BBA https://www.bba.org.uk The voice of banking Wed, 30 Jul 2014 18:45:39 +0000 en-US hourly 1 http://wordpress.org/?v=3.9.1 BBA comment on BoE announcement on remuneration https://www.bba.org.uk/news/press-releases/bba-comment-on-boe-announcement-on-remuneration/ https://www.bba.org.uk/news/press-releases/bba-comment-on-boe-announcement-on-remuneration/#comments Wed, 30 Jul 2014 11:39:20 +0000 https://www.bba.org.uk/?post_type=news&p=24817 Read More]]> Responding to the Bank of England announcement on responsibility and accountability in the banking sector, Anthony Browne, chief executive of the BBA, said:

“One banker rewarded for failure is one too many. That’s why banks have already taken steps to right the wrongs of the last decade, cutting cash bonuses by more than 75% and fixing rewards more closely to the long-term health of the business. We also agree that clawbacks can certainly be a useful way to discourage wrongdoing and are in the interests of customers and shareholders.

“We’ll examine the detail of these new proposals with interest, but it is important that any new regulation does not put British banks at a disadvantage when it comes to attracting and retaining the best workers here and overseas.”

ENDS

For more details please call the BBA press office on 020 7216 8989.

Notes to Editors

Substantial changes to remuneration

  • Total bonuses for investment banks were down 55% between 2007 and 2011, according to pay consultants McLagan.
  • Immediate cash bonuses were down 77% in the same period. [McLagan, 2012]
  • The annual average bonus per employee in the financial services sector fell in 2012/2013, whereas sectors such as the manufacturing of chemicals and man-made fibres saw an increase. [ONS, Average Weekly Earning: Bonus payments, 2012-13]
  • From 2015 bonuses will be capped at no more than fixed salary, rising to twice the salary if shareholders give their approval.
  • Bankers classed as Code Staff have a significant proportion of their bonus deferred for three years; higher-paid bankers have the majority of their bonus deferred for five years.
  • There has been a huge shift away from cash bonuses to rewarding staff with shares – a minimum of 50% of bonuses must now be paid in shares. Giving employees shares means that their interests are better aligned with the bank’s longer term financial health, making them less likely to take unreasonable risks. Whenever employees are given shares whether immediately or a few years later – they then have to hold onto them for at least six months.
  • And, if it transpires they took reckless risks or behaved badly, then the deferred bonus can be clawed back.

Sweeping changes in top banking executives

  • Since 2007, 90% of senior executives at the major British banking groups have changed.

Additional banking taxes

  • Banks paid £3.4 billion through a one off bank payroll tax.
  • The banks now pay an annual bank levy, aimed at raising approximately £2.9 billion per annum from 2015/16.

A much safer financial system

  • Banks have rebuilt their balance sheets in the wake of the global financial crisis and are now much safer. Banks now hold three times more of the safest form of capital than they did at the beginning of the financial crisis. By 2019, when Basel III is fully implemented, they will be even more robust. The UK’s implementation is significantly ahead of schedule, and accordingly the UK and its banks are among the best placed in the world.
  • The banks operating in the UK are much better prepared for a future financial crisis. They now have to hold sufficientliquidity to be able to operate during a period where funding dries up, as happened for some of them in 2007.
  • The banks have restructured their balance sheets to reduce exposures to riskier trading assets.
  • The industry is determined that taxpayers’ money is never used again to bail out banks.
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Synectics Solutions Ltd https://www.bba.org.uk/about-us/associates/synectics-solutions-ltd/ https://www.bba.org.uk/about-us/associates/synectics-solutions-ltd/#comments Wed, 30 Jul 2014 10:33:17 +0000 https://www.bba.org.uk/?post_type=associate&p=24798 Read More]]> Synectics Solutions is an independently owned data management company, providing managed database services and fraud prevention solutions.

Our credentials have been demonstrated over 20 years of working with mass data for both Public and Private Sector Clients and our expertise has evolved during the inception, design, development and deployment of key projects, all with a common goal of reducing fraud activity across all sectors.

Our flagshipfraud prevention suite – SIRA – was built from the ground up on feedback from UK Financial Services risk and fraud professionals. Our systems are moulded around our clients’ businesses and are flexible enough to change as their needs evolve over time. Our people come with an innovative attitude, they listen to our clients’ challenges and adopt them as their own.

Each of our clients’ systems are configured and built in view of the market in which they operate and the specific fraud risks associated with their business. Front-end user control and flexibility is supported by specialist consultancy resource that enables these systems to easily adapt and evolve to changing fraud trends.

