22nd Jul 2014 Back to top
  • BBA Brief – 22 July 2014

    PPI complaints halve as FOS claims “worst is over”

    The number of new complaints relating to mis-sold payment protection insurance (PPI) by the Financial Ombudsman Service (FOS) declined by 57% in the past three months, reports the Times (£, p32). The FOS received 56,869 complaints between April and June 2014, compared to 132,152 in the same period last year. Complaints during the first six months of 2014 stood at 85,184 – down from 160,000 over the same period last year. The ombudsman said that they were seeing a change in the nature of grievances towards more complex cases.

    US Money Market Fund rules to shake-up funds

    The FT (£, p28) reports that new rules to be unveiled in the US this week are likely to affect investors holding money in $900 billion (£527 billion) of the country’s $2.6 trillion money market funds industry. The proposals, expected tomorrow, will mean some funds have to switch from a fixed $1 share cost to a floating share price. The move would make funds less like bank accounts as investors see their balances fluctuate and could lead to investors moving money to banks or unaffected market funds to avoid changes. Affected fund managers may respond by introducing new products or systems to prevent investors from moving their money.

    SFO begins criminal investigation into alleged forex rigging

    The Director-General of the Serious Fraud Office (SFO), David Green, has announced that he will investigate claims that traders and financial staff actively manipulated the daily fix used in London’s foreign exchange market (Telegraph, B1). The £3 trillion-a-day market uses the daily rate to determine the value of their profits and portfolios. The SFO joins international regulators who are already examining the issue and is expected to apply for “blockbuster funding” to finance their work (Times, £, p32). The news comes as the SFO suggested it would bring the first Libor trial to court next year with further cases in 2016 (CityAM, p3).

    OECD finds that governments have collected £29 billion in tax crackdown

    The Organisation for Economic Co-operation (OECD) released figures showing that €37 billion (£29.3 billion) had been collected since 2009 in efforts to reduce tax evasion via offshore accounts (FT, £, p8). The announcement formed part of the OECD’s newly published rules for the automatic information exchange that aims to make it harder for tax evaders to use tax havens. The proposal outlines details for how banks and governments should share tax information and have been signed up to by more than 65 countries.

21st Jul 2014 Back to top
  • GLAC – a beginner’s guide

    Mark Carney is “spearheading” efforts to reach an international agreement on it. The FT put it on its front page. But what is GLAC and why is bail-in so important to the post-crisis regulatory agenda? BBA Senior Policy Director Adam Cull explains why in the latest blog from his beginner’s guide series.

  • Is British influence in Brussels about to fall off a cliff?

    New research from the BBA has revealed that UK influence in Brussels is set to decline sharply in the coming years as the number of British officials falls of a “cliff edge”. The BBA has called on the Government to take action to arrest this decline.  In this article BBA Head of EU Affairs, Gergely Polner, talks through some of the main findings of the report and suggests some ways the UK Government could arrest this decline.

  • BBA Brief – 21 July 2014

    BBA warns that UK is losing influence in Brussels as number of key officials declines

    The FT (£, p2) and the Times (£, p2) write up a research note from the BBA which warns about the loss of UK influence in Brussels as the number of British officials falls sharply.  The note finds that, the proportion of British nationals employed in policy influencing roles in the Commission has decreased from 9.6% in 2004 to 5.3% in 2014 and that the proportion of British staff is even lower in those Directorates General that are crucial in drafting financial services legislation (e.g. 3.5% in DG MARKT).  Worryingly, not a single person from the UK Government’s re-launched EU Fast Stream has gone on to join the EU Commission.  BBA Chief Executive Anthony Browne said: “London is the financial capital of Europe and has the largest number of international banks in the world. Most of the laws that govern their activity emanate from the EU.  They are strong supporters of the single market but sometimes this legislation can have difficult unintended consequences.  So it is crucial for that international cluster that the UK has as much influence as possible in Brussels… The situation is bad now, but set to get much worse. Fewer than three in a hundred people passing EU entrance exams are from the UK. We are also worried that a number of senior British officials will be retiring soon, and that the UK Government is not doing enough to replace them. This cliff edge effect is real and worrying.  Increasing the number of UK civil servants in Brussels will benefit politicians and businesses alike – the Government needs to up its game.”

    Global bail-in rules run into difficulties

    According to the front page of the FT Mark Carney is leading global discussions to put in place global proposals on bailing-in creditors of globally significant banks – a key part of ending too big to fail.  This could lead to some banks having to issue billions of dollars of new bonds earmarked to carry any losses.  The rules on “gone concern loss-absorbing capacity” are causing problems for the Japanese and the Chinese whose different legal and banking systems are not as compatible with the plans.  The aim is to have the issue signed off by world leaders in Brisbane in November, but the details are so contentious that they may not be agreed until the summit itself.

    CMA to launch market enquiry

    The Competition and Markets Authority has announced that it is minded to launch a full market investigation into the personal current account and SME lending markets in the autumn. BBA Chief Executive Anthony Browne was quoted extensively in the weekend media responding to the news saying, “Banks are pro-competition – they compete for customers every day.  Last month we published a series of ideas to help new banks set up and smaller players to grow. We hope these suggestions will be taken up by regulators and politicians.”  In his blog, BBC business editor Kamal Ahmed looks at whether the CMA review could lead to the end of free banking. He concluded, “Now the CMA has opened this Pandora’s box, it is going to be very difficult to nail it shut again.”

    Free schools falling behind on financial education

    BBA research has uncovered concerns that the Government’s flagship free schools are much less likely to teach financial education than the average secondary school.  The Mail on Sunday (p86) quoted Anthony Browne saying, ‘It is hugely disappointing that the Government’s flagship free schools aren’t teaching pupils how vital it is that they stay on top of their finances.  We would like to urge the new Education Secretary Nicky Morgan to make sure that at least the basics of budgeting, borrowing and saving are taught in every school.”

    Which? calls for customers to shop around on overdraft charges

    Research by Which? suggests that consumers could save money on overdraft charges by shopping around.  The Sunday Express quoted BBA Executive Director Eric Leenders who said that banks help customers to compare charges with itemised statements and online calculators and that consumers had recently saved nearly a billion in reduced overdraft charges. (B3)

  • British influence in the EU

    british-influenceCulture, acquired knowledge and networks frame the understanding of problems and the proposed solutions even in the best managed bureaucracies. This is true for the European institutions, especially for the biggest institution by sheer staff numbers, the European Commission.

    While EU civil servants and Commissioners are not supposed to consider the national interests of their country, the relevant academic research1 acknowledges the importance of nationality in international organisations and the Commission implicitly accepts this by its requirement in the staff regulations for “geographical balance”.

  • UK heading for a “cliff edge” in terms of staffing numbers in Brussels

    New research from the BBA has revealed that UK influence in Brussels is set to decline sharply in the coming years as the number of British officials falls of a “cliff edge”. The BBA has called on the Government to take action to arrest this decline.

20th Jul 2014 Back to top
  • BBA Comment on Which? release on the cost of current accounts

    Responding to the Which? investigation and release entitled “The real cost of current accounts” the BBA’s Executive Director of Retail, Eric Leenders, said:

    “Banks already help customers to compare account charges in a variety of ways such as making literature available in branches and online calculators. They also itemise charges on bank statements and use text alerts to communicate important account information instantly.

    “All the major banks also participate in the Government’s midata initiative to encourage transparency and make information about customers’ current account use available to them in a downloadable format.

