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Chancellor outlines approach for EU negotiations
The FT (£, p4) reports that the Chancellor Philip Hammond has said the UK must adopt a realistic negotiating position with the rest of the European Union to avoid facing years of damaging economic uncertainty. Mr Hammond said: “I think what will start to reduce uncertainty is when we will set out more clearly the kind of arrangement we envisage going forward with the EU.” He also said a potential trade deal with China represented a significant opportunity in the next “couple of years” (Times, £, p2).
EBA to publish latest stress test results
The Times (£, p35) reports that the European Banking Authority will reveal the results of its latest stress tests on Friday, with the spotlight expected to focus on the state of Italy’s banks. British banks are expected to perform strongly in the EU-wide tests as they have built up their capital reserves and written down debts more aggressively than some of their continental rivals. The Guardian (online only) separately reports that UK high street banks are preparing to set out how they will respond to the interest rate cuts when they start to publish results later this week.
Foreign Secretary provides reassurance over passporting
Foreign Secretary Boris Johnson has moved to assuage concerns that the UK will lose financial passporting rights following the vote to leave the EU (Telegraph, online only). Speaking in New York, Mr Johnson said he “expected” that passporting would be maintained because it was in the interests of both the UK and the Eurozone (FT, £, online only). He also said that London would remain a world leading financial centre due to its deep pool of capital markets.
Dr. Rebecca Harding, Chief Economist at the BBA, looks at what upcoming data could mean for the direction of interest rates.
Eric Leenders, the BBA’s Managing Director for Retail and Commercial Banking, blogs about a new report demonstrating how a consumer-led revolution is transforming the way that we interact with our banks.
Ian Fiddeman, the BBA’s Policy Director for Retail Banking, blogs about the launch of the new Standards of Lending Practice and how they will help customers.
BBA publishes new Way We Bank Now report
The latest BBA Way We Bank Now report – Help at Hand – has been published today. BBC News leads on how the increasing popularity of mobile banking apps has led to fewer people using internet banking, while the Guardian noting that payments via apps soared by 54 per cent in 2015. New CACI data also shows the number of visits to bank branches has fallen from 476 million in 2011 to 278 million in 2016 as more people using digital technology. This is expected to continue for the next five years, with 185 million visits in 2021.
The report was also covered by City AM (p8), the Sun (p47, paper only), the i (p51, paper only), Daily Mail (online only), Daily Mirror (online only), Banking Technology and Finextra. BBC Breakfast also ran a feature on the report.
BBA Chief Executive Anthony Browne said: “We are in the midst of a consumer-led revolution in the way we do our day-to-day banking. Customers love the new technology that is allowing us to bank round the clock.
“You can set up standing orders while standing in the queue for the bus and check your balance while checking in at the airport. The choice now on offer from banks, from state-of-the-art branches to cutting edge apps, has put customers firmly in the driving seat on the way we bank.”
New figures show higher fraud levels
New figures from the Office for National Statistics have revealed that almost six million fraud and cyber crimes were committed last year in England and Wales (BBC News). The official crime survey showed that fraud is the most common type of crime. The FT (£, p3) notes that half of the three million cases of bank fraud came through the internet. Brandon Lewis, policing minister, said: “As crime falls, we know that it is also changing. Fraud and cyber offences are not a new threat and the government has been working to get ahead of the game, committing to spend £1.9bn on cyber security and cyber crime over the next five years.”
Customers are using mobile banking apps more than 7,610 times a minute, or 4 billion times a year, as part of a “consumer-led revolution” of personal finance, according to a new report by the BBA.
We have more choice than ever about how, when and where we manage our money. Driven by consumer demand, digital innovation in banking is rapidly rising and giving us flexibility to manage our money on our terms.
The BBA’s influential Way We Bank Now report shows that through the use of digital technology we are in contact with our bank more than ever before. And for the first time customers are preferring to use mobile apps more than banks’ websites.
Peter Farley, Capital Markets Strategist at Misys, blogs about a webinar looking what banks need to do to be compliant with the new Fundamental Review of the Trading Book.
FCA may intervene on overdraft fees
Andrew Bailey, Chief Executive of the Financial Conduct Authority, has stated that the regulator may investigate possible “consumer detriment” caused by overdraft charges (Times, £, p41). Mr Bailey said that the FCA “can do more than the CMA [Competition and Markets Authority]”, which is set to publish its final report on the retail banking sector next month. He described recent research by Which? that found overdraft costs could be higher than payday loans as a “useful point”. Mr Bailey also raised concerns over the peer-to-peer lending sector (FT, £, online only).
