The TBTF (Too Big to Fail) Landscape

Throughout the 2008 crisis, governments around the world came to the aid of the ailing financial sector in various ways. Bottom line is that the banking industry received massive public support with some banks receiving government funding or becoming nationalized.

However, scarce capital relative to bank risk increased the depth of the financial crisis and the cost of government involvement. Hence, reforms passed under the Dodd-Frank Act are designed to reduce the probability of too-big-to-fail (TBTF) bank failure by increasing minimum capital levels. While that makes sense in theory, is this working in practice? In other words, should excessively large banks be prevented from failing for the public good?

Big Banks: Too Big?

The Dodd-Frank Act was designed to avert a repeat of the 2008 crisis and prevent governments from having to rescue big banks. However, the largest banks in the U.S. are bigger today than they were prior to the meltdown. Five banks (JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, and Goldman Sachs) held more than $ 8.5 trillion in assets at the end of 2011 compared to $6 trillion in 2006.

There is a legitimate concern that Dodd-Frank Act legislation has not solved the problem of putting taxpayer money on the hook for TBTF banks.

The Dodd - Frank Act Legislation

Title II of the Dodd-Frank Act created the Orderly Liquidation Authority. Under this special process, the Federal Deposit Insurance Corporation (FDIC) has the power to bail out a large financial institution under crisis.

To minimize widespread consequences, the FDIC will allocate a selected portion of the firm's asset and liabilities to a new institution, allowing some creditors to receive higher payments than under a bankruptcy or a bailout.

However, bailing out some creditors can have a negative effect that actually increases the chance of bank failure. Generally, creditors administer risk undertaken by a financial firm by cutting their exposure. A bailout will put them in a comfort zone and gives them less reason to be cautious.

Moreover, the shareholders in a failing bank, unlike creditors bailed out under Dodd-Frank, will not be protected, causing uncertainty throughout the bailout process.

The Steps Ahead

Industry experts are proposing various methods to ensure the stability of the industry and address the problem of TBTF.

Restructure big banks: According to Richard Fisher, president of Federal Reserve Bank of Dallas, the corporate entities of large financial institutions should be reorganized to ensure a speedy bankruptcy process. Smaller banking entities that are more in line with the 99.8 percent of banks in the U.S. are easier to regulate.

Expose big bank assets: U.S. accounting principles allow banks to cover up derivatives trading: U.S. banks hide about $5 trillion in derivatives assets in their balance sheets. Industry pundits believe U.S. banks should adopt International Financial Reporting Standards (IFRS) t0 reveal assets held in derivatives. Moreover, following IFRS guidelines will force banks to disclose their true book to market ratios. True book-to-market-value ratios will be less than 1.0, in a sense restructuring all big banks into small operational units.

Expose the use of special purpose entities: The special purpose entity--an accounting device engaged by Enron to hide its debts--is finding its place again. Wells Fargo's "variable interest entities" had total assets of about $1.5 trillion by the end of 2011 as cited by Forbes. Industry experts demand transparency in these activities.

Examine banks' role in the economy: The key function of banks is to increase opportunities and condense the risk for citizens and enterprises. The monetary help banks receive from the Federal Reserve has no positive impact on the economy. Banks are doing well and getting bigger, but the real economy is struggling. Efforts should be made to monitor bank activities devoted to uplifting the economy.

Expose "bad profits" practices: In their quest for profits, a few banks began practicing what is commonly known as "bad profit practice" such as rigging LIBOR rates, mistreatment of foreclosures, tax dodging activities, and money laundering. New regulations designed by the Federal Reserve and other governing bodies should make industry reporting more transparent and make it easier to keep a close eye on such practices and thus, track the impact of bank practices on the economy.

The Future

The Dodd-Frank Act includes procedures to wind down troubled institutions. But in order for Dodd-Frank to succeed, regulators must take stern steps against large, politically interconnected, and powerful companies. The Federal Reserve must encourage the financial sector to provide transparency. If banks fulfill the purpose of their existence in the economy, then profits will follow.

High Loan To Value Mortgages Remain Elusive

Over the last six years, since the beginning of the banking crisis, the number of deals offered to high value mortgage clients has decreased. As lenders have fallen by the wayside and those that remain have become more reluctant to lend, the choice of large mortgage deals of one million pounds or more has fallen sharply.

However, research has found one area which has benefited over that time. High deposit mortgages, for people looking to borrow less than 60 per cent of their home's value, have increased significantly as lenders compete for this low-risk business.

