Thursday, February 4, 2016

Thursday 02-04-16

The Fed Wants to Test How Banks Would Handle Negative Rates


As interest rates turn negative around the world, the Federal Reserve is asking banks to consider the possibility of the same happening in the U.S.
QuickTakeNegative Interest Rates
In its annual stress test for 2016, the Fed said it will assess the resilience of big banks to a number of possible situations, including one where the rate on the three-month U.S. Treasury bill stays below zero for a prolonged period.
"The severely adverse scenario is characterized by a severe global recession, accompanied by a period of heightened corporate financial stress and negative yields for short-term U.S. Treasury securities," the central bank said in announcing the stress tests last week.
In that particular simulation, the unemployment rate doubles to 10 percent, the same level it reached in the aftermath of the last financial crisis.
Three-month bill rates have slipped slightly below zero several times in recent years, including in September after the Fed delayed rate liftoff amid global financial market turmoil, touching a low of minus 0.05 percent on Oct. 2.
But in the stress test, banks would have to handle three-month bill rates entering negative territory in the second quarter of 2016, and then falling to negative 0.5 percent and holding there through the first quarter of 2019.

Not a Forecast

"This scenario does not represent a forecast of the Federal Reserve," the central bank said. It also assumes "that the adjustment to negative short-term rates proceeds with no additional financial market disruptions."
Fed officials have made clear that they are a long way from contemplating a reduction in rates below zero in their benchmark overnight policy rate. Some, though, have suggested they’d be more open to such a move than in the past should the economy deteriorate significantly.
The central bank left its target range for the federal funds rate unchanged at 0.25 percent to 0.5 percent last week after raising it in December for the first time since 2006.
U.S. policy makers decided against pushing rates below zero during the financial crisis partly because of concern it could lead to dangerous dislocations in the money markets.

European Experience

Since then, the European Central Bank and the central banks of Switzerland, Sweden and Denmark have nudged some official lending rates negative without such repercussions, and Fed officials have publicly taken note.
The Bank of Japan became the latest monetary authority push rates into negative territory last week in an effort to spur lagging growth and increase too-low inflation.
Former Fed official Roberto Perli cautioned against drawing conclusions about future Fed actions from the inclusion of negative U.S. rates in the stress test scenario.
"It doesn’t signal anything" about future monetary policy, said Perli, a partner at Cornerstone Macro LLC in Washington.
Nevertheless, it is "another sign that the Fed would not be entirely adverse" to reducing its target rate below zero should economic conditions warrant, he said.

Bill Dudley

New York Fed President William Dudley said last month that policy makers were "not thinking at all seriously of moving to negative interest rates.
"But I suppose if the economy were to unexpectedly weaken dramatically, and we decided that we needed to use a full array of monetary policy tools to provide stimulus, it’s something that we would contemplate as a potential action," he said on Jan. 15.
Fed Vice Chairman Stanley Fischer said Monday that foreign central banks that had resorted to negative interest rates to stimulate their economies had been more successful than he anticipated.
“It’s working more than I can say I expected in 2012,” he told the Council on Foreign Relations in New York. "Everybody is looking at how this works," he added.

http://www.bloomberg.com/news/articles/2016-02-02/rates-less-than-zero-is-bank-stress-fed-wants-to-test-in-2016

 

Some fitness trackers vulnerable to monitoring, U of T study finds

Research raises questions about user privacy and possible falsified data
 
Some of the top-selling brands of fitness trackers that monitor wearers' heart rates, sleeping patterns and movement are putting user data and privacy at risk, according to a new report.
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Researcher alters data, fakes 800 km walk 0:54

Cybersecurity researchers at the University of Toronto examined eight popular wrist-worn trackers. They tested how they communicate with mobile apps and even upload and store a user's workout information on manufacturers' computer servers.

The researchers conclude that several models expose users to potential internet snoops and hackers even when devices aren't being used for exercise and mobile apps are turned off.
Mike Maiola
'That can be a bit invasive,' squash enthusiast Mike Maiola says after learning about possible privacy problems with his fitness tracker. (CBC)

"Fitness trackers are a fairly new technology and we don't have many regulations right now," said lead researcher Andrew Hilts, who is executive director of Open Effect and a research fellow at Citizen Lab at the U of T's Munk School of Global Affairs.

