Banks warm to EU push on VAT regime

Banks and insurers on Wednesday gave a qualified welcome to European Commission proposals which would clarify and update the value added tax regime for financial and insurance services.

The problems have arisen because financial services and insurance are VAT-exempt under legislation dating from the 1970s.
These sectors are not required to charge the tax when they are supplying the exempt services, but are also generally unable to recover the VAT they pay on the goods and services acquired for their businesses.
While this non-recoverable tax is a significant revenue source for national tax authorities, it bumps up the cost of such services, and puts European Union-based banks and insurers at a disadvantage compared with, say, US counterparts.
As financial markets and practices have evolved, there has been increasing confusion over the extent of the exemption and precisely what businesses are covered. This has led to several long-running cases at the European Court of Justice, and different interpretations in different member states.
Proposals put forward by the European Commission on Wednesday focus on three measures. First, there would be a redefinition of the scope of the exempt services in an effort to bring more clarity. Second, banks and insurance companies would be given the option of taxing their services if they wished.
This is a provision which exists in the VAT directive but is not widely used by EU member states and could be particularly useful if products are being offered to other businesses (rather than the retail market).
Finally, there would be an industry-specific VAT exemption on "cost-sharing" arrangements, including cross-border ones. This would allow institutions to pool their operations and share costs without creating any additional non-recoverable VAT.
The measures received a broad thumbs-up from insurers and banks, although there were some caveats over specifics. "The changes will increase clarity, allowing firms to operate and plan more efficiently," said the Association of British Insurers.
The European Banking Federation also said it was a "first step in the right direction" although it added that there should be greater certainty established around the areas of provision of payment services, derivatives, securities, custodial services and intermediaries.
Some lawyers warned that the definitions will have to be tested in practice. "It's a question of how workable they are in real life," said Greg Sinfield, a partner at law firm Lovells. The taxation commissioner Laszlo Kovacs said he was hoping for a "positive reaction" from most member states, but acknowledged that they would probably see a "slight" loss of tax revenue in the short-term.

Wolseley set to cut 1,300 US jobs

Building and plumbing firm Wolseley plans to cut around 1,300 more jobs in North America after being hit by the slowing US housing market.

The move comes after the firm reduced headcount by 1,700 in the three months to the end of October.
Low consumer confidence and the weak dollar were making trading tough in the US, it said. The firm says the combined cuts will help save the firm £60m.
Reading-based Wolseley saw its overall quarterly profits fall 15%.
Meanwhile the firm, which has the brands Plumb Center and Build Center, saw European profit rise 15% during the three months to the end of October.
"The group continues to take swift and decisive action in the more challenging business conditions" said Chip Hornsby, group chief executive of Wolseley.

Asia Markets Rally Following Wall Street

HONG KONG (AP) - Asian stocks rallied Thursday, tracking an overnight surge on Wall Street, amid a brightening outlook for the U.S. economy -- a key export market for Asian companies.

Investors took heart after the Dow Jones industrial average mustered its biggest two-day point gain in five years after a Federal Reserve official hinted that the central bank may lower interest rates again.
Hong Kong's Hang Seng Index was up 1,175.46, or 4.3 percent, at 28,546.7 points in afternoon trading. In Tokyo, the Nikkei 225 average shot up 359.96 points, or 2.38 percent, to finish at 15,513.74 points.
Markets in Australia, Singapore, South Korea and Philippines also advanced.
Asian stock markets have been battered this month as investors worried about fallout from the monthslong subprime mortgage crisis in the U.S.
But sentiment seems to be improving as companies that made losing bets on subprime mortgages, such as Citigroup Inc. and Freddie Mac, are coming up with ways to raise cash.
Japanese investors snapped up auto and banking shares after the yen declined against the dollar, which helps the country's exporters by inflating their foreign revenues when repatriated. Gainers included Nissan Motor Co. and Mitsubishi UFJ Financial Group Inc.
The U.S. dollar was trading at 110.01 yen midafternoon, up from 109.97 yen late Wednesday in New York, and after falling below 108 yen earlier this week.
In Hong Kong, all 40 blue chips were higher, with property stocks rallying on expectations Hong Kong banks would match a possible U.S. rate cut. Stocks of Sino Land, Hang Lung Properties and Sun Hung Kai Properties were all higher.
The Dow rose 331.01, or 2.55 percent, to 13,289.45 on Wednesday in New York, adding to the blue chip index's 215 point gain on Tuesday and giving the market's best known indicator its largest two-day point gain since Oct. 11, 2002.

Emerging East Asian Bond Markets Resilient, But Risks Loom, Says ADB Report

SINGAPORE - Strong economic growth and improved financial systems along with limited exposure to U.S. subprime mortgages have helped curb spillover effects of global credit woes on emerging East Asian economies, but risks loom, says a new report issued by Asian Development Bank (ADB).

