Following years of sluggish economic recovery, business leaders believe 2017 stands to usher in a long-awaited acceleration in growth. According to ‘America's economic engine - Breaking the cycle’, Deloitte's 2017 report on business and economic trends in the privately-held and middle-market segment, 83% of executives surveyed after the November election are confident that the US economy will improve over the next two years (compared to 65% last year). In fact, 39% of respondents expect the US economy to grow in excess of 3.5% over the next 12 months.
The executives surveyed are equally optimistic about their company's success and performance in the year ahead, particularly across key business metrics such as employment, productivity, profits and capital investment. 78% of respondents expect revenue growth in excess of 5%.
"Our postelection survey paints a positive picture for breakout growth in 2017, pointing to a strengthening economy and potential improvement in business conditions year-over-year," says Roger Nanney, vice chairman, Deloitte LLP, and national managing partner of Deloitte Growth Enterprise Services.
In addition, the survey revealed that two-thirds of respondents believe the US election results will boost the US economy; another 63% believe the new administration will have a positive impact on their company's operations.
Optimism tempered by heavy dose of uncertainty
While postelection promises have buoyed confidence in the economy and in company growth among private company and middle market executives, the results also show increased uncertainty: 70% feel more uncertain than they did a year ago about the main factors driving their future business prospects.
"Certain economic and geopolitical issues are among the obstacles these executives cite in the survey," says Bob Rosone, managing director, Deloitte Growth Enterprise Services, Deloitte LLP. "However, the respondents appear hopeful that these challenges might be addressed with policy changes by the new administration."
According to the survey, business leaders see increased regulatory compliance (33%), keeping up with the pace of technology (33%), and rising health care costs (32%) as the top three obstacles to their company's growth. Executives also emphasized skills shortages as a growing concern, increasing by 10 percentage points from last year as a roadblock to economic and business growth.
When asked which government measures would help their businesses grow the most over the next 12 months, the No. 1 response cited was reducing corporate tax rates; keeping interest rates low, rolling back health care costs, and supporting infrastructure needs were all tied for the next most important measure.
Technology and talent continue to drive mid-market investments
Technology yet again tops the list as the key investment priority for surveyed companies over the next 12 months. Business leaders are particularly looking to focus their technology investments on cloud computing (42%), data analytics (40%), and customer relationship management (34%). They indicated the greatest potential returns from technology investments like these may be business process improvement, employee productivity and customer engagement.
Employee development and training also continue to be a key investment, as 72% of survey respondents indicated they have difficulty finding new employees with the right skills and education. For this reason, training (47%), increasing full-time employees (44%), and increasing compensation (33%) were cited as the top investments in talent over the next 12 months.
Mid-market companies tap M&A and IPO to remain in growth mode
According to the survey, private and mid-market companies are also looking to mergers and acquisitions (M&A) and initial public offerings (IPOs) to reach their business goals. While global M&A and IPO activity slowed sharply in 2016, more companies from the survey expect to pursue deals and go public in 2017.
More than half (53%) of the companies surveyed say they will likely pursue M&A as an acquirer, up from 39% a year ago. Furthermore, 45% of companies say they will likely be an M&A target, up from just 21% last year. Two of the main factors that respondents believe will drive M&A activity in their company over the next 12 months are increased availability of capital and renewed confidence in the economy.
As for pursuing an IPO, 28% of companies reported that they would likely go public in the next 12 months, nearly doubling the number of companies from last year (15%). Reasons cited include broadening the exposure of the company's brand and products, the cost-effectiveness of equity capital, and the need for additional capital to fuel growth.
Companies look to global markets to help address challenges
The survey reiterated the importance of the global economy as US mid-market companies are increasingly looking overseas to expand their operations, boost their productivity, and develop new products and services.
