History of Central Banking - The Panic of 1907

Tom Cunningham, vice president, senior economist, and regional executive of the Federal Reserve Bank of Atlanta, gives an economist's view of the early history of central banking in the United States. Here he discusses the Panic of 1907.

History of Central Banking - An Economist's Perspective

Tom Cunningham, vice president, senior economist, and regional executive of the Federal Reserve Bank of Atlanta, gives an economist's view of the early history of central banking in the United States. He focuses on the evolution of banking from the late 1700s through the Great Depression, with a special focus on the Fed's role in the Depression.

This is the first of a series of four short videos.

Part 1 - Early History of Central Banking

Nigerian Central Bank imposes penalties for offsite ATM compliance failures

The Central Bank of Nigeria (CBN) has introduced strict penalties for banks and acquirers for non-compliance with its directives and policies regarding offsite ATM operations.

In a circular entitled “Penalty for non compliance on CBN circulars and guidelines on ATM operations in Nigeria”, issued by the central bank’s Banking and Payments System department, the bank says that it had become imperative to restore order in the system, stressing that there had been deliberate attempts by participants in the electronic payment arena to frustrate the central bank’s policies.

Apart from a monetary fine of N50, 000 (USD 330) for each of the 14 cases identified and listed in the circular, the affected bank or acquirer stands the chance of being suspended from clearing operations or barred from participating in Real Time Gross Settlement (RTGS), until any infractions have been corrected.

Some of the offences include:

• Non-compliance with Payment Card Industry Data Security Standards (PC IDSS) which attracts a fine of N50,000 per week and will apply until compliance is established, 
• Non-compliance of ATM terminals with Europay, MasterCard and VISA (EMV) level 1&2, which will attract a fine of N50,000 and temporary suspension of the affected terminal until compliance is established,
• A N50,000 fine per day for late submission of return and data on ATM frauds when required,
• Failure to provide audit trails and journals for ATM transaction would also attract a fine of N50,000 per week.

Do you really know why clearing is important?

Seems like a dumb question, right? But in all honesty how many of you out there can define clearing? And how many of you know the important role that clearing pays in the financial system?

In the financial 2007–08 financial crisis, the once mysterious topic of clearing of financial products took center stage in major policy debates. Generally speaking, clearing has to do with the nuts and bolts of the contractual performance of financial products after they have been traded.

Want to learn more? Download this insightful article “What is clearing and why is it important?” from the Chicago Fed.

Stolen HSBC data tapped for Italian tax evasion probe

Italian police have launched a tax evasion investigation based on data stolen from HSBC's Swiss private banking arm by an IT employee, after being given a list of around 7,000 account holders by French counterparts.

According to Bloomberg, a Turin-based court requested the Italian names on the list of 127,000 accounts belonging to 79,000 people, obtained by French authorities. Herve Falciani, an HSBC IT employee stole the data three years ago and fled to France while under investigation before eventually handing it over to authorities.

Last month French prosecutor Eric de Montgolfier revealed that the stolen files have been decrypted and launched a tax investigation based on over 8,000 accounts related to French customers.

The willingness of foreign tax authorities to pay for information relating to Swiss private bank accounts has been a growing source of diplomatic tension. In February German Chancellor Angela Merkel warned her government may buy stolen data on Swiss accounts.

Western Union to cut 175 jobs and consolidate operations

Western Union is to cut 175 jobs and consolidate its operations in an effort to achieve $50 million in annual savings by 2012. The global money transfer operator - which currently employs some 6,800 people - says the overhaul will simplify business processes and move decision making closer to the marketplace. The restructuring comes just over a month after the company named chief operating officer Hikmet Ersek to replace Christina Gold as CEO.

The upheavals will cut through a swathe of management layers, reducing the number of executive vice presidents, senior vice presidents and vice presidents. The company's bill payment business will be put under the command of America's president Stewart Stockdale, and a new position focusing on electronic channels and new customer segments for consumers and businesses will be created.

The proposed changes to business operations include the closing, consolidation, and downsizing of facilities and the creation of a new regional operations centre in Europe.

Most of the management changes will be effective in the next 30 days, while the changes to business operations - resulting in the migration of the work performed by approximately 550 positions - are expected to occur over the next 18 months.

The company anticipates recording a total of approximately $80 million of restructuring charges through 2011, which includes $75 million for severance, facility closure and other costs.

CEO-elect Ersek says: "Simplifying our structure will allow us to improve our productivity and customer focus, capitalize on growth opportunities, and enhance long-term financial returns for our shareholders."

Reserve Bank of India issues alert on fraud in remittance transactions

The Reserve Bank of India (RBI) has advised banks to exercise due caution and to be extra vigilant while opening or allowing transactions in remittances.

“It is clarified that any person resident in India collecting and effecting or remitting such payments directly or indirectly outside India would make himself or herself liable to be proceeded against with, for contravention of the Foreign Exchange Management Act, 1999 besides being liable for violation of regulations relating to know your customer (KYC) norms or anti money laundering (AML) standards,” the RBI said in a notification.

It has been brought to the notice of the RBI that fraudsters are seeking money from the gullible people, under different categories, such as, processing fees, transaction fees, tax clearance charges, conversion charges and clearing fees, said the RBI. The victims have also been persuaded to deposit the amount in accounts with banks in India, and such amounts have been withdrawn immediately.