Tyrie claims Brexit could boost smaller banks
Andrew Tyrie, Chairman of the Treasury Select Committee, has stated that Brexit could benefit smaller banks because of the “one size fits all” approach of European Union regulation to capital and other requirements (Reuters). Mr Tyrie said: “The Bank of England and the government both now need to consider whether the opportunity afforded by Brexit could enable the development of a regulatory regime less prejudicial to small and challenger banks.” A group of seven smaller lenders wrote to Mr Tyrie after Britain voted last month to leave the EU to highlight “major barriers to effective competition” (City AM, p8).
BT fault hits bank customers
A number of BT customers experienced problems with its broadband and telephone services yesterday, which in turn led to temporary disruption of online banking services at several lenders (BBC News). A BT spokeswoman said: “Around 10 per cent of customers’ internet usage was affected following power issues at one of our internet connection partners’ sites in London. The issue has now been fixed and services have been restored.” The fault came a day after BT’s Openreach internet infrastructure business was criticised by MPs over its alleged failure to “adequately” invest in fast fibre.
BBA Policy Advisor Ariane Poulain discusses how digital innovation in banking is helping us to manage our finances on the move and make our money go further.
Bank of England says no ‘sweeping solution’ for banks after Brexit
Bank of England Deputy Governor Sam Woods has warned that relying on MiFID II – the European Union’s securities rules that come into force in 2018 – to allow banks access to the single market after Britain leaves is not a “sweeping solution” (Reuters). Speaking before MPs on the Treasury Select Committee, Mr Woods said: “It would be hard to be confident that would be a sweeping solution for everything, partly because of the scale of this activity at the moment […] “While I think it’s important, it wouldn’t place too much weight personally on the fine specificities of MiFID II or indeed any other one piece of the passporting regime.”
Bailey outlines plans for FCA
Andrew Bailey, the new Chief Executive of the Financial Conduct Authority, has said that the regulator will continue to apply all European Union rules until there is clarity on future relations with the bloc and that there would be no “bonfire of regulations” (Reuters). Mr Bailey also told his first annual meeting that the FCA is working on a new mission statement which it hoped to publish in the early autumn for consultation. He also insisted that there was “no agenda” to bring back light-touch regulation amid criticism over how he was appointed without an interview after Martin Wheatley was sacked from the regulator (Times, £, p36).
IMF warns of Brexit ‘spanner in the works’ of global growth
The Guardian (p1) reports that the International Monetary Fund has cut its forecasts for the UK economy next year after Britain’s vote to leave the EU and also warned it has “thrown a spanner in the works” of the global recovery. The IMF is now forecasting UK growth of 1.3 per cent – down from 2.2 per cent – in 2017. It also highlighted the potential stresses that Brexit may cause within the European banking system, particularly in Italy and Portugal (BBC News).
FCA highlights savings account interest rates
The Financial Conduct Authority has published a list of savings accounts that pay the lowest interest rates to consumers (FT, £, p3). Christopher Woolard, Director of Strategy and Competition at the FCA, said: “In a well-functioning market, providers should be competing to offer the best possible deal to consumers. Our Sunlight Remedy data shows that some consumers could be better off by opening a different account.” The Telegraph (p1) notes customers who get poor rates of interest on their savings accounts could soon receive texts or emails to make them aware of better deals (BBC News).
MPs call for post Brexit digital plan
City AM (p3) reports that the Business Innovation and Skills Committee has warned that the UK’s position as a world leading centre for fintech is at risk following the vote to leave the European Union. The committee’s report highlights the importance of the EU’s Digital Single Market, stating: “We could have led on the Digital Single Market, but instead we will be having to follow. The government must address this situation, to stop investor confidence further draining away.” A separate report from Barclays has found the UK is lagging behind other countries when it comes to digital skills (Guardian, p24).
List of banking ‘conduct costs’ published
The Guardian (online only) reports that the cost of fines, legal bills and customer redress for the world’s 20 biggest banks over the five years to the end of 2015 totalled £252 billion, according to new data published by the CCP Research Foundation. Roger McCormick, CCP’s Managing Director, said: “It remains to be seen whether banks can truly claim that these problems are now behind them (whether or not the costs themselves may be) and reassure us that they are legacy issues.” Fines imposed by the Financial Conduct Authority dropped more than 99 per cent in the first half of 2016 to £7.2 million from £819 million a year earlier.
Dombrovskis focuses on London’s euro trading position
Valdis Dombrovskis, European Union Commissioner for financial services, has stated that it is “too early to draw conclusions” about euro trading activity moving from London (FT, £, p6). Mr Dombrovskis also said that he would pursue “continuity” with the agenda of his predecessor Lord Hill. He also highlighted the importance of the capital markets union initiative: “With the possibility of the EU’s biggest capital market actually leaving the EU, this task becomes even more urgent and even more relevant.”