Even though there are no signs of widespread problems in emerging East Asia, downside risks to regional economic and financial market trends remain and wider ramifications cannot be ruled out in the future, the November edition of Asia Bond Monitor (ABM) says.
“Prolonged global financial market volatility, a rise in risk aversion along with re-pricing of credit risk could lead to a reversal of capital flows into the region,” says Jong-Wha Lee, Head of ADB’s Office of Regional Economic Integration.
The current global credit market turbulence is the first test of innovative financial instruments that have been used to distribute risks in globally interconnected markets and where reverberations can spread at an alarming speed.
While the impact on emerging East Asian economies and markets has so far been limited, a sharper slowdown in global growth and tighter credit policies could damp both household and corporate spending, reduce new issuances and delay those already in the pipeline, adds Mr. Lee.
ABM highlights the need for improved transparency in credit markets through better valuation and accounting of off-balance sheet instruments, strengthening of risk management and enhancing the enabling environment for local currency bond markets. It recommends stronger regional cooperation in monitoring and regulating financial markets and in developing financial institutions’ risk management techniques.
Continued policy reforms and liberalization of bond markets in emerging East Asia has led to several sovereign credit rating upgrades, a move that augurs well for more rapid expansion of the region’s bond markets, which are growing faster than gross domestic product in most markets.
ABM says the value of local currency bond markets in emerging East Asia rose 9.9% in the first half of 2007 from US$2.7 trillion outstanding at end-2006 and is up 17.2% from June 2006.
Foreign exchange gains lifted the dollar value of bonds in most economies. Government local currency bond markets grew 10% in the first half of the year, partly because central banks issued more debt to absorb excess liquidity derived from the region’s large capital inflows.
After outpacing government bond market growth for the previous 18 months, corporate bond markets in emerging East Asia grew at a slower pace in the first half of 2007 partly due to the rising cost of short-term finance.
Yield curves generally steepened in 2007, reversing a two-year trend, as short-term rates fell while long-term rates rose as inflationary pressures emerged in many markets. The report warns that although inflationary pressures remain manageable in most economies, any further overheating could pose a significant upside risk and push bond yields lower.
Despite turbulence in global credit markets, the ABF Pan Asian bond index gained 5.4% in the nine months to September 2007, compared with full-year returns of 13.64% in 2006.
ABM examines local currency bond developments in Emerging East Asia, defined as the Association of Southeast Asian Nations member countries, plus the People’s Republic of China, Hong Kong and the Republic of Korea.

World Bank Assistance to Bangladesh

November 21, 2007-The World Bank has offered up to US$250 million in the aftermath of Cyclone Sidr to help millions of Bangladeshis recover and to strengthen the country’s disaster mitigation systems.

Bank assistance could be used to support short-term needs like food imports, the rapid procurement of medical supplies, cash grants to the poorest victims and help to get people back on their feet and recovering their sources of income and livelihood. Bank support could also help Bangladesh manage macroeconomic shocks over this period of challenge.In the longer term, Bank support would be available for infrastructure rehabilitation, especially damage to embankments and other flood mitigation and shelter infrastructure. Xian Zhu, World Bank Country Director for Bangladesh commended the progress that this disaster-prone country has made in dealing with the short and longer term impact of periodic floods and cyclones.

The Bank’s assistance will also support coastal zone management to help Bangladesh face the challenge of climate change by both mitigating the inevitable impact of future storms and designing the necessary adaptations to protect people and their livestock.

The cyclone support will complement existing commitments from the World Bank in response to massive floods in August and September. The Bank provided US$75 million in quick-disbursing financing as an initial flood response and will support restoration and rehabilitation through reallocation of existing funds to support reconstruction and improvements in the areas of agriculture, health, communications, water and sanitation.

RBI warns ICICI Bank for coercive methods to recover loans

New Delhi: The Reserve Bank has warned ICICI Bank of stern action in case incidents of coercive methods by recovery agents of the bank recur, the Rajya Sabha was informed on Tuesday.

"The bank was advised by the Reserve Bank in October, 2007 that if such incidents recur in future, RBI would be constrained to take stern action," Minister of State for Finance, P.K. Bansal, told the House in a written reply.
Earlier, in view of the alleged harassment of customers by ICICI Bank's recovery agents and the judgement of the Supreme Court, the bank was advised by RBI in August to investigate and take action against the recovery agents involved.
The bank was also advised to look into the system of appointing and reviewing performance of recovery agents and undertake comprehensive review of customer complaints at the highest levels.
Bansal said the apex bank has reported that the customer who had availed the car loan from ICICI Bank filed a case under Section 308 (attempt to commit culpable homicide) of the Indian Penal Code with the IP Estate Police Station in New Delhi, under which three executives of the possession agency were arrested but were later released on bail.
On November 2, Delhi State Consumer Commission has imposed "punitive damages" of Rs 50 lakh on ICICI Bank for alleged use of force and coercive methods by some recovery agents of the bank to take possession of the vehicle finance by the bank, Bansal said.
The Commission also ordered the bank to pay a compensation of Rs 5 lakh to the complainant.
To another question, Bansal said the government has not received any proposal from the Reserve Bank to bring Lender Liability Bill to fix lending terms and conditions for cracking down on unfair recovery means adopted by some private banks in the country.
The guidelines issued by RBI clearly stipulate that the banks would be responsible for all acts of omission and commission of their agents, Finance Minister P Chidambaram said in the house in reply to another question.
RBI reserves the right to impose penalty on a bank for violation of guidelines under the provision of Banking Regulation Act, 1949. RBI takes up the complaints with the concerned banks and cautions them to ensure that such incidents do not recur in future, the Finance Minister said.

The young prisoners of the West Bank

OFER MILITARY BASE, West Bank - It is just after 9 a.m., and an Israeli military court, deep inside this remote West Bank army base, is being called into session.