SIRA provides a single, integrated fraud detection and prevention solution which delivers full lifecycle protection to major names within the UK financial services and insurance markets and to a growing list of international clients. SIRA is a fraud detection and prevention system that leverages best-in-breed data sources, forensic case management tools and a sophisticated decisioning and workflow engine. By providing a fully integrated solution, SIRA eliminates the need to tie together disparate fraud prevention solutions, dramatically simplifying implementations and lowering IT costs.

www.synectics-solutions.com

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A bankers’ oath: part of the answer? https://www.bba.org.uk/news/bba-voice/a-bankers-oath-part-of-the-answer/ https://www.bba.org.uk/news/bba-voice/a-bankers-oath-part-of-the-answer/#comments Wed, 30 Jul 2014 10:26:54 +0000 https://www.bba.org.uk/?post_type=news&p=24795 Read More]]> ResPublica, a leading think tank, wants UK bankers to follow their Dutch colleagues and swear an oath committing them to a common set of ethical practices.

An oath is not the only way to raise ethical and professional behaviour across the industry, but it is an objective we all share. Nor is it the first time such a suggestion has been made.

Indeed the BBA looked at the possibility of introducing an oath as part of our input to the Parliamentary Commission on Banking Standards (PCBS). However, the feeling amongst many was that investing too much in a single solution might be a false summit.

Our suggestion was to create some sort of “standards council” that would work alongside banks’ senior leadership.

The proposed Banking Standards Review Council would work alongside the regulatory authorities to create a blueprint for raising standards. Crucially, this would be achieved via cultural change. Not regulatory compliance.

This way, the Council’s work could complement changes to the regulatory regime and make best use of existing professional and educational bodies. It could even emerge as to be the missing link between the industry and regulator.

The PCBS supported the idea and Sir Richard Lambert has spent the best part of the past 12 months thinking about how it could materialise. Sir Richard’s final report recommended the Governor of the Bank of England chair a nominations committee to select a chairman to take the new body forward.

But Sir Richard’s work is not the only game in town. The criminal and regulatory enforcement regimes have also been strengthened. Today, the regulatory authorities published proposals for replacing the approved persons regime with a senior managers and certification regime. This will enhance individual responsibility across the industry and help realise one of the PCBS’s main recommendations.

The regulatory authorities are also turning banking’s “statements of principle” into a set of banking standards rules. These will give everyone a clearer understanding of the expectations upon individuals working in banking.

The industry is making strides towards meaningful cultural change and an oath may or may not form part of the answer. But it can’t be the only step and it shouldn’t be the first.

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Senior Managers Regime Seminar https://www.bba.org.uk/event/raising-standards/senior-managers-regime-seminar/ https://www.bba.org.uk/event/raising-standards/senior-managers-regime-seminar/#comments Wed, 30 Jul 2014 09:55:37 +0000 https://www.bba.org.uk/?post_type=event&p=22920 https://www.bba.org.uk/event/raising-standards/senior-managers-regime-seminar/feed/ 0 Foreign Banks Conference and Reception https://www.bba.org.uk/event/raising-standards/foreign-banks-conference-and-reception/ https://www.bba.org.uk/event/raising-standards/foreign-banks-conference-and-reception/#comments Wed, 30 Jul 2014 09:53:55 +0000 https://www.bba.org.uk/?post_type=event&p=24598 https://www.bba.org.uk/event/raising-standards/foreign-banks-conference-and-reception/feed/ 0 Business Continuity & Resilience Conference https://www.bba.org.uk/event/capital-markets/business-continuity-resilience-conference/ https://www.bba.org.uk/event/capital-markets/business-continuity-resilience-conference/#comments Wed, 30 Jul 2014 09:53:44 +0000 https://www.bba.org.uk/?post_type=event&p=24785 https://www.bba.org.uk/event/capital-markets/business-continuity-resilience-conference/feed/ 0 Savings & Investments Conference https://www.bba.org.uk/event/retail-banking/savings-investments-conference/ https://www.bba.org.uk/event/retail-banking/savings-investments-conference/#comments Wed, 30 Jul 2014 09:21:43 +0000 https://www.bba.org.uk/?post_type=event&p=24772 https://www.bba.org.uk/event/retail-banking/savings-investments-conference/feed/ 0 BBA Brief – 30 July 2014 https://www.bba.org.uk/news/bba-brief/bba-brief-30-july-2014/ https://www.bba.org.uk/news/bba-brief/bba-brief-30-july-2014/#comments Wed, 30 Jul 2014 09:18:10 +0000 https://www.bba.org.uk/?post_type=news&p=24773 Read More]]> Tougher regulation regime from Bank

The Bank of England will today publish two new regulation documents on the senior managers’ regime and banking remuneration (FT, £, p1). According to the FT, this new regime could include powers to claw back bonuses up to 7 years after they have been paid and a new law that would see “reckless” bankers sent to jail. In the Guardian (p24), the UK Head of Banking and Capital Markets at EY Omar Ali said: “The regime is likely to be the strictest of any market or any industry.”  The Times (£, p37) writes that the Bank of England will also signal its intentions to ensure that the pay of managers and other staff implicated in future financial scandals and bank failures can be recouped.

