19th Sep 2014 Back to top
  • The next stage of a technological revolution

    You could be forgiven for thinking that London’s trams might be an unlikely place to find cutting edge technology. But from this week, this iconic and characterful mode of public transport – along with our more conventional Tube stations and buses – are offering technology that allows you to pay your way with just a flash of your bank card.

  • BBA Brief – 19 September 2014

    Scotland remains a part of the United Kingdom

    The people of Scotland have decided that their country should remain part of the union with England, Wales and Northern Ireland. The FT reports that this ‘no’ vote is likely to boost the economy, averting scenarios feared by investors such as a slump in the pound and capital flight from Scotland. According to the paper, investors reacted with relief with bank shares up sharply after the market opened (FT). Economists believe that pent up demand could now be released, with property and investment deals that had been put on hold going ahead. David Davidson, the Scotland managing director at Cushman & Wakefield commercial property advisers told the paper: “For the last three months it feels like we have been driving with a handbrake on. There will be a surge in investment market activity when the handbrake is released”. Thoughts have now turned to the impact of devolution on spending and public finances. Economist Samuel Tomb told the paper: “…despite the No vote, the UK economy will continue to be buffeted by uncertainty about its political future over the next couple of years.”

    Fines on banks can lead to financial exclusion

    Speaking to the FT (£, p19) Jeremy Bennett, chief executive of Nomura in Europe said that developing countries are having their capital cut off by western banks who are concerned about the multi-billion dollar fines imposed by regulators for sanctions and money-laundering violations. He said: “The use of sanctions as a geopolitical tool is a big risk for financial markets. What we are doing with best intentions in our capital markets regulations, in our money-laundering [regulation], in our use of sanctions…that has an unintended consequence of excluding a large part of humanity from access to capital. That worries me greatly”. The article gives the example of the $9 billion (£5.5 billion) in fines imposed upon BNP Paribas who pleaded guilty to providing finance for customers in Sudan, Iran and Cuba. Mr Bennett says that he ultimately worries about the impact exiting such countries will have on the City of London which acts as a financing hub for many low-income nations.

    August mortgage lending hits six year high

    The Mail (p2) reports on data from the Council of Mortgage Lenders (CML) showing that mortgage lending for this August marked a 13% increase on the same period last year – the highest levels since August 2008. The FT (£, p4) reports that gross mortgage lending in the year to August sits at £203 billion, with a sharp increase in the number of first-time buyers taking out a home loan.  However CML chief economist, Bob Pannell, warned that the new Mortgage Market Review rules could cause a slowdown in the remaining months of this year: “A gentle slowing of lending activity may now be in prospect, as a result of the continuing impact of tighter lending rules and a softening of the London market.”

    Low take up on cheap finance

    The ECB president’s plan to offer cheap four-year loans in an attempt to avoid economic stagnation has faltered due to little interest from commercial banks (Le Soir and FT, £, p1). In total 255 banks took €82.6 billion (£65 billion) out of a possible €400 billion (£243 million) – much less than analysts had predicted. The lack of demand has dealt a blow to Mario Draghi’s ambitions to expand the central bank’s balance sheet to €1 trillion in order to boost lending to small businesses and counter inflation. An article in the Times (£, p53) says that this disappointment is likely to pile more pressure on the ECB to consider moves like quantitative easing, though there is also speculation that low take-up could have been due to the region’s banks not wanting to reveal a weak funding position just weeks before new stress tests.

18th Sep 2014 Back to top
  • BBA Brief – 18 September 2014

    ECJ ruling could see VAT bills rise for financial services

    The European Court of Justice has ruled that services supplied between a group’s headquarters and its branches will be subject to VAT. Previously, European VAT law has allowed countries to treat companies and their overseas branches as single entities, however these services will now be taxed at rates of between 15% and 27%, writes the FT (£, p17). The Telegraph (B7) states that the ruling will “disproportionally affect the UK financial service industry”, with British banks that receive services from foreign offices and the UK subsidiaries of banks headquarters elsewhere likely to be affected.

    G20 split over impact assessment of regulation

    The current holders of the G20 presidency Australia are facing opposition after it backed calls to undertake a cost-benefit analysis of financial regulation, writes the FT (£, p7). B20, the business lobby group, has called for international standard setters to investigate side-effects of financial regulation and consider their impact on growth and stability. However some G20 members such as Japan and the US have voiced their concerns, stating that individual nations already have robust procedures to analyse such regulations.

    Commentators warn of EU membership following Yes vote

    BBC Business Editor Kamal Ahmed  warns that a Yes vote in today’s Scottish referendum could increase the likelihood of the UK leaving the EU. He adds that those businesses who may wish to relocate may move to continental Europe rather than the UK due to the heightened risk of Brexit. In the FT (£, p24) Jonathan Guthrie echoes Kamal’s sentiments, stating that Scots are more pro-european and that a Yes vote could make the “English more nationalistic and thus more eurosceptic”.

    Lenders cut mortgage rates

    A number of mortgage lenders have cut their rates and increased their range of fixed-rate loans in recent days, despite expectations that the Bank will raise interest rates next year, reports the Guardian (p29). The Mail (p30) writes that it is “great news for consumers” after a “rising number of new lenders has helped to increase competition and push down rates”.

