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CMSPI – IAC State of the Industry Report
CMSPI – IAC State of the Industry Report
Section 2.1.4 – U.S. Case Study The Current State - Financial Institutions Stabilize Following Record Interest Rate Hikes Despite a tumultuous early 2023, with banks like Signature Bank and Silicon Valley Bank selling assets to the FDIC or banks like First Republic or Citizens Bank selling assets directly to other banks, such as JPMorgan Chase or Iowa Trust & Savings Bank 55 , U.S. banks appear to have overcome the impact of a nearly two-year period in which the U.S. Federal Reserve raised the prime rate 11 times from near zero to almost 5.4%, the highest level in 22 years. 56 According to its October 2023 Financial Stability Report, bank profitability remained strong from May to October 2023. The report looks at U.S. policy interventions by the U.S. Department of Treasury, the Federal Reserve, and the Federal Deposit Insurance Corporation as playing a key role in managing the liquidity constraints and stresses of the banking system in March 2023. In addition, the Fed report found that the banking industry overall “maintained a high level of liquidity” since the May report, and that funding risks for most banks remained low. 57 Regulation and Issuer Income In 2023, the U.S. banking industry saw the introduction of two key pieces of proposed regulation that would impact their credit and debit portfolios: the Credit Card Competition Act, which would require credit issuing banks with more than $100 billion in assets to badge two unaffiliated networks on each credit card, and the Federal Reserve’s proposal to lower the base and ad valorem components of the 2011 debit interchange cap. In public comments, bank associations have pointed to the impact that these interventions may have on their current margins and revenues of these products. 58 59 Recent Fed reporting indicates that banks maintain strong margins going into 2024.
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55 https://www.fdic.gov/bank/historical/bank/bfb2023.html 56 https://apnews.com/article/inflation-economy-interest-rates-federal-reserve-powell-2200b5e - 3da872a349550ea707d4d6d42 57 https://www.federalreserve.gov/publications/files/financial-stability-report-20231020.pdf 58 https://www.aba.com/-/media/documents/letters-to-congress-and-regulators/06062023-aba-and-sbas-letter- to-senate-and-house-on-credit-card-competition-act---june-6-2023.pdf?rev=6cbb27525beb4e6ea8e18d6b55c- c517f 59 https://www.aba.com/about-us/press-room/press-releases/federal-reserve-proposed-regulation-ii-chang- es#:~:text=ABA%20Statement%20on%20Federal%20Reserve’s%20Proposed%20Regulation%20II%20Changes&- text=%E2%80%9CWe%20are%20deeply%20disappointed%20with,process%20that%20produced%20this%20 result.
Figure 2.3 – Card Market Shares for Issuers in Asia Pacific 54
54 Market shares are based on card transaction value. Some of the names have been shortened for legibility. All data is from Euromonitor 2022 except for Indonesia from Euromonitor 2021.
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