Posts Tagged ‘financial ratings’
Written on November 29th, 2011 by Samanthano shouts
The stock market’s most recent rise is due to the lifting of cash access restrictions made on European banks—due to the serious decline of confidence in the European banks recession recovery.
According to an article distributed by the Associate Press, “‘The central banks of the world have resolved that there will not be a liquidity shortage,’ said David Kotok, chairman and chief investment officer of Cumberland Advisors. ‘And they have learned their lessons from 2008. They don’t want to take small steps and do anything incrementally, but make a big bold move that is credible.’” The stocks of huge American financial institutions such as Morgan Stanley, J.P. Morgan Chase, and Citigroup have gone up between 6 and 7 percent, on Tuesday. These are being seen as big gains in such a shifting economy.
Essentially, rates for loans have been lowered to a point that simply makes it much easier for banks to borrow all of the money that they wish. This is a great alleviation for these banks and gives them more liquidity. However, experts have also been issuing caution to these large establishments and to the world at large. They have noted that this may just be the catalyst for another bubble effect later on and that this latest move may only be a matter of passing the buck. According to them, there has to be a sturdier foundation from which to build a stronger economy than what we are experiencing now—and since 2008.
“‘People are taking comfort that it’s globally coordinated,’ said Peter Tchir, who runs the hedge fund TF Market Advisors. ‘In itself it does nothing, but the bulls are anticipating that this is just the beginning of central bank and other actions’ to ease market pressures.”
“A successful action would be expected to reduce borrowing costs for Italy and other nations, Tchir said. Italy’s borrowing costs edged lower Wednesday, but the nation was still paying more than 7 percent interest for 10-year borrowing — a dangerously high level.”
—The Associated Press
Banks may be relieved at what may be considered a holiday miracle; however, some experts have noted that this could be a set up for an even more devastating financial upset later on down the line.
Even with cautionary mentions, the upward climbs of stocks have given a clear indication that there is more confidence within the market. Perhaps the infusion of morale will foster greater results instead of a more negative financial outcome. The Dow has increased by enough points to take them out of the pointed low the Dow was in only a week ago. The Standard & Poors index increased by almost 4 percent, on Tuesday. However, in another AP article, Standard & Poors is noted as decreasing the credit value of particular US banks—Bank of America, J.P. Morgan Chase & Co., Citigroup, Morgan Stanley, and more. This may also prove to be a most confusing time for some.
Standard & Poors have been noted as lowering credit ratings due to new practices and/or procedures recently adopted by particular banks.
Resources:
David Wagner, “Stocks leap on central banks’ coordinated action,” The Associated Press: http://www.ap.org
Yahoo! News: http://news.yahoo.com
Written on October 21st, 2011 by Samanthano shouts
A New Personal Finance Solution
This is truly an interesting endeavor. Online banking has been with us for quite some time now. Most people refer to this as being able to have full access to the brick and mortar bank they have already joined. The ability to check up on account activity, new payments, and making money transfers with the touch of a button, is very convenient. However, some banks are now exclusively online. This type of banking completely eliminates the need for standing in line, and other related bank lobby issues. Because there is a lowered need for human capital, most online banks offer double and sometimes even triple the interest rate earnings as compared to other banks. This option makes for a profitable move. However, changing rates over the years has become more comparable to brink and mortar banks. Even so, some still believe that online or Internet banks are the new age way to go. And online banks do still have a slightly higher earning rate and lower to no fees. But how are people really getting along with an all-electronic banking system? Let us weigh the pros and cons of this matter.
First of all, higher interest earned with low to zero minimums, is probably the biggest draw to exclusive online banking. Typical brick and mortar banks offer an interest rate earning of less than 1% for most accounts, and some with high minimums to even begin earning interest. At the most you may get 1.3% interest earnings on a savings account. This has led to some consumers finding that online or Internet banks may be able to offer more for less. Even comparable rates may bring out more consumers if there are other existing accommodations being made to them that brick and mortar banks will not offer.