Bankers fear new industry tax raid
The Sunday Telegraph (B3) reports that leading bankers are concerned about the Government potentially imposing a new tax on the sector to shore up the public finances following the EU referendum vote. An unnamed senior executive at a major bank said: “There will be a tax cost to the Treasury if the economy slowdown and revenues fall. We got a reprieve on the bank levy last year, so perhaps that benefit could be reversed.” The Office for Budget Responsibility predicted the banks would pay £2.9 billion this financial year on the levy, with the rate falling to £2.2 billion by 2020-21.
UK to launch free trade talks
The Daily Mail (p4) reports that the Government is aiming to secure ground-breaking free trade deals with zones ten times the size of the EU before Britain leaves in 2019. Liam Fox, the new International Trade Secretary, is due to fly to the US in the coming days for tentative talks while he also had discussions with the Canadian Trade Minister last Friday. Mr Fox said: “We’ve already had a number of countries saying: we’d love to do a trade deal with the world’s fifth-biggest economy without having to deal with the other 27 members of the EU” (Sunday Times, £, p1).
Dr Rebecca Harding, Chief Economist at the BBA, blogs about the economic outlook for the week ahead in the UK and Europe.
Matt Field, the BBA’s Digital Policy Adviser, blogs about how FinTech is transforming consumer attitudes and expectations when it comes to banking.
Bank of England holds interest rates
The Bank of England yesterday kept interest rates unchanged at 0.5 per cent despite speculation that it would cut them for the first time since March 2009 (BBC News). The Bank’s Monetary Policy Committee voted 8-1 to hold rates, leading to sterling climbing by more than two cents against the dollar immediately after the announcement. The Bank said: “Most members of the committee expect monetary policy to be loosened in August. The precise size and nature of any stimulatory measures will be determined during the August forecast and Inflation Report round.” The Times (£, p39) notes that any additional stimulus will be set out alongside the Bank’s inflation report on 4 August.
European lenders face up to €40 billion capital bill
A report from the Boston Consulting Group has claimed that European banks could be forced to put as much as €40 billion of extra capital into their UK branches as a result of the EU referendum vote (FT, £, p16). The report also said that Brexit will trigger an 8-22 per cent rise in annual costs for the banks’ capital markets divisions, which may prompt banks to withdraw from some activities. The report states: “Clearly, the ability of banks to centre their operations and maintain scale in a single, well-capitalised London entity is now uncertain […] The additional benefits of liquid, robust markets and access to talent as well as clients may be eroded.”
MPs warn over money laundering
The Home Affairs Committee has criticised the Government and the National Crime Agency for failing to prevent the UK property market being exploited by international money launderers (Guardian, p11). Keith Vaz, the committee’s Chairman, said “The proceeds of crime legislation has failed. London is a centre for money laundering, and its standing as a global financial centre is dependent on proactively and effectively tackling money laundering. Investment in London properties is a major route which tarnishes the image of the capital. Supervision of the property market is totally inadequate.” The MPs also called for a new criminal offence to be created for refusing to hand over money and assets derived from crime (BBC News).
Commenting on the latest BBA figures, Mike Conroy, Managing Director, Business Finance said:
“The BBA’s data for Q1 2016 are pre-Referendum but show some nervousness ahead of the result. For example, Q1 showed high lending approval rates against a backdrop of reduced demand, with some £6 billion of new lending facilities approved and the level of lending support has been stable over the past year. It is difficult to predict the impact of Brexit on commercial lending, but as Mark Carney said last week, the Bank of England’s reduction in capital requirements is designed to support bank lending of up to £150 billionn to households and businesses in the months ahead despite interest rates being held today.
“We are continuing to see small and medium-sized businesses build up their cash deposits which, alongside reduced credit applications, suggests that SMEs are uncertain about their own business growth in the uncertain domestic and global economic environment. While SMEs may be finding the uncertainties tough, bank lending will nevertheless continue to be available through 2016 to support their businesses.”
Bank of England set to make interest rate decision
The Bank of England’s Monetary Policy Committee will meet today with economists predicting that it will cut interest rates from 0.5 per cent to 0.25 per cent (BBC News). The Times (£, p41) reports that a cut would mark the first shift of the base rate since March 2009. Gerard Lyons, an Economist at Netwealth Investments, said: “There is a case for interest rates to fall. There is a need to protect against downside risk.” The Bank may also restart quantitative easing, in addition to or instead of a rate cut.