    Fed to keep rates low

    The US Federal Reserve has committed to keeping interest rates low for a “considerable time”, reports the Times (£, p41). The central bank confirmed that rates would remain low as long as inflation was under control and until there were improvements in wage growth and long-term unemployment. The policy statement also revealed that the Fed would cut its buying of Treasury bonds by another $10 billion (£6 billion) per month, and expects to end the programme after October (Independent, p59). However the FT (£, p1) writes that the Fed expects rates to rise by 1.25% – 1.5% in 2015, implying five rate rises in their eight meetings next year.

17th Sep 2014 Back to top
  • Social media and crisis management

    Government and businesses face an increasingly urgent need to interpret and act upon information in social media.

    In an era of outsourced services and cross-border operations, banks and financial services firms face a range of threats, ranging from large scale geopolitical risks to localized problems. As a result, their capacity to crowd-source reports rapidly from observers on the ground has seen social media play an increasingly important role in crisis management. Tools such as CrisisNET1, which aggregate reports from social media platforms such as Twitter, have become indispensible tools. At the same time, reports sourced from social media cannot always be trusted and this presents a growing and potentially unmanageable problem.

  • BBA Brief – 17 September 2014

    Infrastructure investment on hold in Scotland ahead of independence vote

    More than 80 public-private partnerships worth £6.2 billion are on hold as foreign investors wait for the result of the Scottish independence vote (Telegraph, B5). The projects are mostly local authority backed and underwritten by the UK Government. However, it is unclear whether the support would be withdrawn if Scotland decides to leave the UK, which is creating uncertainty amongst investors. Elsewhere, the Times (£, p41) reports that a survey of fund managers by Bank of America Merrill Lynch has identified the UK as the “least popular market for investment” because of fears that Scotland will leave the UK.

    Government “bad bank” is close to selling mortgage book

    The Telegraph (B3) reports that UK Asset Resolution (UKAR), which was created from the toxic debts of the bailed-out banks Northern Rock and Bradford & Bingley, has selected JP Morgan as its preferred bidder for a £1.6 billion package of state-owned mortgages. TSB is also believed to have expressed an interest in the purchase. The move could see the British taxpayer recoup hundreds of millions of pounds, but UKAR still has more than 520,000 “risky” mortgages on its balance sheet worth around £75 billion.

    G20 to back OECD rules to end corporate tax avoidance

    New rules designed by the Organisation for Economic Cooperation and Development (OECD) and submitted to the G20 aim to stop transnational corporations from “exploiting differences between tax regimes to conjure up unwarranted tax deductions”, reports the Guardian (p23). The organisation has criticised the current international tax system, which has more than 3,000 bilateral tax treaties, and wants to prevent countries from offering tax incentives to encourage corporations to domicile with them. The move would mean an end to retailers, such as Amazon, using its residence in Luxembourg to avoid paying taxes on UK transactions.

    US money market funds using new Fed tool instead of banks

    European and US banks have expressed concerns that the increasing use by US money market funds of the Federal Reserve’s new “reverse repo programme” (RRP) is distorting the bank repo market (FT, £, p28). The RRP allows the central bank to lend bonds from its vast portfolio of assets to large investors, which will give the Fed some control over short-term interest rates when it takes money out of financial markets. However, banks warn that the tool is exacerbating the outflow of deposits from their institutions.

16th Sep 2014 Back to top
  • BBA Brief – 16 September 2014

    Contactless tube payment

    In an article for CityAM (p21), BBA Chief Executive Anthony Browne writes about the latest advance in the UK banking revolution: contactless tube payment. In the article, Anthony states that “this is just the latest chapter of the astonishing evolution that isn’t just good for consumers but for our country’s economic prospects too”. The article also mentions the BBA’s report published jointly with EY “The Way We Bank Now”, which suggests that “the UK would need an extra 750,000 digitally-skilled workers over the next three years if it is to capitalise on a £12 billion economic opportunity in the digital sector.”

    BoE blames household debt for the deep recession

    A number of papers report that high household debt levels could have been one of the main reasons why the 2008 financial crash became the longest and deepest recession since the 19th century, according to the Bank of England’s Quarterly Bulletin (Guardian, p24). The BoE said this research justified its decision in June to limit mortgage borrowing “to insure against a further significant increase in the number of highly indebted households” (FT, £, p4). The Independent (p57) quotes the report researchers saying: “It is possible to make the case that debt played at least some role.”

    Scottish “yes” could force the BoE to raise interest rates sooner than expected

    In the Times (£, p44), Paris based Lyxor Asset Management warns that a Scottish “Yes” vote could force an interest rate rise. The article explains that “until a month ago, hedge funds had net long positions of sterling versus the dollar, but with increased possibility of Scotland voting for independence, this has gone into reverse”. Albert Edwards, a strategist at Societe Generale, said: “Interest rates may be set to rise a whole lot faster than anticipated if we get a good old-fashioned sterling crisis.”

15th Sep 2014 Back to top
  • Innovation you can bank on

    As highlighted in the BBA’s recent Way We Bank Now work and by the FCA report on Mobile Banking and Payments our mobile devices are now, more than ever ‘essential kit’ – and increasingly used for day to day banking and payments.

  • BBA Brief – 15 September 2014

    BBA raises concerns over leverage ratio proposals

    The BBA has argued that the Bank of England’s new leverage ratio proposals are “too complex and potentially damaging”. In an article on our website BBA Executive Director Simon Hills argued that the plans “would particularly impact lenders with lower risk business models such as mortgage providers. This could create perverse effects- such as incentivising banks to increase the cost of new mortgages or even to engage in higher risk lending.  This is the opposite of what policymakers want to achieve.” (Sunday Telegraph, B1, Reuters)

    To read the full consultation response click here.

