Banks Lose Millions Due to Durbin Amendment: Report

Research from SNL Financial reports a majority of financial institutions saw lower revenue from interchange fees in Q4 2011.

TD Bank Promotes Greg Braca to Head of Corporate and Specialty Banking

The 25-year industry veteran is charged with driving the growth of TD Bank's corporate and specialty banking businesses.
TD Bank has named Greg Braca its new head of U.S. corporate and specialty banking. The 25-year industry veteran moves to this new position after serving as regional president for TD Bank's Metro New York market and head of healthcare banking.

In his new role, Braca will be oversee corporate banking in partnership with TD Securities, as well as the commercial real estate, healthcare, equipment finance, asset-based lending and dealer commercial services verticals. He'll report to Bharat Masrani, TD Bank's president and CEO.

Since joining TD Bank in 2002, Braca has helped foster its growth in the metro New York region, as well as in the bank's small business, government banking, middle market and specialty lending businesses. Previous to joining TD Bank, Braca served as senior vice president for FleetBoston Bank's New York Metro Healthcare Group.

"I'm thrilled to take on this senior leadership role within TD Bank, driving the growth of our corporate and specialty banking businesses, as we become an industry-leading corporate bank and continue to build upon our rapidly expanding portfolio of clients," said Braca in a news release. "Each of our six businesses within corporate and specialty banking has enormous potential for growth, especially as we leverage the TD brand across all our markets from Maine to Florida."

Report Points to Security Holes in Customer-Facing Bank Apps

The CRASH Report, a study of the structural quality of applications, reveals that banks have some work to do when it comes to making their customer-facing applications structurally sound and secure -- especially as they innovate in the mobile channel.
New York-based software analysis company Cast Software recently released its second annual CRASH (Cast Report on Application Software Health) report, a study of the structural quality -- the engineering soundness of the architecture and coding -- of business application software. The study examined 745 enterprise software applications in 160 organizations across industries. For the banking industry, the most significant finding is that while most legacy core banking applications tend to be secure, the newer, customer-facing financial apps tend to have more structural flaws that could cause operational problems such as outages, performance degradation, breaches by unauthorized users and data corruption.

Bill Curtis, senior vice president at Cast Software and co-author of the CRASH report, says that there are a number of reasons for the disparity of structural soundness between older, back-end applications and newer, customer-facing apps. "These large legacy applications usually sit on mainframes and are not exposed to web. It's the exposure to the internet that opens the doors for hackers to come in," he explains, adding, "For 30 or 40 years the IT people at banks have been trying to eliminate all of the security holes in these legacy applications. They've really been working hard over a long period of time and have gotten common weaknesses out of the apps."

The programming language used to write the application also makes a difference in its structural soundness, according to Curtis. He says that many financial core applications have been written in the mature COBOL programming language, while customer-facing apps are being written in newer languages that tend to be less secure. On top of that, he notes, they're often built in several computer languages. "While developers often know a few languages very well, they don't know all of them," he says. "That makes it difficult to look at the entire app to make sure it's structurally sound."

The integration that modern, customer-facing apps require to operate introduces yet another challenge to achieving structural soundness, notes Curtis. "In the old days, we used to just build an application," he says. "Now that application interacts with a lot of other applications, which continues to create new ways to make mistakes. We're constantly learning about new problems."

Key to avoiding and combatting these application problems is continuing education, asserts Curtis. "Software engineering is a relatively new discipline," he says. "Computer science departments don't teach the engineering of how to apply computer science to the applications that run the banks. Once they get out into the real world there's an awful lot to learn."

At the very least, warns Curtis, all developers should be aware of the common known weaknesses that hackers tend to exploit and avoid them when building applications -- which is something he says isn't happening enough now. Banks can point their developers to theCommon Weakness Enumeration website, a free resource that identifies these known weakness, and do upfront inspections of codes against a checklist of them, he notes. Beyond testing and analysis of code design, Curtis says that bank IT departments also must do a static analysis that looks of an entire structure of an application as well as a dynamic analysis that runs the code to look for performance issues.

As banks increasingly innovate in the mobile channel, taking the proper steps to ensure the structural soundness of applications becomes more important than ever, says Curtis. "Security will raise its head in new ways that are more taxing on the bank because of all the different ways hackers can reach them," he says. He acknowledges that mobile applications could be just as secure as other apps, saying, "I don't think we're there today, but we can get there."

Brady Leaves Bank of America to Become KeyCorp CIO

Amy Brady is moving on from a 25-year career at Bank of America to become KeyCorp's new CIO.
Cleveland-based KeyCorp announced today that it has named industry veteran Amy Brady as its new chief information officer. She is replacing Al Coppolo, who retired at the end of 2011 after serving as the KeyCorp's CIO since August 2009.

As CIO, Brady will head the institution's Key Enterprise Technology division and serve on the company's 13-member management committee. She will report to Tom Stevens, KeyCorp's chief administrative officer.