A soldier slams his palm on a table, bringing the courtroom to order for the case of a Palestinian charged with attempted murder. A pair of Israeli security guards enters with the defendant between them. A slight figure with large almond eyes and her hair wrapped in a headscarf, she shuffles in, her sneaker-covered feet bound in rattling leg chains.
Her name is Ayat Dababsa. She is 15 years old. In January, Ayat was arrested at a checkpoint in Hebron after Israeli soldiers discovered a kitchen knife in her school bag. She had no history of violence or trouble, and did not injure, or threaten, anyone. But interrogators took her into custody and hours later -- outside the presence of a parent or lawyer -- she signed a confession stating she had planned to use the knife to kill an Israeli soldier. The confession was written in Hebrew, a language she doesn't read.
Since then, she has been held without bail. If convicted, the ninth-grader will likely receive a prison sentence of five years or longer. To Israeli authorities, Ayat's case typifies a generation of Palestinian youth more radical than their parents, less optimistic about chances for peace, and more ready to use force to achieve a Palestinian state. Since violence broke out in 2000, children as young as 11 have helped fill the ranks of Palestinian militant groups, throwing stones and Molotov cocktails, transporting explosives and weapons, and carrying out suicide bombings, according to a recent report by Israel's Shin Bet security service.
But to human rights organizations, Ayat is one of an alarming number of Palestinian youths being jailed under a largely concealed military justice system. During the last seven years of violence in the Middle East, Israel has put more than 5,000 Palestinian children behind bars, human rights groups and Palestinian officials estimate.
Little is known about these young prisoners. Israeli military, security and prison officials could not provide figures on the number of Palestinians younger than age 18 who have been detained since 2000. Nor would they allow visits with those behind bars. Advocacy groups and Palestinian officials acknowledge that their estimates of Palestinian child detainees are often incomplete, and they complain that access to court records and hearings is severely limited.
Still, international and Israeli human rights groups -- such as Defense for Children International, Machsom Watch and Yesh Din -- have grown deeply concerned by what they have observed of Israel's system of justice for Palestinian juveniles, a system that they say often denies minors their most basic rights.
Juveniles are protected by international agreements -- of which Israel is a signatory -- according them the rights of due process, protection from torture and mistreatment, and timely access to legal counsel. Detention is considered a punishment of last resort.
But the Israeli military justice system -- where only Palestinians are tried -- impedes meetings between young defendants and their families and attorneys, keeps minors behind bars for excessive periods, and routinely denies them bail, according to recent studies by Israeli and international human rights groups.
Palestinian juveniles facing charges in Israel's military courts -- unlike juveniles in most of the developed world, including the U.S. and Israel -- are handled by judges, police and probation officers with no training in juvenile justice. From arrest to sentencing to often lengthy prison terms, minors are effectively treated as adults, in violation of such agreements as the U.N. Convention on the Rights of the Child and the Geneva Conventions, critics say.
In fact, in the military court, a Palestinian child is even defined differently. The court considers any Palestinian 16 or older an adult -- a departure from the international standard of 18 that Israel applies to its own citizens -- subjecting them to more severe sentences. Those under 16 can be eligible for lighter sentences, the only concession the system accords minors.
Israel, however, says these international laws don't apply in the occupied territories.
Michael Sfard, an Israeli human rights attorney, says the system's treatment of minors amounts to a "gross violation of the rights of the child" as outlined by international conventions of the United Nations. The fact that an accused is a minor is seldom mentioned in these courts, he says. "These children are being tried as adults, for all practical purposes."
Israeli military prosecutors argue that Ayat's confession is enough for the judge to find her guilty. The attorneys defending Ayat, meanwhile, believe she had no intention of harming anyone when she carried a knife to a checkpoint, but likely got herself arrested on purpose to escape stresses at home -- a common practice among young Palestinian girls, defense attorneys say.
Guilty or not, critics say, a 15-year-old like Ayat should have the same rights and privileges Israeli civilian courts offer Israeli youths -- who are protected during police investigations, tried in juvenile courts and provided rehabilitation programs.
"She is perceived as a threat to the security of the state of Israel -- she is not seen as a juvenile who may have her own problems," says Rasha Shammas, an advocacy officer for child prisoners for Defense for Children International, an independent human rights organization that defends 60 percent of the juvenile cases brought by the Israeli military.
"Put yourself in my situation," says Mohammad Dababsa, Ayat's father, who sat in the rear of the courtroom, forbidden under court rules to speak to or approach his daughter. "You see your daughter who you miss and love. She is cuffed on her hands and feet, and soldiers are guarding her, and you can't even talk to her."

U.S. Sanctions Force World Bank to Halt Some Iran Aid

WASHINGTON, Nov. 3 — The World Bank, newly caught up in the Bush administration’s campaign against Iran, has had to suspend payments for earthquake relief, sanitation and other projects there in response to new American sanctions on leading Iranian banks, World Bank officials say.
Only $5.4 million in payments has been suspended for four projects, involving earthquake relief, water and sanitation, environment management and urban housing, the officials said, and they do not expect the suspensions to be permanent.
But the bank has no plan to resume payments because it is having trouble finding banks in Iran to handle them now that the United States has barred dealing with four of Iran’s largest banks, accusing them of involvement in terrorism, or nuclear or missile programs.
“At this point, the World Bank is looking for alternate ways to support these projects,” said a bank official, who spoke on condition of anonymity. “It is unknown how difficult that might be. It is not that easy to find alternatives. We have no answer on how or when at this point.”
American officials said they hoped that the decision by the World Bank would increase pressure on Iran, not necessarily by stopping humanitarian projects but by dramatizing the country’s economic isolation in light of its refusal to suspend uranium enrichment and negotiate with the West over its nuclear program.
The World Bank step, while small, illustrates the extraordinary reach of American sanctions, even though they were imposed unilaterally after the United States was stymied in its recent efforts to get the United Nations Security Council to approve wider penalties.
The payments for the World Bank projects have all gone through Bank Melli, one of Iran’s largest banks, but Bank Melli was accused last month by the United States of being involved in nuclear proliferation and terrorism. Also listed were two other institutions, Bank Mellat and Bank Saderat. Bank Saderat had already been listed by United States as being involved in financing terrorism.
Some Congressional critics of the administration’s Iran policies have called on the United States to block World Bank aid programs for Iran altogether. The World Bank has nine active projects in Iran and, by last year, had financed 48 operations worth about $3.4 billion, according to the bank’s Web site.
The effect of the United States’ listing four major Iranian banks is that no American bank is allowed to facilitate any dollar-based transaction between them and any other bank in the world.
The Security Council has adopted two resolutions, one last year and another this year, calling on a freeze of assets in Iran deemed to be linked to its nuclear and ballistic missile programs. The aim of the resolutions is to get Iran to suspend its uranium enrichment activities, which Western experts say are part of a secret program to make a nuclear bomb.
Only one Iranian bank, Bank Sepah, has been identified by the Security Council as involved in nuclear and ballistic missile programs. According to information circulating among members of the Security Council, the bank has all but ceased to function.
Bank Saderat, Bank Melli and Bank Mellat have been listed only by the United States. But Western diplomats, citing official information circulating in Europe and the United States, say that most major banks in Europe have ceased working or are winding down their business with them.
In addition, the diplomats said the Dutch, French, Italian and German governments had begun reducing their state credits promoting trade with Iran. The Bush administration, however, is pressing them to do more.
Administration officials say they have pressed more than 40 banks worldwide to stop doing business with Iran, and most have taken at least some steps. But banks in the Persian Gulf, China and other parts of Asia have continued, and in some cases have filled the gap left by the absence of Western banks. World Bank officials could not say whether the bank would turn to these institutions to help ease payments for the projects in Iran.

