BBA https://www.bba.org.uk The voice of banking Thu, 18 Sep 2014 22:09:29 +0000 en-US hourly 1 http://wordpress.org/?v=3.9.1 Management Solutions https://www.bba.org.uk/about-us/associates/management-solutions/ https://www.bba.org.uk/about-us/associates/management-solutions/#comments Thu, 18 Sep 2014 15:56:41 +0000 https://www.bba.org.uk/?post_type=associate&p=29619 Read More]]> Management Solutions is an international consulting services company focused on consulting for business, risks, organization and processes, in both their functional components and in the implementation of their related technologies. With its multi-disciplinary team (functional, mathematicians, technicians, etc.) of over 1,400 professionals, Management Solutions operates in more than 30 countries from its 18 offices (9 in Europe – London, Madrid, Barcelona, Bilbao, Warsaw, Frankfurt, Zürich, Milan and Lisbon, 8 in the Americas – New York, San Juan de Puerto Rico, Mexico City, Bogota, São Paulo, Lima, Santiago de Chile, and Buenos Aires, and one in Asia – Beijing).

To cover its clients’ needs, Management Solutions has structured its practices by sectors (Financial Institutions, Energy and Telecommunications) and by lines of activity, covering a broad range of skills -Strategy, Commercial Management and Marketing, Organization and Processes, Risk Management and Control, Management and Financial Information, and Applied Technologies.

In the financial sector, Management Solutions offers its services to all kinds of companies -banks, insurance companies, investment firms, financial companies, etc.- encompassing global organizations as well as local entities and public bodies.

As from 1st April 2013, Management Solutions was appointed to the Skilled Person Panel in the ‘Prudential – Deposit Takers and Recognised Clearing Houses’ area, among other areas – Please refer to the FCA and PRA websites to see the Panel in full.

Our mission, values and commitments are best represented in our Corporate Social Responsibility Report (http://www.managementsolutions.com/PDF/ENG/13report.pdf).

Research and Development:

A key pillar of Management Solutions value proposition is its Research and Development activity. In the current international context, characterised by the consequences of an economic crisis that has affected both the developed and emerging economies, proactivity towards change is more relevant than ever. In light of this, our Research and Development function reflects Management Solutions’ commitment to staying ahead of the industry and meeting the market’s growing demand for innovation.

Such mandate is translated in in-depth monographic research and innovation papers as well as briefs about current topics in the Firm’s areas of activity and in those areas of interest for clients and professionals. As an example, some of the latest newsletters written by R&D have dealt with Model Risk Management, the Liquidity Risk Regulatory Framework and its impact on management, as well as the impacts of Stress Tests on the financial system:

  • Model Risk Management: This newsletter provides an overview of model risk management in financial institutions as well as its regulatory treatment. It also covers the key pillars to be addressed for an appropriate MRM Framework, together with a specific example on model risk quantification. http://www.managementsolutions.com/PDF/ENG/Model-Risk.pdf
  • Liquidity Risk Regulatory Framework: The document provides a global overview of liquidity standards and their impacts both on the real economy and on the financial sector. The analysis also covers the stability of deposits and their dependence on macroeconomic variables. Finally, the document describes how financial institutions are adapting their management frameworks to this new reality. http://www.managementsolutions.com/PDF/ENG/Liquidity-risk.pdf
  • Impacts of Stress Tests in the Financial System: This study aims to provide an overview of stress tests, its nature and implications for financial institutions. It covers internal stress testing as well as industry-wide stress testing applied by supranational and national supervisory bodies. The document contains a retrospective quantitative empirical exercise in order to assess the degree of accuracy both in terms of macroeconomic scenarios and forecasted losses and capital expected. http://www.managementsolutions.com/PDF/ENG/Stress-test.pdf
  • Capital Adequacy for Credit Risk: This study provides an analysis of credit risk capital requirements under different scenarios and risk parameter assumptions in order to assess how those affect the regulatory capital model as well as economic capital consumption.http://www.managementsolutions.com/PDF/ENG/Capital-adequacy.pdf

Other relevant information:

For further information on Management Solutions, please refer to the different sections in our webpage: http://www.managementsolutions.com/site/eng/default.htm