Brady is joining KeyCorp directly from a 25-year run at Charlotte, N.C.-based Bank of America, where she held a variety of leadership positions. Most recently, she was chief information officer, enterprise technology and operations at Bank of America.

"Amy has an impressive 25-year record of delivering outstanding results across numerous banking disciplines," said KeyCorp Chairman and CEO Beth Mooney, in an announcement of the appointment. "She has led major initiatives focused on innovation as well as technology, and her breadth of experience will add significant value to Key and its clients."

Brady Leaves Bank of America to Become KeyCorp CIO

Amy Brady is moving on from a 25-year career at Bank of America to become KeyCorp's new CIO.
Cleveland-based KeyCorp announced today that it has named industry veteran Amy Brady as its new chief information officer. She is replacing Al Coppolo, who retired at the end of 2011 after serving as the KeyCorp's CIO since August 2009.

As CIO, Brady will head the institution's Key Enterprise Technology division and serve on the company's 13-member management committee. She will report to Tom Stevens, KeyCorp's chief administrative officer.

Brady is joining KeyCorp directly from a 25-year run at Charlotte, N.C.-based Bank of America, where she held a variety of leadership positions. Most recently, she was chief information officer, enterprise technology and operations at Bank of America.

"Amy has an impressive 25-year recThe best site of auto http://www.mawiniwe.blogspot.com .ord of delivering outstanding results across numerous banking disciplines," said KeyCorp Chairman and CEO Beth Mooney, in an announcement of the appointment. "She has led major initiatives focused on innovation as well as technology, and her breadth of experience will add significant value to Key and its clients."

Citigroup Pays $158 Million in U.S. Mortgage Fraud Pact

Citigroup Inc has agreed to pay $158.3 million to settle U.S. civil claims that it defrauded the government into insuring thousands of risky home loans made by its CitiMortgage unit.

Citigroup Inc has agreed to pay $158.3 million to settle U.S. civil claims that it defrauded the government into insuring thousands of risky home loans made by its CitiMortgage unit.

Wednesday's settlement resolves claims under the federal False Claims Act against the third-largest U.S. bank, and arose from a "whistleblower" lawsuit brought by Sherry Hunt, a CitiMortgage employee in Missouri.

CitiMortgage "admits, acknowledges and accepts responsibility" for misleading the government into insuring risky home loans, according to settlement papers filed in U.S. District Court in New York. Investigators said the misconduct lasted for more than six years.

The civil fraud case is part of a crackdown by the Department of Justice against lenders it believes contributed to the housing crisis by originating risky home loans that should not have been made, insured or sold.

Whistleblowers can receive up to 25 percent of settlements reached with the government in such cases, depending on how much work they contributed. It was not immediately clear how much Hunt, a quality control manager at CitiMortgage, might recover. Neither she nor her lawyer, Finley Gibbs, responded to requests for comment.

Citigroup spokesman Mark Rodgers said the bank is pleased to settle.

"We take our quality assurance processes seriously and have pro-actively undertaken process improvements to ensure that they are as robust as possible," he said.

Rodgers also said Citigroup has set aside enough money to cover the payout. The bank had said last week it was taking a $125 million after-tax charge against results for its just-completed fourth quarter in connection with mortgage litigation.

Claims brought under the False Claims Act have recovered more than $34 billion in federal and state cases since the law was amended in 1986, according to the Taxpayers Against Fraud Education Fund.

FALSE CERTIFICATIONS

The government accused Citigroup of falsely certifying that many of its loans qualified for insurance from the Federal Housing Agency, which is part of the U.S. Department of Housing and Urban Development.

Investigators said 9,636, or more than 30 percent, of nearly 30,000 HUD-insured mortgage loans that CitiMortgage made or underwrote since 2004 have defaulted, costing the agency nearly $200 million in insurance claims.

"For far too long, lenders treated HUD's insurance of their mortgages like they were playing with house money," U.S. Attorney Preet Bharara in Manhattan said in a statement. "In fact, they were playing with other people's money and other people's homes."

The government also contended that even after a 2008 HUD audit found "numerous defects" in CitiMortgage's oversight of loans in default, quality control deteriorated.

It said this was in part because the unit pressured workers to encourage quality control personnel to ignore problems, rewarding them with higher salaries if they succeeded.

In January 2011, for example, CitiMortgage held a "Star Players Award" ceremony for the efforts of some workers to challenge defects reported by the quality control unit.

According to the complaint, even after Citi's fraud unit confirmed that loans were fraudulent, another unit responsible for self-reporting the loans to HUD rarely did. In August of 2010, Hunt, the whistleblower, commented to Michael Watts, the director of quality control, that "there are so few loans being self-reported that I am not sure the process still exists," according to the complaint. She was told the process had been "transferred back to the (business) channels."

Some of the loans that Citi failed to report included mortgages that defaulted when their first payment was due and had other signs of mortgage fraud, according to the complaint.

