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Banking rankings

The Federal Deposit Insurance Corp. has released its annual snasphot of how financial institutions split up the deposit pie in Western New York.

M&T Bank Corp. remained securely at the top, increasing its deposit market share to 47.2 percent from 42.75 percent the year before. As of June 30, M&T reported deposits of $15.6 billion -- out of $33 billion for the entire market -- spread across 57 branches.

First Niagara Financial Group remained second in market share, improving its percentage to 27.6 from 26.2 a year ago. It reported deposits of $9.1 billion at 57 branches.

The most notable change was at third. KeyBank moved up to No. 3 from No. 4, with 10.7 percent of the market. HSBC Bank USA was No. 3 last year, but has sold its upstate retail branch network. So HSBC disappeared from the local rankings and its 8.76 percent market share from 2012 was absorbed by other institutions.

No. 4 on the list was Citizens Financial Group (4.76 percent), followed by Bank of America (3.98 percent) and Evans Bank (1.96 percent).

Total deposits in the Western New York market increased 2.2 percent from a year ago.

-- Matt Glynn

Best bets for financing a new car looked into which states had the lowest financing options available for a new car and created a top 10 list. New York did not make the cut, finishing instead in the middle of the pack.

The state with the lowest aggregate average loan rate on new cars was Michigan, at 3.03 percent. said credit unions "dominate" for the lowest rates offered in that state.

New York's rate was 3.51 percent. Meanwhile, seven states came in at 4.01 percent or higher, with Rhode Island the highest, at 5.11 percent. said its study looked at base rates offered by banks and credit unions on new car loan products, using a statewide average of rates to determine the rankings.

The study says car buyers who don't live in one of the top 10 states should not despair: "When it comes to affordable financing, there are always great options available on the local level, and it's up to the borrower to find them."

-- Matt Glynn




Money laundering redux

CharteredLondon-based Standard Chartered Bank stands accused by New York regulators of laundering $250 billion in oil money for Iran.

It follows a string of similar scandals, such as one uncovered at HSBC, in which offices in Buffalo helped to launder money from Mexican drug cartels, shady Russian business men and terrorists. HSBC ended up setting aside $700 million to cover penalties for that activity.

The New York Times has an interesting story today that looks at how each of the banks exploited a weak law in order to make money laundering easier:

Foreign banks until 2008 were allowed to transfer money for Iranian clients through their American subsidiaries to a separate offshore institution. In the so-called U-turn transactions, the banks had to provide scant information about the client to their American units as long as they had thoroughly vetted the transactions for suspicious activity. Suspecting that Iranian banks were financing nuclear weapons and missile programs, the loophole was finally closed in 2008 . . . .

Foreign banks until 2008 were allowed to transfer money for Iranian clients through their American subsidiaries to a separate offshore institution. In the so-called U-turn transactions, the banks had to provide scant information about the client to their American units as long as they had thoroughly vetted the transactions for suspicious activity. Suspecting that Iranian banks were financing nuclear weapons and missile programs, the loophole was finally closed in 2008 . . . . 

Since the tighter sanctions went into effect, there have been no charges brought on post-2008 conduct, although Treasury’s letter says that investigations are ongoing.

Gina Talamona, a Justice Department spokeswoman, said that the lack of recent illegal conduct is because the settlements with foreign banks “required the banks to implement rigorous compliance programs and other safeguards” against further violations of sanctions. She said that the department’s enforcement program “has had a significant impact on banking industry practices involving sanctions.”

- Samantha Maziarz Christmann

No victory in swipe fee settlement

CCMerchants have been fighting credit card companies over swipe fees for years. As the battle drags on, you may have noticed more mom-and-pop retailers have instituted a minimum purchase amount for credit card purchases.

Thanks to a recent settlement, merchants will now be able to pass swipe fees on to consumers rather than incurring them themselves.

The Wall Street Journal interviewed about two dozen retailers, many of whom said they aren't sure whether they want to risk alienating their customers by passing the cost of swipe fees on to them:

Steven Resnick, a partner at the accounting firm Resnick Amsterdam Leshner in Blue Bell, Pa., which sued Visa and Mastercard, says he would "definitely not" impose a surcharge on clients because "it would be like we're nickel-and-diming them," he says.

SwipeAfter complaining about being nickel-and-dimed by the credit card companies, one would hope merchants wouldn't want to turn around and do the same to their own customers.

The swipe fee settlement is a messy victory for merchants. They are no longer required to pay the surcharge themselves, but they still have to figure out who pays it. The credit card companies still get their money, which amounts to about 1 percent to 3 percent per transaction. But it begs the question, especially in a society where one almost cannot function without plastic, what is so costly about the system that every swipe costs so much?