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BBA Brief – 18 September 2014 https://www.bba.org.uk/news/bba-brief/bba-brief-18-september-2014/ https://www.bba.org.uk/news/bba-brief/bba-brief-18-september-2014/#comments Thu, 18 Sep 2014 09:03:37 +0000 https://www.bba.org.uk/?post_type=news&p=29467 Read More]]> ECJ ruling could see VAT bills rise for financial services

The European Court of Justice has ruled that services supplied between a group’s headquarters and its branches will be subject to VAT. Previously, European VAT law has allowed countries to treat companies and their overseas branches as single entities, however these services will now be taxed at rates of between 15% and 27%, writes the FT (£, p17). The Telegraph (B7) states that the ruling will “disproportionally affect the UK financial service industry”, with British banks that receive services from foreign offices and the UK subsidiaries of banks headquarters elsewhere likely to be affected.

G20 split over impact assessment of regulation

The current holders of the G20 presidency Australia are facing opposition after it backed calls to undertake a cost-benefit analysis of financial regulation, writes the FT (£, p7). B20, the business lobby group, has called for international standard setters to investigate side-effects of financial regulation and consider their impact on growth and stability. However some G20 members such as Japan and the US have voiced their concerns, stating that individual nations already have robust procedures to analyse such regulations.

Commentators warn of EU membership following Yes vote

BBC Business Editor Kamal Ahmed  warns that a Yes vote in today’s Scottish referendum could increase the likelihood of the UK leaving the EU. He adds that those businesses who may wish to relocate may move to continental Europe rather than the UK due to the heightened risk of Brexit. In the FT (£, p24) Jonathan Guthrie echoes Kamal’s sentiments, stating that Scots are more pro-european and that a Yes vote could make the “English more nationalistic and thus more eurosceptic”.

Lenders cut mortgage rates

A number of mortgage lenders have cut their rates and increased their range of fixed-rate loans in recent days, despite expectations that the Bank will raise interest rates next year, reports the Guardian (p29). The Mail (p30) writes that it is “great news for consumers” after a “rising number of new lenders has helped to increase competition and push down rates”.

Fed to keep rates low

The US Federal Reserve has committed to keeping interest rates low for a “considerable time”, reports the Times (£, p41). The central bank confirmed that rates would remain low as long as inflation was under control and until there were improvements in wage growth and long-term unemployment. The policy statement also revealed that the Fed would cut its buying of Treasury bonds by another $10 billion (£6 billion) per month, and expects to end the programme after October (Independent, p59). However the FT (£, p1) writes that the Fed expects rates to rise by 1.25% – 1.5% in 2015, implying five rate rises in their eight meetings next year.

Stat of the day

The number of unemployed people has fallen by 468,000 over the past year, the largest annual fall in unemployment since 1988 (ONS)

Today’s diary

Scottish Independence Referendum

CBI releases its industrial trends monthly survey

In brief

Bank of England minutes reveal that the MPC remained split 7-2 against an interest rate rise, with Martin Weale and Ian McCafferty those calling for an increase. (FT, £, p4)

The International Monetary Fund has warned that the global recovery is “precarious” due to geopolitical tensions and the prospect of tighter monetary policy in the US. (FT, £, p7)

El Mundo reports that the Scottish referendum has encouraged nationalistic movements elsewhere in Europe.

The Independent (p59) reports that wages increased below inflation, with the average total pay rising by 0.7% in July, below the CPI measurement of 1.6% for the same month.

The FT (£, p32) reports that South Africa has become the third non-Muslim country to issue sukuk bonds.

What the commentators say

Ahead of the results of the ECB’s asset quality reviews and stress tests, Sam Fleming and Alice Ross discuss the impact of these health checks and the likely outcomes. (FT, £, p19).

The FT’s Lex column (£, p16) suggests that Apple would improve mobile payments due to its “tech expertise, brand recognition and devices”.

The FT’s Robin Harding examines the pressure building on Janet Yellen after eight months as Fed chairman.

If you have five minutes…

Standard Chartered chairman Sir John Peace argues in the Mail (p79) that a new approach is needed to increase UK trade with emerging markets, stating that Britain should “showcase established markets such as pharmaceuticals and financial services, and promote newer ones such as technology”.

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Social media and crisis management https://www.bba.org.uk/news/insight/social-media-and-crisis-management/ https://www.bba.org.uk/news/insight/social-media-and-crisis-management/#comments Wed, 17 Sep 2014 15:24:15 +0000 https://www.bba.org.uk/?post_type=news&p=29412 Read More]]> Government and businesses face an increasingly urgent need to interpret and act upon information in social media.

