BBA The voice of banking Wed, 26 Nov 2014 15:46:29 +0000 en-US hourly 1 Bank Rating Framework Wed, 26 Nov 2014 15:44:52 +0000 0 Clicks and mortar banking is here to stay Wed, 26 Nov 2014 12:51:57 +0000 Read More]]> It’s hard not to be staggered by the speed at which the British public is embracing banking by mobile phone and tablet computer.

Nearly 15 million have downloaded banking apps already and usage doubled during 2012 and 2013. It seems that millions of us love the convenience of being able to check our balance and make payments from the palm of our hands, whenever and wherever we please.

But a couple of times in recent weeks a radio interviewer has asked me if the take-up of this technology has spelled the end for the bank branch.

At the BBA we’re confident branches will remain a vital part of banking in the 21st century, even if their numbers do fall.

Firstly, technology is not for everyone. We all know people who are reluctant to email, let alone join Facebook or take to Twitter. Banks want to serve their customers and understand that not everyone wants to harness apps or other digital services.

They also have to meet the needs of consumers who are keen but feel they lack the necessary skills. Banks have trained thousands of branch staff to help customers who want to get online to do so.

The deals banks have in recent years signed with the Post Office to allow customers – including small businesses for a number of banks – to withdraw and pay-in cash and cheques are vital here too.

These ensure customers can carry on banking in a community if their branch closes, but they also ensure that hundreds of places around the country now have somewhere they can bank for the very first time.

Secondly, even if you are a zealous user of mobile banking you will probably still want to use a branch from time to time.

Millions of customers are now only using a branch once or twice a year, for those bigger moments, such as applying for a mortgage, assessing their financial options or resolving a complaint. Those are important times and banks want to be able to offer that face-to-face interactions at this time.

Thirdly, if you doubt the future of bank branches – get out there and visit some. More than 2,200 have been refurbished in the last year. That’s well over 20% of the estate.

Often these upgrades reflect how the way we bank is changing, with banks of iPads and more spaces to have a discreet conversation with staff rather than bellow at a glass screen.

Banks clearly see a future in their high street outlets – they wouldn’t be spending money upgrading their premises if they did not.

There are caveats to this, of course. An important one is that there are some banks that will pride themselves on offering branch-free services – and will market themselves as being able to offer better value products and services as a result. Several providers have been doing this for years.

Similarly, there may be big telecoms companies and internet brands that come to offer banking services but see no reason to open a network of branches.

But most of us I suspect will opt towards a Clicks and Mortar model, where we use a combination of phone, internet and branch banking. The balance between each of these channels will vary from customer to customer.

This is a far cry from the days when you could only bank if you could find time to enter a branch between 9:30 and 3:30, Monday to Friday.

Clicks and mortar service is a style of banking that offers far more choice and flexibility than we’ve ever had before.

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BBA Brief – 26 November 2014 Wed, 26 Nov 2014 10:44:17 +0000 Read More]]> “Cooling” UK housing market

Many of today’s paper’s report on the BBA’s high street banking statistics, which were published yesterday. The Guardian (p28) says the figures showed a slowdown in mortgage approvals, with the number of approvals for house purchases hitting a 17-month low of 37,076 in October. The paper adds that cooling in the housing market is a result of the Bank of England’s mortgage market requirements, high prices, the uncertainty caused by the 2015 general election and the prospect of higher interest rates next year.

Changes due for current account switching service

The Chancellor is to announce changes to the Current Account Switching Service (CASS) in his Autumn Statement on 3 December, according to Sky. Sky sources report that George Osborne will announce an extension of the service to small businesses with a turnover of up to £6.5 million. The banks are expected to extend the two-year period in which they will guarantee the redirection of payments to a customer’s new bank account to 36 months.

Regulator launches investigation into credit card market

The Financial Conduct Authority (FCA) has begun an in-depth investigation into the UK’s credit card market. (Telegraph, B3). The paper quotes Christopher Woolard, the FCA’s director of policy, risk and research, who said: “The credit card market is well-established and hugely important for UK consumers, who hold around 70% of all credit cards in Europe. We want to understand in more depth what drives consumers to make the choices they do and how firms develop the services they offer. We want to make sure that the market works well for all consumers and that card-holders get a fair deal.”

Carney says UK economy needs monetary stimulus

Appearing before the Treasury Select Committee yesterday, Bank of England Governor Mark Carney insisted that monetary policy will not be loosened further, but said that the British economy still needs monetary stimulus despite an expected growth rate of 3.5 per cent this year (City AM, p2). He told MPs “the [Bank’s] next move in policy is going to be an increase”. Also giving evidence, Monetary Policy Committee member Kristin Forbes said the fact that measures of domestically generated inflation were low should continue to keep inflation contained for now. She added that deflation was unlikely.