    EU ministers fail to agree on FTT; Schaeuble says “small first step” is on the cards

    At the informal ECOFIN meeting in Milan on Saturday European finance ministers failed to agree on proposals for a new Financial Transactions Tax (FTT) after opposition from France.  German Finance Minister Wolfgang Schaeublesaid:“Given the different situations in the different countries, we will probably only agree on a small first step, but a small first step is better than none… I am very optimistic that, if we make the first step, we will create a knock-on-effect that leads to further steps and that could convince other countries to join in.”  It is expected that a proposal could be agreed on by the end of the year. (EUbusiness)

    End of free banking could spur new entrant       

    The Sunday Telegraph (B2) reports that the Competition and Market Authority’s consultation on whether to hold a full enquiry into the banking sector ends on Wednesday. The article speculates that if the result of the enquiry is a recommendation to end “free when in credit banking” this could lead to a wave of new companies entering the market, which could boost competition.

  • The Bank’s leverage ratio proposals are too complex and could be damaging

    The BBA supported the concept of a simple, non-risk based leverage ratio when it was proposed by international banking standard setters at the Basel committee in 2009.  That’s why we have today raised some concerns about the Financial Policy Committee’s (FPC) proposals for a UK specific leverage ratio (see the full response here).  We believe that they are too complex and potentially damaging.

14th Sep 2014 Back to top
  • Competition in the interest of customers

    Responding to the Which? report on customer satisfaction levels for bank accounts, a spokesman for the BBA said:

    “Britain has a vibrant, competitive banking market – with more than 50 current account providers. There is more and more choice between these products, which reflects how we all bank in slightly different ways.

12th Sep 2014 Back to top
  • BBA Brief – 12 September 2014

    Hike in UK interest rates could shake market

    Speaking to the BBA Donald Kohn, a former vice-chairman of the US Federal Reserve’s Board and current member of the Bank of England’s financial policy committee, has warned that raising interest rates “is not without its risks and dangers” (Times, £, p51). Following remarks made by Bank of England governor, Mark Carney, who said that rates were likely to rise in the spring, Mr Kohn said that the banking industry needed to be ready for defaults, an increase in borrowing costs and a liquidity crunch.

    Mortgage approvals for first time buyers highest since crisis

    The Mail (p6) reports figures from the Council of Mortgage Lenders (CML) which signal that first time buyers are “flocking back to the market”, with the number of mortgages approved at its highest level since the crisis. The number of home loans approved last month topped the 30,000 mark for the first time since August 2007.

    The same CML statistics also revealed that the over-60s are driving the boom in buy-to-let (Mail, p18). According to CML, the number of older borrowers taking out loans for rental properties has risen by 58% in two years.

    Apple’s mobile payment technology could come to Europe

    The FT (£) reports that banks and credit card companies are in talks to bring new payment technology to Europe. At the moment those hoping to buy the new iPhone 6 when it is released in the coming days will not be able to use Apple Pay, which allows customers to pay for goods using their phone or Apple watch, as it will be launching in the US first. Apple are currently in talks with European banks and credit card companies who will need to sign-up to the technology. If introduced, Apple Pay could be used on the 350,000 points of sale in the UK that currently offer contactlesspayments.

    To read more about how banking and payment technology is evolving, take a look at the BBA’s The Way We Bank Now report here.

    BoE shows concern over virtual currency

    The Bank of England has said that virtual currencies such as Bitcoin could “make central banks obsolete, create huge economic risks and trigger deflation”, according to an article in the Times(£). The Bank stated that people could be defrauded and that governments would have to address “taxation, money laundering and the possible use of new payment systems in financing terrorism or other crime”. The BoE added: “The total stock of digital currencies is at present too small to pose a threat to financial stability, but further increases cannot be ruled out and it is conceivable in time that there could be an asset price crash among free-floating digital currencies that had the potential to affect financial stability.”

    IMF warns over Scotland vote

    The International Monetary Fund (IMF) has warned that a “yes” vote in the Scottish referendum next week could result in market turbulence (FT, £, p4). A spokesman for the organisation said: “The immediate effect is likely to be uncertainty over the transition to potentially new and different monetary, financial and fiscal frameworks in Scotland”. The article goes on to say that an independent Scotland would have to resolve its membership of the IMF as, with a population of just 5.3 million, it would be too small to have its own executive director and would have to look to form a constituency with another territory.

11th Sep 2014 Back to top
  • BBA Brief – 11 September 2014

    1.1 million customers have switched current accounts

    Figures released by the Payments Council show that between October 2013 and August 2014 there’s been a 19% increase in the current account switching rate, in comparison to the same period last year (Guardian, p34). The figures also show that an estimated 1.1 million customers have switched provider in the 11 months since the Current Account Switch Service (CASS) was launched. The Mirror (p58) highlights the Payments Council’s Executive Chairman Gerard Lemos saying: “It’s clear from reviewing the very first year that it’s [CASS] made great ground.”