More than half of the companies surveyed expect to increase their revenues generated outside of the US, with 29% predicting revenue increases between 26 and 40% over the next 12 months. Canada, Western Europe, and Asia Pacific are expected to be the top three contributing markets. Additionally, nearly 60% of mid-market companies expect to have 11% or more of their workforce outside the US, compared to 42% currently. This will be an important trend to follow as the skills gap consistently emerges as a growing concern.
"As mid-market companies plan for overseas expansion and closing the skills gap, new policies and regulations around trade could have a significant impact on economic activities abroad," concluded Nanney. "The good news is that companies in this segment are confident and looking for opportunities to improve their businesses in an ever-changing landscape.”
(Source: Deloitte)
The Fannie Mae Home Purchase Sentiment Index® (HPSI) increased by 2% in January to 82.7, ending a five-month decline. Four of the six components that comprise the HPSI were up in January.
The net share of Americans who believe that home prices will go up in the next 12 months rose by 7%, and the net share reporting significantly higher household income in the past 12 months rose by 5%. The net percentage of those who say that it is a good time to sell a house rose by 2%, while the net share of those who say it is a good time to buy a house fell by 3%. On net, consumers demonstrated slightly greater confidence about not losing their jobs, while the net share of those who believe mortgage rates will go down remained unchanged.
"Three months after the presidential election, measures of consumer optimism regarding personal financial prospects and the economy are at or near the highest levels we've seen in the nearly seven-year history of the National Housing Survey," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "However, any significant acceleration in housing activity will depend on whether consumers' favorable expectations are realized in the form of income gains sufficient to offset constrained housing affordability. If consumers' anticipation of further increases in home prices and mortgage rates materialize over the next 12 months, then we may see housing affordability tighten even more."
Home Purchase Sentiment Index – Component Highlights:
Fannie Mae's 2017 Home Purchase Sentiment Index (HPSI) increased in January by 2% to 82.7. The HPSI is up 1.2 percentage points compared with the same time last year.
- The net share of Americans who say it is a good time to buy a house fell by 3 percentage points to 29%, matching the survey low from May and September 2016.
- The net percentage of those who say it is a good time to sell rose by 2 percentage points to 15%.
- The net share of Americans who say that home prices will go up increased by 7 percentage points in January to 42%.
- The net share of those who say mortgage rates will go down over the next 12 months remained constant this month at -55%.
- The net share of Americans who say they are not concerned about losing their job rose 1 percentage point to 69%.
- The net share of Americans who say their household income is significantly higher than it was 12 months ago rose 5 percentage points to 15% in December, reversing the drop in December.
(Source: Fannie Mae)
A coalition of over 25 American businesses of diverse sizes and industries, including both importers and exporters, representing nearly every sector of the American economy have launched the American Made Coalition in support of pro-growth tax reform. The coalition strongly supports modernizing the outdated US Tax Code by removing barriers to economic growth and American job creation. The Coalition believes the obsolete and biased tax system subsidizing imports of foreign goods must be replaced with one that restores the United States' competitive advantage in the foreign marketplace.
"American workers and businesses are not competing today on a level playing field with foreign competitors because of an outdated and unfair tax system," said John Gentzel, coalition spokesman. "The American Made Coalition is committed to advancing legislation that modernizes our tax system, levels the playing field for American businesses and workers, encourages investment, incentivizes job creation in the US, and helps American-made products compete worldwide. The House tax reform blueprint has the best chance of moving real transformative tax reform for the first time in more than 30 years."
The American Made Coalition is focused primarily on supporting reform efforts, championed in the House of Representatives by Speaker Paul Ryan and Ways and Means Committee Chairman Kevin Brady, that would lower tax rates, encourage domestic investment, spur job creation, and modernize the overall tax system for a 21st Century economy.
A key aspect of the House tax reform blueprint is a border adjustment provision that would eliminate the "Made in America tax" - an unfair tax hitting goods produced domestically while favoring foreign-made goods. By ending the "Made in America tax," we can create a more favorable business environment for American manufacturing and level the playing field so American workers can compete with foreign competitors.