    “The good news is that across the board overdraft charges have plummeted since 2008, with estimated consumer savings of up to £928 million over the past five years.”

  • Financial education is important for pupils at all schools, says BBA

    Free schools introduced by Coalition ministers are nearly five times more likely to omit financial education from lessons than standard secondary schools, official figures have shown.

    New research has found that free schools are much less likely to teach financial education than other schools.

    5% of all secondary schools admitted that they did not teach financial education, in response to a Freedom of Information Request. However, that proportion rose to 24% for free schools.

    Consumers groups, charities, banks and other experts have urged ministers to ensure that the basics of money management are taught to all pupils.

18th Jul 2014 Back to top
  • BBA Brief – 18 July 2014

    CMA consulting on market investigation

    The Competition and Markets Authority (CMA) has announced this morning that they will be consulting on a provisional decision to conduct a market investigation into personal current accounts and small business banking. The decision follows the conclusion of market studies into these two areas, with the SME banking study being undertaken as a joint project with the FCA. As part of the consultation the CMA will be inviting views on recent developments in the banking sector, as well as on the ‘in principle’ proposals to remedy suspected problems put forward by some of the main high street banks.

    Many of the newspapers pre-empted the announcement, with the FT (£, p1) suggesting that the consultation will last at least 18 months.

    BBA Chief Executive, Anthony Browne said: “All the banks will co-operate fully with this review and any subsequent investigation. There are substantial changes currently underway across the banking industry to strengthen competition – which improves choice and service for customers. We welcome the fact that the CMA has recognised that there have been a number of recent improvements for customers.

    “Banks are pro-competition – they compete for customers every day. Last month we published a series of ideas to help new banks set up and smaller players to grow. We hope these suggestions will be taken up by regulators and politicians.”

    See the BBA’s full press release here and report on competition in banking here.

    On the eve of the announcement Business Secretary Vince Cable wrote to RBS chief executive Ross McEwan asking him to speed up the divestment of challenger bank Williams & Glynn in order to boost competition (Times, £, p40).

    ECB give two week deadline

    The European Central Bank (ECB) has given banks with holes in their balance sheets a two week window this autumn in which they can plug the gaps (FT, £, p8). Yesterday, the regulator published refreshed plans to carry out stress tests – to include both baseline and adverse scenarios – on 128 of Europe’s biggest banks, who will then receive the results in October and be granted a fortnight to produce plans to cover any shortfalls over a six month period. The ECB has stressed the need for tests to be rigorous as previous tests failed to uncover all flaws.

    Handelsbanken opens fifth regional bank

    Swedish lender Handelsbanken is to open a fifth regional bank covering Yorkshire and the north east of England (CityAM, p11). The firm currently has 177 branches across the UK and reported yesterday that it increased its lending by 12% to £12.8 billion in the second quarter of the year. The bank’s UK chief executive, Anders Bouvin said: “We will continue to invest in traditional, local banking to meet the demand we see from businesses and individuals across Britain.”

  • BBA response to today’s CMA announcement

    Reacting to this morning’s announcement by the Competition and Markets Authority, BBA chief executive Anthony Browne said:

    “All the banks will co-operate fully with this review and any subsequent investigation. There are substantial changes currently underway across the banking industry to strengthen competition – which improves choice and service for customers. We welcome the fact that the CMA has recognised that there have been a number of recent improvements for customers.

    “Banks are pro-competition – they compete for customers every day. Last month we published a series of ideas to help new banks set up and smaller players to grow. We hope these suggestions will be taken up by regulators and politicians.”

17th Jul 2014 Back to top
  • Help rebuild Britain’s savings culture

    The BBA wants to hear your thoughts on how we can change our country from a nation of debtors into a nation of savers. Please submit your response to our consultation by Friday August 22.  The BBA’s Rob Watts outlines some of the responses we have already received.

  • Resilience in a changing world

    Resilience is about recovering from adversity – an issue the banking system knows all too well having undergone considerable change in recent years. But the banks are starting to rise to the challenges resulting from the heightened demands of regulators, customers and social media.

  • BBA Brief – 17 July 2014

    CMA poised to make banking industry announcements

    The Competition and Markets Authority (CMA) is expected to publish the findings of its report into competition in business banking and personal current accounts (Guardian, p25). A provisional decision on whether to conduct a full investigation is expected on Friday, with a final decision not due until this Autumn.

    For further information on how to make the banking industry more competitive please read the BBA’s Promoting Competition in the UK Banking Industry report.

    Bank account switching up 16 per cent

    Current account switching numbers are up by 16 per cent in the first half of the year in comparison to the same period in 2013 (CityAM, p8). According to the Payments Council, 600,000 customers used this new service between January and June this year. The Mirror (p51) highlights the CEO of the Payments Council Adrian Kamellard saying: “The account switch service set out to remove the fear factor from switching – and these results suggest that it is doing exactly that.”

    Independent party to run the gold benchmark

    The four banks that run the gold benchmark are seeking an independent administrator to oversee the market (FT, £, p28). According to the FT, the banks said they would seek proposals with “a view to appointing a third party to assume responsibility for the gold fix”. The Times (£, p36) quotes the London Gold Market Fixing Limited saying that the review of its procedures conducted with the assistance of Slaughter & May, a City law firm, had concluded that they were “broadly aligned” with international standards for benchmark setting.

16th Jul 2014 Back to top
  • How the UK can lead in digital banking

    Millions of British people are embracing payment by mobile phone, banking apps and a range of other technologies which make it easier to bank than ever before. This is great for consumers, but there’s another tantalising opportunity from these innovations.

    As EY’s Partner in Digital Financial Services Tariq Khatri writes, Britain’s economy is well-placed to benefit from a boom in digital financial services.

  • FATCA: the tip of the tax exchange iceberg

    The Foreign Account Tax Compliance Act (FATCA) finally became a reality on the 1st July; FATCA is a US tax avoidance measure which came about after the financial crisis at the end of the last decade. It requires Foreign Financial Institutions (FFI’s) to identify U.S. citizens, report on their income and assets and, in some circumstances, withhold on paymentsto account holders.

  • BBA Brief – 16 July 2014

    FSB proposes 15 reforms to forex market

    The Financial Stability Board (FSB) has proposed a series of reforms to global forex markets to reduce the risk of collusion in the wake of alleged manipulations, reports the Times (£, p40). The changes to the £2.9 trillion daily market include widening the one-minute “window” used by traders to set forex benchmarks and the use of alternative benchmark methodologies. The FSB suggested that the structuring of the market helped create the impression of front-running with dealers “trading ahead of the fix”. Responding to the proposals, a BBA spokesman said: “It’s vital that we have a system that is robust and punishes any wrongdoing while being sensitive to the need to continue to attract global banks and investors to the UK”.

    Dodd suggests consolidating US prudential regulators

    Chris Dodd, one of the architects of the US Dodd-Frank legislation, has revived the prospect of establishing a single US prudential banking regulator (FT, £, p8). The former US senator had previously complained that the number of organisations overseeing the American financial system was excessive. Only one of these four institutions was abolished in 2010, leading to concerns that some issues could “slip between the cracks” of the three regulators. At an event marking the four-year anniversary of the signing of the legislation, Mr Dodd said he would like to have created a single prudential regulator and that the idea still had “life”. Read the BBA’s Adam Cull report Beyond Boundaries on how to drive regulatory coherence.

