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Banks in new fee schemes Americans are about to see red on bank debit card fees
Bank of America Corp. has stoked some controversy with plans to begin charging $5 a month for debit card purchases next year, though not at the ATM. Other big banks are in the process of testing a similar concept, or plan to, according to The Wall Street Journal.
The banks are scrambling to make up for lost revenue when new limits on swipe fees come into effect tomorrow, capping the amount banks charge retailers for customers swiping with debit cards. Those ceilings are expected to cost Bank of America, for example, $2-billion a year in lost revenue.
The issue's touchy, of course, given the era of bank bailouts.
Senator Dick Durbin of Illinois, who was instrumental in the caps, accused the bank of "sticking it to its customers," in a statement issued yesterday.
"Swipe fee regulation will still allow banks to cover the actual costs of debit transactions but will rein in the banks' excessive profit-taking," he said.
"Small business and merchants will benefit from fee relief and consumers will benefit from lower prices. And banks that try to make up their excess profits off the backs of their customers will finally learn how a competitive market works."
A Bank of America spokeswoman said the "economics" of offering debit cards have changed, given new regulations.
"Customers who don't want to pay this fee can continue to access their checking accounts to get cash from ATMs, through online bill pay, and increasingly through their mobile phones, she said.
"We'll notify customers in writing at least 30 days before we begin applying this fee.The fee will be waived for customers with certain premium accounts. In addition, In addition, Wealth Management/Merrill Lynch and US Trust clients will not be charged the fee."
A bad day, a bad quarter Say goodbye to one ugly quarter.
Stocks sank today and currencies were roiled as economic jitters again sapped the optimism of investors, closing out a third quarter many investors would like to forget.
The Canadian dollar slipped below 96 cents U.S., hitting its lowest level in about a year and closing down more than a penny at 95.40 cents. For a sense of the volatility, look at trading yesterday, when the currency was as high as 97.50 cents and as low as 96.13 cents.
Once the jitters fade, said Camilla Sutton and Eric Theoret of Scotia Capital, the loonie should regain some of its losses.
"There is increasing evidence that as the appetite for the [U.S. dollar] fades, there is pressure to find other alternatives," they said in a research note today. "... Canadian fundamentals fit the mold for a potential reserve currency well, however the capital markets fail miserably in terms of liquidity. Still, there has been anecdotal evidence that global central banks have interest in diversifying at least a minor portion of total reserves into [the Canadian dollar]
A softer currency, of course, can provide a bit of economic juice. David Watt, senior fixed income and currency strategist at RBC Dominion Securities, noted yesterday that the exchange rate acts as a "shock absorber." A shock to the system, particularly where global demand is concerned, will generally push commodity prices down and the U.S. greenback up.
"A weaker [Canadian dollar]would be the first line of defence of the Canadian economy from heightened global uncertainty," Mr. Watt said.
"In a perfect world, the currency adjusts to cushion the real economy. Other macro policy levers (fiscal and/or monetary) would be available as required and [Finance Minister Jim Flaherty]has pledged to be 'responsive, flexible and pragmatic.'"
In the stock markets, Tokyo's Nikkei closed down slightly, while Hong Kong's Hang Seng slipped 2.3 per cent. Stocks were then hammered in Europe, and North America followed suit, with the Dow Jones industrial average , the S&P 500 and Toronto's S&P/TSX composite all down.
Vincent Delisle, also of Scotia Capital, thinks it's overdone, and that while recession risks have heightened, the markets "may be overpricing this outcome." The gloomy headlines, he said today, don't correlate with the actual damage to the economy and corporate earnings.
"When comparing the 2008 meltdown to the 2011 selloff, it looks like markets are 'shooting first' and 'ask questions later,'" he said.
Economy grows Canada's economy kicked off the third quarter with growth in July of 0.3 per cent, following a bad second quarter.
Manufacturing and mining were the main drivers, though other sectors also gained, The Globe and Mail's Jeremy Torobin reports. The factory sector grew 1.4 per cent, rebounding from three straight months of contraction, Statistics Canada said. Mining output also climbed, by 2.9 per cent, largely on rebounds for copper, lead and zinc mining after production troubles had slowed things down.
On the other side, construction contracted 0.3 per cent, and the home resale market slipped 1.1 per cent.
"Overall, a healthy gain – although recent indicators suggest some potential deceleration in the following months, which should leave [third-quarter]GDP at around 2 per cent annualized," said Emanuella Enenajor of CIBC World Markets.
Economist Krishen Rangasamy of National Bank of Canada said a technical recession - that would be marked by another contract in the third quarter, which ends today - appears "highly unlikely."
"Sectors of the economy that were hit hard in [the second quarter] because of temporary factors, like autos, are now bouncing back," he said.
"The good handoff from June and the strong start to [the third quarter] puts Canada on track for growth of roughly 2 per cent annualized in the third quarter. Our own concerns are mostly about [the fourth quarter] given the slump in business and consumer confidence and a slow moving U.S. economy, as well as next year when fiscal drag is expected to hit on both sides of the 49th parallel."
