largest year for securities issuance and we now have just short of $100 billion in K Certificates outstanding. This year we also issued Q and M Certificates, adding variety to the investment opportunities for our customers. Part of the reason for our success is the exceptional credit performance of our collateral. At the end of the year, total K-Deal delinquencies amounted to 1 basis point.”
“The multifamily market is healthy and we expect to issue approximately $25 billion in multifamily securities across 17 to 20 K-Deals next year. Also, in 2015 we expect to introduce a few new types of collateral to our securitizations, including 10-year floaters and small balance loans.”
This announcement is not an offer to sell any Freddie Mac securities. Offers for any given security are made only through applicable offering circulars and related supplements, which incorporate Freddie Mac’s Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission (SEC) on February 27, 2014; all other reports Freddie Mac filed with the SEC pursuant to Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) since December 31, 2013, excluding any information “furnished” to the SEC on Form 8-K; and all documents that Freddie Mac files with the SEC pursuant to Sections 13(a), 13(c) or 14 of the Exchange Act, excluding any information furnished to the SEC on Form 8-K.
Almost five years after it began, the unfair bank fees case against ANZ looks destined to reach a final conclusion in the High Court of Australia, after appeals against the Federal Court’s previous rulings were upheld today.
Chief Justice of the Federal Court James Allsop today delivered the judgment of the Full Court of the Federal Court, in response to appeals over last year’s judgment from both sides.
Last year’s ruling handed down by Justice Michelle Gordon, found that late payment fees charged by the ANZ Bank were penalties, and thousands of customers should receive compensation for amounts that had been unfairly charged.
ANZ challenged that ruling, and Maurice Blackburn on behalf of the plaintiffs, challenged the ruling that other exception fees were not considered penalties.
Today the Full Court found in favour of ANZ by overturning Justice Gordon’s original decision that late fees were penalties and rejecting the plaintiffs’ argument that other exception fees ought to have been found to be penalties.
National head of class actions at Maurice Blackburn, Andrew Watson, said the plaintiff’s legal advisors would be reviewing the judgment with a view to making application for special leave to appeal to the High Court of Australia.
“There is a public interest in having these issues resolved by Australia’s highest court,” Mr Watson said.
The class actions are being funded by IMF Bentham on a no-win no-fee basis.
History of the bank fees class actions 22 September 2010: First bank fees class action filed against ANZ 5 December 2011: Justice Gordon in the Federal Court finds that late payment fees are capable of being penalties, but finds for ANZ on other fees 16 December 2011: Class actions filed against Commonwealth, Westpac, NAB and Citibank 22 December 2011: Maurice Blackburn appeals adverse findings in Justice Gordon's December judgment 1 February 2012: Class action filed against Westpac subsidiaries St George and BankSA 18 April 2012: Class action filed against BankWest 14 August 2012: High Court hears appeal from Justice Gordon's judgment of 5 December 2011 6 September 2012: High Court rules that bank fees can be considered penalties 2-10 December 2013: Bank fees class action trial against ANZ runs in the Federal Court before Justice Michelle Gordon 5 February 2014: Justice Gordon hands down judgment finding that late payment fees on credit cards are penalties and should be repaid, with no retrospective time limitation on claims. Justice Gordon finds for the ANZ on the other fees 18 - 19 August 2014: Hearing of appeal before Full Court of the Federal Court Wednesday 8 April 2015: Appeal judgment delivered by the Full Court of the Federal Court. Finds in favour of ANZ on its appeals and against the plaintiff on its appeals. - See more at: http://www.mauriceblackburn.com.au/about/media-centre/media-statements/2015/bank-fees-fight-for-consumers-likely-to-go-to-the-high-court/#sthash.lzeAV4eN.dpuf
CUPERTINO, California ―Apple® today announced Apple Pay™, a new category of service that will transform mobile payments with an easy, secure and private way to pay. Apple Pay works with iPhone® 6 and iPhone 6 Plus through a groundbreaking NFC antenna design, a dedicated chip called the Secure Element, and the security and convenience of Touch ID™. Apple Pay is easy to set up, so hundreds of millions of users can simply add their credit or debit card on file from their iTunes Store® account. Apple Pay will also work with the newly announced Apple Watch™, extending Apple Pay to over 200 million owners of iPhone 5, iPhone 5c and iPhone 5s worldwide.
Apple Pay supports credit and debit cards from the three major payment networks, American Express, MasterCard and Visa, issued by the most popular banks including Bank of America, Capital One Bank, Chase, Citi and Wells Fargo, representing 83 percent of credit card purchase volume in the US.* In addition to the 258 Apple retail stores in the US, some of the nation’s leading retailers that will support Apple Pay include Bloomingdale’s, Disney Store and Walt Disney World Resort, Duane Reade, Macy’s, McDonald’s, Sephora, Staples, Subway, Walgreens and Whole Foods Market. Apple Watch will also work at the over 220,000 merchant locations across the US that have contactless payment enabled. Apple Pay is also able to make purchases through apps in the App Store℠.
“Security and privacy is at the core of Apple Pay. When you’re using Apple Pay in a store, restaurant or other merchant, cashiers will no longer see your name, credit card number or security code, helping to reduce the potential for fraud,” said Eddy Cue, Apple’s senior vice president of Internet Software and Services. “Apple doesn’t collect your purchase history, so we don’t know what you bought, where you bought it or how much you paid for it. And if your iPhone is lost or stolen, you can use Find My iPhone to quickly suspend payments from that device.”
Apple Pay will change the way you pay. When you add a credit or debit card with Apple Pay, the actual card numbers are not stored on the device nor on Apple servers. Instead, a unique Device Account Number is assigned, encrypted and securely stored in the Secure Element on your iPhone or Apple Watch. Each transaction is authorized with a one-time unique number using your Device Account Number and instead of using the security code from the back of your card, Apple Pay creates a dynamic security code to securely validate each transaction.
“JPMorgan Chase has been pleased to collaborate on Apple Pay to create a better, faster and safer payments system, which puts the customer first, creating an exceptional customer experience for consumers and merchants. Everyone wins,” said Jamie Dimon, chairman and CEO, JPMorgan Chase & Co.
“We’re providing our customers with tools to make their financial lives better, including our 30 million digital banking customers,” said Brian Moynihan, CEO of Bank of America. “For them, better means simple and convenient. Apple Pay is another exciting move in that direction.”
“Apple Pay is the kind of innovative thinking that brings the worlds of online and offline commerce closer together,” said Ken Chenault, CEO of American Express. “We’re excited to work with Apple to offer Card Members and merchants a simple and secure way to make purchases in stores and on apps.”
Online shopping in apps with iPhone is also as simple as the touch of a finger. Users can pay for physical goods and services including apparel, electronics, health and beauty products, tickets and more with Touch ID. Checkout can happen with a single touch, so there’s no need to manually fill out lengthy account forms or repeatedly type in shipping and billing information, and card details are kept private and are not shared with the online merchant. For example, quickly order grill accessories for a backyard BBQ from the Target app, easily request a ride with Uber without having to create an account first or avoid the lunch line by using Rapid Pick-Up and paying ahead in the Panera Bread app. Simply make your selection and when ready to buy, use Apple Pay to complete the transaction.
Starting in October, with iPhone 6 and iPhone 6 Plus, Apple Pay will be available in the US as a free update to iOS 8. Apple Pay will work in stores with iPhone 6, iPhone 6 Plus and Apple Watch. Apple Pay APIs will be available to developers in iOS 8 so they can enable purchasing physical goods within their apps on iPhone 6 and iPhone 6 Plus.
*American Express, Bank of America, Capital One Bank, Chase, Citi and Wells Fargo at availability with additional banks coming quickly thereafter including Barclaycard, Navy Federal Credit Union, PNC Bank, USAA and U.S. Bank.
Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.
The economic outlook for Asia and the Pacific remains favorable, with the region projected to remain the global growth leader over the medium term. While the pace of expansion has moderated since the global financial crisis, robust consumption helped to cushion the blow from weaker external demand. As a region of oil importers and supply chain participants, Asia is set to benefit from the recent decline in world oil prices and the ongoing recovery in advanced economies. However, real and financial volatilities could disrupt this favorable outlook, and further delays in structural reforms could hold back growth. Therefore, policies should remain focused on building resilience and enhancing productive capacity.
Growth in the Asia and Pacific region is expected to hold steady at 5.6 percent in 2015 and to ease slightly to 5.5 percent in 2016. Domestic demand is forecast to continue to drive growth, supported by the windfall boost to real incomes from lower world oil prices and strong labor market conditions. These factors are expected to offset the effect of tighter financial conditions from capital fl ow reversals triggered in part by the prospect of monetary tightening by the Federal Reserve. Net exports are also expected to add only marginally to growth. Across the region, lower oil prices will temporarily push down headline infl ation and, with a large part of the windfall expected to be saved, current account balances will increase.
Nonetheless, considerable heterogeneity is apparent across the region. China is slowing to a more sustainable pace; Japan is expected to see growth pick up following a year of stagnation; exporters of non-oil commodities whose prices have fallen sharply (Australia, Indonesia, Malaysia, and New Zealand) will be adversely affected by the terms-of-trade swing; elsewhere, however, growth is expected to stabilize or increase. In addition, effective exchange rates across the region have diverged, reflecting several factors: (1) in the context of asynchronous monetary policies in major advanced economies, including Japan, some currencies have remained more closely tied to the U.S. dollar, while others
have allowed more flexibility; (2) the differential impact of large changes in the terms of trade on net commodity importers and exporters; and (3) capital is fl owing into some countries but reversing from others. This regional diversity could lead to increased volatility.
While the Asia and Pacifi c outlook remains solid, the balance of risks is tilted to the downside. First, signifi cantly slower-than-expected growth in China or Japan would impact the rest of the region and the world given these economies’ large size and deep trade and fi nancial linkages. Countries with strong supply chain linkages as well as commodity exporters to these large economies would be especially affected. Second, persistent U.S. dollar strength against the euro and the yen would likely exert an autonomous tightening of domestic financial conditions in the region and impose higher debt service costs for fi rms with sizable U.S.-dollar-denominated debt. In addition, a stronger dollar relative to other major currencies could erode export market shares for economies whose currency displays limited flexibility against the U.S. dollar. Third, the rapid buildup of debt across the region could heighten the sensitivity of growth to global financial and inflation conditions. Tighter financial conditions in the United States would raise domestic borrowing costs, while lower global inflation—if imported into Asia—would increase the level of real debt. The resulting increase in the carrying cost of debt could impinge on domestic spending, while higher debt could weaken the credit channel of monetary policy On the other hand, lower world oil prices present an important upside risk for Asia’s growth.
Notwithstanding the projected increase in the world price beginning later this year, over the longer term oil prices are expected to remain signifi cantly below the average of recent years. Additional support to growth could materialize if the supply contribution to the price decline is larger or more persistent than currently envisaged, or if the propensity to spend from the oil price windfall is larger than currently anticipated.
While debt has risen across much of Asia and the Pacific, reaching high levels in some economies, fi nancial sector risks have been contained by sustained income growth and supportive financial conditions. However, risks are evident in the real estate sector, and although bank credit-to-GDP ratios have been increasing more slowly in most economies, previous rapid credit growth has generated sizable positive credit gaps in several economies. Notwithstanding these developments, banks’ balance sheets have generally strengthened across Asia and the Pacific.
Going forward, Asia’s pace of potential growth is likely to remain below precrisis levels. Mirroring developments in realized growth, potential growth has slowed across much of the region. The decline reflects primarily decelerating total factor productivity, although slower growth in labor’s contribution due to aging was a major factor in several economies. Slower total factor productivity growth may reflect diminishing returns from participating in global value chains (see Chapter 2), which could limit productivity gains in the absence of structural reforms. Over the medium term, the region would also benefit from deeper regional financial integration, which has lagged trade integration. Furthering financial integration holds the promise of more efficient allocation of regional savings to meet the region’s large investment needs while also supporting financial inclusion.
What is the role for policy in this environment? Most countries in Asia and the Pacific are in the enviable position of having adequate interest rate and fiscal policy space to supply additional temporary stimulus if needed. However, based on growth and inflation forecasts, current policy interest rates are appropriate across the region, although concerns about fiscal sustainability and financial stability, as well as the risk of renewed global financial volatility, may warrant somewhat tighter stances in several countries. Moreover, policymakers will also need to contend with several countervailing forces, including the temporary fall and subsequent increase in the price of oil, potential capital fl ow volatility, and rising asset prices. Macroprudential policies and foreign currency intervention can assist to contain financial stability risks and address sporadic disorderly conditions in the foreign exchange market, but permitting exchange rate flexibility to absorb shocks. On the fiscal front, the decline in oil and food prices provides a window of opportunity to further reform or phase out subsidies, thereby improving spending efficiency and shielding public spending from future commodity price fluctuations. Further fiscal consolidation is appropriate in countries where public debt remains elevated. Structural reforms remain critical to boost productivity growth across the region, including state-owned enterprise and financial sector reforms in China, initiatives to raise services productivity and labor force participation in Japan, and measures to address supply bottlenecks in India, the Association of Southeast Asian Nations, frontier economies, and small states.
It is a pleasure to address today’s ABA National Institute on Bitcoin and Other Digital Currencies. As head of the Justice Department’s Criminal Division, I am privileged to lead over 600 attorneys who investigate and prosecute federal crime, help develop criminal law and formulate law enforcement policy. Our talented prosecutors perform crucial work in many of the areas relevant to today’s discussion, including the fight to combat money laundering, financial fraud, child exploitation and cybercrime.
This afternoon, I’d like to discuss the department’s approach to the emerging virtual currency landscape, our ongoing efforts to prosecute those who commit crimes by using virtual currency, and our view that compliance and cooperation from exchanges, companies and other market actors can ensure that emerging technologies are not misused to fund and facilitate illicit activities.
The department is aware of the many legitimate actual and potential uses of virtual currency. It has the potential to promote a more efficient online marketplace. It also potentially can lower costs for brick and mortar businesses, by removing the need to pay credit card-related costs. And in theory, it can help speed and reduce the cost of cross-border transactions. But we also have seen that criminals have been among the first to enthusiastically embrace the use of virtual currency, primarily in crime involving the internet.
Many of the inherent features of virtual currencies are exactly what makes them attractive to criminals. Many criminals like virtual currency systems because these systems conduct transfers quickly, securely and with a perceived level of anonymity. For others, the irreversibility of payments made in virtual currency and lack of oversight by a central financial authority is appealing. Finally, the ability to conduct international peer-to-peer transactions that lack immediately available personally identifying information has made decentralized virtual currency attractive to those who wish to cover their money trail.
As a result, virtual currency facilitates a wide range of traditional criminal activities as well as sophisticated cybercrime schemes.
Much of the illicit conduct involving virtual currency occurs through online black markets such as the now-shuttered Silk Road, which operated on an anonymized “dark web” network that masked users’ physical locations, making them difficult to track. Similar online black markets continue to operate, offering on a global scale, a wide selection of illicit goods and services. While these have included more traditional crimes such as narcotics trafficking, stolen credit card information, and hit-men for hire, we have also seen a significant evolution in criminal activity.
For example, Bitcoin has been utilized to fund the production of child exploitation material through online crowd-sourcing – a development rarely seen before the prevalence of virtual currency. It has also been used to buy and sell lethal toxins over the internet and as a payment method for virtual kidnapping and extortion, allowing near-instantaneous transactions across the globe between perpetrators of phishing and hacking schemes and their victims.
Despite the significant challenges in investigating, much less prosecuting, this activity, the department already has a strong record of bringing cases in which virtual currencies were used to facilitate criminal conduct. While the burgeoning assortment of online exchanges, virtual currencies and virtual marketplaces has created a complex and evolving environment or “ecosystem” as this audience knows it, we too are keeping pace and will pursue those who exploit vulnerabilities in that ecosystem for illegal gain.
In this arena, we rely principally on money services business, money transmission and anti-money laundering statutes. While individual users who are not acting as exchangers or transmitters are not required to register with FinCEN, many virtual currency systems, exchangers and related services are. Additionally, most states also require money transmitters to obtain a state license in order to conduct business in that state, and some like New York have established virtual-currency specific licensing requirements. Any failure to register or obtain a license may subject a money transmitter to criminal prosecution, and a money transmitter that knowingly moves funds connected to a criminal offense also faces prosecution for money laundering, regardless of licensing status. Whether the currency involved is virtual or traditional, the department enforces these critical laws to prosecute money services businesses that engage in money laundering or facilitate crime by flouting registration and licensing requirements.
The department’s enforcement actions have evolved along with the virtual currency ecosystem. Our first major action against a virtual currency service used for illicit purposes was in 2007, when the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS), together with our Computer Crime and Intellectual Property Section (CCIPS), spearheaded the prosecution against e-Gold and its owners on charges related to money laundering and operating an unlicensed money transmitting business. E-Gold was a popular online currency exchange, and was a favored hub for cybercriminals in part because of the lack of account holder identity verification. An e-mail address was the only information needed to set up an account, allowing global anonymous transactions. After a multi-agency investigation, e-Gold and three associated individuals pleaded guilty in 2008 to charges of money laundering and operating an unlicensed money transmitting business.
In the wake of e-Gold’s demise, the virtual currency system Liberty Reserve was created. As alleged in our pending indictment, Liberty Reserve was structured and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes.
Liberty Reserve quickly became one of the principal money transfer agents used by cybercriminals around the world to distribute, store and launder the proceeds of their illegal activity. Like e-Gold, any would-be account holder needed little more than a working email address to move funds around the globe. Again, this virtual currency platform became a favorite of cybercriminals and other tech-savvy wrongdoers, enabling them to engage in anonymous financial transactions, all conducted in violation of BSA requirements.
Before the government shut down Liberty Reserve in 2013, it had accumulated more than one million users worldwide, including more than 200,000 in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds. These funds included suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, child pornography, narcotics trafficking and other crimes.
In a case jointly spearheaded by AFMLS and prosecutors from the Southern District of New York, several of Liberty Reserve’s top executives, including a co-founder of the company, the IT Manager and its Chief Technology Officer, have pleaded guilty to money laundering and operating an unlicensed money transmitting business and have been sentenced up to five years in prison. The creator of Liberty Reserve was extradited to the United States from Spain in October 2014 and is currently awaiting trial, where he is, of course, presumed innocent.
The department has also taken action against a number of individuals and groups who sought to exploit decentralized systems such as Bitcoin and anonymized dark web servers to finance illicit trade and activity in online black markets.
The first major prosecution of a dark market website was by the Southern District of New York in a case against Ross Ulbricht, aka “Dread Pirate Roberts,” who was arrested in October 2013 and convicted by a jury for his role in creating and operating Silk Road, an online black market whose payment operations exclusively used Bitcoin.
Silk Road – designed to act as a black-market bazaar completely free from government regulation and oversight – attempted to enable its users to exchange illegal drugs and other unlawful goods and services anonymously and beyond the reach of law enforcement. It emerged as one of the most extensive criminal marketplaces on the internet. Before it was dismantled by law enforcement, Silk Road was used by thousands of drug dealers and other vendors to distribute hundreds of kilograms of illegal drugs and other unlawful goods and services to well over a 100,000 buyers, and has been linked to at least six overdose deaths around the world. Further, Silk Road was also used to launder hundreds of millions of dollars derived from these unlawful transactions. And just a few weeks ago, in a federal courtroom in New York City, Ulbricht was sentenced to a term of life in prison – a cautionary tale for all those who would use dark spaces on the internet to flout the law.
The Silk Road story, however, did not end with Ross Ulbricht. Two federal agents, sworn to uphold the law, were also apparently lured by the perceived anonymity of virtual currency.
Carl Force, a Special Agent with the Drug Enforcement Administration, and Shaun Bridges, a Special Agent with the U.S. Secret Service, were both assigned to the Baltimore Silk Road Task Force, which investigated illegal activity in the Silk Road marketplace.
Force served as an undercover agent. According to court documents, Force went rogue and developed additional online personas to engage in complex bitcoin transactions to steal hundreds of thousands of dollars from the government and from the targets of the investigation. Independently, Bridges also allegedly engaged in an even larger direct theft, illegally diverting over $800,000 in virtual currency to his personal account.
Both individuals have been charged by the Criminal Division’s Public Integrity Section and prosecutors from the Northern District of California with wire fraud, theft of government property and money laundering. These investigations and prosecutions should send a strong message to those who would exploit technology to commit crimes: no matter how anonymous people might feel using virtual currency, their actions are not untraceable. People should not assume that law enforcement will not notice when they act on the dark web, or that we are not keeping up with emerging technology. Our successful prosecutions have shown that neither the supposed anonymity of the dark web nor the use of virtual currency is an effective shield from arrest and prosecution.
In addition to the operators of Silk Road and the drug traffickers who conducted their deals online in bitcoin, prosecutors from the Southern District of New York have also taken action against those who enabled this activity through the operation of Bitcoin currency exchanges. We understand that there are legitimate exchanges, and many of those are working closely with FinCEN and other regulators to ensure compliance with the law. But there are also many exchanges that don’t concern themselves with following the law.
From approximately December 2011 to October 2013, Robert Faiella ran an underground Bitcoin exchange on the Silk Road website under the alias “BTCKing,” and sold bitcoin to users to fund their purchases on the site.
Faiella would run bitcoin orders through Charlie Shrem, who operated a New York-based company that acted as a bitcoin to fiat currency exchange. Although Shrem was the company’s Anti-Money Laundering Officer and had registered the company with FinCEN as a money services business, Shrem failed to report any of BTCKing’s activity, despite knowing it was being used for illegal purchases. Shrem’s assistance enabled BTCKing to finance Silk Road transactions without collecting any personal identifying information from customers. Faiella pleaded guilty to operating an unlicensed money transmitting business involving funds he knew were intended to support unlawful activity, and Shrem pleaded guilty to aiding and abetting Faiella’s operations. Just this past winter, they were sentenced to four and two years in prison, respectively.
While these cases demonstrate that the criminal use of virtual currency has grown rapidly in recent years, its comparative scale versus traditional money laundering still pales in magnitude. Few virtual systems currently can accommodate the hundreds of millions of dollars we have seen in certain large-scale money laundering schemes involving government-issued currency. That said, as virtual currencies become more mature and better understood by criminals, we expect to see an increase in both individualized criminal activity and large-scale money laundering enterprises.
In some ways, companies and individuals operating in the virtual currency ecosystem are at a crossroads, and they have an opportunity to help virtual currency emerge from its association with criminal activities. While there obviously are good and legitimate reasons to use these currencies, industry participants are now on notice that criminals too, make regular use of them. So, to ensure the integrity of this ecosystem and prevent its penetration by crime, the industry must raise the level of its game on the compliance front.
That includes strict compliance with money services business regulations and anti-money laundering statutes. I understand that you have heard from our partners at FinCEN this morning about our collaborative efforts to investigate and enforce anti-money laundering laws, and you’ll also hear more from Katie Haun this afternoon about the investigation of the virtual currency business Ripple Labs, which operated an unlicensed money transmitting business.
Ripple sold a virtual currency called “XRP,” but failed for a time to register with FinCEN as a money service business and failed to establish and maintain appropriate anti-money laundering protections. Importantly, the department resolved this investigation after Ripple agreed to a number of substantial remedial measures. This includes cooperation in other ongoing investigations, a change in business model and oversight by independent auditors, an extensive look-back through their previous activities and development of an extensive compliance framework.
The resolution with Ripple Labs underscores the importance of having a strong compliance program to ensure adherence to the law. Virtual currency exchangers and other marketplace actors comprise the front line of defense against money laundering and other financial crime. Robust compliance programs, such as those imposed on Ripple Labs, are essential to keeping crime out of our financial system. If a money services business finds itself subject to a criminal investigation, we will look, as we do in all cases involving potential prosecution of a business entity, at the factors set forth in the Principles of Prosecution of Business Organizations, or Filip Factors. Two of the Filip Factors in particular, the existence of an effective and well-designed compliance program and a company’s remedial actions, including steps to improve upon an existing compliance regime, are explicitly set forth as factors prosecutors should consider.
As you know, there is no “one-size-fits-all” compliance program. Rather, effective anti-money laundering and other compliance programs must be tailored to meet the circumstances, size, structure and risks encountered by each entity. And virtual currencies, with their perceived anonymity, pose compliance risks that money transmitters such as Western Union do not face. Industry participants must address those risks, even when it may be costly to do so.
Just as in any other corporate investigation, when reviewing the conduct of, for example, an exchange, the department will examine whether a company has meaningfully addressed compliance. We have resolved cases against many financial institutions and other entities, and are deeply familiar with hallmarks of a genuine compliance program.
We expect virtual currency businesses to take compliance risk as seriously as they take any other business risk. Now, we recognize that new entrants in emerging fields may find that compliance requires a significant expenditure of resources, and we will be context-specific in analyzing appropriate compliance frameworks including consideration of the size and scope of the business. But a real commitment to compliance is a must, particularly given the significant risks in the virtual currency market. In the long run, investment in effective compliance programs will be well worth it, especially in the event that a company has to interact with law enforcement.
In many ways, I think that is a message that everybody gathered here today can appreciate. As the virtual currency markets attempt to move past their association with the Silk Roads and Liberty Reserves of the online world, are used to finance legitimate activity, and are becoming increasingly subject to regulation, robust compliance with existing anti-money laundering laws and regulations is necessary – indeed, critical – to bolster the reliability and value of virtual currency.
The challenges posed by the cases I’ve described are not unique to the virtual currency world. Indeed, these dark web criminals are merely using new tools to conduct the same old crimes, committing what is essentially street crime like drug trafficking and extortion, but over computer networks.
For those investors, exchanges and compliance officers who deal in virtual currency, compliance is of paramount importance. Adherence to regulations and state license requirements can reduce the liability of corporations who invest or deal in virtual currency. As seen with Ripple Labs, compliance and remediation can lead to a more favorable resolution of criminal investigations and adhering to anti-money laundering guidelines allows the legitimate use of virtual currency to grow and be responsive to infiltration and abuse by criminal elements. While the department will aggressively investigate and prosecute criminal activity that is funded through virtual currency, money services businesses that fall under the department’s scrutiny can also receive credit for meaningful and sincere compliance efforts.
Your compliance and cooperation will make it more difficult for those who seek to operate illicit and underground marketplaces and will be a key element for law enforcement to shed light on these illegal virtual currency transactions. It also will help to ensure the continued viability of virtual currency systems in the future.
Thank you for the opportunity to address this year’s National Institute on Bitcoin and Other Virtual Currencies.
The Government today announces that Australia will become a founding member of the Asian Infrastructure Investment Bank (AIIB).
The decision comes after extensive discussions between the Government, China and other key partners around the world.
There is an estimated infrastructure financing gap of around US$8 trillion in the Asian region over the current decade.
The AIIB will be part of the solution to closing this gap.
Joining the AIIB presents Australia with great opportunities to work with our neighbours and largest trading partner to drive economic growth and jobs.
The AIIB will work closely with the private sector, paving the way for Australian businesses to take advantage of the growth in infrastructure in the region.
The governance of the AIIB will be based on best practice, ensuring that all members will be directly involved in the direction and decision making of the bank in an open and transparent manner.
We look forward to working with other members to lay the foundations for an effective new multilateral institution which is expected to be operational by the end of the year.
Australia will contribute around A$930 million as paid-in capital to the AIIB over five years and will be the sixth largest shareholder. The AIIB will have paid-in capital of US$20 billion ($A25.2 billion) with total authorised capital of US$100 billion (A$126.2 billion).
The Treasurer will attend the Articles of Agreement signing ceremony at the Great Hall of the People, Beijing on Monday 29 June.
Banks in Central, Eastern and Southeastern Europe (CESEE) reduced the pace of deleveraging in the first quarter of 2015 compared with the previous quarter, and the related capital outflows moderated. Credit growth continued to diverge across the CESEE region, according to the latest report from the Vienna Initiative Steering Committee.
Banks reporting to the Bank for International Settlements (BIS) reduced their exposure to the region by 0.3 percent of GDP in the first quarter of 2015, following a 0.7 percent reduction in the fourth quarter of 2014. Excluding Russia and Turkey, the fall in exposure in the first quarter of 2015 was also 0.3 percent of GDP.
BIS reporting banks lowered their exposure in about half of the countries in the region, mostly toward Southeastern Europe and the Commonwealth of Independent States. They increased or maintained their exposure elsewhere.
In line with developments in the BIS banks’ external positions, overall net capital outflows from the region moderated in the first quarter of 2015 relative to the previous quarter.
Credit growth remained uneven across CESEE countries, reflecting differences in growth prospects and different degrees of corporate balance sheet repair. While economic recovery continues in many countries in the region, in about half of the countries output recovery is accompanied by continued contraction or stagnation of credit to the private sector.
The CESEE Deleveraging and Credit Monitor is prepared by the staff of international financial institutions taking part in the Vienna Initiative’s Steering Committee. It is based on the BIS’s International Banking Statistics published on July 24, 2015.
The Vienna Initiative was established at the height of the global financial crisis of 2008/09 as a private-public sector platform to secure adequate capital and liquidity support by Western banking groups for their affiliates in Central, Eastern, and South Eastern Europe (CESEE). It was relaunched as “Vienna 2” in January 2012 in response to renewed risks for the region from the Euro zone crisis.
NEW YORK, Feb. 9, 2022 — Bank of America Community Development Banking (CDB) provided $6.6 billion in loans, tax credit equity investments, and other real estate development solutions in 2021, surpassing a previous record of $5.9 billion in financing in 2020.
CDB deployed $4.1 billion in debt commitments and $2.5 billion in investments to help build strong, sustainable communities through affordable housing and economic development across the country.
Community Development Banking video featuring Maria Barry, National Executive for Community Development for Bank of America
Community Development Banking video featuring Maria Barry, National Executive for Community Development for Bank of America
“The need for affordable housing in communities across the U.S. has continued to grow during the pandemic, and our Community Development Banking team has been there to serve clients through these most uncertain times,” said Maria Barry, Community Development Banking national executive at Bank of America. “We remain steadfast in our commitment to advising clients and providing creative financing solutions to help build safe, affordable housing and to supporting the communities where we live and work.”
CDB delivers innovative financing solutions to help create affordable housing for individuals, families, seniors, veterans, the formerly homeless, and those with special needs. These efforts are part of the company’s commitment to deploying capital to address global issues outlined in the United Nations Sustainable Development Goals (SDGs).
From 2005 to 2021, Community Development Banking financed more than 263,000 housing units, of which 86% (more than 227,000) are affordable housing.
In 2021, CDB-financed developments produced more than 13,000 housing units, of which 90% (more than 11,600) were affordable housing units. This included:
3,200 units for seniors.
3,400 units for formerly homeless, veterans or those with special needs.
5,500 certified green units.
Last year, CDB provided $1.6 billion to finance 3,300 housing units where developers included access to health-related services such as vaccines and flu shots, wellness exams, nutrition education and mental health assistance. CDB also provided more than $368 million in financing to minority- or woman-led affordable housing developers, which resulted in 1,500 affordable housing units.
In addition, in April 2021, Community Development Banking was the first bank to launch a fund with dedicated financing and support to BIPOC (Black, Indigenous and People of Color) developers. In partnership with Enterprise Community Partners, CDB announced a $60 million investment to support Enterprise’s Equitable Path Forward, a five-year initiative to help facilitate racial equality in housing. We are reviewing proposals from minority developers of multi-family, affordable and supportive housing to provide increased access to capital and career development opportunities across the Bank’s footprint.
This commitment complements Bank of America’s $1.25 billion, five-year commitment to help advance racial equality and economic opportunity. The work focuses on closing the racial wealth gap in Black and Hispanic-Latino communities with a focus on affordable housing, health and healthcare, jobs/reskilling and small business.
Bank of America Global Corporate and Investment Banking also provided $412 million in tax credit investments, bringing the 2021 total to $7 billion in affordable housing and economic development financing.
Bank of America
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 67 million consumer and small business clients with approximately 4,200 retail financial centers, approximately 16,000 ATMs, and award-winning digital banking with approximately 41 million active users, including approximately 33 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business households through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the United States, its territories and approximately 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
For more Bank of America news, including dividend announcements and other important information, visit the Bank of America newsroom and register for news email alerts.
Reporters may contact:
Anu Ahluwalia, Bank of America
Phone: 1.646.855.3375
anu.ahluwalia@bofa.com
SOURCE Bank of America Corporation
Bank of America Merrill Lynch today announced a social impact partnership with New York State and Social Finance Inc. that resulted in a successful capital raise of $13.5 million to fund a new pay-for-success program. The offering proceeds provided by private and institutional investors will be used to fund a 5 ½-year program focused on comprehensive reentry employment services to 2,000 formerly incarcerated individuals in New York City and Rochester, N.Y.
Social impact partnerships provide an innovative way to finance social programs. These programs provide funding – often in the form of fixed income or private equity offerings (referred to generically as “social impact bonds”) – for selected nonprofits with a proven track record of success, and enable governments to save money and pay only for positive results. If a pay-for-success program meets identified success metrics, private and institutional investors have the potential to earn positive financial returns. Through these programs, the public, private and nonprofit sectors work together to achieve positive social outcomes.
“We are proud to join New York State, Social Finance and others in this landmark program. Through partnerships such as this, and the preferences of today’s investors, innovative social finance has truly come of age,” said Andy Sieg, head of Global Wealth and Retirement Solutions for Bank of America Merrill Lynch. “One of the most pronounced trends among our clients is for their investments to not only earn a return but also to help drive social change in their communities and in society. We’re unlocking the potential for this type of investing, enabling clients to direct capital to programs and organizations proven to produce positive outcomes, and taking an important step toward a scalable new marketplace.”
This new social impact investment opportunity was available only to qualified high net worth and institutional clients of Merrill Lynch and U.S. Trust*, as well as other investors identified by Social Finance. The proceeds of the project will finance programs delivered by the Center for Employment Opportunities (CEO), a world-class provider of training and employment service programs to formerly incarcerated individuals in New York.
“This public-private partnership applies financial innovation to achieve a common goal: increase employment and improve public safety in New York,” said Tracy Palandjian, chief executive officer and co-founder of Social Finance Inc. “The investment is focused on directing resources toward prevention, tackling the source of the problem rather than treating the symptoms, and equipping people with training to help them lead productive and healthy lives.”
Formerly incarcerated individuals face numerous challenges when seeking employment upon release from prison. As a result, many of these individuals continue to engage in criminal behavior and return to prison or jail within three years of their release1. Corrections costs have quadrupled during the last 20 years, making prison spending the states’ fastest growing budget item after Medicaid2. In 2012, New York spent $3.6 billion on state prisons, or more than $60,000 per inmate.
The goal of this pay-for-success program is to reduce recidivism and increase employment by providing participants work experience and supportive coaching. The objectives of the program are to reduce social and financial costs associated with prison recidivism, and to provide a positive impact on family support and public safety. Specifically, this program aims to:
Expand proven workforce reentry services to formerly incarcerated individuals in need.
Help to break the downward cycle of recidivism among these individuals.
Lower government remediation costs, including incarceration and criminal justice services.
Save taxpayer dollars related to criminal justice expenditures, victim costs of crime, and public assistance.
Overview of the investment and partners involved
Social Finance identified the opportunity, conducted due diligence to select service providers like CEO, and worked with Bank of America Merrill Lynch to structure the partnership with New York State and the U.S. Department of Labor. Social Finance will also provide ongoing performance management throughout the life of the project.
CEO will provide life skills training, transitional employment, job placement and retention support to 2,000 formerly incarcerated individuals during a four-year period.
The U.S. Department of Labor will provide outcome-based payments for the benefit of investors for the first half of the program (first 1,000 served), while New York State will make such payments for the second half of the program (next 1,000 served).
Chesapeake Research Associates will serve as validator to ensure that outcomes are measured according to the specified methodology designed to determine the success of the program.
Bank of America Merrill Lynch worked with Social Finance to define the terms of the investment and acted as the placement agent for the offering to qualified high net worth and institutional investors.
The Robin Hood Foundation provided strong early support by making a commitment to invest in the program. Since 1988, Robin Hood Foundation has focused on finding, funding, and creating programs and schools that generate meaningful results for families in New York’s poorest neighborhoods.
The Rockefeller Foundation provided a $1.32 million guaranty facility to the project, which will cover 10 percent of the investors’ principal should the project fail to repay investors 100 percent of their investment. Throughout its 100-year history, The Rockefeller Foundation has enhanced the impact of innovative thinkers and actors working to change the world by providing the resources, networks, convening power and technologies to move them from idea to impact.
The investment is for 5 ½ years. Investors may lose all of their investment if the program does not meet certain measures of success. Offers to purchase interests in this investment were made pursuant to a private placement memorandum, which contains important information about the risks, performance and other material aspects of the investment.
This Press Release is courtesy of Bankofamerica.com
Bank of America Merrill Lynch, a global leader in payments, last week hosted a series of informational webcasts on key considerations for corporates as they enter the last stages of SEPA implementation. These webcasts are the latest in a series of initiatives – including client-facing sessions, forums and workshops – that the firm has generated over the past 18 months to help clients prepare for the SEPA deadline.
Led by Jennifer Boussuge, head of Global Transaction Services, EMEA, with commentary from regional head of Payments and Receivables, Ad van der Poel, the webcasts highlighted the fact that preparations and interpretations differ across today’s SEPA-zone, and that depending on a counterparty’s readiness, corporates could face a wide range of experiences.
Van der Poel noted that despite the recent spike in migration rates, adoption continues to be a challenge. “The European Commission’s recent announcement (extending the deadline by six months) has not changed the urgency with which we are treating SEPA conversion,” he said. “Our message to clients is to maintain focus and be fully compliant by the original end date so that from 1 February, direct debit and ACH payments can be made as SEPA transactions as opposed to legacy domestic ones.”
“The advantage for SEPA-ready companies is that they are already reaping the benefits of value-added migration services, such as our IBAN enrichment offering,” he continued. “But for others who were concerned about meeting the February deadline, there is now a transition window that can be utilised.”
For those companies who still have concerns, van der Poel noted that as well as technology and file formats, it is important to consider internal and external business partners such as customers, payroll vendors, human resources and employees’ banks. He also stressed the need for a contingency plan should companies be unable to make payments to vendors and employees or collect money.
“Thinking beyond the SEPA migration date and its challenges, there are broad efficiencies to be gained from the regulation’s adoption,” added Jennifer Boussuge. “SEPA should be viewed not as a hindrance, but rather as a catalyst for visibility and control. For example, SEPA adoption provides an opportunity for automation, rationalisation and centralisation, which can then help with efficiency gains in all areas of business.”
Boussuge asked the audience to imagine:
Reusing the same standards and data elements in the invoice and in the purchase order – which will lead to enormous efficiencies in a corporate’s value chain.
Creating an innovation such as a new mobile payment method where the underlying payment instrument covers the entire eurozone – meaning that the reach of an innovation is immediately expanded from one to 33* countries.
“While it’s challenging to predict what will influence your business a decade from now, through your actions today, you can shape and build the foundations for innovations in the years to come,” Boussuge concluded. “There is light at the end of the tunnel and numerous benefits to consider once the scheme is in full force.”
This Press Release is courtesy of www.bankofamerica.com
Bank of America Merrill Lynch Global Transaction Services (GTS) today announced the implementation of a tailored collections and payments solution in China for OSI Group (OSI) LLC, a privately-owned U.S.-based food processing corporation. In addition to a full suite of treasury management services to help OSI optimize working capital in China, the customized solution includes dedicated credit facilities to support its new operations in Weihai, Shandong province, China.
The integrated collection and payments solution provides OSI with enhanced efficiencies and control of treasury processes for its expanding China operations. Under the solution, OSI maintains local currency operating accounts and USD capital accounts with Bank of America Merrill Lynch, while also integrating existing accounts with local banking partners. Additionally, Bank of America Merrill Lynch’s solution will include various deposit and FX services.
By implementing CashPro Online™ and CashPro Connect, Bank of America Merrill Lynch’s unified global platform, OSI will utilize a single portal to manage all its China treasury operations, which is supported by automated and comprehensive information reporting processes.
“This deal highlights the unique ability of Bank of America Merrill Lynch to pair local market experience with global connectivity and solutioning,” said Ivo Distelbrink, head of Global Transaction Services, Asia Pacific. “As OSI continues to expand in China, we commit ourselves to delivering the full strength of our local presence, global resources and unrivaled universal banking model.”
Bank of America Merrill Lynch’s unique China UnionPay (CUP) Alliance also represents an important differentiating component of the larger solution developed for OSI. The alliance supports card acquiring from all domestic cards and the majority of non-China cards, while also providing direct debit collection from individual accounts opened with over 100 major local banks. Through this market-first alliance in China, OSI can use point of sale machines provided by CUP to collect debit and credit card payments from their diversified base of local buyers, and automatically centralize funds in their Bank of America Merrill Lynch account, allowing for clear reporting and streamlined reconciliation.
“Bank of America Merrill Lynch’s solution meets our requirements for a comprehensive and scalable banking solution to manage daily treasury management activities, streamline banking arrangements across our entities in China, and build cost efficiencies as we expand in this strategic market,” said Frank Wang, Finance director of OSI China.
OSI has been operating in China since opening its first factory in Beijing in 1992. In addition to integrated poultry facilities and two existing protein further-processing plants, the company operates four produce plants and a dough operation in this market. Additionally, OSI has facilities in India, Japan, Taiwan, the Philippines and Australia, and employs approximately 10,000 people throughout Asia Pacific.
Bank of America
Bank of America is one of the world’s largest financial institutions, serving individual consumers, small businesses, middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 49 million consumer and small business relationships with approximately 5,100 retail banking offices and approximately 16,200 ATMs and award-winning online banking with 30 million active users and more than 15 million mobile users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Bank of America Merrill Lynch is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., all of which are registered broker-dealers and members of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA.
Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured * May Lose Value * Are Not Bank Guaranteed.
About OSI Group
For close to 60 years, OSI Group, LLC has been a global leader in supplying value-added protein items and other food products to leading foodservice and retail brands. It is a privately held corporation with more than 55 facilities in 16 countries. The company’s global headquarters is located outside of Chicago in Aurora, Illinois, USA.
Copyright 2014 Bank of America Corporation. All rights reserved. Bank of America, Merrill Lynch, Broadcort and their logos are trademarks of Bank of America Corporation and/or its affiliates.
Visit the Bank of America newsroom for more Bank of America news.
www.bankofamerica.com
– See more at: http://newsroom.bankofamerica.com/press-releases/commercial-and-middle-market-banking/bank-america-merrill-lynch-gts-implements-tailor#sthash.8xrOE2co.dpuf
Bank of America today announced that the Chief Investment Office (CIO) has introduced initiatives to promote the representation of women and people of color among asset managers on its wealth management platform and across the industry. Multiple studies reflect the potential for strong investment results by diverse teams.1 In light of this, the CIO is now incorporating diversity analysis into the review and selection of all existing and new asset managers who are available to Merrill and Bank of America Private Bank clients.