Research from financial analysts Moneyfacts has discovered that the number of mortgage products in the 60 per cent 'loan to value' bracket has rocketed in recent years. Prior to the banking crisis high 'loan to value' mortgages of 90 per cent or more were the norm, as were high income multiples but such mortgage deals are now almost non-existent. Now that 60 per cent 'loan to value' mortgages are the norm the first time buyer market has stagnated but banks and other lenders remain keen to secure high deposit mortgage business.

While mortgage deals for first time buyers and at higher loan to values are still hard to come by, there are plenty of deals if you have a large depositof 40 per cent or more. The low risk nature of this type of borrowing has led many lenders to offer superb rates in order to attract good quality large mortgage business.

As well as high deposit mortgage deals from mainstream lenders, there are also countless more products available through private banks in the UK and overseas. High value mortgage clients who need over £500,000 at a low loan to value have a superb choice of deals right now. The Government's Funding for Lending scheme has been a contributing factor to the increased choice of deals.

However, some experts believe the government initiative is not targeting the right type of borrower; those looking for a 90 per cent loan to value, which the initiative was designed to help. The scheme effectively has just widened the choice of deals for those who already had a choice.

If you're struggling to agree a home loan, you're not alone. Banks and other lending institutions are focusing more than ever on profitable clients only and even some higher net-worth clients are feeling the effects. And, it's not just the large high street banks and building societies that are limiting the deals available. Privatebanks, which have traditionally prided themselves on establishing personal relationships with their customers, have begun to weed out the less profitable clients.

High 'loan to value' mortgages for high net worth finance clients arealso harder to obtain as some smaller banks are ceasing lending for such home loans. Fortunately, there are still some private banks with an appetite to lend to large mortgage clients and a number of London mortgage brokers have developed relationships with private banks in the UK and overseas who are still keen to lend to high net worth individuals, oftenwith extremely competitive pricing.

Situations When A Financial Advisor Will Help With Retirement Savings

Nearly 6 million people contribute to a retirement savings plan each year. This is only 24 percent of the eligible population of the country. The average contribution towards retirement savings is less than 4 percent of the disposable income of a household. This is placing many people in a position where it will be necessary to work beyond the traditional retirement age in order pay bills. One solution is to hire a financial advisor to help create a more structured and realistic plan for retirement. There are several reasons to hire an advisor.

No Financial Experience

Even the most well-educated professionals often have a limited amount of knowledge about the financial markets. Understanding the constantly changing world of finance is something that is best left to individuals who have dedicated years to education and learning within the industry. It is always a good choice to turn to a financial planner when personal knowledge of the markets, economics and finance is limited. Making the wrong decisions could have devastating repercussions a decade or more in the future when it is too late to consult an advisor.

Late Start

Many people have trouble starting to save as early as most experts suggest. Some individuals go through long periods of underemployment that make it impossible to save for retirement. Starting to save late in life is a very good reason to contact a financial advisor. The advisor will look at the reality of the situation and establish realistic goals that will allow a comfortable retirement later. The advisor might also suggest using more aggressive investment options that have the potential to erase some of the years without savings.

Complex Assets

Some individuals who are planning for retirement have a very complex collection of assets. This could mean stock options with several employers combined with retirement accounts and tax-deferred investment vehicles. Some people might have to deal with large estates or commitments to businesses established by family members. A financial planner will take the time to sort through complex financial situations and discover exactly how the assets will affect retirement. A planner also has the knowledge to prevent different types of investments and vehicles from becoming a tax burden because of conflicts and missed opportunities.

Previous Mistakes

Financial mistakes do occur on a regular basis. Many people attempt to manage savings for retirement personally at some point. A financial advisor should be hired if a large financial mistake has occurred. The mistake might involve moving accounts and losing money to taxes, losing money because of a poorly balanced portfolio or making poor savings choices that have minimized returns. These mistakes can derail retirement plans. An advisor will have the skill to navigate out of bad investments and could potentially restore the savings over time.

Life Changes

Dramatic changes happen to everyone at some point during life. This could mean a divorce, a death or a bankruptcy. It can be difficult to recover after a life-changing event. Allowing retirement savings to lapse or go unmanaged for a long period after an event can affect returns. A financial advisor will have the objectivity and time to sort through retirement plans and protect the money that is already saved.

Top 3 Reasons Why Virtual Accounting Is The Way To Go

This day and age we are living in a technology society. Everything is online - banking, photos, shopping, music, TV shows and even movies. Yet at the same time, I am amazed at how many people don't want to do things online. Are they going to stay in the paper age forever?