The $158.3 million payout is separate from New York-based Citigroup's agreement to pay as much as $2.22 billion under last week's roughly $25 billion U.S. settlement with five big mortgage servicers over alleged foreclosure abuses.

Bank of America Corp reached a $1 billion resolution of FHA claims as part of last week's settlement. U.S. Attorneys in Colorado, North Carolina and South Carolina were also part of the foreclosure investigation, the Justice Department said, suggesting other whistleblower suits could be part of any final settlement. Spokespersons for those offices either declined to comment or didn't return calls.

DEUTSCHE BANK, ALLIED HOME

Last May, the government accused Deutsche Bank AG and its MortgageIT Inc unit in a $1 billion False Claims Act case over misleading HUD into insuring risky mortgages.

Six months later, it filed similar charges against Houston-based Allied Home Mortgage Capital Corp, which had billed itself as the largest privately held U.S. mortgage broker.

Deutsche Bank and Allied Home have fought the charges. Andrew Levander, a lawyer for Deutsche Bank, and Bruce Alexander, a lawyer for Allied Home, did not immediately respond to requests on Wednesday for comment.

Wednesday's Citigroup settlement was approved by U.S. District Judge Victor Marrero in Manhattan, the Justice Department said.

Shares of Citigroup closed down 1.1 percent at $31.72 on the New York Stock Exchange.

The case is U.S. ex rel. Hunt v. Citigroup Inc et al, U.S. District Court, Southern District of New York, No. 11-05473. (Reporting By Jonathan Stempel in New York; Additional reporting by Rick Rothacker in Charlotte, N.C. and Aruna Viswanatha in Washington, D.C.; Editing by Matthew Lewis, Gerald E. McCormick, Tim Dobbyn and Bernard Orr)

Copyright 2012 Thomson Reuters. Click For Restrictions 

Citigroup Pays $158 Million in U.S. Mortgage Fraud Pact

Citigroup Inc has agreed to pay $158.3 million to settle U.S. civil claims that it defrauded the government into insuring thousands of risky home loans made by its CitiMortgage unit.

Citigroup Inc has agreed to pay $158.3 million to settle U.S. civil claims that it defrauded the government into insuring thousands of risky home loans made by its CitiMortgage unit.

Wednesday's settlement resolves claims under the federal False Claims Act against the third-largest U.S. bank, and arose from a "whistleblower" lawsuit brought by Sherry Hunt, a CitiMortgage employee in Missouri.

CitiMortgage "admits, acknowledges and accepts responsibility" for misleading the government into insuring risky home loans, according to settlement papers filed in U.S. District Court in New York. Investigators said the misconduct lasted for more than six years.

The civil fraud case is part of a crackdown by the Department of Justice against lenders it believes contributed to the housing crisis by originating risky home loans that should not have been made, insured or sold.
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Whistleblowers can receive up to 25 percent of settlements reached with the government in such cases, depending on how much work they contributed. It was not immediately clear how much Hunt, a quality control manager at CitiMortgage, might recover. Neither she nor her lawyer, Finley Gibbs, responded to requests for comment.

Citigroup spokesman Mark Rodgers said the bank is pleased to settle.

"We take our quality assurance processes seriously and have pro-actively undertaken process improvements to ensure that they are as robust as possible," he said.

Rodgers also said Citigroup has set aside enough money to cover the payout. The bank had said last week it was taking a $125 million after-tax charge against results for its just-completed fourth quarter in connection with mortgage litigation.

Claims brought under the False Claims Act have recovered more than $34 billion in federal and state cases since the law was amended in 1986, according to the Taxpayers Against Fraud Education Fund.

FALSE CERTIFICATIONS

The government accused Citigroup of falsely certifying that many of its loans qualified for insurance from the Federal Housing Agency, which is part of the U.S. Department of Housing and Urban Development.

Investigators said 9,636, or more than 30 percent, of nearly 30,000 HUD-insured mortgage loans that CitiMortgage made or underwrote since 2004 have defaulted, costing the agency nearly $200 million in insurance claims.

"For far too long, lenders treated HUD's insurance of their mortgages like they were playing with house money," U.S. Attorney Preet Bharara in Manhattan said in a statement. "In fact, they were playing with other people's money and other people's homes."

The government also contended that even after a 2008 HUD audit found "numerous defects" in CitiMortgage's oversight of loans in default, quality control deteriorated.

It said this was in part because the unit pressured workers to encourage quality control personnel to ignore problems, rewarding them with higher salaries if they succeeded.

In January 2011, for example, CitiMortgage held a "Star Players Award" ceremony for the efforts of some workers to challenge defects reported by the quality control unit.

According to the complaint, even after Citi's fraud unit confirmed that loans were fraudulent, another unit responsible for self-reporting the loans to HUD rarely did. In August of 2010, Hunt, the whistleblower, commented to Michael Watts, the director of quality control, that "there are so few loans being self-reported that I am not sure the process still exists," according to the complaint. She was told the process had been "transferred back to the (business) channels."

