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Greek saga continues
In a televised address, Greek prime minister Alexis Tsipras urged his fellow countrymen to vote No in the upcoming referendum, describing the country’s creditors as “extremist conservative forces” who are “blackmailing you to say Yes to everything without any prospect of exiting the crisis” (FT, £, p1). This came hours after a letter was published which suggested that Mr Tsipras had accepted many of the terms of the bailout. However, creditors rejected the proposals as they “could not form the basis of the new €29.1 billion bailout programme Athens now seeks”.
Eurozone finance ministers agreed that negotiations will be put on hold until after Sunday’s referendum. Meanwhile, the European Central Bank kept Greek banks’ access to emergency loans at just under €89 billion. However, the Times (£, p32) reports banks are expected to have run out of money by the time Greece go to the polls on Sunday, with cash machines having already run out of €20 notes yesterday.
BoE report highlights risks to UK economic stability
The Bank of England’s Financial Stability Report revealed that the central bank is keeping watch on the situation in Greece, and is willing to take “any actions required” to keep the financial system stable and secure. The report states: “The [BoE] will continue to monitor developments and remains alert to the possibility that a deepening of the Greek crisis could prompt a broader reassessment of risk in financial markets” (FT, £, p2). The Times (£, p39) points to concerns over the buy-to-let market, with the Bank warning that “lending to landlords is expanding far faster than the rest of the mortgage market”. The Guardian (p26) notes that other risks include the reduction in market liquidity, Britain’s current account deficit, cyber attacks and the scale of bank fines.
Governor Mark Carney also pointed to an assessment of financial regulation since the crisis, addressing unintended consequences if necessary. “We need to take stock of everything that’s been done…If there are some inefficiencies we are mature enough to make some adjustments”, he said. However, CityAM (p2) reports that Dr Carney played down the risk of financial institutions leaving the UK, stating they would still have to comply with international regulations and standards. He added: “The competitiveness that’s built into the [UK financial] system is much bigger, is much more robust, than any one individual institution.”
Vickers defends the ringfence
Sir John Vickers yesterday told parliament that the need to implement his ring-fencing reforms is as strong as ever. He told a Lords committee: “In my view the case for these measures are every bit as strong as when we published the report four years ago – in some cases they are stronger still”. He pointed out that “a large chunk of GDP has been lost forever”, adding “those costs have been passed on to taxpayers and benefit recipients on a vast scale.” HSBC retail chairman Jonathan Symonds said that the cost to HSBC of implementing the reforms would be £1.5 billion. He said: “We are devoting enormous resources to putting it in place – we’re not equivocating whatsoever” (Mail, p63).
Mr Symonds is also quoted in the Telegraph talking about the challenge of implementing the rules (B3): “I will have to move 16 million customers in an 18-month period. I have 250,000 customers who will have to change their sort codes – and just imagine how many standing orders you have. One of those has 1 million customers, I have to employ 400 to 500 people to practically do that”.
ECB could push Greek banks “over the edge”
The FT (£, p6) that the European Central Bank’s governing council could increase the amount of collateral that Greek banks need to post in order to access emergency loans which could leave some of the lenders struggling to access financing. “This is a dangerous game unless you have perfect information, and it is far from perfect,” said one official following the situation. Huw Pill, economist at Goldman Sachs and a former central bank official said: “If you raise haircuts to reflect that Greece is a country in default, then you will push Greek banks over the edge. But the ECB will be reluctant to take that step. In practice, the ECB has been quite pragmatic in the past.”
Personal borrowing reaches pre-crisis levels
The FT (£, p2) looks at the competition between high street lenders for new customers in the unsecured lending markets. It reports that prices continue to fall as borrowing reaches pre-recession levels. It quotes a recent Standard & Poor’s report which said: “We expect mortgages and consumer finance to lead net lending gains again in 2015, with approximately 2 per cent industry-wide growth in mortgage balances and 8 per cent growth in consumer credit.”
Bank bosses back bereavement campaign
Some of the UK’s leading bank chief executives have backed a campaign by Money Mail (p46) that calls on companies to make it easier for bereaved families to close loved ones’ accounts after they die. The campaign calls for: “all banks to offer direct phone numbers to bereavement specialists and information on how companies can provide support and what relatives will need to do… And we want banks to provide a Tell Us Once service — so with one visit to a bank, a relative can close all their other financial accounts including those with energy providers, utilities and other banks.”
Damien Hugoo, product manager at Easy Solutions, highlights the issues around fraud involving ATM machines, as new innovations begin to replace debit and credit cards.
Legislation proposed by Germany on bail-in-able debt could set an important precedent for Europe, writes Jason Webb, Senior Reporter at SNL Financial.
Tsipras urges Greeks to vote ‘no’
Greek prime minister Alexis Tsipras has urged voters to reject creditors’ demands in this Sunday’s referendum on a package of proposals put forward to solve the ongoing crisis, BBC News reports. The proposals include VAT reform, measures to increase the corporate income tax take and pension reform. In a televised address last night, Mr Tsipras said a clear vote against austerity would help Greece negotiate a better settlement to the crisis. He also warned that he would not stay in office to oversee more cuts.
The FT (£, p2) adds that chancellor George Osborne yesterday said the threat posed by Grexit to the wider British economy should “not be underestimated” and British tourists travelling to Greece should take with them hundreds of euros in cash amid concerns over cashpoints running dry. The likelihood of a Greek exit from the single currency knocked £34 billion off Britain’s leading companies yesterday, and has dropped by a further 1% today, the Telegraph writes.
Consequences of Bank Levy could be “terrible blow” for Britain
Ahead of the chancellor’s emergency Budget next week, the Telegraph (B5) sets out the factors that are causing concern in the business community, including the Bank Levy. The paper says the Levy has risen from 0.05% of a bank’s global balance sheet when it was introduced in 2010, to 0.21% today. BBA Chief Economist Richard Woolhouse is quoted saying: “No other financial centre has a similar levy. It acts directly against competitiveness of UK banks competing overseas with foreign banks who don’t have to pay the Levy.” The article adds that a decision by HSBC or Standard Chartered to move their headquarters out of London due to the consequences of the Levy being imposed could be a “terrible blow” for Britain’s reputation.