    Carney warns of mortgage risk as expectations of interest rate rise grows

    A number of papers report comments made by Bank of England Governor Mark Carney on mortgages and interest rates during his monthly appearance in front of the Treasury Select Committee yesterday (FT, £, p3). The Governor rejected the Bank of International Settlement’s recommendation that the Bank usher in a “swift return to normal interest rates”, suggesting the advice came from “a vacuum… outside political and economic reality” (Telegraph, B1). Dr Carney added that his warning that rates could rise faster than expected was designed to “shake up the markets”. Elsewhere, Dr Carney suggested the Bank could consider restrictions on the length of a loan in response to the growing number of people who could be left exposed by long-duration mortgages.

    FCA to cap payday loan charges

    The Financial Conduct Authority has outlined proposals to cap the overall cost of a payday loan at 100 per cent of the amount borrowed. The move could reportedly cost the industry £420 million in lost revenues and save a borrower £193 a year in charges, writes the Guardian (p17). The cap is set to apply to the £2.5 billion annual market from January 2015. The FT (£, p4) reports that the regulator’s move could lead to banks replacing the sizeable number of payday lenders expected to exit following the new rules.

    Cabinet reshuffle concludes as Juncker becomes Commission President

    A number of papers report the reshuffle of Conservative members of the Government and confirmation of Jean-Claude Juncker as the European Commission President. Matt Hancock has replaced Michael Fallon, who becomes Defence Secretary, as Minister of State for Business, Innovation and Skills and Energy and David Gauke is the new Financial Secretary to the Treasury – taking his tax portfolio with him – and replaced by Priti Patel as Exchequer Secretary. The FT (£, p1) suggests the reshuffle reflects a move to push harder for EU reforms by the Prime Minister. Meanwhile, Mr Juncker outlined a “federalist” agenda for his time in the Commission including a £300 billion fund for infrastructure investment (Times, £, p31). Read BBA Head of UK Government Affairs Rebecca Park’s blog on why this reshuffle isn’t just about women.

15th Jul 2014 Back to top
  • Why this reshuffle isn’t just about women

    Today’s reshuffle isn’t just about the Conservative Party ensuring that it appears to represent Britain ahead of next year’s General Election, it’s also about ensuring that David Cameron has the right team in place to run the Conservatives’ General Election Campaign.

  • UK bankers will lend more in 2014 – and may be paid more too

    The majority of British bankers expect the economy and industry’s performance to strengthen in the second half of 2014, according to EY’s European Banking Barometer. This means more lending to businesses and jobs in banking. But will it mean higher pay? EY’s UK Banking and Capital Markets leader Omar Ali looks at what the survey’s results mean for UK banks and their staff.

  • BBA Brief – 15 July 2014

    Capital markets key to Eurozone recovery

    In the FT (£, p13) Hugo Dixon argues that non-bank finance through a “capital markets union” is key to stimulating EU growth. He states that the UK would profit as the main supplier of alternative finance as it is “home to the continent’s largest capital market”. The author writes that the EU is much more “bankcentric” than the US, and that Europe would benefit from alternative sources of finance such as corporate bond issues, peer-to-peer lending and venture capital. Mr Dixon adds that the market should be transparent and use “targeted regulations to ensure…stability and probity”, and welcomes the move by the ECB and Bank of England to revive the securitisation market.

    IMF concern over Eurozone

    The International Monetary Fund has warned that the Eurozone’s economic recovery is weak and uneven and that any new shocks could “sour financial market sentiment [and] halt the recovery” (Times, £, p39). The organisation also called for the ECB to be ready to use quantitative easing or an asset purchase programme should inflation remain low, adding that “a persistent failure to meet the inflation target could undermine central bank credibility (Telegraph, B1).

    The BBA will publish a paper later this month suggesting ways to support growth in the Eurozone.

    Cabinet reshuffle begins

    number of papers lead with yesterday’s reshuffle which saw William Hague stand down as Foreign Secretary to be replaced by former Defence Secretary Philip Hammond. Mr Hague – who is now leader of the House of Commons – along with former Science and Universities Minister David Willetts will retire as MPs at the 2015 General Election. Another casualty was former Environment Secretary Owen Paterson. The majority of new appointments will be announced today.

14th Jul 2014 Back to top
  • Diversity and Inclusion Business Council – Policy into action

    The new national Diversity and Inclusion Business Council, launched today, brings together entrepreneurs, academics and the banking sector to promote access to finance for ethnic minority and women-owned businesses. Read co-Chairs Monder Ram and Sara Carter’s blog on how the council will help these entrepreneurs drive our economy and their communities forward.

  • BBA Brief – 14 July 2014

    BoE pushing for change to capital rules for challengers

    The Sunday Telegraph (B1) reported how at a recent BBA conference on increasing competition in the banking sector the Bank of England called for a relaxation of capital rules for smaller banks. It quotes Martin Stewart from the Prudential Regulatory Authority saying, “There is clearly a strong body of evidence that there should be some change. We have taken it to the latest round of Basel negotiations that there should be an alternative.”  A separate article (B5) in the paper looked at how new entrants were shaking up the banking market in the UK.  The FT (£, p20) notes the BBA’s latest competition report which calls for challenger banks to be given access to average internal risk weights for bigger lenders. This would allow them to hold less capital against safer loans.  In a comment piece (B2) James Quinn, Business Editor at the Sunday Telegraph, takes a cautionary note, warning “the recent history of smaller banks with smaller balance sheets in this country does not make for pleasant reading.”

    Forex traders offered immunity deals by US

    The front page of the FT reports that investigators from the US Department of Justice are offering junior traders immunity deals in exchange for information about senior colleagues.  One lawyer told the paper that the investigations were “well advanced” but another lawyer said that while the DoJ had offered immunity deals to a number of traders, most had so far declined as they did not have “killer evidence” to trade against leniency.  Read the BBA’s response to the launch of the Treasury’s review in to strengthening standards in financial markets here.

    Debate over the future of bank branches continues

    The Weekend FT (£, p3) looked at how the traditional bank branch is changing.  It quotes BBA Chief Executive Anthony Browne saying, “Branches are being reinvented, the death of the branch has been much exaggerated.”  It reports, “The industry group says that 2,274 branches have been refurbished in the past two years. That compares with the near 600 branches that have been closed by the four biggest high street banks since the start of 2013.” Alex Brummer wrote in Saturday’s Mail (p89) that while some “traditionalists” will push back against how the bank branch is changing, “The reality, as the British Bankers’ Association has pointed out, is that banking transactions, worth nearly £1bn a day, are carried out electronically.”However, a survey published by Accenture today (Times p40, Telegraph B3) suggests that bank branch usage is actually increasing. It also found that a quarter of people would be happy to have an internet only bank in the future. In a letter to the Sunday Telegraph Age UK Charity Director Caroline Abrahams warns that there is a proportion of the population that will never access banking services online.

    BoE looks at varying leverage ratio

    Reuters reports that the BBA raised concerns about the Bank of England’s plans to allow it to vary the leverage ratio in the future.  BBA Executive Director Simon Hills said: “Adding in complexity runs the risk of creating its own distortions and penalising safer lending. Our members will work with the regulator to identify problematic areas a more complex leverage ratio would introduce.”  The Weekend FT (£, p17) reported that the proposals may limit the ability of a bank to use coco bonds when calculating its leverage ratio.  Read Simon Hills’ blog on this issue here.