The Tax Foundation estimates the House Blueprint proposal will create 1.7 million new jobs, boost GDP by 9.1%, and increase wages by 7.7%.
The American Made Coalition believes that 2017 presents an important opportunity to modernize our tax system and a focused public campaign - one supporting competitive business tax rates, a modern territorial system, and the border adjustment of businesses taxes - is urgently required to achieve success. Together, these three components are essential to leveling the playing field for American-made goods and services and encouraging American jobs, investment, and manufacturing.
(Source: American Made Coalition)
Eventbrite, the world's leading ticketing and event technology platform which powers more than two million events each year, has acquired Ticketscript, one of Europe's largest self-service ticketing providers. The acquisition positions Eventbrite as Europe's third largest ticketing platform, and greatly expands the company's global prominence as a leading live music event technology partner, especially in clubs and live show venues.
In 2016 alone, Ticketscript and Eventbrite's combined European operations processed more than 35 million tickets worth over EUR500 million for nearly a million events.
Following the acquisition, around a quarter (23%) of Eventbrite's global employees will work in Europe.
Ticketscript, founded in 2006, is headquartered in Amsterdam and is active in five European countries: the UK, Germany, the Netherlands, Spain and Belgium.
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Frans Jonker, CEO of Ticketscript, who will join Eventbrite as GM for continental Europe, said: "We have been building significant market presence in Europe for ten years, with a focus on self-service ticketing for music events. We share Eventbrite's passion for allowing event organisers to control their event marketing and ticketing, whilst retaining their end customer data. Joining forces with Eventbrite, the global innovation leader in event technology, will no doubt help further accelerate the digital transformation of the European live experience industry."
Eventbrite processed 150 million tickets for more than 600,000 event organisers in 180 countries last year. Founded in San Francisco in 2006, Eventbrite opened its first international presence in London in 2011, and maintains offices in eight countries on four continents. The company's other European operations are in Ireland, Germany, and most recently the Netherlands.
Julia Hartz, CEO of Eventbrite, said: "This acquisition supercharges Eventbrite's footprint in Europe and brings ten additional years of traction in the music space and experience in European markets to our business. It perfectly aligns with our strategic vision to become the world's leading marketplace for live experiences, and adds significant assets and technical power to our platform. We are looking forward to this new partnership combining the best solutions from both companies, and bringing them to our customers around the world."
(Source: Eventbrite)
United Steelworkers (USW) International President Leo W. Gerard issued the following prepared statement at a press conference this week where the Economic Policy Institute (EPI) released a study outlining the jobs lost from the US-China trade deficit since 2001. The EPI study identifies job losses in every state and congressional district.
"EPI's study paints a stark picture of the damage that the growing US trade deficit with China has inflicted on workers. Since China joined the World Trade Organization (WTO) in 2001, more than 3.4 million jobs have been lost across the country. No state or congressional district has been immune from the negative impact of China's trade policies.
"China has used virtually every tool, legal and illegal, to steal our jobs and undermine our manufacturing base and economy. Subsidies, dumping, overcapacity, currency manipulation and cyberespionage are all practices used by China to help amass a $3.9 trillion trade surplus since 2001. Mounting trade deficits are sapping our economic strength and undermining our national security. It's time to demand that China play by the rules.
"The USW is the largest industrial union in North America. Our members know firsthand the impact of China's policies. We have participated in or initiated dozens of trade cases at tremendous cost - money and jobs - to respond to China's actions. Our government needs to recognize how its flawed trade policies have damaged workers and their communities, while corporations and Wall Street have reaped profits. We need a new approach to trade that puts working families first.
"Trade played an enormous role in last year's campaigns. Promises have been made to address these problems, but time is growing short. Working Americans want change and expect their leaders to take action rather than continuing to cater to the special interests who offshore production and outsource jobs. Talk is cheap and threats are easy.
"What is needed is a clear, consistent and comprehensive approach to deal with China's protectionist and predatory trade practices. Politicians have talked about the need to change our nation's trade policies, but slogans and speeches are no substitute for action."