In the first quarter of this year, the CIO Due Diligence team enhanced its investment process to evaluate all asset managers’ policies and practices on diversity and inclusion at both their organizational and investment team levels. Going forward, this analysis will be used in the CIO team’s overall investment assessments and factor into their level of conviction in investment strategies.
In addition, this team will collaborate with asset managers and industry groups who are focused on developing investment solutions that serve to (1) aggregate and direct capital to diverse managers, and (2) provide capital to diverse-owned businesses and populations as part of their underlying investment mandates.
“We are deeply committed to advancing the social and economic benefits of greater diversity and inclusion,” said Keith Banks, head of the Investment Solutions Group at Bank of America. “We hope these important steps forward will further encourage the asset management industry to accelerate its support of diverse-owned firms, portfolio managers and investment solutions.”
A 2019 Knight Foundation analysis found that only 1.3% of industry assets were managed by diverse-owned asset management firms. In 2017, 1.1% of assets were managed by such firms, indicating little progress over two years. The study also “found no statistically significant difference in performance across asset classes,” even after controlling for risk. In fact, it found that “funds managed by diverse-owned firms were overrepresented in the top-performing quartile of mutual funds, hedge funds and private equity.” Efforts to increase diverse-owned firms and investment solutions have intensified as demand for them increases, particularly from high net worth clients, foundations, endowments and other institutional investors.
“Multiple studies link diverse and inclusive organizations to stronger organizational performance,” said Anna Snider, head of due diligence for Merrill and Bank of America Private Bank. “We recognized the need to embed a diversity and inclusion assessment into the core of our due diligence process. We believe that this, along with other environmental, social and governance (ESG) considerations, can and should inform investment conviction and play an increasingly important role in our selection of managers and strategies going forward.”
In addition to these efforts, the CIO will actively participate in several industry initiatives, which include sponsoring the:
2020 Global GenderSmart Investing Summit, a global initiative dedicated to unlocking capital at scale, with a focus on gender equality, the climate crisis, education, health and human rights.
NICSA Diversity Project, which is designed to share research and best practices for building a more diverse roster of next-generation asset managers – breaking down traditional hurdles to success for women and people of other diverse backgrounds.
Bank of America and the Visa Foundation are sponsoring Project Sage 3.0. The project, conducted by the Wharton Social Impact Initiative of the University of Pennsylvania’s Wharton School and Catalyst at Large, is the group’s third study of women-led, gender- and diversity-focused fund mandates. Based on an annual survey, the study is designed to respond to increased interest in understanding the characteristics of available private equity and debt solutions, including size, scope, stage and geography, as well as focus on diversity in investment selection.
Today, nearly 20,000 Merrill and Bank of America Private Bank wealth advisors serve clients representing approximately $2.9 trillion in client balances.2
Bank of America commitment to advancing racial equality and economic opportunity
Bank of America recently announced a $1 billion, four-year initiative to help advance racial equality and economic opportunity, with a particular focus on helping to create opportunity for people and communities of color. The company is focusing on areas where systemic, long-term gaps exist and where significant change is required for progress to occur and to be sustainable, including health and health care, jobs/reskilling, and support to small business and affordable housing, all through a lens of racial equity.
1 Harvard Business Review, July/Aug. 2018 and Nov. 4, 2016
2 Source: Bank of America earnings report, Q2 2020
Bank of America
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 66 million consumer and small business clients with approximately 4,300 retail financial centers, including approximately 3,000 lending centers, 2,600 financial centers with a Consumer Investment Financial Solutions Advisor and approximately 2,200 business centers; approximately 16,900 ATMs; and award-winning digital banking with approximately 39 million active users, including approximately 30 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business households through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the United States, its territories and approximately 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
The Chief Investment Office, which provides investment strategies, due diligence, portfolio construction guidance and wealth management solutions for Global Wealth and Investment Management (GWIM) clients, is part of the Investment Solutions Group (ISG) of GWIM, a division of BofA Corp.
Today we’re fining Bank of America, N.A. and FIA Card Services, N.A. for unfairly billing consumers for services relating to identity theft protection “add-on” products and for using deceptive marketing and sales practices for credit protection “add-on” products.
We are also ordering Bank of America to refund fees and provide other redress to consumers. Approximately 2.9 million consumers will be receiving or already have received up to $727 million in refunds for fees they paid for these products and services as well as additional redress.
If you’re impacted by the announcement, you don’t have to take any action to receive a credit or check. If you are one of the consumers affected by the order, Bank of America should have already notified you or will notify you directly. If you have questions about whether you are entitled to a refund, you can contact Bank of America.
Who is eligible for compensation?
Nearly 1.4 million consumers have already received or will receive refunds of at least $250 million in fees for the “credit protection” products (Credit Protection Plus and Credit Protection Deluxe). You will receive refunds if you are a Bank of America customer who enrolled in these products at any time over the phone, were charged a fee between October 1, 2010 and March 31, 2013, and either did not activate benefits or who had a request for benefits denied.
Approximately 1.5 million consumers purchased the “identity theft protection” products (Privacy Guard, PrivacySource, and Privacy Assist) and were improperly billed for services that were not performed. As a result, consumers paid at least $459 million in fees, interest, and over-limit charges for these products without receiving full services. Today’s announcement recognizes the refunds Bank of America has already provided to consumers harmed as a result of the illegal billing practices relating to these identity theft protection products.
Eligible consumers who were enrolled in the “identity theft protection” products received refunds if they enrolled in these products between October 2000 and September 2011 but did not receive full credit monitoring services, received only partial credit monitoring and/or credit report retrieval without notice, and/or didn’t receive credit report retrieval benefits.
What do eligible consumers get?
That depends on the product consumers were enrolled in and some other factors.
Eligible consumers who were enrolled in a “credit protection” product for less than a year, who made a request for benefits that was denied or closed, or who, complained to the CFPB or to Bank of America stating that they did not authorize enrollment in the product, will receive a refund of all fees charged from October 1, 2010 through March 31, 2013. Eligible consumers who were enrolled in a “credit protection” product for a year or more and who do not fall within any of the groups described above will receive a refund of 300 days of fees charged from October 1, 2010 through March 31, 2013.
Some consumers who were enrolled in “credit protection” product will also receive:
A reduction in charged-off balances due to product fees charged from October 1, 2010 through March 31, 2013.
“Credit protection” services for six months at no-cost for consumers enrolled in the product as of March 1, 2013.
Bank of America has already completed reimbursement for the “identity theft protection” eligible consumers, so eligible consumers should have already received refunds. If you have questions about receiving a refund for this product, you can contact Bank of America.
Bank of America is responsible for providing refunds
Watch out for scammers claiming they will get you a refund. When large numbers of consumers get refunds, scammers sometimes pop up. The scammer may charge you a fee or try to steal your personal information. If someone tries to charge you, tries to get you to disclose your personal information, or asks you to cash a check and send a portion to a third party in order to “claim your refund,” it’s a scam. Please call us at (855) 411-CFPB to report the scam.
This news is courtesy of www.consumerfinance.gov
Bank of America announced today that Merrill Edge® will open 600 new investment centers within its expanding coast-to-coast financial center footprint, bringing its total to 2,800 by 2020. The effort is part of Bank of America’s previously mentioned plan to invest heavily in both its physical and digital presence across the United States, entering new markets and redesigning more than a third of its existing financial centers. To meet growing client demand for investment services, Merrill Edge also expects to add 300 new Financial Solutions Advisors™ for a total of 4,000 representatives by year-end.
The 600 new Merrill Edge investment centers will be added to new and existing Bank of America financial center locations. Merrill Edge investment centers will be built within new financial centers opening in Cleveland; Cincinnati; Columbus; Indianapolis; Lexington, KY; Pittsburgh; and Salt Lake City. Merrill Edge investment centers will also be added to existing financial center locations in Chicago; Houston; Kansas City, Kan.; Los Angeles; Miami; Minneapolis; New York; Philadelphia; San Francisco; and San Jose. Bank of America currently has 4,500 financial centers across the United States, including 2,200 with dedicated, on-site Merrill Edge Financial Solutions Advisors and another 770 through video conferencing.
Merrill Edge is a streamlined financial platform that offers access to online and advised investing, trading, brokerage and banking services. Clients can be self-directed; work with a Financial Solutions Advisor; or access Merrill Edge Guided Investing, an online advisory program that offers Global Wealth & Investment Management CIO-directed portfolio management strategies. Since its creation in 2010, Merrill Edge has grown steadily to $184.5 billion in assets and more than 2.4 million accounts. Merrill Edge also works with Merrill Lynch and U.S. Trust to support clients’ needs as they become more complex – giving clients access to our full wealth management offering.
“Our goal is to serve our clients in ways most convenient to them, and we have both the brick and mortar and the digital presence to do just that,” said Aron Levine, head of Merrill Edge at Bank of America. “Our clients have asked for seamless integration of their Bank of America banking and Merrill Edge investing, and appreciate being recognized and rewarded for their relationship. We continue to listen and deliver, enabling us to grow responsibly and meet our clients’ evolving needs.”
Continued tech innovations and new capabilities for clients
Merrill Edge continues to create new solutions to help clients pursue their investing goals. One example is the launch of Merrill Edge Guided Investing1 last year, an online investing service that provides access to investment strategies managed by the Merrill Lynch and U.S. Trust Chief Investment Office. Client behavior suggests that Merrill Edge Guided Investing is instrumental to retirement planning. Three-quarters of accounts that have been opened by our clients are focused on retirement goals, with most (80 percent) set for a time horizon of 10 or more years.
Most recently, Merrill Edge launched two new patent-pending experiences for the self-directed investor, helping them make more informed investing decisions. Stock Story helps clients discover critical information about companies in a new and innovative way without having to know all the investing jargon. Portfolio Story provides step-by-step guidance to key elements of their account, helping clients quickly find answers to their most critical questions.
Additional capabilities to advance the client experience and help clients meet their financial goals include:
Integrated capabilities across banking and investments
Ability to view one’s entire financial picture on a single page, including Merrill Edge investing accounts, Bank of America banking accounts and other accounts, such as 401(k)s held at other financial institutions.
Bank of America’s Preferred Rewards program recognizes and rewards clients for their relationships across deposits, investments and loans.
Trade stocks, ETFs, mutual funds and options online or with the Merrill Edge mobile app.
Transfer money in real time2 from Bank of America banking accounts with instant access to place trades.
Access to thousands of the most highly requested index and low-cost funds.
Access to fixed income portfolios, ladder bonds, treasuries and CDs designed to provide a steady income flow.
Industry-recognized research, insights and tools
Stay on top of the markets with real-time Briefing.com updates throughout the trading day, along with access to over 30 independent news providers.
Easy access to tools and research for the self-directed investor to explore ETFs, mutual funds, equities and other investments with no minimums and no maintenance fees.
Access to industry-leading BofA Merrill Lynch Global Research, CFRA and Morningstar research.
Learn more about investing with the Merrill Edge Investing Classroom, a series of courses that range from basic to more sophisticated strategies.
Understand your investing impact3 with access to environmental, social and governance scores for individual stocks and your portfolio.
Industry recognition, awards and accolades
In the last year, Merrill Edge received many industry accolades and reviews, recognizing its excellence in client experience and innovative tools and resources.
“We’re thrilled to be recognized by these prestigious organizations,” said Dean Athanasia, co-head of Consumer & Small Business at Bank of America. “These awards demonstrate our commitment and our success in helping clients pursue their financial and life goals and showcase our best-in-class approach to the industry.”
Notable awards and recognition include:
Barron’s 2018 Best Online Broker Survey 4 (March 2018) – Merrill Edge earned 4 out of 5 stars and was named one of the top online brokers.
Customer Service Institute of America 5 (March 2018) – Merrill Edge has been awarded the 2017 International Service Excellence Award in the category of customer-focused innovations.
Stockbrokers.com’s eighth annual Online Broker Review 6 (Feb. 2018) – Merrill Edge was awarded 4.5 out of 5 stars, and received a No. 1 ranking for overall client experience and a No. 1 ranking for new tool for its new stock research experience.
Corporate Insight’s 2017 e-Monitor Awards Report 7 (Jan. 2018) – Merrill Edge earned the top spot in the equity research and quotes category due to its new stock research experience. Merrill Edge also earned the most medals of any firm.
NerdWallet 8 (Jan. 2018) – Merrill Edge was named one of the “best online brokers for stock trading in 2018.”
J.D. Power 9 (Nov. 2017) – Merrill Edge’s contact centers were recognized for providing “an outstanding customer service experience” in the live phone channel for the seventh consecutive year.
Kiplinger’s Personal Finance Magazine 10 (Oct. 2017) – Merrill Edge was named the top online broker in a tie with Fidelity.
To learn more about Merrill Edge and these updates, visit www.merrilledge.com.
1 Please review the Merrill Edge® Guided Investing Program Brochure at www.merrilledge.com/guided-investing-program-brochure for important information including pricing, rebalancing, and the details of the investment advisory program.
2 Certain banking and brokerage accounts may be ineligible for real-time money movement, including but not limited to transfers to/from bank IRAs (CD, money market), 529s, SafeBalance Banking®, credit cards and transfers from IRAs, loans (HELOC, LOC, mortgage) and accounts held in the military bank. Accounts eligible for real-time transfers will be displayed online in the to/from drop-down menu on the transfer screen.
3 Impact investing and/or environmental, social and governance (ESG) investing has certain risks based on the fact that ESG criteria exclude securities of certain issuers for nonfinancial reasons and therefore, investors may forgo some market opportunities and the universe of investments available will be smaller. ESG ratings are provided by MSCI ESG Research LLC, an independent provider of research-driven insights and a Registered Investment Advisor under the Investment Advisors Act of 1940, that provides in-depth analysis on the ESG-related business practices of more than 6,000 companies.
4 Merrill Edge® was one of 19 brokers evaluated in the Barron’s 2018 Best Online Broker Survey, March 26, 2018. Barron’s evaluated firms in Trading Experience & Technology, Usability, Mobile, Range of Offerings, Research Amenities, Portfolio Analysis & Reports, Customer Service, Education, Security, and Costs to rate the firms. Merrill Edge earned the top overall score of 32.7 out of a possible 40. Learn more at http://webreprints.djreprints.com/54692.html . Barron’s is a trademark of Dow Jones & Co., L.P. All rights reserved. Reprinted with permission of Barron’s. The ranking or ratings shown here may not be representative of all client experiences because they reflect an average or sampling of the client experiences. These rankings or ratings are not indicative of any future performance or investment outcome.
5 Merrill Edge® was named the “winner” in the Customer-Focused Innovations category by the Customer Service Institute of America for 2017. The judging criteria are based on an on-site interview; the balanced scorecard methodology; and review of the organization to determine if the customer is the focus of the business and how that is supported through culture, processes, procedures, training, hiring practices, and daily actions. The ranking or ratings shown here may not be representative of all client experiences because they reflect an average or sampling of the client experiences. These rankings or ratings are not indicative of any future performance or investment outcome.
6 Merrill Edge® was evaluated as one of 13 online brokers in the 2018 StockBrokers.com Online Broker Review published on February 20, 2018. StockBrokers.com evaluated brokers using 292 variables across 10 categories. The best-in-class rating recognizes brokers who ranked in the top five in that category. Learn more at http://www.stockbrokers.com/review/merrilledge. The ranking or ratings shown here may not be representative of all client experiences because they reflect an average or sampling of the client experiences. These rankings or ratings are not indicative of any future performance or investment outcome.
7 Merrill Edge® earned the top spot in the equity research & quotes category of the 2017 e-Monitor’s Awards Report 2017 in part due to its stock story capability. In its analysis, e-Monitor reviewed the offerings and capabilities for the 18 firms in the e-Monitor coverage group, divided into six distinct categories: core product offerings, account information & performance reporting, equity research & quotes, planning tools, alerts, and mobile capabilities. Each category included a distinct set of attributes and criteria used to grade and rank firms. Based on this review, they awarded gold, silver or bronze medals to those firms that excel. More information on this award can be found at http://corporateinsight.com/e-monitor-reports/december-2017-2017-e-monitor-awards. The ranking or ratings shown here may not be representative of all client experiences because they reflect an average or sampling of the client experiences. These rankings or ratings are not indicative of any future performance or investment outcome.
8 Merrill Edge® was named by NerdWallet as one of the “best online brokers for stock trading” in January 2018. To be included, approximately 20 online trading firms were extensively reviewed by NerdWallet in a range of categories including but not limited to: fees, available investments, customer support, and mobile apps. Learn more at https://www.nerdwallet.com/blog/investing/best-online-brokers-for-stock-trading. The ranking or ratings shown here may not be representative of all client experiences because they reflect an average or sampling of the client experiences. These rankings or ratings are not indicative of any future performance or investment outcome.
9 J.D. Power 2017 Certified Contact Center ProgramSM recognition is based on successful completion of an audit and exceeding a customer satisfaction benchmark through a survey of recent servicing interactions. For more information, visit www.jdpower.com/ccc.
10 Merrill Edge® was ranked No. 1 overall (tied with Fidelity) out of seven online brokers by Kiplinger’s Personal Finance’s Best Online Brokers Survey, October 2017. To be included, firms had to offer online trading of stocks, ETFs, funds and individual bonds. The results were based on ratings in the following categories: Total Commissions Score, Breadth of Investment Choices, Tools, Research, Ease of Use, Mobile Access, and Advisory Services. Learn more at http://www.kiplinger.com/slideshow/investing/T023-S002-best-online-brokers-2017/index.html from Kiplinger’s Personal Finance, October 2017. © 2017 The Kiplinger Washington Editors. Used under License. The ranking or ratings shown here may not be representative of all client experiences because they reflect an average or sampling of the client experiences. These rankings or ratings are not indicative of any future performance or investment outcome.
Merrill Edge®
Merrill Edge® is a streamlined financial platform that offers access to online and advised investing, trading, brokerage and Bank of America banking services. Clients can be self-directed; work with a Financial Solutions Advisor™ to use managed portfolios; or access Merrill Edge Guided Investing, an online advisory program that offers Global Wealth & Investment Management Chief Investment Office-directed portfolio management strategies.
Bank of America
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 47 million consumer and small business relationships with approximately 4,500 retail financial centers, approximately 16,000 ATMs, and award-winning digital banking with approximately 35 million active users, including approximately 24 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Bank of America Chief Executive Officer Brian Moynihan will participate in the Bernstein Strategic Decisions Conference on Wednesday, May 30 at 4 p.m. Eastern Time. A live audio webcast will be accessible through the Bank of America Investor Relations website at http://investor.bankofamerica.com. A replay will also be available.
Bank of America
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 47 million consumer and small business relationships with approximately 4,400 retail financial centers, approximately 16,000 ATMs, and award-winning digital banking with approximately 36 million active users, including 25 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the United States, its territories and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
The Bank of England today announced the results of the first concurrent stress testing exercise of the UK banking system. Alongside the stress test publication, the Bank of England also published its Financial Stability Report, which sets out the Financial Policy Committee’s (FPC) assessment of the outlook for the stability and resilience of the financial sector, and the Systemic Risk Survey, which quantifies and tracks market participants’ perceptions of systemic risks.
Following on from the EU-wide stress test, the 2014 UK stress test of the eight major UK banks and building societies was designed specifically to assess their resilience to a very severe housing market shock and to a sharp rise or snap back in interest rates. This was not a forecast or expectation by the Bank of England regarding the likelihood of a set of events materialising, but a coherent, severe ‘tail risk’ scenario.
The eight banks and building societies tested as part of this exercise were Barclays Bank, Co-operative Bank, HSBC Bank, Lloyds Banking Group, Nationwide Building Society, Royal Bank of Scotland, Santander UK and Standard Chartered.
There was substantial variation across the banks and building societies in terms of the impact of the stress scenario. From an individual-institution perspective, the Prudential Regulation Authority (PRA) Board judged that this stress test did not reveal capital inadequacies for five out of the eight participating banks, given their balance sheets at end-2013 (Barclays, HSBC, Nationwide, Santander UK and Standard Chartered). The PRA Board did not require these banks to submit revised capital plans.
Following the stress testing exercise, the PRA Board judged that, as at end-2013, three of the eight participating banks (Co-operative Bank, Lloyds Banking Group and Royal Bank of Scotland) needed to strengthen their capital position further. But, given continuing improvements to banks’ resilience over the course of 2014 and concrete plans to build capital further going forward, only one of these banks (Co-operative Bank) was required to submit a revised capital plan.
The FPC considered the information provided by the stress-test results from the perspective of the resilience of the UK banking system as a whole. The FPC noted that only one bank fell below the 4.5% threshold at the trough of the stress scenario, that the capitalisation of the system had improved further over the course of 2014 and that the PRA Board had agreed plans with banks to build capital further. Overall, the FPC judged that the resilience of the system had improved significantly since the capital shortfall exercise in 2013. Moreover, the stress-test results and banks’ capital plans, taken together, indicated that the banking system would have the capacity to maintain its core functions in a stress scenario. Therefore, the FPC judged that no system-wide, macroprudential actions were needed in response to the stress test.
Mark Carney, Governor of the Bank of England, said:
“The stress test completes our capital framework by informing judgments about the appropriate size of capital buffers for individual firms and for the system as a whole. It is a major component of both our macro- and micro-prudential regimes. As a joint exercise between the PRA and FPC, it demonstrates the major synergies possible across the Bank of England. This was a demanding test. The results show that the core of the banking system is significantly more resilient, that it has the strength to continue to serve the real economy even in a severe stress, and that the growing confidence in the system is merited.”
The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending 3 August 2016, the MPC voted for a package of measures designed to provide additional support to growth and to achieve a sustainable return of inflation to the target. This package comprises: a 25 basis point cut in Bank Rate to 0.25%; a new Term Funding Scheme to reinforce the pass-through of the cut in Bank Rate; the purchase of up to £10 billion of UK corporate bonds; and an expansion of the asset purchase scheme for UK government bonds of £60 billion, taking the total stock of these asset purchases to £435 billion. The last three elements will be financed by the issuance of central bank reserves.
Following the United Kingdom’s vote to leave the European Union, the exchange rate has fallen and the outlook for growth in the short to medium term has weakened markedly. The fall in sterling is likely to push up on CPI inflation in the near term, hastening its return to the 2% target and probably causing it to rise above the target in the latter part of the MPC’s forecast period, before the exchange rate effect dissipates thereafter. In the real economy, although the weaker medium-term outlook for activity largely reflects a downward revision to the economy’s supply capacity, near-term weakness in demand is likely to open up a margin of spare capacity, including an eventual rise in unemployment. Consistent with this, recent surveys of business activity, confidence and optimism suggest that the United Kingdom is likely to see little growth in GDP in the second half of this year.
These developments present a trade-off for the MPC between delivering inflation at the target and stabilising activity around potential. The MPC’s remit requires it to explain how it has balanced that trade-off. Given the extent of the likely weakness in demand relative to supply, the MPC judges it appropriate to provide additional stimulus to the economy, thereby reducing the amount of spare capacity at the cost of a temporary period of above-target inflation. Not only will such action help to eliminate the degree of spare capacity over time, but because a persistent shortfall in aggregate demand would pull down on inflation in the medium term, it should also ensure that inflation does not fall back below the target beyond the forecast horizon. Thus, in tolerating a temporary period of above-target inflation, the Committee expects the eventual return of inflation to the target to be more sustainable.
The MPC’s choice of instruments is based on a consideration of their likely impact on the real economy and inflation. The MPC has examined closely the interaction between monetary policy and the financial sector, both with regard to ensuring the effective transmission of monetary policy to households and businesses, and with consideration for the financial stability consequences of its policy actions.
The cut in Bank Rate will lower borrowing costs for households and businesses. However, as interest rates are close to zero, it is likely to be difficult for some banks and building societies to reduce deposit rates much further, which in turn might limit their ability to cut their lending rates. In order to mitigate this, the MPC is launching a Term Funding Scheme (TFS) that will provide funding for banks at interest rates close to Bank Rate. This monetary policy action should help reinforce the transmission of the reduction in Bank Rate to the real economy to ensure that households and firms benefit from the MPC’s actions. In addition, the TFS provides participants with a cost effective source of funding to support additional lending to the real economy, providing insurance against the risk that conditions tighten in bank funding markets.
The expansion of the Bank of England’s asset purchase programme for UK government bonds will impart monetary stimulus by lowering the yields on securities that are used to determine the cost of borrowing for households and businesses. It is also likely to trigger portfolio rebalancing into riskier assets by current holders of government bonds, further enhancing the supply of credit to the broader economy.
Purchases of corporate bonds could provide somewhat more stimulus than the same amount of gilt purchases. In particular, given that corporate bonds are higher-yielding instruments than government bonds, investors selling corporate debt to the Bank could be more likely to invest the money received in other corporate assets than those selling gilts. In addition, by increasing demand in secondary markets, purchases by the Bank could reduce liquidity premia; and such purchases could stimulate issuance in sterling corporate bond markets.
As set out in the August Inflation Report, conditional on this package of measures, the MPC expects that by the three-year forecast horizon unemployment will have begun to fall back and that much of the economy’s spare capacity will have been re-absorbed, while inflation will be a little above the 2% target. In those projections the cumulative growth in output is still around 2½% less at the end of the forecast period than in the MPC’s May projections. Much of this reflects a downward revision to potential supply that monetary policy cannot offset. However, monetary policy can provide support as the economy adjusts. Had it not taken the action announced today, the MPC judges it likely that output would be lower, unemployment higher and slack greater throughout the forecast period, jeopardising a sustainable return of inflation to the target.
This package contains a number of mutually reinforcing elements, all of which have scope for further action. The MPC can act further along each of the dimensions of the package by lowering Bank Rate, by expanding the TFS to reinforce further the monetary transmission mechanism, and by expanding the scale or variety of asset purchases. If the incoming data prove broadly consistent with the August Inflation Report forecast, a majority of members expect to support a further cut in Bank Rate to its effective lower bound at one of the MPC’s forthcoming meetings during the course of the year. The MPC currently judges this bound to be close to, but a little above, zero.
All members of the Committee agreed that policy stimulus was warranted at this time, and that Bank Rate should be reduced to 0.25% and be supported by a TFS. Eight members supported the introduction of a corporate bond scheme, and six members supported further purchases of UK government bonds.
These measures have been taken against a backdrop of other supportive actions taken by the Bank of England recently. The FPC has reduced the countercyclical capital buffer to support the provision of credit and has announced that it will exclude central bank reserves from the exposure measure in the current UK leverage ratio framework. This latter measure will enhance the effectiveness of the TFS and asset purchases by minimising the potential countervailing effects of regulatory requirements on monetary policy operations. The Bank has previously announced that it will continue to offer indexed long-term repo operations on a weekly basis until the end of September 2016 as a precautionary step to provide additional flexibility in the Bank’s provision of liquidity insurance. The PRA will also smooth the transition to Solvency II for insurers.
The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy in order to meet the 2% inflation target and in a way that helps to sustain growth and employment. At its meeting ending on 9 September 2015, the MPC voted by a majority of 8-1 to maintain Bank Rate at 0.5%. The Committee voted unanimously to maintain the stock of purchased assets financed by the issuance of central bank reserves at £375 billion.
Twelve-month CPI inflation rose slightly to 0.1% in July but remains well below the 2% target rate. Around three quarters of the gap between inflation and the target reflects unusually low contributions from energy, food, and other imported goods prices. The remaining quarter reflects the past weakness of domestic cost growth, and unit labour costs in particular. Although pay growth has recovered somewhat since the turn of the year, the recent increase in productivity means that the annual rate of growth in unit wage costs is currently around 1% – lower than would be consistent with meeting the inflation target in the medium term, were it to persist. Additionally, sterling’s appreciation since mid-2013 is having a continuing impact on the prices of imported goods. A combination of these factors has meant that the average of a range of measures of core inflation remains subdued, although it picked up slightly in July to a little over 1%.
Inflation is below the target and the Committee’s best collective judgement is that there remain at least some underutilised resources in the economy. In that light, the Committee intends to set monetary policy in order to ensure that growth is sufficient to absorb the remaining economic slack so as to return inflation to the target within two years.
The Committee set out its most recent detailed assessment of the economic outlook in the August Inflation Report. The aim of returning inflation to the target within two years was thought likely to be achieved conditional upon Bank Rate following the gently rising path implied by the market yields prevailing at the time. Private domestic demand growth was forecast to be robust enough to eliminate the margin of spare capacity over the next year or so, despite the continuing fiscal consolidation and modest global growth. And that, in turn, was expected to result in the increase in domestic costs needed to return inflation to the target in the medium term, as the temporary negative impact on inflation of lower energy, food and import prices waned. In the third year of the projection, inflation was forecast to move slightly above the target as sustained growth led to a margin of excess demand.
The Committee noted in the August Report that the risks to the growth outlook were skewed moderately to the downside, in part reflecting risks to activity in the euro area and China. Developments since then have increased the risks to prospects in China, as well as to other emerging economies. This led to markedly higher volatility in commodity prices and global financial markets.
While these developments have the potential to add to the global headwinds to UK growth and inflation, they must be weighed against the prospects for a continued healthy domestic expansion. Domestic momentum is being underpinned by robust real income growth, supportive credit conditions, and elevated business and consumer confidence. The rate of unemployment has fallen by over 2 percentage points since the middle of 2013, although that decline has levelled off more recently. Global developments do not as yet appear sufficient to alter materially the central outlook described in the August Report, but the greater downside risks to the global environment merit close monitoring for any impact on domestic economic activity.
There remains a range of views among MPC members about the balance of risks to inflation relative to the target. At the Committee’s meeting ending on 9 September the majority of members judged that the current stance of monetary policy remained appropriate. Ian McCafferty preferred to increase Bank Rate by 25 basis points, given his view that building domestic cost pressures would otherwise be likely to lead to inflation overshooting the target in the medium term.
All members agree that, given the likely persistence of the headwinds weighing on the economy, when Bank Rate does begin to rise, it is expected to do so more gradually and to a lower level than in recent cycles. This guidance is an expectation, not a promise. The actual path that Bank Rate will follow over the next few years will depend on the economic circumstances.
New Rules are affecting the way banking is conducted in the tri-state area of New York.
Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $40.3 billion in the fourth quarter of 2013, a $5.8 billion (16.9 percent) increase from the $34.4 billion in earnings that the industry reported a year earlier. This is the 17th time in the last 18 quarters — since the third quarter of 2009 — that earnings have registered a year-over-year increase. The improvement in earnings was mainly attributable to an $8.1 billion decline in loan-loss provisions. Lower income stemming from reduced mortgage activity and a drop in trading revenue contributed to a year-over-year decline in net operating revenue (the sum of net interest income and total noninterest income). More than half of the 6,812 insured institutions reporting (53 percent) had year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable fell to 12.2 percent, from 15 percent in the fourth quarter of 2012.
“The trend of slow but steady improvement that has been underway in the banking industry since 2009 continued to gain ground,” said FDIC Chairman Martin J. Gruenberg. “Asset quality improved, loan balances were up, and there were fewer troubled institutions. However, challenges remain in the industry. Narrow margins, modest loan growth, and a decline in mortgage refinancing activity have made it difficult for banks to increase revenue and profitability. Nonetheless, these results show a continuation of the recovery in the banking industry.”
The average return on assets (ROA), a basic yardstick of profitability, rose to 1.10 percent in the fourth quarter from 0.96 percent a year ago. The average return on equity (ROE) increased from 8.53 percent to 9.87 percent.
Fourth quarter net operating revenue totaled $166.1 billion, a decline of $2.8 billion (1.7 percent) from a year earlier, as noninterest income fell by $4.2 billion (6.6 percent) and net interest income increased by $1.4 billion (1.3 percent). The average net interest margin — the difference between the average yield banks earn on loans and other investments and the average cost of funding those investments — was 3.28 percent, the highest average of any quarter in 2013, but down from 3.34 percent in the fourth quarter of 2012.
Total noninterest expenses were $5.8 billion (5.3 percent) lower than in the fourth quarter of 2012, as litigation expenses fell by $3.1 billion at one large institution. Banks set aside $7 billion in provisions for loan losses, a reduction of $8.1 billion (53.7 percent) compared to a year earlier. This is the 17th consecutive quarter that the industry has reported a year-over-year decline in quarterly loss provisions.
Asset quality indicators continued to improve as insured banks and thrifts charged off $11.7 billion in uncollectible loans during the quarter, down $6.8 billion (37 percent) from a year earlier. The amount of noncurrent loans and leases — those 90 days or more past due or in nonaccrual status — fell by $14 billion (6.3 percent) during the quarter. The percentage of loans and leases that were noncurrent declined to 2.62 percent, the lowest level since the 2.35 percent posted at the end of the third quarter of 2008.
Net income over the full year of 2013 totaled $154.7 billion, an increase of $13.6 billion (9.6 percent) compared to 2012. The average full-year ROA rose to 1.07 percent from 1.00 percent in 2012. More than half of all institutions (54.2 percent) reported higher net income in 2013, while only 7.8 percent were unprofitable. This is the lowest annual proportion of unprofitable institutions since 2005.
Financial results for the fourth quarter of 2013 and the full year are contained in the FDIC’s latest Quarterly Banking Profile, which was released today. Also among the findings:
Total loan balances increased. Loan balances increased by $90.9 billion (1.2 percent) in the three months ending December 31, as all major loan categories except one- to four-family residential real estate loans experienced growth during the quarter. Loans to commercial and industrial (C&I) borrowers increased by $27.3 billion (1.7 percent), loans secured by nonfarm nonresidential real estate properties rose by $17.1 billion (1.6 percent), and credit card balances posted a $14.3 billion (2.1 percent) increase. Home equity loan balances declined for a 19th consecutive quarter, falling by $6.9 billion (1.3 percent). Balances of other loans secured by one- to four-family residential real estate properties fell by $13 billion (0.7 percent), as the amount of mortgage loans sold during the quarter exceeded by $29 billion the amount of mortgage loans originated and intended for sale. For the 12 months through December 31, total loan and lease balances were up by $197.3 billion (2.6 percent).
Mortgage activity remained well below year-ago levels. One- to four-family residential real estate loans originated and intended for sale were $307.7 billion (62 percent) lower than in the fourth quarter of 2012, as rising interest rates in the first half of 2013 reduced the demand for mortgage refinancings. Noninterest income from the sale, securitization and servicing of mortgages was $2.8 billion (34 percent) lower than a year ago. Realized gains on available-for-sale securities also were lower than a year ago, as higher medium- and long-term interest rates reduced the market values of fixed-rate securities. Banks reported $506 million in pretax income from realized gains in the fourth quarter, a decline of $1 billion (66.6 percent) from a year ago.
The number of “problem banks” fell for the 11th consecutive quarter. The number of banks on the FDIC’s “Problem List” declined from 515 to 467 during the quarter. The number of “problem” banks is down by almost half from the recent high of 888 at the end of the first quarter of 2011. Two FDIC-insured institutions failed in the fourth quarter of 2013, down from eight in the fourth quarter of 2012. For all of 2013, there were 24 failures, compared to 51 in 2012.
The Deposit Insurance Fund (DIF) balance continued to increase. The unaudited DIF balance — the net worth of the fund — rose to $47.2 billion as of December 31 from $40.8 billion as of September 30. Assessment income and a reduction in estimated losses from failed institution assets were the primary contributors to growth in the fund balance. Estimated insured deposits increased 0.7 percent, and the DIF reserve ratio — the fund’s balance as a percentage of estimated insured deposits — rose to 0.79 percent as of December 31 from 0.68 percent as of September 30. A year ago, the DIF reserve ratio was 0.44 percent. By law, the DIF must achieve a minimum reserve ratio of 1.35 percent by 2020.
This Press Release is courtesy of www.fdic.gov
Investment scams accounted for a third (33 per cent) of all money customers lost to scammers in 2023, up 23 per cent year-on-year, according to Barclays data1. Of all scam types, investment scams made up the greatest share of total claim values, with the volume of investment scams increasing by almost a third (29 per cent).
This spike is being fuelled by scammers taking advantage of their ability to promote unverified financial adverts on social media sites; more than 6 in 10 (61 per cent) investment scams now take place on these platforms.
Believing that they are investing in their future, investment scam victims are claiming an average of £14,313 – over five times more than the overall average scam claim. Barclays data shows millennials and men are particularly susceptible – men’s average investment scam claim increases to £16,306, while claims by young people aged 21-40 account for 48 per cent of all investment scams.
Whilst scammers target potential victims in a number of ways, adverts purporting to offer high-return investment opportunities are a common tactic – with a quarter (23 per cent) of young people saying that they’ve spotted what they believe to be an investment scam advertised on social media2. Almost one in five young people (17 per cent) have been contacted on social media by an individual offering an investment opportunity and one in every 10 people in the UK (11 per cent) know someone who has fallen victim to an investment scam.
A common trick that scammers will play is to get their victims to invest a small amount at the start – this then seemingly returns high rewards, which the scammers pay out from other victims’ money. This often convinces the victim that the investment is legitimate and in-turn leads to larger amounts being lost to the scammers, often over a long period of time.
As testament to the importance of due diligence, analysis of data from the FCA’s consumer helpline3 shows that there has been a sharp spike in investment scam-related calls, up 193 per cent in the last five years. The data also reveals investors have saved £2 million by identifying when purported investment opportunities were too good to be true – either by spotting spelling, grammatical or formatting mistakes, or by realising that requests for personal information were suspicious.
Stephanie Mac Sweeney, Head of Fraud Strategy at Barclays said: “It’s worrying to see such a rise in investment scams – with victims often heartlessly scammed out of large sums of money that they have been saving for their future. The banking industry works hard to educate, identify and intercept scams, but the only way to drive real change is to target these scams at their source. With the majority of investment scams now taking place on their platforms, social media firms must take responsibility, act on their promises and deliver a robust verification system to protect innocent people from falling prey to fraudulent investment adverts.”
Stephanie Mac Sweeney offers her top tips to help identify an investment scam:
More information on how to spot an investment scam and tips on how to protect yourself can be found on the Barclays website.
ENDS
Notes to editors
1Barclays business and personal current account customer scam data for January – December 2023.
2Consumer research conducted by an Opinium study of 2,000 participants, February 2024. Unless stated, all data cited is for young people, aged 18-34 years.
3FCA ScamSmart research and data: Armchair detective investors take inspiration from Sherlock Holmes to foil investment scams
For more information, please contact please contact Dee Fallon at deirdre.fallon@barclays.com or India McMillan at india.smyth@barclays.com
About Barclays
Our vision is to be the UK-centred leader in global finance. We are a diversified bank with comprehensive UK consumer, corporate and wealth and private banking franchises, a leading investment bank and a strong, specialist US consumer bank. Through these five divisions, we are working together for a better financial future for our customers, clients and communities.
OMAHA, Neb. & PORTLAND, Ore. – Aug. 10, 2015 – The boards of directors of Berkshire Hathaway Inc. (NYSE: BRK.A; BRK.B) and Precision Castparts Corp. (“PCC”) (NYSE: PCP) have unanimously approved a definitive agreement for Berkshire Hathaway to acquire, for $235 per share in cash, all outstanding PCC shares. The transaction is valued at approximately $37.2 billion, including outstanding PCC net debt.
“I’ve admired PCC’s operation for a long time. For good reasons, it is the supplier of choice for the world’s aerospace industry, one of the largest sources of American exports. Berkshire’s Board of Directors is proud that PCC will be joining Berkshire,” said Warren E. Buffett, Berkshire Hathaway chairman and chief executive officer.
“We are very pleased to be joining forces with Berkshire Hathaway,” said Mark Donegan, PCC’s chairman and chief executive officer. “We see a unique alignment between Warren’s management and investment philosophy and how we manage PCC for the long-term. We believe that as part of Berkshire Hathaway, PCC will be exceptionally well-positioned to support our customers’ needs into the future. This transaction offers compelling and immediate value for our shareholders, and allows PCC’s employees to continue to operate in the same manner that has generated many years of exceptional service and performance to our customers.”
The transaction requires approval by a majority of PCC’s outstanding shares. Closing is expected to occur during the first quarter of calendar 2016, subject to customary closing conditions, including clearance under the Hart-Scott-Rodino Act and competition clearance in certain foreign jurisdictions.
PCC will continue to do business around the world under the Precision Castparts name and maintain its headquarters in Portland, Oregon.
In light of this announcement, the three nominees who would have joined PCC’s Board of Directors if elected at PCC’s upcoming Annual Meeting of Shareholders, Peter B. Delaney, James F. Palmer and Janet C. Wolfenbarger, have withdrawn their candidacy. None of Mr. Delaney, Mr. Palmer or Ms. Wolfenbarger currently serves on PCC’s Board of Directors and PCC does not intend to nominate replacement directors for election at the Annual Meeting in their place. Other than Mr. Delaney, Mr. Palmer and Ms. Wolfenbarger, the nominees named in the Proxy Statement sent or made available to PCC shareholders, all of whom currently serve on PCC’s Board of Directors, intend to stand for election at the Annual Meeting. PCC intends to convene its Annual Meeting on August 11, 2015 as currently scheduled and, without conducting any business, adjourn the Annual Meeting to August 17, 2015 at 10:00 a.m., Pacific Time, in the Bella Vista Room of the Aquariva Restaurant, 0470 SW Hamilton Court, Portland, Oregon.
Credit Suisse acted as financial advisor to PCC and PCC’s legal counsel is Cravath, Swaine & Moore LLP and Stoel Rives LLP. Berkshire Hathaway’s legal counsel is Munger, Tolles & Olson LLP.
About Berkshire Hathaway (www.berkshirehathaway.com):
Berkshire Hathaway and its subsidiaries engage in diverse business activities including insurance and reinsurance, utilities and energy, freight rail transportation, finance, manufacturing, retailing and services. Berkshire Hathaway’s common stock is listed on the New York Stock Exchange, trading symbols BRK.A and BRK.B.
About Precision Castparts Corp. (www.precast.com):
Precision Castparts Corp. is a worldwide, diversified manufacturer of complex metal components and products. It serves the aerospace, power, and general industrial markets. PCC is a market leader in manufacturing complex structural investment castings and forged components for aerospace markets, machined airframe components, and highly engineered, critical fasteners for aerospace applications, and in manufacturing airfoil castings for the aerospace and industrial gas turbine markets. PCC also is a leading producer of titanium and nickel superalloy melted and mill products for the aerospace, chemical processing, oil and gas, and pollution control industries, and manufactures extruded seamless pipe, fittings, and forgings for power generation and oil and gas applications.