Credit Risk: Who's Going To Go Bankrupt?

One could say the business of bankruptcy is booming, with the bankruptcy reform bill of a couple years back, the current mortgage meltdown, and the periodic use of the word recession by economic pundits.

Amid all of the talk about credit woes, two major brands with big-time penetration among financial services firms, Visa and Experian, are hoping to expand upon their already considerable inroads by teaming up to develop credit risk management products and services. The alliance intends to produce a series of jointly developed products to help financial institutions reduce credit-related losses. "We'll have a combination of a broader level of consumer credit information, as well as spending characteristics," says Nancy Hilgers, vp of processing on emerging products for Visa.
Credit risk management has always been a tough function for financial institutions, but perhaps never more so than in the current environment. Driven by adjustable rate mortgages that were extended to high-end subprime borrowers over the past couple of years, an increasing percentage of the population faces bankruptcy risks as the rates on these mortgages goes up rapidly.
For example, the Mortgage Bankers Association reports that mortgage delinquencies were at 5.12 percent at the end of the second quarter, and $14.82 percent for subprime mortgages-the highest levels in five years. And that's just one financial product. Rising credit card debt also endangers both consumers and institutions, making the market ripe for products that can assess an institution's consumer accounts and search for potential problems.
The first product that will come out of the Visa/Experian partnership, BankruptcyPredict, aims to reduce losses by identifying consumers in financial distress and predicting bankruptcies up to two years in advance. By using transaction data and credit file information from Experian, the product delivers credit risk scores to financial institutions. The institutions then consider that score and other risk information when making decisions on when to offer financial education or other actions that may help cardholders recover from financial distress. "This gives account managers a predictive tool and it allows financial institutions to make effective account management choices," says Steven Wagner, an svp at Experian.
The product also uses consumer credit and transaction activity across multiple financial account types. By including many forms of payment cards and other loans or credit products, such as mortgages and lines of credit, financial institutions will have access to a broader range of consumer debt relationships when making account management decisions. It will be available daily, weekly, monthly or quarterly, based on the needs of the institution.
BankruptcyPredict, which will be a subscription service commercially available from both Experian and Visa in early 2008, will have access to a large vault of data from both firms. There are more than 521 million Visa-branded cards issued by more than 13,000 financial institutions generating about $1.8 trillion in the past year.

Mobile Banking 2.0: Was There a First Wave?

The intense focus on mobile banking is creating a lot of excitement in the marketplace, and its prospects bode well for the future, though the prevailing notion that the industry is facing mobile banking 2.0 is a bit of an overstatement. At last look, 1.0 never registered, but who's counting?

While the benefits of mobile banking are clear, there are some issues to contend with before industry players can expect a groundswell of movement on the consumer front. A recent report fromAite Group argues that security vulnerabilities will be a major issue, but that institutions can and should deal with this so that the m-banking movement can proceed.
While wireless networks are now capable of delivering broadband speed over handsets, Aite Group research suggests that consumers may not yet be ready to have financial information transmitted over cell phones. The desire for mobile banking is one thing, security concerns another. Therein lies the challenge with consumers.
The report, called "Mobile Banking Security: The Black Cloud Attached to the Silver Lining," contends that the same types of security attacks that have affected the online world will find their way to the mobile one.
Aite senior analyst Nick Holland maintains that lack of end-user education about threats to mobile devices, the millions of transaction-enabled handsets and the global reach of the mobile Internet are a virtual guarantee of criminal activity.
This possibility is inevitable. But the betting person in this editor in chief, figuratively speaking, says that the FaceBook generation won't care. If you spend any time perusing the MySpace and FaceBook sites, it's clear that concerns about privacy and security aren't top of mind with the "I Am" generation, New York magazine's description for a generation of young people who share everything-journal entries on heartache, financial information, business plans, photos, personal facts. This is a crowd that cares less about perceived risk than any generation before it-good news for those looking to expand mobile financial services.
With these consumers in mind, Holland argues that "banks must not shun offering mobile transaction services. The end user will become savvy with time, and the channel will eventually develop mechanisms to further aid the customer. The key is for banks to get started sooner than later, in order to accelerate the learning curve and lessen exposure to mobile fraud when it does occur."

Fed's Fisher: energy, food prices risk inflation

WASHINGTON (Reuters) - The U.S. economy remains healthy despite the housing crisis but inflation could be pushed up by food and energy prices, a top Federal Reserve policy-maker said in on Wednesday.

