Financial services firms have privately expressed concern that cyber security professionals are losing the war against cyber-criminals, and have agreed that dealing effectively with threats, including those already existing on private networks, is more important than trying to build walls that hope to keep them out.
The BBA is shaking up the way it publishes it’s closely-followed annual abstract of statistics. Richard Woolhouse explains why and discusses some of the most striking numbers.
Anthony Browne, the BBA’s Chief Executive, has written to the Chancellor of the Exchequer regarding the Government’s consultation on whether HM Revenue & Customs should have more powers to directly recover debts from taxpayers.
The BBA has been compiling data for more than 30 years and presenting information to describe the UK banking industry, customer transactions and financial activity.
Internet banking surges by nearly 40% in just four years
Customers use these services almost 800,000 times an hour
Customers of Britain’s high street banks used internet banking nearly 7 billion times in 2013, according to industry statistics compiled by the BBA.
A report by Which? released today calls for a national savings strategy. But with nearly half of the country unhappy with how much they save, what is the best way to save up a rainy day fund? BBA Director of Media Relations Rob Watts considers Which?’s wise words and reminds us it’s not too late to submit a response to the BBA’s Future of Savings consultation.
A number of banks already refer businesses, unsuitable for bank finance, on to alternative finance providers. But a new Government proposal seeks formalise the process across the entire industry. BBA Executive Director of Business Finance Irene Graham’s blog looks at the proposal and argues that it is all about making sure businesses get the right finance at the right time.
This week UK Export Finance (UKEF), the UK’s export credit agency, has launched an invitation for banks to partner up on its enhanced Direct Lending Scheme. The move supports the Government’s target of achieving exports of £1 trillion by 2020 and is the latest step towards realising its broader economic policy objective of “strong, sustainable and balanced growth”.
The Bank of England’s inflation report continues to keep commentators guessing about the precise timing of rate rises. But one thing it makes clear is that interest rates will begin to rise in the foreseeable future. When they do, changes will be very gradual and are likely to settle at around 3% – well below the historical average of 5%.
Applying for business finance can feel daunting for SME owners. With businesses to run and limited resources, many could be worried that applying for finance will eat up time they simply don’t have.
BBA chief economist, Richard Woolhouse, said:
“These figures suggest that British consumers have greater appetite to take on credit as the recovery takes hold. The number of payments on credit cards in June was 15% higher than in the same month last year.
“Customers are also harnessing more interest-free offers which show they are using these cards to take more control over how they spend and borrow.
“More than 40 per cent of all borrowing on cards incurs no interest at all. Customers clearly value the flexibility a credit card in your wallet or purse can give.”
Commenting on Office of National Statistics figures on internet access, BBA Chief Executive Anthony Browne said:
“It’s great that more people than ever are banking online. Banks are working hard to make online banking accessible to everyone and online and mobile banking mean it’s now easier than ever to stay on top of your finances.
“It’s particularly good to see an increase in online banking amongst the over 50s who are now more likely to bank on the internet than to use Facebook or book a holiday.
“Of course we recognise that internet banking isn’t for everyone, and that’s why across the country the bank branch network is being modernised to ensure that all customers get the best possible service.”
BBA Executive Director, Irene Graham said:
“The banking industry fully supports efforts to help match businesses rejected for finance with other lenders. In fact many of the banks already run programmes that refer businesses unsuited to bank finance to a range of alternative providers.
“We are also keen that any new process should give customers as many options as possible so that they can get the right finance for their business. It is equally important that the customer’s consent and choice is kept at the centre of any future scheme.”
The 2008 financial crisis proved a turning point in consumers' attitudes towards the world’s financial services industry. However, as recent research conducted by Grant Thornton UK LLP has found, the UK's top retail banks are responding and consumers' loyalty towards established high street pillar banks is improving. Over the past two years Grant Thornton, in collaboration with InsightNow, has produced an…
The EU Commission’s new President is reportedly planning to create a new directorate-general for financial services. But BBA Chief Executive Anthony Browne has some reservations. A new DG could fracture the single market and lead to a flurry of new initiatives instead of giving the last tranche time to bed down. Read his blog here.