ATM and minimum fees are virtually nonexistent in online banks. And if by chance an ATM charges you, most online banks will reimburse you. To top it all off, most online banks do not charge a debit usage fee either. Now that is really good customer service.
One drawback from online banking is opening up an account to begin with. The typical way of opening up a bank account with a brick and mortar bank is to bring your identification information to the location of your choosing. However, with an online bank this exchange is more rigorous and takes longer in order to avoid fraud concerns. Most importantly, opening up an online bank account will need for you to send in your signature. You can probably send all of this information in electronic format. However, it is best to check with the bank for more enrolling details.
A very important feature that you want to make sure of before signing up for an online banking account is making sure that the online bank is FDIC insured. Some of the online banks are not.
Another issue can be the transferring of your money from your brick and mortar bank to an online bank. This may take a much longer time because you will have to mail in your deposits on a regular basis. Some online banks do take payment via MoneyGram or UPS though. Future paycheck payments may be easier with the use of direct deposit. However, some bank consumers like face-to-face interactions with people that know he or she by name.
All of this becomes a matter of personal preference compared with functionality and pricing that one can live with. The explosive rise of banking fees lately, have consumers begging for a better banking deal. For some, online banking may be the best way for an alternative banking experience, with higher earning potential, and low to no fees attached.
Resources:
Bankrate.com: http://www.bankrate.com
Main Street: http://www.finance.yahoo.com
My Bank Tracker: http://www.mybanktracker.com
Written on September 15th, 2011 by Samanthano shouts
Have to Provide Plans to Regulators
There are quite a few banks that are now under scrutiny by US “regulators,” due to the recent financial crisis they may have been involved in. This includes the purchase or selling of mortgage-backed securities. Coupled with the housing failure that began, roughly around 2008, a lot of financial institutions have been determined to have crossed the line, and are being dealt with quite seriously. This is by official monitoring institutions and investors. There is a lot of money to pay back and those that may consider themselves as an interested party, want to be sure that these banks will be able to pay.
The Regulator
The Federal Deposit Insurance Corp. (FDIC) has created a unanimously approved rulebook to oversee the proper installation of pay back plans, from these banks. Some of these regulations include “rules [that] require banks with $50 billion or more in assets to submit so-called living wills to the FDIC, the Federal Reserve and the Financial Stability Oversight Council and send revised plans annually,” according to an Associate Press report. These banks would have to include how, and possibly to whom, they may sell off assets: if they are not able to produce enough income to pay back debt owed. The plans have to start pouring in by July 2012. However, smaller banks are being allowed to wait to file their paperwork until 2013, according to the same report.
The report further reveals an intent being made by these regulators. These plans have been designed to hopefully prevent targeted, or other banks, from receiving a government bailout in the future. Instead, regulators have seen it fitting that they be wholly responsible, for any debt they may incur.
The Plans Construct
The plans to be submitted have to be extremely detailed. They must contain every aspect of the banks operation, all revenue producing items or products, and “liabilities.” They must provide details on who and how much they owe. There must also be a “risk” forecast for all of these details. If the regulators choose to make modifications, they will be able to. This includes the immediate selling of assets, or completely scrapping the plan – making the bank start all over again. And if banks should want to modify already approved plans, they must send in a detailed report on these changes, or plans to change, within six weeks.
Out of the 124 financial institutions being targeted, approximately 21% are American. The remaining are foreign subsidiaries.
Regulators will possess the power “to seize and dismantle banks that threaten the broader financial system,” according to the same report (AP). And if they come to believe that a financial institution may possibly head down that same road – they will be able to make them submit financial plans too.
It would be very interesting to see how well this will go and how this will affect economic recovery – in the long run. It seems as though this is what should have been going on all along: at least to a certain extent. The financial reporting makes enough logical sense to have always been a necessary factor in place. However, it is the element of forcing a “living will” situation on these financial institutions that will give this operation more teeth.