Business Secretary calls on CBI to recognise EU’s need to change
Speaking at a key CBI dinner last night, Business Secretary Sajid Javid accused the CBI of showing its hand too early by coming out in support of Britain remaining in the EU before negotiations had even begun, the Telegraph (p2) reports. The paper quotes the Business Secretary saying: “I heard that the CBI thinks the UK should remain in the European Union no matter what. That the people of Britain should vote to stay in regardless of whether or not the Prime Minister wins the concessions that British business so badly needs…Of course you’re entirely free to come to that conclusion. But does it really make sense to say, so early in the process, that ‘the rules of this club need to change, but don’t worry – we’ll always be members no matter what’?” Mr Javid said he hoped his comments would be taken in the spirit of friendship.
Investor panic grows in China
Stocks across China – including the Shenzhen and the Shanghai composite index – fell yesterday despite efforts by the People’s Bank of China to reassure investors by cutting interest rates last weekend, the Independent reports (p49). On Saturday the central bank cut its one-year lending rate by 25 basis points and lowered its reserve requirements for some commercial banks, but this was not enough to prevent the country’s stocks turning into a bear market. The paper adds that in the past fortnight Chinese stocks traded in Shanghai and Shenzhen have lost around 16trn yuan (£1.6trn) of paper value – almost as much as the current value of the entire FTSE 100.
Commenting on the Annual Appeals Process Report from Independent External Reviewer Professor Russel Griggs, BBA Executive Director of Business Finance, Irene Graham, said:
“Small businesses play a vital role in our economy, and banks are keen to support them. The Appeals Process lets an SME challenge a bank’s finance decision and thousands of business owners have done exactly that, unlocking millions of pounds.
“We would urge any business unhappy at being turned down for a loan to ask the bank to look again. Sometimes, however, bank finance just isn’t the right match for the firm and banks have partnerships with alternative providers and brokers to help.
“The Appeals Process should encourage those considering taking on finance to apply with confidence – and with eight out of ten applications approved, you’re more likely to get a “yes” first time around than you might think.”
Greece closes banks after failed weekend talks
The Greek government has shut down the country’s banks until next Tuesday and limited the amount customers can withdraw from ATMs to €60 per day (Times, £, p1). On Saturday eurozone finance ministers refused to extend the current bailout programme beyond its planned expiry on Sunday. Greek finance minister, Yanis Varoufakis, said that the closures were an essential way of fighting back against the demands of the eurozone countries and the IMF, who asked the Greek government to hike VAT and cut pensions. Mr Varoufakis said: “Greece will take pride in proving that they can assert themselves against the decisions taken by the eurogroup.” The closures come as the ECB said it would freeze the amount of emergency loans it supplied to keep the Greek banking system afloat.
The Telegraph (p10) reports that Mr Varoufakis has said that Greece will not be pushed out of the eurozone, and the planned referendum next week is on the bailout package and not the single currency. According to the Independent (p8), US president Barack Obama has contacted German chancellor Angela Merkel to express his concern about the country dropping out of the eurozone.
UK banks “slip down global league table”
A top 1,000 league table of banks published by The Banker today has seen a number of British banks slide down the rankings according to the magazine’s editor, Brian Caplen. In the Independent (p54), Mr Caplen said: “We may have seen the end of the UK-based global bank”. He continued: “With the rise in regulation and the need to allocate capital to specific jurisdictions, the disappearance of profitable areas like proprietary trading and more volatile investment banking returns the banks have had to concentrate more on where they make their money.”
New trade association for the payments industry announced
Payments UK, a new trade association for the payments industry, is being launched today. According to the announcement the new association “will provide a single, authoritative voice for the UK payments industry at home, across Europe and the globe.” Payments UK will succeed the Payments Council. Maurice Cleaves, chief executive of Payments UK, said: “Payments UK will lead the collaborative drive to ensure that payments in the UK remain world-class, meeting the needs of all those who make or receive them. In a matter of years, the sector has been transformed from just a handful of players to many hundreds and the regulatory agenda has changed significantly. Payments UK is set up to enable the industry to navigate through such change. Over the coming months Payments UK will report on the industry’s World Class Payments project, which sets out a vision of what payments of tomorrow could look like if they are built on customers’ needs.” See press release here.
Tomorrow marks Greece’s “last chance”
The FT (£, p1) reports that EU leaders have set tomorrow as the final day the Greek government will be given to strike a bailout deal or “trigger a ‘plan B’ that would attempt to prevent a Greek default from damaging the rest of the eurozone”. The date was set after negotiators failed to agree a deal for the fourth time in a week. The Greek government has missed multiple deadlines to agree a reform plan that would release €7.2 billion in bailout funds. Yesterday, talks collapsed after the Greek finance minister, Yanis Varoufakis, presented his own proposals to representatives from the European Commission, International Monetary Fund, European Central Bank, described as “the creditors’ plan with edits”. The Telegraph (B1) writes that German chancellor Angela Merkel has warned that she will not be “blackmailed” and is pushing for a solution by Monday at the latest “to ensure that markets do not spiral into chaos on Monday morning”.
“Unprecedented” demand for high-interest pensioner bonds
The Times (£, p40) reports that the demand for high-interest pensioner bonds has led the government savings bank that handled them to come in more than £3 billion above target last year. The Treasury considered the bonds to be a way of helping elderly savers who have lost out after years of low interest rates, but the bonds have been criticised by those who say they drive investment from banks and building societies. More than a million over-65s took advantage of the scheme which launched in January. Richard Woolhouse, BBA Chief Economist said: “Savvy savers appear to be continuing to take advantage of good deals, such as pensioner bonds, which is why we’re seeing weaker bank deposits”.
PM pleased with EU negotiations
Prime Minister David Cameron has said that he is “delighted” that EU renegotiations are underway after setting out his aims to EU leaders in Brussels (BBC). According to the BBC, Mr Cameron wants an opt-out on the core EU aim of “ever closer union”, to boost the sovereignty and powers of national parliaments, to safeguard the City of London, to curb internal EU immigration by cutting benefits and to make the EU more streamlined and competitive. The European Council’s president, Donald Tusk, has said that there is a will to help the UK.