New Prime Minister appoints cabinet
Theresa May has taken over as Prime Minister and set about naming her frontbench team (Times, £, p1). Among the most notable appointments were Philip Hammond replacing George Osborne as Chancellor, Boris Johnson taking over as Foreign Secretary, and David Davis heading a new department dedicated to taking the UK out of the European Union. Mr Hammond told the Today programme (skip to 02:18:00) this morning that: “We have got to make sure in our negotiations with the European Union we have very clearly in our minds the need to ensure access to European Union Single Market for our financial services industry.” David Cameron was given a standing ovation by Conservative MPs after his final Prime Minister’s Questions yesterday (BBC News).
Homes market gives mixed message
The Times (£, p41) reports that a number of housing surveys delivered mixed messages yesterday. The Council of Mortgage Lenders said homeowners borrowed £9.4 billion in May, a 15 per cent month-on-month rise. The CML said that the property market had been “regaining some equilibrium” and that for lenders it was “business as usual”. However, the latest Royal Institution of Chartered Surveyors survey showed interest across the country falling significantly last month because of the Brexit vote. Simon Rubinsohn, Chief Economist at RICS, said: “Big events such as elections typically unsettle markets, so it is no surprise that the EU referendum has been associated with a downturn in activity.”
The BBA’s Executive Director of Prudential Capital and Risk, Simon Hills, blogs about a BBA response on Leverage Ratio proposals
David Wren, the BBA’s Tax Policy Director, blogs about a new corporate criminal offence for companies who fail to prevent tax evasion and the role of new industry guidance in the fight against financial crime.
Theresa May set to become Prime Minister
David Cameron will stand down as Prime Minister later today, with Theresa May set to replace him (Telegraph, p1). Mr Cameron said: “As I leave today, I hope people will see a stronger country, a thriving economy, and more chances to get on in life.” He will tender his resignation to the Queen after Prime Minister’s Questions. Meanwhile, Labour’s National Executive Committee has ruled that Jeremy Corbyn should automatically be included in the leadership contest (BBC News). Pontypridd MP Owen Smith has announced he will stand in the contest.
Carney lays ground for new round of monetary stimulus
Mark Carney, the Bank of England Governor, has said steps to strengthen bank balance sheets after the financial crisis meant there “won’t be a credit crunch”, but stressed that demand for loans depended on the economy (Telegraph, B5). Mr Carney said: “We have been talking to the banks […] and their orientation is outward facing, their balance sheets are in strong positions, they are in the business of taking on risk […] If they have to, they may adjust their risk profit, but they have a lot of capital and they need to put it to work” (Telegraph, B5). He also told the Treasury Select Committee that it is “important” that he and the Chancellor can have private conversations after being challenged about his discussions on Brexit (BBC News).
Foreign Secretary speaks at BBA Summer Reception
Bloomberg reports that Foreign Secretary Philip Hammond said that he will work to support the financial services industry during discussions following the European Union referendum vote. Speaking at the BBA’s Summer Reception, Mr Hammond acknowledged that “financial services industry is probably the most directly affected” by a Brexit and said “we will do our bit to get you the certainty you crave.” He also added: “I know and understand the importance of passporting.” Nick Robinson also featured Mr Hammond’s speech in a package on the Today programme (skip to 1:37:00).
Nominations are open for ifs University College and BBA 2016 Financial Innovation Awards, which seek to recognise and reward innovation in the finance sector.
Theresa May set to become Prime Minister
Theresa May will take over as Prime Minister from David Cameron on Wednesday evening after she was announced as the new Conservative leader last night (BBC News). Mr Cameron announced yesterday that he would chair his final cabinet meeting today before standing down after Prime Minister’s Questions. Andrea Leadsom pulled out of the race to succeed Mr Cameron leaving the path clear for her rival Ms May. Separately, Angela Eagle has formally launched a leadership challenge against the Labour leader Jeremy Corbyn (Guardian, p7).
Banks sign up to Women in Finance Charter
The FT (£, p23) reports that more than 70 banks and other City firms have signed up to the Government’s Women in Finance Charter. The charter set a number of voluntary commitments designed to improve gender balance at financial companies following recommendations by Jayne-Anne Gadhia, the Chief Executive of Virgin Money. Harriett Baldwin, Economic Secretary to the Treasury, said: “By signing the charter, firms are committing to driving change at the senior levels of the male-dominated financial services industry. Such widespread commitment will make a genuine difference to gender diversity in financial services” (Guardian, online only). BBA Chief Executive Anthony Browne wrote a blog on the Women in Finance Charter in May.
Treasury Select Committee to question Bank of England
Bank of England Governor Mark Carney will appear before the Treasury Select Committee this morning in the first appearance since the UK voted to leave the European Union (Times, £, p42). He is likely to face questions over the direction of interest rates, the current account deficit and the fall in sterling. Richard Sharp, an external member of the Financial Policy Committee, will also attend the session.