Today’s diary

House of Commons: Treasury Select Committee – Payment Systems Regulator

Trilogue on European Long Term Investment Funds

CBI: Quarterly distributive trades survey

ONS: Business Investment – Q3 2014 provisional results

ONS: UK GDP Q3 2014 (second estimate)

CSFI: Roundtable on digital currencies

Stat of the day

1.6 million – the number of current account customers that have registered their mobile number with their bank to use Paym (Daily Mail, p51).

In brief

A report by the International Capital Market Association (ICMA) has found that the introduction of more stringent capital regulations on banks has made it harder to trade corporate debt. ICMA says as a result of the lack of liquidity, “virtually every participant” in the European corporate bond market sees “a correction lurking over the horizon” (Telegraph, B5).

A survey of FTSE100 firms and other large companies carried out by PwC has revealed that cuts in corporation tax could be having a positive effect on the public purse (City AM, p16).

European Commission President Jean-Claude Juncker has launched a €315 billion (£250 billion) “New Deal” – a three-year investment plan to boost the European economy (Telegraph, B1).

Ethiopia is to issue its first sovereign bond, and is looking to raise up to $1 billion (£636.4 million) from international investors (FT, £ p30).

Businesses that bank with HSBC will be the first that are able to use the new mobile banking service Paym (Daily Mail, p51).

A study by the New City Agenda and Cass Business School has warned it will take British retail banks “a generation” to change the sales culture in banking (FT, £, p2).

The Organisation for Economic Co-operation and Development (OECD) has urged the Bank of England to raise interest rates next year as Britain’s economic recovery leads to stronger wage growth and higher inflation (Telegraph, B1).

The Swiss franc has risen to a two-year high ahead of a referendum on proposals for Switzerland’s national bank to triple its gold reserves, amongst fears that a “Yes” vote could trigger a worldwide gold rush (Guardian, p31).

Germany has provided the highest number of officials working in the European Commissioners’ Cabinets (31), followed by France (21) and the UK (18) (European Voice).

The vending machine industry will have to pay £72.8 million in labour costs, fresh mechanisms and software upgrades to accommodate the new 12-sided £1 coin, which will arrive in 2017 (Independent, p57).

Nationwide has warned that the Chancellor’s new pensioner bonds could hurt bank deposits and affect mortgage lending by taking money from the real economy (Telegraph, B3).

What the commentators say

Writing in the Independent (p17), Hamish McRae says that this Christmas is likely to be “lousy” for the Chancellor as despite consumption in Britain booming, government revenues are languishing. “Some taxes are doing fine. Corporation tax, up 3.1%, is exactly on target. National Insurance contributions, up 3%, are actually a bit above target, which would fit in with the strong growth in the employment. But VAT, up 2.7%, is quite a bit worse than the target of 3.9%. That suggests some leakage, legal or illegal. But the really big problem is income tax, the biggest tax of all.”

In the Daily Mail (p71), Alex Brummer says one can understand why the Governor of the Bank of England would like to make the Old Lady “more boring” but argues that post financial crisis it will be hard to make that happen. Mr Brummer argues that the Bank’s role in maintaining financial stability means it is directly involved in the most important decision for most British households – mortgages – and its role as prudential regulator means it its “thrust into the centre of the debate” about the safety of the banking system and culture.

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BBA Brief – 25 November 2014 Tue, 25 Nov 2014 10:10:06 +0000 Read More]]> BBA stats show cooling housing market

High Street Banking statistics released this morning by the BBA reveal a continued cooling of the housing market, with house purchase approvals 16% lower than in October last year. However, annual growth in unsecured borrowing is running at 2.8%, the highest rate since 2008. BBA Chief Economist Richard Woolhouse said:

“Today’s figures suggest that the cooling of the property market has continued in recent weeks. Approvals were 16% lower in October than in the same month last year – the corresponding figure for September was a 10% decline. Despite a softening in the housing market, consumers continue to show confidence in the economy with unsecured borrowing at its highest growth rate in years. At the same time we all continue to make the most of new ISA rules, stashing more in our savings accounts over the course of the last year.”

BoE: Larger buffers for clearing houses

David Bailey, the Bank of England’s Head of Markets Infrastructure and Policy, said yesterday that clearing houses may require bigger capital buffers to prevent them needing government bailouts. Citing the FSB’s recent total loss absorbing capacity announcement, Mr Bailey told a conference that “we will need to consider carefully whether and how this concept could be effectively translated to CCPs [central counterparties]” (FT, £). Mr Bailey also called for CCPs to show regulators clearer stress tests, stating: “There is no requirement for CCPs to disclose the details of the stress tests which they use…it may be difficult for participants to fully compare the level of stress that CCPs can withstand” (CityAM, p14).

