Entries tagged with “Financial services”.


WASHINGTON - APRIL 6:   U.S. President George ...
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PricewaterhouseCoopers and security vendor Finjan expect insider fraud and cybercrime to rise as IT jobs are lost. Desperate IT workers who have been laid off will go rogue in 2009, selling corporate data and using crimeware, reports have predicted. The credit crunch will drive some IT workers to use their skills to steal credit-card data using phishing attacks, and abuse their privileged corporate computer access to sell off valuable financial and intellectual information, forensic experts have warned.

Both PricewaterhouseCoopers (PwC) and security vendor Finjan are forecasting that the recession will fuel a significant rise in insider fraud and cybercrime in 2009.

A PwC forensic expert claimed the financial-services sector is already investigating a rising number of staff frauds, while Finjan cited evidence of a trend in 2008 for unemployed IT staff in Eastern Europe and Asia to use crimeware toolkits to launch phishing attacks and seed malware to steal financial details.

Neil Ysart, senior manager of forensic services at PwC, said: “People from the financial sector are all saying the same thing: there is a rise in internal investigations as everyone has seen a rise in suspected fraudulent activity.”

“There are certain types of fraud where an understanding of technology would make it easier to circumvent controls and IT staff have the knowledge to do that — for example, the theft of data at telcos,” Ysart said.

“There was a range of very well-documented frauds that took place during the recession in the early 1990s and it does not take a great deal of insight to realize we will see an increase at a time like this,” he said.

Forensic specialists at PwC are advising businesses to mount extra checks on areas where staff will be most tempted to defraud the company, such as expenses, access to sensitive customer data or massaging performance figures to win a bonus. Of the use of crimeware, Finjan’s report states: “Having the large number of layoffs of IT professionals all around the world, especially in the USA, we expect a rising number of people willing to ‘give it a try’ and to get stolen credit-card numbers, online-banking accounts and corporate data that they can use to generate income.”

A recent report by security vendor McAfee also found there is a risk that cybercrime may further slow the speed of UK economic recovery, a sentiment echoed by the joint architect of the UK’s Police Central e-Crime Unit, Charlie McMurdie.

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IT spending in the Asia-Pacific region will grow at a slower rate in 2009. But Asian economies will fare better during the current economic crisis than those in the West, according to a study. IT spending in the Asia-Pacific region will grow at a slower rate in 2009 than in 2008, but Asian economies will fare better during the current economic crisis than those in the West, according to Springboard Research.

The research company expects growth in IT spending in the Asia-Pacific (excluding Japan) region to be 7.1 percent in 2009, a decrease from 10.2 percent in 2008.

Springboard’s Asia-Pacific IT Market Predictions 2009 released Thursday, noted that even though all countries in the region will be affected by the economic crunch, the degree of fallout will vary.

India and China will continue to grow, albeit at lower rates, the analyst said. The two countries’ relative strength in IT spending will help power the region’s growth and increase their dominance in the Asia-Pacific IT market.

Mature IT markets in export-oriented economies such as Taiwan will be most affected. Similarly, those heavily dependent on the financial services industry including Hong Kong and Singapore are at risk of a significant IT spending slowdown in 2009, Springboard predicted.

Thailand will also experience comparatively slower growth as it deals with both the economic crisis and its ongoing political troubles that have increased business uncertainty in the country.

According to Springboard, Indonesia and Vietnam will face relatively lower risk of a spending cutback, as the combination of limited existing IT investments and solid domestic demand in these countries will ensure ongoing IT expenditure.

“Even with slower growth, Asia will continue to emerge as a critical region for IT vendors and we will continue to see a substantial shift in investment moving to Asia and other global emerging markets,” Dane Anderson, Springboard’s CEO and executive vice president of research, said in a media statement Thursday.

“While the crisis will affect Asia, it will also further cement the region as crucial to any global company’s growth strategy moving forward,” he noted.

The report added that over the next two to three years, the economic crisis will help drive the ongoing transfer of wealth, power and innovation from the West to the East.

Multinational vendors will continue to view Asia as a critical growth market for IT, Springboard said. It expects many more U.S.-based companies to transfer more resources–budgets and people–into the region and set up special teams at their corporate offices to focus only on emerging markets.

