News

Introduction: the industry at a crossroads

It was February last year that the UK Chancellor of the Exchequer George Osborne described 2013 as the year in which banking would be “reset”. He then underlined his commitment to this goal, by warning that banks would face break-up if they ignored orders to ring-fence their investment and retail divisions.

Miliband: No early EU referendum

A number of papers report today that Labour leader Ed Miliband has virtually ruled out an EU referendum if his party are voted in at the next election. The opposition leader wrote in today’s FT (£, p11) of David Cameron’s “arbitrary” timetable for a 2017 election and argued that this could distract Labour from their focus on the cost of living and the economy.

He added: “The next Labour government will legislate for a new lock: there would be no transfer of powers from the UK to the EU without a referendum on our continued membership of the EU.”

Industry responds ‘constructively’ to OFT review

Articles in the Times (£, p38) and the FT (£, p4) this morning note yesterday’s announcement from the Office of Fair Trading on the SME lending market. Though the OFT raised concerns about the difficulties facing new entrants to the lending market, they praised the BBA for responding “constructively” to their review. You can read the BBA response to the announcement here.

The Times also reports that a groups of 8 alternative lenders – Crowdcube, Funding Circle, Market Invoice, Platform Black, Seedrs, Zopa and Pensionledfunding.com – have launched their own referrals website, www.alternativebusinessfunding.co.uk.

Carney to appoint City deputy

Bank of England Governor Mark Carney is to appoint a deputy governor with specific responsibility the BoE’s relationship with the City, according to today’s FT (£, p1) and Telegraph (p1). The comments were made during a five hour hearing with the Treasury Select Committee where the Governor remarked that the new deputy would be responsible for undertaking a “root and branch” investigation into market intelligence in the financial sector.

The BBA supports the creation a professional standards body. We have done so for some time and Sir Richard’s presence ensures it will operate independently. This is essential if it is have a lasting impact. But it is also important that the new body’s work complements on-going regulatory reform and reflects the diverse nature of the UK’s banking sector.

The BBA today calls on the Government to help savers and boost exports in a wide-ranging Budget submission designed to promote growth.

Life will be a little easier for George Osborne when he delivers this year’s Budget speech on 19 March.

Sturdy GDP data, impressive employment figures and higher mortgage lending since last year’s statement suggest that Britain’s economic recovery is now picking up speed after a muted start.

Last night a much anticipated vote in the European Parliaments’ ECON Committee on a proposal for a regulation on Money Market Funds (MMFs) was delayed. This leaves providers of these products holding their breath with regards to their uncertain future.

CMA announces review of SME and current account markets

The Competition and Markets Authority (CMA) has today announced that it will conclude the Office of Fair Trading’s (OFT) market study into banking for small and medium-sized enterprises (SMEs). It will also carry out a short update of the OFT’s 2013 review of personal current accounts. The CMA will consult on its provisional decision on whether to launch a full market investigation into both markets during this summer with a final decision expected by the autumn. Read the BBA’s response to the announcement here.

Bank looks to business investment, productivity and exports to sustain recovery

Bank of England Deputy Governor Charlie Bean outlined the Financial Policy Committee’s priorities for how to sustain the economic recovery, reports the Times (£, p40). Britain needs to move away from a reliance on “higher spending and housing investments” towards rising business investment, productivity and exports. Mr Bean added that the recent appreciation of sterling could damage UK exports but there were signs that business investment was picking up.

Labour will tax bonuses to support youth jobs, says Balls

The FT has splashed with Labour’s plans to re-introduce the bonus tax, raise the top rate of income tax and launch a mansion tax to bring down long-term youth unemployment. Shadow Chancellor Ed Balls said the bonus tax would only be introduced in 2015-16 despite suggestions that a Labour Government would make the tax permanent. The Telegraph’s editorial (p21) acknowledges the need to tackle joblessness but questions “the proposed financing of [Labour’s] programme”.

Responding to the announcement from the Office of Fair Trading on the SME banking market, BBA Chief Executive Anthony Browne said: 

“The UK’s banks are in favour of competition – they compete with each other every day to win new customers. There is also huge change taking place at the moment with new banks and other financial providers entering the market and new technologies improving customer service.  

Read the full statement here

Our final two days in Washington focussed on the prospect of aligning US and EU rules. Finding common ground has not always been easy in recent years. I’ve sat through some difficult discussions. Yet this year I witnessed a willingness to move forward with discussions over issues such as changes to derivatives regulations bearing fruit.