In an era of outsourced services and cross-border operations, banks and financial services firms face a range of threats, ranging from large scale geopolitical risks to localized problems. As a result, their capacity to crowd-source reports rapidly from observers on the ground has seen social media play an increasingly important role in crisis management. Tools such as CrisisNET1, which aggregate reports from social media platforms such as Twitter, have become indispensible tools. At the same time, reports sourced from social media cannot always be trusted and this presents a growing and potentially unmanageable problem.

In a recent study, we examined rumours current during the riots in England in 20112. In the example below, the rumour was that rioters were about to attack a hospital in Birmingham. Tweets 1-2 in the table repeat the initial rumour in various forms. Tweets 3-5 illustrate variants of denials of the rumour, referring to eye witness reports (3), offering an alternative explanation for reports of police being seen near the hospital (4) and relaying information from other media sources (5).

Tweets

(1) 08/08/2011 19:03 – Police in Brum moving to protect the Childrens Hospital as a pile of hooded people move towards it!  #birminghamriots
(2) 08/08/2011 19:20 – Gangs are trying to get into Birmingham’s Children Hospital. That is fucking disgusting. Have they no heart? #BirminghamRiots
(3) 08/08/2011 19:48 – Girlfriend has just called her ward in Birmingham Children’s Hospital & there’s no sign of any trouble #Birminghamriots
(4) 08/08/2011 19:53 – May I remind clueless/hysterical  #birminghamriots commentators that Children’s Hospital sits face-face with city’s central police station
(5) 08/08/2011 20:13 – #birminghamriots brmb radio and chief medical officer have confirmed Birmingham children’s hospital has NOT been hit by riots

Working with the Guardian Newspaper Interactive team, we created visualisations of the rumour’s trajectory, illustrating changes over the rumour lifecycle of the weight of claim and counter-claims.

Visualisations of the hospital rumour showing tweets supporting the rumour (green) and tweets challenging it (red). Each circle represents a tweet and its size reflects influence (i.e. number of followers) of the tweeter. Initially, tweets supporting the rumour dominate but, within two hours, tweets challenging it become dominant3. Another feature is that mainstream media lags behind crowd-sourced reports and the lack of presence from emergency services early in the rumour lifecycle. This suggests they find it difficult to make effective use of social media during crises.

Our conclusions from this study are two-fold. First, while social media is a fertile medium for launching rumours, it also provides robust mechanisms for self-correction. Second, there is an urgent need to understand how organisations with a role in responding to crises – whether government agencies, news media, or businesses – can be assisted to distinguish between truth and rumour more quickly.

To this end, the Pheme project4 is developing computer-based techniques to assist government agencies, news media and businesses to assess the veracity of reports in social media more quickly and reliably. The project team is applying these techniques initially in journalism and healthcare but is interested in working with collaborators in other key corporate applications, such as business intelligence, market research, campaign and brand reputation management.

Professor Rob Procter
Department of Computer Science
University of Warwick
rob.procter@warwick.ac.uk
@robnprocter

1 http://crisis.net/about/
2 Procter, R., Vis, F., & Voss, A. (2013). Reading the riots on Twitter: methodological innovation for the analysis of big data. International journal of social research methodology, 16(3), 197-214.
3 For interactive visualisations, see www.guardian.co.uk/uk/interactive/2011/dec/07/london-riots-twitter
4 www.pheme.eu

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BBA Brief – 17 September 2014 https://www.bba.org.uk/news/bba-brief/bba-brief-17-september-2014/ https://www.bba.org.uk/news/bba-brief/bba-brief-17-september-2014/#comments Wed, 17 Sep 2014 08:36:17 +0000 https://www.bba.org.uk/?post_type=news&p=29333 Read More]]> Infrastructure investment on hold in Scotland ahead of independence vote

More than 80 public-private partnerships worth £6.2 billion are on hold as foreign investors wait for the result of the Scottish independence vote (Telegraph, B5). The projects are mostly local authority backed and underwritten by the UK Government. However, it is unclear whether the support would be withdrawn if Scotland decides to leave the UK, which is creating uncertainty amongst investors. Elsewhere, the Times (£, p41) reports that a survey of fund managers by Bank of America Merrill Lynch has identified the UK as the “least popular market for investment” because of fears that Scotland will leave the UK.