“Many of the larger IT vendors are already doing this and these initiatives will continue to expand, with other mid-tier vendors also adopting this strategy,” the research firm said in the report. These investments will help continue the education and awareness of IT within the region, which will help spur on more IT spending, especially in the small and midsize market space.

Springboard added: “We therefore believe that an increase in Asian IT spending will be an early indicator that the crisis is abating. At the end of this crisis, we will see Asia emerge as a much bigger part of many companies’ global strategies–both from IT vendors investing more in the region as well as other vertical industries funneling more investments into Asia; thus creating the opportunity for more IT spending related to these investments.”

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FRANKFURT, GERMANY - NOVEMBER 14:  Ben Bernank...
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Why fighting zombie-bank syndrome with zero interest rates isn’t a great idea.

By Rachel Pulfer

That’s the news from U.S. Federal Reserve Chairman Ben Bernanke.

On Tues. Dec. 16, the Fed issued a statement in which it slashed official target interest rates to a historic low range, to combat what most indicators Stateside show to be a rapidly deepening recession. The Federal Open Market Committee voted unanimously to reduce the target fed funds rate for interbank lending from 1% to a range of zero to 0.25%. That’s the lowest since the Fed started publishing the funds target in 1990.

The statement explained that the Fed will “employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability.” It added that it expected interest rates to remain low “for some time”. (The market-determined effective federal funds rate already has already hit record lows in recent weeks.)

The Dow took off on the news, leaping more than 300 points to close a whisker under 9,000. Other markets followed suit.

Officials also signaled a new phase for policy, in which lending programs financed by the Fed’s ballooning balance sheet replace the federal funds rate as the Fed’s primary policy tool.

“Over the next few quarters, the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets. It will expand this … as conditions warrant,” read the statement. “The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities.”

Economists call this quantitative easing. In plain English, that means the Fed just vowed to print money, by flooding banks and mortgage agencies with credit at zero interest. The goal is to spur lending and jump-start a stagnant economy.

There is something of a precedent for what the Fed is doing. Japan did this earlier this decade, to jolt that country out of its decade-long deflationary slump. Back in 1996, the Japanese government took over ownership stakes in many of Japan’s banks to bail them out after a crisis. Lending froze, creating “zombie banks” — banks so risk-averse, all they did was sit on cash.

Sound familiar? Bernanke is clearly concerned that in the current climate, U.S. banks are at risk of going zombie, spurring a deflationary cycle that threatens to send the global economy into a tailspin. He’s right to be concerned: banks aren’t lending in the current environment, for the simple reason that demand has collapsed. The inflation report released by the U.S. government on Tuesday showed the Consumer Price Index was 3 percent lower last month than it had been three months earlier.

But is quantitative easing, coming on top of the US$350 billion bailout of financial services already paid out and other federal stimulus efforts to come in the winter, the answer?

Article continues here

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Price-Earnings Ratios as a Predictor of Twenty...
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David West writes in his recent article about the best approach to analyzing common shares.

“The simple fact is that there are only two things that will increase the economic value of a common share. One is an increase in the amount of money a company makes each year. The other is an increase in its net asset value. Let’s take them one at a time.

First of all, let’s say a company is worth $1 million dollars, and in one year it makes a 10% profit, or $100,000. Assuming the company pays out the full $100,000 in dividends, the company is also worth $1 million at the end of that year.

Now suppose that company makes an 11% profit in the second year, perhaps through higher revenues or by lowering its expenses, and 12 % in the third year, and 13% in the fourth year. If it pays out all of those profits in dividends, the company will still be worth, in terms of assets, $1 million. But the common shares will be worth more, because the company is increasingly more profitable. A reasonable proxy for this contribution to the value of the common shares is the trend in the company’s net income over several years.”

For more the full articles is here.

David West, CFA, FCSI, has been in the investment industry for more than 20 years. David writes about income trusts and mutual funds for Canadian Business Online; he is also editor of two private financial advisory newsletters; is contributing editor to the MoneyLetter; and provides investment courses to major financial institutions

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