BBA calls for more help for exporters

The FT (£, p4) reports that the BBA has called on George Osborne to give more support to exporters in next week’s Budget.  The BBA’s submission to the Treasury ahead of the Budget suggests that the Government should look to develop a supply chain finance scheme, expand country risk coverage and to benchmark the performance of UK Export Finance against other export credit agencies.

The BBA’s Budget submission can be downloaded here.

Paym – new mobile payments to launch soon

Paym, the new mobile payments system, is set to be launched in the coming weeks according to the FT (£, p15). The new system, set to be unveiled today, will allow customers of nine of the biggest banks to pay each other through their smartphones.

Labour pledges new bonus tax will run until at least 2020

The Mirror (p2) reports that the Labour Party will extend a jobs guarantee for 16-24 year olds who are long-term unemployed to five years.  The scheme – to be funded by a tax on bank bonuses – will give a paid job to everyone who has been out of work for more than a year.  Labour had initially only pledged to bring the scheme in for one year but Ed Balls will today make a manifesto commitment to it lasting until 2020. The Mail (p4) reports that Labour had previously pledged to fund ten different policies through the new tax on bank bonuses, which is expected to raise up to £2 billion, but that the tax will now solely be spent on the jobs guarantee.  Mr Balls will say:  “After the global banking crisis and with bank bonuses soaring again this year, it’s fair to pay for our jobs plan with a repeat of Labour’s tax on bank bonuses.”

The start of ISA season may not be something you put in your diary, but earning tax free interest on your savings can make a real difference to your personal finances. It is now easier than ever to shop around for the best rates and make your money work better for you.

Lending market will be subject to full review by CMA

The Independent (p55) reports today that the small business lending market is expected to be the subject of a major investigation by the Competition and Markets Authority (CMA) when it takes over from the OFT next month, with an announcement expected today or early next week. According to the report the OFT review concluded that a “full-scale enquiry is required by the CMA”.

Treasury consults on cashing cheques by app

CityAM (p10) reports on a consultation launched by HMT on whether new technology that allows users to cash cheques via apps would save customers time and money. The idea is backed by charities and small business groups who believe it will help cash-flow. The Financial Secretary to the Treasury, Sajid Javid, said: “New technology has the potential to deliver real benefits for customers. That is why we’re creating a new payments regulator and why we’re consulting on speeding up the cheque clearing process.”

FCA lays out new regulations for crowdfunding

A number of papers report this morning on the new rules for crowdfunding as outlined by the regulator. In the Guardian, Barry James, Founder of the Crowdfunding Centre, warned that rules for a 10% cap on investments from investors would take the “crowd out of equity crowdfunding” (p30). In the Times (£, p42) it is also reported that the rules will limit the marketing that crowdfunding companies can send to retail clients and force platforms to keep debt payments going even if they collapse. The FCA said that consumer protection was at the heart of the measures (FT £, p4).

Tyrie criticises BoE’s oversight structure

The chair of the Treasury Select Committee, Andrew Tyrie, has said that the Bank of England needs a board “worthy of the name”, criticising the bank’s oversight amid allegations of forex manipulation (FT, p2). Next Tuesday the committee will question BoE governor Mark Carney and Paul Fisher, the bank’s director of markets.

We dedicated the second day of our US trip to technical discussion of US regulatory policy and tax. Three significant points emerged from heavy weight IIB panel discussions.

Eight months ago the Parliamentary Commission on Banking Standards’ (PCBS) published its final report. Its members have now asked the Prudential Regulation Authority (PRA) for reassurance that it is getting on with its recommendations on the remuneration code in banking.

BoE launches new investigation into foreign exchange manipulation

The Bank of England has suspended a member of staff and opened an internal investigation due to allegations of forex fixing (FT, p1). According to the BoE, the person who had been suspended “may have failed to keep adequate records of meetings at which senior traders discussed practises around the fixing”. CityAM (p3) highlights the BoE’s statement: “The Bank of England does not condone any form of market manipulation in any context whatsoever.”

The Telegraph (pB1) writes that Mark Carney will appear in front of the Treasury Select Committee next Tuesday to explain the Bank’s involvement in the forex manipulation. Pat McFadden, a Labour member of the Committee said this issue “could not be more serious” and that “the reputational risks of the Bank of England in this matter are enormous.”

Banks speed up compensation to small firms

According to the Financial Conduct Authority, Britain’s banks have accelerated compensation payments to small firms who were mis-sold interest rate products, CityAM (p10). The total redress paid by the end of February is £482m, up from £306.3 in January and out of the 18,800 firms covered by the FCA review 11,700 are already in redress phase.