Resources:
Associate Press: http://www.ap.org
Yahoo! News: http://www.finance.yahoo.com
Written on September 13th, 2011 by Samanthano shouts
Another Growing Trend
The Banking conglomerate is cutting approximately “30,000 jobs” over the next few years. It is estimated that this will save them billions of dollars, according to a report in the Associated Press. CEO, Brian Moynihan stated that the bank has made some significant changes over the past two years. According to the report, the Bank of America has new goals and is setting a new direction for the company – it wants to become a smaller (and possibly more manageable) bank. The bank has already “eliminated 6,000 jobs,” before the announcement, according to the report.
New Executive Team
There has certainly been a change on who is running the show at the Bank of America, as top executives have left the bank, leaving their duties to the “Commercial Banking Chief” and “Investment Banking Head,” according to the article. They will both be answering to the CEO in their new positions. There has been no official word on the exact reasons why the former executives are leaving.
Stocks Going Up
As a seemingly direct result of this restructuring, Bank of America stocks have gone up a bit on Monday.
Why The Change?
There is a lot of speculation – of course the first thing that may come to mind is all of the trouble the bank has had to face recently. According to further reports (AP), the bank has lost “value” over the past few months due to the eventual fall out of “poorly written mortgages,” it purchased. This is a direct result of the bank’s acquisition of mortgages from Countrywide Financial Corp., three years ago, according to the report. They also purchased Merrill Lynch a year after the Countrywide purchases. This was during the big bursting of the housing bubble, as I am sure you can recall. This set a downward spiral into place for the bank. Now, all three lenders are being sued by, “investors and regulators,” as a result of the failing value of those mortgages (acquired), according to the report.
Further reports note that the Bank of America has the highest amount owed, out of the other 16 banks currently being sued for “mortgage-backed security sales,” at over $55 billion dollars. The bank has paid back a little more than $12 billion so far according to those same reports. Experts believe that settlements may be offered very soon with regulators; however, no mention of the same with “investors,” according to the reports.
What This Means to You
If you are an investor, it seems that you are already in line, or will have to get into line for your remedy. Customers or other consumers may expect the usual occurrence when large companies diminish staff: customer care failings, possible fee hikes, service changes, or longer waiting periods for proper service overall. Of course this is only speculation right now. On the other hand, things may improve after the transitional period is over. That is a very real possibility as well.
There are currently no reports of any of the other banks being scrutinized, cutting large amounts of staff or restructuring their line of executives or other departments.
Resources:
Associated Press: http://www.ap.org
Yahoo! News: http://www.news.yahoo.com
Written on September 12th, 2011 by Samanthano shouts
How Things Are Looking Right Now
Stocks went down today, as the fear of a real financial collapse in Europe overwhelms investors, according to an article in the Associated Press today. It seems that Greece is the frontrunner of their worries right now. And any country that has is holding any bonds for Greece right now, like France, may get dragged down with poor credit ratings in the mix up. This could assure a gloomy outlook for the European banks for quite some time. This is creating yet another reason for American Economists to worry – as a collapse in Europe may cause further economic trouble for the US.
Is Anyone Doing Well?
The only rises noted today were in technology, education publications, and a Casino resort. Bank of America was noted in the report as having a small rise that is believed to be due to an announcement of restructuring to combat costs.
Up and Down
Some experts have noted that the market is changing so rapidly that the best thing to do may just be nothing at all. However, with no reconciliation in site, it seems to be quite challenging to just sit still and watch.
