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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)

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