However, the Prime Minister also appears to have acknowledged that treaty change may not be possible before the end of 2017. The BBC reports that Mr Cameron has instead argued for “irreversible” and “legally binding” guarantees that EU law will be changed, in case treaties can’t be changed in time before the in/out referendum.
David Robson, head of research and development at training provider International Compliance Training, says firms recognise that the financial crime nettle needs to be grasped, but CDD is not just about complying with requirements.
BoE grants licence to online bank
The Times (£, p43) and a number of the other papers report that Atom Bank – Britain’s first digital only bank – has been granted a banking licence “in the latest sign that some people no longer regard branches as essential”. The article adds that Atom plans to be a full-scale bank with current accounts and mortgages, and advisors available through instant messaging or video link. The Telegraph (B3) writes that “Atom’s licence comes with restrictions because its systems need further testing before regulators let the new bank go live”, adding that “it also needs to finish raising the £75 million required to meet regulatory capital rules”. In the article Atom Bank chairman Anthony Thomson cites BBA research published last week, commenting that “mobile banking has overtaken branches, telephones and even internet transactions”. Read our latest Way We Bank Now report, World of Change, here.
Standard Chartered to move power to regional hubs
Standard Chartered’s new chief executive Bill Winters is reportedly planning an overhaul of the emerging markets bank “to shift capital and power to regional hubs” (FT, £, p19). According to the paper Mr Winters is expected to hand more power to a handful of regional subsidiaries in key markets, such as Hong Kong, Singapore, India, the United Arab Emirates and Africa. Mr Winters apparently intends to concentrate capital and liquidity in regional hubs as opposed to centralising control in London, which would be in line with what local regulators have been requesting. A full strategic plan is expected to be unveiled at the end of the year.
Fears that Greece will fall short on debt deal
The Telegraph (B1) reports that Greece’s future in the eurozone was thrown into “fresh turmoil” yesterday as late night talks took place between the country’s prime minister Alexis Tsipras and European Commission president Jean-Claude Juncker. The International Monetary Fund (IMF) and European Central Bank (ECB) had laid out a series of proposals for Greece that asked for further spending cuts in order to pay down the country’s debts, as well as asking the Greek government to abolish exemptions on VAT and implement an overhaul of state pensions. The paper reports that they were quick to reject the demands as “absurd”. The Times (£, p41) reports that markets in Europe and the United States slipped yesterday amid fears that the country will fail to strike a debt deal “potentially sending the country spinning out of the eurozone and triggering broader investor panic across the Continent”.
BBA stats show mortgage approvals up
Many of the papers reported the BBA’s High Street Banking statistics, which showed that mortgage lending was at its highest level in more than a year. The Times (£, p46) writes that “the general election removed the uncertainty that had dampened the mood of the housing market”, adding that “would-be buyers were tempted to step on to or up the property ladder by fierce competition between lenders, which resulted in more record-low mortgage rates.” Richard Woolhouse, Chief Economist at the BBA, said: “Household borrowing remains robust and this is indicative of the wider recovery we’re seeing in the economy. The increase in mortgage approvals this month is consistent with the trend we’ve seen since the start of the year. The numbers show that the property market remains buoyant after the general election. Fierce competition between lenders means that there are some great mortgage deals available from the high street banks. Personal borrowing by British families also seems to be strong – the uptake of personal loans and credit card borrowing is further proof of consumers’ confidence.”
In her latest blog for BBA Insight, Julie Pardy, partner at training and consultancy company FSTP, considers the ramifications of the Prudential Regulation Authority’s consultation on board responsibilities.
Property market buoyant as mortgage approvals increase
High Street Banking Statistics published by the BBA today show that mortgage approvals rose again in May for the fifth month in a row. Unsecured borrowing stands at its highest rate since autumn 2010, and is growing at an annual rate of 5%. Commenting, Richard Woolhouse, Chief Economist at the BBA, said:
“Household borrowing remains robust and this is indicative of the wider recovery we’re seeing in the economy. The increase in mortgage approvals this month is consistent with the trend we’ve seen since the start of the year. The numbers show that the property market remains buoyant after the general election. Fierce competition between lenders means that there are some great mortgage deals available from the high street banks. Personal borrowing by British families also seems to be strong – the uptake of personal loans and credit card borrowing is further proof of consumers’ confidence.”
Regulators seek bonus clawback for up to a decade
The Prudential Regulation Authority and the Financial Conduct Authority have unveiled proposals to clawback the bonuses of senior banking executives for up to ten years, in the event of wrongdoing. The rules will apply to those working at banks, building societies and PRA-designated investment firms. The Scotsman says the plans will give Britain “the toughest banking pay regime in the world”, after regulators.
Treasury Select Committee chairman Andrew Tyrie described the plans as a “step forward”, but suggested the deferral period could go further. He is quoted by the Guardian (p21) saying: “The regulators themselves identified that attempts to manipulate the foreign exchange markets dated back to January 2008 – over seven years ago – when recently fining the banks. There remains a need, in a minority of cases, for even longer deferral.” CityAM (p1) and the Times (£, p37) quote BBA Executive Director Simon Hills saying:
“It is right and proper that designated senior managers should be subject to a further 3-year clawback period where there are outstanding internal or regulatory investigations at the end of their normal seven-year deferral period.”
Click here to read the BBA’s response in full.
Pressure mounts on Tsipras
The FT (£, p8) reports that pressure is mounting on Greek prime minister Alexis Tsipras to build support for his concessions to his country’s creditors. The paper says Greece’s parliament will have only a few days to pass the economic reforms promised by Athens in order to secure bailout aid. Mr Tsipras’ reform plan will be presented to eurozone leaders tomorrow. A government spokesman is quoted saying that forcing a vote next week increases the odds that the prime minister could lose his majority.
Elsewhere, the Telegraph (p1) predicts that millions of British tourists could pay higher prices in Greece under Mr Tsipras’ plans to increase taxes for holidaymakers travelling to the country. Proposed reforms include the abolition of the Aegean Islands’ current tax exemptions.
Richard Woolhouse, Chief Economist at the BBA, said:
“Household borrowing remains robust and this is indicative of the wider recovery we’re seeing in the economy.
“The increase in mortgage approvals this month is consistent with the trend we’ve seen since the start of the year. The numbers show that the property market remains buoyant after the general election. Fierce competition between lenders means that there are some great mortgage deals available from the high street banks.