Juncker to unveil stimulus package

European Commission President Jean-Claude Juncker will announce €21 billion (£16.6 billion) in EU seed money tomorrow to help resuscitate Europe’s economy, the FT (£, p8) writes. The European Fund for Strategic Investment will be used to raise funds worth an estimated €315 billion for higher-risk projects by seeking to “leverage small amounts of public money to attract large amounts of private capital”. The plans will not be finalised until it is endorsed by the 28-member Commission, however it has seen resistance from some northern countries such as Britain, who have “emphasised that the scheme must not lead to an increase in the EU budget” (Guardian, p21). Officials hope to have it fully approved by mid-2015.

Latest from the BBA

Executive Director Paul Chisnall argues that better regulation will only come if the European Commission reconsiders its proposals for bank structural reform.

Today’s diary

BBA High Street Banking stats

House of Commons: Treasury Select Committee – Bank of England November 2014 Inflation Report

House of Commons: BIS Committee – Transatlantic Trade and Investment Partnership

Council Working Group on Benchmarks

Trilogue on the fourth Anti-Money Laundering Directive

Stat of the day

£11.2 billion – the total ISA deposits in the 12 months to October, an increase of almost 22% on the same period last year (BBA High Street Banking stats)

In brief

The front page of the Mail claims that due to restrictions introduced in April this year, homebuyers in their late thirties and forties are “being refused mortgages because they are too old”.

Deloitte has been appointed to conduct a review into the technical glitch into the Bank of England’s Real Times Gross Settlement system on 20 October. (Guardian (p26)

The Times (£, p4) writes that “up to six members of the cabinet would vote to leave the EU”.

The FT (£, p6) reports that following easing measures taken by the Chinese and Japanese central banks, there is pressure on other Asian central banks to follow suit.

Bank of England Chief Economist Andy Haldane has warned that global growth levels could be “soggy” for some years as “debt levels [are] still a bit high, both out there among companies and households”. (Times, £, p44)

El Mundo reports that the Spanish Association of Banks (AEB) said publicly it would consider meeting the radical Spanish left-wing political party Podemos (“We can”).

What the commentators say

Louise Cooper writes in the Times (£, p41) that “regulation is only part of the solution to stop individuals breaking rules. An honest corporate culture is also essential.”

The Independent’s (p51) James Moore writes that the “new leadership the [banking] industry has promised is failing, its culture is little changed.”

The FT’s (£, p11) Simon Samuels argues that a bank’s risk culture is more important than its capital levels, and suggests ways of addressing this issue such as regulators disclosing their own assessment of a bank’s risk culture or banks revealing their actual losses compared to expected losses each year.

In CityAM (p27), Social Market Foundation economist Katie Evans calls for the Financial Services Compensation Scheme to be reduced to £30,000, as the current level of £85,000 “is contributing to a sense of apathy around financial services”.

David Riley writes in the FT (£, p30) that risks over instability and liquidity are still evident despite the G20’s measures to address “too big to fail”.

If you have five minutes…

In the FT (£, p9), John Authers examines the US stock market, and warns that the risk it “continues charging upwards until it becomes overheated seems very real”.

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October 2014 figures for the high street banks Tue, 25 Nov 2014 09:31:02 +0000 Read More]]> Richard Woolhouse, Chief Economist at the BBA, said:

“Today’s figures suggest that the cooling of the property market has continued in recent weeks. Approvals were 16% lower in October than in the same month last year – the corresponding figure for September was a 10% decline.

“Despite softening in the housing market, consumers continue to show confidence in the economy with unsecured borrowing at its highest growth rate in years.

“At the same time we all continue to make the most of new ISA rules, stashing more in our savings accounts over the course of the last year.”


Please read the full release and excel tables via the links below.

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Better Regulation will only come if the European Commission reconsiders its proposals for bank structural reform Mon, 24 Nov 2014 11:41:57 +0000 Read More]]> Better regulation is an idea that has been around in policymaking circles as long as the mythical bent banana. But given the renewed emphasis that EU Commission President Jean-Claude Juncker has given to this agenda by assigning it to First Vice-President Frans Timmermans, there are many in the business community hoping that his bite will be as good as his bark.

Which is why, as reported in the FT today, we have decided to a write joint letter with our counterparts from France, to ask them to look again at a piece of legislation that is causing a great deal of concern, not only in London but in financial centres across Europe.

As I have argued before we are concerned that the proposals could conflict with measures that have already been passed in the UK and in other European capitals. British banks are already beginning to implement the Vickers ringfencing reforms, so adding another layer of complexity and uncertainty by introducing additional EU rules with little or marginal benefit does not seem like a good idea.

Indeed I would suggest that this makes this a perfect candidate to be looked at again under the Better Regulation agenda. Given that several national parliaments have already passed their own regimes in this area it is not clear how these proposals would comply with the EU’s principle of subsidiarity – indeed the French Senate has already opined that they most certainly do not.

In the recent stringent stress tests by the European Central Bank (ECB) the major EU-based banks – GSIBs in the vernacular – all passed. Indeed only one bank that is in scope of these proposals was asked to raise more capital by the ECB.

