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.”
The most urgent task for Europe is to generate a lasting recovery and permanently stronger economic growth. The financial crisis has resulted in high unemployment levels in parts of Europe which could undermine the fabric of society and youth unemployment rates which will potentially leave permanent scars. Without urgent action, the danger is of a ‘lost generation’ of disaffected young people.
The BBA today urges Europe’s leaders to make kick-starting economic growth their “top priority” and sets out a twelve-point plan setting out how this could be done.
In the report – Financing European Growth – the banks set out detailed proposals that will promote growth by improving access to finance for SMEs, boosting exports, strengthening infrastructure investment and enhancing the EU’s global competitiveness.
Changes in the way customers are interacting with their bank are throwing up a series of challenges for some of Britain’s biggest brands. They are placing the emphasis firmly on banks to supply them with something new and engaging. Accenture’s Head of Research and Banking Research Lead for UK & Ireland Robert Stubbs argues that banking is on the cusp of turning a corner.
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.
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.
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 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)
Culture, 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”.
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.
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.”
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.
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.”
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.”
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.”
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 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.
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.
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.
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.
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.
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.
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.
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
A 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.
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.
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)
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.
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).
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.
“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.”
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.
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.
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.
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.
Since 2007, a huge amount of necessary work has been done to reform and repair our banking sector.
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.
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.
A 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.
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.
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 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.
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
Jean-Claude Juncker, the newly elected European Commission president, is planning to carve financial services out of the directorate-general for the single market (DG MARKT) , according to the FT. This Read More
*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 Read More