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Main / What We're Reading Weblog

As discussed in my earlier blog on patents, the courts and Patent & Trademark Office have been struggling with how to define whether something that is a business method is patentable material. Some feel that business methods are intangible and should not be eligible for patents, unlike a traditional hardware-based patent. Many of the patent attorneys I've spoke with say that the U.S. patent system wasn't designed to keep up with new technologies, such as software and business processes, and that is why we are seeing so many problems around these kinds of patents.

If you're a risk professional, you're in luck. According to the fourth annual Professional Compensation Survey by risk management executive search firm Risk Talent Associates (RTA), today's risk professionals are taking home heftier paychecks. The study looked primarily at risk pros in the capital markets space and found that average total compensation increased by 7 percent in 2007 over 2006, with an 8 percent compound average growth rate (CAGR) since 2003. The survey notes that compensation for managers specializing in market risk or credit risk is almost equal, and only slightly less than compensation for those focused on enterprise risk.

In my usual morning perusal of news items, I ran across this post from The Bellwether Daily, a blog that proclaims itself the source of "Midwest news they seem to lose," "they" being the mainstream news media. In it, blogger Bill Sloat describes a lawsuit Dayton, Ohio-based NCR has filed against a former employee, now at Hewlett-Packard, around trade secrets. NCR maintains that the ex-vice president of the company who left NCR for HP intends to leak information pertaining to the ATM giant's financial services practice and other key areas.

With all the talk of "green" this and "green" that, it's interesting when a figures from a survey such as the one by InfoPrint Solutions Company, a joint venture between IBM and Ricoh, show that paper is still "in" with consumers. Granted, the report might be a little self-serving. InfoPrint is, after all, a printer and software solutions company. However, I still think the numbers are worth a look.

Sometimes I like to share with readers some low-tech solutions to potential problems at banks. Take vaults, for example. What happens if someone—employee or customer—gets locked inside? Sure, there are procedures at banks to ensure something like that doesn't happen. But there is still that possibility. Well, Diebold is now offering "vault survival kits" for financial institutions. The kits are one of those "just in case" things that may come in handy one day.

It looks like Dutch banking giant ING will be joining the legions of smaller (and in some cases, somewhat shady) financial institutions in leaving the virtual world of Second Life. However, unlike some of its counterparts in the virtual world, the move is not the result of financial insolvency. Rather, ING says the decision was driven by its desire to better concentrate on its acquisition of Postbank.

I recently ran into this interesting item while perusing my usual news sites. In short, the Florida Bankers Association wants to encourage its members to institute a policy where customers cannot wear sunglasses, hats or hoods when entering a branch for service. This is the FBA's latest effort in helping member banks ramp up security at the "store" level after a spike in bank robberies in the state.

A little while back, I blogged about the financial services community in the virtual world of Second Life, the brainchild of Linden Lab. These banks and brokers deal in Linden Dollars, which is the money of Second Life. According to wikipedia, although the exchange rate between real dollars and Lindens does fluctuate, there are approximately 270 Lindens to one U.S. dollar.

Two new reports, both issued within the last week, detail methods that financial institutions could employ to lessen their environmental impact. While many banks are starting to take steps to become greener, lack of regulatory guidance leave many institutions unsure of what paths to pursue and where to start. TowerGroup and Gartner offer some advice for those looking for some direction.

Lately we've been hearing more news about "green" banking initiatives than you can shake a stick at. Most of what has come across my desk have been either panicked warnings and dire predictions about what will happen with corporations don't become more environmentally friendly, or more concrete news, such as Sovereign Bank's efforts to move customers to e-statements or NACHA's announcement that it is forming a "green coalition."

By Maria Bruno-Britz, Bank Systems & Technology

Some people just don’t give up. Everyone knows just how dangerous things are these days in terms of cybercrime. If you’re a bank, you’re target numero uno for determined hackers.