We are also concerned these plans would undermine President Juncker’s proposals to create a Capital Markets Union. For example, the market making of convertible bonds, which is an important way for firms to raise capital in Europe would be constrained. We should be freeing up capital flows across Europe if we want to create jobs and growth not erecting new barriers to it unless there is a very good prudential reason for doing so.

Finally the data used by the Commission to draft its impact assessment dates from back 2010 which means it takes no account of the sweeping changes in how banks operate since the crisis.  These include landmark reforms to capital, leverage and liquidity. Crucially there have also been reforms which safeguard depositors in the event of a bank failure which already provide the power to bank regulators to alter a bank’s structure. Furthermore, the proposed adoption of measures for Total Loss Absorbing Capacity following scheduled G20 endorsement will strengthen this set of reforms.

So we would ask Mr Timmermans and his colleagues to look again at this proposal which is a banana skin that we could all avoid slipping on.

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BBA Brief – 24 November 2014 Mon, 24 Nov 2014 10:15:41 +0000 Read More]]> London falls further behind New York in global rankings

The Telegraph (B1) reports that London has fallen further behind New York in a survey of financial services professionals.  Kinetic Partners’ survey of 300 finance professionals found that 59% thought New York was the world’s number one financial centre and 38% thought it was London.  This is a complete reversal in just two years when nearly two thirds of respondents saw London as the pre-eminent financial centre in the world.  53% of respondents said that Shanghai would be the leading emerging market centre in five years’ time.

In a comment piece Ben Wright argues that “at least part of the City’s fall from grace on the global stage is the unseemly spat between Brussels and London over banker pay.  One bank chief executive said last week that the new pay rules are not yet damaging his firm’s ability to retain staff. But it is making it harder to attract talent… This is how a potential exodus of bankers will happen – not in a rush, but slowly as replacements for old jobs based in London are filled in Hong Kong or New York.”  (Telegraph, B2)

BBA calls on EU to reconsider structural reform proposals

The FT (£, p18) reports that the BBA and its French counterparts, the FBF, have written to EU Commissioner Frans Timmermans calling on him to look again at proposals to change bank structures across Europe.  Mr Timmermans is in charge of reviewing EU regulations to see if they need adapting.  The letter says:  “We believe there to be grounds for considering, as part of your better regulation review, whether the case for structural reform at a European level has been proven and whether the proposal can be said to pass your test of subsidiarity… There is a serious risk that the structural reform measures, as currently proposed, would constitute a considerable handicap in financing European companies.”  According to the article the EU is unlikely to withdraw the measure but it is expected to be watered down, although the ban on “proprietary trading” is likely to remain.

BBA calls for workplace ISA scheme

The Sunday Times (£, M6) reported on BBA proposals for employees to be given new workplace savings products to help them become more “financially resilient”.  It quoted Anthony Browne, chief executive of the BBA, saying: “It is often life’s uncertainties that get people into financial trouble. Too many do not have those rainy day funds to call on if they lose their job, the boiler breaks or the car dies.  Without those emergency pots, many of us can find ourselves forced into the arms of payday lenders, or worse. A work-based ISA that is transferable from job to job could help millions to cope better with life’s ups and downs.”

Claims companies making millions out of PPI compensation

The Times (£, p44) reports that the biggest claims management companies have made over £150 million in fees from PPI compensation in the last year.  The paper quotes Richard Lloyd, from Which saying: “Consumers should avoid using claims firms that charge hefty fees for PPI complaints they could easily do themselves for free.”

Today’s diary

European Parliament: ECON has an economic dialogue with Commissioner Moscovici

Council Working Group on Multilateral Interchange Fees and Payment Services Directive II

Social Market Foundation: Good Culture in Financial Services: Does the Model Matter?

Stat of the day

28% – the number of respondents to the Kinetic Partners survey that believed London would be the most important financial centre in the world in five years’ time.

Latest from the BBA website

Face painters, handcrafted gin makers and ladies who camp in the wild were just some of the entrepreneurs that came together for the Mentorsme Awards in London on 18 November. The BBA’s Emily Hoquee went to find out more.

The BBA and many others were concerned that tough new powers for the taxman would unwittingly catch vulnerable customers. Rebecca Park explains why HM Revenue and Customs was right to modify its plans.

In brief

National Australia Bank is reported to have hired Morgan Stanley to advise on the sale of its Yorkshire and Clydesdale brands (Times, £, p43).

Italian bank Intesa Sampaolo is considering a bid for Coutts which is currently owned by RBS.  RBS is looking to sell the international part of the Coutts business but has ruled out selling Coutts in the UK. (FT, £, 17)

According to the FT (£, p17) Goldman Sachs  is investing in a new “Siri-style” service for investors which can instantly answer millions of complex financial questions by automating previously human-intensive research.

In an interview with the Times (£, p45) Simon McNamara from RBS talks about how technology is changing the way we bank. “It’s not that long ago that, to be perfectly honest, the only services we provided were at a cash counter within a branch.  Now, between the hours of 7.30 and 9 o’clock in the morning, this device is the most active service that we provide.”