*Please note that this will be the last BBA brief until Monday, 1st September*
Nearly 40,000 people use help to buy
Housing minister, Brandon Lewis said that via Help to Buy the Government has assisted with the purchase of up to 40,000 new homes. The Guardian (p34) reports that more than 4,000 households in England used the government scheme in June – the highest number since the scheme was launched in 2013. These latest figures are from the first phase of the scheme which offers an interest-free loan for 20% of the value of a new-build property.
Rates may rise early, says deputy governor
Bank of England deputy governor Ben Broadbent has said that interest rates may rise early but any rises will be “limited and gradual” to take account for borrowers and the levels of household debt (Mail). They quoted Broadbent from an interview with Bloomberg: “The real message we’re trying to get across is that for other reasons to do with what’s going on in the global economy, investment, credit and risk premia, the level of interest rates that’s likely to be necessary to meet our objectives and the gradient of our path to get there, are likely to be lower than the previous expansions.”
Eurozone inflation falls
The BBC reports that Eurozone inflation has fallen to 0.4%, its lowest level since the financial crisis when prices fell to 0.1%, and into what the European Central Bank (ECB) describes as “the danger zone”. The central bank considers that inflation of below 1% risks deflation. According to the FT (£, p6) it could fall again in August, putting more pressure on the ECB to start quantitative easing.
Banks face closer scrutiny as ECB begins clean-up
The FT writes that losses at Banco Espirito Santo and BNP Paribas are likely to reminder the industry of “the risks posed by tougher regulation and closer scrutiny of financial balance sheets”. The losses come as the ECB begins its comprehensive assessment process, reviewing lenders’ balance sheets ahead of the launch of a banking union. James Chapell, an analyst at Berenberg told the paper: “…hidden losses in bank balance sheets continue to get uncovered, as people are unable to support those debts”.
The notorious GameOver Zeus malware and associated CryptoLocker ransomware are suspected to have made a return in an as of yet undetermined form. But as experts try to detangle their codes, there is a risk that people’s private banking information could be exposed to fraudsters. It falls to banks to take the right steps to protect their customers. Some efforts have already been…
Bank announces rules on remuneration and senior managers regime
A number of papers report on yesterday’s announcement by the PRA and FCA over proposals to clawback bonuses seven years after they have been paid and jail bankers whose decisions contribute to a bank failure.
The FT (£, p3) quotes BBA CEO Anthony Browne, who states: “It is important that any new regulation does not put British banks at a disadvantage when it comes to attracting and retaining the best workers her and overseas”. The paper also notes that employment lawyers believe that clawbacks will be difficult to enforce “particularly where bankers have resigned and moved abroad”. The Telegraph (B1) also quotes Anthony, and cites a senior banking source who warns that the new regime could be a potential “gravy train” for lawyers as bankers challenge decisions made by former employers.
The Times (£, p35) writes that the new rules will cost banks and building societies £260 million to implement. Although the rules apply to UK banks plus subsidiaries of foreign banks operating in the UK, the Independent (p51) reports that watchdogs are working on how to apply the new regime to foreign banks which are presently overseen by their home country regulators.
Anthony appeared on BBC Radio Five Live, BBC Radio World at One and BBC News to discuss the proposals, whilst BBA Director of Media Relations Rob Watts was interviewed on Sky News, BBC Radio Oxford, the Voice of Russia and French Radio London. The full BBA press release reads: “One banker rewarded for failure is one too many. That’s why banks have already taken steps to right the wrongs of the last decade, cutting cash bonuses by more than 75% and fixing rewards more closely to the long-term health of the business. We also agree that clawbacks can certainly be a useful way to discourage wrongdoing and are in the interests of customers and shareholders. We’ll examine the detail of these new proposals with interest, but it is important that any new regulation does not put British banks at a disadvantage when it comes to attracting and retaining the best workers here and overseas.”
Commission president considers finance tsar
Incoming European Commission President Jean-Claude Juncker is weighing up creating a new EU financial services tsar charged with regulating the financial sector, according to the FT (£, p1). Currently, EU financial regulation is overseen by the internal markets commissioner Michel Barnier. However, senior officials state that the new finance directorate would most likely include the banking and market units from Mr Barnier’s department, and combine them with the financial stability unit from the economic and financial affairs department. The FT says that banks are concerned that this will skew financial services regulation towards the Eurozone. The paper quotes the BBA’s EU caucusing report, which states: “We suggest that the UK government should proactively defend the unity of [the internal market directorate] and oppose any plan to move financial services units out of it.”