    FCA to cap payday lenders

    The Financial Conduct Authority (FCA) is set to introduce a cap on the amount payday lenders can charge for credit – expected to be set at £30 for every £100 lent. The Consumer Finance Association says it expects the sector to shrink about half in the coming years. The association said its members, nine of the UK’s biggest payday lenders, had lent 50 per cent less in the past three months than in the same period last year. (FT, £, p2)

11th Jul 2014 Back to top
  • Simplicity is the ultimate sophistication

    The introduction of a leverage ratio will help make the financial system safer. Especially if it takes the form of a simple, internationally harmonised measure. BBA Executive Director for Prudential Capital and Risk Simon Hills responds to the Financial Policy Committee’s leverage ratio consultation paper in his latest blog.

  • BBA Brief – 11 July 2014

    FPC looks at toughening up the leverage ratio

    The Bank of England’s Financial Policy Committee (FPC) has today released a consultation paper on a review of the leverage ratio.   The consultation will report back fully in November but the FPC is consulting on whether it should be given the power to vary the leverage ratio over time as a key tool of macroprudential policy.  The FPC also states that it is “minded to recommend to HM Treasury that it be granted powers of Direction over all components of the leverage ratio framework that are not harmonised under European Union (EU) legislation…The leverage ratio framework could be applied to a subset of firms only, during any transitional period.” (Reuters)

    Fines should not damage stability, says Bailey

    Andrew Bailey, head of the Bank of England’s Prudential Regulation Authority, spoke out yesterday to say that fines imposed on banks for misconduct should not “undermine financial stability” (FT, £, p3). His comments came in the wake of US fines on BNP Paribas totalling $8.9 billion (£5.2 billion). Mr Bailey said that he was working with his counterparts in the FCA to assess what fines were coming down the line, but there was some difficulty gauging the impact of penalties when stress-testing banks’ financial strength. Answering questions after a speech in London, Mr Bailey said: “We do have to be very clear that actions are taken which do not undermine the stability of the financial system.”

    The FCA said that in 2013-14 it levied fines totalling £425 million – a record for the regulator.

    In the US (FT, £, p22) banks are facing new uncertainty after the BNP Paribas case revealed some divergence between enforcement officials on how penalties are determined, making sanctions hard to predict and creating new risks for banks. Though the US Treasury Department’s Office of Foreign Asset Control (Ofac) would ordinarily administer policy in this area, including calculating fines, the BNP case saw other agencies like the Department for Justice “ratchet up their penalty in unprecedented ways.”

    Andrew Bailey also said that the Bank would step in if lenders were deemed to be underestimating how risky their loans are. Mr Bailey said that banks with inadequate risk weights may have to cede power to the regulator (FT, £, p5).

    Banks update branches in-line with consumer behaviours

    The FT (£, p4) reports on Barclays’ plans to modernise branches by giving 6,500 cashiers new positions focused on giving customers advice about their finances. Staff will still be on-hand to process transactions for those who prefer not to use digital or self-service machines. The move comes as a result of banks noticing a change in behaviour from customers who are increasingly using their branches for bigger decisions such as mortgage applications and investments rather than day-to-day transactions.

    The article goes on to quote the BBA’s new report It’s In Your Hands – released earlier this week – revealing that internet banking transactions are now worth almost £1 billion each day. You can read the latest The Way We Bank Now report here.

    Portuguese bank troubles international markets

    Shares in one of Portugal’s biggest banks – Banco Espirito Santo – slumped by 19% before the country’s regulator suspended trading yesterday. International bond and share markets felt the reverberation as investors lost faith in the lender, sparking a sell-off and fears of a new eurozone crisis. According to the FT (£, p1) the Bank of Portugal has said that “the solvency of Banco Espirito Santo is solid”.  The sell-off also prompted the International Monetary Fund to issue a statement: “The Portuguese banking system has been able to endure the crisis without significant disruption, aided by substantial public capital support and extraordinary measures from the ECB. However, as the Bank of Portugal acknowledges, pockets of vulnerability remain” (Times, £, p37).

  • Borrowing levels reported by British lenders

    Major lenders today publish details of borrowing to individuals and businesses classified by more than 9,000 postcode sectors at the end of 2013, six months prior to their release.

    The industry-wide data has been compiled jointly by the BBA and the Council for Mortgage Lenders.  Participating lenders will also publish their own figures on their websites.

  • Commenting on today’s FCA figures on interest rate hedging products

    “The banks have now written to almost all affected businesses advising them of the outcome of the review of their file. 14,549 of these customers have now received redress outcomes and more than £1.2 billion has been accepted.”

10th Jul 2014 Back to top
  • Let’s make sure an overflow of good doesn’t convert to bad

    BBA Executive Director for Prudential Capital and Risk Simon Hills responds to Bank of England Deputy Governor Andrew Bailey’s speech on the capital adequacy of banks. He argues that banks are much stronger and safer than they were before the financial crisis. But with plenty of reforms still on the table, it’s vital we avoid any unintended consequences of regulation.

  • Tesco, Twitter or Facebook – which will be the next big bank?

    The future of banking is at a crossroads. Major consumer brands are entering the market and using their advanced technological know-how to compete with traditional banks. But barriers to entry still exist. Pinsent Mason’s John Salmon looks at whether Tesco, Twitter or Facebook could be the next big bank.

  • BBA Brief – 10 July 2014

    FCA launches wholesale markets competition review

    The Guardian (p21) reports that the Financial Conduct Authority (FCA) “will investigate allegations that high frequency traders unfairly steal a march on rival investors” as part of its wider competition review into wholesale markets announced yesterday. The FCA’s Director of Competition Mary Starks said the FCA had launched an “exploratory” exercise into competition in high speed trading because “wholesale financial markets play a crucial role in the economy, and the UK plays a key role in the international markets”. Commenting on the announcement, a BBA spokesman said: “The industry supports more competition in all banking markets. Competition between wholesale banks for business is already intense and the FCA’s review will help ensure markets are working effectively. That means fair prices, innovative players and plenty of choice for customers.”

    Banks waiting for inquiry results

    The Competition and Markets Authority (CMA)is preparing to release the results of its study into competition in banking next week (FT, £, p2). According to the FT, the CMA is expected to launch a formal investigation into this area in the autumn which could potentially change the landscape of the banking sector before May’s general election. The FT references the BBA arguing: “It is too early to investigate competition in banking because the industry is in the middle of a fundamental overhaul. Technology is changing how consumers interact with banks, a new current account switching service was launched last September, and both RBS and Lloyds are being forced to spin of part of their retail networks to create new ‘challenger banks’.”

    For further information about the way we bank now read the BBA’s latest report It’s in your hands.

    If you want to read more about competition in banking read BBA’s Media Relations Adviser Tommy Ricketts’ blog A level playing field, not silver bullets.

    Dame Clara Furse: “Securitisation may be the key”

    In the Times (£, p37), Financial Policy Committee (FPC) member Dame Clara Furse writes that the FPC is focussing on ways of ensuring that the supply of credit to good borrowers is maintained by improving the diversity and robustness of the market-based finance in the UK. Ms Furse writes that: “Securitisation has the potential to ensure a more constant, reliable source of credit and can provide an important source of funding for mortgages, business lending, credit cards, car finance and other lending. Importantly, it provides a channel to transfer the risk of lending away from the banks, drawing in a wider range of investors for the provision of credit to the economy.”

    Cable orders a review into state asset sell-offs

    The Business Secretary announced that former City Minister Lord Myners will lead a panel of experts to investigate alternatives to initial public offerings for privatising state assets. The announcement was made ahead of the results of a report investigating last year’s privatisation of the Royal Mail, which is expected to be published next week. The FT (£, p1) writes that this report is expected to argue that the flotation of the postal service could have achieved better value for the taxpayer.

