BBA https://www.bba.org.uk The voice of banking Mon, 24 Nov 2014 11:58:46 +0000 en-US hourly 1 http://wordpress.org/?v=3.9.1 Better Regulation will only come if the European Commission reconsiders its proposals for bank structural reform https://www.bba.org.uk/news/bba-voice/better-regulation-will-only-come-if-the-european-commission-reconsiders-its-proposals-for-bank-structural-reform/ https://www.bba.org.uk/news/bba-voice/better-regulation-will-only-come-if-the-european-commission-reconsiders-its-proposals-for-bank-structural-reform/#comments Mon, 24 Nov 2014 11:41:57 +0000 https://www.bba.org.uk/?post_type=news&p=34972 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 https://www.bba.org.uk/news/bba-brief/bba-brief-24-november-2014/ https://www.bba.org.uk/news/bba-brief/bba-brief-24-november-2014/#comments Mon, 24 Nov 2014 10:15:41 +0000 https://www.bba.org.uk/?post_type=news&p=34955 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 https://www.bba.org.uk/policy/financial-and-risk-policy/bank-reform/european-and-international/eu-structural-reform-better-regulation/ https://www.bba.org.uk/policy/financial-and-risk-policy/bank-reform/european-and-international/eu-structural-reform-better-regulation/#comments Mon, 24 Nov 2014 09:51:57 +0000 https://www.bba.org.uk/?post_type=policy&p=34947 Read More]]> The BBA and the Fédération Bancaire Française (FBA) 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 FBA 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 FBA 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 https://www.bba.org.uk/news/bba-voice/women-in-businesses-celebrate-success-at-the-top-of-the-bt-tower/ https://www.bba.org.uk/news/bba-voice/women-in-businesses-celebrate-success-at-the-top-of-the-bt-tower/#comments Sun, 23 Nov 2014 08:08:31 +0000 https://www.bba.org.uk/?post_type=news&p=34936 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 mentorsme.co.uk.

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This week in Westminster https://www.bba.org.uk/news/banking-matters/this-week-in-westminster-20/ https://www.bba.org.uk/news/banking-matters/this-week-in-westminster-20/#comments Fri, 21 Nov 2014 15:32:59 +0000 https://www.bba.org.uk/?post_type=news&p=34907 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.”

Exports

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:

Accountability

  • 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.

Conduct

  • 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.

PCBS

  • 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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This week in Brussels https://www.bba.org.uk/news/banking-matters/this-week-in-brussels-21/ https://www.bba.org.uk/news/banking-matters/this-week-in-brussels-21/#comments Fri, 21 Nov 2014 15:29:46 +0000 https://www.bba.org.uk/?post_type=news&p=34905 Read More]]> ECJ Advocate General dismisses UK’s challenge to bankers’ bonuses cap

European Court of Justice’s Advocate General Niilo Jääskinen gave an opinion on Thursday where he said the limit on remuneration in CRD IV was valid. The UK Government had challenged the directive on the grounds that it infringed the proportionality and subsidiarity principles. Mr Jääskinen rejected that argument and the claims put forward by the UK, and called on the Court to dismiss the case altogether.

A spokesman for the BBA said: “There have already been sweeping changes made to the way that bank staff are paid since the financial crisis. Bonuses are smaller and staff are rewarded for making decisions that benefit the businesses, shareholders and the broader economy.

“We believe that shareholders should be given powers to determine staff pay – not politicians. That’s why banks consult with investors before setting staff pay and shareholders also have the power to vote on the pay of senior bankers.

“We believe this law runs counter to recent reforms and will make the system less robust by incentivising firms to increase fixed pay.  It also puts European banks at a disadvantage when competing with firms in other parts of the world.”

The full opinion can be found here.

Following the announcement, HM Treasury withdrew its challenge against the bonus cap. Chancellor George Osborne said:

“The fact remains these are badly designed rules that are pushing up bankers’ pay, not reducing it. These rules may be legal but they are entirely self-defeating, so we need to find another way to end rewards for failure in our banks.”