Some of the loans that Citi failed to report included mortgages that defaulted when their first payment was due and had other signs of mortgage fraud, according to the complaint.

The $158.3 million payout is separate from New York-based Citigroup's agreement to pay as much as $2.22 billion under last week's roughly $25 billion U.S. settlement with five big mortgage servicers over alleged foreclosure abuses.

Bank of America Corp reached a $1 billion resolution of FHA claims as part of last week's settlement. U.S. Attorneys in Colorado, North Carolina and South Carolina were also part of the foreclosure investigation, the Justice Department said, suggesting other whistleblower suits could be part of any final settlement. Spokespersons for those offices either declined to comment or didn't return calls.

DEUTSCHE BANK, ALLIED HOME

Last May, the government accused Deutsche Bank AG and its MortgageIT Inc unit in a $1 billion False Claims Act case over misleading HUD into insuring risky mortgages.

Six months later, it filed similar charges against Houston-based Allied Home Mortgage Capital Corp, which had billed itself as the largest privately held U.S. mortgage broker.

Deutsche Bank and Allied Home have fought the charges. Andrew Levander, a lawyer for Deutsche Bank, and Bruce Alexander, a lawyer for Allied Home, did not immediately respond to requests on Wednesday for comment.

Wednesday's Citigroup settlement was approved by U.S. District Judge Victor Marrero in Manhattan, the Justice Department said.

Shares of Citigroup closed down 1.1 percent at $31.72 on the New York Stock Exchange.

The case is U.S. ex rel. Hunt v. Citigroup Inc et al, U.S. District Court, Southern District of New York, No. 11-05473. (Reporting By Jonathan Stempel in New York; Additional reporting by Rick Rothacker in Charlotte, N.C. and Aruna Viswanatha in Washington, D.C.; Editing by Matthew Lewis, Gerald E. McCormick, Tim Dobbyn and Bernard Orr)

Copyright 2012 Thomson Reuters. Click For Restrictions 

New KeyBank EVP Carpetto Brings New Payments Perspective

Al Carpetto, KeyBank's new EVP, says he wants the bank to be viewed as a top-tier payments provider, including in areas such as treasury management, foreign exchange and institutional asset services.

KeyBank is gaining a new perspective on payments. In February, Alfred Carpetto joined the Cleveland-based bank as EVP and head of the Enterprise Commercial Payments Group. Carpetto brings to the position the benefit of having seen the payments industry from different vantage points throughout his career.

Most recently, Carpetto served as head of global transaction services for the Americas at Edinburgh-based Royal Bank of Scotland (RBS). Prior to that, he was a sales executive within the Treasury and Securities Services Group at New York-based JPMorgan Chase, where he spent 18 years. He also has held leadership positions at Donaldson, Lufkin & Jenrette and at Dean Witter Reynolds.

"I am very excited about this opportunity," Carpetto tells BS&T. "Having worked in the payments industry, I think KeyBank has a unique opportunity with its clients. ... They've chosen KeyBank in many aspects of their business."

One of the many challenges that Carpetto says he looks forward to managing is the development of what he calls the group's brand. "I'm not sure everybody fully understands what the Enterprise Commercial Payments Group brings to the table," he explains. "Most people may think it's just cash management, but it's not."

KeyBank's ($89 billion in assets) Enterprise Commercial Payments Group includes not only treasury management, but also international foreign exchange and institutional asset services -- businesses that historically have been separate at the bank but have recently been pulled together under a singular payments umbrella that's being managed by Carpetto. "KeyBank's restructuring and renaming of this business is an example of another major bank saying the paymentsbusiness is important and it needs to be leveraged and cross-sold into client relationships," he says.

Carpetto says he plans to tackle the brand development with a "two-front assault." First, he'll work internally to get the once-separate business segments to understand the group's structure and value proposition. Then he'll lead the group in using that knowledge to provide client messaging and to drive that understanding externally.

"We manage products that are sold by everyone in the bank. So whether you're a large corporate relationship banker or middle-market banker, it doesn't really matter because every client can use the payments products we offer," Carpetto relates. "We talk to clients very frequently, and as a result that leads to conversations that can tee-up other opportunities. We clearly have an advantage when we're talking to clients from a payments perspective."

Product Development: A Vertical Leap

Developing products and client relationships in more verticals is another task on Carpetto's list. "You're going to see some really aggressive moves by some banks in the next two to three years -- and KeyBank will hopefully be one of them -- to start to focus on different verticals that are very paper-intensive," he says, explaining that as businesses desire to make more progress toward paperless, automated processes, financial institutions can help them achieve their goals of becoming more efficient.

Carpetto says one of the verticals he'll be "pushing very hard" is the healthcare vertical. "As the economy improves, we're going to start getting more prospects on the table for discussion, and I think the payments business is a great business to lead with," he comments.