Government “bad bank” is close to selling mortgage book

The Telegraph (B3) reports that UK Asset Resolution (UKAR), which was created from the toxic debts of the bailed-out banks Northern Rock and Bradford & Bingley, has selected JP Morgan as its preferred bidder for a £1.6 billion package of state-owned mortgages. TSB is also believed to have expressed an interest in the purchase. The move could see the British taxpayer recoup hundreds of millions of pounds, but UKAR still has more than 520,000 “risky” mortgages on its balance sheet worth around £75 billion.

G20 to back OECD rules to end corporate tax avoidance

New rules designed by the Organisation for Economic Cooperation and Development (OECD) and submitted to the G20 aim to stop transnational corporations from “exploiting differences between tax regimes to conjure up unwarranted tax deductions”, reports the Guardian (p23). The organisation has criticised the current international tax system, which has more than 3,000 bilateral tax treaties, and wants to prevent countries from offering tax incentives to encourage corporations to domicile with them. The move would mean an end to retailers, such as Amazon, using its residence in Luxembourg to avoid paying taxes on UK transactions.

US money market funds using new Fed tool instead of banks

European and US banks have expressed concerns that the increasing use by US money market funds of the Federal Reserve’s new “reverse repo programme” (RRP) is distorting the bank repo market (FT, £, p28). The RRP allows the central bank to lend bonds from its vast portfolio of assets to large investors, which will give the Fed some control over short-term interest rates when it takes money out of financial markets. However, banks warn that the tool is exacerbating the outflow of deposits from their institutions.

Today’s diary

BofE: Agents’ Summary of Business Conditions – September 2014

BofE: Minutes of the Monetary Policy Committee Meeting held on 3 and 4 September 2014

Council Working Party on Tax Question on Common Consolidated Corporate Tax Base

ECB: Governing Council meeting in Frankfurt

Stat of the day

The latest Scottish independence polls show a 48%:52% split in favour of the Union (UK polling report)

In brief

The European Union and Ukraine have signed a landmark free-trade agreement as the Kiev-government seeks to orientate its economy away from Russia (FT, £, p5).

The ECB will launch the first of its six “targeted longer-term refinancing operations” on Thursday where it will allow banks to borrow up to €400 billion (£319 billion) in cheap, four-year loans, in a bid to push inflation back up to 2% (FT, £, p6). Meanwhile, the German Banking Association has complained that it remains unclear how the ECB will “join-up” the results of its stress tests and asset quality review (FT, £, p16).

The fact that the Consumer Prices Index fell from 1.6% in July to 1.5% in August and wages grew by 0.5% on the same three months a year ago is likely to mean the Bank of England holds interest rates, writes the Guardian (p27).

The Mail reports that Barclays are set to give 10,000 London commuters “bPay” wristbands that contain a chip allowing them to make contactless payments. Read the BBA’s Way We Bank Now report (here) looking at how digital technology is changing retail banking.

French telecoms group Orange has agreed a partnership with Bank of Africa to allow customers to transfer money between their Orange Money account and their bank account with a mobile phone, reports the FT (£).

The Financial Reporting Council has confirmed that keeping talent will no longer be a valid justification for paying big remuneration packages (FT, £, p6).

The FT (£, p5) reports that stronger compliance requirements and more risk-adverse banks is making it harder for Chinese companies to open accounts in the British Virgin Islands.

A new survey by consumer group Which? has ranked First Direct the best brand for customer service (BBC).

Mortgage borrowers can, for the first time, take advantage of five-year fixed rate loans of below 3% writes the Mail (p47).

The volume of shares traded through “dark pools” has fallen by 24% since US prosecutors launched investigations into secretive trading exchange in June, writes the Times (£, p47).

What the commentators say

John Plender argues that despite the fragile global economic recovery and rising geopolitical risks stemming from Ukraine, Syria and Scotland, investors seem to have “wide-eyed faith in the power and wisdom of central bankers” (FT, £, p30).

Writing in the Times (£, p41), Ed Conway looks at the economic case for Scottish independence and argues that independence will mean that, at least in the short-term, house prices will fall, the cost of borrowing will rise as too will the cost of living.

The FT’s leader column (£, p10) argues that George Osborne should focus on shifting the economy away relying on household spending and concentrate on raising productivity.