9th Jul 2014 Back to top
  • BBA Brief – 9 July 2014

    Beware unintended consequences of regulation, says the BBA’s Anthony Browne

    The Telegraph (B1) and CityAM (p3) quote extracts from BBA Chief Executive Anthony Browne’s speech at Mansion House last night warning against poorly thought-out regulations. Anthony reiterated comments made in the BBA’s competition report, arguing that breaking up Britain’s biggest banks could backfire and undermine the universal service they offer. His speech also discussed the implications of new international regulations that were causing banks to “de-risk” and retreat from offering services in developing economies.

    The speech comes after the release of the BBA’s second Way We Bank Now report, It’s in your hands, examing the effects of digital technologies on consumer trends in retail banking. Yesterday, Anthony featured on Channel Five news, BBC News 24, BBC Breakfast and the Today Programme to discuss its findings.

    FCA interim report calls for better rates and more competition for savers

    A number of newspapers report the findings of an interim report by the Financial Conduct Authority (FCA) into competition in the cash savings market. The report argued that “while some aspects of the cash savings market are working well”, most account holders are not capitalising on the best deals available to them (FT, £, p2). The Mail (p43) suggests that savers are losing £3.74 billion a year in interest.

    Responding to the FCA’s interim report, a BBA spokesman said: “Banks are making it easier for customers to find out which savings product is best suited for them. Banks notify customers in advance of any significant reduction in their interest rate. Where a bonus rate is about to end the banks also advise customers before the change takes place. As more new players enter the savings market banks competition for customers is hotting up all the time. If you do not think you are getting the best possible deal we would encourage you to shop around as there is lots of choice out there.”

    MPs attack HMRC over plans that “go against the Magna Carta”

    The Treasury Select Committee criticised HM Revenues & Customs chief executive Lin Homer at an evidence session yesterday on proposals to use new powers to access bank accounts (Times, p1). The measures would allow the tax authority to use the past twelve months of personal bank statements of alleged tax avoiders to work out how much money they could take from their account without causing “hardship” (FT, £, p4). The Mail (p4) reports comments made by Lord Thurso MP, who said the move goes “against the Magna Carta” by allowing the state to seize a bank account without judicial process.

8th Jul 2014 Back to top
  • Anthony Browne speech from the BBA Annual Dinner 2014

    Since 2007, a huge amount of necessary work has been done to reform and repair our banking sector.

  • BBA Brief – 8 July 2014

    Customer revolution sweeping personal banking

    Mobile and internet banking is now being used for transactions worth nearly £1 billion a day, according to a major industry-wide report into consumer-friendly technology by the BBA and EY released today.  Banking apps for mobiles and tablets have now been downloaded more than 14.7 million times, internet banking services typically receive 7 million log-ins a day and spending on contactless cards is expected to rise to £6.1 million a week this year – up from £3.2 million in 2013.  BBA CEO Anthony Browne commented:  “This report shows just how enthusiastically the British public is embracing mobile banking, contactless cards and a range of other consumer-friendly banking technologies. The way we bank now has made it a lot easier for us to keep track of our finances, with far more options about how we spend our money and talk to our bank.”

    Anthony appeared this morning on Wake up to Money, the Today Programme and BBC Breakfast.  BBA Director of Media Relations Rob Watts discussed the report on BBC Wales, BBC Ulster and BBC WM.  The report was covered in the Telegraph (B5), Reuters and the Guardian (p25).

    Download the full report – It’s in your hands - here

    New banks waiting in the wings set to increase competition for customers…

    The Telegraph (B5) reports that 25 new banks are preparing to enter the UK market after regulators changed the rules to make it easier to set up a new banks.  The relaxation of rules around capital levels for new banks and a new fast-track process “have been positive for new entrants and will make a contribution to increasing competition and thus benefit customers” according to the chief executive of the Prudential Regulatory Authority (PRA)  Andrew Bailey.  The article quotes BBA Executive Director Simon Hills urging the regulators to go further, by reducing the amount of capital a so-called “challenger” bank must hold against certain loans. “The PRA should allow smaller banks to hold less capital against the safest forms of lending”, he said.

    As the Big banks up their game

    According to research by Grant Thornton, customer perceptions of services delivered by the biggest banks, and their subsequent loyalty towards them, has largely increased. The  survey of 4000 customers found that five out of the biggest banks in the study improved their ranking, with the remainder remaining largely unchanged.

  • Britain embraces £1 billion-a-day digital banking “revolution”

    Mobile and internet banking is now being used for transactions worth nearly £1 billion a day, according to a major industry-wide report into consumer-friendly technology by the BBA and EY.

    The second Way We Bank Now report also shows that millions of customers are using contactless cards, payment by mobile and SMS balance alerts. In 2014 the rate of adoption of digital banking has grown strongly with more than 15,000 people downloading banking apps a day.

  • It’s in your hands

    wwbnA revolution is underway in how people spend, move and manage their money…

    Millions of customers are harnessing easy-to-use technology that allows you to bank wherever and whenever you please.

7th Jul 2014 Back to top
  • Bank branches are still integral but they are changing

    He is apparently an icon of the banking industry. Decked out in pinstripes and inspecting his gold fob watch, he was nit-picking, bureaucratic and elitist. If anyone has the temerity to ask for an overdraft, he would bellow “stupid boy”.

    Of course, there was much to love about Captain Mainwaring of Dad’s Army, just as there was about retail banking in the mid-20th century.

    But when people say to me – as they often do – that “we need a return to Captain Mainwaring style banking”, I think “really?” The reality is that compared to the supposed golden age of banking, the way we bank now is far easier and faster.

  • Securing growth for Europe

    Europe’s securitisation markets all but disappeared following the financial crisis. But a new discussion paper from the European Central Bank and Bank of England seeks to revive them to boost growth. The BBA’s response, submitted late last week, argues that this is a welcome initiative and one the industry fully supports.

  • BBA Brief – 7 July 2014

    BBA report highlights the changing nature of retail banking

    BBA CEO Anthony Browne writes in the Sunday Telegraph (p6) that the age of “Captain Mainwaring-style banking” has been superseded by technological advances which have made banking for customers “far easier and faster”. The article appears ahead of Tuesday’s annual Mansion House dinner, at which the BBA will launch its second ‘Way We Bank Now’ report which will show how digital banking, such as mobile apps and contactless cards has “transformed speed of service” of retail banking. Mr Browne adds that bank branches will remain integral for big decisions such as taking out a mortgage, but notes how digital innovation not only improves service for consumers, but also increases competition on the high street as banks look to attract customers with the latest technology.

    In a separate article the Sunday Telegraph’s (p1) James Quinn notes that some banking models such as Metro Bank and Handelsbanken focus on bank branches, and that where there are branch closures alternatives such as mobile vans or the Post Office network are available for consumers. Mr Browne appeared on the Sky News Murnaghan show to discuss the report, whilst last night BBC London Radio’s Nikki Bedi discussed whether “Captain Mainwaring-style banking” was still in demand. In response to Mr Browne’s article, Jane Warren writes in the Daily Express (p25) that although online banking is on the rise, the “personal touch” of “Captain Mainwaring-style banking” is what many people still look for.