"I find that there is greater symmetry of risk between growth and inflation than is commonly surmised," Dallas Federal Reserve Bank President Richard Fisher said in a speech prepared for delivery to an Australian economists group in Sydney. A text was provided via E-mail.
"Our concern about inflation at the Dallas Fed stems from two more pervasive sources -- food and energy, where we foresee a risk of a more pernicious pass-through effect than we saw in the recent price increases of underlying commodities," he said.
Oil prices have pushed toward $100 a barrel in recent days but retreated on Tuesday, and Fisher said food prices as gauged by the U.S. consumer price index were up 5 percent through September.
Core inflation, which strips out food and energy prices on the grounds that these are volatile components of the index, is running in the 2 percent range. But Fisher said he was uncomfortable about ignoring the trend in energy and food prices and noted that it was rare for core and food inflation to diverge for very long.
"A spread of the current magnitude between food price inflation and the core index occurred on several occasions between 1957 and 1980. But we have not seen it in a quarter century," he said.
Fisher, a voting member of the Fed's interest-rate setting committee next year, also voiced support for a shift in Fed rhetoric seen as limiting the scope for further rate cuts.
"While the Federal Reserve remains ready to act if needed ... I believe it was appropriate for the FOMC (Federal Open Market Committee) to focus squarely on the economy at its October 30 and 31 meeting," he said.
The Fed lowered interest rates by a quarter-percentage point to 4.5 percent on October 31 and said that upside risks to inflation roughly balanced downside risks to growth. The language was seen as a signal that the Fed was reluctant to cut rates again to shelter the economy from a housing slowdown.
Investors have clamored for interest rate relief from a credit crunch sparked in August by problems in the U.S. subprime mortgage market for borrowers with risky credit. But Fisher said the fallout from strains in the credit market appeared contained.
"Beyond the troubles in financial markets, we have had an otherwise healthy economy in the U.S., with, thus far, the only other significant signs of weakening coming from continual corrections in the housing market," he said.
He acknowledged there may be more write-offs linked to subprime mortgage investments by financial institutions, but remained upbeat overall. "I suspect some real 'cow patties' remain in some prominent institutional punch-bowls in the U.S. and abroad, and they will undoubtedly come to light before too long." "I would submit, however, that we are on our way back to markets priced by reason rather than fantasy and that systemic risk has been lessened substantially," he said.

Banks tighten lending standards

WASHINGTON (AP) -- More banks have tightened lending standards on home mortgages, the Federal Reserve said Monday in the latest sign of fallout from a spreading credit crisis.

The Fed said that many banks reported tighter standards for traditional prime mortgages, nontraditional mortgages such as "interest only" loans and for subprime mortgages, those offered to borrowers with weak credit histories.
The Fed survey, which was conducted in early October, found that 41 percent of banks responding said that they had tightened loan standards either "considerably" or "somewhat" for prime residential mortgages, those offered to borrowers with strong credit histories.
The 41 percent figure was up from about 15 percent of banks who said they were tightening standards on prime mortgages in the last survey in July. The Fed's survey covered 49 banks, including many of the nation's largest. These banks account for about 75 percent of all residential real estate loans on the books of commercial banks.
The Fed's quarterly survey of senior loan officers found that 60 percent of the banks that offered nontraditional mortgages had tightened lending standards, up from 40 percent in the July survey. The Fed's definition of nontraditional mortgages covers such products as interest-only loans and "Alt-A" mortgages that require limited verification of income.
The survey found that 56 percent of banks still offering subprime mortgages had tightened standards in the latest survey. Furthermore, the report said that 40 of the 49 banks surveyed said they are no longer offering subprime mortgages. Of the nine banks that are still providing such loans, five said they had tightened standards while four said lending standards were basically unchanged.
Mortgage reform bill picks up key backing The current credit crisis began with rising defaults in the market for subprime loans. Those defaults have already cost billions of dollars of losses and are expected to exact an even higher toll as an estimated 2 million subprime mortgages reset to sharply higher rates through the end of 2008.
Financial markets have been roiled since August with worries about how much bigger the losses will become. Citigroup (Charts, Fortune 500), the nation's largest bank, announced on Sunday the departure of Charles Prince, its chairman and chief executive officer, and estimated that it would take additional losses of $8 billion to $11 billion. Those losses would come on top of $6.5 billion in credit-related losses in the third quarter.
The Fed survey found that banks were tightening lending standards for most types of loans including commercial loans to businesses. The survey said that about one-fourth of those responding said they had tightened standards for various types of consumer loans other than credit cards.
About one-fourth of the banks surveyed said that consumer loan demand had fallen since July.

Head of Atlanta Federal Reserve Bank says economy will weaken in fourth quarter

The broad U.S. economy has so far seen limited spillover from the widespread problems in the housing market, but economic performance will weaken in the fourth quarter and likely remain weak through the first half of 2008, Dennis Lockhart, head of the Federal Reserve Bank in Atlanta, said during a speech in Huntsville Wednesday.

Lockhart, who serves as CEO and president of the Federal Reserve Bank, is currently a non-voting member of the interest rate-setting Fed Open Market Committee.
Lockhart spoke to the Huntsville Rotary Club at the Von Braun Center said he thinks the economy will slow over the coming quarters and return to growth in later in 2008, but he offered that forecast with a qualifier.
"If I were to use one word to characterize our current economic circumstances, that word would be 'uncertain,'" Lockhart said. "Much of this uncertainty relates to the potential depth, length and impact of the housing downturn and potential flow-back to Main Street from the turbulence we have seen on Wall Street."
Lockhart said his fourth-quarter forecast for U.S. Gross Domestic Product is similar to other commercial forecasts which estimate GDP at around 2 percent. For the third quarter, U.S. GDP grew at an annual rate of 4 percent.

Banks count on enticements to lure customers back

MINNEAPOLIS _ Most businesses try to entice customers to empty their pockets. A growing number of banks have a formula for getting every last cent _ installing self-service coin-counting machines in the lobby.