"Bank of America, J. P. Morgan Chase, Fidelity Investments and hundreds of others are hoping to capitalize on the latest wrinkle in medical care paid by consumers: health savings accounts ..."

Health Savings Accounts Attract Wall St.
New York Times (registration required)
January 27, 2006

HSAs are slated to be one of the key themes in the State of the Union speech.

Gee, I wonder if it will become a partisan issue.

"On the afternoon my mother died, she left work early. Her day as a computer programmer at Chase Manhattan Bank had skidded to an abrupt stop courtesy of a systemwide computer failure, and all employees got the afternoon off."

...

True, some bankers are willing to take a stand on social issues such as the potential abuse of eminent domain. But there's a real leadership gap when it comes to looking at the big picture — social and environmental sustainability in lending.

Watchdog group BANKTrack rated 39 banks on the basis of 13 categories: human rights; labour rights; indigenous people; climate and energy; dams; biodiversity; forests; fisheries; extractive industries; sustainable agriculture; chemicals; transparency and reporting by the clients; and environmental and social management systems.

The results:

The highest overall average score, achieved by ABN AMRO and HSBC Group, was a 1.31, which if translated to a letter grade is a D+.

Robert Napier, WWF-UK Chief Executive, said:

“This report shows that whilst there has been some good work done by a few of the banks to develop policies the whole sector still has a long way to go. The lack of transparent policies can not only result in over-exploitation of environmental goods such as fisheries and forests but also in increased financial risk to the banks, resulting in transactions being jeopardised.”

Search engine Google makes concessions to the Chinese government, and it makes the front pages of every business newspaper. But banks? A different (and lower) standard seems to apply.

BANKTrack press release
Banks failing environment and social standards

From the McKinsey Quarterly, a "Web exclusive, January 2006" titled:
Rethinking wholesale-banking operations (registration required)

The main ideas:
Since "no more than 10 to 15 percent of all back-office activities" support specific product lines, banks should create shared services organizations and "centers of excellence." They should also move support staff away from "high cost metropolitan locations such as New York and London." At the same time, McK also advises that "the front and back offices work together earlier in the product-development cycle — even during the initial design phase."

The footnote:

This article was adapted from the original version, published in McKinsey on IT, Number 2, Spring 2004.

If the fabled McKinsey & Co. can repurpose content from Spring '04, then so can Bank Systems & Technology! Here's the cover story and related features on outsourcing from the two-year-old-but-still-relevant March '04 issue:

Pump Up The Volume ICICI Bank achieves exponential growth at fractional cost.

Patriots: Will the Winning Streak Continue?
The JPMorgan Chase-Bank One merger has become a bellwether for IT outsourcing.

TransAtlantic Farms Out Check Images
Miami bank's courier costs melt like a snowball in South Beach

United States' Secret Weapon Revealed!
Offshore outsourcing can help banks in global competition, if they dare to use it.

CMM for Everyone
Banks should scale the CMM curve, especially when outsourcing IT.

I hope you find something of value for you in our "BS&T Classic" collection. Enjoy!

Taking a stand on last year's controversial Supreme Court ruling, Winston-Salem, N.C.-based BB&T won't lend to developers building on land taken from private citizens through the power of eminent domain.

“The idea that a citizen’s property can be taken by the government solely for private use is extremely misguided, in fact it’s just plain wrong,” said BB&T Chairman and Chief Executive Officer John Allison.

Read the AP article. (via NYTimes)

Read the release.

According to the FTC:

The major metropolitan areas with the highest per capita rates of reported identity theft were Phoenix/Mesa/Scottsdale, AZ; Las Vegas/Paradise, NV; and Riverside/San Bernardino/Ontario, CA.

The mythical conception of the American West is a place where you go to reinvent yourself, to craft a new identity. I guess some people are taking that literally.

FTC Releases Top 10 Consumer Fraud Complaint Categories: Identity Theft Again Leads the List
Read the release.