Rebecca Harding, Chief Economist at the BBA, blogs about whether the Bank of England should cut interest rates later this week.
Simon Hills, BBA Executive Director of Prudential Capital and Risk, blogs the important role played by foreign banks following a recent conference.
Bank of England set to cut interest rate
The Sunday Telegraph (B1) reports that the Bank of England’s Monetary Policy Committee will cut interest rates when it meets on Thursday amid concerns over an economic slowdown. It is also expected that the Bank will launch a new round of quantitative easing to boost growth. The FT (£, p3) notes that Governor Mark Carney has previously highlighted the limits of monetary policy, stating that “as we have seen elsewhere, if interest rates are too low (or negative), the hit to bank profitability could perversely reduce credit or even increase its overall price.”
May promises crackdown on big business
Theresa May has pledged to reform executive pay and install employees on company boards as she launches her national campaign to become Prime Minister (Times, £, p1). The Home Secretary states that too few people are sharing in the country’s economic success and more needs to be done to tackle irresponsible behaviour by big business. The Sun (p2) notes that the directors of Britain’s top 100 companies now earn 120 times the average sum earned by their employees, compared to 47 times more in 2000.
Chancellor begins world tour to reassure investors
Chancellor George Osborne has begun a world tour designed to reassure international investors about doing business with the UK following the vote to leave the European Union (Telegraph, B3). Mr Osborne is visiting New York today and will next week travel to Singapore and China. He said: “My message to the world is that Britain may be leaving the EU, but we are not quitting the world. We will continue to be a beacon for free trade, democracy and security, more open to that world than ever.”
US investment banks show support for London
Following the UK’s vote to leave the European Union, five top US investment banks have said they will “keep working to promote London and its position as a leading financial centre,” (Telegraph b1). The banks – which include Goldman Sachs, Morgan Stanley and J.P. Morgan – made the joint statement with Chancellor George Osborne following a meeting on Thursday. Reuters referred to the legacy of London’s established financial sector, but added that banks “made no commitment” about keeping jobs in Britain.
May and Leadsom in final round of leadership race
After the second MPs’ ballot for the Conservative leadership, Home Secretary Theresa May and Energy Minister Andrea Leadsom are the final two candidates in the running (Guardian p1). The vote, which was announced yesterday evening, means the UK will have its first female Prime Minister since Margaret Thatcher. The Telegraph (p1) reported that Leadsom is likely to attract Eurosceptic activists who want a “Brexit Prime Minister,” whilst the Times (p1) reported that May, who was backed by 199 MPs, has support from “left and right, leavers and remainers”.
Italian banks facing turmoil
The New York Times reports that Italian banks are “spreading fear through global financial markets,” as they’re faced with non-performing loan portfolios, estimated to be around €360 billion – the equivalent of a fifth of the country’s GDP. The Wall Street Journal suggests the crisis is due to “clubby” relationships with regulators and politicians who’ve shielded against “takeovers, competition, layoffs or consolidation,” and that attempts to improve this have been “half-hearted.” The FT (online only) suggests the UK’s decision to leave the EU has exacerbated Italy’s problem, having “pushed equity and bond prices even lower.”
EU urges Basel Committee to avoid disproportionate costs for banks
Reuters reports that European Union Finance Ministers will issue a statement at their meeting next week urging the Basel Committee to avoid imposing a disproportionate increase of costs on European banks. Ministers will say “the reform package would not be expected to result in a significant increase in the overall capital requirements for the European banking sector.” In a joint document, the French and German banking federations said the new rules as they stand “may mean that the capital requirements for banks will rise in some cases by up to a further 50 per cent.”
NCA warns over cyber threat
Criminals are outpacing UK businesses and law enforcement in “cyber arms race”, according to the National Crime Agency. It said there were 2.46 million ‘cyber incidents’ last year, including 700,000 frauds. The NCA highlighted the threat posed “by a few hundred international cyber criminals”, who exploit businesses through malware-facilitated fraud. The Government is to spend £1.9 billion over the next five years on cyber security.
Welcome to my newsletter. The British people took a historic decision in June to leave the European Union. This has led to a political earthquake in Westminster and Brussels, even if day-to-day life for most people remains largely unchanged. The banking industry is united in our commitment to maintaining financial stability, to continue providing great service to our customers and clients, and doing everything we can to support the British economy. As such, the BBA will work with the wider banking industry and other sectors in the coming months to help Government achieve the best possible outcome for the UK.