Reports of European Economists suggesting that Greece declare bankruptcy has had some mixed reviews among experts. Some authorities have noted that bankruptcy is the best solution for Greece right now, while others have noted it is simply not possible for them to do at all. And yet others have noted that Greece will inevitably recover and does not need to take drastic solutions, according to the AP report. With all of this being said, Greece is still looking forward to a “bailout” from a “multibillion bailout fund.” However, European officials are not “convinced” that Greece is actually meeting the mark on depleting their debt: with the current agreements they may have to do so, according to the report. In defense, Greece has noted that they will have extra revenue by raising “property taxes,” over the next 24 months, according to the report. This is probably what is adding to the confusion and is creating a global uproar as well. Serious concerns are growing in the US as it is believed that a detrimental trickle affect is bound to occur here if any European country “defaults,” or loses its credit standing. This is a lot to think about.
Juergen Stark’s pending departure is definitely one of the reasons for today’s changes in the market, according to the report. He announced his resignation last week.
Expectations
There still seem to be a lot of conflicting expectations. The combination of an unsure European financial system – including the resignation of a top European banking executive – and the currently weak US economy are making things very unbalanced right now. The market is certainly on a roller coaster ride because of it all. This is a time for extremely skilled investors to make a move, or not do anything at all.
Predictions are flying through the wind, and where they will actually land is not very easy to tell. However, a sudden division in authority or leadership is never a good sign. Systems that are simply out of control will be challenging to harness, and not at all if attempted too late.
Resources:
Associated Press: http://www.ap.org
The New York Times: http://www.nytimes.com
Yahoo!News: http://www.news.yahoo.com
Written on September 4th, 2011 by Samanthano shouts
What You Should Know
There has been a lot of talk lately regarding the ratings of financial institutions. Standard & Poor’s financial recent rating statement regarding the U.S. has really put the world in a spin about the American debt crisis. The thing is what does all of this really mean for the average American?
Standard & Poor’s, Moody’s, Fitch, A.M. Best
These are the four main U.S. entities that specialize in rating financial institutions. What they do is to figure out how well a financial institution or other such entity’s credit rating is by using similar standards as done for individuals seeking credit. This includes calculating how much debt has accumulated, the time frame of this accumulation, the ability to meet the payment schedule, and the frequency of requests for credit, just to name a few bits of the criteria. This helps to determine if these institutions are worthy enough for investment. These ratings can make or break an institution’s capability to borrow: which is an extremely important aspect in big business. This will determine how far an entity may be able to expand or grow. Without the ability for growth and expansion a potential borrower will surely be stifled and soon shrivel to competitors. And recovery from such a perilous fall may take a very long time.
These four rating powers inspect and report on the credit ratings of institutions such as banks, not for profit organizations, federal and state financial institutions including governmental entities.
Foreign Matters
S&P created an international ripple effect reaction to their announcement, downgrading the American financial status from AAA to AA, in August. This is the first time in the history of S&P that they have given the U.S. such a rating. This has had an upsetting impact on the way people are conducing their business ar0und the world as well as giving way to very public criticism against the U.S. Countries such as China have immediately brought up questions about the stability of the U.S. dollar continuing to be used as an international “reserve” dollar. However, S&P is the only one of the American agencies that has marked the U.S. with a downgrade, so far. Fitch and Moody’s still have the U.S. under the highest rating for their standards.
Meanwhile other regions like Australia have been showing their strength in having a stronger credit rating. They are currently being seen as having one of the strongest economies right now, with stable credit activity.
What this means for the average American
The average American will feel the effect of the downgraded American credit rating if any part of their income is supplemented with foreign funding. A lowered credit rating could mean that the U.S. will have less financial resources to borrow from to use as a reserve to support particular American programs such as government retirement benefit programs, as well as other social specific programs. The U.S. has also been using foreign money to supplement military functions including war efforts in recent history.
Only time will really be able to tell what is going to happen next. For right now a primary task at hand will be to improve job growth and reducing the U.S. debt crisis. This combination will be a sure road to economic recovery and the rebuilding of the American financial status.
Resources:
CNN: http://www.cnn.com
EHow Money: http://www.ehow.com
Maps of World – Finance: http://www.finance.mapofworld.com