“Personal borrowing by British families also seems to be strong – the uptake of personal loans and credit card borrowing is further proof of consumers’ confidence.”
Responding to the PRA/FCA announcement on remuneration and clawbacks, BBA Executive Director Simon Hills said:
“Banks want compensation that rewards long-term performance, discourages excessive risk-taking and appropriately aligns risk with reward.”
Regulators to “reject ban on bonus buyouts”
The Prudential Regulation Authority and Financial Conduct Authority will today announce that they will not block banks from buying out employees’ bonuses when they move from a rival institution, according to Sky News. Sources said that an outright ban would have an “unacceptable impact on the City’s competitiveness” and would “likely drive up levels of fixed pay in UK firms as they fought to attract staff”.
Greece offers concessions as hopes grow for bailout deal
The Greek government presented concessions to its creditors yesterday, in a sign which eurogroup ministers described as a “positive step” (FT, £, p1). According to those who have seen the Greek plan, proposals include savings in the pension system and tax increases of almost €2 billion (Times, £, p8). However, they arrived too late for the emergency eurozone summit, and talks have now been postponed until Thursday.
Greek bank shares jumped 20% at the news of a possible deal, but German finance minister Wolfgang Schäuble “pushed for curbs on emergency liquidity for Greek banks unless capital controls were imposed”. The FT (£, p6) reports that the European Central Bank has raised the cap on the amount of emergency funding available to Greece’s banks by €2 billion to give lenders a further 24 hours before they risk being unable to honour withdrawals. The Times (£, p33) notes that an estimated €6 billion has been withdrawn from Greek banks in the past week.
Clearing houses: a welcome innovation, but not a “panacea”
Writing in the FT (£, p13), Goldman Sachs president and chief operating officer Gary Cohn praises the innovation of clearing houses, but warns that although they reduce risk, they do not eliminate it. He welcomes the new focus on recovery and resolution, but calls on regulators and industry to ensure that the failure of a clearing house “never becomes a real possibility”. He cites three factors which would help: product suitability, robust risk management and governance structures that put “systemic stability ahead of competitive concerns”. This would allow clearing houses to be an “innovative source of risk reduction that promotes systemic safety”.
Is your firm ready to tackle financial crime? David Heffron, head of financial regulation at international law firm Pinsent Masons, examines the Financial Conduct Authority’s new guidance.
Hampton: “No point whingeing” about ring-fencing
In an interview with the FT (£, p15) RBS chairman Sir Philip Hampton has warned that ring-fencing legislation could put UK banks at a disadvantage compared to their foreign rivals, particularly when trying to cross-sell products like interest rate swaps. He said, however: “There is no point whingeing about it. It had massive cross-party support in parliament so the banks have just got to get on with it.” The Mail on Sunday (p88) picked up on comments by Financial Conduct Authority chairman John Griffith-Jones at a BBA conference last week: “Banks are asking, ‘If I have a customer on both sides of the ring-fence, can I cross-sell, can the two banks have the same brand, do we have to issue two engagement letters?” The Weekend FT (£, p3) looked at how the legislation will impact banks differently and could lead to higher costs for customers. It quotes BBA Executive Director Paul Chisnall saying that it “isn’t an easy process”. While banks have started work on complying with the law, they were “dependent on getting more clarity from regulators on some of the detail”, he said.
Business leaders call for more EU protections for the City
The Telegraph splashes on a new study called “Change, or Go” by a number of leading business people which calls on Prime Minister David Cameron to either secure a number of key reforms to the EU or to be prepared to leave altogether. It calls for a “reversal” of damaging laws for financial services firms and a British veto on future financial services legislation. It also calls for “a permanent mechanism for protecting the non-eurozone states” to ensure the UK Government can never be out-voted by countries belonging to the single currency.
Hopes grow over Greek deal
The Guardian reports that the Greek Government has presented last minute concessions to its creditors ahead of meetings of the heads of eurozone governments this evening. Greece’s international creditors are looking at a deal that would extend the country’s bailout by six months and supply up to €18bn (£12.9bn) in rescue funds.
The Foreign Office and the Association of British Travel Agents have discussed plans to evacuate British holidaymakers from Greece in the event of the country leaving the euro and defaulting on its debts, according to the front page of the Express. Holidaymakers have been advised to carry extra cash with them if they are travelling to Greece.
We are in touch with our banks now more than ever before. That’s because it is easier than ever for us to do our banking.
You can check your balance on a banking app, get text alerts to help you avoid fees and speak to advisers through new innovations like video banking.
European Finance Ministers agree on bank structural reform
Today European Finance Ministers have agreed on a general approach on bank structural reform which recognises the UK’s ringfencing reforms as sufficient. The Commission welcomed the Latvian Presidency compromise and called on to the European Parliament to agree on its position as soon as possible. (Council press release here – just out)
In response the French Banking Federation released a statement warning that the sector risked losing out to the US and UK if exemptions were allowed. Marie-Anne Barbat Layani, chief executive of the French Banking Federation, said: “If the draft proposal is adopted in its current form, this would one of the most shocking financial scandals in European history. French banks are being removed from the market and the funding of French companies is being placed in the hands of other players. Such an exemption is not only unacceptable in terms of the most basic principles of competition, but also contradictory with the very objective of a European regulation, in other words ensuring a level playing field” (Reuters).
Retail banks now “get it”, says top regulator
John Griffiths-Jones, the chairman of the Financial Conduct Authority, has said he is convinced that senior executives in retail banks are committed to rebuilding trust with the customer, the Telegraph (B1) reports.
Speaking at the BBA’s Retail Banking Conference yesterday, Mr Griffiths-Jones said: “I think the retail banking sector has really got it. It will take time to work through, and I say it on trust, but… [I think the executives] really mean it.”
He added that the onus should be on wholesale banks to reform themselves, rather than the regulator to do so. “We need the industry players to do it themselves, with oversight,” he added. “I hope the message has got through to the wholesale industry, and they can get on and do it themselves.”
In a speech at the same event, Antonio Horta-Osório, the chief executive of Lloyds Banking Group, said new regulation would only stop when the public is certain banks have cleaned up their act.