Even with accounting. People will put all of their business online but not their accounting records. They will share picture of kids, post check-in's all over town and tell the whole world everything they did and ate for the day. Yet they won't use online banking or a cloud based software - systems that are way more protected than these social media accounts. And why is that? It's fear of the unknown and trust me I get it. But if you find a reputable company that has all the proper security controls in place, as most companies do, you should have nothing to worry about. Just make sure the company has an emergency plan. This is a plan that will keep your data safe and accessible in the event of an emergency. Often times there is a backup of all the data on a completely different server in a completely different city and state.

Here are three more reasons why you should give virtual accounting a try.

1. Accessible from anywhere. Virtual accounting gives you the ability to access your files from anywhere, whether you're at home, work or on travel. It will save you time and money. It also allows your accountant or CPA to access your files remotely. This helps cut don't travel expenses that you would typically pay as part of your fee. You can also use scan, mail or use cloud services to store and send documents that your accountant.

2. Immediate software updates. Using a virtual system that hosts your main software package, will save you money. You don't have to pay the premium cost of purchasing the software up front. And as a result you never have to worry about software updates. The hosting company will take care of that for you.

3. Safe and secure. Despite what you hear or read in the media, offsite servers and cloud services are safe and secure. Most companies that I have been in contact with use a 256 bit encryption, which is the same security used by bankers. They also provide automatic dual site back-ups that provide that extra security in knowing you can sill access your data in the event of an emergency event.

PDQ Machines Use in Retailing

PDQ machines are used to process card payment transactions at the point of sale. The name is an acronym for the ability to Process Data Quickly. For a number of different reasons PDQ machines have become extremely popular in the last few years, and they are probably the most common device used for processing card payments in the retail environment.

Before the Chip & Pin system was introduced, PDQ machines were used to read data that was embedded in the magnetic strip on the back of the payment cards when they were swiped through the card-reader. The POS included connection to the cash registers, where the items and total transactions values were input. The system also includes the option for manual input of the transaction value. The PDQ machines were then involved with the verification and authorization process, and, in the case of credit card payment transactions, purchasers were asked to sign slips in order to match signatures on the back of the credit cards.

The recently introduced Chip & Pin system was developed to reduce the occurrences of payment card frauds that according to recent reports, total billions annually. Each payment card is assigned a 4 digit PIN which should be entered into the machines as another layer of verification. The cards now include embedded computer chips, that are replacing the magnetic strips on the backs of the cards. The cards are inserted into the machine, and are read in almost the same manner that the magnetic strips were read, but the data storage is now in a different form of integrated circuits and contact with the reader is needed.

Signatures are no longer needed for authorization, as the transactions are completed by the PDQ machines. There may no longer be any input required from the retailer, and the machines are now being used in self-serve units.

It is also possible to use the machines without the card-holder being physically present during the transaction. Retailers or merchants still have the option of manually entering card information such as the card number, during telephone sales, but in place of the assigned PIN, alternative information such addresses or personal security codes, may be requested. The duration of the process may increase slightly when compared to the input of Personal Identification Number.

Retailers are required to pay some fees that are associated with the use of PDQ machines. Processing fees are included with all credit card transactions, and these fees are usually higher than those of other payment cards. However there continues to be dramatic increases in both the volumes and the number of electronic payments, and it is hoped that economies of scale, with much higher volumes, can contribute to lower processing costs.

The machines are available in both the wireless and wired versions. The wireless version is most suitable for mobile commerce, when payments can be processed, anywhere, and at any time, while retailer stores continue to use the wired version.

For the merchant or the retail outlet, not having a method to process credit card payments will result in lost sales as most consumers may often wish to avail themselves of the opportunities and conveniences to pay with payment cards.

The Use of Forex Trading Indicators

Forex trading Indicators, are an important part of technical analysis, in this article we will introduce tools which when applied properly can liberate us from having to constantly observe currency rate fluctuations.

Momentum Indicators or Trend Following

Overall, there are two types of indicators. First there are the so-called indicators of "momentum" or "trend following."These indicators are rather unique as they give you delayed signals. More clearly, the exchange rate will begin its movement and then the indicator will give you the signal. On the other hand, indicators called "oscillators", provide you with signals in advance, meaning before rates begin their movement.

Why are there indicators giving delayed signals, while others giving in advance?

The Difference Between Oscillators and Trending Indicators

With experience you quickly realize that oscillators give many false signals. However, when the signal is correct, you the chances of generate substantial gains are very high. Contrary to this the trend following indicators will give fewer false signals; however the gains will be smaller, since the current trend has already announced before the onset of the signal. Let us look at these different types of indicators in detail.