From a broader, more long-term perspective, Carpetto says, "I want us to be viewed as a top-tier payments provider." He stresses that when he says "payments," he means all products under the Enterprise Commercial Payments Group umbrella, including cash management, payments receivables, information reporting, foreign exchange and trade, as well as institutional asset servicing.

"At the end of the day," Carpetto notes, "I want our people to understand their roles and responsibilities. But most important, I want them to act as trusted advisers to clients. When you sit across from a client you should add value. And the only way you're going to add value is to advise them."

Vista Proposal for Misys Threatens Misys-Temenos Merger Talks

Vista Equity Partners has made a nonbonding proposal to acquire Misys, threatening a possible merger between Temenos and Misys that was announced earlier this month.

San Francisco-based private equity firm Vista Equity Partners has made a nonbonding proposal to acquire London-based financial software vendor Misys. The proposal disrupts merger talks announced earlier this month between Geneva-based banking software provider Temenos and Misys.

Vista is proposing to acquire outstanding shares of Misys for cash but has not yet made a firm offer, which the company must do by March 19. The companies have indicated that they'll make further announcements once the Misys board of directors has had a chance to review the offer and make a recommendation.

New KeyBank EVP Carpetto Brings New Payments Perspective

Al Carpetto, KeyBank's new EVP, says he wants the bank to be viewed as a top-tier payments provider, including in areas such as treasury management, foreign exchange and institutional asset services.

KeyBank is gaining a new perspective on payments. In February, Alfred Carpetto joined the Cleveland-based bank as EVP and head of the Enterprise Commercial Payments Group. Carpetto brings to the position the benefit of having seen the payments industry from different vantage points throughout his career.

Most recently, Carpetto served as head of global transaction services for the Americas at Edinburgh-based Royal Bank of Scotland (RBS). Prior to that, he was a sales executive within the Treasury and Securities Services Group at New York-based JPMorgan Chase, where he spent 18 years. He also has held leadership positions at Donaldson, Lufkin & Jenrette and at Dean Witter Reynolds.

"I am very excited about this opportunity," Carpetto tells BS&T. "Having worked in the payments industry, I think KeyBank has a unique opportunity with its clients. ... They've chosen KeyBank in many aspects of their business."

One of the many challenges that Carpetto says he looks forward to managing is the development of what he calls the group's brand. "I'm not sure everybody fully understands what the Enterprise Commercial Payments Group brings to the table," he explains. "Most people may think it's just cash management, but it's not."

KeyBank's ($89 billion in assets) Enterprise Commercial Payments Group includes not only treasury management, but also international foreign exchange and institutional asset services -- businesses that historically have been separate at the bank but have recently been pulled together under a singular payments umbrella that's being managed by Carpetto. "KeyBank's restructuring and renaming of this business is an example of another major bank saying the paymentsbusiness is important and it needs to be leveraged and cross-sold into client relationships," he says.

Carpetto says he plans to tackle the brand development with a "two-front assault." First, he'll work internally to get the once-separate business segments to understand the group's structure and value proposition. Then he'll lead the group in using that knowledge to provide client messaging and to drive that understanding externally.

"We manage products that are sold by everyone in the bank. So whether you're a large corporate relationship banker or middle-market banker, it doesn't really matter because every client can use the payments products we offer," Carpetto relates. "We talk to clients very frequently, and as a result that leads to conversations that can tee-up other opportunities. We clearly have an advantage when we're talking to clients from a payments perspective."

Product Development: A Vertical Leap

Developing products and client relationships in more verticals is another task on Carpetto's list. "You're going to see some really aggressive moves by some banks in the next two to three years -- and KeyBank will hopefully be one of them -- to start to focus on different verticals that are very paper-intensive," he says, explaining that as businesses desire to make more progress toward paperless, automated processes, financial institutions can help them achieve their goals of becoming more efficient.

Carpetto says one of the verticals he'll be "pushing very hard" is the healthcare vertical. "As the economy improves, we're going to start getting more prospects on the table for discussion, and I think the payments business is a great business to lead with," he comments.

From a broader, more long-term perspective, Carpetto says, "I want us to be viewed as a top-tier payments provider." He stresses that when he says "payments," he means all products under the Enterprise Commercial Payments Group umbrella, including cash management, payments receivables, information reporting, foreign exchange and trade, as well as institutional asset servicing.

"At the end of the day," Carpetto notes, "I want our people to understand their roles and responsibilities. But most important, I want them to act as trusted advisers to clients. When you sit across from a client you should add value. And the only way you're going to add value is to advise them."

Vista Proposal for Misys Threatens Misys-Temenos Merger Talks

Vista Equity Partners has made a nonbonding proposal to acquire Misys, threatening a possible merger between Temenos and Misys that was announced earlier this month.