To see full report, click here. For more on the EPI, go to www.epi.org
(Source: EPI)
Countering the narrative that slow economic growth is "the new normal" for America's economy, the Pacific Research Institute today released the first in a series of reports from its new study, Beyond the New Normal, which makes the case that future U.S. economic growth can meet -or exceed - past growth trends if the right economic policies are adopted.
"America's economy has been stuck in neutral for so long that some economists claim that low growth rates are now the new normal," said Dr. Wayne Winegarden, PRI Senior Fellow in Business and Economics, and co-author of Beyond the New Normal.
"History has shown that when free-market policies are embraced, America's economic engine roars. President Trump and Congress should adopt these policies that have proven successful in growing the economy and lifting more people out of poverty."
Part 1 of Beyond the New Normal provides an overview of the case Winegarden and co-author Niles Chura will present arguing that free-market policies are needed to stimulate long-term, strong economic growth in the US.
Among the key points in Part 1 of their study:
- Average family income and average household income stagnated during much of the 1970s, and since 1999. Average annual real GDP growth has averaged just 1.89 percent since 2001.
- During times of slow economic growth, other negative trends, including slower average household income growth, greater income inequality, and increased poverty, have followed. These negative trends were reversed when the economy grew at a more rapid pace.
- Strong economic growth occurs when there is a pro-growth policy environment in place that:
- Empowers the private sector to efficiently employ capital, labor, and technology;
- Discourages value destroying rent-seeking behavior; and
- Provides core public goods as efficiently as possible.
"Status quo thinking is holding back robust economic growth and keeping more Americans stuck in poverty," said PRI President Sally Pipes. "In this and subsequent volumes, Wayne and Niles make the compelling case that the President and Congress must instead embrace proven, free-market policies if we are to return America to the days of strong and sustained economic growth."
Dr. Wayne Winegarden is a Senior Fellow in Business and Economics at Pacific Research Institute. He is also the Principal of Capitol Economic Advisors and a Contributing Editor for EconoSTATS. Niles Chura is the founder of Ouray Capital.
(Source: Pacific Research Institute)
National Write Your Congressman (NWYC) has found small business owners voicing high levels of optimism for the incoming administration's plans for the US economy and their own business prospects in its Q4 2016 Index. NWYC, an organization that gives small businesses a voice in American government, issued its Quarterly Index measuring small business owners and operators' sentiment towards Congress and their confidence in the US government.
The Q4 2016 Index found its membership of small business owners expect the most direct and positive impact on their 2017 business results from five specific components of President Trump's first 100 days agenda: tax reduction, health care reform, regulation relief, elimination of corruption and energy production.
The renewed sense of optimism is based on small business owners' opinions that the overall business climate, long-term success of their business and revenue growth will improve as new the administration takes power.
"Every day, NWYC listens to small business owners across the country and this quarter's Index shows what we hear in the field -- that owners are encouraged by President Trump's first 100 days agenda and have a specific mandate for their members of Congress," said Randy Ford president of National Write Your Congressman. "The uptick in our members' confidence in the fourth quarter of 2016 is encouraging as we work to make their voices heard to Congress."
NWYC's poll represents the opinions of more than 1,000 NWYC members across 46 states in the construction, services, manufacturing and agriculture industries.
"As the engine driving the US economy, small business owners are revved up for a powerful first quarter and NWYC will be working alongside our membership of construction workers, farmers, machinists and financial service providers to make sure their voices and opinions are heard by Congress," said Ford.
(Source: NWYC)
The Dow Jones index broke through the 20,000 mark for the first time yesterday, as markets continue to respond to the potentially stimulative economic policies of the new US President. The Dow Jones now stands at over three times the low it reached in March 2009, when it traded at a touch over 6,600 points.
The Shiller CAPE ratio, one of the most widely-used measures of valuation for the US stock market, currently stands at 28.46, its highest level for 15 years. However it’s worth noting that it has been as low as 4.78 (December 1920), and as high as 44.20 (December 1999).