US banks braced for outflow
The FT (£, p16) reports that US banks face losing up to $1 trillion in wholesale deposits as the Federal Reserve reverses emergency economic policies and raises interest rates. These measures were introduced to increase liquidity and provide support for banks following the crisis.
ECB survey shows improving lending climate
The ECB’s quarterly lending survey reveals that banks relaxed credit standards for all types of loans in the three months to June, with the FT (£, p8) noting that this is the first time this has happened since Q2 2007. The survey also signals that demand for loans from households and businesses has continued to rise. Analysts believe that the stronger lending figures make it less likely that the ECB will take further unconventional measures such as quantitative easing.
“One banker rewarded for failure is one too many. That’s why banks have already taken steps to right the wrongs of the last decade, cutting cash bonuses by more than 75% and fixing rewards more closely to the long-term health of the business. We also agree that clawbacks can certainly be a useful way to discourage wrongdoing and are in the interests of customers and shareholders.
“We’ll examine the detail of these new proposals with interest, but it is important that any new regulation does not put British banks at a disadvantage when it comes to attracting and retaining the best workers here and overseas.”
Raising ethical and professional standards in banking is an objective we all share. But a single solution, such as a bankers’ oath, can only ever form part of the answer. Read BBA Executive Director for Financial Policy and Operations Paul Chisnall’s blog discussing the oath and why Sir Richard Lambert’s Banking Standards Review Council can deliver lasting cultural change.
Tougher regulation regime from Bank
The Bank of England will today publish two new regulation documents on the senior managers’ regime and banking remuneration (FT, £, p1). According to the FT, this new regime could include powers to claw back bonuses up to 7 years after they have been paid and a new law that would see “reckless” bankers sent to jail. In the Guardian (p24), the UK Head of Banking and Capital Markets at EY Omar Ali said: “The regime is likely to be the strictest of any market or any industry.” The Times (£, p37) writes that the Bank of England will also signal its intentions to ensure that the pay of managers and other staff implicated in future financial scandals and bank failures can be recouped.
Europe’s investment banks “regain ground”
The FT (£, p17) reports that Europe’s investment banks are finally “regaining some ground” after a period in which they have been losing market share to US rivals. According to the FT, one of the significant reasons for Europe’s positive performance is that the continent’s banks had an easier time in beating last year’s results. In 2013, European banks were “hit much harder” than their US counterparts by the downturn in debt trading by the Federal Reserve’s reduction in its bond purchasing programme. In relation to the European banks’ performance, Analyst at JP Morgan Kian Abouhossein said: “They have simply regained some of the market share that they have lost last year.”
Lambert: Bankers’ oath “just hot air”
Responding to proposals from think tank ResPublica, calling for bankers to take an oath, Head of the Banking Standards Review Sir Richard Lambert said the proposal was “hot air” and warned it could even “backfire”, undermining standards in the banking sector (CityAM, p30). Sir Richard also stated that: “If you have all bankers taking an oath and it is just words, and it is then within six months to be flawed, I think you’re in a worse place than you were before.”
ResPublica calls for bankers’ oath
A new report by the think-tank ResPublica, Virtuous Banking, calls on the banking industry to mimic the medical profession by introducing an oath for bankers (Times, £, p3). ResPublica director Philip Blond said: “The bankers’ oath represents a remarkable opportunity to fulfil their proper moral and economic purpose”. The report will be launched by Sir Richard Lambert who chairs the Banking Standards Review Council, a body established to examine culture and ethics in the profession. Speaking on the Today Programme on BBC Radio 4 Sir Richard said that whilst it was the “most headline grabbing” recommendation in the report, he did not necessarily endorse the proposal. BBA Chief Executive Anthony Browne is quoted in the Times on cultural change saying: “There’s clearly been some progress since the financial crisis, but there is still a long way to go.”