The front page of the FT (£) reports that the most advanced ever computer malware has been discovered hacking into Russian and Saudi Arabian telecoms  companies.

Italian trade envoy Carlo Calenda has raised concerns about the slow pace of negotiations of a US-EU free trade deal (FT, £, p7)

RBS announced on Friday that it made an error when calculating its Common Equity Tier one ratio for the European Banking Authority’s stress tests (BBC).

The Weekend FT (£) reported the European Central Bank governor Mario Draghi has signalled a more “muscular” approach to getting Eurozone inflation back up to near its 2% target.

What the commentators say

In the Guardian (p23) Larry Elliott looks at whether the financial system is now safer and quotes experts who describe CoCos as “fool’s gold”.

In the Independent (p55) David Prosser previews a Panorama programme into interest rate hedging products this evening.

In the FT (£, p11) Wolfgang Munchau questions why only the radical left are considering debt restructuring as a response to the problems in the Eurozone economies.

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EU Structural Reform: Better Regulation Mon, 24 Nov 2014 09:51:57 +0000 Read More]]> The BBA and the Fédération Bancaire Française (FBF) have written to First Vice-President Timmermans to call for a fresh look at the European Commission’s proposals on the structural reform of banks. The BBA and FBF feel that, given the fact that the Global Systemically Important Banks (GSIBs), are now safer than before the financial crisis, the Commission’s proposal is not necessary. Adopting the proposal in its current form could have a negative impact in financing European countries, which is counter to the EU’s efforts to restore growth and improve employment. The aim of the proposal, to strengthen financial stability and improve efficiency and consumer protection, is already addressed by national legislation in the UK and France. Finally, the data used to draft the Commission’s impact assessment dates from 2010, and consequently does not correspond to the current situation of European banks. The BBA and the FBF hope that, given the reasons outlined, the Commission will consider whether the case for structural reform has been proven.

The BBA’s Paul Chisnall sets out why the case for reform should be re-examined under the EU’s Better Regulation regime here.

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Women in businesses celebrate success at the top of the BT Tower Sun, 23 Nov 2014 08:08:31 +0000 Read More]]> Extreme make up. Camping in the wild. Handcrafted gin. What do these things have in common? They are all businesses that were nominated for an award at the Mentorsme Excellence in Women’s Enterprise Mentoring Awards held at the top of London’s BT Tower on 18 November, during global entrepreneurship week.

The awards ceremony, held at the BT Tower, saw the BBA and its partners celebrate the successes of female entrepreneurs and their business mentors. Mentorsme, which is managed by the BBA on behalf of Lloyds Banking Group, HSBC, Barclays, RBS and Santander, is an online gateway for small and medium-sized enterprises that want to benefit from friendly, unbiased support and guidance from an experienced mentor. The initiative includes 1,000 bank staff who give their services for free.

One of this year’s nominees was Hetti Dysch, owner of Babes in the Woods, a business specialising in bespoke camping hen weekends. Hens and their friends can indulge in activities such as bushcraft, yoga and wild walks. Hetti was nominated for the Excellence in Digital Start Up award.

Ronnie Murray, owner of “extreme make up” company Diamond Faces was nominated for the Excellence in Growth award. Ronnie set up her business after buying a set of face paints from a toy store and a book from a fancy dress shop. Today Diamond Faces offer face painting and glitter tattoos for children’s parties, corporate events and festivals.

Women with their own businesses like Hetti and Ronnie comprise about 30% of the self-employed population. There were more than 70 nominations for the awards this year and competition was extremely tough – merely getting shortlisted was an achievement in itself.

Black Energy Renewables won the Excellence in Start Up award after generating sales worth more than £150,000 in just a year. Offering design consultancy and project management in the alternative energy sector, the business received support from three mentors with banking and management consultancy backgrounds.

The Excellence in Growth award went to Hadland Care Group, Dorset’s most successful nursery business with 15 nurseries and nine play clubs. The business was mentored by Sandra Bigland, who helped its director to clarify the ideas and challenges that she faced.

Handcrafted gin maker Dunnet Bay Distillery was honoured with the award for Export and Innovation. Following mentorship from James Knowles, the business sold its first batch of Rose Rock gin in just 48 hours and now has buyers in more than 20 countries.

The Digital Enterprise award went to Realsafe Technologies, which launched REALRIDER, a safety app for motorcyclists that alerts the emergency services in the event of a crash, and sends an ambulance to the rider’s last known GPS location. Mentor Natalia Blagburn helped to shape the firm’s business plan and get it investment-ready.