EU bonus rules advantage Asian and US banks

According to the FT (p23), British banks claim new EU rules on remuneration give advantages to Asian and US banks. Tom Gosling, head of PwC’s reward practise argues: “It is absolutely true that the market in the US is still fiercely competitive…US banks are not pulling out of this game, they see the industry as highly profitable and are continuing to aggressively go after the best staff.”

Banks may have to leave Scotland if Scotland voted “yes”

The Times (£p2) and FT, write that under an EU directive from 1995, RBS and Lloyds Banking Group would have to move from Edinburgh to London if Scotland voted for independence. Lloyds argued that the EU law could force it to shift its legal domicile to London if the “Yes” vote won. However, it pointed out that the law was relatively untested and it was unclear what it would mean for the future of the bank.

The rain finally looked like subsiding as I left the UK, but winter was still in full swing as I arrived in America for the BBA’s annual visit to Washington DC. So cold has been the weather here that the Federal Government is currently closed in preparation for “Titan”, the latest winter storm.

Bonuses under the spotlight

Governor of the Bank of England Mark Carney has written a letter to the Treasury Select Committee, announcing that the Prudential Regulatory Authority (PRA) will start consulting this month on strengthening rules on clawing back bankers’ bonuses, according to the FT (£, p4). The PRA will also consult on other recommendations from the parliamentary commission on banking standards such as extending the period for bonus deferral beyond the current three to five years; Mr Carney wrote in his letter that he was “confident that most of the recommendations from the commission…could be put into practice.”

However, the Times (£, p38) states that Mr Carney warned the Committee that proposals to cancel the pensions of bankers whose banks receive taxpayers cash “could fall foul of European laws”. Mr Carney wrote that the “scope for taking action in respect of pension rights will require very careful legal analysis”.

The announcement came as the European Commission approved rules identifying which bankers would be included in the bonus cap (EU Observer).  The Guardian (p21) reports that Belgian MEP Philippe Lamberts, who helped devise the cap, has called for the European Commission to sue the UK Government, after accusing the Coalition of having no interest in halting “absurd remuneration packages”. EU commissioner for the single market Michelle Barnier, said some banks were “doing their utmost to circumvent remuneration rules” (FT, £, p4).

The Telegraph Business section leads with an interview with Barclays Chief Executive Anthony Jenkins, who reveals that the decision to increase bonuses at Barclays last year was to avoid “a situation where the business begins to contract”, after 700 staff left the US investment bank after compensation was cut.

Claims managements companies reap rewards of PPI compensation

The Guardian (p24) cites a report from Citizens Advice which states that claims management firms have pocketed £5bn of the compensation paid out to those who were mis-sold PPI. The report also found that four in ten of those who made claims did not know that they could make one without the use of a claims management firm. The Mail (p28) states that these firms made the claims “without being clear that they would take up to 25 per cent” of the redress.

Lenders could face tougher capital rules

Stefan Ingves, head of the Bank of International Settlements, has called for a regulatory floor to be set to stop banks underestimating their risks and so holding insufficient capital buffers against some loans, according to CityAM (p8).

Banks revise sales incentives

A Financial Conduct Authority (FCA) report has found that all the big retail banks have either replaced their incentives schemes or had made substantial changes to them, notes the FT (£, p4), with frontline staff being rewarded for customer service rather than volume of sales. The Times (£, p37) quotes Chief Executive of the FCA Martin Wheatley, who said: “We’ve seen some good progress but it is going to take time to see whether the changes firms have made to incentive schemes and their controls stick.”

It’s not often you open the morning’s newspaper to see Martin Wheatley, CEO of the Financial Conduct Authority (FCA), praise culture in banking. Too frequently his attention is taken up with customers that have been let down and the legacy of mis-sold products. Today’s FCA release struck a different note.

Finally, the European Commission has come forward with plans to restructure Europe’s banking sector after taking “into account the useful report by the high level [Liikanen] group”.

Bank culture is changing says regulator

The Telegraph (pB5) reports that retail banks have “listened” and taken action to change their bonus culture, according to a Financial Conduct Authority (FCA) review. FCA Chief Executive Martin Wheatley said: “Large numbers of firms are changing the way they reward sales staff and advisers to motivate better behaviour.”

