New accounting rules “fundamentally flawed”
Major European banks could be forced to recognise loan losses of as much as €61 billion due to new accounting rules, according to a Barclays study reported by the FT (£, online only). Barclays’ analysts found that the rules would cause an increase of around 34% in loan loss provisions across the group, as well as lower bank valuations and more volatile earnings. The paper adds that the Local Authority Pension Fund Forum has described the new rules on the financial instruments “fundamentally flawed” and its lawyer, George Bompas QC, believes that the new regime would still not give a “true and fair” view of banks’ financial position.
Stock market volatility continues
Volatility in Asia’s stock markets has continued this morning, with Shanghai opening down more than 4%, BBC News reports. Yesterday US stocks closed down nearly 3% after economic data was released suggesting that China’s manufacturing sector had contracted at its fastest pace for three years. The country’s official manufacturing purchasing managers’ index hit a three-year low of 49.7 in August, down from 50 in July, sparking a global market sell-off. CityAM (p2) quotes Naeem Aslam, chief market analyst at AvaTrade, saying: “The manufacturing PMI data is the measure of large state-owned firms and the reading not only fell short of expectations, but it also dipped into a negative territory and this makes the headline which traders certainly do not like at all.”
Personality tests for credit mooted by researchers
Some customers looking to borrow from their bank or building society might face psychometric tests to determine their chances of repaying the credit, according to the Daily Mail (p35). Research from the University of Edinburgh Business School has suggested that such tests can be effective. The paper quotes BBA Executive Director for Retail Banking Eric Leenders, saying: “I can never see psychometric testing replacing the straightforward affordability tests. However, it is possible that in some cases tests of this kind might be able to help determine whether a customer is vulnerable and needs extra support. It’s right that banks take a look at new types of technology that could perhaps benefit consumers.”
Challengers to meet Government over tax surcharge
The Daily Mail (p7) quotes Paul Lynam, chief executive of Secure Trust Bank and chairman of the BBA’s Challenger Bank Panel, describing the 8% corporation tax surcharge as “completely at odds” with the Government’s claim it supports challenger banks. The Mail also quotes BBA figures which show that banks will pay £39.35 billion in bank-specific taxes between 2010 and 2021. Yesterday it was reported that a group of challenger banks is to meet Charles Roxburgh, director general of financial services at the Treasury, to discuss the tax.
Commenting on the latest Bank of England monthly Bankstats, BBA Chief Economist Richard Woolhouse said:
“Net mortgage lending is now back to pre-crisis levels. Together with the surge in mortgage approvals this provides further evidence that the housing market is hotting up.
“In particular, it seems that shrewd consumers are rushing to remortgage and grab competitive deals before interest rates start to rise from current record lows.
“The growing demand for unsecured lending also suggests that consumers are increasingly confident about the economic outlook.”
Banks challenge Treasury over profit surcharge
Chief executives of the UK’s largest challenger banks will meet with Treasury officials this week to discuss concerns over the impact of the corporation tax surcharge, the Sunday Telegraph (B1) reported. Ahead of the meeting, a letter from the Chancellor to the challenger banks suggests the Government does not intend to make any swift changes, but states: “However, I want to take the time to listen to your concerns, carefully consider alternatives you put forward and give these serious consideration.” The 8% surcharge, set out in the Summer Budget, affects a wider range of institutions than the Bank Levy.
Writing in CityAM (p23), Shadow Economic Secretary to the Treasury Alison McGovern states that the surcharge “risks stifling competition and acting as a restraint on sensible lending”. She warns that the “consequences for the long-term health of the financial services sector and the wider economy could be seriously damaging”.
Lending to farmers increases at record pace
Britain’s farmers successfully applied for £12.4 billion in credit in 2014, the highest annual increase since records began, reports the Telegraph (B3). BBA figures show that total lending to farmers and rural businesses rose from £11.1 billion in 2013 and £10 billion the previous year. Farmers in northern England and the south east enjoyed the largest increase in loan approvals of 15% in 2014. BBA Chief Executive Anthony Browne said: “An appetite to borrow is an important barometer of business optimism. With rates still low and a wide spread of lenders, there has rarely been a better time for businesses of all sectors to borrow.”
