Bank of England publishes Financial Stability Report

The Bank of England published its bi-annual Financial Stability Report on 25 June. The Report is part of the delivery of the Bank’s strategy for its financial stability work, as set out in the Bank’s Annual Report 2010. The Report concentrates on the Bank’s assessment of conjunctural risks to financial stability. It was largely prepared ahead of the recent announcement by the Chancellor of the Exchequer of the Government’s plans to change the UK’s system of financial regulation.

The Financial Stability Report aims to identify key risks to UK financial stability and to stimulate debate on policies needed to manage and prepare for these risks. The Report is produced half-yearly by Bank staff under the guidance of the Bank's Financial Stability Executive Board, whose best collective judgment it represents, and following review by the Financial Stability Committee of the Court of Directors of the Bank of England.

Under the Banking Act, 2009 the Bank's financial stability objective is 'to contribute to protecting and enhancing the stability of the financial systems of the United Kingdom'. The Report is one vehicle to help it meet that objective.

In relation to current conditions, the Report notes that since December markets have focused increasingly on strains placed on sovereign balance sheets. In April, concerns over Greek sovereign risk spilled over to other European countries and developed rapidly into a generalized retreat from risk-taking. Inadequate transparency about sovereign exposures led to counterparty concerns and renewed strains in bank funding markets. In response, the IMF and European authorities put in place a substantial package of support. While these measures helped to stabilize conditions, market pressures have not yet abated. EU leaders also recently announced plans to publish the results of stress tests conducted on the largest European banks; this will be another important step.

In terms of resilience, the Report says that UK banks have raised their capital and liquidity buffers substantially, which has helped them weather recent tensions. But, in common with their peers, they face a number of challenges in the period ahead. UK banks need to maintain resilience in a difficult environment, while refinancing substantial sums of funding; they have a collective interest in providing sufficient lending to support economic recovery; and they will need over time to build larger buffers of capital and liquidity to meet more demanding future regulatory requirements. The new Basel regulatory regime will be agreed in the autumn. An extended transition to this new regime would enable banks to build resilience through greater retention of earnings, while sustaining lending. The new regime should include a buffer of capital which banks can use to absorb stresses, as well as a hard minimum. That buffer might need to vary over the cycle.

You can download the report at; http://www.bankofengland.co.uk/publications/fsr/2010/fsrfull1006.pdf

Barclays adds enhancements to its mobile banking service

To celebrate the first anniversary of Barclays.mobi service, Barclays provides a series of further enhancements to its UKs mobile phone banking service. The service is said to attract more than four million hits a month.

The updated service now includes:

• Currency conversion calculator as the summer holiday season kicks off
• 'At a glance' balance screen has been updated for easier customer views
• Introduced 'tappable' bars to support finger friendly principles for mobile phones
• Bookmarks feature - customers can save the mobi link to support access and navigation; IPhone users can also save the link as a Barclays icon 'lozenge'
• Introduced a mobile business site specifically for business customers.

Sean Gilchrist, Barclays Digital Banking Director, said: "In just over a year we have grown the service from nothing to over 4 million hits a month which is just phenomenal. The feedback from our customers is very much around 'snack banking' on the move, it's clear they want to see their balance, recent transactions and make payments whilst out and about. We believe the interest in banking through mobile hand-sets is market-driven and the iPhone has been a catalyst for it, as people use their phone to do more things. In addition we're also seeing an increase in terms of bandwidth that the phone can operate at and availability of Wi-Fi hotspots, so all in all people are getting a much better experience and prepared to use their phones to do more."

These latest enhancements build on a year of several key developments to the Barclays.mobi service which give customers a web application service operating on all of the main mobile platforms. Customers including those with Apple, HTC, Nokia, Motorolla, Blackberry etc mobiles have a user friendly mobile experience with access to the full range of services without having to scroll around.

The full range of services on offer includes:

• Balances
• Mini-statements
• Transfers between Barclays accounts
• Third party payments 
• Branch and ATM locator' using maps that specifically fit mobile handsets
• Mobile frequently asked questions and answers
• Currency conversion tool
• Free mobile security software from Kaspesky
• 'Layar' collarboration with Barclaycard which allows customers using iPhone or Android (but also comes pre-installed on the Samsung Galaxy S) to use a touch-screen device to find the nearest Barclays ATM, shop that accepts contactless - it integrates with google maps to help you find out just how to get there.

Barclays also offer a text banking service where customers can register to receive weekly balance, mini-statement, limit and transaction alerts for a small monthly fee of £2.

Prosecutor calls for prison sentence for Jerome Kerviel

The prosecutor in the trial of Jerome Kerviel has called for the former Societe Generale trader to spend four years in prison, if convicted. Mr Kerviel is standing trial over allegations that he bet €50bn euros of SocGen's money without the bank's knowledge. The bank says his actions cost it around €5bn.