Meanwhile, the latest complaints data from the Financial Ombudsman Service shows complaints were 38 per cent higher in 2013, but those unrelated to PPI fell by 11 per cent. Eric Leenders, the BBA’s executive director in charge of retail banking, said: “Banks have been working hard to deliver the service their customers expect and deserve.”

Sir Richard asks for views on new professional standards for banks

Writing in CityAM, Sir Richard Lambert states that banks will be obliged to commit to a “programme of continuous improvement in their standards of behaviour” with annual progress reports, under the new professional standards body being set up by the former CBI director general. Banks will be obliged to provide annual updates on whistleblowing, diversity and discipline. Sir Richard’s consultation ends on Friday.

Funding for Lending to concentrate on supporting business

Banks drew a total of £41.9 billion from the Bank of England’s Funding for Lending Scheme (FLS) since its launch in 2012, writes the Times (p39). Net lending to SMEs was slightly down as businesses continued to pay off debts and build up cash reserves, but the Bank’s data shows that new lending increased by 27 per cent over the past quarter compared to the same quarter last year.

Cable considers options to increase the number of women in top City jobs

Business Secretary Vince Cable has asked the Equalities and Human Rights Commission to advise him on the legality of obliging major businesses to introduce all-female shortlists for top executive jobs, the Guardian (p. 26) reports. A study he commissioned is expected to say that a database of “board-ready” women should be drawn up and given to major City firms, with headhunters required to put at least one strongly-recommended woman on the shortlist for all board positions.

Lending to businesses “heading in the right direction”

The Mail on Sunday reported on comments by Stephen Pegge from Lloyds Banking Group’s SME division, who predicted that the latest Funding for Lending figures published today by the Bank of England would show that “things are heading in the right direction” on business lending.

The BBA’s latest business lending figures show new lending to SMEs from the major banks in the fourth quarter of 2013 rose to more than £7 billion, an increase of 26 per cent on the same period last year.  Download the full release here.

Think tank calls on TfL to launch a new banking service

In the Times (£, p39) the Social Market Foundation has suggesed that Transport for London should turn Oyster cards into fully functional debit cards and that the organisation could use this as a platform to launch a full banking service.  TfL have rejected the idea, Shashi Verma, director of customer experience, said: “Our focus is on making the journeys of our customers better. Oyster has been a fantastic success. We don’t, however, intend to apply for a banking licence.”

McEwan calls for more transparency over bank charges

In an interview with the Sunday Telegraph RBS Chief Executive Ross McEwan suggested that paid for bank accounts would be “addressed in the market place”. He is quoted saying: “It’s not something that’s on our minds at the moment, but I think that’s where it’s going to end up longer-term in the industry, as customers realise they are going to pay for it in some shape or form. Again, it’s around transparency. If that’s the most transparent way of doing it, the industry will end up there.”

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Key Points: £7.1bn of new borrowing facilities were approved in Q4, 26% more than the same quarter of last year, and reflected across all industry sectors and regions of Britain. 40% of agreed overdraft facilities are not currently being used, while demand for new overdraft facilities, particularly from smaller businesses, fell towards the year-end. SME cash holdings rose by 9% last year.…

RBS sets out plans to deliver “real change”

Ross McEwan, chief executive of RBS, delivered a major speech on results day to set out how he intends to restructure the bank into one the “taxpayers can be proud of” and that “earns customer trust” (Telegraph, B4). The bank will look to sell assets to boost its capital position and shift its operational focus on to becoming a “first-rate UK bank”.  The FT (£, p22) also reports that RBS will no longer offer favourable rates to new customers, known as “teaser” rates, and plans to concentrate on improving customer service for its 16 million customers.

Base rates to remain low to protect homeowners

A member of the Bank of England’s Monetary Policy Committee has indicated that base rates are not to exceed three per cent to keep mortgage rates affordable reports the Guardian (p32). David Miles said: “The new normal for monetary policy will probably involve setting Bank rate on average at a lower level than before the crisis”.

Merkel opens door to modest reforms and calls for strong UK voice in Europe

German chancellor Angela Merkel refused to promise “fundamental reform” but expressed her support for making the EU more open and competitive, with less regulation coming from Brussels writes the Times (£, p4). Merkel used a speech at Westminster Palace to discuss the need to protect the single European market, and for the next European Commission to explicitly pursue policies to boost growth.

Businesses warn Salmond against cost of leaving the UK

Standard Life has joined a number of businesses in stating that it would transfer some of its Scottish-based operations to England if the country becomes independent. The Telegraph business leader comments on the impact a “Yes” vote could have on the credit ratings of Scottish based financial institutions. The FT (£, p3) examines the concerns raised by Standard Life on the issues of currency union, the EU, regulation and tax.