Meanwhile bonds yields have been on the rise recently, as investors brace themselves for further US interest rate hikes and the potential for fiscal stimulus and increasing trade tariffs to fuel inflation. The US 10 year Treasury is now yielding 2.5%, compared to 1.6% six months ago. The UK 10 year gilt has gone from yielding 0.8% six months ago to 1.5% today.
Laith Khalaf, Senior Analyst, Hargreaves Lansdown commented:
‘The Trump jump has propelled the Dow Jones to an unprecedented level, as investors pile into US stocks in anticipation of lower corporate taxes and more government spending. Meanwhile expectations of further interest rate rises in the US, and the potential for inflationary fiscal stimulus, has been putting upward pressure on bond yields in the last few months.
Stock indices in the US and UK may well be at or near record highs, however when the earnings generated by companies in these markets are factored in, stock valuations show neither the extreme pessimism of 2008, nor the irrational exuberance of 1999. This means they are trading somewhere in the middle of their range, so are neither exceptionally cheap or hideously expensive. In the short term the stock market could move in either direction, but for long term investors it still makes sense to keep a healthy slug of their portfolio in equities.
Meanwhile bonds have come under pressure of late, as it looks like the US central bank is in the mood to raise interest rates this year. However there have been many false dusks for the bond market, which has defied expectations since ultra-loose monetary policy was initiated all those years ago in response to the financial crisis. Central banks in the UK, Europe and Japan are still engaged in stimulative activity, and while the US Fed is starting to push in the opposite direction, it’s likely to err on the side of caution lest by raising rates too soon it damages the US economy, and propels an already strong dollar even further upwards. While the best days for the bond market may be behind us, there‘s no sign that interest rates are going to return to pre-crisis levels any time soon, which acts as an anchor on rising yields.’
(Source: Hargreaves Lansdown)
As the new US President settles in, Zillow finds the value of the White House has appreciated 15% since Barack Obama's inauguration in 2009.
The White House, valued at $397.9 million has appreciated 15% since the Obamas moved in eight years ago. The White House is the most valuable home on Zillow’s valuation list.
President-elect Donald Trump will be the 44th President to move into the 55,000 square-foot home(ii). Unlike some past presidents, luxury living is not new to Trump, who is moving from his three-story penthouse in The Trump Tower to one of the most famous homes in America.
The value of the White House, currently at its peak, is expected to appreciate 3 percent over the next year, in line with home value growth expected throughout Washington, D.C. Home values across the country have appreciated 6.5 percent over the past year and 9 percent since Barack Obama's inauguration in 2009.
"President-elect Trump is moving into one of the most famous homes in the country -- and, according to Zillow, it's also the most valuable home in the country," said Zillow Chief Marketing Officer Jeremy Wacksman. "President Obama's term coincided with a massive recovery of the US housing market, and that's reflected in the updated value of the White House. Home values across the country are growing at their fastest pace since 2006, with many markets setting new records -- one of the reasons why the White House is worth more now than it has ever been."
The White House has 132 rooms, 32 bathrooms and sits on 18 acres. Notable features include basketball and tennis courts, a sun room and a library, all of which influence the home's Zestimate. Were a potential buyer to take out a standard 30-year fixed mortgage on the White House today, the monthly payment would be about $1.6 million(iii), according to Zillow. The monthly rental payment would be just over $2 million per month.
(Source: Zillow)
2016 has been quite a year for global property markets. China’s slowdown, the impeachment of Brazil’s president, the Brexit referendum in the UK and the US presidential election have all contributed to a rather tumultuous year. Will property markets fare any better in 2017? And where precisely are the hotspots that bear watching as the new year unfolds? Ray Withers, CEO of Property Frontiers reveals all…
UK – era of the staycation
In 2009, during the height of the recession, UK residents made 15.5% fewer overseas trips and 17% more domestic trips. Since then British holidays are still gaining in popularity: the number of domestic trips in 2015 was up by 11% on the previous year. The Brexit referendum’s repercussions may well change how we experience summers to come. This is the new era of the staycation.