But the popular self-service coin counters are not the only way banks are working to lure customers back from the Internet and phone banking to bricks and mortar. The bait includes espresso bars, areas for watching TV and employees who greet customers at the door and offer individual service in banks without teller windows.
The trend marks an about-face from the direction many banks headed in the '90s, an era of mergers when immediate profits took precedence over long-term growth and many banks decided only one in five of their customers were big enough borrowers or savers to improve their bottom line. The unlucky majority were pushed to do much of their banking on the Internet or by phone, with fees serving as the club to discourage people from other options.
"Banks felt they needed to get more profitable by concentrating on their profitable customers. It didn't bother them if their less profitable customers went away," said Ben Crabtree, a securities analyst at the brokerage firm Stifel Nicolaus.
Profits grew but revenue growth stalled for many banks that followed the strategy.
"There's a general sense in the industry that the service quality needs to go up," Crabtree said. "The whole model of cutting costs, becoming more efficient and concentrating on the most profitable customers has been negative for growth."
Wayzata, Minn.-based TCF banks has been one of the leaders of the move back toward encouraging customers to come back to branches, installing free coin-counting machines, extending branch hours and offering no-cost checking, Crabtree said.
Community banks and credit unions are following the same pattern. So are some giants, like Wells Fargo, which has added self-service coin-counting machines at many of its branches.
The idea is to get more face time with customers.
"Banking remains a very competitive business," said Joseph Morford, banking analyst at RBC Capital Markets, a brokerage firm in San Francisco. "It's a whole lot easier to do more business with your existing customers than to try to recruit new customers."
And the more business that customers do with a bank, he explained, the stronger their loyalty.
"The bigger the share of their wallet, the more likely they are to stay with you a long time," Morford said. Wells Fargo has been one of the best at embracing that concept. "A good percentage of their revenue has come from doing (more) business with the customers they already have," he said.
When Lake Community Bank opened a branch in Long Lake, Minn., last December, the list of amenities included a coffee bar and stadium seating with small desks that allow customers to fill out paperwork while watching a nearby TV.
"Customers really seem to like it," said Michael Byrne, the bank's president. With investors cruising the Web and Sunday papers shopping for the best rates on savings accounts and CDs, winning customer loyalty has become a challenge, he said. The new attention to its lobbies _ including bankers who deal with customers face to face with no teller windows between them _ has paid off for Lake Community.
"We've gotten about $15 million in new deposits and we've been there short of a year," Byrne said. Many new branches take two or three years to match those results, he said. Coin-counting machines seem to be a particularly big hit with walk-in customers. Park Midway Bank in St. Paul spent $18,000 on a coin-counting machine for a newly rebuilt branch, locating it not far from the bank's espresso machine.
The bank hopes to build traffic not only from current customers but also from potential clients who remain years away from being able to open an adult account. "One of the reasons we put it in is that we have a children's savings club," said Connie Powell, senior vice resident/operations. "Part of it is to encourage them to bring their money in." Another advantage of the investment is to spare bank employees the time-consuming, dirty job of handling coins that arrive daily in shoeboxes, jars and buckets.
"When I told the tellers we're going to bring it onboard, they were ecstatic," Powell said. For part of the last decade, supermarkets took advantage of banks' disinterest by installing self-service _ but not free _ coin counters as a way to get customers in the door. The popularity of those machines, which led to more than 300 million transactions by Coinstar counters, was used to sell banks on the strategy. Makers of the self-service coin counters argue that their products lure customers back to bank lobbies, where tellers can be trained to use the opportunity to pitch other products rather than simply take deposits.
"It gives the (branch bank) staff time to do other things, like selling other services," said Wayne Stellmach, manager of marketing communications at Cummins-Allison, a Mount Prospect, Ill., maker of self-service coin counters. Cummins-Allison doesn't reveal unit sales, but Coinstar, a rival maker of self-service coin counters, estimates the number in banks exceeds 2,000. The largest coin-counting companies claim double-digit growth rates in bank installations. But they've got a long way to catch up to retail centers, where Coinstar puts industry-wide units at about 15,000.
Coin-tallying machines can count as many as 600 coins per minute, with displays that show a running tally as the coins stream in. The more costly models, priced as high as $30,000, allow customers to put their money in a checking or savings account with the swipe of a debit card and entry of a personal ID number. And the coins can add up. Coinstar tells the tale of gas-station owner Edmond Knowles, who two years ago hauled a collection of 4.5 tons of pennies to a counting machine at an Alabama bank. The pennies, collected over 43 years, totaled $13,084.59 _ or more than 1.3 million coins.

U.S. stocks slide as Citi-inspired credit jitters surface

NEW YORK (MarketWatch) -- Wall Street stocks lost ground Monday after Citigroup Inc. amplified worries about the extent of the credit crisis by saying it might have to write off $11 billion more in losses.

"What were once just concerns about credit have graduated to a full-blown panic," said Kevin Giddis, managing director, fixed income, Morgan Keegan & Co. Down more than 100 points early on, the Dow Jones Industrial Average ($INDU) recently was down 38.4 points at 13,556.7, with 19 of its 30 components lower.
Citigroup (C) led the Dow's declines, its stock slumping 4.5%, after it stirred investor discontent with its announcement that Charles Prince would step down as chairman and chief executive of the largest U.S. bank, which is also looking at writing off up to $11 billion more of the $55 billion in subprime-related securities it holds. .
Stocks pared their losses some after the Institute for Supply Management reported nonmanufacturing sectors of the U.S. economy in October grew more than economists expected, with the ISM index rising to 55.8% from 54.8% in September.
The ISM data was "a little bit better than estimates and helps a little bit," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank. "Industrials bounced the most, and some of the rails are up," said Fitzpatrick, pointing to United Technologies Corp. (UTX) , which was recently up 0.8%.
The S&P 500 ($SPX) fell 4.52 points to 1,505.13, while the Nasdaq Composite shed 6.38 points to 2,804.00. Volume on the New York Stock Exchange came to 448 million, and declining stocks outran advancing issues about 3 to 1. On the Nasdaq, 646 million shares exchanged hands, and decliners topped advancers nearly 2 to 1.

