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Grounds/Reasons for Written Questions A simple 'pie chart' for Revenue and Costs tells a lot Over 5,000 'Depository Institutions' in the USA, including commercial banks, credit unions and savings institutions, issue VISA and MasterCard credit cards. In June 2012, the U.S. Federal Reserve submitted its 25th annual written "Report to the U.S. Congress on the Profitability of Credit Card Operations of Depository Institutions" [12 pgs] which "limits its focus to the 14 credit card banks that have at least $200 million in assets". For the last 26 years the U.S. Central Bank has provided a written annual report to the U.S. Congress on the Profitability of Credit Card Operations of major Depository Institutions which "...accounted for approx 66 percent of outstanding credit card balances on the books of commercial banks or in pools underlying securities backed by credit card balances." The U.S. Federal Reserve's annual Report to the Congress on the Profitability of Credit Card Operations of Depository Institutions - June 2016 includes the below Table 2 which shows that 'USA Credit Card Banks' in 2015 had Net Interest Income of 8.73% and Net Non-Interest Income of -1.94% of average quarterly assets. USA Credit Card Banks are defined as commercial banks with average assets greater than or equal to $200 million with minimum 50 percent of assets in consumer lending and 90 percent of consumer lending in the form of revolving credit.
The disturbing disclosure from the above two 'Revenue' pie charts is that the aggregate of Interest, Cash Advance Fees, and Penalty Fees (Late Payment and Overlimit) aggregate from a high of 86.7% down to 84% of aggregate Credit Card Issuers 'Revenue'. Annual Fees do not exceed 2% of 'Revenue' in either above pie chart.
The above graph appeared in the USA Financial Times on Dec. 23, 2016 article discussing credit cards. One of the charts (“Different business models”) shows a breakdown of spread revenue vs. non-spread revenue for six major Credit Card Issuers in the USA. Patently the top five Credit Card Issuers are deriving "The Lion's Share" of Revenue from the implicit interest margin between "where they borrow money and the interest rates they charge out" on Purchases and Cash Advances on some credit cards. Fee income is relatively minor, except for Amex, BoA and perhaps Capital One.” Section 8 of the Fair Credit and Charge Card Disclosure Act of 1988 directs the U.S. Federal Reserve Board to transmit annually to the U.S. Congress a written report about the profitability of credit card operations of depository institutions. Last August the Board of Governors of the Federal Reserve System presented its 26th "Report to the Congress on the Profitability of Credit Card Operations of Depository Institutions". The Reserve Bank's webpage "Accountability" provides a section titled 'Accountability to Parliament' which notes that the Governor of the Reserve Bank has provided every few years since 1998 to the Commonwealth Parliament a Statement on the Conduct of Monetary Policy. A precedent is therefore in place with the U.S. Federal Reserve reporting annually in writing to the U.S. Congress on various aspects of Credit Cards Profitability, for the Reserve Bank to similarly report annually to the Commonwealth Parliament on various aspects of Credit Cards profitability which would include Credit Card Issuers complying with Section 3.4.8 Changes to benchmark compliance.
===================================================================================== Refer: Summary Page re Written Questions and the Grounds/Reasons Grounds/Reasons (one document with 21 Chapters) Grounds/Reasons (21 separate Chapters) Written Questions (one document with Written Questions) Written Questions (Individual Written Questions) |
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