While residential rental yields are likely to remain strong (outside of London), with so many unknowns house price changes remain tricky to forecast. For UK property investing in 2017, we believe that holiday homes, coastal cottages, and hotels will be popular with investors looking for a favourable stamp duty environment, high yields and insulation from market uncertainty. To maximise returns, look for regions with natural or cultural appeal, unflagging visitor numbers, and an undersupply on the hospitality market.
UK – the hangman loosens the noose on landlords
Philip Hammond’s 1994 election material slipped in a humdinger: ‘hanging for premeditated murder.’ The question is: when it comes to fiscal policy impacting landlords, will the new Chancellor play the hangman or the handyman?
With rock bottom mortgage rates and rent increases of 19% forecast for the next five years, it is still a good time to be a landlord. The lack of supply on the market could well spell a good opportunity for investors. University towns like Bristol and Cambridge and secondary cities like Liverpool, Manchester and Sheffield should remain on the radar for strong yields next year.
Europe – secondary cities withstand shaky politics
Europe’s fractious politics will have a big year in 2017. For an early indication of how those decisions might affect property markets, look to Italy and Austria in the aftermath of their December 2016 votes. The defeat of Renzi’s constitutional referendum in Italy, for example, could cause problems for struggling banks and infect the wider economy, including impacting mortgage lending.
The victory of the liberal over the far-right candidate in Austria’s presidential election, however, favoured stability and European integration. Given that Vienna is unlikely to end its seven-year streak atop Mercer’s global quality of living ranking and its housing market is just 20% owner occupied, the result may well safeguard the city’s growing reputation as a buy-to-let hotspot.
Other cities we think merit attention for high yields in 2017 include Lisbon (thanks to tech clusters and the historic centre), Utrecht (enjoying the Netherlands’ continent-beating 6.57% yields but without Amsterdam’s bubbly prices), and Barcelona (still down on its peak, with growing business appeal).
Europe – Brexit’s beneficiaries?
When (if?) Britain triggers Article 50 in 2017, will we see bankers transfer en masse from London to Amsterdam and startups relocate from Manchester to Hamburg? While large scale migrations are unlikely, the pressure will be on for British cities to reassert their global appeal if the property market is to bounce along at 8% growth again in 2017.
European cities will be putting up a strong fight, and battling to skim off what talent they can. Frankfurt and Paris will make particularly aggressive bids, but they will need to need to drastically improve their supply of office space if they are to become truly viable alternatives.
We may see a new trend for Brits doubling up their holiday or retirement homes as tickets to visa-free travel. Spain and Portugal could see a steep upswing in applications for their ‘golden visas.’
North America – punching above its weight?
The US rocketed past the UK as the stage for the biggest political upset of 2016 with the election of Donald Trump. The S&P Case-Shiller home price index ends the year at a new record peak and such punchy growth will likely continue into 2017. Even if the market proves to be overheated, more responsible lending means a sub-prime-scale implosion is a very distant possibility.
The other theme of US house price growth, its patchy distribution, may also become more pronounced. New York home values appear comatose in comparison to Portland and Seattle, where prices grew by 12% and 11% respectively in the year to September. Yet lunatic price hikes across the border in Canada, make even those numbers look comparatively demure; Toronto closes out 2016 leading the Teranet and National Bank of Canada index with an insane growth rate of 34.6%.
Further afield
South America may become a less daunting investment prospect in 2017, with Brazil and Argentina poised to shake off the political deadlock of last year and Colombia coming closer to peace. Our pick for an enticing investment target is Peru, where a new business-friendly government could revive the property boom and Lima’s hotel market should benefit from fast-growing visitor numbers, a generous tourist spend, and limited supply coming on to the market.