Reuters says that the FDIC intends to do a bit more investigating before hearing Wal-Mart's bid to open a bank, at the behest of a bipartisan group of pols.

Does your bank rely too much on financial modeling in risk management?
If so, you may be vulnerable to "model risk." And no, that's not the risk of being hounded by paparazzi.

For more, read the FDIC's article.

Tip of the hat to Goodwin Proctor LLP's "Financial Services Alert" newsletter.

There has been some speculation MasterCard might expand into information technology services — taking it farther away from its financial services roots.
MasterCard IPO Strategy Seen Priceless in Bailing Credit-Card Brand Out of Legal Trouble (AP)

My bet is that they start offering full-service bank operations outsourcing. With their warchest from the IPO, they could buy one or more of the major core systems vendors and lock up some real business.

One of these days I'd like to pick up the paper and read an article about how there was a crisis averted due to superior long-range planning by a government agency.

In the meantime, we get the GAO describing the inability of various government agencies to come to a consensus on who should be in charge of delivering expertise in anti-terrorist-financing to countries that need our help.

I truly hope they figure it out before FEMA gets involved.

The NY Times story:
U.S. Lacks Plan to Curb Terror Funds, Agency Says
http://nytimes.com/2005/11/29/national/nationalspecial3/29terror.html

The GAO study:
Better Strategic Planning Needed to Coordinate U.S. Efforts to Deliver Counter-Terrorism Financing Training and Technical Assistance Abroad
http://www.gao.gov/new.items/d0619.pdf

Security firm F-Secure has the details of the phishing attack on Swedish bank Nordea, as well as several other informative entries in their security blog.

Hey, chalk one up for the good guys.

http://www.finextra.com/fullstory.asp?id=14451

A small victory in the fight against credit card fraud is better than none.
Of course, this will probably only slow down the crooks, not stop them completely.
Any thoughts?

IBM's banking industry leaders Mark Greene and Rusty Wiley have been on the road talking about their vision for the industry. Now, you can take their viewpoints on the road using your portable digital audio player with their latest podcast.

I sense the emergence of a media trend...

My colleague Chris Murphy reports on the move to two-factor authentication in today's episode of the News Show.

From Greenspan's speech to the National Italian American Foundation:

Conceptual advances in pricing options and other complex financial products, along with improvements in computer and telecommunications technologies, have significantly lowered the costs of, and expanded the opportunities for, hedging risks that were not readily deflected in earlier decades. The new instruments of risk dispersal have enabled the largest and most sophisticated banks, in their credit-granting role, to divest themselves of much credit risk by passing it to institutions with far less leverage. Insurance companies, especially those in reinsurance, pension funds, and hedge funds continue to be willing, at a price, to supply credit protection.

These increasingly complex financial instruments have contributed to the development of a far more flexible, efficient, and hence resilient financial system than the one that existed just a quarter-century ago (right before Greenspan took office in 1987). After the bursting of the stock market bubble in 2000, unlike previous periods following large financial shocks, no major financial institution defaulted, and the economy held up far better than many had anticipated.

If we have attained a degree of flexibility that can mitigate most significant shocks--a proposition as yet not fully tested--the performance of the economy will be improved and the job of macroeconomic policymakers will be made much simpler.

Translation:
Chances are, the banking system has everything under control, so don't worry about my successor even if you've never heard of the person before.

Wall Street Journal article about the "rising financial peril" faced by storm victims.

Here's a New York Times story about Liberty Bank and Trust, which is trying to recover from Katrina, as well as the steady depletion of its assets as customers withdraw their savings.

Bank of America Offers Round-Up Savings Account

Source: Reuters.com

If you sign up for Bank of America's new service, every time you charge something on a debit card, they'll round up to the nearest dollar and put the loose change in a savings account. Now if they only rounded up to the nearest $100, we would have a fighting chance of increasing our savings rate to the point where we wouldn't have to borrow money from abroad to finance our profligate lifestyles.