The Oscillators

We must first understand what these indicators actually want to show us. You should know that through the incoherent movements exposed by graphics, there are two types of configurations that should interest us. The first is the trend, i.e. the exchange rate is clearly moving in one direction, for this reason we employ trend following indicators. The second is the one that could be described as cyclical, i.e. that prices move broadly in ranks without a clear trend. In this situation the oscillators will give optimal signals.

The basic principle of oscillators is that they consider that the exchange rates have a point of balance. When the exchange rate is too far away from that point they trace it to return to this balance.

Trending Indicators Contrary to the oscillators, these indicators are used during clear trend phases. It is not helpful to rely on such indicators in market range conditions. Indeed we must first understand what the purpose of these indicators is. They are typically used to filter out the movements and locate s trend. It is common practice to utilize them together with another filter to a obtain an entry point.

The best known of indicators to monitor trends continues to be the moving average (also called rolling average in statistics). This indicator is applied directly to the exchange rate depending on the time and allows to know the basic movement of the market.

In conclusion, we need to stress the fact that that there are really no type of indicator which is better than the other. Oscillators are very different to trend following indicators and they definitely each have their strengths and weaknesses. Therefore, we can compare oscillators between them, but it is useless to compare them with momentum indicators, it would be like comparing chart patterns with the Fibonacci retracement.

Reasons Why Risk Control And Cutting Losses Are Important To Market Trend Investors

It is truly surprising how stocks can move so fast. Before a person has time to think, a stock can change substantially. This is in large part a factor as to why complaints surrounding the viability of stock investing is usually related to the heavy losses that can be suffered in the span of a singe day. For this reason, one of the most important things a trader can learn early is risk management and the science of learning how to cut losses. This should be a part of all investing strategies, but these are a few specific reasons why risk control and cutting losses are important to a market trend investor.

Market Trends Investors Trade According to Market Trends

As straightforward as that can appear, really consider that. Because the philosophy of this investing plan is based around using indicators to show the direction of stocks, a market investor should avoid trading against the market trend at all costs. However staying in a bad trade despite all the signs is doing exactly that. Sometimes information is missed, sometimes indicators can give false signs. Depending on your position the rise or fall of a stock can result in losses initially. There are times where this is okay but if the gap gets to be too much, just cut losses before it becomes impossible to make up the difference.

Stop-losses were invented specifically to safeguard against traders losing too much money. What type of stop-loss to use depends entirely on the trade you're taking part in. But the basics are that the guaranteed stop-loss will place an absolute hold on the losses you are able to sustain. The trailing stop-loss will assure you of your profits while protecting from loss as it moves up or down according to your profits. Some brokers charge extra for the use of certain stop-losses so make sure that you read up on what your broker does before trying to use one.

Market Trend Investors Cannot Trade Without Limits

When success and trading are discussed, it is often about the trades that make overnight millionaires. What many do not talk about is the discipline that traders need in order to be successful every year. Letting profitable transactions serve their purpose takes as much discipline as does cutting losses when investments are going bad. The amount of losses that you can afford will depend on how much you have to start. Set your absolute limit there or at whatever amount you can't afford to lose. Being aware of where your limit is can make it easier to quit a trade when it gets out of hand. You will have to resist the temptation to hold on. Trading is about doing transactions that profit you.

Market Trend Investor Cannot Linger

When a transaction is not going anywhere good and every sign and indicator is telling you that there is no change coming, don't wait until you're facing ruin to get out. In heeding to the natural human desire to believe in one's own abilities, a trader can lose a lot of money fighting losing battles. A market trend investor needs to be flexible and to not take individual trades personally. Market trends move with too much speed for traders to stick to one trade at the expense of all others. Should the stock begin showing itself alive, it is possible to get back into trades.

People can and sometimes do make incredible sums on the stock market. Because of this it is easy to get lured into the trap of trying to complete the most profitable trades. The reality for most successful traders is that several profitable trades in a day are more valuable than one massive victory. Trend investors do not have the resources or time to stay fixated on a stock that is costing the more money. A home run trade means nothing when the deficits are too much to make the difference.

Nobody wants to be seen as someone who lost everything on the stock market. For this reason very few people are willing to talk about why risk control and cutting losses are important to a market trend investor. The thing is, regardless of what people want to think they do need to trade with trends, abide by self-imposed guidelines, and never linger over a stock to their own detriment. Those who want to trade successfully will need to know how to cut losses quickly in order to make more money on the stock market.