In a letter to Mark Carney in his role as chairman of the Financial Stability Board the Chancellor urged him to push for global standards including looking at the idea of performance bonds: “I was interested by some of the ideas floated by President William Dudley of the New York Federal Reserve which would increase accountability by putting more of senior bankers’ remuneration at risk.”

Higher transparency requirements in the new Commission

European Commission Vice-President Frans Timmermans, responsible for Better Regulation, announced this week that the new Commission will be more transparent regarding its meetings with lobbyists. If approved, the new Commission will have to disclose all interactions with lobbyists, and will only be allowed to meet those individuals whose association is registered in the EU’s public Transparency Register.

These reforms, which cover commissioners, cabinet staff and director-generals, will be discussed in the College next week with a view to implementing them by 1 December.

At present, interest groups are invited to sign up in the EU public register that is shared by the European Commission and Parliament, but doing so is not mandatory. The BBA is one of the 6,000 bodies currently in the Transparency Register.

Rapporteur Neena Gill issues draft report on MMFs

This week Neena Gill (S&D, UK) published her draft report on the Commission’s proposal on Money Market Funds. The proposal was passed on from the last mandate to the new Parliament and to a new Rapporteur. Neena Gill took the file and worked on it from scratch. As it appears, and on the CNAV MMFs controversial issue, the report proposes to allow CNAVs to exist in the following forms:

  • Retail CNAVs – CNAVs which are available for subscription to charities, non-profit organisations, public authorities, public foundations and natural persons, or
  • EU public debt CNAVs – CNAVs which, by 2020, invest up to 80% of its assets in EU public debt instruments (cash, government assets or reverse repos secured with government debt of the Member States)

Only EU public debt CNAVs must hold the 3% capital buffer, which is calculated proportional to the assets not invested in government debt. The buffer must also be built up by 2020.  The Economic and Monetary Affairs Committee will consider the report on 1 December, with a deadline of 11 December set for amendments to be made by. Meanwhile, negotiations are also ongoing in the Council.

EBF Annual Conference

The European Banking Federation held its annual conference this Wednesday in Brussels. The European banking community gathered in the ING auditorium to discuss the future of banking. Regulatory reform, trust and reputational issues affecting the sector, and the changing models of banking in an even more digitalised world, were some of the topics covered in the different discussion panels.

The EBF also introduced its new Chairman, Frédéric Oudea, who will take over Nordea’s CEO Christian Clausen on 1 January 2015 for a two-year period. Mr Oudéa has been French banking group Société Géneral’s CEO since 2008.

Key dates for the week ahead:

24 November

European Parliament: ECON has an economic dialogue with Commissioner Moscovici

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

25 November

Council Working Group on Benchmarks

Trilogue on the fourth Anti-Money Laundering Directive

26 November

Trilogue on European Long Term Investment Funds

27 November

Council Working Group on Benchmarks

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Forward Look https://www.bba.org.uk/news/banking-matters/forward-look-19/ https://www.bba.org.uk/news/banking-matters/forward-look-19/#comments Fri, 21 Nov 2014 15:26:37 +0000 https://www.bba.org.uk/?post_type=news&p=34899 Read More]]> Monday:

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?

Tuesday:

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

Wednesday:

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

CFSI: Roundtable on digital currencies

Thursday:

Council Working Group on Benchmarks

Financial Services Forum annual conference

Friday:

British Retail Consortium: Monthly economic briefing

CBI: Monthly growth indicator survey

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The right solution for a taxing problem https://www.bba.org.uk/news/bba-voice/the-right-solution-for-a-taxing-problem/ https://www.bba.org.uk/news/bba-voice/the-right-solution-for-a-taxing-problem/#comments Fri, 21 Nov 2014 14:39:27 +0000 https://www.bba.org.uk/?post_type=news&p=34894 Read More]]> The front page of today’s Telegraph revealed that the Treasury’s has decided to water down plans to give HMRC powers to take money directly out of people’s bank accounts without permission if they are believed to owe tax.  These changes to proposals are good news for taxpayers and bank customers alike.