Saving for retirement and health care expenses was a priority for employees of all ages during the first half of 2014, according to the latest Bank of America Merrill Lynch 401(k) Wellness Scorecard. This semiannual report reveals trends in the behaviors of financial benefit plan participants, along with employers’ adoption of 401(k) design features in plans serviced by Bank of America Merrill Lynch.1 Key insights from the new report include:
Health savings account (HSA) usage grew 33 percent during the first six months of the year, with more than 384,000 workers now utilizing these tax-advantaged vehicles to prepare for qualified near- and long-term medical expenses. While Baby Boomers (38 percent) and Gen Xers (39 percent) make up the majority of account holders, Millennials (23 percent) are also using HSAs early in their careers.
Millennials are also taking positive retirement savings actions. Nearly 40,000 of these younger workers enrolled in their employer’s 401(k) plan for the first time during the first half of the year – a 55 percent increase from the same six-month period last year. Across all generations, the report found a 37 percent increase among first-time contributors.
“Seeing younger generations more vigorously engaged with workplace savings vehicles is encouraging,” said David Tyrie, head of retirement and personal wealth solutions for Bank of America Merrill Lynch. “These actions represent significant steps toward achieving long-term financial wellness in an era of rising health care costs, increasing longevity and self reliance due to fewer pension plans.”
Trends in employee behaviors revealed through this report are consistent with insights garnered from Merrill Lynch and Age Wave’s ongoing series of retirement studies. In particular, our recent health study found that health care expenses are people’s top financial concern for later life, which makes planning for them an essential part of holistic retirement preparation.2 In addition, our recent work study found that Millennials expect to rely primarily on personal savings and income to fund their retirement.3
Mobile participation on the rise
Employee engagement with Bank of America Merrill Lynch’s Benefits OnLine® Mobile optimized site increased 41 percent – with approximately 170,500 unique users accessing their benefits via mobile device during the first half of the year, up from 120,500 during the same period last year. This further demonstrates that participants want to receive education and information about their benefit plans, along with tools to better manage their finances, in a manner that reflects their on-the-go lives.
Plan sponsors often find mobile access to plan information to be the ideal way to reach Millennials, as well as hard-to-engage employees such as those in industries with limited access to desktop computers. Bank of America Merrill Lynch has introduced ongoing enhancements to its mobile benefits platform since 2012, providing employees access to detailed information in their 401(k), equity, defined benefit and non-qualified deferred compensation plans through a unified mobile experience.
Employers make saving easier, automatic
Employers continue to seek proactive ways to help their employees achieve their retirement goals and improve their overall financial wellness. Results from the report show that:
During the 12-month period ending June 30, 2014, the number of 401(k) plans combining auto enrollment and auto increase grew 19 percent compared to one year early, with 213 plans now using these features in tandem.
Nearly all employers (94 percent) that added auto enrollment during the first half of this year also added auto increase, compared to 50 percent during the same period last year.
Overall, more plan sponsors are adding voluntary auto increase to their plans, with a 63 percent increase in adoption of this feature during the last 12 months. And employees are responding, as evidenced by a 27 percent increase in the number of participants using auto increase.
Advice Access4 is a professional saving and investment advice service – offered online, via phone and in person – tailored to an employee’s life stage and individual situation. Employer adoption of this service as a resource for their workforce increased 6 percent year-over-year (June 30, 2013 to June 30, 2014). Similarly, plan participant usage of the service increased 8 percent during this period, to nearly 210,000 users – 34 percent of whom are Millennials, 26 percent are Baby Boomers.
“With intuitive plan design strategies, companies are making access to financial benefit plans and decision-making about enrollment and contribution rates easier, and helping employees achieve better outcomes through personalized education and advice,” said Steve Ulian, head of institutional business development for Bank of America Merrill Lynch. “By further integrating how employees save for retirement and long-term health care costs, employers can help people see a more complete picture of their financial wellness and make informed choices.”
Bank of America
Bank of America is one of the world’s largest financial institutions, serving individual consumers, small businesses, middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 48 million consumer and small business relationships with approximately 4,900 retail banking offices and approximately 15,700 ATMs and award-winning online banking with 31 million active users and more than 16 million mobile users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Bank of America Merrill Lynch is a marketing name for the Retirement Services business of Bank of America Corporation. Banking activities may be performed by wholly owned banking affiliates of BAC, including Bank of America, N.A., member FDIC. Brokerage services may be performed by wholly owned brokerage affiliates of BAC, including Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a registered broker-dealer and member SIPC.
CHARLOTTE, NC – Bank of America released its 2023 Financial Life Benefits® Impact Report (PDF), revealing that the average 401(k) account balance among men is 50% greater than women’s overall ($89,000 vs. $59,000). However, this gender imbalance is closing among younger generations. Baby Boomer (ages 58-76) and Gen X (ages 43-57) men have significantly greater account balances than women in their generations (87% vs. 53%, respectively). However, the gap between Millennial (ages 28-42) men and women is only 23%. Gen X continue to have the highest 401(k) participation rate (65%) across generations, followed by 57% of Baby Boomers and 55% of Millennials.
“The gender savings gap is an issue we can and must address. It carries personal implications for many, as well as macroeconomic implications for us all,” said Lorna Sabbia, Head of Retirement and Personal Wealth Solutions at Bank of America. “We are encouraged by the strides young, female employees are making, and want to encourage everyone to invest in their futures and leverage the workplace benefits available to them.”
Based on data across Bank of America’s proprietary employee benefits programs, which serve more than 25,000 companies and more than 6 million employees, the Financial Life Benefits Impact Report examines trends within 401(k) plans (PDF),Health Savings Accounts (HSAs) (PDF), equity compensation (PDF) and employee banking programs (PDF).
When looking at 401(k) savings plans as of the end of last year:
Participation rates dropped only slightly to 56% from 58% in 2021.
Average contribution rate declined to 6.4% from 6.6% in 2021.
26% of participants increased their contribution rate as compared to 8% of participants who decreased their savings rate.
The number of participants contributing small amounts (less than $5,000) increased to 66% (from 61% in 2021), while only 9% took full advantage of their 401(k) plan by contributing the maximum amount allowed.
Overall account balances declined by 17% related to stock and bond market declines.
When 401(k) plans include an auto-enroll feature, most employees (85%) participate, compared to just 36% participation without this feature.
Plans with auto-enroll that also have auto-increase rose (57% vs. 55% in 2021).
Employees are leveraging other benefits and resources to support their financial futures
In addition to 401(k) savings plans, employees are leveraging other benefits such as HSAs, equity awards and other financial resources to pursue their goals. Top findings related to these benefits include:
More employees received equity awards in 2022, though values were lower. 23% more participants received awards in 2022 than in 2021. However, there was a 16% decline in average shares outstanding per plan and a 30% decline in the value of outstanding shares at year-end.
HSA account holders are evolving from “spenders” to “savers.” More account holders contributed more than they withdrew (38% vs. 26% in 2021). The average HSA account declined by 6% in 2022, and more assets were held in cash deposits (58%) compared to longer-term investments (42%).
Financial education resources are top of mind. Employees are eager for education, with top interests including retirement (70%) and budgeting (23%). Participants would prefer to learn by attending a webinar (69%), followed by a short video (36%) and visiting a website for information (31%).
Participants want to engage digitally. 63% of participant visits were online, followed by 22% engaging via mobile apps and 15% through call centers.
“Employers serve an important role in ensuring that their employees are equipped with the best possible tools, resources and solutions for financial success and retirement planning,” said Kevin Crain, Head of Retirement Research & Insights at Bank of America. “We’re committed to working with employers to meet the needs of their employees, wherever they are in their financial journey.”
Bank of America
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 68 million consumer and small business clients with approximately 3,900 retail financial centers, approximately 15,000 ATMsE and award-winning digital banking with approximately 56 million verified digital users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business households through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the United States, its territories and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Bank of America is a marketing name for the Retirement Services business of Bank of America Corporation (“BofA Corp.”). Banking activities may be performed by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A., Member FDIC. Brokerage and Investment advisory services are provided by wholly owned non-bank affiliates of BofA Corp., including MLPF&S, a dually registered broker-dealer and investment adviser and Member SIPC.
Bank of America Merrill Lynch, a leader in card services for middle-market, large corporate and public sector clients, today announced that it has enhanced its global card capabilities with new products, services and geographies. The expanded capabilities are the latest developments of a multi-year investment strategy, and reflect the continuing importance of card products to creating optimal working capital solutions for corporations and public entities.
“Everything we’ve done over the last year to enhance our global card programs has been in direct response to client demand,” said Kevin Phalen, head of Global Card and Comprehensive Payables in Global Transaction Services (GTS). “The feedback we receive from clients at our proprietary conferences and day-to-day interactions is critical to designing our investment plans and determining how and where to expand our geographic footprint. We look forward to growing our business with new and existing clients in 2015 and beyond.”
Some of the significant enhancements introduced over the last year include:
Expanded the country footprint: The global reach of our card programs was extended to Guatemala and Turkey.
Enhanced delivery capabilities: We now provide real-time account management and integrated global data consolidation in Hong Kong and India.
Investments in servicing: For our clients’ corporate travelers, we continue to invest in our phone and mobile based solution set. The enhanced functionality allows users to access data and live support via their preferred channel anywhere around the globe, 24×7.
B2B card solutions: We expanded our B2B payment solution utilizing virtual card accounts cards into the Asia Pacific region. Today, clients can enjoy the working capital benefits of the solution in 27 countries across Asia Pacific, EMEA, Latin America and North America.
Chip and PIN: In April, the company announced the expansion of chip and PIN technology to all Purchasing and Travel credit card products available to clients in the United States. The bank has been a leader in chip and PIN technology, having been the first issuer to offer the enhanced security to U.S. travelers, enabling them to make successful transactions at overseas merchants and un-manned terminals.
Mobile solutions: We launched a mobile application of Global Reporting and Account Management, the expense reporting solution for card programs. Executives who are on the go can now leverage the tool’s capabilities to help control spending, optimize profits and facilitate compliance with their own travel policies.
“Improved transparency and tighter control over expenses continue to be hot topics for organizations of all sizes in every region around the world,” said Percy Batliwalla, head of Sales for GTS. “As card programs grow in efficacy and sophistication, they are becoming an increasingly powerful tool for treasury departments – providing them the granular information they need to better manage and forecast their finances.”
Visit the Bank of America Merrill Lynch website for further information about the bank’s Card and Comprehensive Payables Solutions.
Bank of America
Bank of America is one of the world’s largest financial institutions, serving individual consumers, small businesses, middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 48 million consumer and small business relationships with approximately 4,900 retail banking offices and approximately 15,700 ATMs and award-winning online banking with 31 million active users and more than 16 million mobile users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
“Bank of America Merrill Lynch” is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and members of SIPC, and, in other jurisdictions, by locally registered entities. Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed.
Bank of America Merrill Lynch, a leader in Global Commercial Card solutions, today announced that it has launched a mobile application for cardholders of prepaid cards. The app launch demonstrates the bank’s commitment to making the lives of our clients and their cardholders easier by bringing new, digital capabilities to corporate and government clients and to their customers or beneficiaries.
“Prepaid card programs can deliver considerable benefits to companies and government agencies of all sizes. In replacing checks, prepaid cards can help organizations simplify compliance, eliminate manual work, lower expenses, and reduce risks,” said Hubert J.P. Jolly, head of financing and channels for Global Transaction Services at BofA Merrill. “With the mobile app, we’re excited to bring a new level of convenience and transparency to our clients’ prepaid cardholders.”
The app is designed for cardholders who receive a reloadable prepaid card from an employer, government agency or entity with whom they do business. The key features of the mobile app include:
Viewing balances: Cardholders can check their balances while on the go.
Viewing transactions: Users have instant access to pending and posted transactions.
Finding an ATM: Users can access an interactive map that makes it easy to find a nearby ATM.
Suspending or reactivating cards: Cardholders can use the app to place a lock on their card in the event that it is lost or stolen. They can also use it to unlock their card.
Managing and receiving alerts: Users can set up email and text alerts to be notified when card balances are low, when deposits are received, and when their personal information changes.
Biometrics: For biometric-enabled devices, users can take advantage of touch or facial recognition to authenticate their device, replacing the need to input a password.
“While cardholders can already access their account information either online or via customer service phone number, the mobile app makes it even easier for them to manage their financial transactions, which they can now do regardless of their physical location,” added Jolly.
The BofA Merrill Prepaid mobile app is free and available to download from the Apple iTunes® and Google Play™ stores.
Bank of America
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 47 million consumer and small business relationships with approximately 4,400 retail financial centers, approximately 16,100 ATMs, and award-winning digital banking with approximately 36 million active users, including 25 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the United States, its territories and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Investors see growing overvaluations in both bonds and equities and have signaled concern about a valuation bubble forming, according to the BofA Merrill Lynch Fund Manager Survey for April.
The proportion of global investors saying equity markets are overvalued has reached its highest level since 2000. A net 25 percent of respondents to the global survey say that global equities are currently overvalued, up from a net 23 percent in March and a net 8 percent in February. This is still, however, short of the record-high level of a net 42 percent in 1999.
At the same time, the proportion of respondents saying that bond markets are overvalued has reached a new high in the survey’s history. A net 84 percent of the global panel says that bonds are overvalued, up from a net 75 percent in March. At the same time, 13 percent believe that “equity bubbles” are the biggest tail risk markets are facing, up from 2 percent in February.
Global respondents believe that the focus of overvaluation is on the U.S. – a net 68 percent of the panel says that the U.S. is the most overvalued region globally. Global panelists believe that all other regions, including Europe and Japan remain undervalued.
These assessments come as investors increasingly accept that U.S. rates will rise at a time when the European Central Bank and the Bank of Japan are engaged in monetary stimulus. Although a majority of investors expect no Fed hike before the third quarter, 85 percent expect a rate rise to take place this year.
“April’s survey offers further proof that global investors are front-running global monetary policy,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Research. “We are seeing a form of rational exuberance in Europe where a positive view on stocks is supported by fundamentals – but investors no longer believe valuations are cheap,” said Manish Kabra, European equity and quantitative strategist.
Investors signal concerns over dollar valuation
Faced with the prospect of the Fed starting to tighten monetary policy, investors believe that currencies face higher volatility. Eighteen percent of the global panel says that currencies is the asset class most vulnerable to volatility, a rise of 5 percentage points since March.
More investors say the dollar is overvalued against the euro and the yen. The proportion of respondents saying the U.S. dollar is overvalued has risen to a net 13 percent – a big swing from February when a net 12 percent took the view the dollar is undervalued.
A net 8 percent believe the euro is undervalued this month, compared with a net 24 percent saying it was overvalued two months ago. A small majority of the panel (a net 2 percent) now believes the yen is undervalued, compared with a net 12 percent saying it was overvalued two months ago. Despite their view on valuations, however, a majority of investors still expect the dollar to appreciate, and the euro to depreciate, in the coming year.
Edge has come off the euro exuberance
The highs of euro-mania seen in March have eased, but European equities retain much of their allure in April’s survey. A net 46 percent of asset allocators remain overweigh eurozone equities, down from a record net 60 percent in March. A net 37 percent of investors say the eurozone is the region they most want to overweight in the coming 12 months, though this too is down from a net 63 percent in March.
The regional survey shows that Europeans have changed their perspective on valuation. A net 10 percent say that European equities are overvalued this month, up from a net 3 percent taking the view they were undervalued in March. However, a net 73 percent expect better corporate profits in the next year, up from a net 69 percent last month.
Japan also remains in favor. While the proportion of asset allocators overweight Japanese equities ticked down two percentage points over the month to a net 38 percent, the reading remains the fourth-highest since 2006. Furthermore, the proportion of investors seeking to overweight Japan in the coming year rose to a net 22 percent from a net 10 percent.
Shift towards value over growth?
While asset allocators are currently favoring growth sectors such as Technology and Discretionary, global investors have indicated that they will start prioritizing value over growth investing. The survey shows a spike in the proportion of panelists predicting that “value” will outperform “growth” in the coming year – up to a net 25 percent from a net 6 percent in March. The shift is even more pronounced among European investors responding to the Regional Survey. A net 17 percent say that value will outperform growth this month, compared with a net 22 percent taking the opposite view in March, a monthly swing of 39 percentage points.
Fund Manager Survey
An overall total of 177 panelists with US$494 billion of assets under management participated in the survey from 2 to 9 April 2015. A total of 145 managers, managing US$392 billion, participated in the global survey. A total of 83 managers, managing US$172 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Global Research with the help of market research company TNS. Through its international network in more than 50 countries, TNS provides market information services in over 80 countries to national and multi-national organizations. It is ranked as the fourth-largest market information group in the world.
BofA Merrill Lynch Global Research
The BofA Merrill Lynch Global Research franchise covers over 3,400 stocks and 1,100 credits globally and ranks in the top tier in many external surveys. Most recently, the group was named Top Global Research Firm of 2014 by Institutional Investor magazine; No. 1 in the 2015 Institutional Investor All-Europe Fixed Income Research survey; No. 1 in the 2014 Institutional Investor All-Europe survey; No. 1 in the 2014 Institutional Investor All-Asia survey for the fourth consecutive year; No. 1 in the Institutional Investor 2014 Emerging EMEA Survey; and No. 2 in the 2014 Institutional Investor All-America survey. The group was also named No. 2 in the 2014 All-China survey and No. 2 in the 2014 All-America Fixed Income survey for the third consecutive year.
Bank of America
Bank of America is one of the world’s largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 48 million consumer and small business relationships with approximately 4,800 retail banking offices and approximately 15,800 ATMs and award-winning online banking with 31 million active users and approximately 17 million mobile users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Bank of America Merrill Lynch is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated, which is a registered broker-dealer and a member of FINRA and SIPC, and, in other jurisdictions, locally registered entities. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured * May Lose Value * Are Not Bank Guaranteed.
Global investors have regained a strongly bullish stance on the outlook for equity markets in the second half of 2014, according to the BofA Merrill Lynch Fund Manager Survey for July.
A net 61 percent of global asset allocators are now overweight equities. This ranks as the survey’s highest reading on this measure since early 2011 and represents the panel’s second-strongest response ever.
This aggressive positioning for recovery in H2 reflects a significant increase in investors’ inflation expectations. A net 71 percent expect global core CPI to be higher in 12 months, up 13 percentage points since last month. This marks a cyclical high for the survey. Exposure to commodities, an asset class especially sensitive to inflation, has risen to its strongest in more than a year.
A growing number of investors now see inflation moving above trend levels while global growth remains below-trend. Confidence in macroeconomic performance still remains fairly high, though. A net 69 percent forecast that the world economy will strengthen over the next year.
Neither valuation nor tail risks deter fund managers from their optimism. A net 21 percent regard stock markets as overvalued – the survey’s highest reading since 2000. Concerns over potential Chinese debt defaults, “asset manias” and eurozone deflation have all faded since last month. The prospect of geopolitical crises now stands out as the greatest tail risk and threat to financial market stability.
“Improving investor sentiment on global growth, inflation, equities and risk-taking are all testament to a potential macro normalization in the second half. This could eventually feed into a normalization of rates. If growth does pick up, volatility will rise too,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Research. “As Europe’s recovery falters the region is becoming a global passenger as investors pin their hopes on growth elsewhere,” said Obe Ejikeme, European equity and quantitative strategist.
Qualms over core Europe
Regional investors now see global re-acceleration as the likeliest source of eurozone growth. Thirty-three percent of respondents point to this driver after a rise of eight percentage points month-on-month. It has overtaken a renewed stimulus program as the panel’s primary driver of regional recovery.
Global survey respondents have further postponed the timing of anticipated quantitative easing by the European Central Bank. Twenty-five percent now expect QE to take place in 2015, up from June’s 15 percent, while only 12 percent see it starting in Q3.
Against this background, the panel has lost conviction towards European equities. Only a net 10 percent would now most favor overweighting the region across the next year, down 11 percentage points from June’s reading.
German equities have lost favor in particular. Only a net 12 percent of regional fund managers would overweight this market over the next 12 months, compared to a net 31 percent last month.
Periphery appetite fading
Investors’ appetite for exposure to the eurozone periphery is also declining. U.S. high-yield has overtaken EU peripheral debt (down nine points month-on-month) as the investment trade that fund managers regard as most crowded.
Confidence in periphery equities has fallen, too. Most notably, only a net 3 percent of regional investors now see Italy as one of the European equity markets they will seek to overweight over the next year, down 16 percentage points from last month. Appetite for Spain has barely weakened, however.
Call for capex
For the seventh month in a row, investors’ call for companies to invest more in capital spending has again reached a record high. The reading now stands at an unprecedented 65 percent and is mirrored by a record net 71 percent judging that companies are under-investing – the highest reading since the survey began asking this question in 2005.
Conversely, those wanting companies to return surplus cash are at their lowest level in five years. Only 18 percent of fund managers are looking to companies to institute buybacks or dividend payments – or to make acquisitions for cash.
Fund Manager Survey
An overall total of 228 panelists with US$674 billion of assets under management participated in the survey from 3 July to 10 July 2014. A total of 179 managers, managing US$524 billion, participated in the global survey. A total of 113 managers, managing US$293 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Global Research with the help of market research company TNS. Through its international network in more than 50 countries, TNS provides market information services in over 80 countries to national and multi-national organizations. It is ranked as the fourth-largest market information group in the world.
BofA Merrill Lynch Global Research
The BofA Merrill Lynch Global Research franchise covers more than 3,500 stocks and 1,180 credits globally and ranks in the top tier in many external surveys. Most recently, the group was named Top Global Research Firm of 2013 by Institutional Investor magazine; No. 1 in the 2014 Institutional Investor All-Europe survey; No. 1 in the 2014 Institutional Investor All-Asia survey for the fourth consecutive year; No. 1 in the Institutional Investor 2014 Emerging EMEA Survey; No. 2 in the 2013 Institutional Investor All-America survey; No. 2 in the 2013 All-Latin America survey; and No. 2 in the 2013 All-China survey. The group was also named No. 2 in the 2014 Institutional Investor All-Europe Fixed Income Research survey; and No. 2 in the 2013 All-America Fixed Income survey for the second consecutive year.
Bank of America
Bank of America is a leading financial institution, serving individual consumers, small businesses, middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 49 million consumer and small business relationships with approximately 5,100 retail banking offices and approximately 16,200 ATMs and award-winning online banking with 30 million active users and more than 15 million mobile users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Bank of America Merrill Lynch is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated, which is a registered broker-dealer and a member of FINRA and SIPC, and, in other jurisdictions, locally registered entities. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured * May Lose Value * Are Not Bank Guaranteed.
– See more at: http://newsroom.bankofamerica.com/press-releases/economic-and-industry-outlooks/bofa-merrill-lynch-fund-manager-survey-finds-investo-3#sthash.FVLTLCPn.dpuf
Global investors have shifted their attention from Greece to China amid continued concern of a Chinese recession, according to the BofA Merrill Lynch Fund Manager Survey for August. Respondents are scaling back their expectations for economic growth.
• China recession is now rated the number one “tail risk” by 52 percent of panel.
• Fifty-three percent of investors say the global economy will strengthen in coming year, down from 61 percent in July.
• The survey reports the lowest allocations to emerging markets equities since April 2001 and to the Energy sector since February 2002.
• More investors say Global Emerging Markets is the region they most want to underweight; Europe is the region they most want to overweight.
• The survey notes a rising consensus that the Fed will raise rates in third quarter; the majority of panel now expects the yield curve to flatten in next 12 months.
• An anti-commodities stance is evident with moves out of Energy and Materials, while defensive weightings increase.
“Investors are sending a clear message that they are positioned for lower growth in China and emerging markets,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
“European stocks remain in favour – but investors like domestically focused names and are avoiding anything exposed to China or commodities,” said James Barty, head of European equity strategy.
Fund Manager Survey
An overall total of 202 panelists with US$574 billion of assets under management participated in the survey from 7 August to 13 August 2015. A total of 162 managers, managing US$449 billion, participated in the global survey. A total of 100 managers, managing US$224 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Global Research with the help of market research company TNS. Through its international network in more than 50 countries, TNS provides market information services in over 80 countries to national and multi-national organizations. It is ranked as the fourth-largest market information group in the world.
BofA Merrill Lynch Global Research
The BofA Merrill Lynch Global Research franchise covers almost 3,400 stocks and 1,200 credits globally and ranks in the top tier in many external surveys. Most recently, the group was named Top Global Research Firm of 2014 by Institutional Investor magazine; No. 1 in the 2015 Institutional Investor Latin America survey; No. 1 in the Institutional Investor 2015 Emerging EMEA Survey; No. 2 in the 2015 Institutional Investor All-Asia survey; and No. 2 in the 2015 All-America Fixed Income survey for the fourth consecutive year. The group was also named No. 2 in the 2014 Institutional Investor All-America survey and No. 2 in the 2014 All-China survey.
Bank of America
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 48 million consumer and small business relationships with approximately 4,800 retail financial centers, approximately 16,000 ATMs, and award-winning online banking with 31 million active users and approximately 18 million mobile users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Bank of America Merrill Lynch is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated, which is a registered broker-dealer and a member of FINRA and SIPC, and, in other jurisdictions, locally registered entities. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured * May Lose Value * Are Not Bank Guaranteed.
WASHINGTON, World Bank Group President Jim Yong Kim today called for economic growth that creates more just societies, and he defined the institution’s goal of boosting shared prosperity as the World Bank Group’s way of tackling the global challenge of inequality.
Speaking at Howard University in Washington DC on the eve of the World Bank/IMF Annual Meetings, Kim explained how under his leadership, the World Bank Group has set two twin goals: ending extreme poverty by 2030 and boosting shared prosperity among the poorest 40 percent in developing countries. Kim today told attending students and faculty what the second goal – boosting shared prosperity – means in the fight against inequality, and how to make progress in achieving it.
“We are working to ensure that the growth of the global economy will improve the lives of all members of society not only a fortunate few,” said Kim. “To accomplish this, the World Bank Group aims to achieve specific income-related and social goals: We want to raise the earnings of the lowest 40 percent of income earners in developing countries and improve their access to life’s essentials, including food, health care, education and jobs.”
Citing a report from Oxfam International which stated that the world’s richest 85 people have as much combined wealth as the poorest 3.6 billion, Kim said that boosting shared prosperity is also important to the pursuit of justice.
“Think about that: A group far smaller than the number of people in this room possesses more wealth than half the world’s population. With so many Africans, as well as Asians, and Latin Americans, living in extreme poverty, this state of affairs is a stain on our collective conscience. Protecting an individual’s ability to reap financial reward for hard work and success is extremely important. It creates motivation; it drives innovation; and it permits people to help others. At the same time, what does it mean that so much of the world’s enormous wealth has accrued to so few?,” asked Kim.
Kim noted that inequality in societies is a greater issue than income, and he pointed to the Ebola crisis as a failure to share knowledge and infrastructure equitably with countries in Africa.
“For the first time in the history of the World Bank Group, we have set a goal that aims to reduce global inequality,” said Kim. “As the spread of the Ebola virus in West Africa shows, the importance of this objective could not be more clear. The battle against the infection is a fight on many fronts – human lives and health foremost among them. But it is also a fight against inequality. The knowledge and infrastructure to treat the sick and contain the virus exists in high and middle income counties. However, over many years, we have failed to make both accessible to low income people in Guinea, Liberia and Sierra Leone. So now, thousands of people in these countries are dying because, in the lottery of birth, they were born in the wrong place.”
Kim stated that increasing individual incomes, while important, is only part of the equation for boosting shared prosperity. “We need economic growth to deliver benefits that create more just societies. So, in addition to changes in income, boosting shared prosperity also focuses on improving gender equity and low income people’s access to food, shelter, clean water, sanitation health care, education and job opportunities.”
“Boosting shared prosperity is the World Bank Group’s way of tackling the challenge of inequality,” said Kim.
In his speech at Howard, a historically black university, Kim stated that the commitment to equality is evident in the Bank Group’s diversity efforts.
“The Bank is probably one of the most diverse institutions in Washington. Our employees are citizens of over 100 countries and speak almost as many languages,” said Kim. “We have made progress in expanding the diversity of the World Bank Group, but we can do better. For example, for years, we have fallen short in recruiting African Americans to our ranks. That is changing. We have asked some of the most thoughtful national leaders on diversity to help us build a broad and sustained outreach to highly qualified African American candidates. We have also begun a process to establish concrete targets that will result in senior managers hiring more diverse staff. I expect to see the results of our determined activity this coming year.”
Kim noted that Howard and the World Bank Group are in discussions about creating internships for doctoral candidates in economics to work with our Development Economics Vice President’s office.
“These internships would allow the doctoral students a chance to immerse themselves in development policies and programs affecting countries around the world. I hope that this program and my presence encourage many of you to prepare your resumes. Twenty-nine Howard graduates currently work at the Bank. We are always looking for the best and the brightest, and we have found many of them here.”
Kim noted that Dr. Martin Luther King was not only a civil rights leader but a leader in the global fight against poverty.
“Four days before his death, Dr. King gave one of his final sermons. Standing only a few miles from here at Washington’s National Cathedral, he called poverty a ‘monstrous octopus’ that ‘spreads its nagging, prehensile tentacles into hamlets and villages all over our world.’ He said that he had seen it in Latin America, Africa and Asia, in addition to Mississippi, New Jersey and New York. He spoke of the challenge ‘to rid our nation and the world of poverty.’”
In closing, Kim asked the assembled students and faculty to take on the Bank Group’s twin goals:
When the President took office in 2009, the economy was shrinking at its fastest rate in 50 years and shedding over 800,000 private sector jobs per month. The unemployment rate reached 10 percent that year, a level not seen in over 25 years. The housing market was in a free fall and the American manufacturing industry was thought to be in irreversible decline, with the auto industry nearing collapse. The deficit hit a post-World War II high, and health care costs had been rising rapidly for decades.
Today, the U.S. economy is recovering and, in 2014, achieved a number of important milestones. American businesses set a new record for the most consecutive months of job growth: 58 straight months and a total of 11.2 million new jobs, and counting. In 2014, the economy added more jobs than in any year since the 1990s. Significantly, nearly all of the employment gains have been in full-time positions. At the same time, the annual unemployment rate in 2014 fell 1.2 percentage points from the previous year, the largest annual decline in the last 30 years.
Over the last four years, the United States has put more people back to work than Europe, Japan, and every other advanced economy combined. As the economy strengthened, the unemployment rate fell from a high of 10 percent in 2009 to 5.6 percent at the end of 2014. Long-term unemploy- ment declined from 6.8 million in April 2010 to 2.8 million in December 2014 and fell even faster than overall unemployment over the past year.
For the first time in two decades, the United States has started producing more oil than it imports. Domestic natural gas production set a new record high in 2014. The manufacturing sector continues to experience its strongest period of job growth since the late 1990s. Rising home prices are bringing millions of homeowners back above water, restoring nearly $5 trillion in home equity.
The progress in the economy since the President took office has been steady and it has been real. The President’s decisive actions during the financial crisis brought the economy back from the brink, to the increasingly strong growth seen today. The Administration pushed the Recovery Act to jumpstart the economy and create jobs; rescued the auto industry from near collapse; fought for passage of the Affordable Care Act to provide insurance coverage to millions of Americans and help slow the growth of health care costs; and secured the Dodd-Frank Wall Street reform legislation to help prevent future crises. The American people’s determination and resilience, coupled with the Administration’s work, are driving the economy full steam ahead.
Helping, Not Hurting the Economy: The End of Austerity and the Move Away from Manufactured Crises
During the first years of the Administration, the President and the Congress worked together to enact measures that jumpstarted and strengthened the economy, and made it more resilient for the future. In addition to the Recovery Act, the Affordable Care Act, and Dodd-Frank Wall Street reform legislation, the Congress took bipartisan action in 2010 to temporarily reduce payroll taxes and continue emergency unemployment benefits.
Unfortunately, policies adopted in subsequent years hurt, rather than helped, the economy.
A Retrospective on 2013 Sequestration
When the Congress failed to enact the balanced long-term deficit reduction required by the Budget Control Act of 2011, a series of automatic cuts known as sequestration went into effect, cancelling more than $80 billion in budgetary resources across the Federal Government in 2013. Beyond the economic impacts, these cuts also had severe programmatic impacts, shortchanging investments that contribute to future growth, reducing economic opportunity, and harming vulnerable populations. For example:
Hundreds of important scientific projects went unfunded. The National Institutes of Health funded the lowest number of competitive research project grants in over a decade, providing roughly 750 fewer competitive grants in 2013 compared to the previous year. These unfunded grants included more than a hundred competitive renewal applications that were considered highly meritorious for additional funding in peer review, limiting research into brain disorders, infectious disease, and cancer. Also as a result of sequestration, the National Science Foundation awarded 690 fewer competitive awards than the previous year, resulting in the lowest total number of competitive grants provided since 2006, limiting scientists and students’ ability to pursue cutting-edge, potentially revolutionary discoveries.
Tens of thousands of low-income children lost access to Head Start. Over 57,000 children lost access to Head Start and Early Head Start in school years 2012–2013 and 2013–2014, forgoing critical early learning experiences and health and nutrition services intended to help improve their cognitive, physical, and emotional development. As a result, Head Start enrollment dipped to its lowest level since 2001. In addition, Head Start centers were forced to reduce the number of school days by more than 1.3 million. [1]
Fewer low-income families received housing vouchers. A total of 67,000 Housing Choice Vouchers were lost, resulting in reduced access to affordable, safe, and stable housing for low-income families. Although the Department of Housing and Urban Development and Public Housing Authorities took extraordinary steps to prevent families from losing assistance, many vouchers were withdrawn from families that were in the process of looking for housing or not reissued when families left the program, while many of the families remaining in the program faced higher rents.
While the Bipartisan Budget Act of 2013 replaced a portion of the damaging and short-sighted sequestration cuts in 2014 and 2015 with long-term reforms, they did not go far enough. Without further congressional action, sequestration will return in full in 2016, bringing discretionary funding — or, spending that is approved through the appropriations process — to its lowest level in a decade, adjusted for inflation. In fact, assuming roughly the current allocation of resources across programs, a return to sequestration levels in 2016 would mean the lowest real funding level for research since 2002 — other than when sequestration was in full effect in 2013 — and the lowest real per-pupil funding levels for education since 2000, a major disinvestment in exactly the areas where investment is needed to support growth.
[1] Head Start programs reported the number of days of service reduced because a shortened school year was required to implement the unprecedented reductions in their funding. The total number of days grantees reported eliminated from their school year is multiplied by the number of children affected by those cuts to produce the estimate that 1.3 million days of service were eliminated.
Sequestration cuts that took effect in March 2013 reduced the gross domestic product (GDP) by 0.6 percentage points and cost 750,000 jobs, according to the Congressional Budget Office (CBO). In 2011, and again in 2013, congressional Republicans sought to use the Nation’s full faith and credit as a bargaining chip, driving down consumer confidence and driving up economic policy uncertainty measures. The Federal Government shutdown in October 2013 created further uncertainty and reduced growth in the fourth quarter of 2013 by at least 0.3 percentage points.
Beginning in 2014, however, policymakers moved away from manufactured crises and austerity budgeting, helping to lay the groundwork for job market gains and stronger growth. The President worked with congressional leaders from both parties to secure a two-year budget agreement (the Bipartisan Budget Act of 2013) and enact full-year appropriations bills that replaced a portion of the harmful sequestration cuts and allowed for higher investment levels in 2014 and 2015.
The Council of Economic Advisers estimated that the 2013 budget deal will create about 350,000 jobs over the course of 2014 and 2015, meaning that it has likely contributed to the marked improvement in the labor market this past year. Moreover, thanks in part to the budget deal, 2014 will likely have been the first year since 2010 that Federal fiscal policy did not significantly reduce economic growth.
Increased certainty and a break from the threat of shutdown and other fiscal crises also added to growth, according to several independent analyses. For example, an analysis by Macroeconomic Advisers found that fiscal uncertainty cost 900,000 jobs from 2009 through mid-2013. The crises also negatively impacted consumer confidence, which fell markedly around the time of the 2011 and 2013 manufactured crises, and, along with small business optimism, has only returned to pre-recession levels in the past year (see previous chart). Business leaders, economists, and the Federal Reserve Chair have all attributed stronger growth in part to reduced fiscal headwinds and uncertainty, and business leaders have urged policymakers to avoid a return to manufactured crises and needless austerity.
Fiscal Progress
Since 2010, Federal deficits have shrunk at an historic pace — the most rapid sustained deficit reduction since the period just after World War II. The turn away from austerity in 2014 was accompanied by another steep drop in the deficit, bringing it to 2.8 percent of GDP — the lowest level since 2007, about one-third the size of the deficit the President inherited, and below the 40-year average. Over the past five years, actual and projected deficits have fallen due to three main factors.
First, economic growth has helped accelerate the pace of deficit reduction. Growth in recent years has increased revenues and reduced spending on “automatic stabilizers” programs, such as unemployment insurance, that automatically increase during economic downturns.
Second, since 2010, policymakers have put in place more than $4 trillion in deficit reduction measures through 2025, not counting additional savings achieved by winding down wars in Iraq and Afghanistan. These measures include restoring Clinton-era tax rates on the wealthiest Americans and discretionary spending restraint. Sequestration cuts account for a minority of the discretionary savings achieved since 2010, and have had a negative impact on critical services and public investments in future growth (see above, A Retrospective on 2013 Sequestration).
Finally, deficits are falling due to historically slow health care cost growth. The years since 2010 have seen exceptionally slow growth in per-beneficiary health care spending in both private insurance and public programs (see previous chart). As a result, 2011–2013 saw the three slowest years of growth in real inflation-adjusted per-capita national health expenditures since record-keeping began in 1960. While some of the slowdown can be attributed to the Great Recession and its aftermath, there is increasing evidence that much of it is the result of structural changes. These include reforms enacted in the Affordable Care Act that are reducing excessive payments to private insurers and health care providers in Medicare, creating strong incentives for hospitals to reduce readmission rates, and starting to change health care payment structures from volume to value.
The health care cost slowdown is already yielding substantial fiscal dividends. Compared with the 2011 Mid-Session Review, aggregate projected Federal health care spending for 2020 has decreased by $216 billion based on current budget estimates, savings above and beyond the deficit reduction directly attributable to the Affordable Care Act.
The chart below shows how slower health care cost growth and policy changes are contributing to improving the medium-term budget outlook. In the 2011 Mid-Session Review, published in July, 2010, the Administration projected a 2020 deficit of 5.1 percent of GDP if current policies were to continue. The Budget projects a baseline deficit of 3.3 percent of GDP in 2020, a reduction of 1.9 percentage points, or $491 billion. One major contributor to the improvement is lower-than-expected Federal health spending. Revisions to health spending forecasts based on the historically slow growth of the past several years (and based on the assumption that only a portion of the slowdown will continue) account for about half of the net improvement in the projected deficits. Another important factor is the high-income revenue increases enacted in the American Taxpayer Relief Act of 2012, which contributed about a fifth of the new improvement. Discretionary spending restraint has also played a large role, although the impact of sequestration is much less than the impact of the pre-sequestration Budget Control Act caps and prior appropriations action and less than the savings from winding down wars.
An under-appreciated aspect of the Nation’s recent fiscal progress has been the way these same factors, discussed above, have led to a significant improvement in the long-term outlook (as discussed in more detail in the Long Term Budget Outlook chapter of the Analytical Perspectives volume). Moreover, as discussed below, a number of the President’s Budget policies, and particularly the proposed reforms to health and immigration, will not only substantially reduce deficits over the next 10 years, but will have a growing impact in reducing deficits beyond the next decade.
The Budget: A Roadmap for Continued Economic and Fiscal Progress
The progress that has been made to date is significant, but not sufficient to address either the Nation’s economic or fiscal challenges. The Budget increases investments that will accelerate growth and expand opportunity, while also finishing the task of putting the Nation on a sustainable fiscal path.
Investing in Growth and Opportunity. The Bipartisan Budget Act of 2013 reversed a portion of sequestration and allowed for higher investment levels in 2014 and 2015, but it did nothing to alleviate sequestration in 2016. In the absence of congressional action, non-defense discretionary funding in 2016 will be at its lowest level since 2006, adjusted for inflation, even though the need for pro-growth investments in infrastructure, education, and innovation has only increased due to the Great Recession and its aftermath. Inflation-adjusted defense funding will also be at its lowest level since 2006.
The Budget finishes the job of reversing mindless austerity budgeting and makes needed investments in key priorities, even while setting the Nation on a fiscally responsible course. The proposed increases in the discretionary bud- get caps make room for a range of domestic and security investments that will help move the Nation forward. These include investments to strengthen the economy by improving the educa- tion and skills of the U.S. workforce, accelerating scientific discovery, and continuing to bolster manufacturing. They also include program integ- rity initiatives that will reduce the deficit by many times their cost. As described in the Investing in America’s Future chapter, the Budget proposes to further accelerate growth and opportunity and create jobs through pro-work, pro-family tax re- forms and through mandatory investments — or, direct spending that is determined outside the appropriations process — in surface transportation infrastructure, universal pre-kindergarten, child care assistance for middle-class and work- ing families, and other initiatives.
Putting the Nation on a Sustainable Fiscal Path. The Budget achieves $1.8 trillion of deficit reduction over 10 years, primarily from health, tax, and immigration reform. As described further in the Investing in America’s Future chapter, the Budget includes about $400 billion of health savings that grow over time, extending the life of the Medicare Trust Fund by approximately five years, and building on the Affordable Care Act with further incentives to improve quality and control health care cost growth. It also reflects the President’s support for commonsense, comprehensive immigration reform along the lines of the 2013 bipartisan Senate-passed bill. The CBO estimated that the Senate-passed bill would reduce the deficit by about $160 billion over 10 years and by almost $1 trillion over two decades, while the Social Security Actuary estimated that it would reduce Social Security’s 75-year shortfall by eight percent. In addition, the Budget obtains about $640 billion in deficit reduction from reduc- ing tax benefits for high-income households.
Under the Budget, deficits decline to about 2.5 percent of GDP. Starting in 2016, debt de- clines as well, reaching 73.3 percent of GDP in 2025, a reduction of 1.9 percentage points from its peak. The key test of fiscal sustainability is whether debt is stable or declining as a share of the economy, resulting in interest payments that consume a stable or falling share of the Nation’s resources over time. The Budget meets that test, showing that investments in growth and opportunity are compatible with also putting the Nation’s finances on a strong and sustainable path.
The economic growth and progress the Nation has seen in the President’s first six years in of- fice prove that America’s resurgence is real. As the President said it would be, 2014 was a year of action and a breakthrough year for America; a year that saw accelerated job growth, sharp declines in unemployment, uninsured rates at near-record lows, and a continuation of his- torically slow health care price growth. Now it is time to invest in America’s future to drive economic growth and opportunity, secure the Nation’s safety, and put the Nation’s finances on the road to a more sustainable fiscal outlook. The Budget does just that.