    Juncker nominates Lord Hill as financial services Commissioner

    A number of papers report Juncker’s decision to nominate Lord Hill as the new financial services Commissioner for the EU. The Telegraph (p14) writes that Lord Hill – if approved by the European Parliament – “will oversee a major economic shake-up with plans to liberalise the European Union’s capital markets.”  Lord Hill said it was a “great responsibility” to run a new commission department and David Cameron stated yesterday that Lord Hill’s appointment was “a great piece of news” and that it’s “great to have someone in the heart of the European Commission”. BBA’s Chief Executive Anthony Browne also commented on Lord Hills’ nomination by saying: ““This appointment should be good for customers and businesses as the Commission looks for ways to unlock the flow of finance to bolster jobs and growth across Europe.”

    Carney warns Scotland over needing “billions in reserve” if they vote “yes” to independence

    Bank of England Governor Mark Carney told MPs on the Treasury Select Committee yesterday that central banks will need to have at least 25% of their GDP in reserve if they use another country’s currency (FT, £, p4). Dr Carney used Hong Kong as an example, which has US Dollars as its currency and 110% of its GDP in reserve. Dr Carney said: “Countries with complex financial systems would require higher levels of reserves.”  The Telegraph (B1), highlights Carney saying there would be “real fiscal costs” to this, while Andrew Tyrie, Treasury Select Committee chairman, said Scotland would face a “very big shortfall” which would “almost certainly” need cuts or higher taxes.

    Germany and France raise concerns over the ECB’s securities plan

    The European Central Bank (ECB) plans to revive the Eurozone economy by buying asset backed securities (ABS), despite doubts from Germany and France (FT, £, p6). The ECB President, Mario Draghi, announced last week that the ECB intends to buy an “unspecified” amount of these securities from banks to “free up” balance sheets and “boost” lending to businesses in the EU. However, the French and German finance ministries are calling for measures to encourage “high quality securisation” and believe that “an intervention in the form of a public guarantee scheme would be problematic”.

10th Sep 2014 Back to top
  • Credit where it’s due

    Anyone looking to take out credit in the UK is not short of places to go looking. There are more than 30 credit card issuers, at least 60 mortgage providers and over 100 firms offering personal loans.

  • BBA response to Lord Hill’s appointment

    Responding to the appointment of Lord Hill to lead the European Commission’s newly created Financial Stability, Financial Services and Capital Markets Union directorate-general, Anthony Browne, chief executive of the BBA, said:

    “This is a good decision for Europe. We welcome the approach by President-elect Juncker to entrust key Commission portfolios to people with the right experience.

    “This appointment should be good for customers and businesses as the Commission looks for ways to unlock the flow of finance to bolster jobs and growth across Europe.”

  • BBA Brief – 10 September 2014

    Party leaders head to Scotland to campaign for “No” vote

    The newspapers are dominated by the latest news from the Scottish independence campaign, as the latest poll indicates voter intentions are nearly 50:50 (Times, £, p8). The Guardian (p1) reports that the leaders of Britain’s three main political parties have agreed to suspend Prime Ministers’ Questions in favour of travelling to Scotland to support the “No” campaign. A joint statement said: “There’s one thing on which we all agree passionately: the United Kingdom is better together”. Writing in the Mail (p7), David Cameron argues that “our union is precious” and outlines plans to give more powers to Scotland over taxation and borrowing.

    The Times (£, p8) describes how “Devo-Max” might work and reports that Bank of England Governor Mark Carney has called a currency union between the UK and an independent Scotland “incompatible with sovereignty” (Times, £, p7). The comments come as several investors indicate they are pulling cash from Scotland to limit their exposure to the UK (FT, £, p1).

    Meanwhile, the Financial Conduct Authority’s Chairman, John Griffith-Jones, told the Treasury Select Committee that the financial regulator was making “contingency plans” for a “Yes” vote. Mr Griffith-Jones added he was unable to comment on the precise nature of post-independence regulation. At the evidence session, Treasury Select Committee Chairman Andrew Tyrie criticised the regulator for a “slow and apparently obstructive approach on a number of issues” and called for greater scrutiny of money–laundering regulations (Telegraph, B3).

    Carney tells TUC interest rates likely to rise before wages

    Speaking at the Trade Union Congress in Liverpool, Mark Carney indicated that interest rates will begin to normalise in spring 2015 and continue to rise “very gradually” (Mail, p4). The comments were made as part of the conference’s debate on the lack of wage growth in the UK. Dr Carney said pay rises are not expected to exceed inflation until “around the middle of next year”. The Governor added that firms had looked to hire during the recession instead of investing in capital, which meant more people were in work.

    Dr Carney also said he found the lack of female executives at the Bank of England “striking”. The proportion of female senior managers at the Bank has increased from a fifth to a third since the Governor took over, but the process of rebalancing would “take years”.

    Apple launches new iPay technology

    Alongside yesterday’s launch of its new iPhone6 and iWatch, Apple announced iPay, a new payments system that will allow consumers to pay for goods via their “smart” devices (FT, £, p1). Tim Cook, the company’s new CEO, said that Apple hoped the technology, which will only be offered in the US at first, would “replace” the traditional wallet and plastic card.

    Elsewhere, the Mail (p45) reports that Lloyds Banking Group is set to trial the use of fingerprint recognition technology for its mobile app. It aims to make “paying quicker and more efficient and the app more secure”, according to a Lloyds spokesperson. Read more about how technology is changing retail banking in the BBA’s Way We Bank Now report here.