San Francisco-based private equity firm Vista Equity Partners has made a nonbonding proposal to acquire London-based financial software vendor Misys. The proposal disrupts merger talks announced earlier this month between Geneva-based banking software provider Temenos and Misys.

Vista is proposing to acquire outstanding shares of Misys for cash but has not yet made a firm offer, which the company must do by March 19. The companies have indicated that they'll make further announcements once the Misys board of directors has had a chance to review the offer and make a recommendation.

A New Customer Experience Leader: Q&A With USAA's Jeff Easley

At a time when banks often are public enemy No. 1, how did USAA Federal Savings Bank manage to top Forrester Research's 2012 Customer Experience Index? Simply by putting the customer first, says Jeff Easley, USAA executive director of deposits product management.
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The financial industry has experienced a swell of consumer discontent over the past year with the rise of movements such as Occupy Wall Street and Bank Transfer Day. But amid the negative attention being given to banks in recent months, San Antonio-basedUSAA Federal Savings Bank ($48.8 billion in assets) has been recognized for its efforts to satisfy its customers. The bank, which serves military personnel and their families, scored higher than any other institution in the most recent Customer Experience Index from Cambridge, Mass.-based Forrester Research, an annual study that this year surveyed more than 7,500 consumers about 160 brands across 13 industries. This is the first time in the survey’s five-year history that a bank topped the list, which includes retail giants such as Amazon, Costco and Kohl’s. Bank Systems & Technology senior associate editor Olivia LaBarre spoke recently with Jeff Easley, executive director of deposits product management at USAA, about how the organization has become a leader in customer experience and what it plans to do to keep its customers happy.

Bank Systems & Technology: How has USAA been keeping its banking customers satisfied during a time when public perception of banks has been notably negative?

Easley: Our mission is to facilitate the financial security of our members. That's our core value, that's our DNA. So a sustained focus on that has allowed us to continue to find ways to improve our customer service and deliver that value.

Our members are really first in terms of the decisions that we make. ... At a time when other institutions are adding fees, we're still offering a free checking account and reimbursing ATM fees that other banks charge. We offer free mobile banking and free web bill pay. We see that as our mission, and we make that core to what we do.

Bank Systems & Technology: Which specific innovations or initiatives have positively impacted the customer experience at USAA over the past couple of years?

Easley: Innovations such as Deposit@Home and Deposit@Mobile, the services that allow our customers to capture images of checks with their smartphones or their scanners at home, have been great innovations for us and bring great value to our members. In the past year, we launched a service at the UPS Store called Easy Deposit. This allows our members to deposit checks through the more than 2,000 UPS Store locations.

We've also been launching new financial centers, which are in major markets and allow our members to do more than just banking with us. They have the full range of products and services that we offer. We also launched Money Manager, our [personal financial management tool]. That was in 2010, and we've since seen great adoption of that capability, with high member satisfaction.

Bank Systems & Technology: What role does technology play in the customer experience at USAA?

Easley: The focus on our members is what drives our innovation. Technology is absolutely key to delivering on that promise of convenience to our members. We strive to provide a seamless, integrated solution and exceptional service in any channel, whether members are calling us for help or are using mobile or Internet channels. We use technology to be that one, consistent USAA while providing the channel of choice for our members.

We were also among the first to leverage technology for the deposit solutions I mentioned earlier. Some of that insight for developing those products was driven by how mobile many of our members are. Since [the military families that we service] move around the world and the United States as they do, mobile technology is certainly important in terms of how we provide services to them.

In our financial centers we have video telephony, which is another way to connect our members to our member services representatives in a face-to-face environment. That's also a key channel for us as well. Overall, technology permeates all of the services that we offer and has enabled us to provide that channel of choice to our members.

Bank Systems & Technology: How does USAA plan to maintain or even improve its customer experience?

Easley: We plan on continuing to invest heavily in making our channels better. We'll just continue to focus on what our members need and how these technologies and channels add value to them, make their lives easier and help move them up the financial security scale.

Mobile and tablets appear to be full of potential in terms of adding more value for our members. We'll certainly keep an eye on the industry and where things are going, and it's our priority to make sure we're there when technologies are available.

We understand the unique needs of our military families, and we want to be able to provide something great to our members and meet their lifestyles and their needs. In terms of our hard wiring, that's what we do and what we focus on. It's exciting to leverage technology and what's available in the marketplace and bring those things together to accomplish our mission.

A New Customer Experience Leader: Q&A With USAA's Jeff Easley

At a time when banks often are public enemy No. 1, how did USAA Federal Savings Bank manage to top Forrester Research's 2012 Customer Experience Index? Simply by putting the customer first, says Jeff Easley, USAA executive director of deposits product management.