BofA Merrill Lynch Global Research today released its outlook for the markets in 2015, forecasting that the bull market in global equities will continue next year but returns will slow to single-digit rates. Strong fundamentals and healthy growth in the U.S. economy support a case for investor optimism and opportunism; however, in the lower-return, higher-volatility environment projected ahead, selective allocation and defensive portfolio moves will be crucial for performance.
At the annual BofA Merrill Lynch Year Ahead Outlook news conferences held today in New York and London, analysts from the Institutional Investor magazine top-ranked global research firm summarized their outlook for the U.S. and global economies as cautiously optimistic.
“While our key measures suggest that the bull market in equities can continue, the sentiment is far from euphoric,” said Candace Browning, head of BofA Merrill Lynch Global Research. “The world appears to be under-allocated to stocks, and we believe we are still only a third of the way into the Great Rotation from bonds. In the U.S., we are maintaining our long-term sector weightings with no changes from 2014, as many of the macroeconomic expectations last year have been delayed. In the current environment, now is the time for investors to be highly selective and make tactical moves to position portfolios for more thematic investing in a transforming world.”
Robust U.S. economic growth continues to outpace the rest of the world, boding well for U.S. employment, wages and housing in 2015. Core inflation is expected to remain steady, and as the new year begins, confidence is high, oil prices are low, the dollar is strong and Washington is relatively calm. As stocks near fair value, sentiment among the research team shifts from extremely bullish to slightly bullish. In the second half of the year, the U.S. Federal Reserve will begin slowly hiking interest rates and investors can anticipate three key changes: lower liquidity, wider credit spreads and higher volatility.
Against this backdrop is moderately accelerating global growth, offset by the very real threat of deflation outside the U.S., particularly in Europe. The BofA Merrill Lynch Global Research team made the following 10 macro calls for the year ahead.
The Standard and Poor’s 500 Index expected to rise to 2200. While we believe the era of excess returns and excessively low volatility is in the past, the secular bull market in stocks should continue. Expected gains in the year ahead imply a price return of approximately 6 percent, in line with an anticipated modest deceleration in earnings growth.
U.S. and global economic growth accelerating. The U.S. economy should continue to grow with household and corporate balance sheets nearly fully recovered and with more stable Federal and state and local fiscal policy In 2015, U.S. GDP growth is projected at 3.3 percent, with global real GDP growth of 3.7 percent (up from 3.2 percent in 2014) and Euro Area GDP growth of 1.2 percent.
Moderate emerging market acceleration. Economic growth in emerging markets should reach 4.5 percent next year, up slightly from a disappointing 4.2 percent in 2014 (but below the consensus call of 4.8 percent). The improvement should be driven by stronger U.S. growth, lower energy prices and cyclical rebounds in a few large economies like Brazil and India.
Inflation, disinflation and deflation. Low inflation is driving policies in every country. Core inflation in the U.S. is expected to remain steady at about 1.5 percent, well below the Federal Reserve’s 2 percent target. Meanwhile, the global backdrop is disinflationary. In 2015, we expect Japan to focus on ending deflation, while Europe faces a major threat of outright deflation, which if it occurs, could trigger another debt crisis.
Commodities face near-term headwinds. Moving into 2015, we see downside risks to energy prices on the back of OPEC’s decision to allow the market to “stabilize itself.” This could result in lower oil prices but also higher price volatility. Our Brent crude oil forecast is reduced for an average of $77 per barrel, and our WTI forecast is reduced to $72 per barrel in 2015. The combination of a strong U.S. dollar, higher interest rates and relatively subdued growth should keep other commodity prices in check in 2015. Even then, we expect base metals to perform relatively well on falling inventories, particularly aluminum and zinc, though copper is less certain. Lastly, gold prices potentially could fall to $1,100 per ounce.
Global rates and currencies: liquidity transfusion. The U.S. dollar should remain strong in 2015 as the U.S. economy outperforms and the Fed moves to the exit. Rates outside the U.S. are expected to remain low, or even decline, with the five-year German government bond yield potentially falling to zero and the euro/U.S. dollar and U.S. dollar/yen reaching 1.20 and 1.23, respectively, by the end of 2015.
Credit markets under pressure. We expect next year to bring an end to an unprecedented five-year reach for yield trade as investment grade credit spreads widen to 140 basis points with total returns close to zero. A paradigm shift in U.S. high-yield outlook should occur in 2015 with returns in the low single-digit range, as investors demand a higher premium for liquidity. Defaults should rise moderately to about 2.0-2.5 percent. IG and HY Issuance is expected to decline by 10-15 percent next year on less refinancing activity.
Global fixed income: a call for quality. The story of 2015 may be outflows for both retail and institutional investors in the U.S. and wider investment-grade spreads. U.S. investment-grade bonds could see a total return of zero. Meanwhile, investment grade in emerging markets should return 2.4 percent; in Europe, 1.5 percent to 2 percent; and in Asia, 1.4 percent. Total returns for high yield could finish around 6 percent in Asia and the emerging markets, around 5 percent in Europe and 2-3 percent in the U.S.
Hope springs eternal for U.S. housing market. New home sales are picking up to more normal levels, rising 18 percent in 2015 and 13 percent in 2016 from extreme lows. Existing home sales should increase by a more moderate 5 percent in 2015 and 3.2 percent in 2016, while home price appreciation continues to slow.
U.S. energy boom set to slow. Total U.S. energy production continues to be driven by substantial shale production; however, most shale oil projects generate very little free cash flow, which means that output is highly price-sensitive. The steep price drop will impact operations of small, levered shale producers. Thus we see U.S. shale oil output growth dropping down to half of this year’s levels. In 2015, we expect natural gas prices to average $3.90 per million British thermal units, driven by continued strong domestic production growth of 3.1 billion cubic feet per day and a drop in weather-sensitive demand. Both the U.S. natural gas and thermal coal markets are expected to remain weak throughout 2015, in our view, and liquid natural gas should enter a bear market.
BofA Merrill Lynch Global Research
The BofA Merrill Lynch Global Research franchise covers nearly 3,400 stocks and 1,100 credits globally and ranks in the top tier in many external surveys. Most recently, the group was named Top Global Research Firm of 2013 by Institutional Investor magazine; No. 1 in the 2014 Institutional Investor All-Europe survey; No. 1 in the 2014 Institutional Investor All-Asia survey for the fourth consecutive year; No. 1 in the Institutional Investor 2014 Emerging EMEA Survey; No. 2 in the 2014 Institutional Investor All-America survey; and No. 2 in the 2013 All-China survey. The group was also named No. 2 in the 2014 Institutional Investor All-Europe Fixed Income Research survey; and No. 2 in the 2014 All-America Fixed Income survey for the third consecutive year.
Bank of America
Bank of America is one of the world’s largest financial institutions, serving individual consumers, small businesses, middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 48 million consumer and small business relationships with approximately 4,900 retail banking offices and approximately 15,700 ATMs and award-winning online banking with 31 million active users and more than 16 million mobile users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
German service providers reported a further rise in business activity in August, although the pace of
expansion slowed since the previous month. Employment also rose at a weaker rate, while new business continued to increase. Meanwhile, business sentiment fell to the lowest level in nearly one year.
The seasonally adjusted Markit Germany Services Business Activity Index fell from July‟s 37-month high of 56.7 to 54.9, thereby signalling a strong, albeit weaker rise in German service sector output. Business activity has now risen for 15 consecutive months and the rate of growth remained above the long-run series average of 53.0. Surveyed companies linked higher activity to the processing of backlogs and increased new orders. Out of the six monitored sub-sectors, Transport & Storage companies signalled the sharpest rise in output. The headline index reading followed an earlier „flash‟ estimate of 56.4.
Meanwhile, total private sector output expanded at the slowest pace in 10 months, as highlighted by the final Markit Germany Composite Output Index – which measures the combined output of the manufacturing and service sectors – falling from July‟s 55.7 to 53.7. Nevertheless, the latest index reading was above its long-run average of 53.0.
Private sector employment rose for a tenth straight month, albeit at the weakest rate since March. New business received by German service sector companies continued to increase in August, and the rate of growth picked up slightly since July.
Panelists generally linked higher volumes of new work to successful acquisitions and stronger demand.
With output and new orders rising further, German service providers hired additional workers in August. The rate of job creation eased, however, and was the slowest in five months. Some companies increased their staffing levels in order to reduce backlogs of work.
Indeed, the level of unfinished work in Germany‟s service sector fell further in August. Work outstanding has now declined continuously on a monthly basis since December last year.
On the price front, input costs in Germany‟s service sector continued to increase in August. However,
the rate of input price inflation eased since July and was the weakest in over four years. Some
panellists linked the weaker inflation to competitive market conditions and lower borrowing costs. Rising staff costs meanwhile contributed to the overall increase.
August data signalled a further marginal rise in prices charged by German service providers. The rate of charge inflation was the weakest since April, with the vast majority of the survey panel reporting
no change since July. The level of positive sentiment towards the business outlook fell to an 11-month low, which some companies linked to a weakening domestic economy, the introduction of a minimum wage and rising global insecurity.
Commenting on the final Markit Germany PMI® survey data, Oliver Kolodseike, economist at Markit and author of the report said: “Germany’s service sector sustained its strong growth momentum in August, although activity growth slowed since the previous month. New business continued to flood in, but companies were relatively cautious about their staffing levels, with employment rising only slightly.
“Total private sector output meanwhile expanded at the slowest pace since October last year and job
creation also weakened. Our survey respondents partly linked slower growth to a weakening economic environment, with some panelists also mentioning heightened geopolitical tensions.
“The Composite PMI data are currently still signalling an expansion in German GDP in the third quarter, following the surprise drop in Q2. It is, however, very unlikely that growth will be as strong
as seen in the opening three months of the year.”
This news is courtesy of http://www.markiteconomics.com/
The economic fallout from the COVID-19 pandemic has been devastating for U.S. small businesses, with many experiencing dramatic declines in revenues and cash liquidity following the government-mandated closures that began in March. The effects of the economic downturn have been especially severe for Black-owned businesses— many of which entered this crisis undercapitalized.1
As a step towards helping black-owned businesses recover and move forward, a coalition of four business advocacy groups—the National Minority Supplier Development Council, US Black Chambers, National Urban League and Black Enterprise— have partnered with JPMorgan Chase to launch Advancing Black Entrepreneurs by Chase for Business. Together with Chase Business Banking, these organizations have developed an educational curriculum designed specifically for eligible black entrepreneurs on key topics that are vital to business growth and sustainability.
Experts from the four business advocacy groups will administer a series of 90-minute virtual sessions to participating entrepreneurs at no cost. The first session focuses on how business owners can address immediate financial needs and build resiliency in the age of coronavirus. Participating entrepreneurs will receive free instruction on a variety of topics— including how to protect cash flow, reduce expenses, maintain vendor relationships, collect outstanding revenues, and manage inventory and other assets.
“How businesses adapt, innovate and plan for the future will determine their future survival— and we’re committed to helping as many black entrepreneurs as we can navigate this path,” said Christopher Hollins, Managing Director of Chase Business Banking. “The businesses that will be best positioned to thrive after this crisis are those that have managed cash flows effectively, pivoted business models where necessary, and strengthened ties to their communities while keeping employees and customers safe.”
Black-owned businesses experienced a 26% decline in cash balances in March compared to the prior year,2 according to the JPMorgan Chase Institute, and could require more recovery assistance than others due to severe revenue shocks in recent months.
Participating entrepreneurs will also receive instruction on how to reimagine their businesses if necessary— with insights into how to build more flexibility into supply chains, develop an online presence, revisit staffing models, and a primer on accounting best practices for new grants or loans they may have recently received. In addition, the course will provide insights into how to manage banking relationships in this environment.
Here’s what the advocacy groups had to say about this initiative:
“Black entrepreneurs play a vital role in the economic health of black communities, and it is critical that we equip them with the necessary tools and insights at this time,” said Adrienne Trimble, President and CEO of the National Minority Supplier Development Council. “We’re looking forward to working with the coalition and Chase Business Banking to position black-owned businesses for success and prepare them for life after the crisis.”
“Although we’re certainly in a difficult economic environment, there are countless examples of businesses that are finding a way to move forward, and it’s important that we share these stories and provide a roadmap for black entrepreneurs,” said Ron Busby, the President and CEO of US Black Chambers. “Together with the coalition and Chase Business Banking, we will deliver timely, actionable content to an audience that needs it on a mass scale.”
“Black-owned businesses are a pillar of our communities, and we must be intentional about connecting them to crucial resources like the Advancing Black Entrepreneurs initiative in this time of crisis,” said Marc Morial, the President and CEO of the National Urban League. “If we don’t act now in a meaningful way, we’re facing a real risk of seeing the racial wealth gap accelerate at an even faster rate.”
“It is important that we connect black business owners to insights, mentorship and resources during this time of crisis to help them not just survive, but to position them for life beyond the crisis,” said Derek Dingle, Senior Vice President and Chief Content Officer at Black Enterprise. “Advancing Black Entrepreneurs is about helping black entrepreneurs create sustainable models for growth, and position them for continued job creation within the communities they serve.”
1.JPMorgan Chase Institute, “Small Businesses in Black and Hispanic Communities Have Lower Profitability and Cash Liquidity than Businesses in White Communities.” 9/30/2019
2.JPMorgan Chase Institute, “Small Business Financial Outcomes during the Onset of COVID-19.” 6/2020
About JPMorgan Chase
JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm with assets of $2.6 trillion and operations worldwide. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, and asset management. A component of the Dow Jones Industrial Average, JPMorgan Chase & Co. serves millions of customers in the United States and many of the world’s most prominent corporate, institutional and government clients under its J.P. Morgan and Chase brands. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.
MCLEAN, Va.- Capital One 360, the nation’s largest direct bank, is opening its first area Café at 799 Boylston Street in Boston’s Back Bay. Bostonians visiting the new Café can recharge their bank accounts, their devices and their lives by learning new ways to save time and money, and trying out financial and digital tools – all while enjoying free Wi-Fi and a hand-crafted espresso from Peet’s Coffee & Tea’s full line of beverages.
As an online bank, Capital One 360 lets people bank where and when they want – but also knows that making a face-to-face connection to its Customers and communities is important. The Café is a retail destination where Customers can experience the same banking services as the Capital One 360 online bank, along with Associates who are available to answer banking questions and demonstrate digital and financial tools, all while enjoying a hand-crafted latte. Boston will be the first U.S. city to have multiple Capital One 360 Cafés with additional locations scheduled for Downtown Crossing, Coolidge Corner and Harvard Square.
“Boston is a vibrant, digitally savvy city with residents who embrace innovation and ingenuity, and the city is an ideal place for us to expand and build upon the success of our 360 Cafés,” said Jim Kelly, Head of Direct Banking, Capital One. “Our Cafés provide a great environment for us to interact with the local community and our Customers. From fostering conversations about saving, to introducing new financial tools, our Cafés give us an opportunity to make personal connections, and showcase our passion for helping people save time and money.”
Peet’s Coffee & Tea hand-crafted coffee and tea beverages
Capital One 360 Cafés have been serving Peet’s espresso and drip coffee for more than a decade, since the first Café opened in New York City in 2001. In the new Boston 360 Cafés, Peet’s will be the exclusive beverage and food service provider, with trained baristas on staff to serve its full line of premium hand-crafted coffee, espresso and tea beverages. Peet’s also will offer bagged coffee, tea and other merchandise. Since Peet’s opened its first store in Berkeley, Calif. in 1966, the company has been dedicated to crafting the highest quality, hand-roasted coffee using the world’s best beans and maintaining a strict standard of freshness.
“Our expanded relationship with Capital One 360 further highlights our strong commitment to bring Peet’s premium, quality coffee to more neighborhoods across the U.S., beginning this year with Capital One 360 Cafés in Boston,” said David Burwick, President and CEO of Peet’s Coffee & Tea. “With a dedication to fresh, premium coffee and hand-crafted beverages, we’re taking it to the next level together with Capital One 360, creating Cafés in Boston with a more unique, personal experience that Customers will appreciate.”
Of note, as part of the Boston roll-out, Capital One Customers will receive a 50 percent discount on their hand-crafted Peet’s beverage purchases when they use a Capital One credit or debit card.
From cups of coffee to giving back
In addition to serving 360 Customers, the Back Bay Café will be a community hub for bringing people together for events focused on digital tools, trends and innovations, as well as education and face-to-face conversations. Similar to other 360 Cafés, it will offer free meeting space for non-profit groups.
In the New England region, Capital One has partnered with Junior Achievement to teach local students about money management. In addition to Junior Achievement, Capital One works with BUILD, whose mission is to use entrepreneurship to motivate low-income students. Before doors to the Back Bay Café even opened, Associates have dedicated their time to working with these two organizations. Already, Associates have painted and installed new technology at BUILD, while also working with students on ways to grow their businesses using digital tools and technology.
This Press Release is courtesy of www.capitalone.com
SEATTLE, In its ongoing quest to empower self-directed investors, Capital One ShareBuilder has introduced a selection of new tools designed to help investors research securities and better understand their investments.
“As we approach the New Year, now is a great time for investors to review their portfolio holdings and performance, and determine if their current allocation aligns to their long-term goals,” said Dan Greenshields, president of Capital One ShareBuilder. “Self-directed investors are looking to build a sound investing strategy, and these new tools may help them keep track of their investments and better understand the outcomes of their investing decisions as markets and personal circumstances change.”
ShareBuilder’s new Portfolio Allocation and Performance tools are designed to educate investors on strategic asset allocation and the relationship between allocation and return. The What If I Had Invested tool allows investors to determine how a theoretical investment would have performed.
Portfolio Allocation breaks down a portfolio by asset class, market cap and security. This tool may help investors better understand the level of diversification among their asset classes, and determine if they have enough exposure to various asset classes.
Performance provides a transparent overview of each account’s overall performance, highlighting time-weighted returns for specific periods of time. This tool offers investors greater transparency and a clear understanding of gains and losses amongst their investments.
Using What If I Had Invested, investors can learn how a U.S.-listed stock investment may or may not have paid off (had they actually made the investment). Performance is broken down by total gains and losses, total market value, total transaction fees and annualized and cumulative returns, offering investors insights into specific equities’ historical performance.
Capital One ShareBuilder also introduced a new Global Markets research and trading tool available on its iPad tablet app, enabling investors to track 19 major global exchanges (three domestic and 16 international) and research the indexes, ETFs, mutual funds and equities that provide exposure to each country or region. Investors can track performance and make trades from their iPad.
“Today investors are increasingly aware of international markets, and we’ve seen immense interest in well-known international equities like the Chinese e-commerce site Alibaba. We’re also experiencing strong growth in mobile trading, with nearly one-quarter of our trades now being made via mobile device,” said Greenshields.
Showcased below, the Global Markets iPad tablet app allows investors to explore a virtual globe to assess the performance of various indexes over time and research securities within each index, as well.
Global Markets
For full information on each of these products, visit www.sharebuilder.com.
About Capital One ShareBuilder
Capital One ShareBuilder is a leading online investing site for investors who have long-term financial goals and want to say goodbye to investing complexity. Whether you’re a seasoned investor or just getting started, ShareBuilder by Capital One has tools and resources to help Americans plan their financial futures. No minimum balance required when you open an account and pay low commissions when investing. Trade when you want, any amount you want, and what you want — stocks, exchange-traded funds, mutual funds, options and retirement tools.
BEIJING, Oct. 30, 2021 — In early October, the International Monetary Fund, in its World Economic Outlook, trimmed its 2021 global growth forecast to 5.9 percent and warned of high uncertainty in economic recovery.
Against such a backdrop, the leaders of the world’s 20 largest economies gathered in Italy’s Rome on Saturday trying to make the multilateral platform work again — just as it did when they held two summits a year in the immediate aftermath of the 2008 global financial meltdown.
Cooperation against pandemic
As the COVID-19 still ravages the world, global vaccine cooperation was prioritized by Chinese President Xi Jinping when delivering his speech via video at the first session of the summit.
He proposed a six-point Global Vaccine Cooperation Action Initiative with a focus on vaccine R&D cooperation, fair distribution of vaccines, waiving intellectual property rights on COVID-19 vaccines, smooth trade in vaccines, mutual recognition of vaccines and financial support for global vaccine cooperation.
Inequality in vaccine distribution is prominent, with low-income countries receiving less than 0.5 percent of the global total and less than 5 percent of Africa’s population is fully vaccinated, according to the World Health Organization (WHO).
The WHO has set two targets to deal with the pandemic: to vaccinate at least 40 percent of the world’s population by the end of this year and increase it to 70 percent by mid-2022.
“China is ready to work with all parties to increase the accessibility and affordability of vaccines in developing countries and make positive contributions to building a global vaccine defense line,” Xi said.
China has provided over 1.6 billion doses of vaccines for over 100 countries and international organizations to date. In total, China will provide over 2 billion doses for the world in the whole year, he added, noting that China is conducting joint vaccine production with 16 countries.
Building open world economy
In promoting the economic recovery, the president stressed that the G20 should prioritize development in macro policy coordination, calling for making global development more equitable, effective and inclusive to ensure that no country will be left behind.
“Advanced economies should fulfill their pledges on official development assistance and provide more resources for developing countries,” Xi said.
He also welcomed the active participation of more countries in the Global Development Initiative.
Not long ago, he proposed the Global Development Initiative at the United Nations and called on the international community to strengthen cooperation in areas of poverty alleviation, food security, COVID-19 response and vaccines, development financing, climate change and green development, industrialization, digital economy and connectivity.
The initiative is highly compatible with the G20’s goal and priority of promoting global development, Xi said.
Adherence to green development
Meanwhile, addressing climate change is high on the global agenda as the 26th session of the Conference of the Parties (COP26) to the UN Framework Convention on Climate Change will open on Sunday in Glasgow, Scotland.
In this context, Xi urged developed countries to lead by example on emissions reduction, saying that countries should fully accommodate the special difficulties and concerns of developing countries, deliver on their commitments of climate financing, and provide technology, capacity-building and other support for developing countries.
“This is critically important for the success of the upcoming COP26,” he said.
Xi has, on many occasions, highlighted China’s view on global climate governance and expressed China’s firm support for the Paris Agreement, facilitating major progress at the global level.
In 2015, Xi delivered a keynote speech at the Paris Conference on Climate Change, making a historic contribution to the conclusion of the Paris Agreement on global climate action after 2020.
Earlier this month, he emphasized efforts to achieve China’s carbon peak and neutrality targets when addressing the leaders’ summit of the 15th meeting of the Conference of the Parties to the Convention on Biological Diversity.
The G20 summit this year was held both online and offline under the Italian Presidency, focusing on the most pressing global challenges, with issues related to the COVID-19 pandemic, climate change and economic recovery topping the agenda.
Created in 1999, the G20 comprising 19 countries plus the European Union, is the main forum for international cooperation on financial and economic issues.
The group accounts for almost two-thirds of the world’s population, over 80 percent of the global Gross Domestic Product and 75 percent of global trade.
https://news.cgtn.com/news/2021-10-30/China-puts-forward-proposals-on-boosting-global-development-14MDU37P5gk/index.html
SOURCE CGTN
CONTACT: Jiang Simin, +86-188-2655-3286, cgtn@cgtn.com
Related Links
www.cgtn.com
Let me begin by thanking the organizers for inviting me to participate in this important dialogue on the role of finance in society. The financial sector is vital to the economy. A well-functioning financial sector promotes job creation, innovation, and inclusive economic growth. But when the incentives facing financial firms are distorted, these firms may act in ways that can harm society. Appropriate regulation, coupled with vigilant supervision, is essential to address these issues.
Unfortunately, in the years preceding the financial crisis, all too many firms took on risks they could neither measure nor manage. Leverage, interconnectedness, and maturity and liquidity transformation escalated to dangerous levels across the financial system. The result was the most severe financial crisis and economic downturn since the Great Depression. Almost 9 million Americans lost their jobs, roughly twice as many lost their homes, and all too many households ended up underwater on their mortgages and overburdened with debt. To be sure, some individuals and families borrowed unwisely, but too often financial institutions encouraged the behavior that resulted in such excessive debt.
In my remarks today I will discuss some important reasons why the incentives facing financial institutions were distorted and the steps that regulators are taking to realign those incentives.
The Important Role of the Financial Sector
Before discussing the incentives that contributed to the buildup of risk at financial institutions, I would like to highlight the important contributions that the financial sector makes to the economy and society. First and foremost, financial institutions channel society’s scarce savings to productive investments, thereby promoting business formation and job creation. Access to capital is important for all firms, but it is particularly vital for startups and young firms, which often lack a sufficient stream of earnings to increase employment and internally finance capital spending. Indeed, research shows that more highly developed financial systems disproportionately benefit entrepreneurship.1
The financial sector also helps households save for retirement, purchase homes and cars, and weather unexpected developments. Many financial innovations, such as the increased availability of low-cost mutual funds, have improved opportunities for households to participate in asset markets and diversify their holdings.2 Expanded credit access has helped households maintain living standards when suffering job loss, illness, or other unexpected contingencies.3 Technological innovations have increased the ease and convenience with which individuals make and receive payments.4
The contribution of the financial sector to household risk management and business investment, as well as the significant contribution of financial-sector development to economic growth, has been documented in many studies.5 Such research shows that, across countries and over time, financial development, up to a point, has disproportionately benefited the poor and served to alleviate economic inequality.6
Distorted Incentives in the Financial Sector
Despite these benefits, as we have seen, actions by financial institutions have the potential to inflict harm on society. Instead of promoting financial security through prudent mortgage underwriting, the financial sector prior to the crisis facilitated a bubble in the housing market and too often encouraged households to take on mortgages they neither understood nor could afford. Recent research has raised important questions about the benefits and costs of the rapid growth of the financial services industry in the United States over the past 40 years.7
A combination of responses to distorted incentives by players throughout the financial system created an environment conducive to a crisis. Excessive leverage placed institutions at great risk of insolvency in the event that severe, albeit low-probability, problems materialized. Overreliance on fragile short-term funding by many institutions left the system vulnerable to runs. And excessive risk-taking increased the probability that severe problems would, in fact, materialize. Moreover, regulators–and the structure of the regulatory system itself–did not keep up with changes in the financial sector and were insufficiently attuned to systemic risks. Once concerns began to develop about escalating losses at large firms, insufficient liquidity and capital interacted in an adverse feedback loop. Funding pressures contributed to “fire sales” of financial assets and losses, reducing capital levels and heightening liquidity pressures–culminating in the near collapse of the financial system in late 2008.
Capital and liquidity
Several factors encouraged excessive leverage, including market perceptions that some institutions were “too big to fail.”8 Financial institutions also had an incentive to engage in regulatory arbitrage, moving assets to undercapitalized off-balance-sheet vehicles. The complexity of the largest banking organizations also may have impeded market discipline. In addition, financial intermediation outside of the traditional banking sector grew rapidly in the years up to 2007, leaving gaps in the regulatory umbrella. And conflicts in the incentives facing managers, shareholders, and creditors may have induced banks to increase leverage.9
To strengthen banks’ resilience, the Federal Reserve and the other banking agencies have substantially increased capital requirements. Regulatory minimums for capital relative to risk-weighted assets are significantly higher, and capital requirements now focus on the highest-quality capital, such as common equity. In addition to risk-based standards, bank holding companies and depositories face a leverage ratio requirement. Also, significantly higher capital standards–both risk-weighted and leverage ratios–are being applied to the most systemically important banking organizations. Such surcharges are appropriate because of the substantial harm that the failure of a systemic institution would inflict on the financial system and the economy. Higher capital standards provide large, complex institutions with an incentive to reduce their systemic footprint. We are also employing annual stress tests to gauge large institutions’ ability to weather a very severe downturn and distress of counterparties and, importantly, continue lending to households and businesses. Firms that do not meet these standards face restrictions on dividends and share buybacks. As a result of these changes, for the largest banks, Tier 1 common equity–the highest-quality form of capital‑‑has more than doubled since the financial crisis.
New liquidity regulations will also improve incentives in the financial system. Prior to the crisis, institutions’ incentives to rely on short-term borrowing to fund investments in riskier or less liquid instruments were distorted in two important ways. First, many investors were willing to accept a very low interest rate on short-term liabilities of financial institutions or on securitizations without demanding adequate compensation for severe-but-unlikely risks, such as a temporary loss of market liquidity. Perhaps these firms expected government support or simply considered illiquidity a very remote possibility. Second, institutions’ attempts to shift their holdings once concerns about credit or liquidity risk arose created a fire-sale dynamic that amplified declines in market values, causing unanticipated spillovers onto other institutions and across markets.10
Recently implemented regulations aim to strengthen liquidity. For example, a new liquidity coverage ratio requires internationally active banking organizations to hold sufficient high-quality liquid assets to meet their projected net cash outflows during a 30-day stress period. A new process–the Comprehensive Liquidity Analysis and Review–sets supervisory expectations for liquidity-risk management and evaluates institutions’ practices against these benchmarks. A proposal for a net stable funding ratio would require better liquidity management at horizons beyond that covered by the liquidity coverage ratio. A proposed capital surcharge for the largest firms would discourage overreliance on short-term wholesale funding. Also, the Securities and Exchange Commission has adopted changes in regulations that may help avoid future runs on prime money market mutual funds (that is, money funds that invest primarily in corporate debt securities). And reforms in the triparty repo market have reduced risks associated with intraday exposures.
Large, complex institutions and too big to fail
In the aftermath of the crisis, the Congress tasked the banking regulators with challenging and changing the perception that any financial institution is too big to fail by ensuring that even very large banking organizations can be resolved without harming financial stability. Steps are under way to achieve this objective. In particular, banking organizations are required to prepare “living wills”–plans for their rapid and orderly resolution in the event of insolvency. Regulators are considering requiring that bank holding companies have sufficient total loss-absorbing capacity, including long-term debt, to enable them to be wound down without government support.11 In addition, the Federal Deposit Insurance Corporation has designed a strategy that it could deploy (known as Single Point of Entry) to resolve a systemically important institution in an orderly manner.
The crisis also revealed that risk management at large, complex financial institutions was insufficient to handle the risks that some firms had taken. Compensation systems all too frequently failed to appropriately account for longer-term risks undertaken by employees. And lax controls in some cases contributed to unethical and illegal behavior by banking organizations and their employees. The Federal Reserve has made improving risk management and internal controls a top priority. For example, the Comprehensive Capital Analysis and Review, which includes the stress tests that I mentioned, also involves an evaluation to ensure firms have a sound process in place for measuring and monitoring the risks they are taking and for matching their capital levels to those risks. Also, supervisors from the Fed and other agencies have pressed firms to improve their internal controls and to make their boards of directors more directly responsible for compensation decisions and employee conduct.
Changes to Regulatory and Supervisory Focus
As I noted, the financial crisis revealed weaknesses in our nation’s system for supervising and regulating the financial industry. Prior to the crisis, regulatory agencies, including the Federal Reserve, focused on the safety and soundness of individual firms–as required by their legislative mandate at the time–rather than the stability of the financial system as a whole. Our regulatory system did not provide any supervisory watchdog with responsibility for identifying and addressing risks associated with activities and institutions that were outside the regulatory perimeter. The rapid growth of the “shadow” nonbank financial sector left significant gaps in regulation.
In response, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) expanded the mandate and authority of the Federal Reserve to allow it to consider risks to financial stability in supervising financial firms under its charge. Within the Federal Reserve System, we have reorganized our supervision of the most systemically important institutions to emphasize what we call a “horizontal perspective,” which examines institutions as a group and in comparative terms, focusing on their interaction with the broader financial system. We also created a new office within the Fed to identify emerging risks to stability in the broader financial system–both the bank and nonbank financial sectors–and to develop policies to mitigate systemic risk. The Dodd-Frank Act created the interagency Financial Stability Oversight Council, chaired by the Treasury Secretary, and the Federal Reserve is a member. It is charged with identifying systemically important financial institutions and systemically risky activities that are not subject to consolidated supervision and designating those institutions and activities for appropriate supervision. And it is charged with encouraging greater information sharing and policy coordination across financial regulatory agencies.
Where We Stand
My topic is broad, and my time is short. Let me end with three thoughts. First, I believe that we and other supervisory agencies have made significant progress in addressing incentive problems within the financial sector, especially within the banking sector. Second, policymakers, including those of us at the Federal Reserve, remain watchful for areas in need of further action or in which the steps taken to date need to be adjusted. And, third, engagement with the broader public is crucial to ensuring that any future steps move our financial system closer to where it should be. Active debate and discussion of these issues at this conference and in other forums is important to improve our understanding of the challenges that remain.
References
Admati, Anat R., Peter M. DeMarzo, Martin F. Hellwig, and Paul Pfleiderer (2013a). “Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity Is Not Socially Expensive,” Leaving the Board Working Paper 2065. Stanford, Calif.: Stanford Graduate School of Business, October 22.
—— (2013b). “The Leverage Ratchet Effect,” Leaving the Board Working Paper 3029. Stanford, Calif.: Stanford Graduate School of Business, December 2.
Beck, Thorsten, Asli Demirgüç-Kunt, and Ross Levine (2007). “Finance, Inequality and the Poor,” Leaving the Board Journal of Economic Growth, vol. 12 (March), pp. 27-49.
Board of Governors of the Federal Reserve System (2015). “Federal Reserve Survey Provides Information on Mobile Financial Services,” press release, March 26.
Cecchetti, Stephen G., and Enisse Kharroubi (2012). “Reassessing the Impact of Finance on Growth,” Leaving the Board BIS Working Papers 381. Basel, Switzerland: Bank for International Settlements, July.
Financial Stability Board (2014). “Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution.” Leaving the Board Basel, Switzerland: FSB, November 10.
Fort, Teresa C., John Haltiwanger, Ron S. Jarmin, and Javier Miranda (2013). “How Firms Respond to Business Cycles: The Role of Firm Age and Firm Size,” Leaving the Board IMF Economic Review, vol. 61 (August), pp. 520-59.
Goldsmith, Raymond W. (1969). Financial Structure and Development. New Haven: Yale University Press.
Gorton, Gary, and Guillermo Ordoñez (2014). “Collateral Crises,” Leaving the Board American Economic Review, vol. 104 (February), pp. 343-78.
Gorton, Gary, Stefan Lewellen, and Andrew Metrick (2012). “The Safe-Asset Share,” Leaving the Board American Economic Review, vol. 102 (May), pp. 101-6.
Greenwood, Robin, and David Scharfstein (2013). “The Growth of Finance,” Leaving the Board Journal of Economic Perspectives, vol. 27 (Spring), pp. 3-28.
Guiso, Luigi, Paola Sapienza, and Luigi Zingales (2004). “Does Local Financial Development Matter?” Leaving the Board Quarterly Journal of Economics, vol. 119 (August), pp. 929-69.
Hanson, Samuel G., Anil K. Kashyap, and Jeremy C. Stein (2011). “A Macroprudential Approach to Financial Regulation,” Leaving the Board Journal of Economic Perspectives, vol. 25 (Winter), pp. 3-28.
King, Robert G., and Ross Levine (1993). “Finance and Growth: Schumpeter Might Be Right,” Leaving the Board Quarterly Journal of Economics, vol. 108 (August), pp. 717-37.
Krueger, Dirk, and Fabrizio Perri (2006). “Does Income Inequality Lead to Consumption Inequality? Evidence and Theory,” Leaving the Board Review of Economic Studies, vol. 73 (January), pp. 163-93.
Levine, Ross (2005). “Finance and Growth: Theory and Evidence,” in Philippe Aghion and Steven Durlauf, eds., Handbook of Economic Growth. Amsterdam: Elsevier B.V., pp. 865-934.
Malkiel, Burton G. (2013). “Asset Management Fees and the Growth of Finance,” Leaving the Board Journal of Economic Perspectives, vol. 27 (Spring), pp. 97-108.
Myers, Stewart C. (1977). “Determinants of Corporate Borrowing,” Leaving the Board Journal of Financial Economics, vol. 5 (2), pp. 147-75.
Philippon, Thomas, and Ariell Reshef (2012). “Wages and Human Capital in the U.S. Financial Industry: 1909-2006,” Leaving the Board Quarterly Journal of Economics, vol. 127 (November), pp. 1551-609.
—— (2013). “An International Look at the Growth of Modern Finance,” Leaving the Board Journal of Economic Perspectives, vol. 27 (Spring), pp. 73-96.
Rajan, Raghuram G., and Luigi Zingales (1998). “Financial Dependence and Growth,” Leaving the Board American Economic Review, vol. 88 (June), pp. 559-86.
Stein, Jeremy C. (2012). “Monetary Policy as Financial Stability Regulation,” Leaving the Board Quarterly Journal of Economics, vol. 127 (February), pp. 57-95.
Zingales, Luigi (2015). “Does Finance Benefit Society?” Leaving the Board NBER Working Paper Series 20894. Cambridge, Mass.: National Bureau of Economic Research, January.
1. Recent reviews have highlighted potential costs of a distorted financial sector, but such reviews also emphasize the range of both theoretical and empirical work that has documented the many ways in which the financial sector can support economic efficiency; see, for example, Greenwood and Scharfstein (2013) and Zingales (2015). Guiso, Sapienza, and Zingales (2004) discuss evidence that financial development supports entrepreneurship, and Fort and others (2013) examine the importance of financing for business formation and young firms. Return to text
2. Greenwood and Scharfstein (2013) discuss how an important fraction of growth in the U.S. financial sector reflects the greater demand of households for asset management services and credit. Malkiel (2013) considers similar issues and reviews how improved access to low-cost investment options has benefited households. Return to text
3. Krueger and Perri (2006) analyze how an increase in access to credit contributed to households’ ability to smooth spending despite substantial income volatility. Return to text
4. Changes in payment technologies have been rapid, and an area of particular interest is the fast growth of mobile payment and financial service technologies. The Federal Reserve has conducted several surveys to understand these developments, and the most recent results are discussed in Board of Governors (2015). Return to text
5. A substantial body of research finds that financial development supports economic growth, including Goldsmith (1969), King and Levine (1993), Rajan and Zingales (1998), and Levine (2005). It is noteworthy that this research emphasizes differences across countries, and that the United States is among the most financially developed countries in the world. Return to text
6. Beck, Demirgüç-Kunt, and Levine (2007) show that financial development reduces poverty and inequality in a study examining evidence across countries. Return to text
7.Zingales (2015) raises a number of questions regarding ways in which distortions in the financial sector may contribute to “rent seeking” activity that may promote inefficiency. Philippon and Reshef (2012) examine trends in compensation in the financial sector and the contribution of such trends to the increase in income inequality in the United States in recent decades. Philippon and Reshef (2013) and Cecchetti and Kharroubi (2012) revisit the links between financial development and economic growth, focusing particularly on these relationships around periods of rapid growth in the financial sector or among economies with a large financial sector. Return to text
8. For a review of many factors that may have contributed to leverage in the financial sector and a discussion of how, in some cases, these factors reflect distortions that imply leverage was excessive, see Admati and others (2013a). Return to text
9. The notion that “agency problems”–that is, conflicts in the interests of managers and various stakeholders in firms–may contribute to excessive debt has a long history, most notably following the notion of “debt overhangs” from Myers (1977). Hanson, Kashyap, and Stein (2011) emphasize the potential importance of this issue for the financial sector. Admati and others (2013b) present a related mechanism. Return to text
10. The notion that securities issued by financial institutions may provide liquidity services in a manner that potentially contributes to fragility because such securities do not have the safety and liquidity of publicly issued securities is examined in, for example, Gorton, Lewellen, and Metrick (2012); Stein (2012); and Gorton and Ordoñez (2014). Return to text
11. For a discussion of total loss-absorbing capacity, see Financial Stability Board (2014), a consultative document on a proposal for a common international standard on total loss-absorbing capacity for global systemic banks. The comment period on this FSB proposal ended in February of this year.
The Global Financial Crisis and Great Recession posed daunting new challenges for central banks around the world and spurred innovations in the design, implementation, and communication of monetary policy. With the U.S. economy now nearing the Federal Reserve’s statutory goals of maximum employment and price stability, this conference provides a timely opportunity to consider how the lessons we learned are likely to influence the conduct of monetary policy in the future.
The theme of the conference, “Designing Resilient Monetary Policy Frameworks for the Future,” encompasses many aspects of monetary policy, from the nitty-gritty details of implementing policy in financial markets to broader questions about how policy affects the economy. Within the operational realm, key choices include the selection of policy instruments, the specific markets in which the central bank participates, and the size and structure of the central bank’s balance sheet. These topics are of great importance to the Federal Reserve. As noted in the minutes of last month’s Federal Open Market Committee (FOMC) meeting, we are studying many issues related to policy implementation, research which ultimately will inform the FOMC’s views on how to most effectively conduct monetary policy in the years ahead. I expect that the work discussed at this conference will make valuable contributions to the understanding of many of these important issues.
My focus today will be the policy tools that are needed to ensure that we have a resilient monetary policy framework. In particular, I will focus on whether our existing tools are adequate to respond to future economic downturns. As I will argue, one lesson from the crisis is that our pre-crisis toolkit was inadequate to address the range of economic circumstances that we faced. Looking ahead, we will likely need to retain many of the monetary policy tools that were developed to promote recovery from the crisis. In addition, policymakers inside and outside the Fed may wish at some point to consider additional options to secure a strong and resilient economy. But before I turn to these longer-run issues, I would like to offer a few remarks on the near-term outlook for the U.S. economy and the potential implications for monetary policy.
Current Economic Situation and Outlook
U.S. economic activity continues to expand, led by solid growth in household spending. But business investment remains soft and subdued foreign demand and the appreciation of the dollar since mid-2014 continue to restrain exports. While economic growth has not been rapid, it has been sufficient to generate further improvement in the labor market. Smoothing through the monthly ups and downs, job gains averaged 190,000 per month over the past three months. Although the unemployment rate has remained fairly steady this year, near 5 percent, broader measures of labor utilization have improved. Inflation has continued to run below the FOMC’s objective of 2 percent, reflecting in part the transitory effects of earlier declines in energy and import prices.
Looking ahead, the FOMC expects moderate growth in real gross domestic product (GDP), additional strengthening in the labor market, and inflation rising to 2 percent over the next few years. Based on this economic outlook, the FOMC continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives. Indeed, in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months. Of course, our decisions always depend on the degree to which incoming data continues to confirm the Committee’s outlook.
And, as ever, the economic outlook is uncertain, and so monetary policy is not on a preset course. Our ability to predict how the federal funds rate will evolve over time is quite limited because monetary policy will need to respond to whatever disturbances may buffet the economy. In addition, the level of short-term interest rates consistent with the dual mandate varies over time in response to shifts in underlying economic conditions that are often evident only in hindsight. For these reasons, the range of reasonably likely outcomes for the federal funds rate is quite wide–a point illustrated by figure 1 in your handout. The line in the center is the median path for the federal funds rate based on the FOMC’s Summary of Economic Projections in June.1 The shaded region, which is based on the historical accuracy of private and government forecasters, shows a 70 percent probability that the federal funds rate will be between 0 and 3-1/4 percent at the end of next year and between 0 and 4-1/2 percent at the end of 2018.2 The reason for the wide range is that the economy is frequently buffeted by shocks and thus rarely evolves as predicted. When shocks occur and the economic outlook changes, monetary policy needs to adjust. What we do know, however, is that we want a policy toolkit that will allow us to respond to a wide range of possible conditions.