9th Sep 2014 Back to top
  • BBA Brief – 9 September 2014

    UK bonus challenge begins in ECJ

    The Government’s attempt to overturn the cap on bankers’ bonuses began in the European Courts of Justice yesterday. The Telegraph (B5) reports that Belgian judge Koen Lenaerts and Advocate General Niilo Jääskinen focussed on the argument by Treasury lawyers that the ruling contravenes the Lisbon Treaty. Mr Lenaerts described this claim as “inconsistent” as the UK had not opposed other parts of similar EU legislation. Mr Jääskinen announced that the final judgement on the case would be made on 20 November 2014. The paper adds that although the decision is made by the group of judges, “they tend to follow the Advocate General”.

    Meanwhile, MEPs will threaten to veto the candidate for the next EU financial services commissioner unless they promise to prevent banks from circumventing bonus cap rules, according to the FT (£, p8). Gianni Pittella, leader of the parliament’s Socialist group, told the paper: “If you are part of the EU you must apply the same rules as any other member state.”

    TSB to open more branches

    A year after it began trading as a separate company, TSB has announced plans to open 30 new branches, writes the BBC. The bank has also promised customers that they will be able to telephone their local branches directly, with CEO Paul Pester stating “TSB is a High Street bank, not a Wall Street bank”. In addition, Santander has also announced plans to open or extend more than 30 branches over the next two years. Read the BBA’s Promoting competition in the UK banking industry report here.

    BSA rejects leverage ratio proposals

    In its response to the Bank of England’s consultation seen by the FT (£, p22), the Building Societies Association (BSA) has questioned plans for a tougher leverage ratio, describing it as a “primitive” measure of risk. The association warned that firms would be incentivised to take on more risks and pass higher costs onto consumers. The submission also argued that a rise in the ratio from 3% to 4% could result in a 25% fall in mortgage lending.

    HMT calls on end to red tape

    HM Treasury’s financial services director Katharine Braddick has called for Brussels to deal with the unintended consequences of red tape that have resulted from European legislation. Ms Braddick told delegates at the BBA’s Foreign Banks Reception: “The EU must take stock, review the cumulative effects of this enormous post-crisis package of regulation, and ensure the unintended consequences are mitigated”. For more information on BBA events click here.

8th Sep 2014 Back to top
  • We are the United Nations of banking

    I often think that there’s something rather misleading about the name of our organisation. The title “British Bankers’ Association” might easily suggest that our main interests lie solely in British banks and those who work for them when, in fact, this isn’t entirely true.

  • BBA Brief – 8 September 2014

    Apple and Vodafone set to join payments revolution

    The FT (p17) reports that Vodafone and Apple are both set to launch integrated mobile wallet payments systems in the coming days.  Near field communciations technology will be integrated into SIM cards or the iPhone to allow customers to swipe for payments at contactless tills.  The paper quotes Mark Ritzman from m-commerce who said that these payments systems “will start to replace the leather wallet”.

    Fears grow over union break-up as poll puts Yes ahead

    The front pages of all the main papers this morning report that the UK could be heading for a break up following a YouGov opinion poll yesterday that put support for independence at 51%, with the No camp on 49%. It is reported that the palace is briefing that the Queen is concerned over the situation.

    ECJ to hear UK challenge on bonuses as EU threatens industry over allowances

    The European Court of Justice will today consider the UK’s legal challenge to the EU’s bank bonus cap. A Treasury spokesman said “These latest EU rules on bonuses, rushed through without any assessment of their impact, will undermine all of this [financial stability] by pushing bankers’ fixed pay up rather than down, which will make banks themselves riskier rather than safer.  In other words, as the Chancellor has said, they may undermine responsibility in the banking system rather than promote it.  Regulation of pay in this manner goes beyond what is permitted in the EU treaty. That’s why we are challenging these rules in the European court, to ensure the legislation respects the EU treaty and actually achieves what it’s meant to – a more stable banking system that serves the economy, businesses and consumers.”(Mail p62).

    The front page of the FT reports that outgoing EU Commissioner Michel Barnier has written to the European Banking Authority to warn that the EU is prepared to challenge new cash allowances which have been introduced since the cap came into effect.  In the letter he said he wanted to “underline [his] strong concerns with regard to the continuing reports of the use of these allowances.”

    Which? calls for shake up of credit market

    Saturday’s papers reported on the demand by consumer group Which? to ban the term 0% on credit cards that come with an upfront balance transfer fee and for health warnings to be given to unauthorised overdrafts with high interest rates (Guardian, p40).  The Mirror (p58) quoted a BBA spokesman saying, “If you feel you are paying too much for your credit, it’s important to shop around and look at the rates offered by other providers.”  It also reported on our monthly credit card statistics which showed that 42% of all borrowing on credit cards is now interest free.

6th Sep 2014 Back to top
  • Millions of customers harnessing a competitive credit market

    Commenting on the Which? report on the credit industry, a spokesman for the BBA said:

    “Britain has a competitive credit market with clear rules that rightly oblige lenders to set out interest charges and notify borrowers if rates change.

5th Sep 2014 Back to top
  • A little more time please

    In his latest article for BBA Voice, Executive Director Simon Hills says that the incoming senior managers regime has the potential to change banks for the better, but calls on regulators to give the industry a little more time than the “tight” 6 month deadline to implement it.