Bank of England highlights financial stability risks
The Bank of England has outlined a number of risks to the UK economy following the European Union referendum vote (BBC News). Governor Mark Carney said there was a “challenging” outlook ahead, with yesterday’s Financial Stability Report raising concerns over the commercial property market and household debt. The Bank’s Financial Policy Committee also relaxed capital requirements for banks to ensure the availability of credit for households and businesses. Mr Carney said: “If there is a slowdown in credit, it will be demand driven, not supply driven. It’s important to ensure that there is no question about the availability of credit. It is the one thing we want to take off the table.” (FT, £, p2). The Bank also intends to encourage “the Basel Committee to review carefully any possible unintended effects of forthcoming leverage ratio standards” on market liquidity (FT, £, pX).
First round of voting in Conservative Party leadership election
Theresa May last night secured a clear winning margin over her rivals in the first round of voting to become the next Conservative Party leader and Prime Minister (Times, £, p1). The Home Secretary polled more votes from MPs than the other four candidates combined, leading to Liam Fox being automatically eliminated and Stephen Crabb deciding to pull out of the contest. A second ballot tomorrow will decide the final run-off, with either Andrea Leadsom or Michael Gove expected to be eliminated. The contest will be decided by more than 150,000 Tory members.
Business Secretary calls for emergency tax cuts
Sajid Javid, the Business Secretary, has called for urgent tax cuts to boost the economy following the EU referendum vote (FT, £, p2). Mr Javid admitted that a new fiscal stimulus could lead to the budget deficit widening but said it was necessary to encourage investment. He also urged the UK to take advantage of cheap borrowing rates to create a ‘Growing Britain’ fund worth up to £100 billion.
David Northern, Partner at Parker Fitzgerald, blogs about the potential changes to the landscape for UK based banks following the vote to leave the European Union.
Commenting on the reduction of the countercylical capital buffer announced in the Bank of England's Financial Stability Report today, the BBA's Chief Executive Anthony Browne said: "This will boost confidence in the British economy at this time of uncertainty, by enabling banks to lend more to businesses and households. It shows the new regulatory regime working as intended, and is a…
Bank of England set to publish Financial Stability Report
There is widespread coverage anticipating measures that the Bank of England may take when it publishes the Financial Stability Report later this morning. The Chancellor yesterday stated that the Bank and the Treasury could pump up the Funding for Lending Scheme in an attempt to boost the economy after the Brexit vote (Telegraph, p4). The Guardian (online only) also reports that the Bank could reverse plans to increase the countercyclical capital buffer for banks to 0.5 per cent of risk-weighted assets from March 2017.
London’s role in euro clearing in the spotlight
The FT (£, p32) looks at the potential impact on London’s role in euro clearing if passporting rights are withdrawn following the European Union referendum vote. Dirk Schoenmaker, Senior Fellow at think-tank Bruegel, said: “The potential impact for the City of London is that up to 69 per cent of its interest rate derivatives market could move to continental Europe after Brexit.” Euro-denominated swaps trading represents a third of the global interest rate derivatives market, according to data from the Bank for International Settlements. The UK is home to the majority of the euro business.
Investment banking fees drop
Investment banking fees in the UK and Ireland dropped by more than a quarter in the first half of 2016, according to Thomson Reuters (City AM, p2). UK and Ireland fees totalled $2.5 billion in 2015, down 28 per cent, while Europe as a whole was down 26 per cent. Ian Gordon, Investec’s head of banks research, said: “[It] provides a foretaste for an extremely challenging outlook for IB revenues going into the second half of this year and beyond – which will be met by further rounds of rationalisation and cost reduction.” He also highlighted the decline in mergers and acquisitions activity and initial public offerings.
Latest Northern Ireland borrowing details for individuals and businesses are available for more than 9,000 postcode sectors. The industry-wide data is compiled jointly by the BBA and the Council for Mortgage Lenders and complements existing publication of data for postcode sectors in Great Britain. Participating lenders also publish their own figures on their websites. Notes to editors 1. Which lenders…
Latest GB borrowing details for individuals and businesses are available for more than 9,000 postcode sectors. The industry-wide data is compiled jointly by the BBA and the Council for Mortgage Lenders. Participating lenders also publish their own figures on their websites.
Dr. Rebecca Harding, Chief Economist at the BBA, blogs about what the EU referendum vote means for monetary policy in the UK ahead of tomorrow’s Financial Stability Report.
Chancellor outlines Brexit recovery plan
The Chancellor has pledged to cut corporation tax to below 15 per cent in an effort to encourage businesses to continue investing in the UK following the EU referendum vote (FT, £, p1). In an interview with the FT (£, p3), George Osborne said: “We’ve got to pick ourselves up and make the best of it and make the most of it. I don’t sit here feeling sorry for myself, feeling somehow that it is all going to unravel. Quite the reverse.” He also outlined plans to strengthen the UK’s relationship with China, with another trade visit planned for later this year.