Europe’s investment banks “regain ground”

The FT (£, p17) reports that Europe’s investment banks are finally “regaining some ground” after a period in which they have been losing market share to US rivals. According to the FT, one of the significant reasons for Europe’s positive performance is that the continent’s banks had an easier time in beating last year’s results. In 2013, European banks were “hit much harder” than their US counterparts by the downturn in debt trading by the Federal Reserve’s reduction in its bond purchasing programme. In relation to the European banks’ performance, Analyst at JP Morgan Kian Abouhossein said: “They have simply regained some of the market share that they have lost last year.”

Lambert: Bankers’ oath “just hot air”

Responding to proposals from think tank ResPublica, calling for bankers to take an oath, Head of the Banking Standards Review Sir Richard Lambert said the proposal was “hot air” and warned it could even “backfire”, undermining standards in the banking sector (CityAM, p30). Sir Richard also stated that: “If you have all bankers taking an oath and it is just words, and it is then within six months to be flawed, I think you’re in a worse place than you were before.”

Stat of the day

Mortgage approvals rise to 67,196 in June, 8% more than in May (Bank of England).

Today’s diary

House of Lords rises for recess

ONS publishes economic review

European Commission: Monthly business and consumer survey

In brief

The Mail (p37) writes that the investigation into the Financial Conduct Authority for the mis-handled announcement regarding a review of 30 million closed life insurance policies as gone up to £2.2 million.

Banks should be “forced” to simplify overdraft charges for current accounts according to Moneyfacts.co.uk, writes the Express (p31).

EU sanctions targeting Russian state-owned banks could harm broader Russian corporate and retail sectors (FT, £, p2).

Banks are increasing pay-outs on one and two-year fixed-rate bonds because of the rate rise predictions, writes the Mail (p46).

What the commentators say…

Chris Blackhurst argues that it’s time to “bring rogue bankers to book” and believes that there is a “yawning chasm” between how bankers actually think and act (Independent, p50).

Thomas Hale looks into the euro-dollar relationship and analyses both the Federal Reserve’s tightening of monetary policy and the European Central Bank’s potential quantitative easing-style measures (FT, £, p28).

If you have five minutes…

In today’s Mail (p44), Victoria Bischoff looks at one of Barclays’ high-tech counterless branches and gets introduced to “the bank branch of the future”.

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MiFIR / MiFID II – Draft ICMA Consultation and Discussion paper responses https://www.bba.org.uk/policy/capital-markets-infrastructure/mifid-and-mifir/mifir-mifid-ii-draft-icma-consultation-and-discussion-paper-responses/ https://www.bba.org.uk/policy/capital-markets-infrastructure/mifid-and-mifir/mifir-mifid-ii-draft-icma-consultation-and-discussion-paper-responses/#comments Tue, 29 Jul 2014 15:07:17 +0000 https://www.bba.org.uk/?post_type=policy&p=24748 If members have any specific comments on the ICMA drafts, please provide these to Francesco Angelini (Francesco.Angelini@bba.org.uk) at your earliest convenience.

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BBA Brief – 29 July 2014 https://www.bba.org.uk/news/bba-brief/bba-brief-29-july-2014/ https://www.bba.org.uk/news/bba-brief/bba-brief-29-july-2014/#comments Tue, 29 Jul 2014 09:09:47 +0000 https://www.bba.org.uk/?post_type=news&p=24721 Read More]]> ResPublica calls for bankers’ oath

A new report by the think-tank ResPublica, Virtuous Banking, calls on the banking industry to mimic the medical profession by introducing an oath for bankers (Times, £, p3). ResPublica director Philip Blond said: “The bankers’ oath represents a remarkable opportunity to fulfil their proper moral and economic purpose”. The report will be launched by Sir Richard Lambert who chairs the Banking Standards Review Council, a body established to examine culture and ethics in the profession. Speaking on the Today Programme on BBC Radio 4 Sir Richard said that whilst it was the “most headline grabbing” recommendation in the report, he did not necessarily endorse the proposal. BBA Chief Executive Anthony Browne is quoted in the Times on cultural change saying: “There’s clearly been some progress since the financial crisis, but there is still a long way to go.”

