Wall Street Journal

Banks have turned to home equity lines of credit as a means of counteracting a slowdown in refinancing and the continued depression of mortgage originations. In 2015, lenders loaned $156 billion to consumers through HELOCs, the highest amount since 2007 when the housing bubble burst and nearly a quarter higher than in 2014. And the average line of credit is also hitting new highs at $119,790, according to CoreLogic. The push for these lines of credit signifies a change of heart for many banks that had drawn down this segment or exited the market entirely following the housing downturn. Aiding them this time around, however, is a spike in home prices, which is allowing consumers to tap into more money through the loans. Still, banks aren’t taking too many chances: They’re requiring higher credit scores, and homeowners typically are capped in terms of the equity they can take out of their homes.

Splitting up a big bank like Citigroup may remain a pipe dream, akin to becoming a mermaid, the paper says. While Keefe, Bruyette & Woods analysts think a smaller Citigroup is what the doctor ordered, such an endeavor may fall firmly in the category of “easier said than done.” KBW in particular advised that Citigroup should sell its Banamex unit. Part of the problem though, according to Federal Financial Analytics’ Karen Shaw Petrou, is Citigroup may find a dearth of interested buyers for the unit. The banks that typically would jump at such a deal – HSBC, Standard Chartered and Barclays, among them – are dealing with their own troubles. And while Banamex could theoretically be spun off, it could easily become burdened with a lower credit rating. So, it seems that for now anyway Citigroup might just be caught between a rock and a hard place.

In the Philippines, consumers have their social media accounts to thank for their latest loans. The Southeast Asian country has become a hotbed for alternative credit scoring practices. A vast majority of the country’s population, roughly 70%, eschew traditional bank accounts, and only 4% have credit cards. Consequently, when folks need a loan, they historically faced limited options given their poor credit histories and turned instead to family and friends. But now, companies like Lenddo are bridging the credit rating gap and helping alternative lenders provide these unconventional customers with loans. Lenddo creates credit ratings based on social media and e-mail accounts. But the company doesn’t just look at the content of those accounts, but also the person’s usage of the accounts. So if they’ve had an e-email account for a long time and use it regularly, they’re considered more reliable.

Financial Times

Italy’s first bank merger in a decade could set the stage for further consolidation across the country’s financial services industry. Last week, Banco Popolare di Milano and Banco Popolare agreed to merge, creating Italy’s third-largest bank with roughly $190 billion in assets. It’s the first merger since a law was passed last year that required Italy’s 10 largest banks to become joint stock companies by the end of 2016 in a bid for greater consolidation across a banking industry that features more than 600 banks. Other banks have either become merger targets or expressed interest in a sale, including UBI Banca, Banca Monte dei Paschi di Siena and Banca Carige. But Italy’s banks may find it difficult to merge given the European Central Bank’s demands for capital raises and improved governance, which can make the process of a sale more difficult.

For the world’s largest investment banks, consumer reporting failures have added up to nearly $43 billion in fines, according to analytics firm Corlytics. The list of banks fined includes Bank of America, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley and UBS. Overall, Corlytics found that fines over the past seven years for everything from reporting issues to exchange rate rigging have cost the companies roughly 14% of their equity. Second most expensive, after consumer reporting issues, was problems with the sale of residential mortgage securities. These fines cost the banks a total of nearly $28 billion. Securitization and rate setting led to $14.6 billion and $20.2 billion in fines respectively for the 10 banks. The big takeaway from the data: diversified companies pose more risk and thus the potential for more costs tied to regulatory burdens and fines.

New York Times

Bitcoin no longer hogs the virtual currency spotlight, as a competitor has attracted attention from the likes of JPMorgan Chase and Microsoft. The currency, called Ethereum, has been described as “Bitcoin 2.0.” and over the past quarter has spiked 1,000% in value, drawing more interest than any other bitcoin alternative. Similar to bitcoin, Ethereum relies on blockchain technology that publicly records every transaction. But Ethereum offers more than just the currency, including means of creating online markets and transactions called smart contracts. Applications developed through Ethereum allow for people “to manage and pay for electricity, sports bets and even Ponzi schemes.” But the new platform’s luck could run out. Some of its success may stem from the fact that it has yet to face the scrutiny that bitcoin has – and given its wider array of applications, Ethereum may draw even more ire. Still, that risk hasn’t stopped IBM and Microsoft from experimenting with Ethereum’s usefulness. And as long as bitcoin faces continued in-fighting among its community of adopters and developers, observers say, Ethereum may have a chance to make it big.

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