Carney to encourage banks to keep lending
The Sunday Times (£, B1) reported that the Bank of England is expected to outline measures to boost lending, including loosening capital buffer requirements for the banking sector, when it publishes the financial stability report on Tuesday. The Guardian (p18) quotes economists at Investec as saying: “Tuesday’s financial stability report could prove to be significant, perhaps for a cut in the counter-cyclical capital buffer. The governor conveyed a concrete message that financial and monetary policy will act in the same direction. Presumably this applies to credit policy too, with the possibility of a widening and an extension in the funding for lending scheme.” Interest rates are also expected to be cut from their historic lows over the coming months.
Challenger banks increase competition
The Telegraph (B1) reports that twenty new banks are seeking a license from the Bank of England to launch in the UK. Six banks are part-way through the process of applying for a licence, while another 14 have held pre-application talks with the Prudential Regulation Authority. The PRA’s former Chief Executive Andrew Bailey has previously said that making it easier to secure a banking license is part of increasing competition in the sector, as well as ensuring that banks can fail without being bailed out by the taxpayer.
Carney vows to take action following EU referendum vote
The FT (£, p1) reports that Bank of England Governor Mark Carney yesterday declared that the central bank would take “whatever action is needed to support growth”, which probably included “some monetary policy easing” in the next few months. Mr Carney also said a downturn was on its way and the UK was already suffering from “economic post-traumatic stress disorder”.
The Sun (p10, paper only) reports that a number of banks have this week confirmed they will remain in the UK and not move jobs overseas. At a conference organised by TheCityUK, HSBC and Barclays both confirmed they say they will stay in the UK following the Brexit vote (FT, £, p17). However, the European Banking Authority is reportedly looking to move from its Canary Wharf headquarters (FT, £, p23). The FT (£, p11) also has a special report on whether the referendum vote will lead to banks shifting activity to other financial centres.
Boris Johnson yesterday pulled out of the race to become Conservative Party leader and Prime Minister after Michael Gove withdrew support for his candidacy and instead put himself forward (Times, £, p1). Other candidates include Home Secretary Theresa May, Work and Pensions Secretary Stephen Crabb, Energy Minister Andrea Leadsom and former Cabinet Minister Liam Fox.
Banks warned over conflicts of interest by new standards board
Banks have been warned about conflicts of interest by the FICC Markets Standards Board, the new body charged with cleaning up the City, according to the FT (£, p22). A year after the Bank of England and Treasury called for its creation, the body made its first concrete proposals yesterday focussing on reference-price transactions. Elizabeth Corley, interim Chair of the board, said: “The new standard is intended to give clear guidance to traders and market practitioners about what is acceptable conduct in the context of these types of transaction and create greater clarity about what good market practice looks like and what types of practice should be avoided.”
Simon Hills, BBA Executive Director of Prudential Capital and Risk, blogs about the Basel Committee’s consultation on reducing variation in credit risk-weighted assets.
Reaction to EU referendum vote
The FT (£, p2) reports that the Bank of England called in senior executives from Britain’s biggest lenders to discuss the impact of the vote to leave the European Union. The newspaper states that officials at the central bank reassured the industry about the amount of liquidity in the system, as well as encouraging them to continue lending to consumers and businesses. Separately, the Guardian (p9) highlights a speech that Mark Carney, the Bank of England Governor, will deliver later today in an effort to calm fears over the UK’s financial system.
Speaking at the BBA’s Retail Banking Conference yesterday, BBA Chair Noreen Doyle said: “While we may have resisted some of the reforms over the past eight years, the increase in the capital in the system and the strict attention by the Bank of England to the liquidity in the system has actually reaped substantial benefits in an orderly market over the past few days, and may that continue” (Telegraph, p8). The BBA’s Chief Executive Anthony Browne added: “After this referendum result, we are where we are. Don’t let’s talk ourselves down into a recession, let’s talk ourselves up and work together to make sure Britain has a great future.”
Senior executives from the UK’s high street banks also said that they have seen an increase in customer queries about mortgages and currency following the EU referendum (FT, £, online only).
European Council President Donald Tusk has insisted that “there will be no single market a la carte” for the UK, (City AM, p4). European Commission President Jean-Claude Juncker echoed those comments, stressing that all of the EU’s four freedoms – goods, services, people and capital – must be accepted. However, the French Finance Minister Michel Sapin has said everything will be on the table in the negotiations. Meanwhile, the FT (£, p2) reports that the UK will be sidelined from the Capital Markets Union initiative that was originally put forward by Britain’s Commissioner Lord Hill.
Michael Gove and Theresa May have this morning announced their intention to run to be the next Conservative Party leader and Prime Minister (BBC News).