Finally, this year’s best mentor awarded was tied between Jeannette Forbes and Chelsey Baker. Jeanette is CEO of PCL Group, an IT service company to the offshore, marine, commercial, industrial and renewables sector. She was honoured for her work with Wendy Marr, Managing Director of Genesis Personnel. Under Jeanette’s guidance, Wendy has obtained directorship of her business and increased turnover. Chelsey Baker has more than 20 years’ business experience and was awarded for her worked with luxury spa owner Michelle Walkes  of Manor Grove Spa. Chelsey supported Michelle and gave her significant guidance including how to target new market streams and creating a marketing strategy.

Thank you to all those who entered these awards and to our partners including the Women’s Business Council represented by Cilla Snowball,  Wendy Hallet Emer Timmons,  our host at BT.

The experience of the businesses represented at this year’s awards demonstrates that mentoring is an effective way of encouraging entrepreneurs to pursue their passions. It also helps businesses grow, expand and play a role in contributing to economic growth. If you would like to find about more about mentoring services please visit

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This week in Westminster Fri, 21 Nov 2014 15:32:59 +0000 Read More]]> PMQs

Mr Nigel Dodds (DUP: Belfast North) asked the Prime Minister if he would look to devolve corporation tax powers to the Northern Ireland Assembly. The Prime Minister responded:

“On the issue of corporation tax, I maintain the commitments that I have made before about what we will be saying and when we will be saying it, but as we address this issue we are also going to have to look carefully at the Northern Ireland budget, and to ensure that the budget is working and that the Government of Northern Ireland are working, because that is an important part of the overall picture.”

The full Hansard transcript can be read here.

BIS Oral Questions

The issues of government support for small businesses, branch closures, UK/EU relationship, exports, board representation and regional banks were raised in BIS Oral Questions.

Support for small businesses

Robert Halfon (Con: Harlow) asked what recent support the Minister has provided to small businesses. Matthew Hancock (Con: West Suffolk), Business and Enterprise Minister responded:

“The British Business Bank is now fully operational and has facilitated a total of £2.3 billion of new lending and investment to more than 21,000 businesses. The growth accelerator scheme supports just under 20,000 firms, and 22,600 start-up loans have been drawn down, totalling more than £199 million. More than that, we support small businesses by delivering on our long-term economic plan.”

David Wright (Lab: Telford) (Lab) said access to start-up finance is clearly very important for small businesses, but businesses also need growth funding. He asked what more can the Government do to support them. Mr Hancock responded:

“The hon. Gentleman is absolutely right. The 22,000 firms that have received start-up loans have been supported, but the new British Business Bank, something that we have not had before, has supported £2.3 billion of financing, a lot of it to the scale-up firms that he is talking about. Ultimately, we need a strong banking system. After the chaos the banking system was left in, we have been turning that around with stronger regulation. Banking balance sheets are starting to improve and move in the right direction, but it has taken an awful long time to turn the mess around.”

Andrew Stephenson (Con: Pendle) asked what recent support the Department has provided to small business to help them to continue to grow and thrive. Vince Cable (LD: Twickenham), Business Secretary responded:

“We are actively involved in supporting small business through the start-up loan scheme, through credit flows to the business bank and by creating a deregulatory and favourable tax environment.”

Branch closures

Caroline Dinenage (Con: Gosport) asked the Minister to urge banks to do more to keep important local services open. Mr Hancock responded:

“Yes, of course. The changes in banking and the way that most people bank — their use of technology — has an impact on how banks operate. Ultimately, this is a commercial matter for the banks, but we have to ensure that banking services are available in all communities, not least to make sure that vulnerable people have access to services if they cannot use the technology.”

UK/EU relationship

Ian Swales (LD: Redcar) asked what effect will the uncertainty over the UK’s membership of the European single market will have on the Secretary of State’s trade forecasts. Dr Cable responded:

“My hon. Friend is right to stress the importance of inward investment to job growth in the UK. Indeed, many manufacturers and banks in the City of London have made it clear that the expectation of being able to export to the European single market is fundamental to their decision to locate here.”


Henry Smith (Con: Crawley) asked what steps he is taking to raise awareness among businesses of export support services. Mr Hancock responded:

“United Kingdom Trade & Investment uses the “Exporting is GREAT” marketing campaign to raise awareness of the benefits of exporting and to encourage small businesses to export. Last week was UKTI’s national exporting week. Over 150 UKTI trade officers from posts around the world provided export advice to more than 5,000 companies.”

Following, Mr Smith asked what specific assistance can be given to the smallest firms to give them the confidence to make the most of lucrative export markets. Mr Hancock responded:

“Some 89% of UKTI customers are small and medium-sized enterprises and nearly one in five is new to exporting or has been exporting for less than a year. I think we should do all we can to encourage this trend.”

Board representation

Philip Davies (Con: Shipley) asked the Minister what his policy is on representation of people from ethnic minorities in boardrooms. Dr Cable responded

“We believe that it is in the best interests of business to tap into the widest talent pool, resulting in a diverse and representative business leadership. I have therefore asked Trevor Phillips to start a new private sector-led campaign that will seek to address the lack of ethnic diversity in boardrooms. The purpose of the campaign will be to achieve similar success to our work on addressing gender diversity in boardrooms.”

