Democrats target credit bureaus; premium card lenders retreat

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Picking up the pieces
Last year’s stunning drop in the value of digital currencies — with losses costing investors about $700 billion — likely means that “institutional investors will be wary of owning too much of the much smaller but still risky market," the Wall Street Journal says. “Where does the digital currency market go now that many speculators have been wiped out? It will take a lot of new liquidity to offset what’s been lost.”

Yet Eswar Prasad, a professor at Cornell University, still sees a future for blockchain, the technology underlying bitcoin and other cybercurrencies, which he says “could transform the worlds of finance and central banking.” In a Financial Times op-ed, Prasad, who is also a senior fellow at the Brookings Institution, says “central banks, including the U.S. Federal Reserve, need to figure out the implications of such distributed ledger technologies and how to adapt to them. At the very minimum, there are looming changes to how central banks run monetary policy and ensure financial stability.”

Wall Street Journal

Back in the spotlight
Credit bureaus, which have "largely escaped" new federal oversight following the massive Equifax hack of 2017, will likely get renewed scrutiny as the Democrats take over the House. “House Democrats have put legislation responding to the Equifax hack at the top of their agenda. A handful of existing proposals, some bipartisan, offer a road map for possible changes to how the industry handles consumer information, including subjecting credit-reporting companies to tougher cybersecurity standards and making it easier for consumers to fix errors on their credit reports.”

Coming home to roost
Ultra-premium rewards credit cards "have turned into financial albatrosses" at many large banks, causing many of them to pull back on the business. “After ratcheting up the perks for several years, banks hit peak rewards frenzy about two years ago,” the paper reports. “Now banks face increasing costs associated with the cards. Consumers have figured out how to game the system, spending just enough to earn generous sign-up bonuses — then abandoning the cards in a drawer. Others pay their bills in full and avoid interest charges and late fees.”

Changing places
Cross-border bank debt has fallen nearly 17% since the 2008 financial crisis, a “10-year period of decline and stagnation unprecedented in the records of the Bank for International Settlements.” The retreat is “a rare example of a sector in which leverage has been curtailed even as global debt has boomed.”

Financial Times

No home field advantage
American and European banks “could steal a march on” rival British banks on their home turf this year thanks to “landmark” regulations that took effect on Jan. 1. The rules, which the paper calls the “biggest sectoral overhaul in a generation — and one that has been more costly and complicated in its planning than Brexit for the U.K. banking industry” — requires British banks to “ringfence” their retail business from their riskier investment banking operations. But the rules don’t apply to foreign banks doing business in the U.K., which has led to concerns that “the largest U.K. lenders could lose ground to their European and U.S. rivals.”

Going mobile
Despite a nationwide crackdown by the People’s Bank of China on merchants who refuse to accept cash, the volume of mobile payments in the country “is quickly rendering cash obsolete.”

“The government has taken a series of steps to ensure Ant Financial and Tencent” — the two largest mobile payments providers — “do not grow too powerful.” Nevertheless, mobile payments volume more than doubled in 2017 from the previous year, and “refusing cash has become relatively common” at some merchants.

Elsewhere

Too big to print
The European Central Bank will stop printing 500-euro banknotes later this month. “Because of its high value and portability, experts believe the 500-euro note had become prized by criminals for money laundering and even terrorist financing, earning the nickname ‘Bin Laden’ in some circles.”

Quotable

“The Equifax data breach response is far from over. There will be more legislation in the next two years that impacts Equifax and the other credit bureaus.” — Jaret Seiberg, an analyst with Cowen Washington Research Group.

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