Now if you'll excuse me, I have to book my next European vacation, make dinner reservations for tonight, and show those online punks who's the REAL king of Texas Hold' Em.

... an 1821 hurricane lifted the tide 13 feet in an hour, with the East and Hudson rivers converging over lower Manhattan as far north as Canal Street.
Hurricane in NYC Could Happen, With Subways and Wall Street Flooding and Millions Evacuating

Between terrorism and storms, I'm not sure whether to buy a bunker or build an ark.

"I had this woman on the phone telling me that I was not only a deadbeat, but a pimp, too."
- Paul Fairchild, identity theft victim

New York Times, Oct. 1, 2005
For Victims, Repairing ID Theft Can Be Grueling

Yeah, I hear that all the time.

The U.S. Department of the Treasury and the Federal Reserve Banks, as part of the Go Direct campaign, will begin a national television advertising campaign on Oct. 4 to motivate Social Security and Supplemental Security Income (SSI) recipients to switch to direct deposit. The ads will air for three to four days a week around the beginning of each month - the time when many people get their federal benefit checks in the mail. The ads will be on a variety of cable networks including CNN, Fox News, Lifetime, Game Show and several others.
http://godirect.org/

Instead of spending taxpayer dollars on an ad campaign, why not simply pay people to switch? Or if that's unfair to people who already accept direct deposit, start assessing a fee for receiving a paper check.

"Now I know Texas like I know Gandhinagar"
- Madhavi Patel, call center employee

Thanks, pardners!

Do you have a lot of loose change lying around the house?
Don't want to spend time putting it into those pesky coin sleeves?
No "Coinstar" machine at your local grocery store?

Then this service is for you. Just pack up your coins and mail them to Fayetteville, Arkansas, where they'll count the coins for you and send you a check within 7 to 10 days!

You can then use the money to buy comic books, so that you can assess the relative riskiness of underwriting life insurance policies for various superheroes.

Asked to assess the life insurance needs of five fictional characters, Americans believe superheroes Batman and Spiderman have much greater needs than cartoon parents Fred Flintstone and Marge Simpson.

Only 18 percent answered "none of the above/don't know," a category combining those who realize that fictional characters do not need life insurance with those who simply can't decide whether Batman or Marge Simpson face greater risks.

I would guess that "crimefighting" would fall outside of the policy coverage anyway, and it would be really hard for Bruce Wayne's estate to collect.

Click the link to read the release for yourself...

After Hurricane Katrina, a Bank Turns to Money Laundering
http://www.nytimes.com/2005/09/29/business/29hancock.html

"It will take up to at least half a year to reconsolidate."

—John Hairston, chief operating officer, Hancock Bank (Gulfport, Miss., $4.7 billion in assets)

The thieves spent three months tunneling under a busy city avenue in Fortaleza, about 1,500 miles northeast of Sao Paulo, to break into the Central Bank vault and steal the equivalent of $70 million in Brazilian currency, the real.

George Clooney, call your agent. There's another heist picture in the works.

The chairman of Swedish bank Svenska Handelsbanken AB will step down from his post next year to go sailing around the world, the bank said Tuesday.

Searching for acquisitions, perhaps?

Party's over, folks.

WASHINGTON, Sept. 28 - Credit card loan delinquencies reached a record high of 4.81 percent of accounts in the second quarter of this year, according to the American Bankers Association's Consumer Credit Delinquency Bulletin.

In calculating these results, ABA incorporated revised information on the first quarter delinquency rates. As a result, the credit card loan delinquency ratio for the first quarter was revised upward to 4.76 percent of accounts from the previously reported 4.03 percent.

"The last two quarters have not been pretty," said James Chessen, ABA's chief economist. "Gas prices are taking huge chunks out of wallets, leaving some individuals with little left to meet their financial obligations," he said. "With gas prices still rising, the third quarter is not likely to be any better."