The BBC quote BBA Executive Director for financial policy and operations, Paul Chisnall, saying: “Restoring trust and confidence is the banking industry’s number one priority. But meaningful cultural change in an industry as complex and diverse as banking takes time. The Parliamentary Commission on Banking Standards reached a similar conclusion and that’s why initiatives like Sir Richard Lambert’s Standards Review are so important. It may be that the new standards review body decides that some within the industry should be subject to an oath or a code of ethics. It very well could be part of the answer.”
Lloyds freeze bonuses of those involved in rate rigging
Lloyds Banking Group has frozen bonuses for 22 members of staff after the bank was fined £226 million by UK and US regulators for its role in rigging the rates in the Bank of England’s Special Liquidity Scheme (Mail, p65). Bank of England Governor Mark Carney issued a statement calling the actions “highly reprehensible” and suggested criminal proceedings may be undertaken against those involved. Chief executive Antonio Horta-Osorio condemned the practice, saying: “Together, the board and the group’s management team have taken vigorous action over the last three years to prevent this kind of behaviour, through closing or reducing our legacy investment banking activities”. Lloyds Chairman Lord Blackwell added: “Their behaviour involved a gross breach of trust and we condemn it without reservation” (Telegraph, B1).
IMF says pound overvalued but interest rates should stay low for now
The International Monetary Fund’s (IMF) annual assessment of the UK economy suggested that the pound was overvalued by as much as 10%, preventing the economy from rebalancing towards exports (FT, £, p4). The Fund added that whilst the Bank of England should hold interest rates for now, policymakers should raise them to keep the housing market in check (Guardian, p17). Despite concerns, the IMF said that some of the “headwinds” holding back the recovery had eased as it revised the UK’s growth forecast for 2015 up from 2.7% to 3.2%.
New Money Market Funds could increase systemic risk
The FT Stephen Foley (£, p26) discusses the US Securities and Exchange Commission’s new money market fund rules, which were designed to limit systemic risk and prevent runs across the fund management system. Despite their intention, Mr Foley argues that because many investors will not be able to countenance the risk of losing access to their money in the event of a run, the practice of erecting gates to protect investors may actually increase systemic risk.
The BBA’s conference on regulatory reporting gave firms an excellent opportunity to share their experience and knowledge about how to prepare for the challenges posed by the EU’s Markets in Financial Instruments Regulation (MiFIR).
UK banking sector “almost out of the woods”
BBA Director of Strategy James Barty writes in CityAM (p15) that since the financial crisis banks have increased equity capital and halved overall leverage to create a more secure banking system. He adds that lending to individuals and businesses will increase as banks return to profit. James concludes that “the sector has started to turn a corner, and this is good news for the economy as well”.
German academics question legality of banking union
Europe’s banking union will be challenged in Germany’s constitutional court, after a group of Eurosceptic academics claimed that it is illegal under German law as it was created without the necessary treaty changes. Markus Kerber, a finance professor at Berlin Technical University told the FT (£, p6) that the case concerned both the single supervisory mechanism and the single resolution mechanism, adding that “the European Central Bank has been given more power than it should have”. The FT states that the case could spend months in the courts, forcing European officials to defend one of the main responses to the Eurozone financial crisis.
NY Fed to focus on bank ethics
The Federal Reserve Bank of New York is to step up pressure on banks to improve their ethics and culture following allegations of benchmark rate rigging, writes the FT (£, p17). NY Fed general counsel Thomas Baxter has written to bank executives stating that the tone needs to be set at the top. Although banks have increased the number of compliance staff, the FT writes that they are “worried about how regulators will measure how well they are doing in terms of ethics and culture”. Read BBA Executive Director of Financial Policy and Operations Paul Chisnall’s blog on Sir Richard Lambert’s Banking Standards Review here.
Financial sector to feel effect of Russian sanctions
The Telegraph (B4) writes that Trade Minister Lord Livingston has warned that the City of London will feel the force of tougher sanctions on Russia, stating: “We’ve got to make sure that the whole of Europe thinks that the UK is absolutely willing to take its share of the pain and do the right thing.” Meanwhile, the FT (£, p5) reports that German Foreign Minister Frank-Walter Steinmeir has said that Germany will back EU economic sanctions against Russia. Wolfgang Münchau writes in the FT (£, p11) that any sanctions imposed on Russia could have adverse macroeconomic effects in Europe.