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Kreab Gavin Anderson https://www.bba.org.uk/about-us/associates/kreab-gavin-anderson/ https://www.bba.org.uk/about-us/associates/kreab-gavin-anderson/#comments Tue, 16 Sep 2014 16:15:37 +0000 https://www.bba.org.uk/?post_type=associate&p=29320 Read More]]> Kreab & Gavin Anderson is a world leading communications consultancy with over 350 experienced consultants of 40 nationalities in 26 countries. Experts in financial, corporate and public affairs communications and issues management worldwide. Providing strategic advice to more than 700 clients worldwide

Website: www.kreabgavinanderson.com

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BBA Brief – 16 September 2014 https://www.bba.org.uk/news/bba-brief/bba-brief-16-september-2014/ https://www.bba.org.uk/news/bba-brief/bba-brief-16-september-2014/#comments Tue, 16 Sep 2014 08:56:37 +0000 https://www.bba.org.uk/?post_type=news&p=29208 Read More]]> Contactless tube payment

In an article for CityAM (p21), BBA Chief Executive Anthony Browne writes about the latest advance in the UK banking revolution: contactless tube payment. In the article, Anthony states that “this is just the latest chapter of the astonishing evolution that isn’t just good for consumers but for our country’s economic prospects too”. The article also mentions the BBA’s report published jointly with EY “The Way We Bank Now”, which suggests that “the UK would need an extra 750,000 digitally-skilled workers over the next three years if it is to capitalise on a £12 billion economic opportunity in the digital sector.”

BoE blames household debt for the deep recession

A number of papers report that high household debt levels could have been one of the main reasons why the 2008 financial crash became the longest and deepest recession since the 19th century, according to the Bank of England’s Quarterly Bulletin (Guardian, p24). The BoE said this research justified its decision in June to limit mortgage borrowing “to insure against a further significant increase in the number of highly indebted households” (FT, £, p4). The Independent (p57) quotes the report researchers saying: “It is possible to make the case that debt played at least some role.”

Scottish “yes” could force the BoE to raise interest rates sooner than expected

In the Times (£, p44), Paris based Lyxor Asset Management warns that a Scottish “Yes” vote could force an interest rate rise. The article explains that “until a month ago, hedge funds had net long positions of sterling versus the dollar, but with increased possibility of Scotland voting for independence, this has gone into reverse”. Albert Edwards, a strategist at Societe Generale, said: “Interest rates may be set to rise a whole lot faster than anticipated if we get a good old-fashioned sterling crisis.”

Today’s diary

Council Working Group meeting on Payment Services Directive

Stat of the day

There are 28,415,000 cards with contactless technology (The Way We Bank Now, 2014)

In brief

Ana Botín has made her first appearance as the new Executive Chair of Banco Santander and she pledged to turn the bank into “the number 1 bank in the Eurozone and one of the top 10 banks world-wide by market capitalisation.” (Wall Street Journal).

A hundred of Britain’s biggest companies have called for an overhaul of the business rates system, warning that it is no longer “fit for purpose in the 21st century” (Telegraph, B1).

Eurozone growth is holding back the global economy, the OECD warns (BBC).

According to a survey by the Children’s Society, three quarters of parents would like TV adverts for payday lenders banned (Guardian).

As the US economy improves, the Federal Reserve looks at “normalising” US monetary policy, reports the FT (£, p32).

What the commentators say

In the FT (£, p16), Tom Braithwaite describes why investors have been shifting away from investment banks with geopolitical uncertainty.

In the Mail (p70) the economist Neil MacKinnon raises warns on how breaking with the UK could affect Scotland’s finances.

If you get five minutes…

The website Quartz looks at the reasons behind the success of Islamic finance in Hong Kong.

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Innovation you can bank on https://www.bba.org.uk/news/bba-voice/innovation-you-can-bank-on/ https://www.bba.org.uk/news/bba-voice/innovation-you-can-bank-on/#comments Mon, 15 Sep 2014 15:11:09 +0000 https://www.bba.org.uk/?post_type=news&p=29180 Read More]]> As highlighted in the BBA’s recent Way We Bank Now work and by the FCA report on Mobile Banking and Payments our mobile devices are now, more than ever ‘essential kit’ – and increasingly used for day to day banking and payments.

The banking industry understands this, with substantial investment in providing consumers with flexibility through mobile banking. In fact, the FCA notes in their report that the majority of firms now invest more than 5% of their IT budget specifically on mobile development.

