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Rate Rise on the Horizon? Continued global economic woes look likely to continue to put a damper on the possibility of the Federal Reserve electing to raise rates this week. Recently, China has reported soft GDP growth, and Japan eyed a major decline in export growth, the Wall Street Journal reports. Instability at the global economic level helped fuel the Fed’s previous decision not to raise rates in September. Of course, it’s not only global economic factors that are likely to persuade the Fed against taking action on interest rates. The U.S. job market growth has weakened since the last Fed meeting, and an improving labor market was a factor that Fed chair Janet Yellen cited as necessary to “bolster” confidence in an inflationary move, the Financial Times writes.
Investors, like economists, remain pessimistic on the chances of a Fed move — in large part because of other central banks around the world. The European Central Bank has slashed its inflation outlook for this and the following two years, saying it could expand its bond-buying program, the Journal reports. In Asia, the People’s Bank of China cut interest rates yet again, and the Bank of Japan looks poised to do the same. Altogether, it seems more and more unlikely that the U.S. central bank will raise rates when its foreign counterparts are doing the exact opposite.
Wall Street Journal
Financial services giant USAA announced it will switch its payment card portfolio to Visa — a major shock to MasterCard, which served the company for around 30 years. The move is a rare one, considering the depth of USAA’s relationship with MasterCard. Before the switch, USAA had been MasterCard’s biggest debit-card issuer, a position now filled by Fifth Third Bancorp, the paper notes.
Citigroup was sent into a panic in July after a series of trades by a small U.K. hedge fund and lapses in bank-risk controls cost the company up to $400 million. The financial hit was recorded in the bank’s second-quarter earnings as a $175 million charge for “valuation adjustments related to certain financing transactions,” but the paper notes details are just coming to light. The incident brings yet another major institution into the debate regarding the effectiveness of banks’ risk management controls, following issues at Deutsche Bank and Bank of New York Mellon Corp.
A study from Accenture finds bank directors could stand to brush up their skills when it comes to technology. The study indicated only 6% of directors globally have any technology experience despite the growing importance of technology know-how given cybersecurity risks and upstart digital challengers. Additionally, more than half of the 109 biggest banks in the world had no board member with technology experience. The U.S. and the U.K. banks outpace those elsewhere in this metric, according to the study.
Royal Bank of Scotland will become the first bank in the world to adopt Facebook at Work, the new in-house social media platform launched by the California company. The bank’s 100,000-person workforce will have access to a mobile app and desktop site to communicate. RBS will become Facebook’s largest corporate customer and will get the service for free for now, until Facebook begins charging for features such as integration with Microsoft Office products.
New York Times
An academic study notes earnings misstatements often had a sort of domino effect. The study found if one company restated earnings, others in the same industry would often end up doing the same. This, however, didn’t happen often when the initial company faced regulatory action, litigation or wide news coverage of its errors.
Quartz: As part of an effort to strengthen soiled reputations and avoid future scandals, some banks have begun to take a novel approach: hiring soldiers. Banks, including Barclays, have ramped up their recruitment former armed forces members. While these new recruits may not have the expertise of their counterparts who went to colleges like Harvard or Oxford, banks benefit from their strong moral compasses and trustworthiness.