Mr Kerviel, whose lawyer said he would fight the prosecution's call, maintains the bank knew about his risk taking. He is facing charges of forgery, breach of trust and unauthorized computer use. The maximum sentence for the allegations is five years.

In his summing up of the case, prosecutor Jean-Michel Aldebet has requested the maximum sentence, but with one year suspended. The trial has seen Mr Kerviel's former bosses and colleagues line up to testify against him.

SocGen's lawyer, Jean Veil, accused Mr Kerviel of "duplicity" for reassuring his bosses that nothing was wrong while racking up the huge losses.

On Tuesday, the bank's president and chief executive at the time of the losses, Daniel Bouton, called the trading scandal a "catastrophe".

"It's not an issue of losses or amounts," he told the courtroom.

"The trust that should exist between us is shattered. I cannot believe for one second any of Jerome Kerviel's supervisors were aware [of his actions]."

Mr Bouton maintained that Mr Kerviel's actions were unauthorised, and "outside any remit".

But he acknowledged that there had been flaws in SocGen's risk management systems.

At the start of the trial earlier this month, Mr Kerviel said his superiors at the bank had "encouraged" him to take risks.

The bank was fined 4m euros by French regulators for failures in those systems following the scandal.

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Canadian government launches payment system review

Canadian Finance Minister, Jim Flaherty, has launched a task force to review the way the payments system in Canada. The minister said it was important to ensure the payments system facilitates the introduction of new technologies to the benefit of users without compromising safety and efficiency or consumer protection.

“Today, Canadians can pay for things in a bewildering number of ways, even by tapping a cell phone against a scanner,” Flaherty said in a statement Friday.

The task force will be chaired by Pat Meredith, a professional associate and senior adviser at the strategy consulting firm Monitor Group. Meredith is a former executive vice-president of corporate strategy at CIBC. The task force is expected to provide recommendations to the minister by the end of 2011.

Earlier this year, the federal Competition Bureau turned down a request by the Interac Association to allow the debit payment processor to become a for-profit business. Interac is governed by a consent order issued by the Competition Tribunal to prevent the company from engaging in anti-competitive practices. Interac’s desire to restructure from a not-for-profit association structure to a for_profit model requires a change to that order.

The federal regulator suggested that Interac could make other changes, including to its governance structure while maintaining its non-profit status, that would allow it to remain competitive to new challenges in the market.

However the bureau said it would be open to revisiting its rulings if things change in the future.

Visa and MasterCard have been eyeing the Canadian debit card market, which is dominated by Interac. MasterCard has also been actively expanding its Maestro debit program in Canada and has been working since late 2008 to increase acceptance.

Wells Fargo becomes first bank to introduce ATM e-receipts

US bank Wells Fargo has introduced its new ATM e-receipt service to its all online banking consumers. The new option allows customers to decide on whether they want to have an ATM receipt sent an Online Banking inbox or to the specified email address. Wells Fargo is the first and only bank, so far, to launch the kind of service.

All Wells Fargo customers can use the service while Wachovia consumers will be able to access it soon after they convert to Wells Fargo. The conversion is scheduled to take place through 2011.

In order to start using the service customers need to continue using the ATM the same way they do it at present time. They can select the new option on the receipt selection screen. When they visit the inbox they have prespecified before they will see an email sent to them from Wells Fargo Online titled “Your Wells Fargo ATM Receipt.”

FBI issues warning over denial-of-service phone scam

The FBI has issued a warning to Americans after a spate of telecommunications denial-of-service (TDoS) attacks left fraudsters able to access online bank and brokerage accounts. The TDoS attacks use automated dialing programs and multiple accounts to overwhelm victims' mobile phones and land lines with thousands of calls.

When victims answer the calls they hear dead air, an innocuous recorded message, advertisement, or a telephone sex menu. The attacks are a diversionary tactic, enabling the fraudsters to use personal information about the victim they've acquired through social engineering techniques or malware to pilfer online accounts.

Because the victim's phone lines are tied up, their banks are unable to contact them to verify transfers, enabling the fraudsters to empty accounts.

The FBI says it discovered the new-style attacks through a private industry partner, which found a Florida dentist who lost $400,000 from his retirement account after a denial-of-service attack on his phones.

Since April "there has definitely been a noticeable surge in telephone denial-of-service attacks, with numerous incidents having been reported in several Eastern states" says the agency.

It has now teamed up with the Communication Fraud Control Association - comprised of security professionals from communication providers - to analyze the patterns and trends of telephone denial-of-service attacks, educate the public, and catch the fraudsters.