Government launches review into anti-money laundering rules
The Government last week announced a review to “improve the effectiveness of rules designed to prevent money laundering and terrorist financing”. The Weekend FT (p3) quoted Business Secretary Sajid Javid saying: “This new review is about making sure the rules we have to protect our strong financial services industry from abuse are not unintentionally holding back new and existing British business.” He added that the review would look at the implementation of existing legislation, and was not about “scrapping rules”. The article noted that the BBA welcomed the initiative, stating: “We want to make sure the system is targeted against criminals while not impacting disproportionately on genuine customers.”
Growth in contactless payments
The growth in use of contactless cards is expected to accelerate from today, the Times (£, p7) reports, as the limit for a single transaction rises from £20 to £30. CityAM (p9) quotes new figures from The UK Cards Association which show that spending on contactless cards rose to £2.5 billion in the first six months of 2015, with monthly spending almost doubling over that period. Saturday’s Mail (p34) reported that all retailers will have to provide contactless payment technology by 2020 under new rules introduced by Visa and Mastercard. BBA figures released in June revealed that consumers using contactless cards have together saved over 90 years of time since they were introduced.
New industry-wide figures published by the BBA show that bank lending to farms and other rural businesses increased by £1.3 billion last year – the largest rise since records began nearly 15 years ago.
The amount lent by major retail banks to agricultural businesses in the North and the South East expanded most quickly, both increasing by 15% in 2014.
However, there was growth in every region of the UK, with rises of 12% in Wales, Scotland and the North West.
The BBA’s Annual Statistical Abstract shows that loans and overdrafts to agriculture, hunting and forestry businesses grew to £12.4 billion in 2014 – up from £11.1 billion a year before and £10 billion in 2012.
This means the total volume of borrowing secured by this crucial part of the economy grew by £2.4 billion in two years – a rise of 24%.
Debbie Roberts, Account Manager at software solutions firm Hitec Labs, explains the value of mitigating conduct risk.
BBA Policy Advisor Sam Mannion weighs up the arguments for changing the European Market Infrastructure Regulation’s reporting regime.
The BBA’s Chief Economist, Richard Woolhouse, and Research Analyst Aneta Dyakova explain what our latest High Street Banking Statistics say about the economy.
Richard Woolhouse, Chief Economist at the BBA, said:
“These figures show that thousands of us managed to tear ourselves away from the Ashes series to remortgage during July.
“This was a 29% surge on 12 months before and the highest figure we’ve seen for four years. Savvy homeowners are snapping up competitive deals before an expected increase in interest rates.
“There were concerns that new regulations had made applying for a mortgage more onerous. But remortgaging is still a straightforward process that can take even less time than Alastair Cook and his men took to beat Australia.”
Stuart Palmer, CEO of charity Five Talents UK, explains how microfinance is helping to support individuals across Africa and Asia.
There were 7% more SME loan approvals in Q1 than in the same quarter a year earlier. Representing an approval rate of 9 in 10 applications, the value of new lending was some 33% higher, reflecting higher average loan values.
Borrowing stocks in the construction and real estate sectors continue to reduce, as a result of larger businesses repaying borrowing or using alternative finance, or debt being written-off or sold.
Household deposits and borrowing remain fairly static.
BBA Director of Strategy and Digital Matthew Herbert observes how consumers are driving the boom in digital banking.
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
New accounting rules “fundamentally flawed” Major European banks could be forced to recognise loan losses of as much as €61 billion due to new accounting rules, according to a Barclays Read More
Shrewd customers rush to remortgage Commenting on the latest Bank of England monthly Bankstats, BBA Chief Economist Richard Woolhouse said: “Net mortgage lending is now back to pre-crisis levels. Together Read More