  • BBA Brief – 5 September 2014

    ECB cuts rates and introduces stimulus

    Mario Draghi, president of the European Central Bank, announced measures yesterday to cut the central bank’s benchmark interest rate to 0.05% in combination with a new asset purchase programme in a bid to avoid deflation. Mr Draghi would not reveal the scale of the purchases but stated that the aim was to boost the Bank’s balance sheet by up to €1 trillion(£794 billion), the highest level since the start of 2012 (FT, £, p1). The FT (£, p7) said that Draghi’s choice of stimulus, which he refers to as “a broad portfolio of simple and transparent asset-backed securities”, marked a comeback for the practice of reprocessing bundles of loans. The Telegraph (p1) reported the consequent surge in the European markets as the euro plunged to a 14-month low of $1.30 against the dollar.

    UK interest rates remain low

    The Bank of England’s Monetary Policy Committee has voted to hold interest rates at their current 0.5% low and keep the central bank’s stock of assets purchased under quantitative easing to £375 billion (FT, £, p3). According to the paper, most City economists are not expecting a rate rise until next year with none of the 42 polled by Reuters expecting a rise yesterday.

    Technology continues to change the way we bank

    The cashpoint of the future looks and feels more like a smartphone, according to the BBC, who surveyed the latest developments in ATM technology at a recent “cash machine jamboree” in London. The event featureda new cashpoint based on a tablet computer produced by security and software company Diebold. The article explains: “It is two-thirds of the size of a traditional cash machine, uses touch screen keypads, and just plugs in using a broadband connection”. Users will also be able to organise their withdrawal in advance, and built in cameras with facial recognition protects personal safety and could even catch fraudsters in the act.

    Another development in a bid to tackle fraud has been unveiled by Barclays, who hope to launch “finger vein authentication” for large businesses next year (Times, £, p46). To use this technology the user simply inserts their finger into a special reader which allows them to access their accounts without the need for PINs or passwords. Though barely known in Britain, this method of identification has been around since 2002 and is used in eight out of ten cashpoints in Japan. The Guardian (p10) writes that, crucially, the technology only works with live fingers.

    You can read the BBA report on the evolution of technology in banking – The Way We Bank Now – here.

    Independence vote leads pound to drop

    The Times (£, p45) reports how the pound dropped a US cent yesterday as the result of speculation over the Scottish independence vote. According to the article analysts have said that a “yes” vote could create uncertainty, sparking a run on sterling and a sell-off of companies with large Scottish exposure. According to one industry expert, the pound could fall 5% against the dollar and the euro if Scotland votes to break away from the United Kingdom.

  • July 2014 – Credit Card Market

    Richard Woolhouse, the chief economist at the BBA, said:

    “This is another set of good numbers that shows the UK consumer is putting the tough years behind them and feeling more confident about spending again.

    “It’s also very striking how savvy customers have become in recent years. As much as 42% of all borrowing on cards now is interest free – up from 34% two years ago.

    “This illustrates how many of us are cleverly using plastic to give us greater control about how we manage our finances without being charged to do so.”

4th Sep 2014 Back to top
  • BBA Brief – 4 September 2014

    New challengers see digital as the future of banking

    The Times (£, p47) reports that a new bank with no branches aimed at 24 to 35 year-olds is weeks away from applying for a formal banking licence. Anne Boden, a former chief operating officer at Allied Irish Bank is leading the new venture, and says that the challenger bank will be “the first to fully harness new technology, offering its services on mobile phones and tablets and making use of data kept on customers’ devices”, adding that the project “would be more like a Google or an Amazon than a traditional bank”. Ms Boden states that the bank has aims to have “millions of customers within five years”. Anthony Thomson, who is working on bringing Atom Bank into the market, said: “I’d be very surprised if more people weren’t doing exactly this. Digital in general and mobile in particular is the future of banking.

    Read the BBA’s Promoting competition in the UK banking industry here and the BBA’s The Way We Bank Now work here which highlights the rise in digital banking.

    US banks in liquidity shortfall

    The Federal Reserve yesterday finalised details of the liquidity coverage ratio, which will require lenders to have a certain amount of assets which can quickly be converted into cash. The FT (£, p17) writes that if the ratio was applied today then banks would have to hold about $2.5 trillion (£1.5 trillion) of high-quality liquid assets over a 30 day stress period, which is $100 billion more than they currently have. The rules will initially only apply to the largest US banks, but the Fed is proposing to extend the measures to the US holding companies of the largest foreign banks. The FT (£, p16) Lex column argues that such regulation could lead to “perverse outcomes”.

    Capital requirements too high, claim ABI

    The FT (£, p4) reports that the Association of British Insurers (ABI) has accused the Bank of England of increasing the cost of insurance by “imposing unnecessarily onerous capital requirements on the sector”. The trade association’s director of regulation Hugh Savill told a conference organised by Policy Exchange that the Bank was raising minimum requirements above those detailed in the EU’s Solvency II regulation. Mr Savill claimed that there had been several recent examples of groups having more onerous requirements forced upon them, adding that this had begun “to look like a pattern”.

    Bank chief warns over shadow banking

    The head of Deutsche Bank Anshu Jain has called for clearer regulation of the shadow banking sector as it poses “bank-like risks”, writes the FT (£, p18). Mr Jain told a conference in Frankfurt that the shadow banking sector “must be able to give clear responses to regulators on key questions…and this requires a clear regulatory framework”. The paper adds that Bank of England Governor Mark Carney recently wrote in the FT that it was “time to take shadow banking out of the shadows”.