Concerns grow over rate rises
Halifax’s Housing Market Confidence tracker reveals that the net balance of people who think that 2015 will be a good time to buy a house has fallen from 34 per cent to 5 per cent in the first three months of this year, writes the Telegraph (B1). The survey states that the reasoning behind this is down to inflated prices and a potential rise in interest rates, with 18 per cent of people pointing to action by the Bank of England as cause for concern, up from 13 per cent last year. In addition, CityAM (p2) cites a survey by accountancy firm Moore Stephens which states that a one per cent rise in interest rates could cost UK companies £2 billion a year, whilst individuals would see costs rise by £7.6 billion. The Express (p48) warns that the ONS may revise its GDP estimate up by 2.5 per cent as part of its revision of the national accounts, which would “heap further pressure” on the Bank to raise rates.
UK economy grows by 0.8%
The Office of National Statistics have released GDP figures showing that the economy is now 0.2% ahead of its pre-crisis peak, growing by 0.8% in the second quarter of 2014 (BBC).
Tougher accounting rules for banks
Yesterday the International Accounting Standards Board published a new package of reforms – IFRS 9 – which will come into effect in January 2018. The FT (£, p20) writes that these new measures will require banks to recognise expected losses at an earlier stage than in the past. The standard is the result of a five year project after concerns about impairment surfaced during the financial crisis as banks were unable to recognise losses until they were incurred, despite their ability to see the losses coming. This, in turn, led to overstated profits at times. The Times (£, p39) says that critics of the new standards think they do not go far enough as they only force banks to look ahead to the next 12 months rather than over the lifetime of a loan – a crucial difference between the new rules and a similar standard under development in the US which investors will need to understand when comparing peer groups of banks.
EU proposals could stop banks charging for research
The Financial Conduct Authority has endorsed European proposals that could stop banks charging investors for research out of share dealing commissions (FT, £, p3). The measures would separate out charges for trading shares and the cost of broker research in order to avoid conflicts of interest and make sure investors get a better deal. According to the article, proposals have triggered concern that London’s competitiveness could be put at risk and some smaller brokers could be put out of business.
Knock-on effect of Russian sanctions
The Telegraph (B5) writes about the knock-on effect of Russian sanctions on British business, quoting a senior figure from a US investment bank who has said that there is an “increasing degree of caution” in the City. The article goes on to examine the impact on different industries, saying that London’s international investment banks are likely to notice the impact.
SEC approves new rules on money market funds
The Securities and Exchange Commission (SEC) has approved new rules on money market funds in order to prevent future runs on the investments (FT, £, p28). The FT reports that this new reform requires certain funds which had been treated like bank accounts to switch to a floating share price instead of a fixed $1 a share cost. The article also reports that to prevent runs “new rules would allow a money market fund’s board to impose temporary suspension on redemptions…if a fund’s level of weekly liquid assets fell below 30% of its total assets”.
Mortgage approvals increase 3.3%
Despite new lending rules in the housing market, data released by the BBA shows that mortgage approvals have risen 3.3% since May (Telegraph, B3). The number of mortgage approvals went up from 41,881 in May to 43,265 last month (Times, p42), this figure represents the highest number of approvals in three months but remains below the peak levels seen at the beginning of the year (FT, £, p3).
The BBA Chief Economist Richard Woolhouse said: “These figures show that mortgage approvals are rising again after four months of decline. That’s encouraging because those decisions are a leading indicator of what’s happening in the housing market. But the jury is still out on exactly how the new rules are affecting customer applications or approvals. Nevertheless, the higher demand for personal loans suggests that the consumer’s confidence in the recovery is growing.”
Challenger banks close up the gap
The Telegraph (B3) writes that challenger banks are narrowing the gap between them and Britain’s big lenders. The article says that Metro Bank has increased its deposits by 21% in the last quarter, suggesting that its “banking revolution” is working (Telegraph, B3). The Independent (p56) also highlights the rise of Metro Bank and report that its “deposit base grew 21% in the quarter and 125% year on year to £1.96 billion while loans increased 21% and 216% to £1.2 billion”. The Independent also highlights the City minister Andrea Leadsom saying that “the Government wants to make it easier for new banks, including lowering capital requirements and making access to payment systems better”.