The BBA supports the Government’s aim to ensure that taxes can be collected from those that can pay but will not. However, the initial plans announced in this year’s Budget did not include sufficient protections to prevent some of the most vulnerable members of our society being captured by proposals designed to target individuals that wilfully avoid paying taxes they owe.

The BBA raised concerns about the plans in the summer and signed a letter to the Sunday Times alongside a broad coalition of groups such as Liberty and the Law Society – calling them a “power too far”.

It’s is good to see that the Government is now looking to build in extra protections including:

  • Establishing a new, specialist unit to deal with cases involving vulnerable members of society, as well as providing a dedicated team and helpline.
  • Ensuring that judicial oversight of the process is enshrined in legislation, by allowing for appeal to the County Court.
  • Putting a hold on debtors’ accounts and giving them 30 days – more than twice as long as previously planned – to contact HMRC and arrange payment of the debt or object to the use of these powers before any money is taken.

 

The Government has also confirmed that the powers will not be used unless a face-to-face meeting has occurred. This is crucial to ensure that no one has money taken out of their bank account without their knowledge and, where an individual does dispute the use of these powers, they will now have the right to appeal the use of these powers through county courts.

The revised proposals will undergo an extended period of scrutiny and will therefore not be included in any finance bill before the General Election.

This is a welcome move and we will be reviewing the Government’s consultation response and draft legislation when it is published to ensure that all the necessary safeguard for bank’s customers are included.

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BBA Brief – 21 November 2014 https://www.bba.org.uk/news/bba-brief/bba-brief-21-november-2014/ https://www.bba.org.uk/news/bba-brief/bba-brief-21-november-2014/#comments Fri, 21 Nov 2014 09:33:19 +0000 https://www.bba.org.uk/?post_type=news&p=34774 Read More]]> HMT U-turns on tax powers

The front page of the Telegraph reports that the Treasury has watered down its plans to give HMRC powers to take money directly out of people’s bank accounts without permission if they are believed to owe tax.  The new safeguards will ensure that taxpayers have to have a face-to-face meeting first and that they will have the right of appeal through the county courts.  Crucially the plans will not now be put into primary legislation until after the general election.

The BBA raised concerns about the proposals in the summer and signed a letter to the Sunday Times along with a broad coalition of groups such as Liberty and the Law Society – calling them a “power too far”.

HMT gives up on bonus cap challenge

Following on from the news that the EU Advocate General had ruled against the UK legal challenge to the EU bonus cap, the UK Government has decided to withdraw its case.  Chancellor George Osborne is quoted in the FT (£, p2) saying: “I’m not going to spend taxpayers’ money on a legal challenge now unlikely to succeed. The fact remains these are badly designed rules that are pushing up bankers’ pay, not reducing it. These rules may be legal but they are entirely self-defeating, so we need to find another way to end rewards for failure in our banks.”  In a letter to Mark Carney in his role as chairman of the Financial Stability Board the Chancellor urges him to push for global standards including looking at the idea of performance bonds: “I was interested by some of the ideas floated by President William Dudley of the New York Federal Reserve which would increase accountability by putting more of senior bankers’ remuneration at risk.”

The article quotes the BBA saying:  “We believe that shareholders should be given powers to determine staff pay – not politicians.  We believe this law runs counter to recent reforms and will make the system less robust by incentivising firms to increase fixed pay. It also puts European banks at a disadvantage when competing with firms in other parts of the world.”

US warns on EU benchmark plans

The US could be forced into tougher regulation if proposed European rules on benchmarks  prevent access for EU banks and asset managers to US markets, reports the FT (£, p30). Timothy Massad, chairman of the Commodity Futures Trading Commission warned senior US policy makers that the European Commission’s tougher oversight of benchmarks could have “adverse markets consequences”. EU proposals seek to prohibit European-supervised banks and asset managers from using benchmarks outside of the EU. In a letter seen by the FT, Mr Massad wrote: “The US does not have such a supervisory regime and in the absence of any changes, the third-country equivalency requirement would prohibit EU institutions from hedging using thousands of products traded on US futures exchanges and swap execution facilities”.