Greek banks teeter on the brink, EU officials warn
With talks between EU leaders and the Greek government still in deadlock, some European officials have warned that the country’s banks may not open next week, City AM and other newspapers report. The Mail (p81) reports that sterling has strengthened to a seven-month high amid the Greek crisis.
The BBA has issued the following statement on what the situation means for UK banks and their customers: “The UK banking industry has very low exposures to Greece and we are confident that Greece’s decision will have a minimal impact on banks and their customers in the UK. Anyone who is on holiday or working in Greece and fears that they might be affected should contact their bank in the first instance. If they have concerns relating to travel they should contact their travel insurance provider.”
New private bank to focus on digital offering
Hampden and Co today becomes the UK’s first new private bank for 30 years, the FT (£, p21) reports. The start-up will focus on providing better digital services than its peers. Graeme Hartop, Hamden’s chief executive, said: “There is no doubt new players coming in are having an impact on the wider market place and it is bringing in effective competition.” He said existing wealth managers were facing increased competition from low-cost alternatives. You can read the BBA’s report on the contribution made to the UK economy by the private banking industry here.
Customers able to access banking services in more ways than ever before
Mobile and internet banking, alongside banking services offered through the Post Office, means that banks customers are “better served than ever before”, according to research published by the BBA. The Telegraph (B4) notes that 99.9% of customers live within a 20-minute drive of a bank branch or Post Office. The article quotes BBA Chief Executive Anthony Browne, saying:
“It is now easier than ever for people to do their banking. You can check your balance, pay back a friend digitally or speak to your bank for advice 24/7. That means we are all in touch with our banks now more than ever before. But technology is not for everyone which is why all the major banks have done deals to allow you to do basic banking through Post Office branches. That means there are now more places where you can bank than ever before.”
Read the BBA’s full press release here.
Ahead of today’s BBA Retail Banking Conference, Mr Browne appeared on 5live’s Wake Up to Money (36:00) and Radio 4’s Today programme (19:00) to discuss the widening access to banking services and digital banking. He noted that banking is going through a “digital revolution”, and that mobile and internet banking is “driven by customer demand, it’s what customers want”. However, he added that the bank branch is not dead, with a number of banks upgrading their branches and expanding their branch network.
Bank stress tests criticised
An Adam Smith Institute report has called for the Bank of England’s stress tests to be scrapped, describing them as “fatally flawed”, writes the FT (£, p2). The report, written by Durham University’s Professor Kevin Dowd, argues that the tests are “worse than useless” as the Bank set the bar “too low for minimum capital requirements and left itself open to banks manipulating their risk-weighting models”. The report notes that the tests “failed to apply a minimum ratio of capital to leverage”, and that they are “sleep-walking” the banking sector into another financial crisis (CityAM, p10). In response, the Bank declined to comment but pointed to evidence given by BoE official Alex Brazier to the Treasury Select Committee, in which he described the programme of tests as “really tough” and “a big step forward for macroprudential policy”.
Fed set to raise rates
The US Federal Reserve has signalled a possible rise in interest rates as soon as September, reports the FT (£, p1). The committee expressed “cautious optimism” for the US economy, but indicated that the pace of tightening would be slow. 15 of the 17 officials at the central bank expected a rate rise by the end of the year, however the committee appear to be “heavily divided” as to whether there would be one or two increases in interest rates in 2015. The Times (£, p39) notes that the Fed lowered expected rates at the end of 2016 to 1.625% from 1.875%, and at the end of 2017 to 2.875% from 3.125%.
People are now in touch with their bank more frequently than ever before, according to new research by CACI for the BBA.
Welcome to the BBA’s Retail Banking Conference – follow all the action on out live blog and Twitter page @bbavoice
(Hosted by the BBA and organised by the CSFI – with Graham Bishop and Nickolas Reinhard of Afore Consulting)
The three topics discussed in this vlog were Brexit, Grexit, & PSD2.
BBA: UK less attractive for banking
The BBA’s Chief Executive Anthony Browne has said that some banks have quietly moved business and jobs away from London in response to increasing tax and regulatory burdens, the Times (£, p37) reports. Speaking at the BBA’s annual summer reception last night, Mr Browne said that the head of one international bank told him that the Government had “acted like an African dictator” raiding banks’ balance sheets through the Bank Levy.
Mr Browne is quoted saying: “Every day I speak to banks from across the globe who have invested in the UK. They tell me that they are moving business and jobs back home or to other rival financial centres. They aren’t doing it on a whim. They give me frighteningly detailed analyses of why the UK is no longer an attractive place to do banking. What was a trickle is, I fear, turning into a flood.”
Eurozone bonds volatile as Greek talks go on
Growing fears that Greece will not agree a bailout deal at tomorrow’s finance ministers’ meeting sparked talks of an emergency weekend EU summit and caused Eurozone bonds to experience one of their most volatile days since the Greek general election five months ago, the FT (£, p1) writes. Yesterday Greek prime minister Alexis Tsipras denounced a compromise plan presented by his country’s bailout monitors as “humiliating for our people” and accused the International Monetary Fund of “criminal responsibility” for the country’s economic state.
Chancellor George Osborne has stepped up UK contingency planning for Grexit, the paper adds, and says that although he and Governor Carney believe the UK financial system can withstand a Grexit, they are worried about the knock-on effect on economic confidence.
Elsewhere, BBC News reports that the president of the European Commission, Jean-Claude Juncker, has accused Mr Tsipras of misleading voters and said that the Government had not told the truth about its bailout proposals.
Lloyds’ chief executive to speak in favour of ringfence
Lloyds Baking Group’s chief executive, António Horta-Osório, will tomorrow tell the BBA’s retail banking conference that the ringfence makes the financial system stable and as such should benefit even those banks which are feeling the pain of the structural reforms, the Telegraph reports (B1). Click here for more information about tomorrow’s conference.
What are the advantages for Britain of having such a strong, competitive banking industry? Emily Hoquee picks over the details of a new BBA report highlighting many of the secret benefits of banking.
Banking is all around us.
It affects the way we organise our daily lives, helps us with life-changing decisions, like buying our first home, or the smaller things, like paying our bills on time.
Consumers taking advantage of contactless cards have together saved over 90 years of time since they were introduced, a new publication by the BBA has found.