This is good news for consumers.

I like services that make my life easier. I especially like services that I can interact with effortlessly on my mobile device that don’t fail me when I want to use them most.

As a relatively recent migrant to these shores, I can compare the differences and similarities in services internationally. And while it might be understandable to assume that UK financial infrastructure is much the same as the rest of the world – it isn’t.

One example is the Current Account Switching Service, which leads the way for making it easy for customer to switch bank accounts. Since its introduction a year ago, over a million customers have made use of this service and switched their current account. A report published last week sets out how much has been achieved.

The FCA study  is short and to the point, and it should be read by anyone thinking of delivering a mobile banking or payments service.  At a high level, the report identifies the following key areas to consider when measuring whether good outcomes are being delivered to consumers:

  • Consumer understanding of their legal rights and obligations, and what is being done to aid this understanding
  • Key decision makers knowledge in relation to the pace of innovation and technology
  • Data protection, security, and technology robustness
  • Oversight of third parties and outsourced functions
  • Business understanding of the regulatory framework (especially for new entrants)

The good news is that banks and new participants are increasingly investing and innovating in the mobile banking and payments space. This is providing real benefits for consumers.

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BBA Brief – 15 September 2014 https://www.bba.org.uk/news/bba-brief/bba-brief-15-september-2014/ https://www.bba.org.uk/news/bba-brief/bba-brief-15-september-2014/#comments Mon, 15 Sep 2014 09:22:17 +0000 https://www.bba.org.uk/?post_type=news&p=29123 Read More]]> BBA raises concerns over leverage ratio proposals

The BBA has argued that the Bank of England’s new leverage ratio proposals are “too complex and potentially damaging”. In an article on our website BBA Executive Director Simon Hills argued that the plans “would particularly impact lenders with lower risk business models such as mortgage providers. This could create perverse effects- such as incentivising banks to increase the cost of new mortgages or even to engage in higher risk lending.  This is the opposite of what policymakers want to achieve.” (Sunday Telegraph, B1, Reuters)

To read the full consultation response click here.

EU ministers fail to agree on FTT; Schaeuble says “small first step” is on the cards

At the informal ECOFIN meeting in Milan on Saturday European finance ministers failed to agree on proposals for a new Financial Transactions Tax (FTT) after opposition from France.  German Finance Minister Wolfgang Schaeublesaid:“Given the different situations in the different countries, we will probably only agree on a small first step, but a small first step is better than none… I am very optimistic that, if we make the first step, we will create a knock-on-effect that leads to further steps and that could convince other countries to join in.”  It is expected that a proposal could be agreed on by the end of the year. (EUbusiness)

End of free banking could spur new entrant       

The Sunday Telegraph (B2) reports that the Competition and Market Authority’s consultation on whether to hold a full enquiry into the banking sector ends on Wednesday. The article speculates that if the result of the enquiry is a recommendation to end “free when in credit banking” this could lead to a wave of new companies entering the market, which could boost competition.

Today’s diary

FSB releases its quarterly “Voice of Small Business” Index for Q2

European Parliament: Plenary session week in Strasbourg

Council Working Group meeting on Insurance Mediation Directive II

Stat of the day

£11.7 billion the estimated value of initial public offferings in London this year – the highest level since 1998 according to Capita Asset Services. (FT, £, p19)

In brief

A customer satisfaction survey by Which? found that some high street banks still have more to do to improve customer satisfaction.

In the Sunday Mirror (p32) the BBA argued that we have a “vibrant, competitive” banking system and that it is easier than ever for dissatisfied customers to switch banks. The Sunday Times Money section looked at how it’s never been easier to move your current account and surveyed the best deals on the market.

Saturday’s Mail (p4) looked at the rise in online fraud and scams such as vishing.  It reports that the BBA is planning to launch a consumer campaign in the coming weeks.

Outgoing EU Commissioner Michel Barnier has said that banks remain “too big to fail, too complex to resolve and too costly to save.” (Independent on Sunday, p12)

The Bank for International Settlements has found that cross border lending has risen for the first time in three years.  Banks lent €580bn (£461billion) between the end of December last year and the end of March 2014 in foreign markets. (FT, £, p9)

The latest figures from Rightmove suggest that the housing market could bounce back strongly in the autumn (Mail, p58).