The Pre-Crisis Toolkit
Prior to the financial crisis, the Federal Reserve’s monetary policy toolkit was simple but effective in the circumstances that then prevailed. Our main tool consisted of open market operations to manage the amount of reserve balances available to the banking sector.3 These operations, in turn, influenced the interest rate in the federal funds market, where banks experiencing reserve shortfalls could borrow from banks with excess reserves. Before the onset of the crisis, the volume of reserves was generally small–only about $45 billion or so.4 Thus, even small open market operations could have a significant effect on the federal funds rate. Changes in the federal funds rate would then be transmitted to other short-term interest rates, affecting longer-term interest rates and overall financial conditions and hence inflation and economic activity. This simple, light-touch system allowed the Federal Reserve to operate with a relatively small balance sheet–less than $1 trillion before the crisis–the size of which was largely determined by the need to supply enough U.S. currency to meet demand.5
The global financial crisis revealed two main shortcomings of this simple toolkit. The first was an inability to control the federal funds rate once reserves were no longer relatively scarce. Starting in late 2007, faced with acute financial market distress, the Federal Reserve created programs to keep credit flowing to households and businesses.6 The loans extended under those programs helped stabilize the financial system. But the additional reserves created by these programs, if left unchecked, would have pushed down the federal funds rate, driving it well below the FOMC’s target. To prevent such an outcome, the Federal Reserve took several steps to offset (or sterilize) the effect of its liquidity and credit operations on reserves.7 By the fall of 2008, however, the reserve effects of our liquidity and credit programs threatened to become too large to sterilize via asset sales and other existing tools. Without sufficient sterilization capacity, the quantity of reserves increased to a point that the Federal Reserve had difficulty maintaining effective control over the federal funds rate.
Of course, by the end of 2008, stabilizing the federal funds rate at a level materially above zero was not an immediate concern because the economy clearly needed very low short-term interest rates. Faced with a steep rise in unemployment and declining inflation, the FOMC lowered its target for the federal funds rate to near zero, a reduction of roughly 5 percentage points over the previous year and a half. Nonetheless, a variety of policy benchmarks would, at least in hindsight, have called for pushing the federal funds rate well below zero during the economic downturn.8 That doing so was impossible highlights the second serious limitation of our pre-crisis policy toolkit: its inability to generate substantially more accommodation than could be provided by a near-zero federal funds rate.
Our Expanded Toolkit
To address the challenges posed by the financial crisis and the subsequent severe recession and slow recovery, the Federal Reserve significantly expanded its monetary policy toolkit. In 2006, the Congress had approved plans to allow the Fed, beginning in 2011, to pay interest on banks’ reserve balances.9 In the fall of 2008, the Congress moved up the effective date of this authority to October 2008. That authority was essential. Paying interest on reserve balances enables the Fed to break the strong link between the quantity of reserves and the level of the federal funds rate and, in turn, allows the Federal Reserve to control short-term interest rates when reserves are plentiful. In particular, once economic conditions warrant a higher level for market interest rates, the Federal Reserve could raise the interest rate paid on excess reserves–the IOER rate. A higher IOER rate encourages banks to raise the interest rates they charge, putting upward pressure on market interest rates regardless of the level of reserves in the banking sector.
While adjusting the IOER rate is an effective way to move market interest rates when reserves are plentiful, federal funds have generally traded below this rate. This relative softness of the federal funds rate reflects, in part, the fact that only depository institutions can earn the IOER rate. To put a more effective floor under short-term interest rates, the Federal Reserve created supplementary tools to be used as needed. For instance, the overnight reverse repurchase agreement (ON RRP) facility is available to a variety of counterparties, including eligible money market funds, government-sponsored enterprises, broker-dealers, and depository institutions. Through it, eligible counterparties may invest funds overnight with the Federal Reserve at a rate determined by the FOMC. Similar to the payment of IOER, the ON RRP facility discourages participating institutions from lending at a rate substantially below that offered by the Fed.10
Our current toolkit proved effective last December. In an environment of superabundant reserves, the FOMC raised the effective federal funds rate–that is, the weighted average rate on federal funds transactions among participants in that market–by the desired amount, and we have since maintained the federal funds rate in its target range.
Two other major additions to the Fed’s toolkit were large-scale asset purchases and increasingly explicit forward guidance.11 Both were used to provide additional monetary policy accommodation after short-term interest rates fell close to zero. Our purchases of Treasury and mortgage-related securities in the open market pushed down longer-term borrowing rates for millions of American families and businesses. Extended forward rate guidance–announcing that we intended to keep short-term interest rates lower for longer than might have otherwise been expected–also put significant downward pressure on longer-term borrowing rates, as did guidance regarding the size and scope of our asset purchases.
In light of the slowness of the economic recovery, some have questioned the effectiveness of asset purchases and extended forward rate guidance. But this criticism fails to consider the unusual headwinds the economy faced after the crisis. Those headwinds included substantial household and business deleveraging, unfavorable demand shocks from abroad, a period of contractionary fiscal policy, and unusually tight credit, especially for housing. Studies have found that our asset purchases and extended forward rate guidance put appreciable downward pressure on long-term interest rates and, as a result, helped spur growth in demand for goods and services, lower the unemployment rate, and prevent inflation from falling further below our 2 percent objective.12
Two of the Fed’s most important new tools–our authority to pay interest on excess reserves and our asset purchases–interacted importantly. Without IOER authority, the Federal Reserve would have been reluctant to buy as many assets as it did because of the longer-run implications for controlling the stance of monetary policy. While we were buying assets aggressively to help bring the U.S. economy out of a severe recession, we also had to keep in mind whether and how we would be able to remove monetary policy accommodation when appropriate. That issue was particularly relevant because we fund our asset purchases through the creation of reserves, and those additional reserves would have made it ever more difficult for the pre-crisis toolkit to raise short-term interest rates when needed.
The FOMC considered removing accommodation by first reducing our asset holdings (including through asset sales) and raising the federal funds rate only after our balance sheet had contracted substantially. But we decided against this approach because our ability to predict the effects of changes in the balance sheet on the economy is less than that associated with changes in the federal funds rate. Excessive inflationary pressures could arise if assets were sold too slowly. Conversely, financial markets and the economy could potentially be destabilized if assets were sold too aggressively. Indeed, the so-called taper tantrum of 2013 illustrates the difficulty of predicting financial market reactions to announcements about the balance sheet. Given the uncertainty and potential costs associated with large-scale asset sales, the FOMC instead decided to begin removing monetary policy accommodation primarily by adjusting short-term interest rates rather than by actively managing its asset holdings.13 That strategy–raising short-term interest rates once the recovery was sufficiently advanced while maintaining a relatively large balance sheet and plentiful bank reserves–depended on our ability to pay interest on excess reserves.
Where Do We Go from Here?
What does the future hold for the Fed’s toolkit? For starters, our ability to use interest on reserves is likely to play a key role for years to come. In part, this reflects the outlook for our balance sheet over the next few years. As the FOMC has noted in its recent statements, at some point after the process of raising the federal funds rate is well under way, we will cease or phase out reinvesting repayments of principal from our securities holdings. Once we stop reinvestment, it should take several years for our asset holdings–and the bank reserves used to finance them–to passively decline to a more normal level. But even after the volume of reserves falls substantially, IOER will still be important as a contingency tool, because we may need to purchase assets during future recessions to supplement conventional interest rate reductions.14 Forecasts now show the federal funds rate settling at about 3 percent in the longer run.15 In contrast, the federal funds rate averaged more than 7 percent between 1965 and 2000. Thus, we expect to have less scope for interest rate cuts than we have had historically.
In part, current expectations for a low future federal funds rate reflect the FOMC’s success in stabilizing inflation at around 2 percent–a rate much lower than rates that prevailed during the 1970s and 1980s. Another key factor is the marked decline over the past decade, both here and abroad, in the long-run neutral real rate of interest–that is, the inflation-adjusted short-term interest rate consistent with keeping output at its potential on average over time.16 Several developments could have contributed to this apparent decline, including slower growth in the working-age populations of many countries, smaller productivity gains in the advanced economies, a decreased propensity to spend in the wake of the financial crises around the world since the late 1990s, and perhaps a paucity of attractive capital projects worldwide.17 Although these factors may help explain why bond yields have fallen to such low levels here and abroad, our understanding of the forces driving long-run trends in interest rates is nevertheless limited, and thus all predictions in this area are highly uncertain.18
Would an average federal funds rate of about 3 percent impair the Fed’s ability to fight recessions? Based on the FOMC’s behavior in past recessions, one might think that such a low interest rate could substantially impair policy effectiveness. As shown in the first column of the table in the handout, during the past nine recessions, the FOMC cut the federal funds rate by amounts ranging from about 3 percentage points to more than 10 percentage points. On average, the FOMC reduced rates by about 5-1/2 percentage points, which seems to suggest that the FOMC would face a shortfall of about 2-1/2 percentage points for dealing with an average-sized recession. But this simple comparison exaggerates the limitations on policy created by the zero lower bound. As shown in the second column, the federal funds rate at the start of the past seven recessions was appreciably above the level consistent with the economy operating at potential in the longer run. In most cases, this tighter-than-normal stance of policy before the recession appears to have reflected some combination of initially higher-than-normal labor utilization and elevated inflation pressures. As a result, a large portion of the rate cuts that subsequently occurred during these recessions represented the undoing of the earlier tight stance of monetary policy. Of course, this situation could occur again in the future. But if it did, the federal funds rate at the onset of the recession would be well above its normal level, and the FOMC would be able to cut short-term interest rates by substantially more than 3 percentage points.
A recent paper takes a different approach to assessing the FOMC’s ability to respond to future recessions by using simulations of the FRB/US model.19 This analysis begins by asking how the economy would respond to a set of highly adverse shocks if policymakers followed a fairly aggressive policy rule, hypothetically assuming that they can cut the federal funds rate without limit.20 It then imposes the zero lower bound and asks whether some combination of forward guidance and asset purchases would be sufficient to generate economic conditions at least as good as those that occur under the hypothetical unconstrained policy. In general, the study concludes that, even if the average level of the federal funds rate in the future is only 3 percent, these new tools should be sufficient unless the recession were to be unusually severe and persistent.
Figure 2 in your handout illustrates this point. It shows simulated paths for interest rates, the unemployment rate, and inflation under three different monetary policy responses–the aggressive rule in the absence of the zero lower bound constraint, the constrained aggressive rule, and the constrained aggressive rule combined with $2 trillion in asset purchases and guidance that the federal funds rate will depart from the rule by staying lower for longer.21 As the blue dashed line shows, the federal funds rate would fall far below zero if policy were unconstrained, thereby causing long-term interest rates to fall sharply. But despite the lower bound, asset purchases and forward guidance can push long-term interest rates even lower on average than in the unconstrained case (especially when adjusted for inflation) by reducing term premiums and increasing the downward pressure on the expected average value of future short-term interest rates. Thus, the use of such tools could result in even better outcomes for unemployment and inflation on average.
Of course, this analysis could be too optimistic. For one, the FRB/US simulations may overstate the effectiveness of forward guidance and asset purchases, particularly in an environment where long-term interest rates are also likely to be unusually low.22 In addition, policymakers could have less ability to cut short-term interest rates in the future than the simulations assume. By some calculations, the real neutral rate is currently close to zero, and it could remain at this low level if we were to continue to see slow productivity growth and high global saving.23 If so, then the average level of the nominal federal funds rate down the road might turn out to be only 2 percent, implying that asset purchases and forward guidance might have to be pushed to extremes to compensate.24 Moreover, relying too heavily on these nontraditional tools could have unintended consequences. For example, if future policymakers responded to a severe recession by announcing their intention to keep the federal funds rate near zero for a very long time after the economy had substantially recovered and followed through on that guidance, then they might inadvertently encourage excessive risk-taking and so undermine financial stability.
Finally, the simulation analysis certainly overstates the FOMC’s current ability to respond to a recession, given that there is little scope to cut the federal funds rate at the moment. But that does not mean that the Federal Reserve would be unable to provide appreciable accommodation should the ongoing expansion falter in the near term. In addition to taking the federal funds rate back down to nearly zero, the FOMC could resume asset purchases and announce its intention to keep the federal funds rate at this level until conditions had improved markedly–although with long-term interest rates already quite low, the net stimulus that would result might be somewhat reduced.
Despite these caveats, I expect that forward guidance and asset purchases will remain important components of the Fed’s policy toolkit. In addition, it is critical that the Federal Reserve and other supervisory agencies continue to do all they can to ensure a strong and resilient financial system. That said, these tools are not a panacea, and future policymakers could find that they are not adequate to deal with deep and prolonged economic downturns. For these reasons, policymakers and society more broadly may want to explore additional options for helping to foster a strong economy.
On the monetary policy side, future policymakers might choose to consider some additional tools that have been employed by other central banks, though adding them to our toolkit would require a very careful weighing of costs and benefits and, in some cases, could require legislation. For example, future policymakers may wish to explore the possibility of purchasing a broader range of assets. Beyond that, some observers have suggested raising the FOMC’s 2 percent inflation objective or implementing policy through alternative monetary policy frameworks, such as price-level or nominal GDP targeting. I should stress, however, that the FOMC is not actively considering these additional tools and policy frameworks, although they are important subjects for research.
Beyond monetary policy, fiscal policy has traditionally played an important role in dealing with severe economic downturns. A wide range of possible fiscal policy tools and approaches could enhance the cyclical stability of the economy.25 For example, steps could be taken to increase the effectiveness of the automatic stabilizers, and some economists have proposed that greater fiscal support could be usefully provided to state and local governments during recessions. As always, it would be important to ensure that any fiscal policy changes did not compromise long-run fiscal sustainability.
Finally, and most ambitiously, as a society we should explore ways to raise productivity growth. Stronger productivity growth would tend to raise the average level of interest rates and therefore would provide the Federal Reserve with greater scope to ease monetary policy in the event of a recession. But more importantly, stronger productivity growth would enhance Americans’ living standards. Though outside the narrow field of monetary policy, many possibilities in this arena are worth considering, including improving our educational system and investing more in worker training; promoting capital investment and research spending, both private and public; and looking for ways to reduce regulatory burdens while protecting important economic, financial, and social goals.
Conclusion
Although fiscal policies and structural reforms can play an important role in strengthening the U.S. economy, my primary message today is that I expect monetary policy will continue to play a vital part in promoting a stable and healthy economy. New policy tools, which helped the Federal Reserve respond to the financial crisis and Great Recession, are likely to remain useful in dealing with future downturns. Additional tools may be needed and will be the subject of research and debate. But even if average interest rates remain lower than in the past, I believe that monetary policy will, under most conditions, be able to respond effectively.
WILMINGTON, Del. – The vast majority of Americans (90 percent) recognize the importance that access to credit plays throughout their life, according to the new Chase Slate Credit Survey. However, when it comes to awareness of their personal credit health there are gaps. Nearly four-in-ten Americans (39 percent) admit they do not know their current credit score, and more than half (52 percent) do not know that paying bills on time is the factor that has the largest impact on their credit score.
The survey reveals that Americans who have previously checked their credit score consider a “good” score to be 719 on average1. This is 51 points higher than what is considered to be good by those who have never checked their score (668). What Americans may not realize is that even a score of 719 might not give them access to credit at the best rates.
“Having healthy credit could mean the difference between achieving major life goals, such as buying a home or starting a small business, and never realizing those dreams. Yet too many Americans don’t have access to information and tools that empower them to properly plan for the future and manage their credit health,” said Pam Codispoti, President of the Mass Affluent Business for Chase Card Services.
Only 37 percent of Americans feel very confident that their current credit score can help them accomplish certain personal goals in their life, and many wish their credit score were higher. Two-thirds (66 percent) say they would like to be able to improve their credit score over the next year, yet only one-in-three (35 percent) have a plan they feel confident will allow them to succeed and one-fifth (22 percent) admit they have never taken any steps to do so.
Chase recently introduced the new Slate Credit Card, which provides cardmembers with a Credit Score & More feature. Cardmembers have access to their FICO® Score for free as well as the reasons behind their score, a summary view of their credit bureau information and helpful suggestions to manage their credit health. With Slate, cardmembers have the information and insights to understand where they stand so that they can move forward with confidence. The feature is available to Slate cardmembers online at Chase.com.
“Chase is committed to providing our cardmembers with insights and relevant, reliable tools that give them a financial edge,” said Codispoti. “The new Chase Slate credit card offers them their FICO Score as well as the ability to explore key details from their credit bureau report and drill down on each attribute for context, education and an indication of where they stand. It’s a comprehensive picture of their credit health, and one we believe will be valuable and empowering along their financial journeys.”
Americans are checking their scores – but not always for the right reasons
While a majority of Americans say they check their score – with as high as 59 percent having checked in the last year – only two-in-ten Americans (22 percent) say they check their score because it is an important part of managing their finances.
“Your credit score is much more than just a number – it’s a key indicator of credit health that helps you assess where you stand and what’s within reach,” says personal finance expert and Chase Slate financial education partner Farnoosh Torabi. “Checking your score, and checking it regularly, is a simple step you can take now to introduce more positive financial habits into your life. The higher your score, the more likely you are to be deemed eligible for a loan or receive better terms and interest rates.”
Of those who have never checked their credit score, 44 percent say it’s because they did not have a reason to, while one-in-four (27 percent) say they do not have enough time and energy or it’s too much effort to obtain their score.
Generation Xers face credit health headfirst
The Chase Slate Credit Survey suggests Gen Xers are bolder about facing their credit health than other age groups. Just four percent of Gen Xers say they have never checked their score, compared to roughly one-in-five Millennials (19 percent) and 13 percent of Boomers. Further, a majority of Gen Xers (67 percent) claim they know their score, trailed by 60 percent of Boomers and 55 percent of Millennials. The survey hints that hindsight has something to do with it – more than three-in-five Gen Xers (62 percent) claim they would have benefitted from knowing their credit score at some point in their lives.
Although Boomers consider a good score on average to be 726 – higher than Gen Xers (712) and Millennials (695) – they are seemingly less proactive about credit health than their generational counterparts. More than one-in-four Boomers (28 percent) admits they have never taken steps to improve their credit score, compared to 19 percent of Millennials. Yet Millennials appear to be more self-assured than their older counterparts, as nearly three-in-five Millennials (59 percent) say they would be comfortable disclosing their credit score to their parents, compared to only 35 percent of Gen Xers.
Americans tend to keep credit health close to the vest
According to survey findings, Americans are more comfortable disclosing their age (70 percent) and their weight (12 percent) than their credit score (11 percent) or their income (7 percent). Almost half (44 percent) indicate they would not be okay disclosing their credit score to their partner, and even more wouldn’t be comfortable sharing with their parents (62 percent), their siblings (72 percent) or their best friend (75 percent). One quarter of Americans (26 percent) say they would not be comfortable sharing their credit score with anyone.
Hispanics distinguish themselves as more forthcoming with their scores and report being more comfortable than Americans overall with disclosing their credit score to their partner (63 percent versus 56 percent, respectively), their parents (49 percent versus 38 percent, respectively) and their siblings (35 percent versus 28 percent, respectively). Comparatively, only 16 percent of Hispanics say they would not share their credit score with anyone.
The survey also reveals that more than one-third (37 percent) of Americans who are married or have a partner do not know their significant other’s credit score. However, only 16 percent say it would have been beneficial to know their significant other’s credit score before getting married. Millennials who are married are more likely to know their spouse’s score (74 percent) than married Gen Xers (61 percent) and Boomers (59 percent).
About the 2015 Chase Slate Credit Survey
The 2015 Chase Slate Credit Survey was commissioned on behalf of Chase Card Services to measure Americans’ understanding, attitudes and perceptions around credit and credit health. The survey was conducted via an online survey by Stratalys Research, an independent research company. Interviews were conducted from February 27 – March 11, 2015 among a nationally representative sample of 1,000 respondents age 18 and older. The credibility interval for a sample size of 1,000 is +/- 3.6% and larger for subgroups.
About Chase
Chase is the U.S. consumer and commercial banking business of JPMorgan Chase & Co. (NYSE: JPM), a leading global financial services firm with assets of $2.6 trillion and operations worldwide. Chase serves nearly half of America’s households with a broad range of financial services, including personal banking, small business lending, mortgages, credit cards, auto financing and investment advice. Customers can choose how and where they want to bank: More than 5,500 branches, 18,000 ATMs, mobile, online and by phone. For more information, go to Chase.com. For more information about Chase Slate, go to ChaseSlate.com.
BEIJING, — World Bank Group President Jim Yong Kim today praised China for its growing role in global development in meetings with Premier Li Keqiang and other senior leaders including Finance Minister Lou Jiwei and Governor Zhou Xiaochuan of the People’s Bank of China.
On the first day of his two day visit, President Kim had a far reaching discussion with Premier Li Keqiang on the global economy, development finance and China’s health reforms.
In a separate meeting today, President Kim and Finance Minister Lou Jiwei signed an agreement to establish a $50 million fund to help reduce poverty. The World Bank President also met with leaders of the Multilateral Interim Secretariat for Establishing the Asia Infrastructure Investment Bank (AIIB) to discuss closer collaboration.
These initiatives reinforce the growing partnership with China, which already is the Bank’s third-largest shareholder and an important contributor to IDA, the institution’s fund for the poorest, as well as the Global Infrastructure Facility.
“China is a strong partner in development and a strong partner for the World Bank Group, and we share the commitment to ending poverty and boosting shared prosperity,” said President Kim. “I look forward to a continued strong, cooperative, and productive relationship, which will benefit developing countries around the world.”
The trust fund, which is expected to start later this year, aims to enhance the cooperation between China and the World Bank Group and leverage financial and knowledge-based resources to help developing countries achieve inclusive and sustainable development. It will finance investment projects, operations, knowledge development and human-resource cooperation at both global and regional levels.
“The establishment of this trust fund signals that our partnership with existing multilateral development banks is growing, even as we support new ones. We will continue to partner with the World Bank in fighting poverty and promoting development around the world,’ said Minister Lou.
During his two-day trip to China, President Kim also met with Secretary General Jin Liqun of the AIIB Multilateral Interim Secretariat, who has been nominated by the Chinese government to be the bank’s President-designate. Both agreed to expand their cooperation and explore opportunities for joint financing of projects in the coming months. The prospective founding members of the AIIB signed the Articles of Agreement last month and the bank is expected to be operational by the end of the year.
“I congratulate Secretary General Jin Liqun and all prospective founding members on the great progress made in establishing the AIIB,” said President Kim. “More funding for infrastructure will help the poor, and we are pleased to be working with China and others to help the AIIB hit the ground running.”
Secretary General Jin said: “Since the establishment of the Multilateral Interim Secretariat last November, the World Bank has been very generous in sharing its expertise, lessons of experience and global good practice knowledge with the Secretariat. We plan to identify projects for possible co-financing in the fall. Based on my time at the World Bank as an Alternate Executive Director, I am fully confident that such close cooperation between the Banks will lead to improved lives for citizens of our Member countries.”
The AIIB Multilateral Interim Secretariat and the World Bank are already working together, having exchanged views on matters such as institutional governance, organizational structure, social and environmental safeguards and procurement procedures.
BEIJING, - China’s growth will moderate over the medium term as the economy continues to rebalance gradually. Growth is expected to slow to 7.6 percent in 2014, and 7.5 percent in 2015, from 7.7 percent in 2013, according to the World Bank’s China Economic Update released today.
“The rebalancing will be uneven reflecting tensions between structural trends and near term demand management measures,” says Chorching Goh, Lead Economist for China.
The slowdown in the first quarter reflected a combination of dissipating effects of earlier measures to support growth, a weak external environment, and tighter credit, especially for real estate. However, economic activity, including industrial production, has shown signs of a pick-up in recent weeks. The recent acceleration, which is likely to continue into the next two quarters, reflects robust consumption, a recovery of external demand, and new growth supporting measures, including infrastructure investments and tax incentives for small and medium-sized enterprises.
The China Economic Update, a regular assessment of China’s economy, identifies several risks to this gradual adjustment. First, a disorderly deleveraging of local government debt could trigger a sharp slowdown in investment growth. Second, an abrupt change in the cost of, or access to, capital for such sectors as real estate could significantly reduce economic activity. Finally, the recovery in exports may not materialize if growth in advanced countries weakens.
The Update notes that the policy responses to these medium-term risks should center on fiscal and financial sector reforms, which were part of the government’s reform agenda outlined in November 2013. These include effectively managing and supervising rapid credit growth, especially in the shadow banking system, and gradually reducing the local government debt that has been accumulated through off-budget and quasi-fiscal activities.
“The proposed reform measures are structural in nature,” observes Karlis Smits, Senior Economist and main author of the Update. “In the medium term, these policy measures will improve the quality of China’s growth – making it more balanced, inclusive and sustainable and lay the foundation for sound economic development.”
While these reforms may reduce growth in the short run, policies that promote competition, lower entry barriers to protected sectors and reduce administrative burden on businesses will help dampen the impact, and create a more market-oriented economy.
This news is courtesy of www.worldbank.org
Bolder policies can inject a new momentum into the world economy to help it overcome what has been so far a disappointing recovery, IMF Managing Director Christine Lagarde said.
In a Washington speech heralding next week’s IMF-World Bank Annual Meetings, Lagarde said the IMF’s main job now is to help the global economy shift gears and overcome a brittle and uneven recovery that is beset by risks.
She told an audience at the Georgetown University School of Foreign Service October 2 that the world economy is at an inflection point. “Yes, there is a recovery but, as you all know—and we can all feel it—the level of growth and jobs is simply not good enough.”
The world needs to aim higher and try harder, Lagarde stated. This means “bolder policies to inject a ‘new momentum’ that can overcome this ‘new mediocre’ that clouds the future.”
The Annual Meetings of the IMF and the World Bank Group each year bring together around 10,000 central bankers, ministers of finance and development, private sector executives, and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness.
Weak growth, modest pickup
Six years after the financial crisis began, there is continued weakness in the global economy, and only a modest pickup is foreseen for 2015, Lagarde observed. Among advanced economies, the rebound is expected to be strongest in the United States; modest in Japan; and weakest in the euro area.
Led by Asia, and China in particular, emerging market and developing economies are expected to continue to help drive global activity. For them too, however, it is likely to be at a slower pace than before.
For the low-income developing countries, including sub-Saharan Africa, economic prospects are rising but, as debt builds up in some countries, they need to be watching as well. In the Middle East, the outlook is clouded by difficult economic transitions and by intense social and political strife.
The world economy risks getting stuck with a mediocre level of growth—low growth for a long time, Lagarde said. “If people expect growth potential to be lower tomorrow, they will cut back on investment and consumption today. This dynamic could seriously impede the recovery, especially in advanced economies that are also grappling with high unemployment and low inflation.”
Migration to ‘the shadows’
Lagarde also pointed to concern that financial sector excesses may be building up, especially in advanced economies. Asset valuations are at an all time high; spreads and volatility are at an all time low.
Also worrying is the migration of new market and liquidity risks to the “shadows” of the financial world—part of the less-regulated, nonbank sector, which is growing rapidly in some countries. In addition developments in Ukraine, the Middle East, and in countries affected by the Ebola outbreak represent geopolitical risk.
Generating new momentum
Faced with these events, the world economy can muddle along with sub-par, mediocre growth, Lagarde said. “Or it can aim for a better path where bold policies would accelerate growth, increase employment, and achieve a ‘new momentum.’ ”
A more balanced policy toolkit would use both the demand and supply side of the economy. Monetary policy has provided important support to demand during the crisis, Lagarde observed. Now it needs more support from other policies, specifically
• Growth- and job-friendly fiscal policies, such as addressing tax evasion, supporting more efficient public spending, and cutting payroll taxes;
• Structural reforms to raise productivity, competitiveness, and employment through training programs; encouraging women to join the labor force; opening up product and service markets; and reforming energy subsidies; and
• Boosting efficient public investment in infrastructure, which can be a powerful impetus for growth and jobs.
Still, in many advanced economies, these policies would only go so far unless the flow of credit to the economy is improved. “We need insolvency regimes that can help banks and the private sector effectively deal with their debt burdens—to free up their balance sheets so credit can flow back and grease the wheels of the economy.” Lagarde said.
How to galvanize the globe
But given “mediocre” growth and the policy “momentum” needed to overcome it, galvanizing global cooperation in such an effort involves multilateralism and the role of the IMF, Lagarde said.
Noting that 2014 marks the IMF’s 70th anniversary, Lagarde said the IMF had been a forum for cooperation throughout its history, including through the financial crisis. She cited examples of global economic cooperation in action during this crisis.
”Perhaps most prominent has been the G-20 nations coming together— including to provide additional resources to the IMF— to bolster confidence and safeguard the global financial system.” She noted that the G-20 recently announced further progress in developing strategies to lift medium-term growth by a collective 2 percent of GDP by 2018— holding the promise of more growth and jobs.
“Seventy years on, we continue to adapt to fulfill our raison d’être—to safeguard stability by helping countries through economic fallouts, and forging cooperative solutions to global problems. For you and for generations to come,” Lagarde said.
Officials from the 188 members of the IMF and the World Bank are attending the 2014 Annual Meetings. Under the broader umbrella of the formal sessions, there will be a host of meetings of different official groups, including the Group of Twenty advanced economies and emerging markets, the Commonwealth Finance Ministers, and the Group of Seven. There will also be meetings with civil society, academics, and the private sector.
This courtesy of www.imf.org
Good morning. Provost Lizner, Dean Blount, thank you for your generous introduction. And thank you students, faculty, and guests for coming here this morning.
Some of you may not be aware that Chicago was my home for more than five years. And it is such a pleasure to be home again just before an enormously busy week in Washington, DC next week, when we hold the Annual Meetings of the IMF and the World Bank.
Our event today provides an informal opening to these meetings, and I am grateful that we can hold it at one of the most respected management schools in America. Kellogg’s success is based on what we at the IMF also strive to achieve: the ability of not only adapting to change, but leading it.
I would like to pay tribute to Dean Blount – one of that select group of women to become dean of a top-ranked business school in the United States. Your intellectual experience and vision will help Kellogg continue to anticipate and adjust to tomorrow’s challenges!
As you have rightly said: “In today’s world, sticking with the status quo can be even riskier than striving for change.”
Indeed, the world has changed fast over the past 20 years, and it will not stand still.
In the emerging and developing countries – home to 85 percent of the world’s population – we have seen more progress for more people than at any time in history: child mortality is down, life expectancy is up; absolute poverty has declined, school enrollment is on the rise.
A good deal of this development is due to the success of China, but there has been a broader trend of economic convergence between the poor and the rich nations—not as fast as it should be, but a trend nevertheless.
We are also in the middle of a giant move toward the digital age. Six billion people now have access to a cell phone, and 3½ billion can access the internet. Innovation is sure to follow.
And who knows, we may be on the cusp of a social revolution. At the UN General Assembly last week, I saw one global leader after another acknowledging that empowering women is not only morally right, but will also be an economic game changer for the planet.
These are all good reasons to be optimistic about the future. And yet, the mood in an important part of the world—the one we call the advanced economies—has shifted in the opposite direction.
Rising economic inequality is a phenomenon in many countries today, rich and poor, but it has really hit home in the advanced world right now, where real incomes for many have been declining – or growing at a much slower rate – and past economic achievements seem at risk.
What this tells us is that governments must work harder to make growth inclusive, so that all people can benefit from the positive trends that I just mentioned.
Of course, the solution to making people better off is not to fall back on protectionism or other failed economic recipes of the past.
The task at hand is, first of all, to take the right macroeconomic policy decisions and maintain economic openness, a combination that has delivered so much good for the world in recent decades.
Getting everyone a bigger piece of the pie means that the pie has to continue to grow.
I will come back to these themes, but let me first talk about the economic outlook.
1. The State of the Global Economy: Still Weak and Fragile
For the past several years, the global recovery has been weak and fragile, and this continues to be the case today. Especially for advanced economies – while there are some good signs – the overall growth outlook still remains subdued.
The U.S. economy has been recovering for some time but had a setback in the first half of 2016, which will lead to a downgrade in our U.S. forecast. However, news on the employment front has been relatively good, and there are hopeful signs of falling poverty and rising median incomes in 2015.
In the Euro area, growth remains sub-par, although economic activity is now holding up under strain from high debt and weaknesses among a number of banks.
Japan also has seen a small rebound, but it will need to implement difficult reforms to maintain momentum.
The prospects of the emerging and developing economies merit some guarded optimism. After driving the global recovery since the 2008 financial crisis, these countries will continue to contribute more than three-quarters of total global growth this year and next.
China is rightly rebalancing from manufacturing to services, from investment to consumption, and from exports to domestic services – which should produce a more sustainable, albeit slower growing economic model. Even so, it will continue to grow at a robust rate of about 6 percent.
So too will India, which is also embarking on significant reforms, at more than 7 percent.
Moreover, Russia and Brazil are showing some signs of improvement after a period of severe contraction.
Commodity exporters have been hit hard by low commodity prices, and countries in the Middle East continue to suffer from conflict and terrorism.
Many low-income countries in Sub-Saharan Africa, which have performed so well over the past decade, are also facing a challenge from lower commodity prices.
Adding it all up, the good and the bad, we continue to face the problem of global growth being too low for too long, benefiting too few.
And even around that modest recovery, there is considerable uncertainty. Diverging paths of monetary policy in the major economies could trigger a resurgence of financial market volatility.
Low productivity growth and high levels of debt could further depress investment and expectations of future demand. And, of course, geopolitical events such as terrorism and the related refugee surge pose risks that are very hard to quantify, let alone mitigate.
Now, I would not speak for the IMF if I did not have a number of policy suggestions for dealing with this forecast, which I admit is not a very uplifting one.
2. Adjusting to Change: Do No Harm
My first policy message would be the one given to students when they enter medical school: “First, do no harm.” What do I mean by that?
I just mentioned tentative signs of improvement among some economies, as well as signs of transition and turnaround in emerging markets.
These changes have not just happened by themselves—they reflect a positive impulse from supportive monetary conditions. They reflect improvements in financial regulation and oversight that have helped the financial sector weather shocks such as the change in the Chinese currency regime or the UK referendum. And they reflect very deliberate structural reforms in a number of countries.
Good policy choices – based on expert analysis – matter, even if they take time to work. This is true especially after a crisis of the 2008 magnitude which – unlike in the 1930s – was itself contained only through the exceptional efforts of policy makers around the globe.
The same applies in reverse. Policies that hurt growth will have real consequences—both for the world at large, and very often also for the very people they are meant to protect.
Take trade, for example.
Since World War Two, trade has been the engine that has propelled economic progress. Trade was growing at twice the rate of global GDP until the 2008 crisis but has since fallen below that pace. This is largely due to weak overall demand, but a non-trivial role is also played by the increase in protectionist trade measures over the past five years. [1]
If we were to turn our backs on trade now, we would be choking off a key driver of growth at a point when the global economy is still in need of every good piece of news it can get.
Restricting trade is a clear case of economic malpractice. Rather than helping those sectors of the economy it means to protect, shutting off trade would deny families and workers important economic opportunities, wreak havoc on supply chains, and raise the cost of many basic goods.
And as our esteemed colleagues Robert McDonald and Janice Eberly have shown, policy uncertainty, including in trade policy, can deter investment – a critical driver of growth.
History tells us that this would disproportionally hurt the poor and worsen real income inequality, including in the United States.
So we must reverse the trend toward protectionism and restore a climate that supports a rebound in trade—by completing multilateral trade agreements and pushing forward reforms in services and other areas of the “new economy” such as regulatory cooperation and intellectual property rights.
Inclusive growth
At the same time, of course, the challenge is to make sure that the gains from trade are widely shared, and that those at risk of losing out are being supported.
Now, I am under no illusion how difficult it is to achieve such inclusive growth. It requires actions that go beyond just economics, and they can be very different from country to country.
But we do know some policies that work: well-designed public investment in education not only raises underlying growth but increases human capital and the earning potential of low-income people. Education of girls, in particular, is a proven high-return investment.
Another good investment is helping workers displaced by offshoring, outsourcing, or new digital technologies. Some of the Nordic countries, for example, have had success with programs that pair retraining with active job counseling—the goal being to shorten the duration of unemployment.
Here in the U.S., we have advocated raising the minimum wage and extending the earned income tax credit as measures that can help low-income workers adapt to dislocation.
These are not silver bullets – none actually exist – but if we want to keep globalization alive for the next generation, there is no alternative to ensuring that it works to the benefit of all.
3. Boosting Growth: The Immediate Response
Let me now turn to the macroeconomic and structural policy priorities.
Our priority must be to emerge from this prolonged environment of low growth, low inflation, and low interest rates that I have termed the “new mediocre.” It is bad for financial stability, bad for employment, and as I just mentioned, it also encourages bad, inward-looking policies.
Pessimists believe that our traditional tools of monetary and fiscal policy are exhausted, but I beg to differ. In my view, there is more policy space – more room to act – than is commonly believed. It requires pushing harder on all policy levers and taking more advantage of the synergies between them.
Let us start with what I have called a three-pronged strategy: using structural, fiscal, and monetary policies in a country-specific way to make them mutually reinforcing.
First, we need to identify for each country a set of structural reforms that provide the biggest effect on growth and productivity relative to the political capital that needs to be spent. For example, breaking down monopolies in the retail sector and professional services has had positive effects on growth, especially during downturns, and we have called for such measures in several advanced economies. [2]
All these efforts should be supported by macroeconomic policies to make them more politically palatable and accelerate their short-term growth effect.
Second, as for fiscal policies, few would dispute that better roads and airports, more power grids, and high-speed internet are essential components of modern public infrastructure. The current low-interest environment provides an historic opportunity to make these necessary investments—and to boost growth.
Unlike in 2008, we are not calling for broad-based fiscal stimulus today. The basic principle is that countries with fiscal space should use it—Canada, Germany, Korea, for example. Not all countries have such space and need to guard against debt problems accumulating later on.
But even for countries where public finances are stretched, reallocating spending within a given envelope will help. Think of replacing current spending with tax credits on R&D that can support technology and promote innovation.
Third, monetary policy in advanced economies needs to remain expansive at this stage. While supporting demand in general, our research also shows that monetary policy could add a further boost to GDP when infrastructure investment is debt-financed. In fact, the impact on GDP would bealmost twice as large and the debt ratio would fall, compared to the case without monetary support. [3]
In all these cases, it is important for countries to adhere to medium-term monetary and budgetary frameworks—which provide policy consistency over time, set clear expectations and allow for some short-term expansion without undermining the credibility of the overall policy effort.
Coordination
Finally, let me emphasize one important and often overlooked aspect of global policy making—the one relating to policy cooperation, or even coordination.
Eight years after Lehman Brothers, countries have gone back to their old ways of policy making, largely following their domestic policy priorities.
No doubt, the current situation is different from the 2008 crisis, which required a prompt, massive, and coordinated fiscal response. But as our “new mediocre” is less acute, it is also more divisive and subtle than a full-blown crisis, and it could prove just as toxic as the recovery has so far proven elusive.
This requires a more sophisticated and coordinated approach. The principle is simple: if all countries act decisively to stimulate their own growth, the positive spillovers reinforce each other. And as everyone is working to expand growth, everyone benefits from the efforts of others, to a much greater effect overall.
We will be providing more detail on the benefits of coordination in a staff paper being released later today.
4. Conclusion
Let me conclude. The bottom line is this:
First, do no harm. Restricting trade and limiting economic openness is sure to worsen the growth outlook for the world and especially its weakest citizens. But we need to rethink fundamentally how growth can be made more inclusive, and act accordingly.
Second, stronger, better growth is possible and will facilitate inclusion. By using monetary, fiscal, and structural policies in concert—within countries, across them, and consistent over time—we can make the whole greater than the sum of the parts.
The IMF can assist countries in identifying their fiscal space, their medium term anchoring and the sequencing of necessary reforms.
A few weeks ago, G20 leaders in Hangzhou expressed strong support for a well-equipped and well-resourced Fund, and we will continue to be at the service of our membership.
Michael Jordan once said: “Talent wins games, but teamwork and intelligence wins championships. Winning the “championship of growth and inclusive globalization” requires teamwork and collaboration across the world.
Thank you!
New York – Citi has announced its intention to sell its Consumer Banking operations in Brazil, Argentina and Colombia. The businesses, which include retail banking and credit card operations, will be transferred from Citicorp into Citi Holdings and will report financial results as part of Citi Holdings, effective first quarter 2016. Citi will maintain a strong presence in Brazil, Argentina and Colombia in order to continue serving its many corporate and institutional clients in these markets.
Citi CEO Michael Corbat said, “While our Consumer businesses in Brazil, Argentina and Colombia are of high quality, we have decided to focus our efforts on opportunities with our institutional clients in these countries and throughout the wider region. Citi is committed to Latin America, where we have operated for over a century and built an unmatched network across 23 countries.
“We allocate our resources where they can generate the best possible returns for our shareholders. These actions will further simplify our Global Consumer Bank, allowing us to more effectively deploy resources to where we have the ability to achieve scale within our targeted segments and see the greatest opportunity for growth,” Mr. Corbat concluded.
The consumer businesses moving into Citi Holdings include roughly $6 billion in assets and did not have a material impact on Citigroup’s net income in 2015. The new Global Consumer Banking footprint will serve nearly 54 million clients in the United States, Mexico, Asia Pacific, Europe and the Middle East, while further simplifying operations and improving performance. Since 2012, the Global Consumer Bank has made significant progress simplifying markets, branches, and products while strengthening controls and improving customer experience.
Citi
Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.
NEW YORK – “Today we shared with our colleagues that we have concluded the major actions that we announced in September 2023 that align Citi’s structure with our simplified operating model: https://www.citigroup.com/global/news/press-release/2023/citi-aligns-organizational-structure-strategy-simplifies-operating-model
While these decisions were not made easily, they have allowed us to strengthen how we run the bank and serve clients through enhanced connectivity and accountability.
After having reset Citi’s strategy and undergone these consequential changes, we will continue to execute on our vision to be the preeminent banking partner for institutions with cross-border needs, a global leader in wealth and a valued personal bank in our home market and focus on our commitment to transform the company for the long term.”
About Citi
Citi is a preeminent banking partner for institutions with cross-border needs, a global leader in wealth management and a valued personal bank in its home market of the United States. Citi does business in nearly 160 countries and jurisdictions, providing corporations, governments, investors, institutions and individuals with a broad range of financial products and services.