The publication says that on average it takes half a second to “wave and pay” by contactless card, while it takes seven seconds to pay by chip and PIN.
EU’s Bank Structural Reform proposals to respect Vickers reforms
The Independent (p51) writes that the UK “looks set to be exempt” from the EU’s Bank Structural Reform proposals due to the UK’s Vickers reforms. The draft proposals are expected to be handed to EU finance ministers on Friday. Reuters reports that under the new proposals “a bank with retail deposits of less than €35 billion will not be subject to the EU law”. The new draft is down from €50 billion under previous EU proposals.
The rise and rise of digital banking
The Telegraph (B1) reports on the rise of digital banking as Lloyds Bank announce the launch of a pilot scheme to allow customers to pay in cheques by taking a photo on their smartphone. Barclays currently has 30,000 customers signed up to use its cheque imaging service. These developments come ahead of an industry-wide cheque imaging service being launched in July 2016.
The Telegraph also reports on figures from the BBA’s latest report “World of Change” which shows that mobile apps are now the most popular way for customers to check their bank balances.
Goldman Sachs has also announced plans to launch an online business bank offering loans to consumers and small businesses in the US (FT, £, 17).
Reform on the horizon for securitisation market
The FT (£, p39) cites research by Moodys looking at investors’ concerns about securitisation. Moodys’ findings suggest that growth in the market is hampered by the current capital requirements and dependent on more bank investors joining the market. Investors want to see a “change in the capital framework for banks that hold structured finance instruments” to create more liquidity in the market.
The report’s findings come at the same time as the EU is focussing on potential reforms for securitisation as part of Commissioner Hill’s proposals for Capital Markets Union. Last week Lord Hill said the Commission would announce new proposals in September to change the requirements of capital charges on securities. Read the BBA’s latest blog on Capital Markets Union.
The banking industry has undergone a number of major reforms since the financial crisis. Over 80 pieces of legislation have been passed to make the financial system more stable and secure. Banks have substantially increased the amount of capital they hold to ensure that the taxpayer never again has to bail out a bank. Changes to remuneration mean that risk…
Can the way we spend, move and manage our money ever have changed so much and so quickly? This transformation has been astonishing and this exciting journey is still only just beginning.
Millions of British people have embraced mobile and internet banking, but BBA Chief Executive Anthony Browne outlines other technological innovations that may soon be available to customers.
Mobile banking overtakes branch usage for the first time
The front page of the Telegraph (B1) business section reports on latest figures from the BBA which show the rise of digital and app banking. New research from CACI for the BBA shows that customers will use mobile devices to check their current accounts 895 million times in 2015, more than the 705 million branch interactions. By 2020 they are forecasting that customers will use their mobile to manage their current account 2.3 billion times – more than internet, branch and telephone banking put together.
UK customers have downloaded banking apps on 22.9 million occasions by the end of March this year – a rise of 8.2 million in just one year. Customers moved £2.9 billion a week using banking apps in 2015 – up from £2 billion in 2014. The Guardian reports that at the same time branch footfall has fallen by 6% in the last year and that telephone banking has dropped by 43%. The story is also picked up by the FT (£) and CityAM (p8).
In a separate article in the Telegraph (B2), BBA CEO Anthony Browne looks at how intelligent use of data could radically change the way we bank. He says it will soon be possible to “marry the vast amounts of data banks hold about our spending with the GPS-enabled mobile phone. The possibilities are staggering. You wander into your favourite clothes retailer, say. Your bank knows you are a regular customer and can alert the retailer, who can then offer you exclusive extra discounts.”
Tyrie calls for clarity on Bank Levy
Re-elected Chairman of the Treasury Select Committee Andrew Tyrie has called for clarity over whether the Bank Levy should be seen by the Treasury as a tax to change behaviours or a revenue raiser. He told the Weekend FT (£, p2): “At the Budget the chancellor gave a return to profitability as one justification for putting up the levy. That suggests the contributions are no longer reflecting risk to the economy but banks’ capacity to pay. I’m not advocating a reduction in taxation but in the longer run clarity will be needed as to whether the levy should be thought of as a tax targeted at balance sheet risk or just a source of revenue.” The Sunday Times (£, B5) suggests that Chancellor George Osborne may look to reform the Bank Levy in the Budget in July.
Banking by smartphone and tablet has become the leading way customers manage their finances, as mobile banking overtakes branches and the internet as the most popular way to bank.
FEMR: policy makers want cultural change
Martin Wheatley, chief executive of the Financial Conduct Authority, has described the recommendations set out in the Fair and Effective Markets Review as an “important inflection point” and “the start of a change” (FT, £, p1-2). Speaking to the paper, Mr Wheatley called for “something more” than escalating fines for misconduct, adding: “The penalties aren’t enough. Cultural change – that’s really the aim of this – not to send people to jail.” FEMR examined the way that the fixed-income, currency and commodities markets rules operate and has called for a new code of conduct. The FCA estimates that 131,000 senior and certified financiers – including for the first time those at hedge funds and asset managers – would be subject to the rules. Mr Wheatley also suggested that the rules could be “internationalised”, given the global nature of FICC activities.
Also speaking to the paper, Charles Roxburgh, director general of financial services at HM Treasury said that competition was a “big theme” in the review, adding: “They are powerful laws that the competition authorities have: it’s clear they apply to these markets. We wanted to catalyse a process to ensure that everyone understands that.” Bank of England deputy governor Minouche Shafik is quoted saying that “banker bashing” will end “when banks are safe and have good standards of conduct”. Elsewhere, Reuters reports that the BBA has welcomed the widening of the rules to trading firms beyond banks. Click here to read the BBA’s response in full.
IMF negotiators pull out of Greece talks
The International Monetary Fund yesterday withdrew its negotiating team from talks with Greece over the country’s soon-to-expire €172 billion bailout, the FT (£, p1) reports. Greek prime minister Alexis Tsipras was told that his government must quickly decide whether to accede to more economic reforms or face bankruptcy. As IMF negotiators pulled out, European leaders said the time for compromise over a bailout deal had come to an end. The paper quotes Donald Tusk, president of the European Council, saying: “We need decisions, not negotiations, now. It’s my opinion that the Greek Government has to be, I think, a little more realistic.” The article says that since April, the Greek Government has promised that a deal would be agreed “within a few days”. George Pagoulatos, an economics professor at Athens Business University, adds: “There’s clearly no desire within the Syriza Government to tackle the consequences of a default – let alone a ‘Grexit’.”