According to swipe fee reform group the Merchants Payments Coalition, the money brought in through swipe fees far exceed the cost of doing business. In fact, they bring in twice as much money as ATM fees and overdraft charges:

What started in the 1960s as a fee to cover the transaction costs of using plastic is now a cash-cow for the big banks that issue 90% plus of all MasterCard and Visa cards.  According to a consultant for the big banks, only 13% of the credit card interchange fee goes to processing credit card transactions; much of the rest goes to pay for billions of pieces of unsolicited junk mail annually among other dubious credit card marketing activities aimed at students or those with bad credit histories.

The more people you ask, the more it sounds like the recent settlement was a victory for no one but the banks, who get to keep the status quo.

Some Libor laughs

The Libor Scandal is no laughing matter. London bankers' practice of reporting false interest rates misrepresented the health of the British banking industry and has caused ripple effects in everything from mortgages and student loans to derivatives and a myriad of financial products.

But if it bums you out to know how casually this sort of thing goes on, take a look at it from the lighter side.



Literary kudos for First Niagara

Here's some news from First Niagara about how the bank made its way into a best-selling book: Allin

A story about a moose and a company CEO who really means it when he asks employees to tell him how things are going were enough to give First Niagara Financial Group a place in a book that hit the big time when it was released.

“All In” authors Adrian Gostick and Chester Elton, who penned New York Times best-sellers “The Carrot Principle” and “The Orange Revolution,” talk about First Niagara’s winning culture in a work that promises to shed light on “how the best managers create a culture of belief and drive big results.”

Shortly after its release in April, “All In” rose to the number-four spot on the New York Times Book Review and made it to the top of USA Today, Barnes & Noble and Amazon rankings. First Niagara President and CEO John Koelmel is delighted by the attention the book is bringing to the organization he has led since 2006.

“We have something really special here,” he said. “It’s our people. And they deserve to be recognized for who they are and what they do.”

Elton will be in Buffalo June 20 for a book-signing session at First Niagara’s headquarters at 726 Exchange Street, Buffalo, 14210. He also will be part of an all-day meeting of the company’s cultural ambassadors, which will include awards to the company’s culture educators.

First Niagara, which quadrupled its assets from 2007 to 2011 and nearly quadrupled its number of branches from 2009 to the present, invests heavily in its culture and in ensuring that all team members across its multi-state footprint understand what makes the company special and how they contribute to that goal.   Koelmel

“John [Koelmel] always says we – not he – are the brand, but the fact is, without his leadership and emphasis upon culture, our culture would not be our differentiator.” said Siobhan Smith, senior vice president of Organizational Development. “Our culture is one of the things that drew many of us to First Niagara and it certainly is one of the reasons – if not the main reason – we stay and give it our all every day.” 

“All In” puts First Niagara in the company of well-known organizations such as American Express, Cigna, FirstNiagaraPepsi Bottling and Avis Budget. The authors maintain these firms have succeeded in creating cultures in which employees believe in their leaders and in their company’s value, vision and goals. These “culture[s] of belief” drive results, Gostick and Elton assert. Even in the midst of a global recession, “All In” companies achieved revenues that were three times higher than those without a strong, positive culture

“First Niagara has a special culture, something worth emulating,” said Gostick. “We visit many companies and it was refreshing to find in First Niagara an organization where leaders have found a way to get team members to truly buy in by listening and treating them like true partners. The passion and commitment were evident in every conversation we had. First Niagara focuses on people and is winning with talent. It has the financial results to show that getting culture right really does pay.”

Banker's mea culpa

DimonA contrite Jamie Dimon testified before the Senate Banking Committee Wednesday. While the JP Morgan CEO acknowledged the company's faults in the bank's $2 billion trading loss, he didn't back down from his anti-regulation stance. (You can see his testimony here).

A Bloomberg article by Christine Harper said his testimony highlights how complex and intertwined with government banking has become. Ironically, author Ron Chernow said in an interview, government programs such as FDIC insurance are what make banks feel safe enough to make big gambles in the first place:

Testimony“You can just imagine in this environment if there wasn’t deposit insurance how much money would be left in these banks,” Chernow said in a telephone interview. “The tradeoff was that in exchange for federally insured deposits that bankers would behave in a particularly cautious and responsible manner.”

JPMorgan, now the biggest U.S. bank with $2.3 trillion of assets, grew during the 2008 financial crisis when it acquired Washington Mutual Inc. and Bear Stearns Cos. with the federal government’s support.

“It was quite counterintuitive that, to this day, the government’s response to the crisis was to create yet bigger and more complicated institutions,” Chernow said. “In addition to the deposit insurance and the regulated nature, another reason why the government has a special stake in this firm is because it was partly a creation of the government during the financial crisis.”

Plenty of folks, such as the New York Times' editorial board, thought senators went too easy on him: DimonSmiles

In brief, he didn’t say much that everyone didn’t already know — and he didn’t give an inch on his fierce opposition to the tough financial regulations needed to ensure that banks’ risky behavior does not again threaten to bring down the financial system. The senators did not press him nearly hard enough. Some Republicans even praised Mr. Dimon for his bank leadership and let him critique proposed financial regulations, while one Democrat sought his advice on how to fix the deficit.