The BBC quote BBA Executive Director for financial policy and operations, Paul Chisnall, saying: “Restoring trust and confidence is the banking industry’s number one priority. But meaningful cultural change in an industry as complex and diverse as banking takes time. The Parliamentary Commission on Banking Standards reached a similar conclusion and that’s why initiatives like Sir Richard Lambert’s Standards Review are so important. It may be that the new standards review body decides that some within the industry should be subject to an oath or a code of ethics. It very well could be part of the answer.”

Lloyds freeze bonuses of those involved in rate rigging

Lloyds Banking Group has frozen bonuses for 22 members of staff after the bank was fined £226 million by UK and US regulators for its role in rigging the rates in the Bank of England’s Special Liquidity Scheme (Mail, p65). Bank of England Governor Mark Carney issued a statement calling the actions “highly reprehensible” and suggested criminal proceedings may be undertaken against those involved.  Chief executive Antonio Horta-Osorio condemned the practice, saying: “Together, the board and the group’s management team have taken vigorous action over the last three years to prevent this kind of behaviour, through closing or reducing our legacy investment banking activities”. Lloyds Chairman Lord Blackwell added: “Their behaviour involved a gross breach of trust and we condemn it without reservation” (Telegraph, B1).

IMF says pound overvalued but interest rates should stay low for now

The International Monetary Fund’s (IMF) annual assessment of the UK economy suggested that the pound was overvalued by as much as 10%, preventing the economy from rebalancing towards exports (FT, £, p4). The Fund added that whilst the Bank of England should hold interest rates for now, policymakers should raise them to keep the housing market in check (Guardian, p17). Despite concerns, the IMF said that some of the “headwinds” holding back the recovery had eased as it revised the UK’s growth forecast for 2015 up from 2.7% to 3.2%.

New Money Market Funds could increase systemic risk

The FT Stephen Foley (£, p26) discusses the US Securities and Exchange Commission’s new money market fund rules, which were designed to limit systemic risk and prevent runs across the fund management system. Despite their intention, Mr Foley argues that because many investors will not be able to countenance the risk of losing access to their money in the event of a run, the practice of erecting gates to protect investors may actually increase systemic risk.

Stat of the day

Collective Eurozone bank assets grew by 0.5% in April and 0.4% in May 2014 to a total of €30.87 trillion (£24.35 trillion). (FT)

Today’s diary

BBA Executive Director Paul Chisnall speaks at launch of ResPublica report “Virtuous Banking: Placing ethos and purpose at the heart of finance”

House of Lords: Economic and Financial Affairs (EU Sub-Committee A) – Review of the EU Financial Regulatory Framework

Bank of England: Bankstats (Monetary & Financial Statistics) – June 2014

Bank of England: Effective interest rates – June 2014

Bank of England: Money and Credit – June 2014

In brief

The Guardian (p1) reports that the US and Europe could introduce a series of new sanctions on Russia’s defence, banking and hi-tech energy sectors within the next 24 hours in response to Russia’s role in the Ukrainian crisis.

The UK’s peer-to-peer lending market is set to hit £1 billion this year as various platforms report new loans of more than £500 million in the first six months of 2014, reports the FT (£, p4).

The Times (£, p41) reports that Italian authorities have seized €104.5 million (£83 million) of assets from Nomura International as part of a fraud investigation.

UBS’s second quarter results reveal that the bank is responding to inquiries concerning the operation of its alternative trading system, known as dark pools. Deutsche Bank has also received a request for information about its use of dark pools, writes the FT.

A future Labour government would underwrite bank loans for small and medium-sized construction groups in a bid to build an extra 10,000 homes a year, according to the FT (£, p2).

The US Commodity Futures Trading Commission has accused Deutsche Bank, HSBC and the Bank of Nova Scotia of attempting to rig the price of silver (BBC News).

What the commentators say…

Allister Heath disagrees with the IMF’s calls for a tax rise to reduce the deficit and suggests productivity growth is the best way to tackle sterling’s overvaluation (Telegraph, B2).

The FT’s Lombard article (£, p16) disputes the suggestion that senior managers at Lloyds were unaware of the malpractice at the bank that led to rate rigging.

Alex Brummer criticises Lloyds following their fine for rate rigging in today’s Mail (p67).

Jeremy Warner (Telegraph, B2) argues that while the global economy is recovering, the Eurozone is “just one shock away from renewed economic contraction” and the Russian sanctions may provide such a shock.

If you have five minutes…

Writing in today’s FT (£, p28) Andreas Utermann argues that the Eurozone needs to continue an accommodative monetary policy, seek tax, pension and labour market reforms and embark on a far-reaching programme of infrastructure investment to restore growth.

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