UKIP wins second by-election

UKIP have won the by-election in Rochester and Strood.  Former Conservative MP Mark Reckless won by 2,920 votes.  The Green Party came fourth, while the Lib Dems got their lowest total ever (BBC).

Today’ diary

EBA: Public Hearing on Payment commitments

ONS: UK public sector finances – October 2014

Stat of the day

30% of world GDP – is the amount of capital that China could start to invest internationally if it fully integrated with the world’s financial systems according to the Bank of England.  In the Telegraph (p25) Jeremy Warner says this would be a “truly epic reallocation of capital”.

Latest from the BBA

The Bank of England has recommended that the Treasury flex new powers granted to it to direct the Prudential Regulation Authority to set leverage ratio requirements. The BBA’s Emily Hoquee examines how this could enhance the safety of the UK banking industry here.

In brief

Martin Taylor, who sits on the Bank’s Financial Policy Committee has claimed in a speech that bank executives are most worried about staying “out of jail”. (Telegraph, B3)

The front page of the Sun criticises former Labour Shadow Minister Emily Thornberry who stood down from her front bench post last night for tweeting about a house with England flags on it in Rochester.

Labour has called for the NHS to be excluded from the transatlantic trade deal between the US and the EU (Independent, p5)

What the commentators say

German EU Commissioner Günther Oettinger raises concerns about France’s ability to meet its deficit targets in an article in the FT (£, 11). He warns: “Without an economically strong France, the eurozone as a whole will not recover.”

In the Independent (p39) Chris Blackhurst attacks the bonus cap as “knee-jerk and not thought through. Banks that hitherto have supported the EU may find themselves looking more fondly at Ukip and Nigel Farage.”

In the Guardian (p, 41) Nils Pratley says that the bonus cap “remains the most illogical piece of reform to emerge from the post-crisis clean-up”.

In the FT (£, p11) former Bank of International Settlements adviser William White describes Japan’s stimulus plans as foolhardy.

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Bank of England unveils recommendations on leverage ratio https://www.bba.org.uk/news/bba-voice/bank-of-england-unveils-recommendations-on-leverage-ratio/ https://www.bba.org.uk/news/bba-voice/bank-of-england-unveils-recommendations-on-leverage-ratio/#comments Thu, 20 Nov 2014 16:11:49 +0000 https://www.bba.org.uk/?post_type=news&p=34760 Read More]]> On October 31 the Bank of England published the Financial Policy Committee’s review into the role of the leverage ratio within the capital framework for UK banks. The FPC’s main function is to help the Bank meet its financial stability objective and to support the Government in its aims for growth and employment. The review was asked for by the Chancellor to consider the leverage standard required to ensure that the UK banking system is sufficiently resilient.

Following a period of consultation, the FPC has recommended that the Treasury uses its power to enable the Committee to direct the Prudential Regulation Authority to set the leverage ratio requirements and buffers for PRA-regulated banks, building societies and investment firms. These include a minimum leverage ratio requirement, a supplementary leverage ratio buffer that will apply to globally systemically important banks (G-SIBs), and a countercyclical leverage ratio buffer. The FPC wants to introduce the minimum level of the leverage ratio of 3% as soon as practicable for the UK G-SIBs.

I think it is right that the Bank seems to have listened to many of the concerns put forward by the industry. We called for a simple leverage ratio that would act as a non-risk based complement to the already much improved risk weighted minimum capital adequacy framework. The BBA did not support the proposal for multiple additional leverage buffers, and felt that any leverage ratio framework set in the UK should be internationally consistent.

So we welcome the removal of the proposal that banks should hold a leverage ratio conservation buffer and a possible Pillar II leverage requirement. If the proposals are accepted by HM Treasury the Bank’s proposals will enhance the safety of the UK banking industry, and will provide it with a framework that balances safety with the need to keep lending affordable. This is a further step towards ensuring that the UK has one of the safest and most competitive banking markets in the world.

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