"We found cases where your data is being sent and you might not be aware, and there's no apparent reason why it's being sent," Hilts told CBC News.
The study examined popular models made by Garmin, Fitbit, Jawbone, Mio, Withings, Xiaomi, Basis and Apple.

Location tracking


Each of the devices uses Bluetooth technology that emits a signal and a unique ID that can be detected even when the tracker is not paired with a mobile phone.

This "can leave their wearers exposed to long -term tracking of their location," concludes the Open Effect / Citizen Lab research report released Tuesday.
To demonstrate, Hilts accompanied CBC News to Yorkdale Shopping Centre in suburban Toronto. He used his own mobile phone to scan for Bluetooth signals. He detected many devices, including a Garmin Vivoactive Smartwatch worn by squash enthusiast Mike Maiola.
Andrew Hilts
Andrew Hilts, executive director of Open Effect and a research fellow at Citizen Lab at the University of Toronto's Munk School of Global Affairs, uncovered possible privacy and data-falsifying problems with some fitness trackers. (CBC)

"That can be a bit invasive," Maiola said with some surprise when CBC News showed him that his wristwatch fitness tracker could be detected even when he wasn't using it for a workout.

The researchers warn this exposes users to having their devices tracked and logged each time they enter a mall or another environment using sophisticated retail data scanning technology.

"I got it for fitness tracking, for golf and a whole host of things. And I wear it every day — it never comes off my wrist, really," says Maiola .

But now he's reconsidering.

This information "might change how I actually use the device and whether or not I have the Bluetooth functionality on."

The Apple Watch received high marks in the study for data security because it is the only model that randomizes a user's Bluetooth ID, making it impossible to track over the long term.

Bogus workout results


The Citizen Lab researchers conclude the Garmin app, called Connect, sends heart rate, workout and movement data across the internet without encryption.

"Eavesdroppers could easily look at their data," Hilts cautions.  

In addition, Hilts says other devices have vulnerabilities that could allow a user with a bit of technical know-how to tamper with their fitness information to log bogus workout results.

This is concerning, says Hilts, because fitness tracker data is increasingly being relied on as evidence in court, or as a basis for rewards or discounts tied to corporate wellness programs and health insurance policies.

"Potentially people could meddle with their data and say they are doing fitness events, fitness activities, even when they weren't," Hilts said.

Sitting at his computer, Hilts demonstrated for CBC News how he was able to send false "walking data" to his Jawbone UP 2 account to make it appear he walked one million steps on a recent Saturday. That's roughly 800 km, the distance from Toronto to Quebec City.
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Privacy study prompts re-think of tracker use 0:47

"I could definitely fake my workout to astronomical levels," Hilts said.
"Let's say the person's insurance premiums are related to the amount of activity they report on their fitness tracker. All it takes is a few bad apples to exploit their device and inflate their step counts."

The manufacturer, Jawbone, told CBC News it is investigating the claims made in the research report and declined to answer questions.

Garmin, the maker of the device that transmits basic fitness data without encryption, declined requests for comment.

Other manufacturers issued statements (MioFitbit, Withings) expressing commitments to privacy, stressing data transmitted from apps does not disclose a user's name. They insist that using Bluetooth LE (Low Energy) is industry-standard and power-efficient despite potential privacy exposures.

Withings, maker of the Pulse O2 tracker, stated the company "does not believe any customer is at risk of having their location tracked over the long term."

However, Withings shut down the Share Dashboard social-media function on its Health Mate app for Android users after CBC News contacted the company about the findings.

"An updated version of the Android app will be available in the coming week and will feature enhanced encryption," said company spokesman Ian Twinn in an email.

Details of the 8 devices studied in the Open Effect / Citizen Lab research report

Wearable fitness devices privacy table

http://www.cbc.ca/beta/news/technology/fitness-trackers-monitoring-users-1.3428817

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