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CAST your mind back to 1978. The mighty Boney M had two number one hits, I was sheepishly starting big school in Cambridge, and Britain had a household savings rate of 12 per cent – more than double the current level.

Britain’s banks urge the Government to do more to foster a savings culture in next month’s Budget. In their submission to the Treasury, the BBA suggests ministers simplify the ISA regime and introduce a new work-based account to encourage millions of employees to build-up a nest egg as they earn.

I’m not the only economist who has raised a few concerns about the shape of our recovery. Until now, the official GDP numbers have suggested that the return of growth was largely fuelled by consumer spending.

BBA urges the chancellor to resurrect Britain’s lost savings culture

Anthony Browne, CEO of the BBA, encourages the Chancellor to “resurrect the savings culture” and believes that “over the past 40 years, we have morphed from a nation of savers into a nation of debtors” (CityAM, p20). The Telegraph (pB1) highlights parts of the BBA’s submission to the Budget which urge the Government to make ISAs more attractive and consider introducing a workplace savings product.

Business investment rallies as GDP figures confirm economic recovery

The second estimate of the official GDP figures shows that the economy grew by 0.7 per cent in the final three months of last year. The report also unveils that business investment grew 2.4 per cent in the final quarter of last year – it was 8.5 per cent higher than in the same period of 2012. Exports increased by 0.4 per cent while household spending growth slowed from 0.9 between July and September to 0.4 per cent between October and December, Mail (p75).

BoE sets new rules for foreign bank branches    

Foreign banks operating in the UK will today meet the PRA to discuss proposed changes to their oversight regime (FT, p3). The new rules “would make it extremely difficult for banks from outside the European Economic Area to offer retail services to UK customers,” the FT says. Branches would need to be converted into subsidiaries that are subject to the full force of UK regulation, in a move that aims to balance financial stability with openness. Read the latest blog by the BBA’s Simon Hills on why getting the regulation right for overseas banks’ branches really matters.

Andrew Bailey warns about plans for the potential Scottish independence    

Deputy Governor at the Bank of England and head of the Prudential Regulation Authority, Andrew Bailey, told the Scottish Affairs Select Committee yesterday that plans for separate regulation in an independent Scotland would be different to any regime “operating in any other part of the world that has a major financial system” (CityAM, p2). In response to Alex Salmond’s plans to share a common regulator in an independent Scotland, Bailey answered: “It’s a pig that I can’t observe flying.” Telegraph (pB5).

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Britain and India share more than a passion for curry. Last week I was in Mumbai to meet with representatives from India’s banking industry, where we talked about many of the same issues that are regularly discussed nearly 4,500 miles away in London.

The PRA has today released a consultation paper describing its approach to the supervision of overseas bank branches as compared to UK based subsidiaries of foreign banks. It rightly  focuses on non-EU branches, which are commonly described as third-country branches.

Mortgage lending rises to pre-crisis levels

Many papers report on yesterday’s high street lending statistics published by the BBA. CityAM (p5) reports that 49,972 mortgages were approved in January, with loans for house purchases rising by 57 per cent since January 2013. The Telegraph (pB1) notes that £8.4 billion was spent on credit cards in January, up 12.5 per cent on a year earlier. For the full release click here.

PRA outlines rules on foreign banks

The FT (£, p16) writes that banks from outside the European Economic Area may be forced to overhaul their legal structure or stop offering retail services, under new proposals set out by the Prudential Regulatory Authority (PRA). CityAM (p5) suggests that the implementation will aim to prevent a repeat of the instability caused by the failure of Icelandic banks based in the UK. The PRA has stated that branches will not be able to continue trading unless there is “a very high level of assurance” from their national regulator that they are capable of being resolved safely in the event of failure (Times, £, p35)

Miliband to offer EU referendum

The Times (£, p22) reports that Labour leader Ed Miliband will “seek to reform Britain’s relationship with Brussels”. A source close to the party said: “Labour are preparing to say, ‘We need treaty change. And we don’t think it will happen by 2017. But when it comes we will have a referendum.” Meanwhile, Angela Merkel is prepared to offer David Cameron limited EU opt-outs in a “sign of the lengths the German chancellor is prepared to go to ensure Britain remains in the EU”, according to the Guardian (p2).