Read the BBA’s report Promoting Competition in the UK Banking Industry for more information.
Carney: the BoE is preparing to raise interest rates
Speaking to business leaders in Glasgow, the BoE Governor Mark Carney said that “the [UK] economy is starting to head back to normal…[and] the bank rate will need to start to rise in order to achieve the inflation target” (FT, £, p1). Mr Carney also said that rising interest rates could hit Britain’s recovery. “Rate rises will need to be slow,” he added, because households might respond to higher interest rates by “freezing” spending, according to the Times (£, p38). The Times also reports that the minutes from the Monetary Policy Committee July meeting seemed to indicate that “an increase before the end of the year was becoming a realistic prospect”.
New BBA report urges Europe to go for growth
The BBA has urged Europe’s leaders to adopt a 12-point plan to boost growth in Europe and reverse years of underperformance. The report, which is picked up in the Telegraph (B5) today, urges European politicians to improve access to finance for SMEs, boost exports, strengthen infrastructure investment and enhance the EU’s global competitiveness. You can download it here.
In an article in CityAM BBA Chief Economist Richard Woolhouse says that the priority should be “rebooting” the securitisation markets. He argues that this would “free up balance sheets and allow banks to lend more to SMEs”.
HMT warned on effects of banking union
The FT (£, p4) looks at the Treasury’s publication of its balance of competences review between the UK and the EU in financial services. The report found there were “significant concerns” that the UK’s decision to stay out of the banking union could have an “unfair or damaging effect… While the ultimate impact of the banking union is hard to predict at this stage, it is likely to pose a number of challenges to the UK’s interest in maintaining a central role of influence in an internationally competitive financial market in the EU.” It also reports that respondents have urged the Government to do more to increase the number of experts seconded by the UK to the Brussels institutions.
Read the BBA’s report on the declining number of British officials in the EU institutions.
Russian sanctions make City wary
The FT (£, p2) looks at how Russian sanctions are starting to have an impact on business in the City as banks re-examine all deals and relationships with Russian companies and individuals. It quotes Chris Tattersall from Grant Thornton saying: “The long arm of the US sanctions regime reaches well outside US borders, so financial institutions in the City and elsewhere cannot afford to be cavalier. Financial institutions will be reviewing their proscribed lists and making sure they are fully up to date and applied properly throughout their systems. If they are providing correspondent banking to a bank in Russia that could provide services to a sanctioned individual, they should be concerned.”
BoE and TSC spat over leverage ratio consultation
The Times (£, p38) reports that Andrew Tyrie and Mark Carney have had a spat over the length of time the Bank gave for a consultation on the leverage ratio. The Bank rejected the suggestion that the original consultation length of five weeks broke official guidance but it has extended the deadline by four weeks, which was welcomed by Mr Tyrie. The Treasury Select Committee has warned that the Bank’s proposals may undermine the simplicity of the ratio.
Read BBA Executive Director Simon Hills on why a complex leverage ratio runs the risk of creating its own distortions.
Regulator to probe packaged accounts
The Mail (p43) reports that the regulator plans to look at how recent reforms to packaged accounts are working. It quotes the BBA saying: “It is always a good idea to consider how many of the benefits will be directly of use to you, particularly if your circumstances have changed. If you have any doubts, you should shop around.”
Richard Woolhouse Chief Economist at the BBA said:
“These figures show that mortgage approvals are rising again after four months of decline. That’s encouraging because those decisions are a leading indicator of what’s happening in the housing market.
“But the jury is still out on exactly how the new rules are affecting customer applications or approvals.
“Nevertheless, the higher demand for personal loans suggests that the consumer’s confidence in the recovery is growing.”
On Thursday we will hear about any agreed actions from last week’s FPC (financial policy committee) meeting. In addition the latest assessment of financial stability by the Bank will be Read More
Financing Growth has been produced to help small- to medium-sized businesses identify some of the different finance options that may be available to expand their business, including information, tips and Read More
Financial services firms have privately expressed concern that cyber security professionals are losing the war against cyber-criminals, and have agreed that dealing effectively with threats, including those already existing on Read More
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