    Competition and innovation in the banking sector heats up

    In an interview with the Telegraph (B5) Santander UK CEO Ana Botin discusses how “being different is critical” to challenging the more established banks, citing the bank’s partnership with Funding Circle. In Saturday’s Telegraph (p34) Jeremy Warner argues that competition rather than regulation will improve conduct in the banking sector. In addition, following the comparison website uSwitch’s survey on current accounts, the Mail of Sunday’s (p82) Jeff Prestridge states that “the dominance of the big banks is under threat like never before”. Read the BBA’s Promoting competition in the UK banking industry report here.

    The Sunday Times (£, p3) reports that industry body Innovate Finance will launch this month to promote Britain’s role as a global centre for financial technology. The Guardian (p43) looks at Osper, a mobile-only banking service designed for eight to eighteen year olds, which aims to “instil good money habits earlier in life”. The paper (p42) also points to Barclaycard which has just launched its bPay contactless payment wristband.

    BBA to address phone banking fraud

    The Mail on Sunday (p77) reports that there has been a rise in the number of cases of “vishing”, where bank customers are duped into giving their account details to fraudsters over the phone. The BBA will meet with Conservative MP Sam Gyimah – who is campaigning on the issue – to discuss what more banks can do in this area. A BBA spokesman said: “The BBA will be launching a campaign later in the year to provide vital tips on what customers can do to avoid being caught out by these clever scams.”

    Basel consider new rules on risk

    The Basel Committee may propose changes to make it harder for banks to understate the riskiness of their assets. According to Europe’s Wall Street Journal (£, p1), the Committee is likely to suggest risk-weighting “floors”, which would set minimum risk weights for certain classes of assets.

4th Jul 2014 Back to top
  • BBA Brief – 4 July 2014

    Barclays creates the Compliance Career Academy

    Barclays has created a Compliance Career Academy in partnership with Cambridge University to improve staff training. Barclays’ chairman Sir David Walker said: “This new training will ensure that compliance staff could go a step further and mentor traders and other colleagues to improve culture and behaviour at the bank” (Telegraph, B1). The FT (£, p15) highlights Sir David saying that the foreign exchange market is in need of “fine tuning” rather than heavy-handed reform. The Guardian (p30) reports Barclays’ chairman saying: “We want people to conduct themselves, that has to be embedded in the business. If we can’t embed it from the top to the bottom we will have failed.”

    For further information on banking standards please read the BBA’s Executive Director of Financial Policy and Operations Paul Chisnall’s blog on better banking standards here.

    BoE: housing market could be a risk

    In a speech at yesterday’s International Festival for Business in Liverpool, Deputy Governor of the Bank of England Sir Jon Cunliffe warned about high household debt after figures from Nationwide showed that the average price of a property in London had risen by more than a quarter over the past year. Sir Jon said that the steps taken last week by the Financial Policy Committee towards limiting risky mortgage lending “are insurance against the possibility of a sustained boom in the housing market…that could make a crash more likely and more severe” (Guardian, p29).

    “Cash has had its day”

    The Express (p20) writes about the fast growing behaviour towards paying with “plastic” and contactless payments. The newspaper writes: “three quarters of retail spending is on ‘plastic’” and “71% of British people admit to carry less than £20 in cash at any time”. For further information on the new bank payment services and technology developments in banking please read the BBA’s Banking on the move.  The BBA will also publish a more in depth report called “It’s in your hands” next week.

  • Labour tries to show they mean business

    There was no a prawn cocktail in sight but Ed Miliband’s speech at yesterday’s Inclusive Prosperity Conference was very much about showing business that the Labour Party has been listening to their concerns, does recognise the importance of wealth creators and will support them under a Labour government.

3rd Jul 2014 Back to top
  • A tax that defies the EU’s guiding principles

    The BBA has today responded to the European Commission’s consultation on tax problems faced by EU citizens when active across borders within the EU. The response urges the Commission to further consider the implications of the proposed FTT for the proper functioning of the internal market and for investors seeking to be active across borders within the EU.

  • May 2014 – Credit Card Market

    Figures published today by the BBA show that people are using their credit cards more than this time last year.

    BBA chief economist, Richard Woolhouse, said:

    “Our figures suggest that British consumers are showing an increasing willingness to take on credit as they become more confident about the recovery.”

  • BBA Brief – 3 July 2014

    Labour appeals to business

    Ed Miliband will today seek to strengthen his party’s relationship with the business world by telling a Policy Network conference that he wants to see “the great, dynamic businesses of our country being enabled to build the wealth, create the jobs and make the profits that will help them succeed”. Mr Miliband will also use his speech to outline plans for a National Infrastructure Commission (CityAM, p1).

    However, the FT (£, p2) reports that the Labour leader will still look to break up markets such as banking and energy which he views as uncompetitive. Speaking on Newsnight, BBA CEO Anthony Browne said: “I think they [banks] need reassuring about what Labour’s intentions are about whether they have a positive vision about banking and the role that banks can play in the economy and society.” The BBA’s report into promoting competition in the banking industry can be read here.

    House prices rise to pre-crisis levels

    Data from Nationwide Building Society reveals that average UK house prices have risen above their 2007 peak (Times, £, p4). The Guardian (p24) reports that London property prices have increased by 26 per cent over the past year, with the average price of a house in the capital topping £400,000 for the first time. Scotland saw the slowest annual growth of 5.4 per cent, writes CityAM (p3).

    Bank robbery numbers fall

    The Times (£, p15) cites BBA figures which show that bank robberies in the UK have declined from 847 in 1992 to 108 in 2012. In London, there were 291 raids in 1992 compared to just 26 in 2012.

2nd Jul 2014 Back to top
  • Reporting, reporting and reporting

    Adapting to legislative change is never easy, especially when it comes with a ranch of new reporting requirements. They can leave firms asking why now, what else will come and how much will it cost? Our Transaction and Trade reporting conference on 16July 2014 focuses on what changes stemming from MiFID II, MiFIR and EMIR mean for businesses throughout the UK.

  • BBA Brief – 2 July 2014

    Number of Post Offices with bank accounts set to double

    The Post Office will be doubling the number of branches that offer current accounts according to the Guardian (p22). By the end of September 239 local Post Offices will offer access to the organisation’s three accounts, all run through a partnership with the Bank of Ireland. According to the article: “Since it introduced the accounts, competition has heated up in the market, with Tesco recently launching an account, TSB releasing a new deal following its demerger from Lloyds, and M&S overhauling its range”. The Post Office described its products as “a real challenger [to] the high-street banks”.

    Last week the BBA published a new report on growing competition in the UK market and what can be done to encourage and strengthen new banking entrants.

    Bank of England split on borrowing rules

    The Telegraph (p3) and the FT (£, p3) report on the minutes of the last Financial Policy Committee meeting which revealed that some members were concerned that setting a high loan-to-income (LTI) cap on mortgage lending might imply that the Bank endorsed borrowing at this level. These members thought that it might be preferable to lower the LTI multiple and open mortgage lending out to more borrowers. Last week the committee agreed to recommend that lenders should not issue more than 15 per cent of new mortgages worth more than 4.5 per cent of the borrowers income. The minutes also revealed that there was some division on whether a cap should be set on the volume or the value of mortgages, with members believing that “neither was ideal in isolation” but agreeing that a dual measure would be too complicated.

    FCA warn of possible fines over swaps mis-selling  

    Yesterday, Nausicaa Delfas, head of the FCA’s specialist supervision department, told the Treasury Select Committee (TSC) that the regulator has not ruled out taking “enforcement action” against banks following the mis-selling of interest rate hedging products. The Times (£, p42) reported comments made by Ms Delfas at a TSC hearing yesterday, where she told the committee that the FCA would consider whether further measures were needed once the voluntary redress process is completed.