Following, Mr Davies suggested that the Secretary of State believes that ethnic minorities should be over-represented in the boardroom.

Regional banks

Bill Esterson (Lab: Sefton Central) asked whether regional banks are the answer to the problem of getting the growth and support that small business needs. Dr Cable responded:

“We warmly welcome challenger banks offering a service to small business. If they can be organised on a local and regional basis, so much the better. The liberalised process of licensing means that these things can come on stream rapidly when they are put forward.”

The full transcript can be read here.

Treasury Select Committee – Fair and Effective Markets Review

The Treasury Select Committee took evidence on the Fair and Effective Markets Review. The witnesses were Dr Nemat Shafik, Deputy Governor, Markets and Banking, Bank of England, and Elizabeth Corley, Chair of the Fair and Effective Markets Review Market Practitioner Panel.

Topics of discussion included accountability, remuneration, conduct, market manipulation and regulatory powers. At the beginning of the session, Chair Andrew Tyrie stated that the Committee would examine foreign exchange manipulation in greater detail during later evidence hearings. This ties in with media coverage suggesting the Committee will look to hear evidence on forex in December.

Key points:


  • Dr Shafki agreed with Committee Chair Andrew Tyrie MP that voluntary codes might be a weakness as they “lacked teeth”, but said that they are addressed in the consultation and could be strengthened.
  • Turning to remuneration, Mr Tyrie asked if those traders whose actions constituted misconduct would have their bonuses taken back.
  • Dr Shafik responded that this was down to individual firms’ remuneration boards, and that the FCA would review their decisions in January. She added that some banks have taken fines from their bonus pool which “sends a very strong signal”.
  • Mr Tyrie replied that there must be individual accountability to ensure they have “skin in the game”. Dr Shafik agreed, and added that criminal sanctions were a very powerful deterrent.
  • The Deputy Governor told Committee members that the consultation asked about extending the definition of material risk takers – as used in the Senior Managers Regime consultation – to include traders involved in benchmarking. The consultation also asks about a professional certification regime to improve standards, as seen in the US.
  • She concluded that enhancing the credibility of markets would give the UK a competitive advantage.

Remuneration policy

  • Jesse Norman MP stated that banks have not always been run in the interests of shareholders, and asked whether fines should be paid from bonus pools. He qualified this by saying that it was harsh on those who had done nothing wrong for fines to be taken out of bonus pools due to the actions of a few “bad apples”.
  • Dr Shafik pointed to a speech made by her colleague Sir Jon Cunliffe in which he discussed the fall in returns on equity, for which the shareholders rather than bankers’ pay had borne the brunt.
  • She added that deferring bonuses was a useful tool to align bankers’ actions with the interests of shareholders. Bonuses should not threaten banks from a prudential point of view, she continued, and if they were aligned to revenue and conduct then that would support financial stability.
  • Ms Corley said that it was positive that shareholders had more of a say over banks’ remuneration policy
  • Mark Garnier MP opined that bondholders should also have a say as they have greater influence than equity holders.


  • David Ruffley MP noted that conduct fines had increased five-fold since 2010. He asked why.
  • The scale of fines reflects the scale of the markets, Dr Shafik answered. In addition, technological advances allow regulators to capture misconduct which may not have been possible in the past. She did not have data to hand to suggest that there was more misconduct than before, and she didn’t agree that regulators now had a broader definition of misconduct.
  • Dr Shafik told MPs that LIBOR has been a wake-up call in challenging “caveat emptor” in financial markets.
  • Mr Ruffley asked why markets are not as fair and effective as they should be.
  • Ms Corley replied that the scale of these markets has grown exponentially over recent decades due to globalisation. The financial crisis provided a realisation that global regulation had to keep pace with this globalisation. She said that the FSB’s agenda is a “catch-up” for the globalisation of financial markets.
  • She said that in the post-crisis world, fixed income, currencies and commodities (FICC) markets had become more important.

Market manipulation

  • Mr Tyrie asked if the rigging of markets had succeeded.
  • Ms Corley answered that the scale of collusion was deeply regrettable. However, it is difficult to see if people got “ripped off” as it was very difficult to calculate this loss.
  • Mr Tyrie then asked if it was possible that the size of the market and the number of players within it had protected customers against actual loss.
  • Dr Shafik responded that the FCA had shown that individuals did make a profit as they were able to manipulate the market. However, trying to quantify the impact on the larger markets is very difficult. It is possible to calculate the gain for the trader but far trickier the loss to the customer, she continued.

Fair and Effective Markets Review Market Practitioner Panel

  • Dr Shafik told the Committee that the panel would offer an insight to the Review’s secretariat, provide written input and take forward the recommendations of the review process. She stressed that they would not be the ones making the recommendations.
  • Ms Corley said that the panel represents a wide array of interests which will enhance its independence.