Banks’ lending practices praised in Treasury Select Committee hearing

Professor Russel Griggs, the Independent External Reviewer of the Banking Taskforce Appeals Process, told MPs yesterday that there is now a “real understanding” between banks and business customers, reports the Times (£, p37). Professor Griggs told the Select Committee inquiry into SME lending: “There seems to be this view that all big banks are the same, but they’re not. The banks are competitive.”

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Mortgage lending and credit card borrowing rise

The BBA’s high street banking stats point to growing consumer confidence, with mortgage approvals now at their highest levels for six and a half years. See release here.

BBA criticises bank levy unpredictability

Both Sky News and CityAM (p3) have reported that the BBA submission to the Treasury ahead of the Budget argues that the frequent changes to the bank levy are “inconsistent with the Government’s desire for the UK to have a competitive, stable and predictable tax regime for business.”

Rise in non-bank lenders

An article in the FT (£, p30) shows the rise in the non-bank lenders, citing figures suggesting that alternative finance providers almost trebled the number of deals they did in the UK and Europe between the first and final quarters of 2013.

PRA makes it easier for banks to set up in UK

The Wall Street Journal (p20) reports that UK regulators are set to lay down new plans on supervising the UK arms of foreign banks, making it easier for them to open more branches provided that they don’t collect retail deposits and their home regulators are co-operative.

Salmond accused of endangering Scottish financial sector

The Scottish First Minister has been criticised for suggesting that Scotland might continue to use sterling should they vote for independence. The so-called ‘Plan B’ was suggested by Salmond during an interview with BBC Radio Four’s Today Programme, where he suggested that Scots would continue to use the pound if Westminster refused a currency union. Opponents argued that this would leave Scotland with no control over their monetary policy and “without a central bank to stand behind the banking and pensions industry, forcing banks to relocate south of the border.” (FT, £ p1)

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At the end of January: Personal deposits were growing by 4.0% annually. BBA statistics director, David Dooks said: “Following on from last month, mortgage borrowing continues to rise compared to a year earlier as mortgage assistance schemes help first time buyers and housing chains more generally. Approvals for new purchases have climbed quite significantly…

Technology has brought banking to the fingertips of millions of people. But rising accessibility has also made the sector more vulnerable to disruption and attacks from opportunistic online criminals via cyber-attacks.

New lenders to enter banking market

The FT (p17) reports that Legal & General is set to begin lending to medium-sized companies by the end of the year.  It would focus on “private placements”, which allow companies shut out of public debt markets to borrow sums as low as £20m, typically for up to 10 years.  The article notes this move “would bolster a market that remains tiny compared to that established in the US, where some of the biggest insurers have been lending for decades”.

The Sunday Times (£, p6) ran an interview with Nigel Terrington the Chief Executive of Paragon which has just been granted a banking license and will focus on car loans, savings accounts and small business loans.

The Independent on Sunday looked at the possibility of more banking activity taking place in supermarkets in the future.

Merkel flies in for key talks on EU reforms

Various newspapers look ahead to Angela Merkel’s visit to the UK this week in which she is predicted to support David Cameron’s moves to renegotiate Britain’s relationship with Europe.

The Mail (p2) reports that William Hague, the Foreign Secretary, said yesterday that the German Chancellor is set to support two of Mr Cameron’s goals – tighter controls of the rights of migrants and greater controls by national parliaments.  Meanwhile, the Guardian (p13) suggested that the “key issue” for the British Prime Minister will be whether he can force concessions on the EU’s “freedom of movement” principle – considered by Jose Manuel Barroso, the European Commission President, as non-negotiable.

IoD warns mansion tax could hit business lending

Plans to impose a mansion tax could undermine Britain’s entrepreneurs, the Institute of Directors (IoD) warns in the Times (£, p40).  Labour and the Liberal Democrats have both proposed introducing a 1 per cent annual levy on the value of any property above £2million.  The IoD said that the charge would make it harder for directors to secure bank loans, thereby hindering investment and the economic recovery.

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Banking industry focus on EU elections

A blog from the BBA website is the central focus of an article in the FT this morning (£ p3) which reflects on the efforts of the banking industry to engage with the forthcoming EU elections, writing to MEPs and candidates in efforts to manage a “potential populist surge” within the parliament.

Rise in interest rates predicted

Most of today’s papers pick-up on the comments of MPC member Martin Weale speaking to Sky News in an interview where he told the channel that he expected interest rates to rise next year. Mr Weale said, “I think it is very helpful if we try and explain that the most likely path for interest rates is that the first rise will come perhaps in the spring of next year” (FT, £ p4).  An analyst tells the Mail that guidance on interest rates ‘does not get any more specific than that’.