New York – Citigroup today announced that it has reached an agreement to settle the ongoing investigation of the Residential Mortgage-Backed Securities (RMBS) Working Group, part of the Financial Fraud Enforcement Task Force. Today’s agreement resolves actual and potential civil claims by the U.S. Department of Justice (the DOJ), several state attorneys general (State AGs), and the Federal Deposit Insurance Corporation (the FDIC) relating to RMBS and collateralized debt obligations (CDOs) issued, structured or underwritten by Citi between 2003 and 2008.
Under the terms of the settlement, Citigroup will pay a total of $4.5 billion in cash and provide $2.5 billion in consumer relief. The cash portion consists of a $4 billion civil monetary payment to the DOJ and $500 million in compensatory payments to the State AGs and the FDIC. The consumer relief will be in the form of financing provided for the construction and preservation of affordable multifamily rental housing, principal reduction and forbearance for residential loans, as well as other direct consumer benefits from various relief programs. Citigroup has agreed to provide the consumer relief by the end of 2018.
Michael Corbat, Chief Executive Officer of Citigroup, said, “The comprehensive settlement announced today with the U.S. Department of Justice, state attorneys general, and the FDIC resolves all pending civil investigations related to our legacy RMBS and CDO underwriting, structuring and issuance activities. We also have now resolved substantially all of our legacy RMBS and CDO litigation. We believe that this settlement is in the best interests of our shareholders, and allows us to move forward and to focus on the future, not the past.”
In connection with the settlement, Citigroup will take a charge of approximately $3.8 billion pre-tax in the second quarter of 2014. Citigroup will issue its second quarter results via press release at approximately 8 a.m. today.
Citi
Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.
Additional information may be found at www.citigroup.com
Benjamin M. Lawsky, Superintendent of Financial Services, announced today that Commerzbank will pay a $1.45 billion penalty, terminate individual employees who engaged in misconduct, and install an independent monitor for Banking Law violations in connection with transactions on behalf of Iran, Sudan, and a Japanese corporation that engaged in accounting fraud. The overall $1.45 billion penalty includes $610 million to the Department of Financial Services (DFS); $300 million to the U.S. Attorney’s Office for the Southern District of New York; $200 million to the Federal Reserve; $172 million to the Manhattan District Attorney’s Office and $172 million to the U.S. Department of Justice.
Superintendent Lawsky said: “When there was profit to be made, Commerzbank turned a blind eye to its anti-money laundering compliance responsibilities. Bank employees helped facilitate transactions for sanctioned clients such as Iran and Sudan, and a company engaged in accounting fraud. What is especially disturbing is that employees sought to alter the Bank’s transaction monitoring system so that it would create fewer ‘red flag’ alerts about potential misconduct, which highlights a potential broader problem in the banking industry.”
From at least 2002 to 2008, Commerzbank used a series of measures – including stripping out information identifying clients subject to U.S. sanctions (“wire-stripping”) – to process 60,000 U.S. dollar clearing transactions valued at over $253 billion on behalf of Iranian and Sudanese entities. Additionally, deficiencies in Commerzbank’s anti-money laundering compliance program resulted in Commerzbank’s facilitation of numerous payments through the Bank’s New York Branch that furthered a massive accounting fraud by the Olympus Corporation, a Japanese optics and medical device manufacturer.
Anti-money-laundering Compliance Failures
Foreign branches often transmitted payment requests to Commerzbank’s New York Branch using non-transparent SWIFT payments messages that did not disclose the identity of the remitter or beneficiary. As a result of not having a complete picture of the transactions, Commerzbank’s New York Branch’s compliance processes and controls were ineffective, and fewer alerts or red flags were raised than would have been if full information had been shared.
Even when transactions from foreign branches did trigger alerts in New York, the New York compliance staff did not have access to the customer information necessary to investigate the alert; they had to request relevant information directly from the foreign branch or from the Home Office in Frankfurt. Overseas personnel, however, often did not respond to those requests by New York staff for many months or sent inadequate or insufficient responses. Many overseas employees were uncooperative or did not respond to requests for more information by those investigating alerts – they felt that New York compliance staff were simply “crying wolf” when they raised BSA/AML compliance issues.
On some occasions, because information from overseas offices was not provided, New York staff “cleared” or closed alerts based on its own perfunctory internet searches and searches of public source databases, without ever receiving responses to its requests for information from the foreign offices.
In an interview with investigators, a New York-based vice president in compliance who was involved in establishing the thresholds used by Commerzbank’s New York Branch’s monitoring software in effect until 2010 reported that, while the goal of the threshold-setting process was to identify suspicious transactions and exclude irrelevant alerts, the threshold floors were driven by the volume of the output of alerts – that is, the threshold floors were set based on a desire not to generate “too many alerts.”
In addition, the New York compliance staff member charged with overseeing the implementation of a new transaction monitoring tool told investigators that the Head of Regional Compliance for Commerzbank’s New York Branch required a weekly update as to the number of alerts generated by the transaction monitoring system.
Furthermore, the compliance staff member reported that in 2011, both the Head of Regional Compliance and the Head of AML Compliance asked him to change the thresholds in the automated system to reduce the number of alerts generated. The compliance staff member reported that he refused to do so.
Olympus Corporation Accounting Fraud
Commerzbank’s BSA/AML compliance deficiencies allowed a customer to operate a massive corporate accounting fraud through the Bank, during which time some senior bank officials in Singapore – two of whom later held senior positions in Commerzbank’s New York Branch while the fraud was ongoing – had suspicions about the business but failed to convey those suspicions to compliance personnel in Commerzbank’s New York Branch or take adequate steps to stop fraudulent transactions.
From the late 1990s through 2011, the Olympus Corporation, a Japanese optics and medical device manufacturer, perpetuated a massive accounting fraud designed to conceal from its auditors and investors hundreds of millions of dollars in losses. Olympus perpetuated its fraud through Commerzbank’s private banking business in Singapore, known as Commerzbank (Southeast Asia) Ltd. (“COSEA”), and a trusts business in Singapore, Commerzbank International Trusts (Singapore) Ltd., and the New York Branch, through its correspondent banking business. Among other things, the fraud was perpetuated by Olympus through special purpose vehicles, some of which were created by Commerzbank – including several executives based in Singapore – at Olympus’s direction, using funding from Commerzbank. One of those Singapore-based Commerzbank executives, Chan Ming Fong – who was involved both in creating the Olympus structure in 1999 while at COSEA, and who later on his own managed an Olympus-related entity in 2005-2010 on behalf of which Chan submitted false confirmations to Olympus’s auditor – subsequently pled guilty in the United States District Court for the Southern District of New York to conspiracy to commit wire fraud. Starting as early as 1999 and continuing intermittently until 2010, Commerzbank facilitated numerous transactions through New York, totaling more than $1.6 billion, which supported the accounting fraud by Olympus.
Over the life of the fraud, numerous Commerzbank employees in Singapore raised concerns about the Olympus business and related transactions. But those concerns did not lead to effective investigation of the business and were not shared with relevant staff in New York responsible for BSA/AML compliance. For example, when Commerzbank sent a London-based compliance officer on special assignment to Singapore in 2008 to analyze and help enhance compliance efforts there, he was told by the Bank’s Asian Regional Head of Compliance and Legal to pay particular attention to the Olympus-related business. The Regional Head of Compliance warned him that, while the business yielded “very substantial” fees for Commerzbank, the structure of the business was “complex” and “extraordinarily elaborate and redolent of layering” and that it raised suspicions of money laundering, “fraud, asset stripping, market manipulation, and derivative Tax offences.”
A new staff member was installed as Head of Regional Compliance for the New York Branch in approximately June 2010. He, too, had spent time at Commerzbank’s Singapore affiliates before coming to New York. And he, too, was aware of the compliance deficiencies in Singapore and of the suspicious nature of the Olympus-related business, which he also knew involved wire transactions through New York. For example, while he was working in Singapore, a resigning compliance staff member told him that Singapore compliance was “a time bomb ready to go off.” Yet, after moving to the New York Branch, he also failed to share any concerns with the New York compliance staff who would have been in a position to scrutinize the fraudulent transactions being processed through New York.
Wire Stripping and Other Schemes to Facilitate Iranian and Sudanese Transaction
Commerzbank also used altered or non-transparent payment messages to process tens of thousands of transactions through New York on behalf of customers subject to U.S. economic sanctions.
In an effort to grow its business relationships with Iranian customers in the early 2000s, Commerzbank created internal procedures for processing U.S. dollar payments to enable those clients, which included state-controlled financial institutions such as Bank Sepah and Bank Melli, to clear U.S. dollar payments through the U.S. financial system without detection.
From at least May 2003 to July 2004, Commerzbank altered or stripped information from wire messages for payments involving Iranian parties subject to U.S. sanctions so as to hide the true nature of those payments and circumvent sanctions-related protections.
The Bank designated a special team of employees to manually process Iranian transactions – specifically, to strip from SWIFT payment messages any identifying information that could trigger OFAC-related controls and possibly lead to delay or outright rejection of the transaction in the United States. Bank employees circulated both formal written instructions and informal guidance via email directing lower-level staff to strip information that could identify sanctioned parties from wire messages before sending the payment messages to U.S. clearing banks.
Beginning in 2005, Commerzbank processed U.S. dollar payments for an Iranian subsidiary of the Islamic Republic of Iran Shipping Lines (“IRISL”) using the accounts of a different, non-Iranian IRISL affiliate in order to avoid detection by correspondents and regulators in the U.S. Later, after the Bank instituted a policy limiting its business with Iranian customers in 2007, Hamburg branch employees moved the accounts of two Iranian IRISL subsidiaries into sub-accounts under the account of one of IRISL’s European affiliates and also changed the country identification codes for certain IRISL affiliates in the Bank’s internal records so as to obfuscate these entities’ true Iranian relationship.
In addition, the Bank recognized that other international financial institutions declined to process Sudanese U.S. dollar transactions, due to U.S. sanctions, and therefore that Sudan represented a potentially profitable market. From at least 2002 to 2006, the Bank maintained U.S. dollar accounts for as many as 17 Sudanese banks, including five SDNs, and processed approximately 1,800 U.S. dollar transactions valued at more than $224 million through the U.S. using non-transparent methods for these clients and other Sudanese entities.
Commerzbank’s New York Branch also helped hide the true nature of the Bank’s U.S. dollar clearing activities by failing to act on numerous indications that payment requests were being submitted in a non-transparent manner; in 2004, an employee even called upon the Frankfurt office to “suppress” the creation of MT210s relating to payments ordered by Iranian banks because “authorities could view our handling of them as problematic.”
Termination of Commerzbank Employees under DFS Order
While several of the Bank employees who were centrally involved in the improper conduct discussed in this Consent Order no longer work at the Bank, several such employees do remain employed by the Bank.
The Department’s investigation has resulted in the resignation from Commerzbank of the employee then serving as the Head of AML, Fraud, and Sanctions Compliance for Commerzbank’s New York Branch, who played a central role in the improper conduct described in this Consent Order.
DFS also ordered the Bank to take all steps necessary to terminate four additional employees, who played central roles in the improper conduct but who remain employed by the Bank: a relationship manager in the Financial Institutions Department; a staff member in the Interest, Currency & Liquidity Management Department; and two members of the Cash Management & International Business Department.
Additionally, as previously noted, a Singapore-based Commerzbank executive who was involved both in Olympus matter pled guilty in the United States District Court for the Southern District of New York to conspiracy to commit wire fraud.
Superintendent Lawsky thanks U.S. Attorney Preet Bharara; Manhattan District Attorney Cy Vance, the U.S. Department of Justice, the Federal Reserve; and the U.S. Department of the Treasury for their work and cooperation in the Commerzbank investigation.
Today, EU ambassadors agreed the Council’s position on two legislative proposals which will free up funds to tackle the effects of the COVID-19 outbreak. Given the urgency of the situation, both proposals were approved without amendments.
The so-called Coronavirus Response Investment Initiative will make available €37 billion of Cohesion funds to member states to address the consequences of the crisis. About €8 billion of investment liquidity will be released from unspent pre-financing in 2019 for programmes under the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund. The measure will also provide access to €29 billion of structural funding across the EU for 2020. Expenditure on crisis response will be available as of 1 February 2020.
The new measures will support SMEs to alleviate serious liquidity shortages as a result of the pandemic, as well as strengthen investment in products and services necessary to bolster the crisis response of health services. Member states will also have greater flexibility to transfer funds between programmes to help those most adversely affected.
EU ambassadors also endorsed without amendment a legislative proposal to extend the scope of the EU Solidarity Fund to cover public health emergencies. The fund was initially set up to help member states and accession countries deal with the effects of natural disasters. Including public health emergencies will enable the Union to help meet people’s immediate needs during the coronavirus pandemic. The aim is to complement efforts of the countries concerned.
Next steps
The European Parliament will now need to agree its position on the new measures. Once there is an agreement, the Council is expected to adopt the measures by written procedure.
WASHINGTON, — Global economic growth is projected to soften from a downwardly revised 3 percent in 2018 to 2.9 percent in 2019 amid rising downside risks to the outlook, the World Bank said on Tuesday. International trade and manufacturing activity have softened, trade tensions remain elevated, and some large emerging markets have experienced substantial financial market pressures.
Growth among advanced economies is forecast to drop to 2 percent this year, the January 2019 Global Economic Prospects says. Slowing external demand, rising borrowing costs, and persistent policy uncertainties are expected to weigh on the outlook for emerging market and developing economies. Growth for this group is anticipated to hold steady at a weaker-than-expected 4.2 percent this year.
“At the beginning of 2018 the global economy was firing on all cylinders, but it lost speed during the year and the ride could get even bumpier in the year ahead”, said World Bank Chief Executive Officer Kristalina Georgieva. “As economic and financial headwinds intensify for emerging and developing countries, the world’s progress in reducing extreme poverty could be jeopardized. To keep the momentum, countries need to invest in people, foster inclusive growth, and build resilient societies.”
Download the January 2019 Global Economic Prospects report.
The upswing in commodity exporters has stagnated, while activity in commodity importers is decelerating. Per capita growth will be insufficient to narrow the income gap with advanced economies in about 35 percent of emerging market and developing economies in 2019, with the share increasing to 60 percent in countries affected by fragility, conflict, and violence.
A number of developments could act as a further brake on activity. A sharper tightening in borrowing costs could depress capital inflows and lead to slower growth in many emerging market and developing economies. Past increases in public and private debt could heighten vulnerability to swings in financing conditions and market sentiment. Intensifying trade tensions could result in weaker global growth and disrupt globally interconnected value chains.
“Robust economic growth is essential to reducing poverty and boosting shared prosperity,” said World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu. “As the outlook for the global economy has darkened, strengthening contingency planning, facilitating trade, and improving access to finance will be crucial to navigate current uncertainties and invigorate growth.”
Analytical chapters address key current topics:
The informal sector accounts for about 70 percent of employment and 30 percent of GDP in emerging market and developing economies. Since it is associated with lower productivity and tax revenues and greater poverty and inequality, this is symptomatic of opportunities lost. Reducing tax and regulatory burdens, improving access to finance, offering better education and public services, and strengthening public revenue frameworks could level the playing field between formal and informal sectors.
Debt vulnerabilities in low-income countries are rising. While borrowing has enabled many countries to tackle important development needs, the median debt-to-GDP ratio of low-income countries has climbed, and the composition of debt has shifted toward more expensive market-based sources of financing. These economies should focus on mobilizing domestic resources, strengthening debt and investment management practices and building more resilient macro-fiscal frameworks.
Sustaining historically low and stable inflation is not guaranteed in emerging market and developing economies. Cyclical pressures that have depressed inflation over the past decade are gradually dissipating. The long-term factors that have helped reduce inflation over the past five decades – global trade and financial integration, widespread adoption of robust monetary policy frameworks – may lose momentum or reverse. Maintaining low global inflation may become as much of a challenge as achieving it.
Policies aimed at softening the blow of global food price swings can have unintended consequences if implemented by many governments in uncoordinated fashion. Government interventions can provide short-term relief, but widespread actions are likely to exacerbate food price spikes, with heaviest impact on the poor. For example, trade policies introduced during the 2010-11 food price spike may have accounted for more than one-quarter of the increase in the world price of wheat and maize. The 2010-11 food price spike tipped 8.3 million people (almost 1 percent of the world’s poor) into poverty.
“Designing tax and social policies to level the playing field for formal and informal sectors as well as strengthening domestic revenue mobilization and debt management will be important priorities for policymakers to overcome the challenges associated with informality in developing economies,” said World Bank Prospects Group Director Ayhan Kose. “As the economic outlook dims, such efforts become even more important.”
Regional Outlooks:
East Asia and Pacific: East Asia and Pacific remains one of the world’s fastest-growing developing regions. Regional growth is expected to moderate to 6 percent in 2019, assuming broadly stable commodity prices, a moderation in global demand and trade, and a gradual tightening of global financial conditions. Growth in China is expected to slow to 6.2 percent this year as domestic and external rebalancing continue. The rest of the region is expected to grow at 5.2 percent in 2019 as resilient demand offsets the negative impact of slowing exports. Indonesia’s growth is expected to hold steady at 5.2 percent. The expansion of the Thai economy is expected to slow in 2019 to 3.8 percent.
Europe and Central Asia: The lingering effects of financial stress in Turkey are anticipated to weigh on regional growth this year, slowing it to 2.3 percent in 2019. Turkey is forecast to experience weak activity and slow to a 1.6 percent pace due to high inflation, high interest rates, and low confidence, dampening consumption and investment. Growth in the western part of the region, excluding Turkey, is projected to slow. Poland is anticipated to slow to 4 percent as Euro Area growth slows. Growth in the eastern part of the region is also anticipated to slow as large economies including Russia, Kazakhstan, and Ukraine decelerate.
Latin America and the Caribbean: Regional growth is projected to advance to a 1.7 percent pace this year, supported mainly by a pickup in private consumption. Brazil is forecast to expand 2.2 percent, assuming fiscal reforms are quickly put in place, and that a recovery of consumption and investment will outweigh cutbacks to government spending. In Mexico, policy uncertainty and the prospect of still subdued investment is expected to keep growth at a moderate 2 percent, despite the fall in trade-related uncertainty following the announcement of the U.S.-Mexico-Canada Agreement. Argentina is forecast to contract by 1.7 percent as deep fiscal consolidation leads to a loss of employment and reduced consumption and investment.
Middle East and North Africa: Regional growth is projected to rise to 1.9 percent in 2019. Despite slower global trade growth and tighter external financing conditions, domestic factors, particularly policy reforms, are anticipated to bolster growth in the region. Growth among oil exporters is expected to pick up slightly this year, as GCC countries as a group accelerate to a 2.6 percent rate from 2 percent in 2018. Iran is forecast to contract by 3.6 percent in 2019 as sanctions bite. Algeria is forecast to ease to 2.3 percent after a rise in government spending last year tapers off. Egypt is forecast to accelerate to 5.6 percent growth this fiscal year as investment is supported by reforms that strengthen the business climate and as private consumption picks up.
South Asia: Regional growth is expected to accelerate to 7.1 percent in 2019, underpinned by strengthening investment and robust consumption. India is forecast to accelerate to 7.3 percent in FY 2018/19 as consumption remains robust and investment growth continues, Bangladesh is expected to slow to 7 percent in FY2018/19 as activity is supported by strong private consumption and infrastructure spending. Pakistan’s growth is projected to decelerate to 3.7 percent in FY2018/19, with financial conditions tightening to help counter rising inflation and external vulnerabilities. Sri Lanka is anticipated to speed up slightly to 4 percent in 2019, supported by robust domestic demand and investment boosted by infrastructure projects. Nepal’s post-earthquake momentum is forecast to moderate, and growth should slow to 5.9 percent in FY2018/19.
Sub-Saharan Africa: Regional growth is expected to accelerate to 3.4 percent in 2019, predicated on diminished policy uncertainty and improved investment in large economies together with continued robust growth in non-resource intensive countries. Growth in Nigeria is expected to rise to 2.2 percent in 2019, assuming that oil production will recover and a slow improvement in private demand will constrain growth in the non-oil industrial sector. Angola is forecast to grow 2.9 percent in 2019 as the oil sector recovers as new oil fields come on stream and as reforms bolster the business environment. South Africa is projected to accelerate modestly to a 1.3 percent pace, amid constraints on domestic demand and limited government spending.
In the first half of 2015 a total of 454,000 counterfeit euro banknotes were withdrawn from circulation –10.5% down on the figure for the second half of 2014, but still higher than in the first half of 2014. The number of counterfeits continues to remain very low in comparison with the increasing number of genuine banknotes in circulation (over 17 billion during the first half of 2015).
Ever since the first euro series was issued, the Eurosystem – i.e. the European Central Bank (ECB) and the national central banks of the euro area – has urged people to stay vigilant when receiving banknotes. Genuine banknotes can be easily recognised using the simple “feel, look and tilt” method described on the euro pages of the ECB’s website and the websites of the Eurosystem national central banks.
If you receive a suspect banknote, you can compare it directly with one you know is genuine. If your suspicions are confirmed, you should contact either the police or – depending on national practice – the respective national central bank. The Eurosystem supports the law enforcement agencies in their fight against currency counterfeiting.
The Eurosystem has a duty to safeguard the integrity of the euro banknotes and continue improving banknote technology. The Europa series is designed to make the banknotes even more secure and to help maintain public confidence in the currency.
During that period:
the €20 and €50 continued to be the most counterfeited banknotes. Compared with the figures reported for the second half of 2014, the proportion of counterfeit €20 notes decreased slightly and that of counterfeit €50 notes increased. Together, they accounted for 86% of the counterfeits; most (97.9%) of the counterfeits were found in euro area countries. Only around 1.6% were found in EU Member States outside the euro area and less than 0.5% were found in other parts of the world.
The Eurosystem communicates in various ways to help people distinguish between genuine and counterfeit notes, and to help professional cash handlers ensure that banknote-handling and processing machines can reliably identify and withdraw counterfeits from circulation. Banknote equipment manufacturers and suppliers will continue to receive support from the Eurosystem in adapting their machines and authentication devices to the Europa series banknotes. If their equipment is still unable to accept these banknotes, operators/owners should contact their suppliers or manufacturers without delay.
The new €20 banknote will be issued as from 25 November 2015.
NEW YORK, Oct. 14, 2021 /PRNewswire/ — Deloitte today announced the launch of its ConvergeHEALTH CognitiveSpark™ for Marketing artificial intelligence (AI) precision engagement solution, a module of the CognitiveSpark suite. CognitiveSpark for Marketing harnesses the power of AI to boost digital marketing return on investment (ROI) for life sciences companies, helping marketers make AI-powered decisions at scale and with speed.
CognitiveSpark for Marketing harnesses the power of AI to boost digital marketing ROI for life sciences companies.
CognitiveSpark™ for Marketing: An Artificial Intelligence (AI) Solution
CognitiveSpark™ for Marketing: An Artificial Intelligence (AI) Solution
A recent Deloitte survey of biopharma executives found that digital innovation is now a burning priority, with 77% of those surveyed saying their organization considers “digital innovation as a competitive differentiator.” And in the same survey, 86% of commercial leaders pointed to “health care provider (HCP)/patient engagement as the top use case likely to be impacted by digital innovation.”
Digital transformation and ultimately how that transformation helps patients, is a key imperative for biopharma Clients. Clients want a solution that helps them identify new opportunities, personalize content to each customer’s journey, and create new insights and modeling to improve customer targeting and experiences. Most importantly, they want to better understand the latent drivers of customer behavior to deliver the information customers need to manage their health — all while preserving transparency and trust.
Life sciences companies face several challenges when using digital marketing approaches to improve patient engagement, including:
Siloed marketing and sales functions: “Stove pipe” patient marketing, and sales functions contribute to disconnected engagement.
Data access and integration challenges: Promotional data comes from a variety of sources, making it difficult to identify, integrate and leverage data from impression through to revenue increase.
Theoretical versus experiential business rules: Patient engagement strategies are often based on rigid and simple if/then business rules, making it difficult to identify and optimize engagement drivers.
Loosely coupled decisioning and engagement layers: Omni-channel patient engagement isn’t tied to a robust decisioning layer that can be fine-tuned to support marketing execution.
CognitiveSpark for Marketing addresses these challenges by providing a flexible approach to connect disparate data sets, breaking down traditional siloes for insight-driven decision-making. The modular, cloud-based product includes:
Integrated data sets: Combines brand impression data with patient longitudinal data to produce an integrated, de-identified data set for analysis.
Quality data sets: Integrates claim data from 320 million patient lives to provide a robust foundation for analysis.
Leading AI technologies: Applies next-gen machine learning and analytic technologies to provide actionable insights and recommendations.
Multi-dimensional visualizations: Provides highly targeted and visual illustrations that translate the noise of data into consumable pieces of information.
Free form user analysis: Enables users to drill down into source data to generate their own queries and insights.
“Digital transformation enabled by AI and machine learning is affecting virtually every aspect of the life sciences value chain,” said Aditya Kudumala, principal, Deloitte Consulting LLP, in Deloitte’s life sciences technology practice. “And when deployed strategically, and scaled across the entire enterprise, AI can help life sciences companies reshape business models, streamline manufacturing, and enhance everything from research to clinical trials to product intelligence. That’s the vision for the CognitiveSpark Suite of products — use AI to bring big data to life and ultimately help life sciences companies be more personalized and authentic in how they engage with health care professionals, patients and other stakeholders.”
CognitiveSpark for Marketing features a focused set of marketing modules built off campaign, behavioral, and medical data — connected in a manner that is designed to provide data privacy, patient safety and security. The cloud-based solution can integrate within an existing marketing analytics ecosystem to generate knowledge and inform marketing spend across multiple channels.
“Patients are surrounded by advertisements for pharmaceutical and health care products, as well as multiple, confusing marketing messages; and at the same time brand teams inherently face a degree of uncertainty in every decision they make,” said Mark Miller, managing director with Deloitte Consulting LLP. “CognitiveSpark for Marketing brings precision and clarity to brand teams and the audiences they are trying to reach so there can be better engagement, more satisfying experiences and ultimately more trust with patients and partners.”
About the ConvergeHEALTH CognitiveSpark Suite
Deloitte develops AI offerings that span the life sciences value chain — from molecule to market — including products through its ConvergeHEALTH CognitiveSpark suite. These AI solutions can help biopharma automate data management for clinical trials; improve manufacturing yield and product quality; leverage patient-generated insights for product enhancement; and power precision patient engagement in marketing. The ConvergeHEALTH CognitiveSpark suite offers a robust, integrated suite of AI-driven capabilities, solutions and products. Built on Deloitte’s CortexAI™, a secure scalable multi-cloud infrastructure, the CognitiveSpark suite is also scalable and flexible enough to integrate with a client’s existing AI platforms. Using CognitiveSpark, life sciences companies can generate new transformative opportunities, drive operational efficiency, fuel business growth — and importantly, benefit patients.
For more information please visit: https://www2.deloitte.com/us/CognitiveSpark-Marketing
About Deloitte
Deloitte provides industry-leading audit, consulting, tax and advisory services to many of the world’s most admired brands, including nearly 90% of the Fortune 500® and more than 7,000 private companies. Our people come together for the greater good and work across the industry sectors that drive and shape today’s marketplace — delivering measurable and lasting results that help reinforce public trust in our capital markets, inspire clients to see challenges as opportunities to transform and thrive, and help lead the way toward a stronger economy and a healthier society. Deloitte is proud to be part of the largest global professional services network serving our clients in the markets that are most important to them. Building on more than 175 years of service, our network of member firms spans more than 150 countries and territories. Learn how Deloitte’s more than 345,000 people worldwide connect for impact at www.deloitte.com.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about to learn more about our global network of member firms.
SOURCE Deloitte
CONTACT: Julie Landmesser, Public Relations, Deloitte Services LP, +1 219 501 1468, jlandmesser@deloitte.com
Related Links
www.deloitte.com
The booming U.S. energy market, robust housing recovery and strengthening economy are creating growth opportunities for investors of non-financial specialty assets, including farmland, timberland, real estate, private businesses, and oil and gas, according to U.S. Trust. In a report published today on its 2014 outlook for non-financial assets, U.S. Trust’s Specialty Asset Management group said it expects strong performance from the asset class and that it is a market poised for long-term growth.
“When you factor in long-term market trends – population growth, economic development in emerging markets and the correlating demands on energy, food and housing – we see a strong growth opportunity emerging for non-financial assets,” said Dennis Moon, national executive of U.S. Trust’s Specialty Asset Management group that manage separate accounts for high net worth investors in real assets.
“Furthermore, the factors that drive the value of these assets are unique and independent of the volatile forces often at play in the broader market, making these investments highly attractive and an important consideration in the construction of a balanced portfolio.”
In its outlook for 2014, U.S. Trust takes an in-depth look at the opportunities for five key non-financial asset categories:
Timberland: Demand for timber is expected to grow as the U.S. housing recovery moves into high gear and competition for resources heats up between pulp and paper mills and renewable energy plants fueling the fast-growing woody biomass market. Timber pricing is rebounding from historic lows and will likely continue to rise as supplies tighten and demand accelerates. These market fundamentals, combined with low return volatility and tax efficiency, suggests a strong 2014 for timberland investments.
Farm and ranch land: With a 4 percent, or in some cases higher, cash yield expected in 2014, farmland remains a favorable investment opportunity. In 2014, farm and ranch land prices are expected to level off as more normal slow growth is anticipated for commodities including corn, soybeans and wheat, spurred by macro-trends such as global population growth. As farmer-investors become more conservative and land prices level off, more opportunities for farmland deals are expected to emerge for long-term investors.
Oil and gas properties: As demand for energy accelerates and the U.S. moves ever closer to energy independence, oil and gas investment activities will continue to be a big area of focus. With the apparent worldwide economic improvement, in conjunction with the transforming energy efficiencies and correlating demands, the stage is set for investment opportunities in energy over the long term.
Commercial real estate: Economic improvements in 2013, both domestic and abroad, translated into stronger demand in the U.S. commercial real estate market, with the office, retail, multi-family and industrial segments all posting improvements for the year in vacancy, rents and valuation. The outlook remains positive overall for commercial real estate investors in 2014; however, there will be variances by product type and market. In the year ahead, multi-housing rent growth is expected to moderate and vacancy rates may slightly rise. Office and industrial properties are seeing continued rent growth but also shifts in tenant preferences for more functional space and amenities. Renovation will likely be the dominant focus of investments in retail properties as many markets continue to deal with “dead centers.”
Private businesses: As an investment class, private businesses are expected to offer a breadth of opportunities both for domestic and foreign acquirers in the year ahead, along with an increase in the inventory for buyers and the number of interested sellers. Positive balance sheet growth should continue to strengthen in 2014, and business owners are benefitting from strong credit opportunities at favorable rates, which should spur M&A activity. However, the pace of private company investment activity may be slowed as business owners face the still unknown impact of the Affordable Care Act on their cost of doing business.
“Non-financial assets can be an effective diversifier to a portfolio of financial assets, and we’re seeing this asset class become an increasing focus for many of our clients, both individual and institutional investors with access to the amount of capital needed for direct investments1,” added Moon. “By their nature, these are unique investments, and the assets themselves need to be managed to maximize the value of the deal and the investment’s income-producing potential.”
The Specialty Asset Management team at U.S. Trust offers strategic insight and specialized experience required to manage and maximize the potential of these investments. Led by Dennis Moon, the executive team includes:
Doug Donnell, national Timberland executive.
John Taylor, national Farm and Ranch executive.
Dick Sadler, national Oil and Gas executive.
Andrew Tanner, national Private Business and Real Estate Services executive.
A copy of U.S. Trust’s 2014 Outlook on non-financial assets is available at www.ustrust.com/sam along with additional whitepapers from the specialty asset management group at U.S. Trust.
1Note: Oil, gas and mineral interests are not available for direct investment through U.S. Trust.
U.S. Trust
U.S. Trust, Bank of America Private Wealth Management is a leading private wealth management organization providing vast resources and customized solutions to help meet clients’ wealth structuring, investment management, banking and credit needs. Clients are served by teams of experienced advisors offering a range of financial services, including investment management, financial and succession planning, philanthropic and specialty asset management, family office services, custom credit solutions, financial administration and family trust stewardship.
U.S. Trust is part of the Global Wealth and Investment Management unit of Bank of America, N.A., which is a global leader in wealth management, private banking and retail brokerage. U.S. Trust employs more than 4,000 professionals and maintains 140 offices in 32 states.
As part of Bank of America, U.S. Trust can provide access to a broad range of banking solutions for individuals and businesses, and an extensive retail banking platform.
Bank of America
Bank of America is one of the world’s largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 50 million consumer and small business relationships with approximately 5,100 retail banking offices and approximately 16,300 ATMs and award-winning online banking with 30 million active users and more than 14 million mobile users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Non-financial assets, such as closely-held businesses, real estate, oil, gas and mineral properties, and timber, farm and ranch land, are complex in nature and involve risks including total loss of value. Special risk considerations include natural events (for example, earthquakes or fires), complex tax considerations, and lack of liquidity. Nonfinancial assets are not suitable for all investors. Always consult with your independent attorney, tax advisor, investment manager, and insurance agent for final recommendations and before changing or implementing any financial, tax, or estate planning strategy.
Energy and natural resources stocks have been volatile. They may be affected by rising interest rates and inflation and can also be affected by factors such as natural events (for example, earthquakes or fires) and international politics.
Diversification does not ensure a profit or protect against loss in declining markets.
U.S. Trust operates through Bank of America, N.A., and other subsidiaries of Bank of America Corporation. Bank of America, N.A., Member FDIC.
This news is courtesy of www.bankofamerica.com
Zurich, Credit Suisse economists and strategic investment consultants who advise the bank’s institutional clients today published a study entitled ‘Swiss Pension Funds 2014 – Perspectives in Demographics and Asset Management’. The study is based on a survey of more than 250 Swiss pension funds. The results indicate that in addition to the low interest rate environment, demographic ageing poses the greatest challenge for pension funds. In this context, representatives of pension funds especially regard the excessive minimum conversion rate as problematic. As a result, the vast majority of them welcome the Swiss Federal Council’s proposal that the minimum conversion rate should be reduced. Despite Switzerland’s ageing population, Credit Suisse economists do not expect 2nd pillar total capital to decline by 2050. They also believe that Swiss pension funds have the potential to improve the efficiency of their asset allocation. The study shows that a long-term investment horizon is beneficial for pension funds in particular. However, many pension funds pursue investment strategies with a short-term focus. Overall, most pension funds demonstrate a high level of cost consciousness – taking account of a range of cost factors – although they generally take the view that the scope for cost savings has largely been exhausted.
Following a prolonged ongoing period of low interest rates – and with the baby boomer retirement wave now beginning – 2nd pillar pension funds currently face a number of challenges. In the latest issue of the study on Swiss pension funds, Credit Suisse economists and strategic investment consultants who advise the bank’s institutional clients analyze major challenges identified by the pension funds surveyed: demographic ageing and management costs. They also look at the advantages offered by a long-term investment horizon and a variety of risk management strategies.
Majority of pension funds support “Old-age Provision 2020”
Over half of the pension fund managers surveyed regard demographic ageing as one of the major challenges that exist. 82% of the survey participants take the view that demographic ageing, combined with an actuarially unsustainable minimum conversion rate, are further intensifying the problem of redistribution from active insured persons to pension recipients. Many pension fund representatives also regard demographic trends as a challenge because, according to 63% of those surveyed, they create the need for higher savings contributions or a reduction in benefits (50%) in the form of lower pensions and/or a rise in the retirement age. In this context, the majority of pension fund representatives surveyed are in favor of the Swiss Federal Council’s package of reforms (‘Old-age Provision 2020’): 57% of respondents are in favor, with another 16% strongly in favor. Of the individual elements of the package, the most popular are the proposed retirement age of 65 for both men and women (63% strongly in favor) and the reduction of the minimum conversion rate to 6.0% (64% strongly in favor). The only proposal rejected by a majority is the setting of the minimum retirement age at 62 (56% against or strongly against).
Population ageing leads to slower capital accumulation and little change in asset allocation
Modeling carried out by Credit Suisse economists in the study shows that by the year 2050, population ageing is likely to lead to a slower rate of 2nd pillar capital accumulation but not to an absolute reduction. Although the annual difference between contributions paid in and benefits paid out could be negative, investment returns should more than compensate for this gap. However, all the demographic scenarios examined in the study point to a substantial slowdown in capital growth, particularly between 2020 and 2035. The impact that an ageing population has on the risk capacity of pension funds means that it also influences asset allocation. Specifically, pension fund representatives anticipate a slight fall in the allocation to equities over the long term. The authors of the study show in their calculations that as the average age of active insured persons rises, there is a statistically significant – but up to date very moderate – negative effect on the proportion of equities held by Swiss pension funds. They do not, therefore, expect to see any fundamental change in asset allocation at Swiss pension funds in the future as a result of demographic trends.
Pension funds do not fully exploit the available diversification potential
In view of the challenges that currently exist, the investment strategies adopted by pension funds are of considerable importance. Around 54% of the pension funds included in the survey use portfolio optimization when defining their investment strategy. The application of modern portfolio theory, as developed by Markowitz, has become established here as the standard approach. This method uses the advantages of diversification across various asset classes to construct portfolios that are risk/return optimized. The study shows that it is not possible to implement theoretically efficient asset allocations because of the regulatory requirements for Swiss pension funds. However, Swiss pension funds do not seem to be fully exploiting the diversification potential that is available even within this regulatory framework. This may be due to the application of stricter internal guidelines by the pension funds that impose additional caps on investments in certain asset classes, or the tendency to invest disproportionately in domestic asset classes (‘home bias’). Moreover, in the case of some asset classes (e.g. real estate), pension funds may be unable to find suitable investment properties in the market.
Long-term investment horizon proves beneficial
A longer investment horizon has advantages for investors, as the study shows. As expected, price fluctuations in Swiss equities were greater than for bonds between 1900 and 2012. However, the longer the equities were held, the less average yields varied. After a holding period of 14 years, there were no negative returns. This finding can also be applied to other asset classes. Pension funds clearly exhibit the characteristics of long-term investors. However, the survey shows that in reality, only 39% of pension funds base their investment strategy on a period of more than five years. 59% reported a relatively short-term investment horizon of two to five years, and 36% of pension funds have changed their strategy three to five times over the past ten years. More than half of the pension funds cited the financial crises and the inclusion of new asset classes as the main reasons for these changes.
Pension funds demonstrate a high level of cost consciousness
The survey found that Swiss pension fund managers demonstrate a high level of cost consciousness – taking account of a range of cost factors. More than half of the pension funds regard costs as important or very important, even if they are not currently the main focus of attention at some funds. A further 38% have already examined the question of costs conclusively. Based on these findings, it comes as no surprise that pension funds believe the potential for cost savings has been more or less exhausted. The majority of pension funds also indicated that diversification and net returns were more important criteria when choosing investments than reducing asset management costs at any price. The study’s authors consider this to be a sensible philosophy because it is not only asset management that gives rise to costs; lost sources of income and unexploited diversification potential also represent substantial opportunity costs.
Credit Suisse AG
Credit Suisse AG is one of the world’s leading financial services providers and is part of the Credit Suisse group of companies (referred to here as ‘Credit Suisse’). As an integrated bank, Credit Suisse is able to offer clients its expertise in the areas of private banking, investment banking and asset management from a single source. Credit Suisse provides specialist advisory services, comprehensive solutions and innovative products to companies, institutional clients and high net worth private clients worldwide, and also to retail clients in Switzerland. Credit Suisse is headquartered in Zurich and operates in over 50 countries worldwide. The group employs approximately 45,100 people. The registered shares (CSGN) of Credit Suisse’s parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at www.credit-suisse.com.
In a joint session of the Federal Open Market Committee (FOMC) and the Board of Governors of the Federal Reserve System, the manager of the System Open Market Account (SOMA) reported on developments in domestic and foreign financial markets. The deputy manager followed with a review of System open market operations conducted during the period since the Committee met on January 27-28, 2015. The deputy manager also discussed the outcomes of recent tests of supplementary normalization tools–namely, the Term Deposit Facility (TDF) and term and overnight reverse repurchase agreement operations (term RRP operations and ON RRP operations, respectively). The TDF operations were executed as three overlapping 21-day term operations with same-day settlement; the total amount of term deposits outstanding peaked at roughly the same level as in the largest operation conducted in prior testing. The term RRP operations were executed as a series of four one-week operations and conducted away from quarter-end; take-up primarily represented substitution away from ON RRP operations. The combination of these term and ON RRP test operations continued to provide a soft floor for money market rates over the intermeeting period.
By unanimous vote, the Committee ratified the Open Market Desk’s domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System’s account over the intermeeting period.
Normalization Tools
A staff briefing provided background on options for setting the aggregate capacity of the ON RRP facility in the early stages of the normalization process. Two options were discussed: initially setting a temporarily elevated aggregate cap or suspending the aggregate cap for a time. The briefing noted that, as the balance sheet normalizes and reserve balances decline, usage of the ON RRP facility should diminish, allowing the facility to be phased out over time. In addition, the briefing outlined strategies for actively reducing take-up at the ON RRP facility after policy normalization is under way, while maintaining an appropriate degree of monetary control, if take-up is larger than the FOMC desires. These strategies included adjusting the values of the interest on excess reserves (IOER) and ON RRP rates associated with a given target range for the federal funds rate, relying on tools such as term RRPs and the TDF to broaden arbitrage opportunities and to drain reserve balances, and selling shorter-term Treasury securities to reduce the size of the balance sheet at a faster pace. In addition, the briefing presented some information on specific calibrations of policy tools that could be used during the early stages of policy normalization.
In their discussion of the options and strategies surrounding the use of tools at liftoff and the potential subsequent reduction in aggregate ON RRP capacity, participants emphasized that during the early stages of policy normalization, it will be a priority to ensure appropriate control over the federal funds rate and other short-term interest rates. Against this backdrop, participants generally saw some advantages to a temporarily elevated aggregate cap or a temporary suspension of the cap to ensure that the facility would have sufficient capacity to support policy implementation at the time of liftoff, but they also indicated that they expected that it would be appropriate to reduce ON RRP capacity fairly soon after the Committee begins firming the stance of policy. A couple of participants stated their view that the risks to financial stability that might arise from a temporarily elevated aggregate ON RRP capacity were likely to be small, and it was noted that there might be little potential for a temporarily large Federal Reserve presence in money markets to affect the structure of those markets if plans for reducing the facility’s capacity were clearly communicated and well understood. However, a couple of participants expressed financial stability concerns, and one stressed that more planning was needed to address the potential risks before the Committee decides on the appropriate level of ON RRP capacity at the time of liftoff.