Conflicts of interest

  • Mr Garnier asked if firms should be broken up where there are conflicts of interest.
  • Ms Corley replied that there is not a one size fits all approach, but that firms must be able to adequately demonstrate that conflicts are being managed. The challenge with information is that it is necessary in FICC markets as it enables appropriate pricing, but that these conflicts must be able to be managed. The consultation deals with surveillance in markets, she added.

Powers of regulation

  • Liberal Democrat MP John Thurso asked if regulators had sufficient powers to do their job
  • Dr Shafik replied that the environment was changing with the introduction of MiFID II which will affect ways in which clients are segmented whilst increasing pre- and post-trade transparency. Benchmark reform in both the EU and the HMT consultation will also expand the regulatory parameter.
  • She welcomed the involvement of the Serious Fraud Office in investigating the forex manipulation.
  • Mr Thurso suggested that there was a “major cultural problem” in which traders operate, and asked whether there are issues with management models.
  • Ms Corley responded said that this was an important question, but that it was more important to strengthen the first line of defence, which was in markets.

Treasury Select Committee – Treatment of financial services consumers

During a meeting of the Treasury Committee on the treatment of financial services consumers, MPs heard evidence from:

  • Joanna Elson OBE, Chief Executive, Money Advice Trust
  • Richard Lloyd, Executive Director, Which?
  • Francis McGee, Director of External Affairs, StepChange Debt Charity
  • Professor John Gathergood, University of Nottingham

Topics of discussion included payday lending, complaints procedures, Parliamentary Commission on Banking Standards’ (PCBS) and credit scores.

Key points:

Cap on payday lending

  • Professor Gathergood said that the cap would hit high street firms harder than those that operated online, and would indeed endanger them. An online market could survive unambiguously, he added.
  • Explaining some of the trade-offs between the expense of credit and its availability, he argued that the FCA judgement was correct, as it would only push 7% of consumers out of the market.
  • Ms Elson warned that the FCA would have to review the cap soon though, and should not wait two years to do this.

Complaints procedures

  • Mr Lloyd described complaints procedures as “a shambles”, saying that there was “an enormous” job to be done on this. He added that consumers were passed “from pillar to post” and issues were not resolved quickly.
  • Pressed on whether firms were simply bad at handling complaints, or whether poor complaints procedures had been obstructed, Mr Lloyd suggested that firms had been uncooperative when dealing with the misselling of PPIs, explaining that it had taken two years for the banks to agree on a letter.
  • It was a mixture of incompetence and a culture of obstructing complaints, he said. “It’s been pretty shocking,” he added.
  • Asked whether banks were getting better, learning and changing, Mr Lloyd said that he had worked with banks at a boardroom level to try to encourage them to listen to complaints, but this change had been very slow to filter through.


  • SNP MP Stewart Hosie asked whether progress was being seen on (PCBS) recommendations.
  • Responding, Mr Lloyd said that this had been painfully slow and many of the recommendations were still “up in the air”. He wanted more effort to ensure basic bank accounts were available and that banks were reaching into communities that needed services.
  • Asked whether the time had come for statutory intervention, Mr Lloyd agreed that it had. There had been positive attitude and noise, he believed, but this was taking time to filter through into practice. A more interventionist approach should be considered, he added.
  • Pressed on where he would start with regard to intervention, Mr Lloyd said that the FCA should take action on complexity of products and disproportionate fees. Unauthorised overdrafts were also a worry, he added.
  • Asked whether the EU Payment Accounts Directive would help banks provide basic accounts, Ms Elson said that she sat on the BBA’s Consumer Panel which had been pushing banks on this. She hoped that action on basic accounts would move on quickly. She also raised concerns over the availability of banking services for undischarged bankrupts.

Credit scores

  • Professor Gathergood said that having a basic bank account was hugely important, adding that the consumer credit market did not have effective price comparison. He said that the credit scoring convention was inherently anti-competitive.
  • Committee Chair Andrew Tyrie then asked whether algorithms used to establish credit scores should be widely available to consumers.
  • Replying, Professor Gathergood said that this was an excellent means of improving competition; provided that consumers were able to understand them.
  • Mr Lloyd told the Committee that the FCA must look at consumer credit as a system and address the early stages of debt, including overdrafts and credit cards. Consumers must not be misled and terms and conditions should be transparent.

Written answers

Ministers answered questions on Payments Service Directive (online fraud), cybercrime, online banking fraud, cyber security, HMRC powers, IRHP redress, small business bank accounts, ECB stress tests, fees and charges, credit unions and Action Fraud.

In addition, following his statement on the G20, the Prime Minister answered a question on remittances.

Key dates for the week ahead:

25 November

House of Commons: Treasury Select Committee – Bank of England November 2014 Inflation Report

House of Commons: BIS Committee –Transatlantic Trade and Investment Partnership

26 November

House of Commons: Treasury Select Committee – Payment Systems Regulator

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