The BBA’s Director of Financial Crime Justine Walker urges banks to participate in a World Bank survey looking at the effects of “de-risking”.
Fair and Effective Markets
The Governor of the Bank of England used his Mansion House speech to announce the findings of the Fair and Effective Markets Review. Declaring an end to ‘the age of irresponsibility’ and “ethical drift”, the Governor unveiled 21 recommendations to strengthen accountability in fixed income, currency and commodity markets.The FT (£, p3) reports that as part of the recommendations the new Senior Managers Regime will be extended beyond senior bankers to cover “shadow bank” participants in the fixed income markets, which is expected to include asset managers, interdealer brokers and hedge fund managers. The proposals will also create common standards for training and qualifications and see the establishment of a new industry-led market standards board to promote best practice.
Commenting on the proposals in the Times (£, p42) the BBA’s Chief Executive Anthony Browne noted that the industry would examine the details of the review, adding: “It’s vital that London once again sets the gold standard for fair dealing and integrity in financial markets. We welcome the intention to extend regulation from banks to other types of trading organisations. This should give customers greater clarity and protection.”
A world leading industry
Chancellor George Osborne used his annual Mansion House speech to put forward his vision for UK financial services. Five years from now, he called on the industry to be “the best regulated in the world, with markets of unquestioned integrity and the highest standards of conduct.” He added: “There will be more competition, more innovation and more players in retail markets – offering customers a better service.” Responding to his speech, BBA CEO Anthony Browne welcomed the Chancellor’s words, stating: “We share his ambitions for a City that is the best regulated in the world and has the highest standards for conduct, with greater innovation and more competition.” However, he cited growing concerns about the competitiveness of Britain as a place to do business. “That’s why we have called for – and will continue to call for – the Government to carry out a strategic review into the taxation of banks in the UK”.
Sale of RBS
The Chancellor also announced that the Government will start selling it’s £32 billion stake in RBS, noting that any further delay would be bad for the economy, the taxpayer and the bank. The Chancellor revealed he had been advised by Bank of England Governor Mark Carney that it was “in the public interest for the government to begin now to return RBS to private ownership” (FT, £, p1). The Times (£, p1) reports the share sale to City institutions will go ahead within months.
Commenting on the Chancellor’s Mansion House speech, BBA Chief Executive Anthony Browne said:
“The Chancellor said some important words tonight about how a successful banking industry is good for Britain. We share his ambitions for a City that is the best regulated in the world and has the highest standards for conduct, with greater innovation and more competition.
Commenting on the publication of the Bank of England’s Fair and Effective Markets Review’s final report, the BBA’s Chief Executive Anthony Browne said:
“It’s vital that London once again sets the gold standard for fair dealing and integrity in financial markets.
BBA EU Policy Advisor Claudia Trauffler recounts the highlights and central topics of the European Commission’s CMU conference.
The BBA’s Head of EU Affairs Ashley Dorrington lays out our suggestions for ways in which the European Commission could get more out of a CMU.
BBA Government Affairs Advisor Jonny Suart gives an update as the EU Referendum Bill gets its first airing this parliament
Mansion House speech speculation
The Independent (p6) writes that the Chancellor will not “retreat” over the levy, but will instead announce that there will be no “further increases”, arguing that banks’ tax burden has reached an “appropriate level”. However, the Times (£, p39) reports that Chancellor George Osborne will use his Mansion House speech to announce that the Bank Levy will be “phased out in its current form”. The article states that the levy will be replaced by a “new corporation tax surcharge levied solely on UK assets”.
Lord Mayor Alan Yarrow will make a “hard-hitting” speech, stating that those who misbehave must face punishment, writes CityAM (p1). He will say: “It’s like a supermarket with no security cameras – if you take something without paying, it is theft. People should uphold professional standards, irrespective of whether the regulators are there or not. It’s up to managers to set that tone.”
The FT (£, p1) reports that the Chancellor will announce legislation which will ensure that future governments run budget surpluses in “normal conditions”. Mr Osborne will say: “In the Budget we will bring forward this strong new fiscal framework to entrench this permanent commitment to that surplus, and the budget responsibility it represents.”
“Treaty change” door opens for Cameron
Prime Minister David Cameron will be able to “exploit plans to change EU treaties” in time for a 2017 referendum, according to a document seen by the Times (£, p15). The report, prepared for Commission president Jean-Claude Juncker, sets out a “two-stage process to rewrite the EU rules between now and mid-2019”. The article suggests that Cameron could attach his demands to the first step of this process which involves a “tidying-up exercise” by spring 2017, including limited treaty change. This would then be followed by a “big revision” in 2019. Open Europe’s Stephen Booth said that the proposals gave the UK Government a chance “to remould the EU and establish different levels of integration for those outside the single currency”.
Anti-money laundering review delayed
A government review into anti-money laundering laws has been delayed until the end of year, writes the FT (£, p3). The Financial Action Task Force is expected to launch its own review of the UK’s laws in early 2016. The article suggests that rules around Politically Exposed Persons (PEPs) “could be tightened”. In a separate report, corruption watchdog Transparency International has described the current methods for seizing corrupt assets in the UK as “not fit for purpose” (FT, £, p3). The report states that the police lack the necessary resources as they acted on only seven out of 14,000 tip-offs last year, and concludes that legal processes are “woefully inadequate” (Independent, p49).
HSBC reshapes business
HSBC plans to reshape, reducing in size by 10% in order to cut costs and simplify its business (BBC). News of these plans – which include a sale of HSBC’s businesses in Turkey and Brazil, and reducing UK-based jobs by 8,000 – came ahead of a presentation to be given by bank chief executive Stuart Gulliver. Mr Gulliver said in a statement: “We recognise that the world has changed and we need to change with it. That is why we are outlining the following… strategic actions that will further transform our organisation.”