In their discussion regarding strategies for reducing ON RRP usage, should it become undesirably large during the early stages of normalization, most participants viewed raising the IOER rate, thereby widening the spread between the IOER and ON RRP rates, as an appropriate initial step. A majority of participants thought term reserve draining tools could be useful in reducing ON RRP usage, although a couple of participants questioned their effectiveness in placing upward pressure on market interest rates, and a few did not see term RRPs as reducing the Federal Reserve’s presence in money markets, arguing that investors view term and overnight RRPs as close substitutes. Many participants mentioned that selling assets that will mature in a relatively short time could be considered at some stage, if necessary to reduce ON RRP usage. However, a number of participants noted that it could be difficult to communicate the reason for such sales to the public, and, in particular, that the announcement of such sales would risk an outsized market reaction, as the public could view the sales as a signal of a tighter overall stance of monetary policy than they had anticipated or as an indication that the Committee might be more willing than had been thought to sell longer-term assets. Some participants pointed out that an earlier end to reinvestments of principal on maturing or prepaying securities would help reduce the level of reserve balances, thereby increasing the effectiveness of the IOER rate and allowing a more rapid reduction in the size of the ON RRP facility. A number of participants suggested that it would be useful to consider specific plans for these and other details of policy normalization under a range of post-liftoff scenarios.
Participants also discussed whether to communicate to the public additional details regarding the approach they intend to take when it becomes appropriate to begin the normalization process, including the width of the target range for the federal funds rate, the settings of the IOER and ON RRP rates, and the use of supplementary tools. A couple of participants suggested communicating a specific commitment to reducing ON RRP capacity soon after liftoff. However, a number of participants emphasized that maintaining control of short-term interest rates would be paramount in the initial stages of policy normalization, and that it was difficult to know in advance when a reduction would be appropriate. They therefore desired to retain some flexibility over the timing of any reduction. That said, many participants agreed that an elevated aggregate capacity for the facility would likely be appropriate only for a short period after liftoff.
At the conclusion of their discussion, all participants agreed to augment the Committee’s Policy Normalization Principles and Plans by providing the following additional details regarding the operational approach the FOMC intends to use when it becomes appropriate to begin normalizing the stance of monetary policy.3
When economic conditions warrant the commencement of policy firming, the Federal Reserve intends to:
Continue to target a range for the federal funds rate that is 25 basis points wide.
Set the IOER rate equal to the top of the target range for the federal funds rate and set the offering rate associated with an ON RRP facility equal to the bottom of the target range for the federal funds rate.
Allow aggregate capacity of the ON RRP facility to be temporarily elevated to support policy implementation; adjust the IOER rate and the parameters of the ON RRP facility, and use other tools such as term operations, as necessary for appropriate monetary control, based on policymakers’ assessments of the efficacy and costs of their tools. The Committee expects that it will be appropriate to reduce the capacity of the facility fairly soon after it commences policy firming.
A staff briefing outlined some options for further testing of term RRP operations over future quarter-ends. While the tests of term RRPs to date had been informative, the staff suggested that if the Committee envisioned using term RRPs as part of its strategy at liftoff, or potentially at some other point during normalization, continued testing may be useful. Participants discussed whether a resolution that authorized term RRP test operations at quarter-ends through the end of 2015 might reduce the probability that market participants mistakenly interpret future decisions about testing term RRPs over quarter-ends as containing information about the likely timing of liftoff. It was noted that such a resolution would be more efficient from an administrative and communications standpoint, as it would simply allow a continuation of recent quarter-end testing of term RRPs. Moreover, the resolution would not convey any information regarding either the timing of the start of policy normalization or whether term RRP operations might be employed at the time of liftoff and, if so, for how long.
Following the discussion of the testing of term RRP operations, the Committee approved the following resolution on term RRP testing over quarter-ends through January 29, 2016:
“During each of the periods of June 18 to 29, 2015; September 18 to 29, 2015; and December 17 to 30, 2015, the Federal Open Market Committee (FOMC) authorizes the Federal Reserve Bank of New York to conduct a series of term reverse repurchase operations involving U.S. government securities. Such operations shall: (i) mature no later than July 8, 2015, October 7, 2015, and January 8, 2016, respectively; (ii) be subject to an overall size limit of $300 billion outstanding at any one time; (iii) be subject to a maximum bid rate of five basis points above the ON RRP offering rate in effect on the day of the operation; (iv) be awarded to all submitters: (A) at the highest submitted rate if the sum of the bids received is less than or equal to the preannounced size of the operation, or (B) at the stop-out rate, determined by evaluating bids in ascending order by submitted rate up to the point at which the total quantity of bids equals the preannounced size of the operation, with all bids below this rate awarded in full at the stop-out rate and all bids at the stop-out rate awarded on a pro rata basis, if the sum of the counterparty offers received is greater than the preannounced size of the operation. Such operations may be for forward settlement. The System Open Market Account manager will inform the FOMC in advance of the terms of the planned operations. The Chair must approve the terms of, timing of the announcement of, and timing of the operations. These operations shall be conducted in addition to the authorized overnight reverse repurchase agreements, which remain subject to a separate overall size limit authorized by the FOMC.”
Mr. Lacker dissented in the vote on the resolution because the March end-of-quarter testing had not yet been completed and he felt that there was no need to authorize additional testing before then.
The Board meeting concluded at the end of the discussion of normalization tools.
Staff Review of the Economic Situation
The information reviewed for the March 17‒18 meeting suggested that real gross domestic product (GDP) growth moderated in the first quarter and that labor market conditions improved further. Consumer price inflation was restrained significantly by declines in energy prices and continued to run below the FOMC’s longer-run objective of 2 percent. Market-based measures of inflation compensation were still low, while survey measures of longer‑run inflation expectations remained stable.
Nonfarm payroll employment continued to expand strongly in January and February. The unemployment rate declined to 5.5 percent in February. Both the labor force participation rate and the employment-to- population ratio rose slightly over the first two months of the year, and the share of workers employed part time for economic reasons edged down. The rate of private-sector job openings moved up in January and was at an elevated level; the rate of quits remained the same as in the fourth quarter, but the rate of hiring stepped down.
Industrial production decreased a little, on net, in January and February, as declines in the output of the manufacturing and mining sectors more than offset an increase in utilities production. Some indicators of mining activity, such as counts of drilling rigs in operation, dropped further. However, automakers’ assembly schedules and broader indicators of manufacturing production, such as the readings on new orders from national and regional manufacturing surveys, generally pointed to modest gains in factory output in coming months.
Real personal consumption expenditures (PCE) appeared to decelerate somewhat going into the first quarter after rising markedly in the fourth quarter. The components of the nominal retail sales data used by the Bureau of Economic Analysis to construct its estimate of PCE declined slightly in January and February, and light motor vehicle sales stepped down; unusually severe weather in some regions in February may have accounted for a small part of the slowing in consumer spending in that month. Recent information about key factors that influence household spending pointed toward a pickup in PCE in the coming months. The purchasing power of households’ income continued to be supported by low energy prices, and real disposable income rose briskly in January. Moreover, households’ net worth likely increased as equity prices and home values advanced further, and consumer sentiment in the University of Michigan Surveys of Consumers was still near its highest level since prior to the most recent recession.
The pace of activity in the housing sector remained slow. Both starts and building permits for new single-family homes declined over January and February. Starts of multifamily units also decreased, on net, over the past two months. Sales of new and existing homes moved down in January, although pending home sales increased somewhat.
Real private expenditures for business equipment and intellectual property products appeared to be expanding in the first quarter at about the same modest pace as in the previous quarter. Both nominal orders and shipments of nondefense capital goods excluding aircraft rose in January. New orders for these capital goods remained above the level of shipments, indicating that shipments may increase in subsequent months. Other forward-looking indicators, such as national and regional surveys of business conditions, were generally consistent with modest increases in business equipment spending in the near term. Firms’ nominal spending for nonresidential structures moved down in January after rising in the fourth quarter.
Federal spending data for January and February pointed toward a further decline in real federal government purchases in the first quarter. Real state and local government purchases appeared to be rising modestly in the first quarter as their payrolls increased in recent months, although their construction expenditures decreased a little in January.
The U.S. international trade deficit widened substantially in December before narrowing somewhat in January. Exports declined in both December and January, reflecting weak agricultural goods exports, the lower price of petroleum products, and falling or flat exports of most other categories of goods. Imports rose in December, with an increased volume of petroleum imports, but declined in January, driven by lower prices and volumes for petroleum.
Total U.S. consumer prices, as measured by the PCE price index, edged up only 1/4 percent over the 12 months ending in January, as energy prices declined significantly. The core PCE price index, which excludes food and energy prices, rose 1-1/4 percent over the same 12-month period. Measures of expected long-run inflation from a variety of surveys, including the Michigan survey, the Blue Chip Economic Indicators, the Survey of Professional Forecasters, and the Desk’s Survey of Primary Dealers, remained stable. Market-based measures of inflation compensation were still low. Measures of labor compensation continued to increase at a modest pace, although faster than consumer prices. Both compensation per hour in the nonfarm business sector and the employment cost index rose 2-1/4 percent over the year ending in the fourth quarter. Average hourly earnings for all employees increased 2 percent over the 12 months ending in February.
Foreign real GDP appeared to expand at a moderate pace in the fourth quarter. While GDP growth stepped down in several economies, including Canada and China, it picked up in the euro area, Japan, and Mexico. Indicators for the first quarter suggested continued firming in the euro area and further slowing in China and Canada. Consumer prices in many foreign economies declined further in the first months of this year, reflecting the falls in energy prices as well as decreases in food prices in some emerging market economies. Many central banks took steps to ease monetary policy during the period, including the European Central Bank (ECB), which began purchasing sovereign bonds under its public sector purchase program (PSPP), and the People’s Bank of China, which lowered required reserve ratios for banks. A number of other central banks in advanced and emerging market economies cut policy interest rates.
Staff Review of the Financial Situation
Movements in asset prices over the intermeeting period largely seemed to reflect receding concerns about downside risks to the global economic outlook. Two strong U.S. employment reports and the January consumer price index release, all of which were above market expectations; the start of sovereign bond purchases by the ECB; and the somewhat more encouraging economic news from Europe all appeared to contribute to the improved sentiment in financial markets. Equity prices were higher, on net, although they declined later in the period.
Federal Reserve communications over the intermeeting period, including the minutes of the January FOMC meeting, reportedly were perceived as slightly more accommodative than expected on balance. Market commentary also highlighted Chair Yellen’s statement at the Monetary Policy Report testimony that the eventual removal of the language in the policy statement noting that “the Committee judges that it can be patient in beginning to normalize the stance of monetary policy” should not be viewed as indicating that the federal funds rate would necessarily be increased within a couple of meetings. However, the effects of these communications on the expected path for the federal funds rate were more than offset by reactions to stronger-than-expected data for the labor market and consumer inflation, along with perceptions of receding downside risks to the foreign economic outlook. On net, the expected path for the federal funds rate implied by financial market quotes shifted up over the period.
Yields on nominal Treasury securities increased across the maturity spectrum, and the Treasury yield curve steepened. Measures of inflation compensation based on Treasury Inflation-Protected Securities increased early in the intermeeting period amid rising oil prices but ended the period little changed, on net, after oil prices dropped back.
Broad U.S. equity price indexes moved up, on balance, over the intermeeting period, and one-month option-implied volatility on the S&P 500 index moved down on net. Spreads of 10-year corporate bond yields over those on comparable-maturity Treasury securities for both BBB-rated and speculative-grade issuers narrowed notably, likely reflecting increased appetite for riskier investments. While the tightening of spreads was broad based, the declines in short- and intermediate-term spreads for speculative-grade energy firms were particularly pronounced, retracing most of their strong run-up approaching the end of last year.
Results from the Desk’s Survey of Primary Dealers and Survey of Market Participants for March indicated that the respondents attached the greatest probabilities to the first increase in the target range for the federal funds rate occurring at either the June or September FOMC meeting; those probabilities were marked up relative to the January survey. In addition, survey respondents widely expected the “patient” language to be removed from the FOMC statement following the March meeting. Conditional on this change in the statement, respondents assigned a roughly 40 percent probability, on average, to liftoff occurring two meetings ahead and assigned most of the remaining probability to later dates.
Credit conditions faced by large nonfinancial firms remained generally accommodative. Corporate bond issuance increased in February, mostly reflecting activity by investment-grade firms. Commercial and industrial loans on banks’ books continued to expand strongly, reportedly in part to fund increased merger and acquisition activity. Institutional leveraged loan issuance during January and February was supported by strong issuance of new money loans, while refinancing activity effectively came to a stop, likely reflecting elevated loan spreads. On net, issuance of collateralized loan obligations was only modestly below the strong pace registered in the fourth quarter of 2014.
Financing for the commercial real estate (CRE) sector stayed broadly available over the intermeeting period. Growth of CRE loans on banks’ books remained solid, in part supported by loans to finance construction activity. The issuance of commercial mortgage-backed securities (CMBS) was still robust so far this year, and spreads continued to be low. After taking into account deals in the pipeline for March, issuance in the first quarter of 2015 was expected to be the strongest since the financial crisis. According to the March Senior Credit Officer Opinion Survey on Dealer Financing Terms, dealers’ willingness to provide warehouse financing for loans intended for inclusion in CMBS increased since the beginning of 2014. In addition, demand for funding of CMBS by hedge funds and real estate investment trusts reportedly rose over the same period.
Credit conditions for mortgages remained tight for riskier borrowers, with relatively few mortgages originated to borrowers in the lower portion of the credit score distribution. For borrowers who qualify for a mortgage, the cost of credit stayed low by historical standards.
Consumer credit rose further over the intermeeting period. Auto and student loan balances continued to expand robustly through January, while credit card balances decelerated slightly. Issuance of consumer asset-backed securities remained robust.
The dollar appreciated against most other currencies over the intermeeting period, as policymakers in the euro area, Sweden, Denmark, and many emerging market economies eased monetary policy even as market participants anticipated monetary policy tightening in the United States. Central bank policymakers in Sweden and Denmark lowered the rates on their respective deposit facilities further below zero. In addition, in Sweden, the benchmark repurchase agreement (or repo) rate was reduced in February to below zero for the first time, and a further cut was announced in March. Equity prices rose in most of the advanced foreign economies, with euro-area stocks rallying both before and after the early March commencement of sovereign bond purchases by the ECB under its PSPP. Stock market performance in the emerging market economies was more varied, with net losses in some and net gains in others. Yields on German government securities declined, with negative yields extending to longer maturities than at the time of the January meeting, likely in reaction to the PSPP, and yield spreads of most other euro-area sovereign bonds over German bonds narrowed. The main exception was Greek bonds, spreads on which widened, on net, amid heightened volatility as negotiations between Greece and its official creditors over support for the country’s public finances continued. Yields on the long-term sovereign bonds of many other countries, including Japan and the United Kingdom, rose during the period.
Staff Economic Outlook
In the U.S. economic forecast prepared by the staff for the March FOMC meeting, projected real GDP growth in the first half of this year was lower than in the forecast prepared for the January meeting, largely reflecting downward revisions to the near-term forecasts for household spending, net exports, and residential investment. The staff’s medium-term forecast for real GDP growth also was revised down, mostly because of the effects of a higher projected path for the foreign exchange value of the dollar. Nonetheless, the staff continued to forecast that real GDP would expand at a faster pace than potential output in 2015 and 2016, supported by increases in consumer and business confidence and a small pickup in foreign economic growth, even as the normalization of monetary policy was assumed to begin. In 2017, real GDP growth was projected to slow toward, but to remain above, the rate of potential output growth. The expansion in economic activity over the medium term was anticipated to gradually reduce resource slack; the unemployment rate was expected to decline slowly and to temporarily move a little below the staff’s estimate of its longer-run natural rate. In its medium-term and longer-run projections, the staff slightly lowered its assumptions for potential GDP growth and real equilibrium interest rates.
The staff’s forecast for inflation in the near term was little changed, with the large declines in energy prices since last June still anticipated to lead to a temporary decrease in the 12-month change in total PCE prices in the first half of this year. The staff’s forecast for inflation in 2016 and 2017 was unchanged, as energy prices and non-oil import prices were still expected to bottom out and begin rising later this year; inflation was projected to move closer to, but remain below, the Committee’s longer-run objective of 2 percent over those years. Inflation was anticipated to move back to 2 percent thereafter, with inflation expectations in the longer run assumed to be consistent with the Committee’s objective and slack in labor and product markets projected to have waned.
The staff viewed the extent of uncertainty around its March projections for real GDP growth, the unemployment rate, and inflation as similar to the average over the past 20 years. The risks to the forecasts for real GDP growth and inflation were viewed as tilted a little to the downside, reflecting the staff’s assessment that neither monetary policy nor fiscal policy was well positioned to help the economy withstand adverse shocks. At the same time, the staff viewed the risks around its outlook for the unemployment rate as roughly balanced.
Participants’ Views on Current Conditions and the Economic Outlook
In conjunction with this FOMC meeting, members of the Board of Governors and participating Federal Reserve Bank presidents submitted their projections of the most likely outcomes for real GDP growth, the unemployment rate, inflation, and the federal funds rate for each year from 2015 through 2017 and over the longer run, conditional on each participant’s judgment of appropriate monetary policy.4 The longer-run projections represent each participant’s assessment of the rate to which each variable would be expected to converge, over time, under appropriate monetary policy and in the absence of further shocks to the economy. These economic projections and policy assessments are described in the Summary of Economic Projections, which is attached as an addendum to these minutes.
In their discussion of the economic situation and the outlook, meeting participants regarded the information received over the intermeeting period as indicating that the pace of economic activity had moderated somewhat. Labor market conditions continued to improve, with strong job gains and a lower unemployment rate, and participants judged that underutilization of labor resources was continuing to diminish. A number of participants noted that slow growth of productivity or the labor force could reconcile the moderation in economic growth with the solid performance of some labor market indicators. Participants expected that, over the medium term, real economic activity would expand at a moderate pace and there would be additional improvements in labor market conditions. Participants generally regarded the net effect of declines in energy prices as likely to be positive for economic activity and employment in the United States, although a couple noted that physical limits on the accumulation of stocks of crude oil could result in further downward pressure on prices and reduce U.S. oil and gas production and investment. Inflation had declined further below the Committee’s longer-run objective, largely reflecting declines in energy prices, and was expected to stay near its recent low level in the near term. Market-based measures of inflation compensation 5 to 10 years ahead remained low, while survey-based measures of longer-term inflation expectations had remained stable. Participants generally anticipated that inflation would rise gradually toward the Committee’s 2 percent objective as the labor market improved further and the transitory effects of energy price declines and other factors dissipated. While almost all participants noted potential risks to the economic outlook resulting from foreign economic and financial developments, most saw the risks to the outlook for economic growth and the labor market as nearly balanced.
Household spending appeared to have slowed somewhat over the intermeeting period, with some participants suggesting that the recent softness in spending indicators was likely due in part to transitory factors, such as unseasonably cold winter weather in parts of the country. Some participants expressed the view that growth in consumer spending over the medium term would be supported by the strong labor market and rising income, increases in wealth and improvements in household balance sheets, lower gasoline prices, and gains in consumer confidence. Although activity in the housing sector remained sluggish, a few participants were cautiously optimistic that recent higher rates of household formation, together with low mortgage rates, would enable a faster pace of recovery.
Business contacts in many parts of the country continued to express optimism about prospects for future sales or investment. However, there were widespread reports of a slowdown in growth during the first quarter across a range of industries, partly reflecting severe winter weather in some regions as well as labor disputes at West Coast ports that temporarily disrupted some supply chains. In several parts of the country, persistently low oil prices had resulted in declines in drilling and delays in planned capital expenditures in the energy sector, and had negatively affected state government revenues. Manufacturing contacts in a couple of regions reported a softening in export sales. In contrast, service-sector activity had been reasonably strong in several parts of the country, as had auto sales, and the increase in household purchasing power from lower gasoline prices was expected to boost retail sales. Labor market conditions continued to improve in most regions, with wage pressures generally reported to be modest.
In their discussion of the foreign economic outlook, several participants noted that the dollar’s further appreciation over the intermeeting period was likely to restrain U.S. net exports and economic growth for a time. A few participants suggested that accommodative policy actions by a number of foreign central banks could lead to a further appreciation of the dollar, but another noted that such actions had also strengthened the outlook for growth abroad, which would bolster U.S. exports. Participants pointed to a number of risks to the international economic outlook, including the slowdown in growth in China, fiscal and financial problems in Greece, and geopolitical tensions.
Participants saw broad-based improvement in labor market conditions over the intermeeting period, including strong gains in payroll employment and a further reduction in the unemployment rate. Several participants judged, based on the improvement in a variety of labor market indicators, that the economy was making further progress toward the Committee’s goal of maximum employment. Nonetheless, many judged that some degree of labor market slack remained, as evidenced by the low rate of labor force participation, still-elevated involuntary part-time employment, or subdued growth in wages. A few of them noted that continued modest wage growth could prompt them to reduce their estimates of the longer-run normal rate of unemployment. A few participants observed that the absence of a notable pickup in wages might not be a useful yardstick for evaluating the degree of remaining slack because of the long lags between declines in unemployment and the response of wages or uncertainty about trend productivity growth. One participant, however, saw some evidence of rising wage growth and suggested that compositional changes in the labor force could be masking underlying wage pressures, particularly as measured by average hourly earnings.
Many participants judged that the inflation data received over the intermeeting period had been about in line with their expectations that inflation would move temporarily further below the Committee’s goal, largely reflecting declines in energy prices and lower prices of non-oil imports. They continued to expect that inflation would move up toward the Committee’s 2 percent objective over the medium term as the effects of these transitory factors waned and conditions in the labor market improved further. Survey-based measures of inflation expectations had remained stable, and market-based measures of inflation compensation over the longer term were about unchanged from the time of the January meeting, although they had exhibited some volatility over the intermeeting period. It was noted that the market-based measures had tracked quite closely the movements in crude oil prices over the period, first rising and then falling back. Participants offered various explanations for this correlation, including that market-based measures of inflation compensation were responding to the same global developments as oil prices, that these measures were capturing changes in risk or liquidity premiums, or that inflation-indexed securities were subject to mispricing. A couple of participants pointed out that the movements in crude oil prices and market-based inflation compensation measures had not been particularly well aligned over a longer historical period, or that information gleaned from inflation derivatives suggested a substantial increase in the probability that inflation would remain well below the Committee’s target over the next decade. One of them judged that the low level of inflation compensation could reflect increased concern on the part of investors about adverse outcomes in which low inflation was accompanied by weak economic activity, and that it was important not to dismiss this possible interpretation.
In their discussion of communications regarding the path of the federal funds rate over the medium term, almost all participants favored removing from the forward guidance in the Committee’s postmeeting statement the indication that the Committee would be patient in beginning to normalize the stance of monetary policy. These participants continued to think that an increase in the target range for the federal funds rate was unlikely in April. But, with continued improvement in economic conditions, they preferred language that would provide the Committee with the flexibility to subsequently adjust the target range for the federal funds rate on a meeting-by-meeting basis. It was noted that eliminating the reference to being patient would be appropriate in light of the considerable progress achieved toward the Committee’s objective of maximum employment, and that such a change would not indicate that the Committee had decided on the timing of the initial increase in the target range for the federal funds rate. Participants generally judged that the appropriate timing of liftoff would depend on their assessment of improvement in the labor market and their degree of confidence that inflation would move back to the Committee’s 2 percent objective over the medium term, and that it would be helpful to convey to the public this data-dependent approach to monetary policy. A few participants emphasized that the decision regarding the appropriate timing of liftoff should take account of the risks that could be associated with departing from the effective lower bound later and those that could be associated with departing earlier. One participant did not favor the change to the forward guidance because, with inflation well below the Committee’s 2 percent longer-run target, the announcement of a meeting-by-meeting approach to policy could lead to a tightening of financial conditions that would slow progress toward the Committee’s objectives.
Participants expressed a range of views about how they would assess the outlook for inflation and when they might deem it appropriate to begin removing policy accommodation. It was noted that there were no simple criteria for such a judgment, and, in particular, that, in a context of progress toward maximum employment and reasonable confidence that inflation will move back to 2 percent over the medium term, the normalization process could be initiated prior to seeing increases in core price inflation or wage inflation. Further improvement in the labor market, a stabilization of energy prices, and a leveling out of the foreign exchange value of the dollar were all seen as helpful in establishing confidence that inflation would turn up. Several participants judged that the economic data and outlook were likely to warrant beginning normalization at the June meeting. However, others anticipated that the effects of energy price declines and the dollar’s appreciation would continue to weigh on inflation in the near term, suggesting that conditions likely would not be appropriate to begin raising rates until later in the year, and a couple of participants suggested that the economic outlook likely would not call for liftoff until 2016. With regard to communications about the timing of the first increase in the target range for the federal funds rate, two participants thought that the Committee should seek to signal its policy intentions at the meeting before liftoff appeared likely, but two others judged that doing so would be inconsistent with a meeting-by-meeting approach. Finally, many participants commented that it would be desirable to provide additional information to the public about the Committee’s strategy for policy after the beginning of normalization. Some participants emphasized that the stance of policy would remain highly accommodative even after the first increase in the target range for the federal funds rate, and several noted that they expected economic developments would call for a fairly gradual pace of normalization or that a data-dependent approach would not necessarily dictate increases in the target range at every meeting.
Committee Policy Action
In their discussion of monetary policy for the period ahead, members judged that information received since the FOMC met in January indicated that economic growth had moderated somewhat. Labor market conditions had improved further, with strong job gains and a lower unemployment rate; a variety of labor market indicators suggested that the underutilization of labor resources continued to diminish. Household spending was rising moderately, with declines in energy prices boosting household purchasing power. Business fixed investment was advancing, although the recovery in the housing sector remained slow and export growth had weakened. Inflation had declined further below the Committee’s longer-run objective, largely reflecting the declines in energy prices. Market-based measures of inflation compensation remained low; survey-based measures of longer-term inflation expectations had been stable. The Committee expected that, with appropriate monetary policy accommodation, economic activity would expand at a moderate pace and labor market indicators would continue to move toward levels the Committee judges consistent with its dual mandate. The Committee also expected that inflation would remain near its recent low level in the near term but rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of energy price declines and other factors dissipate. In light of the uncertainties attending the outlook for inflation, the Committee agreed that it should continue to monitor inflation developments closely.
In their discussion of language for the postmeeting statement, the Committee agreed that the data received over the intermeeting period suggested that economic growth had moderated somewhat. One factor behind that moderation was a slowdown in the growth of exports, and members decided that the statement should explicitly note that factor. In addition, data received over the intermeeting period indicated that inflation had declined, as the Committee had anticipated, and members agreed to update the statement to reflect their judgment that inflation was likely to remain near its recent low level in the near term. Members also judged that it was appropriate to note that market-based measures of inflation compensation remained near levels registered at the time of the January FOMC meeting.
The Committee agreed to maintain the target range for the federal funds rate at 0 to 1/4 percent and to reaffirm in the statement that the Committee’s decision about how long to maintain the current target range for the federal funds rate would depend on its assessment of actual and expected progress toward its objectives of maximum employment and 2 percent inflation. Members continued to judge that this assessment of progress would take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the considerable progress to date toward the Committee’s maximum-employment objective and the implications of that progress for the outlook for inflation, members agreed to remove from the forward guidance in the postmeeting statement the indication that the Committee judges that it can be patient in beginning to normalize the stance of monetary policy and to indicate instead that the Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. Members viewed the new guidance as consistent with the outlook for policy that the Committee had expressed in January, and they agreed that the postmeeting statement should note that an increase in the target range for the federal funds rate remained unlikely at the April FOMC meeting; in addition, they generally saw the new language as providing the Committee with the flexibility to begin raising the target range for the federal funds rate in June or at a subsequent meeting. Members noted that the timing of the first increase would depend on the evolution of economic conditions and the outlook, and that the change in the forward guidance was not intended to indicate that the Committee had decided on the timing of the initial increase in the target range for the federal funds rate.
The Committee also decided to maintain its policy of reinvesting principal payments from agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions. The Committee agreed to reiterate its expectation that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.
At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until it was instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive:
“Consistent with its statutory mandate, the Federal Open Market Committee seeks monetary and financial conditions that will foster maximum employment and price stability. In particular, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to 1/4 percent. The Committee directs the Desk to undertake open market operations as necessary to maintain such conditions. The Committee directs the Desk to maintain its policy of rolling over maturing Treasury securities into new issues and its policy of reinvesting principal payments on all agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The Committee also directs the Desk to engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve’s agency mortgage-backed securities transactions. The System Open Market Account manager and the secretary will keep the Committee informed of ongoing developments regarding the System’s balance sheet that could affect the attainment over time of the Committee’s objectives of maximum employment and price stability.”
The vote encompassed approval of the statement below to be released at 2:00 p.m.:
“Information received since the Federal Open Market Committee met in January suggests that economic growth has moderated somewhat. Labor market conditions have improved further, with strong job gains and a lower unemployment rate. A range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately; declines in energy prices have boosted household purchasing power. Business fixed investment is advancing, while the recovery in the housing sector remains slow and export growth has weakened. Inflation has declined further below the Committee’s longer-run objective, largely reflecting declines in energy prices. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of energy price declines and other factors dissipate. The Committee continues to monitor inflation developments closely.
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. Consistent with its previous statement, the Committee judges that an increase in the target range for the federal funds rate remains unlikely at the April FOMC meeting. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. This change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range.
The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”
Bonn,- DHL, the world’s leading logistics provider, along with IMG Fashion, announced today the launch of a new program, DHL Exported, to support the fashion industry worldwide. This unprecedented program was launched to help designers who are already established in their local market and are gaining momentum internationally, to further their global footprint via the world’s most powerful fashion week platforms. Designers from around the world will submit an application package and select a foreign event of their choice: Mercedes-Benz Fashion Week in New York, London Fashion Week, Milan Fashion Week or Mercedes-Benz Fashion Week Tokyo. A committee of regional experts in each of these markets will review applicants and decide which designer demonstrates the most promise to benefit from debuting their collections at the event.
DHL will sponsor a chosen designer for two consecutive seasons at each of the four Fashion Weeks. Designers will receive a guaranteed spot on the schedule along with a funded and produced runway show. DHL will also underwrite all logistic costs of producing the collection (i.e. international shipping and exporting of hard goods) as well as exporting the collection to New York, London, Milan or Tokyo for the designers’ runway debut.
IMG Fashion will open up the application process from February 17th through April 2nd at www.DHLExported.com. Finalists will be chosen in April for committee review and winners will be announced at exclusive press events in New York, London, Milan and Tokyo in May.
“DHL Exported will assist in breaking down international barriers for fashion’s brightest talent. DHL’s unsurpassed commitment to supporting the needs of fashion professionals will foster the designers’ brands in new markets by enabling them to debut their collection on the runway in either New York, London, Milan or Tokyo”, said Arjan Sissing, Senior Vice President Corporate Brand Marketing, Deutsche Post DHL.
“DHL has been a longtime partner of fashion weeks worldwide and has continuously supported the advancement of the fashion industry,” says Jarrad Clark, VP and Global Creative Director, IMG Fashion Events and Properties. “DHL Exported stands out from other programs as it aims to help designers who are already locally notable but need that extra boost to further reach their international goals. While there are many successful programs to help emerging talent or designers succeed within one specific country, this program is truly designed with the global mindset that brands today need to adopt in order to grow their brand into international successes.
After the four winners have been announced in late May, DHL will support the designers’ journey from the outset of transporting fabrics and supplies for the collection to shipping the completed collection to the runway. To extend the reach and further support each designer, DHL and IMG Fashion are also creating an online portal that allows the designers to sell and ship their fashions around the world.
Application, program details, and nominating committee details are available at DHLExported.com. DHL Exported is supported by IMG Fashion, the British Fashion Council, Camera Nazionale Della Moda, and Japan Fashion Week.
During each Fashion Week, on-site stands will further promote the designer and allow attendees to browse through the designs and place orders. In addition, DHL and IMG Fashion will host leadership discussion panels at each Fashion Week about latest topics relating to the growth and development of fashion globally, including the influence of e-commerce. These discussions will feature industry experts, designers, buyers and journalists.
This Press Release is courtesy of www.mbfashionweek.com
The Royal Bank of Scotland Group plc (“RBS”) today announced it has reached an agreement to sell its internationally managed Private Banking and Wealth Management business to Union Bancaire Privée UBP SA (“UBP”).
The sale comprises client relationships outside the British Isles and associated staff. RBS will continue to service UK Private Banking and Wealth Management client needs, together with those of international clients with a strong connection to the UK, from the British Isles through its Coutts and Adam & Company brands. The transaction is subject to regulatory approvals.
The sale includes relationships managed from Switzerland, Monaco, UAE, Qatar, Singapore and Hong Kong. As at 31 December 2014 assets under management were approximately CHF32bn and total risk weighted assets were CHF2bn. The price paid will be determined in part by assets under management on closing. RBS anticipates receiving a premium. The resulting capital benefit to RBS is expected to be modest after writing off goodwill related to the business and taking into account anticipated exit and restructuring costs. In the Q1 2015 results, the business to be sold will be treated as a disposal group, resulting in an expected charge in the order of £200 million, primarily relating to goodwill write off. Initial closing of the transaction is envisaged in Q4 2015, when a majority of the business is expected to transfer, with the remainder during the first part of 2016.
Alison Rose, CEO, Commercial & Private Banking at RBS commented;
“Last year we set out a clear strategy to create a truly UK-focused bank. This announcement is another important step in that process. Following an extensive review, it was clear that the bank we are building would not be the most appropriate owner of the business being sold.
“We gave careful consideration to identifying a buyer with the capability to take on this business in order to minimise the impact on clients and staff. We believe that in UBP we have found a good long term owner for this business.
“There will be no interruption of service for clients of Coutts or Adam & Company and we remain committed to improving all aspects of our market leading businesses.
“Our Private Banking brands are integral to RBS, supporting our ambition to make this the number one bank for customer service, trust and advocacy in the UK.”
The transaction, supported by Goldman Sachs, is subject to regulatory approvals.
Read more at http://www.rbs.com/news/2015/march/disposal-of-rbs-internationally-managed-private-banking-and-wealth-management-business.html#vdoMTwxZSmAf8fhM.99
The West Bank and Gaza will need policy discipline and donor support in the short run, but a new financing model will be essential over the medium term for sustained private-sector-led growth, the IMF says.
The Gazan economy is struggling to rebuild in the wake of the violent conflict last summer that resulted in losses of over $4 billion. The war also affected confidence in the West Bank, where Israeli restrictions on the movement of labor, access to resources, and trade continue to undermine growth prospects.
The IMF has issued its latest report on the economy of the West Bank and Gaza in advance of the May 27 meeting of the Ad Hoc Liaison Committee, a coordination mechanism chaired by Norway for development assistance to the Palestinian people.
IMF mission chief Christoph Duenwald spoke to the IMF Survey about the report’s findings, outlining what the Palestinian Authority can do to turn the economy around and how the international community can assist.
IMF Survey: The Gaza-Israel conflict dealt a harsh blow to the Palestinians in the summer of 2014. What was the impact on the economy of West Bank and Gaza?
Duenwald: Gaza, where the war played out, saw real GDP decline by 15 percent last year. According to official estimates, the losses from the war are over $4 billion, about 35 percent of West Bank and Gaza’s GDP. Tens of thousands of homes and enterprises were destroyed or damaged, businesses shut down, and utilities and infrastructure were severely damaged.
The humanitarian impact of the war was devastating. More than 2,100 Palestinians died during the conflict, with thousands more injured, and a third of the population was internally displaced. After 51 days of war, there was a truce that ended the fighting, but there’s no permanent truce yet between the two sides.
C:\Users\MBurke\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.Outlook\ZZ3XGEFR\realGDP (5).jpg
IMF Survey: Can you provide an update on where things stand now with the economy?
Duenwald: The economy faces very severe challenges. Even if you don’t factor in last year’s conflict, growth in recent years has not been sufficient to absorb the rapidly growing labor force, so unemployment rates have been very high, especially in Gaza.
In Gaza, reconstruction is proceeding slowly, which reflects in part limitations on the import of construction materials into Gaza. Still, we expect some rebound this year from a low base, with real GDP growing at 7 percent. A big challenge in Gaza is the high unemployment rate, which stands currently at 43 percent overall and at 60 percent among the youth. With the rebuilding of Gaza stalled and many youth unemployed, there is a risk of social unrest.
In the West Bank, we project very modest growth in 2015, after the non-transfer of revenues collected by Israel on the Palestinian Authority’s behalf led to sharply reduced wage payments to civil servants. Now that these transfers have resumed, growth should recover modestly, averaging around 1 percent in 2015.
IMF Survey: What is the IMF’s role in assisting the West Bank and Gaza?
Duenwald: While the IMF cannot provide financial support to the West Bank and Gaza because it is not a member country, we have been providing policy advice in the macroeconomic, fiscal, and financial areas since 1994. We established an IMF Resident Representative Office for the West Bank and Gaza in July 1995 to help fulfill the IMF’s mandate to assist the Palestinian Authority as specified under the Oslo Accords. We’ve also been providing technical assistance to support capacity building in the areas of tax administration, public expenditure management, banking supervision and regulation, and macroeconomic statistics.
IMF Survey: What measures should the authorities take to close the financing gap and put the economy on the path to fiscal sustainability?
Duenwald: The intense fiscal pressures earlier this year caused by the Israeli withholding of clearance revenue (tax revenues collected by Israel on behalf of the Palestinian Authority) were nimbly handled by the authorities. Still, as in previous years, the IMF staff project a large financing gap this year, of nearly half a billion dollars. This means that expenditure is higher than revenue, donor aid, and other financing combined by that amount.
There are also significant downside risks—shortfalls in donor aid, higher-than-expected expenditures, and litigation risks that could involve payment of a large deposit in escrow in connection with the Sokolow lawsuit against the Palestinian Authority and Palestinian Liberation Organization in a New York court.
For 2015, we are advising the Palestinian Authority to keep a tight control over spending, especially the wage bill. We are recommending phasing out the fuel tax subsidy, while using direct cash transfers to protect the poor. There is also scope to strengthen revenue collection. But these measures alone will not close the gap, so stepped up donor assistance is needed.
IMF Survey: With very high unemployment, there’s a limit to how much revenue they can mobilize.
Duenwald: Exactly—that’s why it’s such a difficult situation. It is aggravated by lack of progress on national reconciliation between main Palestinian factions. Hamas remains largely in control of Gaza, and very little tax revenue is collected there yet there are significant expenses. So, if this financing gap is not met by donors or other financing, the West Bank and Gaza will continue to accumulate arrears. This means that private suppliers to the government would not be paid, and the impact of that would ripple through the economy and undermine confidence in the private sector. These developments would, in turn, affect revenue collection.
Over the medium term, we see a critical need to change the financing model. Currently, large deficits with heavy emphasis on current spending and shrinking capital spending are partially financed by generous (but at times fickle) donor aid. This has left financing gaps that are filled by arrears accumulation or bank borrowing. We think that it’s important from a sustainability perspective to change this approach to one that delivers gradually lower deficits with a pro-growth reorientation of government spending, and sustained predictable donor aid.
IMF Survey: The Palestinians have been in a precarious economic position for some time. What can be done to turn the situation around?
Duenwald: The West Bank and Gaza is an economy that is subject to restrictions imposed by Israel on the movement of labor, on access to resources, and on regional and international trade. Those restrictions will likely remain in place as long as there’s no peaceful solution to the conflict.
So I would emphasize four points:
• First, the need for peace between Israel and Palestinians. The overarching factor that constrains growth and greater integration with the global economy is Israeli restrictions—although the Israeli government emphasizes that security concerns limit its ability to lift the restrictions. Until a political solution to the Israeli-Palestinian conflict is found, these restrictions are likely to stay largely in place, although some easing is hoped for in the interim. The key to truly turning this situation around is peace.
• Second, the need for national reconciliation. Another requirement is a fully unified government. Currently there’s a divide between the main political factions, and it will be important for there to be a unified government that speaks with one voice operating in both Gaza and the West Bank. For Gaza specifically, a turnaround would also require a removal of the limitations on imports of construction materials, for donors to make good on the substantial support promised at the Cairo conference last October, and a lifting of the blockade of Gaza.
• Third, the need for reforms by the Palestinian authorities themselves. It is critical that the Palestinian Authority, which has made a lot of progress in institution building over the years, continue on a path of reform, with disciplined fiscal policies and courageous structural reforms. Safeguarding the financial system, which the Palestinian Monetary Authority has managed well so far, is a critical component of the overall policy framework.
• Fourth, the continued importance of donor aid. For the time being, the West Bank and Gaza cannot survive without continued donor aid, so it is important for the international community, which faces many competing demands for aid, to continue their support.
The growing competitiveness and volatility in the world economy, including the rise and fall of currencies and the drop in commodity prices, and the shift of the global economic centre to Asia mean that countries have to adapt. “Within this global transition, our task is clear,” Indonesian President Joko Widodo told over 700 business, government and civil society leaders in the opening session of the 24th World Economic Forum on East Asia.
“We have to reinvent our economies; we have to reinvent our societies.” Indonesia must undergo crucial restructuring, said Jokowi, as he is familiarly known. “Today, we must change from consumption back to production, from consumption to investment in our infrastructure, investment in our industry, but most importantly, investment in our human capital, the most precious resource of the 21st century.”
These changes will not be without pain, he acknowledged. “Change will create winners and losers, but there can be no progress without change. There can be no gain without pain. And even with the pain, my people tell me every week and every month, please change our country.”
The theme of the World Economic Forum on East Asia 2015 is “Anchoring Trust in East Asia’s Regionalism”. ASEAN is to launch the ASEAN Economic Community, a common-market initiative, at the end of the year.
Speaking before Jokowi, Samdech Techo Hun Sen, the Prime Minister of the Kingdom of Cambodia, spoke about that regionalism, noting that two regional trade mechanisms are currently under negotiation – the Trans-Pacific Partnership (TPP), which includes some members of ASEAN, and the Regional Comprehensive Economic Partnership (RCEP), which includes all 10 ASEAN countries. “The two mechanisms should not be confrontational but complementary,” Hun Sen cautioned. He called for the “promoting of deeper regional integration in all sectors through improved connectivity in all aspects – physical, institutional and people-to-people connectivity
Nguyen Xuan Phuc, Deputy Prime Minister of Vietnam, also made a plea for East Asian countries to address challenges and issues among them through collaboration. “It is very important to bear in mind that differences and disputes should be resolved through peaceful measures according to international law,” he said. “Cooperation, mutual respect and trust are indispensable to ensuring the stability and growth of the region.”
Russia, for its part, is looking to cooperate more with the Asia-Pacific region, particularly ASEAN, Arkady Dvorkovich, Deputy Prime Minister of the Russian Federation, told participants. “While we do not have common borders with ASEAN, we are talking about our joint interests in developing many spheres,” such as agriculture, infrastructure development and mining, he said.