    At the same evidence session on SME lending the FCA’s Chris Woolard, director of risk and research policy, suggested that the regulator could create a nursery for new banks to help them deal with rules on risk and capital and improve competition in the SME market (CityAM, p12)

  • Bank support for customers in Northern Ireland Q3/Q4 2013

    Anthony Browne, chief executive of the BBA, said:

    “This is a very important moment – the first time we have ever published any lending and deposit data for businesses and households for Northern Ireland’s local banks.”

1st Jul 2014 Back to top
  • The multi-dimensional chess game around the new European Commission

    The possible composition of the European Commission remains the most interesting question exercising EU policy geeks these days.

    We have collected the gossip reverberating around pubs and corridors of Brussels’ EU quarter.

    (Please treat this as pure speculation or idle gossip. Also, we must have missed some of the publicly available information – grateful if you let us know the mistakes.)

  • BBA Brief – 1 July 2014

    Savers expected to deposit £1 billion into new ISA regime

    The Government’s new rules for the ISA regime come into force today, allowing savers to deposit up to £15,000 tax-free in either cash accounts or stocks and shares, or any combination of the two. The Telegraph (p1) writes that savers have reportedly held off depositing in ISAs since the Chancellor announced the reforms in the Budget and suggests that pent up demand could lead to more than £5 billion being deposited by the end of the month.

    Since the moves were announced in the March Budget banks have been getting ready to help customers take advantage of the new regime and support moves to promote a nation of savers. BBA Retail Policy Director Peter Tyler explains what banks have done to make it easy to switch in his latest blog.

    Mortgage approvals fall to lowest levels since June 2013

    A number of newspapers report Bank of England data showing that approvals for mortgages were down 18.7 per cent in May 2014 from their recent peak in January 2014 (Independent, p47). The news that approvals had fallen for the fourth consecutive month comes after last week’s intervention from the Bank’s Financial Policy Committee to cap high value mortgage lending and may reflect the effect of the new Mortgage Market Review guidelines, according to the Telegraph (B1).

    Commenting on yesterday’s Bank of England data, the BBA’s Chief Economist Richard Woolhouse said: “Today’s data shows that mortgage approvals fell for the fourth consecutive month in a row to a level 20% below their January peak – still around half the pre-crisis level.  This provides the strongest evidence so far that the housing market is cooling and suggests that the Mortgage Market Review is having an impact. Meanwhile, there’s good news on the lending front too. New business borrowing in the past three months was 19% higher than over the same period last year.”

    Large banking sector would pose “a big risk” to an independent Scotland

    A survey of the 1,000 biggest banks by The Banker suggests that the an independent Scotland could have responsibility for regulating a banking sector 12 times the size of its economy, writes the Guardian (p28). Commenting on the findings, Banker editor Brian Caplen said: “This would be even larger than the 10:1 ratio that proved so ruinous in Iceland and presents a significant risk for the country’s economic stability.” Responding, a Scottish government spokesman said: “These figures are outdated and do not reflect the reality of Scotland’s financial sector”.

    Elsewhere, the Times (£, p1) reports that 54 per cent of Scottish voters will say no and 35 per cent will say yes to independence in the upcoming election, according to the latest YouGov poll. Forty nine per cent think that Scotland would be worse off if it becomes independent compared to 27 per cent who think it will be better off. The Times’ editorial (£, p24) argues that whilst the Better Together has not been impressive, the polling shows that the campaign’s fundamental arguments are strong.

30th Jun 2014 Back to top
  • Many happy returns for the new ISA regime

    Tomorrow will see the birth of the new ISA regime announced by the Chancellor in the March Budget.

    Savers will now be able to deposit up to £15,000 tax-free in either cash accounts or stocks and shares, or any combination of the two.

  • BBA comments on Bank of England lending data

    Commenting on today’s Bank of England Bankstats, the BBA’s Chief Economist Richard Woolhouse said:

    “Today’s data shows that mortgage approvals fell for the fourth consecutive month in a row to a level 20% below their January peak – still around half the pre-crisis level.  This provides the strongest evidence so far that the housing market is cooling and suggests that the Mortgage Market Review is having an impact.

    “Meanwhile, there’s good news on the lending front too. New business borrowing in the past three months was 19% higher than over the same period last year.”

  • BBA Brief – 30 June 2014

    UK bank profits dive down league tables

    According to a survey by The Banker reported in the Independent, (p51) UK banks’ share of global profits has shrunk from 11% to 2.4% since the onset of the financial crisis.  Chinese banks top the list, followed by the Americans, with African banks making the highest returns on capital of 24 per cent – double the average return for the rest of the globe and far exceeding average returns of only 4% in Europe. The article reads: “Overall, the UK stands in eighth place globally when it comes to bank profitability.”

    Rise of the challenger banks

    The Sunday Times (£, B1) looked at the rise of the challenger banks, reporting that they had doubled their gross mortgage lending between 2011 and 2013.  The raft of new entrants to the market is also noted in the FT (p18). The newspaper writes: “During the past two weeks, Tesco Bank has entered the current account market; a big peer-to-peer lender has teamed up with Santander UK and Marks and Spencer and Sainsbury’s Bank have expanded their services as they try to break the dominance of the country’s biggest lenders.”

    BBA voices concerns over account aggregation services

    The Sunday Telegraph (B2) looked at the account aggregation services in the UK which pull all your bank, energy and investment accounts into one place.  It quoted the BBA saying that it recognised the value of these services but also had “real concerns” about sharing bank details. “It’s like handing over the keys of your front door to a stranger,” a BBA spokesman said. The BBA would prefer aggregator services that do not require customers to handover account passwords, adding that banks are looking into such technology.

    Business confidence at 22 year high

    According to the Lloyds Bank Business in Britain report,business confidence has reached its highest ever level since the survey began in 1992, reflecting rising expectations for orders, sales and profits in the next six months.  Confidence has also grown across all regions.

27th Jun 2014 Back to top
  • BBA Brief – 27 June 2014

    FPC limits mortgages in its first foray into macro-pru 

    The Bank of England’s Financial Policy Committee (FPC) has announced new “macro prudential” policy measures designed to prevent a credit-fuelled housing boom from leading to high levels of household debt and financial instability (FT, £, p1). The FPC recommended capping the proportion of mortgages a bank can lend above 4.5 times loan to income ratio to 15 per cent of its total lending book. It also introduced a new “stress test” on affordability for borrowers, which will check their ability to make repayments if interest rates climb by 3 per cent. BBA Chief Economist Richard Woolhouse appeared on CBNC yesterday morning trailing the announcement and was subsequently quoted in the International New York Times, where he said the moves were a “cautious and clever intervention… to ensure indebtedness does not get out of control”. He also told: Reuters: “I don’t think it will bite on the economy in the short term but it’s a backstop that’s been put in place”. Read Richard Woolhouse’s blog responding to the new measures here.

    Elsewhere, the Telegraph reports that the Chancellor has announced that the Government would not underwrite mortgages larger than 4.5 times income under its Help to Buy scheme (B1). The FT adds that a future potential rise in interest rates to three per cent, as proposed under the “stress test”, could nearly double the amount households would have to pay in interest payments (£, p3).