UK launch for Apple Pay in July
Apple Pay has announced that it will come to the UK next month and be available in more than 250,000 locations (Guardian, p19). Participating retailers include M&S, Costa and Waitrose, as well as Transport for London. Britain is the first country outside of the US to have access to Apple Pay, which will be compatible with 70% of credit and debit cards. The new payment method allows customers to make purchases using a phone or watch using the same technology as contactless cards. Google’s recently launched Android Pay is expected to rival Apple Pay and, according to reports, won’t charge credit card issuers fees in the way Apple Pay does (Payments Cards & Mobile).
Basel propose capital rule for interest rate risk
The Basel Committee has published a document setting out two proposals obliging banks to set aside capital to cover the risk of interest rate changes to their earnings and core financial cushions (Reuters). Though banks do already set capital aside, there is currently no fixed global capital rule to cover interest rate risk. BBA Executive Director of Prudential Capital and Risk, Simon Hills said: “Different banks have different business models so a “one-size-fits-all” Pillar 1 approach could be difficult to apply. It might also mean that all banks choose to use the same mechanism for managing interest rate risk, which is likely to reduce diversity and customer choice. We’re pleased that the committee has acknowledged that an alternative Pillar 2 approach will be possible.”
Rumours that Government could announce Bank Levy review
The front page of the Weekend FT reported that Chancellor George Osborne would signal an end to “banker bashing” in his Mansion House speech this week. “We have reached a position that is sensible — there is a sense that this is a settlement,” said an Osborne aide. “We are in a stable position.” The Sunday Times (£, B1) reported on speculation that the Chancellor might announce a review into the Bank Levy on Wednesday.
Bloomberg reported that the BBA had written to Treasury Minister David Gauke asking the Government to launch a review into bank taxes in the UK. In the letter BBA Chief Executive Anthony Browne said: “The time is overdue for a strategic review of the Government’s policy for taxing banks, to ensure that the tax regime for banking remains competitive.” The letter was picked up by the Times (£, p40), FT (£, p1) and the Guardian (p20). Appearing on CNBC this morning, Mr Browne said: “The Bank Levy is not the only issue making the UK a less attractive for banks to do business. There are also wider concerns about regulation and moves on remuneration – there is an understanding of this in Government. We can’t throw the baby out with the bath water.”
Fair and Effective Markets Review to “say quite significant things”
Reuters also looks ahead to the Mansion House speech and the announcement of the results of the Fair and Effective Markets Review. It anticipates announcements on tougher sanctions for wrongdoing and making it more difficult for “rogue traders” to move to a new company unchallenged. It quotes Martin Wheatly, chief executive at the Financial Conduct Authority saying: “It is going to say some quite significant things about what the scope of regulation should be for asset classes that historically have not been heavily regulated”.
In an interview with the Independent (p50) Lord Mayor Alan Yarrow said that he hoped the new rules would be developed collaboratively: “If someone spends their time just shoving rules down people’s throats no one will go with the spirit of it. What is critical about this is that it is made not just about a regulator coming down from on high and dumping regulation without any consideration about what has been happening to the market. The regulator is always behind the curve. So you need to have management properly engaged, knowing fair and clean markets are what we need to maintain in everybody’s interests.
“I want to hear about a Fair and Effective Markets Review done not only with consultation from the industry – which I think has been done – but with support for the changes they are recommending, which I expect to hear more about this week. I would like to see that there is full agreement with the companies involved to what changes take place; in other words, they have been party to the decisions. We have suffered from a distancing of the practitioner from the regulator.
Our City is a very important economic engine, and it is vital to the future of this country. We need to get people in the same room to get a sensible, pragmatic approach so the regulator is up to speed with what’s happening next in the City. This is in everyone’s interests.”
Lord Wallace has warned that he and other Liberal Democrat peers could hold up the referendum bill’s passage through parliament, telling the Times (£, p4) that the Salisbury Doctrine did not mean that the Lords had to approve all manifesto commitments: “In an exceptional circumstance, the Lords can say no,” he said. David Cameron has threatened to sack any Ministers who call for an “out” vote in the upcoming EU referendum (Guardian, p1). Leading candidates for the Treasury, Foreign Affairs and BIS select committees have all suggested that they will undertake a review of the costs and benefits of EU membership, according to the Independent (p54). Conservative eurosceptics have expressed “outrage” at the Government’s decision to scrap purdah rules limiting government spending during the referendum campaign (Express, p1)
The BBA’s Executive Director of Business Finance, Irene Graham, calls for entries for female-led business award.
IMF urges Fed not to raise rates
Christine Lagarde, managing director of the IMF, has urged the US Federal Reserve not to hike interest rates until next year. The IMF has predicted that the US economy should grow 2.5% this year, but said the time was not right for a rate rise and that the central bank should be mindful of the potential consequences for the rest of the world. The FT (£, p5) writes of these effects: “Central banks in emerging markets are braced for the possibility of large scale capital outflows, as investors pull their money from Latin America and Asia and return it to higher-yielding US assets”.
Payment processer Worldpay to float
The FT (£, p15) reports that Worldpay – previously part of RBS – has appointed Bank of America Merrill Lynch, Goldman Sachs and Morgan Stanley as global co-ordinators as the payment processing company prepares to float in London. The paper says that the company is seeking a valuation of around £6 billion, which would make it one of the biggest UK IPOs this year. It is likely to be marketed as a fintech provider. The article goes on: “Payment processors hope to take advantage of the consumer shift to online payments that accompanied the advent of widespread broadband and smartphone use. European regulators have been trying to increase competition in the sector and encourage participation in the payments industry from non-banks”.
Credit ratings agency warn over investor confusion
Analysts at credit ratings agency Fitch have said that too much variability in the way that banks report their numbers means that investors cannot fairly compare banks’ capital buffers and financial soundness (CityAM, p4). The company criticised the Basel Committee on Banking Supervision’s Regulatory Consistency Assessment Programme (RCAP), saying it is “making slow progress in reducing risk weighted asset variability and there is limited transparency on which banks’ ratios might be overstated”.
Greece to skip IMF payment
The Greek government will not make the €300 million payment due to the International Monetary Fund (IMF) today, choosing instead to bundle all debts due in June together and pay them at the end of the month – a total of €1.6 billion. The Telegraph (B1) reports that this will be the first time that a developed country has ever missed a payment to the IMF since the creation of the Bretton Woods institutions at the end of the Second World War.
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