Mortgage lending hit £15bn

Both the FT (p4) and CityAM (p2) note a report by CML which says that mortgage lending this January was up 33 per cent on the previous year hitting £15bn, though the organisations chief economist warned against assumptions that that the property market would accelerate sharply. The CityAM article notes that banks and building societies gave out £177.4bn in home loans in 2013, up 23 per cent on 2012 and the highest since 2008. Meanwhile the Guardian (p31) featured an article stating a rise in homes bought for cash, citing figures from the Intermediary Mortgage Lenders Association that found that the proportion of homes funded by mortgages dropped to 62 per cent last year, the lowest since 2005.

More funding from British Business Bank

Funding Circle, the peer-to-peer lending platforms, is to receive £40m of investment from the British Business Bank according to an article in the FT (C&M, £ p23). The article quotes Vince Cable in reference to the high street banks: “If we’re to have a properly functioning business lending market, they need to be challenged by new banks, peer-to-peer lenders and other alternative providers.”

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There are a few issues with the statistics Bill Nighy uses to justify his arguments for introducing a Financial Transaction Tax in the UK.

France and Germany pledge to agree on FTT plan by end of May

The FT (p7) reports that Paris and Berlin are pushing for a European Financial Transaction Tax to be agreed upon before the European Parliament elections in May. German Chancellor Angela Merkel said: “If things move, certain countries may lose their reticence”. The countries are looking to agree on a stamp duty tax on equities and equity derivatives as a first step, which could be expanded later. French President Francois Hollande is quoted saying: “I prefer an imperfect tax to no tax at all.” Leaders of business groups in nine of the eleven EU states who support the tax wrote to the European Commission to express their “strong opposition” to its introduction.

“Recovery still at risk”, says Osborne

The Chancellor of the Exchequer George Osborne will today give a keynote speech in Hong Kong warning that Britain’s recovery is fragile and that economic shocks overseas could still knock it off course writes the Times (p2). Osborne is expected to say: “I’m now the first to say that the recovery is not yet secure and our economy is still too unbalanced.” The speech comes as the Bank of England declared that Britain’s recovery is becoming “more entrenched and broadly based” Telegraph (p5).

Banks look to coco bonuses as the EBA sets new standards for their use

European banks are expected to pay bonuses in contingent convertible bonds (cocos) writes CityAM (p7) as the European Banking Authority (EBA) set out new standards on the instruments. Cocos only have a value when the bank is strong, but if its capital position deteriorates the bond is wiped out.

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Paragon given licence in boost for competition for UK banking

The decision by the Prudential Regulatory Authority (PRA) to grant Paragon a banking licence has been reported across the media (FT, p22). The new bank said it made the decision after the PRA made the licencing process less onerous and that it would launch a range of “straight-forward and competitive products this year”. It has no plans to enter the current account or mortgage markets. Nigel Terrington, chief executive of the Paragon Group, said: “Significantly, banks used to be required to have all their longer-term capital in place in cash on day one – but now [the regulator] requires one year [upfront] and more over time as the balance sheet gets formed.” The announcement forms part of a wider trend of new lenders entering UK banking markets to compete with big banks for savers and loans. Read BBA Chief Executive Anthony Browne speech on competition in banking delivered on 4 February 2014.

Fed pushes on with new rules for overseas banks

The FT reports that the Federal Reserve is pressing ahead with plans to subject the US operations of overseas banks to tougher capital requirements and annual stress tests, despite offering modest concessions. Banks with at least $50bn in global consolidated assets will fall under the new rules which are expected to impact about 100 foreign banks, in addition to 24 US bank holding companies. Daniel Tarullo, the Fed governor in charge of regulation said: “We have to recognise that – notwithstanding all the international co-operation – we do retain the responsibility of maintaining the stability of the US financial system, as do our brethren maintain that responsibility for their own country.”

Senior US and EU officials pledge to push on with Transatlantic Trade Partnership          

Negotiations on a transatlantic trade agreement took a step forward yesterday as officials on both sides of the Atlantic agreed to give proceedings “a jolt” reports the FT. EU Trade Commissioner, Karel De Gucht, said: “Our message to the negotiators now is that we need to step up a gear. The marked-out areas are still larger than the common ground. But we now have a clear picture of the whole field.” On-going talks centre on access to markets, raising standards and harmonising regulatory regimes.