    New ONS data shows stronger growth

    Following changes to the national accounts, the ONS yesterday revealed that the economic downturn was shorter and shallower than previously believed. New figures show that the UK economy returned to pre-crash levels in September 2013, with the cumulative growth rate between 2008 and 2012 revised up by 2.6 per cent. However, the Times (£, p44) notes that the recession was still the deepest since ONS records began in 1948 and the recovery remains the lowest on record. The FT (£, p3) writes that these stronger figures will “complicate the dilemma facing the Bank of England” at today’s Monetary Policy Committee meeting. The paper also suggests that the next government will have cause for concern over public finances as stronger growth has not been aligned with higher tax revenues.

  • A Question of Trust

    Did you catch the thought-provoking radio interview by Andrew Tyrie shortly before dawn yesterday morning?

    Those early birds at Radio 5’s Wake to Money asked the Commons Treasury Select Committee chairman if customers have confidence in British banks. “Much less than they did, and that’s part of the problem we’ve got with the recovery,” Mr Tyrie said.

3rd Sep 2014 Back to top
  • BBA Brief – 3 September 2014

    Tyrie says public has lost trust in banks

    Chairman of the Treasury Select Committee Andrew Tyrie appeared on this morning’s BBC 5Live Wake Up to Money show arguing that it would take years to rebuild public trust in banks. Asked whether British customers have confidence in British banks, Mr Tyrie said: “much less than they did, and that’s part of the problem we’ve got with the recovery. We need small businesses confident enough to do business with bank – that’s been badly shaken.”

    BBA Director of Media Relations Rob Watts responded to the comments on BBC 5Live’s Breakfast show (7.50am) arguing that cash bonuses had fallen, reward incentives have changed and new lending to businesses is increasing.

    Europe’s finance ministers to discuss details of FTT at next ECOFIN

    How to implement the Financial Transaction Tax will be on the agenda when Europe’s finance ministers meet in Italy next week, according to Ben Wright in the Telegraph (B2). The move would add a levy on trades between financial institutions and has been publically opposed by the UK Government. Despite broad support for its introduction, the details of when, what and who will pay a FTT remain undecided. Wright argues that a new tax would lead to a slump in trading volumes and increase costs for banks’ customers and investors. However, the City should avoid complacency because it is likely to be introduced in some shape or form.

    Read BBA Policy Director Sarah Wulff-Cochrane’s blog on why the FTT defies the EU’s guiding principles here.

    Banks look at ways to keep digital identities safe

    A new report by Open Identity Exchange for Lloyds examines the potential for banks to act as a safe place for customers to store all their digital information and vouch for a customer’s identify (FT, £, p24). It claims that the ability to verify someone’s identity could reduce the need for customers to provide a copy of their passport to renew their driving licence.

    The move would be the latest in a series of innovations from banks as they look to adapt to customer’s increasing use of digital technology. For more information on how digital technologies are changing the way people spend, move and manage their money, read the BBA’s Way We Bank Now report (here).

2nd Sep 2014 Back to top
  • BBA Brief – 2 September 2014

    Complaints against British banks fall

    The Telegraph reports that, according to the Financial Ombudsman Service (FOS), the number of complaints against British banks has fallen by 42% in the first half of 2014 due to a decline in the number of complaints for mis-selling insurance. In the first 6 months of 2014, PPI complaints have gone down to 134,000, from 266,000 in the same period last year. However, the Mail (p10) writes that many complaints are being “processed industrially as a number” and says that a “growing proportion” of complaints are rejected by the banks.

    In response to today’s FOS figures, a BBA spokesman said: “There have been steps in the right direction, but at the same time the number of these cases still remains too high. The industry will continue to work with the FCA and the Ombudsman to maintain a good standard of complaints handling and deliver the service customers deserve.”

    EU proposed new funding rules for banks will make equity swaps more expensive  

    According to a letter from the Global Financial Markets Association and the Institute of International Finance, the newly proposed funding rules of the Basel Committee on Banking Supervision would make it “five times more expensive for banks to facilitate short selling” (FT, £, p1). The proposed rule, the Net Stable Funding Ratio (NSFR), aims to ensure that banks hold a minimum amount of stable funding based on the characteristics of their assets. The letter says banks have “serious concerns” about the treatment of equities under the NSFR regime, saying it could “significantly increase transaction costs across equity markets for all participants”.

    Mortgage lending goes down as the Mortgage Market Review takes effect

    The Times (£, p43) writes that according to the Bank of England figures released yesterday, home loan approvals went down from 67,085 in June to 66,569 in July. The Times also suggests that this data “tells a similar story to that of the British Bankers’ Association”, which last week released data showing that “high street lenders had handed out fewer mortgages to households last month as the impact of new rules to control riskier borrowing continued to filter through”. The Bank’s figures also showed a £3.4 billion rise in net lending to households in July, the highest since 2008.

1st Sep 2014 Back to top
  • BBA Brief – 1 September 2014

    SME lending up for third month

    This morning the Bank of England released their monthly monetary and financial statistics, Bankstats. The figures for July showed an increase in net lending to small and medium-sized businesses for the third month in a row.

    Commenting on the figures, a spokesman for the BBA said:

    “These figures show that the net lending picture for Britain’s smaller businesses has been positive for three consecutive months. It’s heartening that fewer firms see access to finance as an obstacle to their business aspirations.