The financial industry has experienced a swell of consumer discontent over the past year with the rise of movements such as Occupy Wall Street and Bank Transfer Day. But amid the negative attention being given to banks in recent months, San Antonio-basedUSAA Federal Savings Bank ($48.8 billion in assets) has been recognized for its efforts to satisfy its customers. The bank, which serves military personnel and their families, scored higher than any other institution in the most recent Customer Experience Index from Cambridge, Mass.-based Forrester Research, an annual study that this year surveyed more than 7,500 consumers about 160 brands across 13 industries. This is the first time in the survey’s five-year history that a bank topped the list, which includes retail giants such as Amazon, Costco and Kohl’s. Bank Systems & Technology senior associate editor Olivia LaBarre spoke recently with Jeff Easley, executive director of deposits product management at USAA, about how the organization has become a leader in customer experience and what it plans to do to keep its customers happy.

Bank Systems & Technology: How has USAA been keeping its banking customers satisfied during a time when public perception of banks has been notably negative?

Easley: Our mission is to facilitate the financial security of our members. That's our core value, that's our DNA. So a sustained focus on that has allowed us to continue to find ways to improve our customer service and deliver that value.

Our members are really first in terms of the decisions that we make. ... At a time when other institutions are adding fees, we're still offering a free checking account and reimbursing ATM fees that other banks charge. We offer free mobile banking and free web bill pay. We see that as our mission, and we make that core to what we do.

Bank Systems & Technology: Which specific innovations or initiatives have positively impacted the customer experience at USAA over the past couple of years?

Easley: Innovations such as Deposit@Home and Deposit@Mobile, the services that allow our customers to capture images of checks with their smartphones or their scanners at home, have been great innovations for us and bring great value to our members. In the past year, we launched a service at the UPS Store called Easy Deposit. This allows our members to deposit checks through the more than 2,000 UPS Store locations.

We've also been launching new financial centers, which are in major markets and allow our members to do more than just banking with us. They have the full range of products and services that we offer. We also launched Money Manager, our [personal financial management tool]. That was in 2010, and we've since seen great adoption of that capability, with high member satisfaction.

Bank Systems & Technology: What role does technology play in the customer experience at USAA?

Easley: The focus on our members is what drives our innovation. Technology is absolutely key to delivering on that promise of convenience to our members. We strive to provide a seamless, integrated solution and exceptional service in any channel, whether members are calling us for help or are using mobile or Internet channels. We use technology to be that one, consistent USAA while providing the channel of choice for our members.

We were also among the first to leverage technology for the deposit solutions I mentioned earlier. Some of that insight for developing those products was driven by how mobile many of our members are. Since [the military families that we service] move around the world and the United States as they do, mobile technology is certainly important in terms of how we provide services to them.

In our financial centers we have video telephony, which is another way to connect our members to our member services representatives in a face-to-face environment. That's also a key channel for us as well. Overall, technology permeates all of the services that we offer and has enabled us to provide that channel of choice to our members.

Bank Systems & Technology: How does USAA plan to maintain or even improve its customer experience?

Easley: We plan on continuing to invest heavily in making our channels better. We'll just continue to focus on what our members need and how these technologies and channels add value to them, make their lives easier and help move them up the financial security scale.

Mobile and tablets appear to be full of potential in terms of adding more value for our members. We'll certainly keep an eye on the industry and where things are going, and it's our priority to make sure we're there when technologies are available.

We understand the unique needs of our military families, and we want to be able to provide something great to our members and meet their lifestyles and their needs. In terms of our hard wiring, that's what we do and what we focus on. It's exciting to leverage technology and what's available in the marketplace and bring those things together to accomplish our mission.

FDIC Updates Stress Test Proposal

As part of its compliance with provisions of the Dodd-Frank regulation, the FDIC board is proposing stress testing for large banks, and says affected banks would benefit from "improved internal assessments of capital adequacy."
Illustrating that modernization of U.S. financial services regulation is still a work in progress, the Federal Deposit Insurance Corporation (FDIC) has approved a notice of proposed rulemaking (NPR) that would require certain large insured depository institutions to conduct annual capital-adequacy stress tests. 

The proposal, to implement section 165(i)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, would apply to FDIC-insured state nonmember banks and FDIC-insured state-chartered savings associations with total consolidated assets of more than $10 billion. The FDIC regulated 23 state non-member banks with total assets of more than $10 billion as of Sept. 30, 2011, according to an FDIC statement.

The Dodd-Frank Act requires each primary federal financial regulator, including the FDIC, to issue consistent and comparable stress-testing regulations for financial companies with total consolidated assets of more than $10 billion. In terms of its requirements, the NPR is substantively similar to a proposal the Federal Reserve published in December 2011. The FDIC's proposal will be published in the Federal Register with a 60-day public comment period.

According to the FDIC, the stress tests would provide forward-looking information that would assist the FDIC in assessing the capital adequacy of the banks covered by the rule. In its statement the regulator says, "The banks that would be required to conduct the stress tests also are expected to benefit from improved internal assessments of capital adequacy and overall capital planning."