Oregon Senator Jeff Merkley probably went at him the hardest. He released this statement after the hearing:

“While it wasn’t his intention, Jamie Dimon today made the case for a strong Volcker Rule. I was pleased to hear him say that he doesn’t want to be in the hedge fund business and that these proprietary trades should not have been made. These large gambling losses are exactly why we need a strong loophole-free Volcker firewall that separates traditional banking and hedge-fund style trading. We cannot continue to allow massive proprietary trades disguised as risk management, hedging, or market-making.”

Here is a bit of Dimon's testimony:


JC Penney ads stir controversy, but not sales

J.C. Penney keeps making headlines, but will it have any effect on the company's bottom line?

The retailer first made a splash in January when it announced it would do away with sales and coupons in favor of an everyday-low-price model. It was part of a plan to revive the fading brand under the new leadership of former Apple executive Ronald Johnson.

The next bit of buzz came when Penney hired Ellen DeGeneres as a spokeswoman. Social conservatives complained and staged a boycott.


Most recently, the company ran Father's Day ads featuring a same-sex male couple. It got the company a lot of free publicity, but has failed to move the needle on sales.


It joins another ad featuring same-sex moms:


Ironically, the most damaging ads were its first set of pre-makeover commercials, which ineffectually described the company's new pricing strategy:


By all accounts, Penney's efforts are missing the mark, says CBS MoneyWatch:

"The retailer's performance has been so bad it faces a possible credit downgrade, hardly a ringing endorsement for a company supposedly in turnaround mode," writes Constantine von Huffman.

Euro scare spreading

Bank patrons across Europe have been withdrawing their money in huge numbers, as fears rise about the stability of the Euro and the European Union.

ZyglisThough not classified as a typical bank run, money is fleeing and fleeing fast.

John Maxfield of explains:

Private bankers in London have reported that European clients are moving into dollar-based assets. Central banks around the world are eschewing the euro in favor of the dollar or even their own currency, according to Bank of America. And hedge funds are doing what hedge funds do -- piling on.

The reason is simple. Nobody wants to be caught with money in a European bank -- more specifically, a bank in Greece, Ireland, Italy, Spain, or Portugal -- if the monetary union disintegrates. Imagine waking up one day only to learn that the 50,000 euros in your bank account had been involuntarily converted into drachmas . . . .

The massive withdrawls prompted New York magazine to take a lighthearted look back at bank runs throughout history.

It starts in Sicily in the fourth century B.C. and ends in present-day Greece.

Main Street banks vs. Wall Street banks

Robert G. Wilmers, chairman and CEO of M&T Bank, penned a letter to the editor that appeared in today’s paper. He felt that a recent editorial unfairly lumped responsible Main Street banks, like M&T, in with the same irresponsible Wall Street banks that brought the country to its knees during the 2008 subprime mortgage crisis.


“To be sure, the handful of gigantic Wall Street banks deserve criticism for putting taxpayers and our overall financial system at great risk,” he writes. “But Main Street banks are very different. They adhere to a much safer strategy. Rather than gambling capital on uncertain investments, they utilize deposits to extend credit to local families and businesses.”

It’s not the first time he’s made his case.

He spoke in detail about the issue in M&T’s 2011 annual report, something that was lauded as a must-read:

We have reached a point at which not only do public demonstrations specifically target the financial industry but when a leading national newspaper would opine that regulation which might lower bank profits would be “a boon to the broader economy.” What’s worse is that such a view is far from entirely illogical, even if it fails to distinguish between Wall Street banks who, in my view, were central to the financial crisis and continue to distort our economy, and Main Street banks who were often victims of the crisis and are eager, under the right conditions, to extend credit to businesses that need it.

He goes on to say that “fear-driven rulemaking” meant to rein in irresponsible banks will harm community banks and the local economies they serve.

He’s not the only one who feels that way.

“Ironically, the larger ‘Wall Street’ banks will likely be more able, at least initially, to maximize opportunities for growth in strategic areas even in this new, more restrictive environment, while smaller, ‘Main Street’ focused banks may suffer under the weight of new rules and regulations, at least at the outset,” writes Amy Markham DeCesare in the New England Real Estate Journal.

  FirstNiagaraThe Wall Street Journal did a story a few months back about a small Texas bank that decided to close its doors rather than deal with tightened regulation:

 "The regulatory environment makes it very difficult to do what we do," said Thomas Depping, Main Street Bank’s chairman.

A group of U.S. Senators also outlined how tightened restrictions on Main Street banks would adversely affect Main Street businesses. They came together last year to seek an amendment to the Dodd-Frank Act that would loosen credit for Main Street businesses: 

“End-users from manufacturing to energy to farming rely on financial risk management tools like over-the-counter derivatives to conduct regular business,” said Sen. Mike Crapo, (R-Idaho) in a statement.  “This amendment provides certainty for Main Street businesses by providing American companies with a clear exemption from excessive margin requirements that without change will lead to a higher cost of doing business.”

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