In Africa and the Middle East, the price of oil has played havoc with economies. Property markets could well see a boost if the price of oil rallies in 2017. This could benefit countries like Ghana and Uganda, where the economies are sufficiently diversified to avoid the pitfalls that accompany surprise discoveries of oil. Land development is already rife in their respective capitals of Accra and Kampala.
Investors have been glued to Iran’s gradual unfurling onto the global stage and will continue to look on in 2017, though caution is advised until President Trump’s official stance makes itself clear.
In Asia, Indonesia and Vietnam are making encouraging moves to attract foreign investors, and boast the economic growth to back it up. 2017 will be crucial for testing how well these new rules work in practice, and early birds who plan appropriately could catch the juiciest worms.
China might decide to employ state intervention for the forces of good to re-jig its land imbalance and loosen the notoriously prohibitive hukou residency permit system. This would allow demand and supply to better align and let some steam out of the Chinese property market’s swelling paper lantern.
Finally, our client database reveals a growing share of Indian investors contending with their Chinese counterparts as the dominant group of family buyers casting a wider net for safe havens overseas. Though the UK has not lost its appeal, we might expect to see them target regions closer to home as traditional Western markets start to feel more volatile.
(For more information please visit Property Frontier)
Dr. Laura Simmons, Senior Advisor, Cornerstone Research
A Cornerstone Research report released at the end of March shows that total settlement dollars in securities class actions hit their lowest mark in 16 years in 2014. The average settlement amount also reached its lowest level since 2000, according to Securities Class Action Settlements—2014 Review and Analysis.
Total settlements dropped to $1.1 billion (€1 billion), from $4.8 billion (€4.4 billion) in 2013, primarily due to a lack of large cases. The largest settlement amount in 2014 was $265 million (€246 million), compared with $2.5 billion (€2.3 billion) in 2013. According to the report, the number of settlements remained largely unchanged last year at 63.
The report also examines ‘estimated damages’, the most important factor in predicting settlement amounts.” Average “estimated damages” decreased 60% from 2013 and were 70% lower than in 2012.
“Since stock price movements are fundamental to damages calculations, lower ‘estimated damages’ may stem from the reduced stock price volatility during the years when many of these cases were filed,” said report co-author Dr. Laura Simmons, Senior Advisor in Cornerstone Research’s Washington office. “And, as the market has remained relatively stable on the whole in 2013 and 2014, it suggests that this trend of lower ‘estimated damages’ for settled cases may continue.”
In addition to lower average ‘estimated damages’, a smaller proportion of large cases involved third-party defendants and public pensions as lead plaintiffs, which contributed to the lower level of settlement amounts. Both of these factors are typically associated with higher settlements.
The Bank of New York Mellon has been hit by a $714 million (€660 million) settlement on accusations of FX manipulation, which resulted in it defrauding government pension funds and investors for more than a decade.
The settlement is part of a broader deal which will see the bank laying off some employees and reworking its foreign exchange operations.
The settlement was struck by the US Attorney in Manhattan and the New York Attorney General and focuses on what the authorities called a ‘fraudulent business model’. The bank claimed to offer clients the best foreign exchange rates ‘free of charge’ but instead offered them lower rates and imposed ‘undisclosed fees’. BNY Mellon secured the gains from better exchange rates rather than passing the gains onto its customers.
“Bank of New York Mellon have admitted to essentially lying outright to their clients to line their own pockets. The most concerning factor is that BNY Mellon’s misconduct was outed by a whistle-blower, which begs the question, how many cases such as this happen where there is no one to lift the lid?” said Philippe Gelis, CEO and Co-Founder of Kantox, a business foreign currency exchange.
“Claims of offering the best FX market rate are ubiquitous in the sector, and so, the only way to ensure they do indeed get the best market rate, companies must benchmark their bank against the live mid-market rate. This is not just another foreign bank being fined in a foreign country by a foreign court, but a warning of malpractice that could be carried out by any bank or broker that does not display live rates transparently."