Financials fallout
In the wake of Citigroup's disclosures and top-management shakeup, the shares of rivals Merrill Lynch & Co. (MER) , Bear Stearns Cos. (BSC) , Credit Suisse Group (CS) and Barclays (BCS) were all the subject of brokerage downgrades.
Other developments on the corporate front included Dell Inc.'s disclosure that the computer manufacturer (DELL) had inked an agreement to acquire storage supplier EqualLogic for about $1.4 billion in cash. Ford Motor Co. (F) and the United Auto Workers reached a tentative contract agreement, including a memorandum of understanding to set up an independent health-care trust for retired workers.
And shares of PetroChina Co. (PTR) more than doubled in their Shanghai debut, giving the oil giant a $1 trillion market capitalization and easily passing Exxon Mobil Corp. (XOM) as the world's largest company.
In commodities trading on the New York Mercantile Exchange, crude-oil futures fell $1.02 to stand $94.92 a barrel, while gold futures shed 50 cents to $808 an ounce. Treasurys were mixed, with the benchmark 10-year note off 1/32 to 103 10/32, its yield ($TNX) at 4.329%.
European shares traded in the red with credit-market jitters back in the news as a private-equity fund withdrew its offer to buy the U.K. supermarket chain J Sainsbury. And overnight, Hong Kong stocks skidded after comments by China's premier raised concerns that a plan to let Chinese investors buy Hong Kong stocks could face delays.

Metavante begins trading on New York Stock Exchange

Nov 2 - Metavante Technologies, Inc. has completed its spin-off from Marshall & Ilsley Corporation (NYSE:MI).

Shares of common stock for Metavante Technologies, Inc. will begin trading today on the New York Stock Exchange under the symbol “MV.” Metavante Corporation is the principal operating subsidiary of Metavante Technologies, Inc.
Metavante President and Chief Executive Officer Frank R. Martire will ring The Opening Bell at the NYSE to mark the occasion. Other members of the Metavante executive team, board members and Metavante employees will join him.
“Today marks the beginning of a new chapter in the 43-year history of Metavante Corporation,” said Martire. “As we take this first step as an independent publicly traded company, we reaffirm that our commitment to delivering leading banking and payment technologies to our financial institution and corporate clients worldwide will not waver. We expect to continue to grow our company to support our clients while delivering the performance that our shareholders deserve. Listing our stock on the world’s largest equities marketplace will help position Metavante for growth both domestically and globally – it’s a proud day for our company and all our employees.”
About Metavante
Metavante Technologies, Inc. (NYSE:MV) is the parent company of Metavante Corporation. Metavante Corporation delivers banking and payments technologies to over 8,600 financial services firms and businesses worldwide. Metavante products and services drive account processing for deposit, loan and trust systems, image-based and conventional check processing, electronic funds transfer, consumer healthcare payments, electronic presentment and payment, and business transformation services. Metavante (http://www.metavante.com/) is headquartered in Milwaukee.

Use Discover Card for Holiday Shopping, Get $20 Gift Card

Discover Card is offering one of the most compelling promotions we’ve seen recently, offering a $20 Discover gift card whenever you use your Discover Card to make $200 in purchases at participating malls.

The promotion runs from November 1 through December 31. The offer is compelling not only for the reward itself—an up-to-10% bonus based on your purchases—but also for the fact that you can do it up to 5 times ($1000 in spending equals $100 in gift cards), and the redemption is easy. You just take your receipts to the mall’s customer service kiosk (or Discover kiosk in some malls), and they hand you the gift card.
The promotion is also fairly wide-ranging, with over 160 malls participating, although some states have many more options than others, and 11 states have none at all.

Tropical Storm Watch Issued For Parts Of Southeastern Florida

SANTO DOMINGO, Dominican Republic -- Tropical Storm Noel triggered mudslides and floods in the Dominican Republic and Haiti, pushing the death toll to 60 on Wednesday and forcing some parents to choose which of their children to save from the surging waters.