    “Banks are in the business of lending and this is good news for the economy. We encourage any business to consider applying for credit to help them grow, export or take on new staff.”

    Cyber attacks on US banks

    Attacks on US banks by financial “Trojans” has tripled in the last year, according to the FT (£, p19). This increase has prompted the US Federal Bureau of Investigation and US secret service to announce an inquiry. It is not clear who is behind recent attacks or what they were seeking but according to the article, bank websites, automated clearing houses and payroll systems are being targeted. Orla Cox, a security operations manager at Symantec, said: “The attacker is interested in financial consumer data but also, a lot of times, information on M&A and other stuff along those lines can be potentially interesting for reasons of corporate espionage, gaining competitive advantages.”

    See the BBA’s report on cyber security – The cyber threat to banking: A global industry challenge – here.

    CBI calls for action on airports

    The CBI today urges the Government to take urgent action to expand Britain’s airports, with “spades in the ground by 2020”, the Telegraph (B1) reports. The business lobby group maintains that a single hub airport is necessary alongside spare capacity to add new routes.

    A Whitehall-commissioned report by the economist Sir Howard Davies is set to deliver its recommendations on how Britain should expand its airports after next May’s election.

    Katja Hall, the CBI’s deputy director general, said: “There can be no more excuses – we need to see the Airports Commission deliver a strong case for new capacity and a clear schedule for delivery.”

    The BBA will be producing a new report on infrastructure later in year.

  • BBA response to today’s Bank of England Bankstats

    Commenting on the latest Bank of England monthly Bankstats, a BBA spokesman said:

    “These figures show that the net lending picture for Britain’s smaller businesses has been positive for three consecutive months. It’s heartening that fewer firms see access to finance as an obstacle to their business aspirations.

    “Banks are in the business of lending and this is good news for the economy. We encourage any business to consider applying for credit to help them grow, export or take on new staff.”

30th Aug 2014 Back to top
  • BBA response to Which? report on overdraft fees

    Responding to the Which? report entitled ‘Consumers frustrated by unauthorised overdraft fees’ the BBA’s Executive Director of Retail, Eric Leenders, said:

    “Across the board overdraft charges have plummeted since 2008, with estimated consumer savings of up to £928 million over the past five years.

    “Banks are keen to help customers compare account charges in a variety of ways, from making charges easier to understand to providing useful online calculators and mobile apps. They also itemise charges on bank statements and use text alerts to communicate important account information instantly.

    “We agree with Which? that the Government’s midata initiative is an important new way for customers to compare costs. From next April all the major banks will make information about customers’ current account use available to them in downloadable spreadsheets.”

28th Aug 2014 Back to top
  • BBA Q2 2014 SME lending statistics release and response to latest FLS

    Commenting on the publication of the Bank of England’s Q2 Funding for Lending Scheme statistics and the BBA’s latest figures on lending to SMEs, BBA Executive Director of Business Finance Irene Graham said:

    “BBA figures out today show that we are starting to see a pickup in borrowing by small and medium sized businesses.  It is also encouraging to see that the Funding for Lending Scheme is continuing to be used to help businesses. Companies are also increasing their cash reserves, which suggests that the sector is in a healthy position.

    “The majority of businesses who approach their bank for a loan are successful and if they are not there is a process in place that allows them to appeal the decision. We’d encourage business owners thinking about borrowing to approach their bank to learn about the range of financing options that are available.”

  • Bank support for SMEs – 2nd Quarter 2014

    Key Points:

    • £7.4 billion of new SME borrowing was approved in Q2, 16 per cent more than in the same quarter last year and the highest quarterly amount since 2011. This increase in borrowing was broadly-based across industry sectors and geographical regions. Demand from medium-sized businesses was notably stronger in Q2, leading to a net expansion in their borrowing.
    • The average value of borrowing facilities approved has been rising for some time and Scotland, Wales, the North West, Yorkshire & the Humber, the East of England, the East Midlands, the South West and London all saw more new borrowing approved than in either the previous quarter or in the same quarter a year earlier.
    • SME holdings of cash are continuing to rise strongly. Deposit levels are up 9 per cent year-on-year and now exceed borrowing by more than £43 billion.

  • BBA comment on the results of SME Finance monitor Q2 2014

    Commenting on the SME Finance Monitor 2014 Q2 results, a BBA spokesman said:

    “It’s encouraging that more smaller businesses are making a profit, building up cash and planning to grow. Only 8% now consider access to finance an obstacle to their future plans. The vast majority of businesses say that they’re happy with their financial situation, and those who are looking to borrow have continued to become more confident about getting finance this year.

    “High street banks approve nearly 7 out of 10 applications for lending and with an appeals process in place for those who are declined finance, we’d encourage small businesses thinking about borrowing to approach their bank to discuss the range of financing options available.”

26th Aug 2014 Back to top
  • July 2014 figures for the high street banks

    BBA Chief Economist Richard Woolhouse said:

    “The banks have been working with the Government to help rebuild Britain’s savings culture. So it’s really encouraging to see evidence of savers taking advantage of the new cash ISA regime in the latest figures.

    “Savings were a little low during the first half of 2014, but it seems people were just waiting until the new rules came into effect to invest their money.

    “Initiatives like NISA are steps in the right direction but today’s household savings ratio is half that of our parents’ generation. More still needs to be done.”