The Federation of Small Businesses is reporting “record-breaking” confidence among its members.  (BBC)

The FT (£, p17) suggests that we are seeing the “comeback of the wheeling and dealing corporate financier” as more investment banks focus on advisory business rather than trading.

In the FT (£, p17 and 18), experts warn that Europe’s companies are adopting a “safety first” approach which has led to them building up record cash piles which is undermining growth.

The Times (£, p55) reports that the challenger bank, Aldermore, could look to float on the stock market in the near future.

The Federal Reserve could raise interest rates sooner than markets expect next year and is expected to further scale back its QE programme this week (Sunday Times, £, B1)

The FT (£, 20) reports that there is some resistance to the Financial Stability Board’s proposals for a new central platform for foreign exchange trading.

What the commentators say

In the Weekend FT (£, p13) Martin Wolf predicted that if Scotland became independent it would “discover the taste of austerity”.

David Smith wrote in the Sunday Times (£, B2) that “Scotland needs the UK a lot more than the UK needs Scotland.”

In today’s FT CityUK (£, p13) Chief Executive Chris Cummings says that Edinburgh is the UK’s second largest city for financial services and argues that this could be put at risk by a Yes vote.

In the Guardian (p29), Owen Jones describes the Transatlantic Trade and Investment Partnership between the EU and the USA as a “menace” and a “threat to democracy” .

If you get five minutes…

In the FT (£) Chris Giles looks at five economic challenges that would face an independent Scotland

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The Bank’s leverage ratio proposals are too complex and could be damaging https://www.bba.org.uk/news/bba-voice/the-banks-leverage-ratio-proposals-are-too-complex-and-could-be-damaging/ https://www.bba.org.uk/news/bba-voice/the-banks-leverage-ratio-proposals-are-too-complex-and-could-be-damaging/#comments Mon, 15 Sep 2014 09:05:48 +0000 https://www.bba.org.uk/?post_type=news&p=29119 Read More]]> The BBA supported the concept of a simple, non-risk based leverage ratio when it was proposed by international banking standard setters at the Basel committee in 2009.  That’s why we have today raised some concerns about the Financial Policy Committee’s (FPC) proposals for a UK specific leverage ratio (see the full response here).  We believe that they are too complex and potentially damaging.

Introducing what would be tantamount to a parallel and complex capital regime to the current risk weighted approach to the calculation of UK banks’ capital requirements would particularly impact lenders with lower risk business models such as mortgage providers. This could create perverse effects- such as incentivising banks to increase the cost of new mortgages or even to engage in higher risk lending.  This is the opposite of what policy makers want to achieve.  After all, that was the route to failure of a number of building societies that demutualised and converted to banks a couple of decades ago.

The FPC’s plans which require banks to meet the ratio using only the highest quality of capital also deviate from the internationally agreed standards. This could disadvantage UK banks as they compete for investors’ capital with their foreign peers at a time when banks throughout the world are raising more capital to meet the new, higher requirements.

So whilst the FPC’s consultation is clearly a carefully considered piece of work we believe it goes too far.  Instead, we would prefer that they wait until the design and calibration of the international regime has been finalised and introduced through the Capital Requirements Regulations that apply to all banks in Europe before deciding whether or not to go further.

Fundamentally there is a risk that the current proposals will increase costs for bank customers and conflict with other rules that seek to make banks safer.  We supported the idea that a simple leverage ratio was an important safeguard as part of the drive to end the problem of too-big-to-fail.  But we would urge the FPC to rethink its latest proposals.

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BBA response to Leverage Ratio Paper https://www.bba.org.uk/policy/financial-and-risk-policy/prudential-capital-and-risk/leverage-ratio/bba-response-to-leverage-ratio-paper/ https://www.bba.org.uk/policy/financial-and-risk-policy/prudential-capital-and-risk/leverage-ratio/bba-response-to-leverage-ratio-paper/#comments Mon, 15 Sep 2014 08:56:27 +0000 https://www.bba.org.uk/?post_type=policy&p=29116 Read More]]> The BBA is pleased to respond to The Financial Policy Committee’s consultation paper reviewing the Leverage Ratio1, which has been prepared in response to the Chancellor’s letter2 asking the Financial Policy Committee (FPC) to consider whether or not it needs any further powers of direction over the leverage ratio, how it would use such powers and where a leverage ratio would fit in with the rest of the macro prudential ‘tool kit’.

Please read the full response via the link below.

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