Financing Growth has been produced to help small- to medium-sized businesses identify some of the different finance options that may be available to expand their business, including information, tips and ideas about products from banks, alternative funders, commercial specialists and the Government to help you as you plan for the future.
EU referendum vote fallout
Business Secretary Sajid Javid has urged employers not to cut jobs because of the vote to leave the European Union and argued they could “take advantage” of Brexit once the Government has strengthened its team of trade negotiators (Times, £, p44). Speaking after a meeting with business leaders yesterday, Mr Javid said: “The biggest issue raised was the need to secure continued access to the Single Market. While I am not in any position to make promises, I assured everyone that my number one priority will be just that in the negotiations to come” (City AM, p1)
Jeremy Corbyn yesterday lost a vote of no confidence, with 172 Labour MPs backing the motion (BBC News). The result, which is not binding, increases pressure on Mr Corbyn following a string of resignations from the shadow cabinet. The Labour leader said the vote has “no constitutional legitimacy.”
The FT (£, online only) looks at the potential impact on the regulatory framework, quoting the BBA’s Chief Executive Anthony Browne. He said: “It is important that we do not have a bonfire of EU red tape, because it could damage our relations with the EU.”
The Times (£, p44) reports that senior City lawyers believe that warnings international banks will move thousands of jobs away from London are misplaced. They argue MiFID II rules that come into force in January 2018 should make it straightforward to gain passporting rights, even if the UK has left the EU. French President François Hollande has that it would be unacceptable for clearing of euro-denominated trades to continue taking place in the UK (FT, £, online only).
The Bank of England yesterday carried out the last of its three scheduled special repo auctions announced before the UK referendum (FT, £, online only). The central bank provided £3.1 billion of additional liquidity to lenders, having received bids amounting to £6.3 billion.
World banking list published
The UK has been ranked seventh in a league table of countries’ banks by total pre-tax profits, according to new research published by trade magazine The Banker (City AM, p2). British banks’ profits fell by 22 per cent to £18.9 billion last year, even though challenger banks moved up the table. Brian Caplen, Editor of The Banker, said: “Before the financial crisis, we had a banking sector that was obviously very large compared to the size of our economy because it was an international banking sector […] But now, if you switch on 10 years later, what the banks have been doing is pulling back from a lot of businesses.”
Welcome to the BBA’s Retail Banking Conference – follow all the action on our live blog below and on Twitter @bbavoice #BBARetailConf 15:40 - CEO Panel - Reflections following Brexit - with Steven Cooper, Chief Executive Officer, Personal Banking at Barclays, Les Matheson, CEO, Personal and Business Banking at RBS, Francesca McDonagh, Head of Retail Banking and Wealth Management at…
EU referendum vote fallout continues
The UK has been downgraded by credit ratings agencies Standard & Poor’s and Fitch following the country’s vote to leave the European Union (BBC News). S&P described the result of the vote as “a seminal event” which would “lead to a less predictable, stable and effective policy framework in the UK” (Guardian, p9). The downgrade comes as expectations rise that the Bank of England will cut interest rates to stimulate the economy.
The FT (£, p19) reports that the world’s biggest banks are pushing regulators and politicians for answers so they can plan for the future of their London operations following the vote. Meanwhile, the Conservative’s 1922 Committee of senior backbench MPs has recommended that a new Prime Minister and Conservative leader should be in place by 2 September. Labour MPs will separately vote on a motion of no confidence in their leader Jeremy Corbyn (BBC News).
Business Secretary Sajid Javid will today hold a meeting of UK business groups to discuss what the UK’s relationship with the European Union should look like in the future. (BBC News).
City AM (p9) reports that Germany, France and Italy have said the EU will not hold talks with the UK on ‘Brexit’ until Article 50 has been triggered. European Commission President Jean-Claude Juncker has urged UK to “clarify its position” on Brexit as soon as possible (BBC News).
Italy resurrects plans to support banking sector
The FT (£, p5) states that Italy is considering a rescue plan for the country’s banks, using the market turbulence to circumnavigate EU rules against state support for lenders. Italian Prime Minister Matteo Renzi latest plan would reportedly seek to waive EU state aid curbs on grounds of “financial stability”. Mr Renzi said: “Today the rules are very difficult, nonetheless all that needs to be done to give tranquillity and confidence to citizens will be given attention by European institutions and national ones, starting with the Italian government.”
Financing Growth has been produced to help small to medium-sized businesses identify some of the different finance options that may be available to expand their business, including information, tips and Read More
Chancellor outlines approach for EU negotiations The FT (£, p4) reports that the Chancellor Philip Hammond has said the UK must adopt a realistic negotiating position with the rest of Read More
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