In his welcoming remarks, Philipp Rösler, Member of the Managing Board, World Economic Forum, stressed the importance of building trust to turn decisions into reality. “Trust is critical. Without trust, there is no motivation. Without motivation, there is no leadership.” The World Economic Forum on East Asia is “a platform for creating trust and leadership to bring the region into a better future,” he concluded.
Real gross domestic product — the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes — increased at an annual rate of 1.5 percent in the third quarter of 2015, according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 3.9 percent.
The Bureau emphasized that the third-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 2 and “Comparisons of Revisions to GDP” on page 4). The “second” estimate for the third quarter, based on more complete data, will be released on November 24, 2015.
The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), state and local government spending, nonresidential fixed investment, exports, and residential fixed investment that were partly offset by negative contributions from private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.
Real GDP increased 1.5 percent in the third quarter, after increasing 3.9 percent in the second. The deceleration in real GDP in the third quarter primarily reflected a downturn in private inventory investment and decelerations in exports, in nonresidential fixed investment, in PCE, in state and local government spending, and in residential fixed investment that were partly offset by a deceleration in imports.
Real gross domestic purchases — purchases by U.S. residents of goods and services wherever produced — increased 1.5 percent in the third quarter, compared with an increase of 3.6 percent in the second.
Current-dollar GDP — the market value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production — increased 2.7 percent, or $121.1 billion, in the third quarter to a level of $18,034.8 billion. In the second quarter, current-dollar GDP increased 6.1 percent, or $264.4 billion.
Disposition of personal income
Current-dollar personal income increased $171.6 billion in the third quarter, compared with an increase of $139.5 billion in the second. The acceleration in personal income primarily reflected an acceleration in wages and salaries and an upturn in farm proprietors’ income that were partly offset by a deceleration in personal interest income.
Personal current taxes increased $15.8 billion in the third quarter, compared with an increase of $27.3 billion in the second.
Disposable personal income increased $155.9 billion, or 4.8 percent, in the third quarter, compared with an increase of $112.2 billion, or 3.4 percent, in the second. Real disposable personal income increased 3.5 percent, compared with an increase of 1.2 percent.
Personal outlays increased $136.6 billion in the third quarter, compared with an increase of $182.3 billion in the second.
Personal saving — disposable personal income less personal outlays — was $636.7 billion in the third quarter, compared with $617.5 billion in the second.
The personal saving rate — personal saving as a percentage of disposable personal income — was 4.7 percent in the third quarter, compared with an increase of 4.6 percent in the second. For a comparison of personal saving in BEA’s national income and product accounts with personal saving in the Federal Reserve Board’s financial accounts of the United States and data on changes in net worth, go to www.bea.gov/national/nipaweb/Nipa-Frb.asp.
WASHINGTON, DC – The 2017 economic growth forecast increased one-tenth from the prior forecast to 2.5 percent due to the government’s upgraded third quarter GDP growth estimate and an expected solid fourth quarter finish, according to the Fannie Mae Economic & Strategic Research (ESR) Group’s December 2017 Economic and Housing Outlook. Consumer demand and investment spending growth are expected to pick up in the current quarter, offset partly by slowing inventory investment and the first drag from trade in a year. Business equipment investment, in particular, grew at its fastest pace in three years during the third quarter, hastened in part by a flurry of deregulation activity, a declining dollar, and strengthening economic growth abroad. With tax legislation potentially passing by year end, the ESR Group sees upside risk to growth but will need to review the final bill before assessing the impact. Absent tax reform, 2018 GDP growth is expected to decelerate to 2.1 percent. Consumer demand is expected to continue to sustain near-term growth as a strong labor market and surging stock and house prices helped push household net worth to a 70-plus-year high. On the heels of the Federal Open Market Committee’s recent decision to raise interest rates for the third time in 2017, the ESR Group predicts two additional hikes in 2018, with further tightening possible based on the potential impact of tax reform on the labor market and inflation.
“The economy appears poised to finish 2017 on a cheerful note as fundamentals increasingly align with strong business and consumer sentiment. Domestic demand is building momentum, job growth is solid and broad-based, and consumer spending looks likely to strengthen,” said Fannie Mae Chief Economist Doug Duncan. “If enacted, tax reform should be a net positive for GDP growth next year, which we currently have pegged at a modest 2.1 percent in the absence of tax law changes. As expected, the Fed raised rates once more last week and, barring inflationary pressure, is expected to tighten two more times in 2018. Finally, the housing market continues its upward grind, as it struggles to balance strong demand and house price appreciation with inventory shortages and affordability concerns.”
Visit the Economic & Strategic Research site at www.fanniemae.com to read the full December 2017 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary. To receive e-mail updates with other housing market research from Fannie Mae’s Economic & Strategic Research Group, please click here.
Opinions, analyses, estimates, forecasts, and other views of Fannie Mae’s Economic & Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae’s business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR Group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.
Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/fanniemae.
In response to a request from the Egyptian authorities, an International Monetary Fund (IMF) mission led by Mr. Chris Jarvis visited Cairo from July 30 to August 11, 2016 to discuss support for the authorities’ economic reform program through IMF financial assistance. At the end of the visit, Mr. Jarvis issued the following statement:
“I am pleased to announce that, in support of the government’s economic reform program, the Egyptian government, the Central Bank of Egypt (CBE) and the IMF team have reached a staff-level agreement on a three-year Extended Fund Facility (EFF) in the amount of SDR 8.5966 billion (422 percent of quota or about US$12 billion). This agreement is subject to approval by the IMF’s Executive Board, which is expected to consider Egypt’s request in the coming weeks.
“Egypt is a strong country with great potential but it has some problems that need to be fixed urgently. The EFF supports the authorities’ comprehensive economic reform program as stated in the government plan approved by the parliament. The government recognizes the need for quick implementation of economic reforms for Egypt to restore macroeconomic stability and to support strong, sustainable and job-rich growth. The program aims to improve the functioning of the foreign exchange markets, bring down the budget deficit and government debt, and to raise growth and create jobs, especially for women and young people. It also aims to strengthen the social safety net to protect the vulnerable during the process of adjustment.
“The government’s fiscal policy will be anchored to placing public debt on a clearly declining path toward more sustainable levels. Over the program period general government debt is expected to decline from about 98% in 15/16 to about 88% of GDP in 2018/19. The aim is to raise revenue and rationalize spending, to reduce the deficit and to free up public funds for high-priority spending, such as infrastructure, health and education, and social protection. As indicated in the budget approved by the parliament, the government will adopt the VAT law after approval by the parliament, and will continue the program begun in 2014 to rationalize energy subsidies. It will advance the structural reform agenda to help increase investment and strengthen the role of the private sector
“Social protection is a cornerstone in the government’s reform program. Budgetary savings that come from other measures will be partially spent on social protection: including specifically food subsidies and targeted social transfers. The social protection measures will preserve or increase support for insurance and medicine for the poor, subsidies for infant milk and medicine for children, health insurance for young children and female primary providers, and vocational training for youth. The government will also develop a plan to enhance the school meals program. Priority will also be given to investment in public infrastructure.
“The CBE monetary and exchange rate policy will aim to improve the functioning of the foreign exchange market, increase foreign reserves, and bring down inflation to single digits during the program. Moving to a flexible exchange rate regime will strengthen competitiveness, support exports and tourism and attract foreign direct investment. This would foster growth and jobs and reduce financing needs.
“Financial sector policies will be geared toward safeguarding the strength and stability of the banking system.
“Structural reforms will aim at improving the business environment, deepening labor markets, simplifying regulations and promoting competition. The ambition is to significantly improve Egypt’s ratings in Doing Business and Global Competitiveness. In this context, the reform measures being implemented target creating a competitive business environment, attracting investment and increasing productivity to provide fertile ground for private sector activity.
“Public financial management and fiscal transparency will be strengthened to improve governance and delivery of public services, enhance accountability in policymaking, and combat corruption.
“With the implementation of the government reform program, together with the help of Egypt’s friends, the Egyptian economy will return to its full potential. This will help achieve inclusive job-rich growth and raise living standards for the Egyptian people. We at the IMF are ready to partner with Egypt in this program. We will also encourage other multilateral agencies and countries to support Egypt. We have talked to our colleagues in the World Bank and the African Development Bank and they are willing to help. It would also be very helpful for Egypt’s bilateral partners to step forward at this critical time.
“The mission would like to thank the authorities and all those with whom they met for their warm welcome and the frank and constructive discussions.”
While companies around the world are taking note of the growing emergence of mobile and digital payment applications, many treasury departments still grapple with the continued existence and enormous cost of paper payments. Clients at the Bank of America Merrill Lynch Conference on Payments and Commercial Card continued to identify that fully converting their payments to electronic was their No. 1 priority in improving their working capital in 2015. The second-highest priority was expanding their card program or adopting mobile/digital business-to-consumer payments. These and other findings were revealed during the two-day event recently held in Phoenix.
“We are facing dramatic shifts in the global payments environment,” said Kevin Phalen, head of Global Card and Comprehensive Payables at BofA Merrill. “As an advisor and service provider to more than 73 percent of treasury departments of the Global Fortune 500, we take our role as facilitator seriously. We hope the dialogue generated among our clients and other industry participants will go some way to advancing preparedness and efficiencies in global commerce,” added Phalen.
This year’s conference, themed “Pay Everywhere: Extending Your Reach,” drew 300 representatives from 175 companies and government agencies based in Asia Pacific, Europe, Latin America and North America. The program featured BofA Merrill experts and other senior industry leaders who spoke on a range of topics, such as how companies can globalize their card programs; new and anticipated innovations in mobile technology; and analyses of regulatory changes impacting payments and cards.
Industry speakers included:
• Wayne Best, global economist, Visa, who gave the keynote speech
• James Carroll, SVP – Innovation, MasterCard
• Karen Webster, CEO, Market Platform Dynamics and founder of PYMNTS.COM
During the event, a number of questions were posed to audience members, generating dialogue among attendees about their respective opportunities and challenges. Notably, 50 percent of attendees said they had a formal payments strategy supported by senior management. And while many clients said that a mobile strategy was not their top priority in 2015, 60 percent did acknowledge that adopting a mobile payments application was something they were likely to introduce in the future. Furthermore, mobile communications are increasingly important to clients, with more than 50 percent of attendees saying mobile alert messaging was “extremely valuable” for their cardholders.
“We were extremely pleased with the outcome of this year’s Payments and Card Conference,” said Ather Williams, head of Global Transaction Services at BofA Merrill. “We’d like to thank our clients and speakers for their active participation and the helpful input they provided. The intelligence we came away with will be invaluable as we determine where to further invest in our platform, and which new capabilities and services will be most beneficial to supporting our clients’ goals.”
Bank of America Merrill Lynch Commercial Card
Bank of America Merrill Lynch is a leading provider of card solutions to large and middle-market companies globally, and to federal, state and local government entities in the United States. BofA Merrill’s Commercial Card group works with these organizations to design integrated ePayments solutions that help unlock working capital while increasing efficiency, visibility and control. As part of the Global Transaction Services business, BofA Merrill’s Commercial Card and Comprehensive Payables group develops strategies and solutions that are closely aligned to the treasury goals of corporate, commercial and government entities. BofA Merrill cardholders can be served in numerous languages and have access to a worldwide network of more than 40 million credit card merchants and ATMs.
Bank of America
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 48 million consumer and small business relationships with approximately 4,800 retail financial centers, approximately 16,000 ATMs, and award-winning online banking with 31 million active users and approximately 18 million mobile users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Bank of America Merrill Lynch is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated, which is a registered broker-dealer and member of SIPC, and, in other jurisdictions, a locally registered entity. Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured * May Lose Value * Are Not Bank Guaranteed
WASHINGTON, DC – The Fannie Mae (FNMA/OTCQB) Home Purchase Sentiment Index® (HPSI) decreased by 2.4 points in September to 64.5, as elevated mortgage rates further dampened already-pessimistic consumer housing sentiment. Five of the HPSI’s six components decreased month over month, including the components measuring perceived homebuying and home-selling conditions. In September, 16% of consumers reported that it’s a good time to buy a home, matching the all-time survey low set last year. Additionally, 63% said it was a good time to sell a home, down 3 percentage points compared to the prior month. Only 17% of consumers indicated that they expect mortgage rates to go down over the next 12 months. Overall, the full index is up 3.7 points year over year.
“Mortgage rates persistently over 7 percent appear to be deepening the malaise consumers feel about the home purchase market,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “In fact, high mortgage rates surpassed high home prices as the top reason why consumers think it’s a bad time to buy a home, a survey first. Notably, the share of consumers expressing pessimism about homebuying conditions hit a new survey high in September, with 84% now indicating that it’s a bad time to buy a home. On the sell side, respondents also listed unfavorable mortgage rates as the top reason why they believe it’s a bad time to sell a home. This indicates to us that many homeowners are probably not eager to give up their ‘locked-in’ lower mortgage rates anytime soon, but it also may reflect the worry of some homeowners that sale values might be suppressed slightly if the pool of qualified homebuyers is constrained by elevated mortgage rates.”
Duncan continued: “Consumers are also not seeing much affordability relief in sight, as they continue to expect home prices to increase in the next 12 months. They also indicated that their personal economic situations are showing signs of strain, including lower year-over-year household incomes and a reduced sense of job security. In our view, all of this points to home purchase affordability remaining a problem for the foreseeable future, which we forecast will keep home sales sluggish into next year.”
Home Purchase Sentiment Index – Component Highlights
Fannie Mae’s Home Purchase Sentiment Index (HPSI) decreased in September by 2.4 points to 64.5. The HPSI is up 3.7 points compared to the same time last year. Read the full research report for additional information.
Good/Bad Time to Buy: The percentage of respondents who say it is a good time to buy a home decreased from 18% to 16%, while the percentage who say it is a bad time to buy increased from 82% to 84%. As a result, the net share of those who say it is a good time to buy decreased 4 percentage points month over month.
Good/Bad Time to Sell: The percentage of respondents who say it is a good time to sell a home decreased from 66% to 63%, while the percentage who say it’s a bad time to sell increased from 34% to 37%. As a result, the net share of those who say it is a good time to sell decreased 7 percentage points month over month.
Home Price Expectations: The percentage of respondents who say home prices will go up in the next 12 months remained increased from 41% to 42%, while the percentage who say home prices will go down decreased from 26% to 23%. The share who think home prices will stay the same increased from 33% to 35%. As a result, the net share of those who say home prices will go up in the next 12 months increased 4 percentage points month over month.
Mortgage Rate Expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months decreased from 18% to 17%, while the percentage who expect mortgage rates to go up remained unchanged at 46%. The share who think mortgage rates will stay the same increased from 34% to 37%. As a result, the net share of those who say mortgage rates will go down over the next 12 months decreased 1 percentage point month over month.
Job Loss Concern: The percentage of respondents who say they are not concerned about losing their job in the next 12 months decreased from 78% to 75%, while the percentage who say they are concerned increased from 22% to 23%. As a result, the net share of those who say they are not concerned about losing their job decreased 3 percentage points month over month.
Household Income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago decreased from 22% to 18%, while the percentage who say their household income is significantly lower increased from 12% to 13%. The percentage who say their household income is about the same increased from 65% to 68%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago decreased 5 percentage points month over month.
About Fannie Mae’s Home Purchase Sentiment Index
The Home Purchase Sentiment Index® (HPSI) distills information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey® (NHS) into a single number. The HPSI reflects consumers’ current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.
About Fannie Mae’s National Housing Survey
The National Housing Survey (NHS) is a monthly attitudinal survey, launched in 2010, which polls the adult general population of the United States to assess their attitudes toward owning and renting a home, purchase and rental prices, household finances, and overall confidence in the economy. Each respondent is asked more than 100 questions, making the NHS one of the most detailed attitudinal longitudinal surveys of its kind, to track attitudinal shifts, six of which are used to construct the HPSI (findings are compared with the same survey conducted monthly beginning June 2010). For more information, please see the Technical Notes.
Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to support the housing market. The September 2023 National Housing Survey was conducted between September 1, 2023 and September 18, 2023. Most of the data collection occurred during the first two weeks of this period. The latest NHS was conducted exclusively through AmeriSpeak®, NORC at the University of Chicago’s probability-based panel, on behalf of PSB Insights and in coordination with Fannie Mae. Calculations are made using unrounded and weighted respondent level data to help ensure precision in NHS results from wave to wave. As a result, minor differences in calculated data (summarized results, net calculations, etc.) of up to 1 percentage point may occur due to rounding.
Detailed HPSI & NHS Findings
For detailed findings from the Home Purchase Sentiment Index and National Housing Survey, as well as a brief HPSI overview and detailed white paper, technical notes on the NHS methodology, and questions asked of respondents associated with each monthly indicator, please visit the Surveys page on fanniemae.com. Also available on the site are in-depth special topic studies, which provide a detailed assessment of combined data results from three monthly studies of NHS results.
To receive e-mail updates with other housing market research from Fannie Mae’s Economic & Strategic Research Group, please click here.
About the ESR Group
Fannie Mae’s Economic and Strategic Research Group, led by Chief Economist Doug Duncan, studies current data, analyzes historical and emerging trends, and conducts surveys of consumer and mortgage lender groups to provide forecasts and analyses on the economy, housing, and mortgage markets. The ESR Group was awarded the prestigious 2022 Lawrence R. Klein Award for Blue Chip Forecast Accuracy based on the accuracy of its macroeconomic forecasts published over the 4-year period from 2018 to 2021.
About Fannie Mae
Fannie Mae advances equitable and sustainable access to homeownership and quality, affordable rental housing for millions of people across America. We enable the 30-year fixed-rate mortgage and drive responsible innovation to make homebuying and renting easier, fairer, and more accessible. To learn more, visit:
fanniemae.com | Twitter | Facebook | LinkedIn | Instagram | YouTube | Blog
9/11/2015- A further sharp downturn in emerging market economies and world trade has weakened global growth to around 2.9% this year – well below the long-run average – and is a source of uncertainty for near-term prospects, says the OECD.
In its latest twice-yearly Economic Outlook, the OECD projects a gradual strengthening of global growth in 2016 and 2017 to an annual 3.3% and 3.6% respectively. But a clear pick-up in activity requires a smooth rebalancing of activity in China and more robust investment in advanced economies.
Emerging market challenges, weak trade and concerns about potential output suggest higher downside risks and vulnerabilities compared with the OECD’s June Outlook.
Presenting the Outlook in Paris, OECD Secretary-General Angel Gurría said: “The slowdown in global trade and the continuing weakness in investment are deeply concerning. Robust trade and investment and stronger global growth should go hand in hand. G-20 leaders meeting in Antalya need to renew their efforts to secure strong, sustainable and balanced growth.” (Read the speech)
In the US, output remains on a solid growth trajectory, propelled by household demand, with GDP expansion expected to be 2.5% next year and 2.4% in 2017.
The recovery in the euro area is set to strengthen, helped by accommodative monetary policy, lower oil prices and an easing of the pace of budget tightening. Euro area activity is expected to grow by 1.8% in 2016 and 1.9% in 2017.
In Japan, recovery was derailed in 2015 by a sharp slowdown in demand from other Asian economies and sluggish consumption. Japan’s GDP growth is expected to accelerate to 1.0% next year, but to slow to 0.5% in 2017 due to the planned consumption tax hike.
Economic growth in China is projected to slow to 6.8% in 2015 and to continue to decline gradually thereafter, reaching 6.2% by 2017, as activity rebalances towards consumption and services. Achieving this rebalancing, whilst avoiding a sharp reduction in GDP growth and containing financial stability risks, presents significant challenges.
In other emerging economies, headwinds have generally increased, reflecting weaker commodity prices, tighter credit conditions and lower potential output growth, with the risk that capital outflows and sharp currency depreciations may expose financial vulnerabilities. Brazil and Russia have experienced recessions and will not return to positive growth in annual terms until 2017. By contrast, growth prospects in India remain relatively robust, with GDP growth expected to remain over 7% in the coming years, provided further progress is made in implementing structural reforms.
The Outlook calls for greater ambition by OECD and G20 countries in supporting demand and pursuing structural reforms to boost potential growth and ensure that its economic benefits are shared by all.
It calls for policies to support short-term demand, including on-going monetary and fiscal policy support in accordance with countries’ policy space. Collective action to increase public investment is essential and would increase growth without increasing debt-to-GDP ratios.
In the run up to the COP21 UN Climate Change Conference in Paris, a special chapter of the Economic Outlook calls for unequivocal action to address climate change, which is critical for long-term economic sustainability and healthy growth.
Most climate policies could be budget-neutral and support growth. There are plenty of examples of countries that have taken action successfully without negative consequences. An effective policy stance would create a more positive environment for investment that would support growth and trade, as well as put us on a path to urgently-needed climate improvement.
The Economic Outlook also looks at the labour market and fiscal impact of the European refugee surge, and will release on Thursday, in advance of the G20 summit in Antalya, a policy note on this issue.
In addition, the Outlook includes a scenario for the global impact of weaker demand growth in China and discusses a number of other issues including: rising US policy interest rates and spill-overs to emerging market economies; growth shortfalls in the euro area and Japan; revisions to potential output growth; and the impact of an increase in public investment in OECD economies.
BOSTON- –Gillette® (NYSE: PG), the world’s leading male grooming brand, today unveils a video that shows the evolution of men’s style over the last century. In just sixty seconds, the video uses the perspective of a man’s bathroom mirror to show iconic looks from each era, spotlighting the way grooming habits have played a role in defining each look and ultimately ending on a man with a fully-shaved chest to highlight the global trend of body shaving. And to ensure guys have the right tools for the times, Gillette has introduced the Gillette BODY Razor built for a man’s terrain.
The video uses a stop motion approach to show evolution of men’s grooming and fashion trends demonstrated through man’s dress, surroundings, soundtrack and hair and shave styles throughout time – moving from an early 20th century man in full suit to a man ready to disco-dance the night way, all the way through to today’s body grooming trend. In addition to the video which was released Wednesday June 25, 2014 on Gillette’s YouTube channel, special behind-the-scenes footage with film creators is available highlighting how the stop motion technology came together to chronicle 100 years of men’s style in only sixty seconds.
“Every era has an iconic look – a combination of fashion and grooming choices. Today’s look calls for body shaving,” said Francesco Tortora, Gillette Global Marketing Director, Procter & Gamble. “Just as fashion constantly evolves, we constantly refine and engineer our precision products to help men feel and look their best. We are proud to offer a precision tool designed to give men an edge in keeping up with the times.”
A recent study conducted by Gillette shows men are more eager than ever to improve their look and hygiene, and to properly prepare for intimate encounters. Body shaving is increasingly part of the routine of 44% of men globally who body groom1. Despite the rising popularity of body shaving, men have had limited tools to choose from, with 58% of current body shavers saying a better razor would enhance their body-shaving experience2.
“Gillette has always worked hard to address the needs of men,” said Tortora. “With body shaving on the rise, we applied our 100+ years of shaving expertise to engineer our first razor specifically built for the terrain below a man’s neck.”
Gillette BODY allows men to tackle the challenging task of body terrain with precision, accuracy, and ease. A unique series of Gillette technologies and features help the razor glide comfortably over body contours:
Rounded Head for increased maneuverability and total body comfort, adapting to body contours and allowing the razor to move through even the tightest spaces.
3 Lubricating Strips providing outstanding glide for incredible comfort, no matter the region.
Ergonomic Anti-Slip Grip for exceptional control, even in the shower, because the last thing you want to do when body shaving is lose control of the razor.
3 Floating Blades for a close, comfortable shave on some of the most sensitive areas of a man’s body.
Forward Pivoting Head that easily adapts to body contours.
Gillette BODY razors are available in specific countries. To find out availability in your country, go to Gillette.com.
Visit Gillette’s YouTube channel to view the online content.
About Gillette
For over 110 years, Gillette has delivered precision technology and unrivaled product performance – improving the lives of over 800 million men around the world. From shaving and body grooming, to skin care and sweat protection, Gillette offers a wide variety of products including razors, shave prep (gels, foams and creams), skin care, after shaves, antiperspirants, deodorants and body wash. For more information and the latest news on Gillette, or to see our full selection of products, visit http://www.gillette.com/.
About Procter & Gamble
P&G serves approximately 4.8 billion people around the world with its brands. The Company has one of the strongest portfolios of trusted, quality, leadership brands, including Always®, Ambi Pur®, Ariel®, Bounty®, Charmin®, Crest®, Dawn®, Downy®, Duracell®, Fairy®, Febreze®, Gain®, Gillette®, Head & Shoulders®, Lenor®, Olay®, Oral-B®, Pampers®, Pantene®, SK-II®, Tide®, Vicks®, Wella® and Whisper®. The P&G community includes operations in approximately 70 countries worldwide. Please visit http://www.pg.com for the latest news and in-depth information about P&G and its brands.
– See more at: http://news.pg.com/press-release/pg-corporate-announcements/emerging-trend-identified-evolution-mens-style-almost-half-#sthash.LemgiUl8.dpuf
SAN FRANCISCO — The U.S. Department of Labor today announced that it obtained a consent order requiring the fiduciaries of the Parrot Cellular Employee Stock Ownership Plan to pay $4,181,818 to the plan. The settlement resolves a suit filed in April 2012 after an investigation by the department’s Employee Benefits Security Administration found violations of the Employee Retirement Income Security Act. The department alleged that plan fiduciaries caused or permitted the ESOP to purchase Parrot Cellular stock for more than fair market value.
The suit, filed in the U.S. District Court for the Northern District of California, named as defendants Dennis Webb, the principal owner of California-based Entrepreneurial Ventures Inc.; Matthew Fidiam and J. Robert Gallucci, EVI executives and ESOP trustees; and Consulting Fiduciaries Inc., an Illinois company that served as the independent fiduciary for the ESOP during a November 2002 stock purchase. EVI operates Parrot Cellular telephone retail stores and is the sponsor of the worker retirement plan.
“Employee stock ownership plans can have great benefits for workers, but only if they adhere to the laws that govern them,” said Secretary of Labor Thomas E. Perez. “We are very pleased to have resolved this matter in a way that brings the plan into compliance with the law and benefits the plan’s participants.”
“Officials responsible for employee stock ownership plans are legally required to act prudently and solely in the interests of plan participants when purchasing or selling employer stock,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi. “This is true for all fiduciaries of all employee benefit plans covered by ERISA.”
Under the terms of the settlement agreement, Consulting Fiduciaries agreed to pay $2 million to the ESOP to settle the allegations. Webb, Fidiam and Gallucci agreed to collectively pay $1.5 million to the ESOP, and Webb agreed to pay an additional $681,818 to the ESOP.
COURTESY: US LABOR DEPARTMENT
NEWARK, N.J., August 13, 2014 – Despite the sentiment that we have entered a digitally dominant age, traditional benefits communication vehicles have not yet become obsolete. Employers report they are taking a multichannel approach to meet the needs and preferences of their employees according to Delivering the Benefits Message, the fifth in a series of five research briefs based on The Prudential Insurance Company of America’s (Prudential’s) Eighth Annual Study of Employee Benefits: Today & Beyond. Group meetings and seminars are still considered the most successful communication methods with 74% of employers using them with great to moderate success.
“Digital communication vehicles continue to develop and progress around us but are not completely eclipsing traditional avenues of communication,” said Jean Wiskowski, vice president, sales strategies, Prudential Group Insurance. “Rather, employers are finding themselves relying on a full suite of tools to reach a dynamic and evolving workforce.”
Individual meetings, email, toll-free numbers and mail at home rounded out the top five most successful communication methods. Both targeted marketing mailings and mail received at home drastically spiked year- over- year with employers reporting each increased by 13% and 14% respectively. Many employers also reported that newer methods of communication are being used with great success including external social media networking and video, CD-ROM or DVD presentations.
Employees did exhibit a preference for communication vehicles in the digital realm with work email (47%), personal email (28%) and online avatar (19%) being named as the top three. Group meetings (19%) and individual meetings (18%) rounded out the top five. For employees the trajectory of benefits communications is clearly moving towards digital: Over the last year more employees have enrolled, obtained plan information and used financial planning tools on computers and mobile devices. Employees also feel that a majority of benefits-related activities will be available via smartphones or tablets in the next five years.
“As individuals increasingly choose digital tools to take in information, benefits communications will be no different. Employers and carriers will need to look at successful aspects of non-digital communications and incorporate them into the digital realm,” said Wiskowski.
As the trend towards year-round benefits education and enrollment strategy gathers steam, employers are examining additional methods carriers can use to communicate to employees outside of their annual enrollment period. To support this strategy, employers reported email would be the optimal vehicle with 84% stating it would be the best method. This finding also echoes employee sentiment. Home mailing (77%) and signing up on a benefits website (76%) rounded out the top three best communications methods outside of enrollment for employers. Notably, 46% of employers said that text messages to mobile phones were a good way to reach employees.
“The current environment for benefits communication vehicles is an expanding and changing one. As employers, brokers and employees begin to examine emerging communication vehicles, it is important to recognize the value traditional ones still hold,” Wiskowski said.
Delivering the Benefits Message is the last in a series of five research briefs that highlight the major findings from Prudential’s Eighth Annual Study of Employee Benefits: Today & Beyond. The research was conducted via the internet during August and September of 2013, and consisted of three distinct surveys—one for plan sponsors, another for benefits brokers and consultants and a third for plan participants.
Prudential Group Insurance manufactures and distributes a full range of group life, long-term and short-term disability and corporate and trust-owned life insurance in the U.S. to institutional clients primarily for use in connection with employee and membership plans. The business also sells critical illness insurance, accidental death and dismemberment and other ancillary coverages and provides plan administrative services in connection with insurance coverages.
Prudential Financial, Inc. (NYSE:PRU) a financial services leader, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees are committed to helping individual and institutional customers grow and protect their wealth through a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds and investment management. In the U.S., Prudential’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit http://www.news.prudential.com/.
It appears Americans have run out of excuses for not paying their friends back in a timely manner, whether it’s for a $5 latte or $2,500 vacation. A new survey released today finds 36 percent of adults currently use a person-to-person payments service (P2P), with millennials leading the charge at nearly double that rate (62 percent). What’s more, 45 percent of non-users say they plan to start using the service within the next year, foreshadowing exponential growth in the coming months.
These findings are from the latest Bank of America Trends in Consumer Mobility Report, exploring emerging payments trends – specifically P2P technologies that allow consumers to send money to others via their mobile device – and forward-looking behaviors among adult consumers who own a smartphone and have an existing banking relationship at any financial institution. The release of the survey follows the bank’s recent introduction of aspects of the Zelle℠ experience into its mobile banking app.
“Technology is developing faster today than at any time in history, and our newest report demonstrates how consumers are embracing emerging technologies to make sense of their financial lives,” said Michelle Moore, head of digital banking at Bank of America. “We were among the first institutions to integrate the features of Zelle this year, and we look forward to developing new innovations that anticipate our customers’ ever-changing needs in the payments space.”
Timing is top of mind
In a world where mobile technology is ubiquitous, most users say they started using P2P due to convenience and time savings (68 percent). This motivation is closely followed by peer influence (48 percent), new offerings from banks (30 percent) and a desire to no longer use cash or checks (16 percent).
Users are also in agreement that time is of the essence when paying each other back. The majority (69 percent) of respondents say they pay others back within the same day, and one-third say in under an hour. Similarly, 53 percent expect others to pay them back within 24 hours, and 22 percent within the hour.
Minding payments p’s and q’s
When it comes to what people are paying each other back for, just about anything goes. Practicality tops the list with shared bills (45 percent), including utilities and rent, being the most popular reason to use P2P, which is closely followed by shared expenses for gifts (42 percent), travel (37 percent) and dining (35 percent).
And the dollar amount doesn’t seem to matter much either. Fifty-one percent believe requesting a payment from others for $5 or less is socially acceptable, and 36 percent claim no amount is “too low.” The same mentality applies to sending funds, as 44 percent say they would be comfortable sending $1,000 or more to others using P2P, with 26 percent saying no amount is “too high.”
Imagining a world without physical currency
In sharing opinions about others’ payments faux pas, it appears that checks cause the most headaches. People are most annoyed by others paying via check in store (51 percent), followed by a delay in cashing checks (38 percent) and ignoring payment requests (24 percent).
As emerging payments continue to rival traditional methods, Americans increasingly question whether today’s youngest generations will ever use cash, checks or credit cards in their traditional forms. When asked what they believe to be true about children under the age of 10, many respondents agree they won’t know how to write a check (71 percent) and won’t use physical credit cards (42 percent). One in seven think the youngest members of Generation Z won’t even know what cash is.
Bank of America’s focus on mobile banking
With more than 22 million active mobile users and growing, Bank of America’s mobile banking platform is an evolving source of increased customer engagement and satisfaction. During the first quarter of 2017, mobile banking customers logged into their accounts 980 million times, or approximately 44 times per user. During that same period, customers made more than 29 million mobile bill payments and nearly 9 million P2P transfers, a growth of 76 percent over 2016. Customers also used their mobile devices to deposit more than 315,000 checks daily and redeem over 1 million credit card cash and travel rewards. More customers are opening new accounts through mobile, with sales increasing by 36 percent over the past year.
About the Bank of America Trends in Consumer Mobility Report
Convergys (an independent market research company) conducted a nationally representative, panel sample online survey on behalf of Bank of America March 20-April 1, 2017. Convergys surveyed 1,005 respondents throughout the U.S., comprised of adults 18+ with a current banking relationship (checking or savings), and who own a smartphone. An additional 407 panelists were surveyed who also use a person-to-person payments service. The margin of error for the national sample of n=1,005 is +/- 3.1 percent, and the margin of error for the person-to-person payments oversample where n=407 is +/- 4.9 percent, with each reported at a 95 percent confidence level.
Bank of America
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 47 million consumer and small business relationships with approximately 4,600 retail financial centers, approximately 15,900 ATMs, and award-winning digital banking with approximately 35 million active users and more than 22 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Accion Chicago (Accion) and Local Initiatives Support Corporation (LISC)—the Entrepreneurs of Color Fund’s nonprofit partners in Chicago—today announced $3.6 million in new investments from six leading institutions: First Midwest Bank, U.S. Bank, The Coleman Foundation, McCormick Foundation, The Chicago Community Trust and Providence Bank & Trust. The new investments, which will be paired with business coaching and mentorship for small businesses, bring the total funding committed to the Entrepreneurs of Color Fund to over $9 million to support minority entrepreneurs on Chicago’s South and West sides.
The Entrepreneurs of Color Fund supports the work of nonprofit lenders Accion and LISC to provide capital to minority-owned small businesses and stimulate economic growth by boosting commercial activity and helping create jobs on the South and West sides. The initiative was launched in July 2018 with initial financial support from JPMorgan Chase and Fifth Third Bank.
“Small businesses are the backbone of our city’s economy, providing needed jobs, services, and opportunity to our families and residents in every neighborhood across Chicago,” said Mayor Lori E. Lightfoot. “The Entrepreneurs of Color Fund plays a critical role in driving small business growth in our communities, particularly those that have experienced generational disinvestment, and we are grateful to these newest funders for stepping up and doing their part as we expand access to capital, develop entrepreneurial skills, and truly unlock our city’s potential as a beacon of hope and opportunity for all.”
Small businesses are key drivers of growth, and that growth is fastest among minority and women entrepreneurs. In Chicago, small businesses employ more than 1 million people. Research shows it would require only a 9 percent increase in small business jobs, or less than one job per existing small business, to eliminate unemployment in Chicago’s low-income neighborhoods.
However, the financial resilience of small businesses varies across Chicago’s neighborhoods. The JPMorgan Chase Institute found that small businesses in many South and West Side neighborhoods have more limited cash reserves than their counterparts on the North side. For example, small businesses in Englewood are operating with less than a week of cash reserves in their deposit accounts compared to 17 days for small businesses in Buena Park—three times the cash liquidity of their Englewood peers.
“A key tenet of LISC Chicago’s economic development strategy is that power and wealth comes through ownership. Investing in local businesses and entrepreneurship is essential to creating community wealth and power and, is integral to supporting the communities we serve,” said Meghan Harte, Executive Director of LISC Chicago. “We are proud to be a partner of the Entrepreneurs of Color Fund and look forward to continuing working together to support minority-owned small business owners on the south and west sides.”
In its first year of operations in Chicago, the initiative has made over 130 loans totaling more than $1.7 million and resulting in nearly 400 new or preserved jobs. Fifty-three percent of the loans support minority women-owned businesses.
The new investments will enable the Entrepreneurs of Color Fund to build on insights gained during its first year to provide more minority entrepreneurs in Chicago with critical access to capital, coaching and other resources needed to support their small businesses.
“Chicago’s neglected neighborhoods need more jobs. Small business owners can create those jobs if they receive the loans and coaching they need to build their businesses,” said Brad McConnell, CEO of Accion Chicago. “That’s what Accion does, and that’s what this partnership is about.”
One of the small businesses that received a loan with support from the Entrepreneurs of Color Fund is Urban Roots, Inc., launched and managed by Jimmie and Tiffany Williams. The landscaping company serves residential, commercial and industrial properties across Chicago and helps to train people with criminal backgrounds with the skills that they need to connect with jobs after incarceration.
“The Entrepreneurs of Color Fund gave us the opportunity to grow and expand our business,” said Jimmie Williams, Entrepreneurs of Color Fund loan recipient and owner of Urban Roots, Inc. “Now, we can continue to offer our services across Chicago, help create more jobs in our neighborhood and give back to our community.”
A History of Impact
The Entrepreneurs of Color Fund was first launched in Detroit in 2015 by JPMorgan Chase, along with W.K. Kellogg Foundation and Detroit Development Fund, to provide minority-owned small businesses with access to capital and technical assistance. The fund has since tripled in Detroit to $22 million. In addition, the Entrepreneurs of Color Fund has expanded to San Francisco, the South Bronx, the Greater Washington region and Chicago as part of JPMorgan Chase’s $40 million, three-year commitment to the South and West sides of the city.
“Small business growth is key to creating economic opportunity for more people on the South and West sides,” said Charlie Corrigan, Head of Midwest Philanthropy at JPMorgan Chase. “At JPMorgan Chase, we are pleased to see businesses, nonprofits and political leaders come together to help minority entrepreneurs get a fair shot at achieving their dreams.”
Eligible entrepreneurs can run new or existing businesses, allowing more businesses to stay local and invest in their neighborhoods. These entrepreneurs are typically unable to qualify for traditional loans, often due to previous credit challenges, limited financial collateral, short business history or informal business practices.
Entrepreneurs seeking small business loans or coaching are encouraged to contact Accion at 312-275-3000 or LISC at 312-422-9550.
About Accion Chicago
Accion helps neighborhood entrepreneurs grow by providing the capital, coaching, and connections small business owners need to create wealth and jobs throughout Illinois and Indiana. By partnering with entrepreneurs, Accion offers the most cost-effective way to invest in underserved communities. Accion offers small business loans between $500 and $100,000 to qualified borrowers and provides free coaching to any entrepreneur who wants to grow their business. Learn more at us.accion.org/chicago.
About LISC
With residents and partners, LISC forges resilient and inclusive communities of opportunity across America—great places to live, work, visit, do business and raise families. Since 1979, LISC has invested $18.6 billion to build or rehab 376,000 affordable homes and apartments and develop 63 million square feet of retail, community and educational space. To learn more, visit www.lisc.org.
About JPMorgan Chase
JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm with assets of $2.7 trillion and operations worldwide. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, and asset management. A component of the Dow Jones Industrial Average, JPMorgan Chase & Co. serves millions of customers in the United States and many of the world’s most prominent corporate, institutional and government clients under its J.P. Morgan and Chase brands. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.
About Fifth Third
Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio and the indirect parent company of Fifth Third Bank, an Ohio-chartered bank. As of June 30, 2019, Fifth Third had $169 billion in assets and operated 1,207 full-service Banking Centers and 2,551 ATMs with Fifth Third branding in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia and North Carolina. In total, Fifth Third provides its customers with access to approximately 53,000 fee-free ATMs across the United States. Fifth Third operates four main businesses: Commercial Banking, Branch Banking, Consumer Lending and Wealth & Asset Management. Investor information and press releases can be viewed at www.53.com. Member FDIC.
Washington, DC — The board of directors of the Export-Import Bank of the United States (Ex-Im Bank) today adopted revisions to its environmental procedures and guidelines governing high-carbon intensity projects, aligning the Bank with President Obama’s goal of reducing carbon pollution, while maintaining the Bank’s focus on continuing to help create and support American export-related jobs.
“No one has been more supportive of U.S. exports and the American jobs they produce and maintain than this Bank and this board. Since 2009, we have supported nearly 1.2 million jobs.” said Fred P. Hochberg, Ex-Im chairman and president. “We can’t do it, however, without considering the environmental costs associated with transactions.”
The revised guidelines adopted today require carbon capture and storage in most countries in order to secure Bank financing for coal-fired power plants, but would provide flexibility for the Bank with respect to the important energy needs of the poorest countries in the world.
The policy revisions were drafted by Ex-Im Bank staff and reviewed extensively by exporters, the public, leading environmental groups, the Administration and other federal agencies through an extensive and transparent vetting process.
“The Bank engages in an important balancing act — in supporting our exporters, we have to weigh the potential impacts on the environment associated with our financing,” Hochberg said. “This balancing act is a Congressional mandate, is a directive in our Charter, is part of our mission and it is something we at the Bank take seriously.
Hochberg noted that: “Our proposed guidelines would balance the Bank’s obligations to its many different stakeholders and also its efforts to support the growth of export-related U.S. jobs.”
“Without guidelines or limits, ever-increasing numbers of new coal plants worldwide will just continue to emit more carbon pollution into the air we breathe,” said Hochberg. “But America cannot do this alone. I strongly support the Administration’s efforts to build an international consensus such that other nations follow our lead in restricting financing of new coal-fired power plants.”
Ex-Im has been a leader among the world’s export credit agencies (ECAs) in adopting measures to protect the environment while financing exports.
•In 1995 the Bank was the first ECA to adopt environmental procedures and guidelines governing its export financing.
•In 1999 the Bank began tracking and publicly reporting projected carbon emissions produced by projects it financed. Even today Ex-Im is the only ECA that tracks and reports carbon emissions.
•In 2009 the Bank approved a formal carbon policy, and in 2010 it approved supplemental guidelines for high-carbon intensity projects.
The guideline revisions approved today are not designed to impact mining projects or coal exports produced by American coal miners. Ex-Im staff have worked with other agencies to ensure that the flexibility of these guidelines would be consistent with those of other federal agencies.
In addition to approving the revisions to its environmental guidelines, the board today approved seven transactions that together will support more than 11,200 U.S. export-related jobs.
This Press Release is courtesy of www.exim.gov