In the NPR the FDIC defines "stress test" as a process to assess the potential impact of economic and financial conditions on the consolidated earnings, losses and capital of the bank over a set planning horizon, taking into account the current condition of the bank and its risks, exposures, strategies, and activities. The NPR describes the content of the reports institutions are required to publish, and the timeline for conducting the stress tests and producing the required reports.

FDIC Acting Chairman Martin J. Gruenberg said in the press release, "Both the FDIC and the institutions being tested will benefit from the forward-looking results that the stress tests will provide. The results will assist in ensuring an institution's financial stability by helping determine whether it has sufficient capital levels to withstand a period of economic stress."

FDIC Updates Stress Test Proposal

As part of its compliance with provisions of the Dodd-Frank regulation, the FDIC board is proposing stress testing for large banks, and says affected banks would benefit from "improved internal assessments of capital adequacy."
Illustrating that modernization of U.S. financial services regulation is still a work in progress, the Federal Deposit Insurance Corporation (FDIC) has approved a notice of proposed rulemaking (NPR) that would require certain large insured depository institutions to conduct annual capital-adequacy stress tests. 

The proposal, to implement section 165(i)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, would apply to FDIC-insured state nonmember banks and FDIC-insured state-chartered savings associations with total consolidated assets of more than $10 billion. The FDIC regulated 23 state non-member banks with total assets of more than $10 billion as of Sept. 30, 2011, according to an FDIC statement.

The Dodd-Frank Act requires each primary federal financial regulator, including the FDIC, to issue consistent and comparable stress-testing regulations for financial companies with total consolidated assets of more than $10 billion. In terms of its requirements, the NPR is substantively similar to a proposal the Federal Reserve published in December 2011. The FDIC's proposal will be published in the Federal Register with a 60-day public comment period.

According to the FDIC, the stress tests would provide forward-looking information that would assist the FDIC in assessing the capital adequacy of the banks covered by the rule. In its statement the regulator says, "The banks that would be required to conduct the stress tests also are expected to benefit from improved internal assessments of capital adequacy and overall capital planning."

In the NPR the FDIC defines "stress test" as a process to assess the potential impact of economic and financial conditions on the consolidated earnings, losses and capital of the bank over a set planning horizon, taking into account the current condition of the bank and its risks, exposures, strategies, and activities. The NPR describes the content of the reports institutions are required to publish, and the timeline for conducting the stress tests and producing the required reports.

FDIC Acting Chairman Martin J. Gruenberg said in the press release, "Both the FDIC and the institutions being tested will benefit from the forward-looking results that the stress tests will provide. The results will assist in ensuring an institution's financial stability by helping determine whether it has sufficient capital levels to withstand a period of economic stress."

Target Holds Credit Card Sale While Paying Off Chase Debt

Target Corp is temporarily suspending its efforts to sell its portfolio of credit card receivables and plans to restart talks with several potential buyers later this year after paying off financing it has with Chase.
Target Corp is temporarily suspending its efforts to sell its portfolio of credit card receivables and plans to restart talks with several potential buyers later this year after paying off financing it has with Chase.

Target said last January that it was actively pursuing a sale of the portfolio. As recently as late November, the company said it was in talks and a deal could be reached as early as the fourth quarter of 2011.

However, on Wednesday, Target signaled a change in course, saying that talks with a limited number of potential partners helped it determine that a pause in those talks and paying off financing it has with Chase would help it reach an agreement on acceptable terms later in 2012 or early in 2013. It gave no other details for the delay.

The company's credit card delinquency rates have improved this year. In December, only 3.1 percent of accounts had three or more payments past due, down from 4.2 percent a year earlier. Just 2.2 percent of accounts had four or more payments past due, down from 3.1 percent a year earlier.

Target's shares fell 1.9 percent to $48. 96 in morning trading on the New York Stock Exchange.

Target said it would retire financing it got from Chase Card Services, a unit of JPMorgan Chase & Co, for 2008 receivables, and that step would allow it to shop the portfolio around once talks with potential buyers resume. A payment related to that move will cut into the company's fourth-quarter earnings.

Target is only looking to sell the debts it is owed by cardholders. It would retain control of its credit card operations, which are part of a key marketing strategy.

Since 2010, Target has offered 5 percent discounts to shoppers who use its branded credit card. Last year, in another push to generate more sales, it added the incentive of free shipping for online orders placed with the so-called REDcard.

The discount retailer now expects a sale of the receivables to happen late this year or early in 2013 -- about a year later than originally planned.

Target said it will pay Chase about $2.8 billion to retire its financing now, before the expected payoff in late 2013. The payment and a make-whole premium will cut its fourth-quarter earnings by 8 cents per share. Earlier this month, Target forecast earnings of $1.35 to $1.43 per share for the holiday quarter.

Target expects to recoup some or all of the cost of the premium through lower expected interest expense in 2012 and 2013. (Reporting by Jessica Wohl in Chicago and Phil Wahba in New York; Editing by Gerald E. McCormick and Maureen Bavdek)