BankNews Jan. 2015

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Chair Janet Yellen Speaks on Monetary Policy and Financial Stability

July 3 – Federal Reserve Chair Janet L. Yellen addressed monetary policy and financial stability at the 2014 Michel Camdessus Central Banking Lecture, International Monetary Fund, Washington, D.C. Below are her comments.

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Ranking Member Waters Leads House Democrats in Supporting Janet Yellen for Federal Reserve Chairman

Aug 1 – Financial Services Committee Ranking Member Maxine Waters, joined by 37 of her fellow Democrats, delivered a letter urging President Obama to nominate Janet Yellen, current vice chairman of the Board of Governors of the Federal Reserve System, to replace Ben Bernanke as chairman of the Federal Reserve when his term expires.

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Fed Vice Chair Janet L. Yellen Gives Outlook on the Economy

October 21 – Federal Reserve Vice Chair Janet L. Yellen gave a presentation titled, “The Outlook for the U.S. Economy and Economic Policy” at the Annual Meeting of the Financial Management Association International. Her comments follow:

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NACHA Board of Directors Elects New Officers, Adds New Members

January 20 – NACHA The Electronic Payments Association has announced the election of new officers and the addition of five new and two re-elected members to its Board of Directors. The Board consists of 19 voting members representing a diverse set of depository financial institutions of all sizes and types that support and warrant the payments on the ACH Network.

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Community Banker Legislation Passes Senate as Part of Terrorist Risk Insurance Act

January 9 – U.S. Sen. David Vitter (R-La.) has announced that the Terrorist Risk Insurance Act (TRIA) passed with his legislation to require the Federal Reserve Board of Governors to have at least one member with community bank or community bank supervision experience. TRIA passed the Senate today, with Vitter’s legislation, 93-4.

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NACHA Seeks Comment on Same-Day ACH Proposal

December 9 – NACHA — The Electronic Payments Association has released a Request for Comment on same-day ACH. The RFC outlines a proposal for new, ubiquitous clearing and settlement options to move virtually any ACH payment faster, expanding upon traditional ACH functionality.

“In today’s environment, everyone wants things faster, including payments,” said Janet O. Estep, president and CEO of NACHA. “Moving forward now signals an immediate, tangible commitment to provide choices for the consumers, businesses and government agencies who want to move money more quickly and efficiently, directly between bank accounts.”

In March 2014, NACHA announced a “phased approach” to implementing new Same Day ACH functionality, and that phased implementation approach is the basis for this Same Day ACH proposal. This approach introduces two new same-day settlement windows, for a total of three ACH Network settlements each day.

In developing the proposal, NACHA engaged an external, expert consulting firm to independently evaluate the industry’s costs, potential use cases and transaction volume for Same Day ACH. More than 200 surveys and in-depth interviews were conducted with financial institutions of all sizes, businesses, and core banking processors to get detailed information on anticipated volumes, opportunities and costs.

The research outlined how same-day ACH payments would be generated from 10 primary use cases, and 63 sub-use cases, including same-day payrolls, expedited bill payments, business-to-business (B2B) payments, and account-to-account (A2A) transfers. The majority of same-day ACH payments are expected to enhance existing ACH applications, giving consumers and businesses the choice of speed.

“Same-day ACH serves a variety of end-user needs,” said Estep. “It creates options for both credit and debit payments, and also supports existing capabilities of the ACH Network to send significant information with the payments.”

Under NACHA’s proposal, all Receiving Depository Financial Institutions (RDFIs) will be mandated to receive same-day ACH files and to make funds available to their customers by the end of the work day. These requirements ensure certainty and value for consumers, businesses and government agencies who want the option to send same-day ACH payments to any bank account in the U.S.

To support this ubiquity, the RFC also introduces an interbank fee as a mechanism for RDFIs to recover the implementation and ongoing costs necessary to enable Same Day ACH. The fee would be paid to the RDFI, which would be required to implement and support same-day payment receipt, by the Originating Depository Financial Institution (ODFI), which would have the opportunity to support new payment offerings for its customers.

“Being able to move payments faster to every financial institution in the U.S. is critical to creating value for the consumers, businesses and government agencies who move their money via ACH,” said Estep. “Requiring RDFIs to implement Same Day ACH ensures this value, and the use of an interbank fee supports this requirement.”

The proposal also includes a built-in “checks and balances” methodology to measure the effectiveness of the interbank fee at defined intervals, with opportunities to reduce the fee if actual Same Day ACH volume exceeds projections.

“Same-day ACH is an essential step to move payments faster,” remarked Estep. “It creates a solid foundation on which to build innovative services that meet today’s demands and tomorrow’s needs. We look forward to hearing feedback on the proposal and to moving forward with Same Day ACH.”

The RFC is open until Feb. 6,  and NACHA has created a number of resources to support greater industry understanding of the proposal. All ACH stakeholders are encouraged to participate in rulemaking and respond to the RFC. For more information about Same Day ACH or to comment, visit www.nacha.org/same-day-ach.

Stop Fiddling With the Fed

Could Congress do monetary policy and bank regulation better?

By Bill Poquette, Editor-in-Chief

A year ago this month, on Dec. 16, a ceremony at the Federal Reserve marked the centennial of the signing of the Federal Reserve Act. At that point a year-long observance was launched, with frequent references to the centennial and special portals devoted to it on the websites of the Board of Governors and the regional banks.

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Fed Proposal Would Levy Risk-Based Capital Surcharge on Largest Holding Companies

December 9 – The Federal Reserve Board has proposed a rule to further strengthen the capital positions of the largest, most systemically important U.S. bank holding companies.

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Many Happy Returns?

By Jeff Goble
The Federal Open Market Committee commenced its historic quantitative easing bond-buying program in November 2008. You may recall that Lehman Brothers, a major Wall Street brokerage firm chartered in 1847, had failed three months earlier. The Dow Jones Industrial Average hit a low of 6,547 on March 9, 2009. These were the worst economic conditions since the Great Depression, and uncertainty ruled the markets. In my opinion, the Fed had no other choice but to step in and initiate historic measures.

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U.S., U.K. Banking Regulators Meet to Discuss Issues Surrounding ‘Global Systemically Important Banks’

October 13 – The heads of the treasuries and leading financial regulatory bodies in the United States and United Kingdom recently participated in an exercise designed to further the understanding, communication, and cooperation between U.S. and U.K. authorities in the event of the failure and resolution of a global systemically important bank, or G-SIB.

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