Minmetals bids for Anvil China's Minetals Resources Ltd. is taking another run at a resources company.
The Chinese concern is bidding $1.3-billion, or $8 a share in cash, for Anvil Mining Ltd. . This time, it's a friendly deal, The Globe and Mail's Brenda Bouw reports.
Several months ago, Minmentals was outbid by Barrick Gold Corp. after it launched a hostile offer for Equinox Minerals Ltd.
Anvil owns the Kinsevere project in the copper-rich Katanga province in the Democratic Republic of Congo, and this would mark the first foray into Africa by Minmetals.
What ails Europe To get a sense of what's wrong with Europe, look no further than the comments today from the president of the European Commission.
Jose Manuel Barroso told a German newspaper that a proposal from Germany and France - they want regular meetings of EU to effectively manage the economy - won't work and is an "illusion."
Whether Mr. Barosso is right or wrong isn't the issue here. Rather, his comments are yet another sign that the continent's leaders can't get their act together, and certainly aren't sending signs of unity to jittery markets.
There are several developments again today in the debt crisis that is hobbling the 17-member euro zone:
- Spain nationalized three banks.
- The inspectors from the European Union, the European Central Bank and the International Monetary Fund who are reviwing Greece's plans, a key step in getting more bailout money, had to reschedule a meeting today because civil servants were occupying a ministry building.
- Portugal's statistics agency revised last year's deficit to a higher 9.8 per cent of gross domestic product.
There had been a sense of relief in the monetary union after Germany's Bundestag voted to support a beefed-up rescue fund, which must be ratified by all 17 countries. That clearly didn't last long, though Austria approved it today.
"The biggest obstacle is Slovakia where they are due to vote on 25th October and where the government is struggling to muster support, against a fierce backdrop of opposition from certain elements in the opposition parties," said CMC Markets analyst Michael Hewson.
"While markets breathed a shallow sigh of relief that Europe's biggest economy is now on board for this particular change, everyone knows the problem has once again been pushed out into the future again. There is also the added problem that voters within the various European countries are now waking up to the fact that this could well be a problem without an end, and without any indication what the final bill is likely to be."
- Barroso slams French-German EU proposal
- Unthinkable for Slovaks to stall rescue fund: EU
- Fears remain enhanced EU fund still not big enough
Inflation climbs The European Central Bank is between a rock and a hard place, with growth slowing and the monetary union in crisis, though with inflation climbing.
Eurostat, the statistical agency, today estimated the euro zone's annual inflation rate at 3 per cent in September, up from 2.5 per cent in August. At the same time, the region's unemployment rate held steady at a high 10 per cent for August.
The disparity in the group is stunning. At the bottom end, Austria, the Netherlands and Luxembourg have jobless rates of between 3.7 per cent and 4.9 per cent. Latvia, Greece and Spain, on the other end of the spectrum, are now struggling with unemployment of between 16.2 per cent and 21.2 per cent.
The elusive parking spot? It's the Friday of a somewhat hectic week, so let's forget about GDP, the euro zone crisis and the ups and downs of the markets for a moment, and focus on an area where we appear to have the upper hand.
It turns out Canadians are relatively mild-mannered when it comes to fights over parking, based on survey results from Toronto and Montreal, and we don't have that bad a time of finding spots compared to other big cities.
IBM yesterday released its first-ever parking study, a survey of more than 8,000 commuters in 20 centres. We all know what it can be like heading to work or shopping, but it turns out we're better off than we may know.
The overall survey measured how much time it takes looking for a spot, the inability to find one, fights over spaces and parking tickets. The worst cities were New Delhi, Bangalore, Beijing, Moscow, Shenzhen, Paris and Milan, and the best included London, New York, Montreal, Buenos Aires, Toronto, Los Angeles and Chicago.
I particularly liked the measures on fighting over parking spots. The most likely drivers to get into a spat, according to the IBM survey, are in Delhi, Bangalore, Nairobi and Milan, while the least likely are in Chicago, Los Angeles, Stockholm, Montreal, Singapore and Toronto.
"In addition to the typical traffic congestion caused by daily commutes and gridlock from construction and accidents, reports have estimated that over 30 per cent of traffic in a city is caused by drivers searching for a parking spot," IBM said.
"Not only do inefficient parking systems result in congestion and increased carbon emissions, they also waste commuters' time, lead to lost productivity and economic opportunities and can lead to inefficient city services."
Toronto and Montreal were the only Canadian cities in the survey.
Headlines of note
- Talks underway on Dow Jones, S&P deal
- U.S. regulators bowed to banks on bailout: watchdog
- Hunt is on for quality stocks with stable profitability
In Economy Lab When you put things in historical perspective, current conditions in the jobs market are at least as good as one might expect after two years of recovery, Stephen Gordon writes.
In International Business What began as a wave of global M&A in stock exchanges has settled on London, Jeremy Grant of The Financial Times reports.
In Globe Careers When it comes to teamwork, "good eggs are not as contagious as bad apples," The Globe and Mail's Wallace Immen finds.
From today's Report on Business