Inflation falls below two per cent as expectations of wage increases rises

The Times leader column argues that with inflation below two per cent, the Bank of England’s policy of low rates has been vindicated. The Guardian (p2) quotes leading economists on the implications of low inflation on wages. Samuel Tombs, UK economist at Capital Economics, said: “This should enable real earnings to rise… and allow the Bank’s monetary policy committee to keep interest rates on hold until well into next year.”

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Price comparison websites are thriving in the UK. They allow millions of consumers to become better informed about everything they buy from credit cards and energy tariffs to groceries and holidays.

Bank of England tells households to plan for future increases in interest rates

The Mail (p65) reports comments made by David Miles, member of the Bank’s monetary policy committee, on the impact of future interest rates rises on household borrowing costs. Mr Miles said: “Interest rates will not remain at this level for many years to come… [families] need to think very carefully what’s going to happen when the cost of that mortgage moves up.” The comments come after Graham Beale, Chief Executive of Nationwide, warned that “a whole generation of borrowers have never experienced increases in their monthly mortgage payments.”

Financial Transaction Tax would cost UK savers £3.6 billion

A report released today by London Economics found that the Financial Transaction Tax would cut the value of household savings in Britain by £3.6 billion pounds because of its effects on the value of property prices and bond holdings. The publication comes as France and Germany are expected to renew efforts to introduce the tax, reports Reuters.

Top EU official warns Brexit would hinder the City and limit British trade

Outgoing vice-president of the European Commission Viviane Reding yesterday warned that the City would “lose its unhindered access to the single market in the case of an exit” limiting its role to one of an “offshore financial centre”, states the FT (p2). The comments were made as Ms Reding challenged claims from British politicians that leaving the EU would not hinder European trade. She also used the speech to call for the creation of a United States of Europe.

Alex Salmond suggests Scotland could keep the pound and join the European Union

There was broad coverage of Scottish First Minister Alex Salmond’s flagship speech in Aberdeen yesterday, including the Telegraph. Mr Salmond challenged claims by leading British politicians that an independent Scotland would not be allowed to keep pound sterling as its currency. He claimed that such a move would result in a “George Tax” that would raise the cost of buying goods in Scotland for English consumers. The Scottish National Party leader also countered the suggestion by President of the European Commission Jose Manuel Barroso’s suggestion that an independent Scotland would be denied entry to the European Union.

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The Financial Ombudsman Service (FOS) offers consumers a potential pathway to their recovery of losses caused by financial services firms. If their complaints are upheld, FOS can order firms to pay aggrieved consumers damages of up to £150,000.  When considering each complaint, FOS aims to ensure that only genuine and substantiated claims are upheld, offering firms a degree of protection…

Study finds that bank chief’s pay is good value compared to other industries

According to a study by Paterson Associates the pay of senior bank executives represents the best value to shareholders across FTSE 250 companies. It rated financial companies most highly in the period 2009-13 when it came to the pay awarded to chief executives compared with the amount of value added in terms of share price increases, buybacks and dividends. (FT, p.21)

Labour candidate calls on party to “hug a banker”

The Times reports that Will Martindale, an ex-banker and Labour candidate for Battersea, told an event last Monday that his party must take care in how it overhauls the financial sector: “We must do it in a way that doesn’t bash bankers. Now is the time that the Labour Party needs to change its language on banking. In a sense we need to hug a banker and to work with banking to get our hands dirty on the detail, to build our credibility.”

Carney calls for greater business investment

On the BBC’s Andrew Marr show yesterday Bank of England Governor Mark Carney stressed the benefits of recent reforms to bank bonuses which mean they are deferred for a long time and can be clawed back.  On the state of the economy he said: “What we’ve had thus far is a consumer-led recovery.  What we haven’t seen yet is business investment picking up… It’s part of the reason why we’re trying to provide as much clarity to business that the path of monetary policy, the path of interest rates, is going to be calibrated very carefully, to ensure that only when we see sustainable growth in jobs, in incomes, and in spending will we make adjustments.”

EU President: difficult for independent Scotland to join EU

On the BBC’s Andrew Marr show yesterday European Commission President Jose Manuel Barroso said it would be “extremely difficult, if not impossible” for an independent Scotland to join the European Union.

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The damage and disruption to homes and businesses of these floods will be felt long after the wind drops and the waters recede.

Banks operating in the UK are required to submit a number of information returns to HM Revenue and Customs (HMRC) on an annual basis.

Utter the words “cyber crime” and many minds will conjure up an image of an awkward teenager tapping away in their bedroom well into the early hours. But cyber crime can be much scarier than that.