The storm lurched out of Cuba and stalled over the ocean, but was projected to skirt Florida and batter the Bahamas, the U.S. ational Hurricane Center said. A tropical storm watch was issued for parts of southeast Florida. With rain still falling two days after the storm hit, rescuers were struggling to reach communities cut off by flooding on the island of Hispaniola. As they did, they found a rising toll of death and damage -- at least 41 dead in the Dominican Republic, 18 in Haiti and one in Jamaica.
Floods inundated the small town of Bonao, forcing Charo Vidal into a tree late Tuesday. She watched her neighbor struggle to do the same nearby, clutching infant twins while she climbed as the waters swept an older daughter away. "She couldn't take care of all three," Vidal said. "That is something very significant, to have a child snatched from your hands and you cannot do anything for them." A man who carried his 6-year-old son on his back also lost him to the flood, Vidal said.
"The child said, 'Daddy, I'm slipping. Daddy, I'm slipping,"' Vidal said. "A lot of people had to choose between losing one child and losing another one," said Liony Batista, a project manager for Food for the Poor, an international Christian relief organization. Batista said 200 homes were destroyed in Bonao alone. At least 50,500 Dominicans fled their homes, 12,000 of which were damaged, said Luis Antonio Luna, head of the Emergencies Commission. Flooding also forced the evacuation of about 1,000 prisoners from a prison north of the Dominican capital.
Luna said officials were trying to reach dozens of isolated communities, but bad weather, a lack of helicopters and damage to bridges and highways slowed rescue efforts. Monica Segura, 28, and her family abandoned their riverside home Tuesday when water rushed in. They fled with some 200 other people to a sports complex in the Dominican town of Barahona. "I don't even know how I'm alive," she said. "I lost everything. The only thing that I could save was the clothes I was wearing."
In neighboring Haiti, floods rushed through houses in the Cite Soleil slum, carrying away a 3-year-old boy as relatives frantically shouted for help and tried unsuccessfully to reach him through the muddy, debris-filled water. Two people were killed when their house collapsed in a mudslide in the hillside suburb of Petionville, and at least three others died in Jacmel, where officials said 150 people were trapped on rooftops awaiting aid.
Some Haitian shelters were overwhelmed by evacuees. One in Cite Soleil, guarded by U.N. troops, had one blanket for every two people. Noel is the deadliest Caribbean storm since Tropical Storm Jeanne hit Haiti in 2004, killing 1,500 people and triggering widespread flooding and mudslides before it became a hurricane. An additional 900 people were reported missing and presumed dead.
This year's deadliest hurricane, Category 5 Felix, killed at least 101 people in September, mostly along the Caribbean coast of Nicaragua and Honduras. At 5 p.m. Eastern, Noel's center was about 240 miles southeast of Miami. The storm was nearly stationary, but was expected to turn to the north away from Florida later in the day and speed away from the U.S. over the Bahamas. It had top sustained winds near 50 miles per hour, up from 40 miles per hour earlier in the day.
Eastern Cuba got soaked but apparently escaped major damage. It also was raining in the Bahamas, where authorities closed most government offices and lines formed at grocery stores and gas stations in Nassau, the capital.
Rough surf warnings were in effect for much of South Florida. Waves were pounding beaches in the Miami area, and residents of a waterfront condominium in South Palm Beach were urged to evacuate after the surf destroyed a retaining wall damaged by another storm. Forecasters said the rain would likely miss drought-stricken Georgia, Alabama and other southeastern states.

Sirf Technology Holdings Inc. may have swung to a third-quarter loss

SAN FRANCISCO (MarketWatch) -- Sirf Technology Holdings Inc. may have swung to a third-quarter loss, but the GPS chipmaker's results were good enough for investors to throw enough of their weight behind the company's stock to send the shares up almost 28% by the time the market closed Wednesday.


Sirf shares rose $6.49 to close at $29.75 after the company said late Tuesday that it lost $16.1 million, or 28 cents a share, on $91.2 million in revenue for its third quarter. Normally, such a loss would send a company's shares into the red, especially since last year, Sirf earned $2.6 million, or 5 cents a share, on sales of $63.7 million.

But since Sirf's loss was caused mainly by a series of one-time charges related to items such as research and development and stock options, investors were willing to give the company a free pass. Excluding those items, Sirf would have earned $17.6 million, or 29 cents a share, which topped the consensus estimates of analysts surveyed by Thomson Financial, who forecast a profit of 22 cents a share on $85.7 million in revenue

Sirf said its results were helped by growth in its automotive business and particularly in portable navigation devices. Analyst Brian Modoff, of Deutsche Bank, said that while Sirf wouldn't comment on its share of the automotive market, "we believe their share has stabilized and may have grown in the quarter." Modoff believes that Sirf's shipments to GPS customer Tom Tom N.V. should help Sirf solidify its position in the market for car-based GPS systems.

Modoff holds a buy rating and raised his price target on Sirf's stock to $35 a share from $30.
Jeffries & Co. analyst Adam Benjamin also lifted his price target on Sirf's stock to $32 from $28 a share and left his buy rating on the stock intact.
Benjamin said that he believes Sirf's strength in the automotive market will help it offset some delays in the company's wireless business, which may experience some delays in deals over the coming months. However, Benjamin said that wireless sales should improve with deals involving Research In Motion Ltd. and Motorola Inc. adding to Sirf's wireless revenue.

Deutsche Bank Earnings Top Expectations

FRANKFURT, nov. 1st— Deutsche Bank avoided the worst of the subprime quagmire that ensnared some other big banks, posting a better-than-expected third-quarter profit Wednesday despite $3.17 billion in write-downs stemming from the loan crisis.

The chief executive, Josef Ackermann, said Germany’s biggest bank had made a good start to the fourth quarter and the bank could still meet its financial goals, and the company’s stock climbed 3.7 percent, to 92.05 euros. Deutsche Bank earned 1.62 billion euros ($2.3 billion), up from 1.24 billion euros in the period a year earlier, and ahead of the 1.4 billion euros ($2 billion) Deutsche Bank had forecast.
Deutsche Bank said net revenue fell 20 percent, to 5.1 billion euros ($7.35 billion), below the 5.56 billion euros ($8 billion) forecast by analysts.
That decline included a 1.56 billion euros ($2.25 billion) write-down of assets on its trading books, including 730 million euros ($1.05 billion) from proprietary trading, the chief financial officer, Anthony di Iorio, said.
The bank also reported other losses, particularly at its corporate and investment banking unit, which was hit by the write-downs, posting a pretax loss of 179 million euros ($257.9 million). Still, the loss was less than the 250 million euros to 350 million euros ($360.2 million to $504.2 million) the bank had originally forecast.
Deutsche Bank’s lending was at a negative 120 million euros ($172.9 million), reflecting 603 million euros ($868.7 million) in write-downs on leveraged loans and loan commitments.
That was offset by revenue from the bank’s role as a merger-and-acquisition adviser, which totaled 269 million euros ($387.6 million) in the quarter, its best ever.
The bank’s asset and wealth management pretax profit rose 45 percent, and its private and business client unit posted a 15 percent gain in pretax profit. Third-quarter profit was also helped by 182 million euros ($262 million) in tax gains and 629 million euros ($906 million) in capital gains.
“The third quarter of 2007 was a period of exceptional turbulence in financial markets,” Mr. Ackermann said in a statement, adding that those challenges still exist. But if markets function at normal levels, he said, “we reaffirm our commitment to delivering on our 2008 financial targets.”