    Juncker set to become new Commission President as EU leaders meet in Brussels

    Leaders of all EU member states are in Brussels to approve the next candidacy for European Commission, expected to be announced as Jean-Claude Juncker. David Cameron has openly opposed Mr Juncker’s appointment stating, “They are contemplating choosing someone who I think will struggle to be the voice of reform and change in Europe” (FT, £, p2). The Guardian (p10) adds that Mr Cameron has warned that supporting Mr Juncker “could have consequences”. The Times (£, p8) writes that the UK’s Permanent Representative to the EU Ivan Rogers warned the Prime Minister to concentrate earlier on attempts by the European Parliament to dictate the next commission president.

26th Jun 2014 Back to top
  • The FPC makes its first foray into macro-pru

    The FPC has announced plans to introduce two new measures to act as insurance against a runaway house price boom. The cap on the share of new mortgages over mortgages with above 4.5 times loan to income ratio of 15% and 3% stress test on borrowers will have minimal impact on the housing market in the short-term. However, they serve as cautious backstops that are likely to affect the much more buoyant markets in London and the South East without undermining the supply of mortgage credit elsewhere.

  • BBA response to Financial Policy Committee recommendations

    Commenting on the recommendations of the Bank of England’s Financial Policy Committee, BBA Chief Economist Richard Woolhouse said:

    “This is a cautious and clever intervention by the Bank in its first major foray into macro prudential policy. The lending cap will have little impact on the market in the short-term, but sets an important backstop to ensure indebtedness does not get out of control and pose a risk to the broader economy moving forward. “

  • BBA Brief – 26 June 2014

    RBS says it will stay neutral on the Scottish referendum

    RBS chairman Sir Philip Hampton used his keynote speech at the bank’s annual general meeting yesterday to calm shareholders and clients in the event of a potential “yes” vote in the Scottish referendum. If voters chose to split the union, Sir Philip said that a great deal of “uncertainty” would be generated and the bank would have to cover “new risk disclosures such as credit rating, tax and regulation” (Times, £, p43).  Sir Philip added that: “Excessive pay and bonuses had helped the banking crisis” but said that “the situation is much better now than it was before the crisis” (Independent, p61).

    At the same meeting, chief executive Ross McEwan suggested that banks could be trusted to control their own mortgage lending, stating: “We don’t think there’s a problem out there, our preference is that we make a move” (Telegraph, B1). McEwan’s comments follow the BBA’s mortgage data release which suggested the new tests introduced by the Mortgage Market Review were working.

    Please read the BBA’s chief economist Richard Woolhouse’s blog on the latest mortgage data here.

    Ring-fencing set to allow options and trade finance

    The FT (£, p2) writes that business customers of more heavily regulated retail banks will be able to sign up for options and trade finance, under final legislative proposals published by the Government yesterday. The Treasury’s initial draft ring fence legislation suggested that these financial institutions would be able to offer small and medium-sized companies some derivatives, but not options. The BBA and other business groups were concerned that excluding these products from the ring-fence would undermine smaller firms looking to grow overseas. A spokesman for the Treasury said: “The Government has committed to […] separate the bank branch from the trading floor and today is an important step towards meeting that commitment.”

    Cheque imaging

    BBC News reports that the Government will introduce new legislation to allow banks to start using “cheque imaging”. Bank customers will be able to take a photo of the cheque they have received and pay it into their accounts by using an email service or a mobile banking app. Barclays’ director for transformation Steven Roberts said: “This is an opportunity to move cheques into the 21st century, to reduce costs and make banking more convenient for customers.”

    Some apps offered by banks have already had more than a billion uses. In a single year the number of mobile phone banking transactions has doubled. This is a much faster take-up than internet banking experienced in the last decade. For more information about the use of technology in banking, please read the BBA’s Way We Bank Now report here.

25th Jun 2014 Back to top
  • A level playing field, not silver bullets – BBA Competition in Banking conference

    Customers are the biggest winners from competition and regardless of whether they were a banker, regulator or politician, everyone agreed that listening to the customer is the key to delivering even more choice and innovation. You just have to look at how easyJet, Ocado and Lidl have shaken up their industries by providing new goods, services and price structures to see this in action.

  • BBA Brief – 25 June 2014

    Leadsom suggests government could ease regulation on challengers

    The Telegraph (p3) and others report on comments made by the Economic Secretary to the Treasury, Andrea Leadsom, at the BBA’s Competition Conference yesterday afternoon. Ms Leadsom remarked that “competition should always trump regulation” and suggested that the Government would consider proposals to bring down the regulatory hurdles currently facing “challenger banks”. She told the conference: “The focus on more regulation will ease off and the focus on making it more manageable for smaller banks will increase. Reforms should be as much about competition as safety and stability”.

    On Tuesday the BBA published a new report on competition entitled Promoting competition in the UK banking industry and the report’s author, BBA Strategy Director James Barty wrote a piece for BBA insight and CityAM.

    On the BBA website Joseph Dickerson, Managing Director & Senior Research Analyst for UK & European Banks at Jefferies International Ltd, gives another perspective on competition and challenger banks.

    Latest lending figures show heat coming out of the housing market

    Many of the papers examine the  BBA high street lending figures released yesterday morning, with most noting the cooling of the mortgage market. The Times (£, p39) said that some would see the cooling as evidence that the Bank of England’s Financial Policy Committee (FPC) should refrain from taking measures to curb mortgage lending when they meet tomorrow. The Telegraph (p3) attribute the slowdown to the introduction of the Mortgage Market Review, saying tighter controls on lending could be responsible for taking the heat out of the market.

    Read BBA Chief Economist Richard Woolhouse’s blog where he considers potential actions by the FPC tomorrow.

    Commenting on the high street lending statistics, the BBA Chief Economist said:

    “Our figures indicate that the heat appears to be coming out of the housing market.  These are the first mortgage approval figures we have seen since the introduction of the Mortgage Market Review, so it is significant they have fallen for the fourth month in a row.  This is being driven by a drop in remortgaging and people borrowing against the value of their homes.

    “There has also been a welcome expansion in business lending this month bolstered by borrowing from the energy sector.”

    Both the i (The paper for today) (p42) and the Evening Standard (p44) noted the drop in the amount deposited in ISA savings which were down a third on the same period in 2013. The articles suggest that many savers will be holding off making deposits until more generous allowances, announced by the Chancellor in this year’s Budget, are introduced in July.  The leader column in the Telegraph (p2) questions what savers can expect in terms of returns from the “NISA” .

    Carney described as “unreliable boyfriend”

    The Governor of the Bank of England has been described as behaving like an “unreliable boyfriend” and as “dovish” about the timing of a likely interest rate hike. Pat McFadden MP, a member of the Treasury Select Committee which Mr Carney appeared in front of yesterday, made the remarks following the Governor’s unexpected comments responding to new data showing a contraction in real wages. Mr Carney said that this change suggested to him that the economy had “more space capacity than previously thought” (Independent, p57). The Times (£, p42) recalls previous criticism of the Governor’s forward guidance by Conservative MP Jesse Norman: “If interest rates are supposed to be determined in this very direct way by data, then as soon as the data changes, the [rate-setting] Monetary Policy Committee’s view changes, you make a speech and monetary policy changes. How can that be a sustainable basis for monetary policy?”.

  • Accelerating competition: How to level the playing field for challenger banks

    There is something that politicians and bankers both agree upon – we believe that greater competition improves the service and the products that customers get. We’ve heard ideas about increasing competition in banking from across the political spectrum. Today, the BBA is adding to that debate with some new ideas on promoting competition by levelling the playing field, so that large and small banks can fairly compete for customers.