News

BBA publishes High Street Banking statistics

The number of people taking out mortgages fell to its lowest level for 19 months in August, according to new data published by the BBA (BBC News). However, consumer credit grew by 6.4 per cent in the year to August, the fastest rate of growth for nearly 10 years. Rebecca Harding, Chief Economist at the BBA, said: “Mortgage borrowing is growing at a slower pace than it has for the last few months reflecting both the slowdown in housing market growth after the April spike and broader trends in the sector.” The Times (£, p40) also notes that remortgaging activity fell by 6.1 per cent to 23,940 loans in August from 23,940 in July.

Draghi calls for no exceptions to Single Market rules

Mario Draghi, the President of the European Central Bank, has urged that no exceptions are made to the rules of the single market during Brexit negotiations (FT, £, p8). Speaking before MEPs, Mr Draghi said: “Regardless of the type of relationship that emerges between the European Union and the United Kingdom, it is of utmost importance that the integrity of the single market is respected […] Any outcome should ensure that all participants are subject to the same rules.” He also added that data pointed “to the euro area economy being resilient to global and political uncertainty, notably following the UK referendum outcome” (Reuters).

Labour outlines new tax avoidance policy

The Labour Party outlined its economic and business agenda at its conference in Liverpool yesterday, suggesting the Party would redouble efforts to eradicate tax avoidance. Shadow Chancellor John McDonnell said: “We will rewrite the rules to the benefit of working people on taxes, on investment, and how our economic institutions work” (Reuters). The FT (£, p3) reports that the policies outlined are the most leftwing economic prospectus for a generation. In response, the British Chamber of Commerce said Labour “must remember that the state cannot control every aspect of economic or business life and stay competitive in a global economy.”

Richard McGrand, Chief Executive at BRP Bizzozero & Partners, blogs about the potential impact of Brexit on cross-border financial services.

City fears Number 10 is shifting towards a ‘hard’ exit from EU

The FT (£, p1) reports leading City figures are concerned that a “hard Brexit” is looking increasingly likely. John McFarlane, Chairman of Barclays and TheCityUK, said: “The danger of hard talk now is that it increases uncertainty, reduces confidence and will result in businesses triggering their exit plans from the UK.” City AM (p1) notes that International Trade Secretary Liam Fox is set to advocate that the UK pushes ahead and becomes an independent member of the World Trade Organisation, signalling his support for a quick exit from the European Union.

Mixed signals on impact of Brexit vote on economy

The Telegraph (B1) reports that analysis by the Treasury has indicated that the vote to leave the European Union will not hit economic growth at all this year, in contrast to the forecasts made before the referendum. Independent economists consulted by the Treasury have provided reassurance that any economic shock was less severe than first feared. Dean Turner, an economist at UBS, said: “Following the leave vote, the economy appears to be performing better than feared thanks to a resilient consumer.” Separate research by the CBI and PwC has found that Britain’s financial services firms are becoming increasingly anxious about life after the Brexit vote (Guardian, p21).

New analysis underlines relationship between the City and EU

The FT (£, p18) has carried out new analysis that looks at “how vital the bridge between the City and the rest of Europe is — for the banks themselves, but also for UK employment, the UK Exchequer and EU capital markets.” The newspaper states that banks using the UK as a gateway to the EU employ more than 590,000 people and make annual profits of more than £50 billion. Robert Rooney, chief executive of Morgan Stanley International, said: “Anything that causes London to fragment, such as a loss of passporting, will result in higher costs, lower liquidity, more trapped capital and less-efficient capital markets. Ultimately that’s not just bad for the UK, it’s bad for Europe and the global financial system.”

Paul Barrett, Head of Wellbeing at the Bank Workers Charity, blogs about a new whitepaper on employee wellbeing in the banking sector.

Dr Rebecca Harding, Chief Economist at the BBA, said: “The High Street Banking statistics published today point to a softer housing market, strong consumer credit and slightly weaker business borrowing in August. The data was collected before the Bank of England reduced interest rates to 0.25% and so give an indication of some of the underlying pressures that the MPC…

Dr Rebecca Harding, Chief Economist at the BBA, blogs about trends in the latest High Street Banking statistics.

Henry Umney, Vice President of Sales at ClusterSeven, blogs about the operational risks posed by end user computing.

The first half of 2016 has seen banks in Northern Ireland approving 9 out 10 loan applications from SMEs, with more than £900 million of lending approved to support the local economy.

Call for inquiry into how banks treat scam victims

The Guardian (p8) reports that Which? has called on banks to do more to protect customers who are tricked into transferring money by fraudsters. The consumer group has lodged a ‘super-complaint’ to the Payment Systems Regulator, which is required to respond in 90 days. Alex Neill, director of policy and campaigns at Which?, said: “Unfortunately, as payment systems have developed, consumer protection hasn’t kept up […] With bank transfers at the moment, consumers have no protection whatsoever, and we don’t think that’s right” (BBC News). Katy Worobec, Director of Financial Fraud Action UK, responded: “Customers rightly expect banks to carry out transactions they have authorised, and banks will provide compensation on a case-by-case basis. However, a blanket approach is equivalent to asking an insurance policy to pay out for theft when the front door was left wide open.”

Bank of England reaffirms commitment to ‘robust prudential standards’

The Bank of England has warned that capital rules for the UK banking sector will not be watered down despite concerns over financial stability following the Brexit vote (FT, £, p2). The Bank’s Financial Policy Committee said: “Irrespective of the particular form of the UK’s future relationship with the EU, and consistent with its statutory responsibility, the Financial Policy Committee will remain committed to the implementation of robust prudential standards in the UK financial system” (Telegraph, B3). The FPC also said the UK’s financial sector has “demonstrated resilience” following the Brexit vote. The Times (£, p44) adds that the FPC announced that Britain’s largest banks will be tested on their ability a Chinese economic crash.

Draghi defends negative interest rates

Mario Draghi, the European Central Bank President, has pushed back against complaints that negative interest rates are the key challenge to profitability in the banking (Reuters). Mr Draghi instead pointed to overcapacity and inefficiency in certain national banking sectors for squeezing margins. He also said the benefits from low interest rates in terms of higher asset prices, a greater stock of lending and fewer debt defaults “tend to outweigh the impact on net interest income over the short term” (City AM, p7).

Surveys show mixed Brexit economic impact

The Guardian (p1) reports that the Organisation for Economic Co-operation and Development has revised its growth forecasts for the UK in 2016 up slightly to 1.8 per cent, but halved its forecasts for 2017 to one per cent. Joe Grice, Chief Economist at the Office for National Statistics, yesterday stated that “the referendum result appears, so far, not to have had a major effect” on the UK economy (BBC News). Meanwhile, a survey of businesses by the Bank of England has found that British investment and employment are likely to be flat over the coming year following the Brexit vote (Reuters).

Wall Street calls for ‘long runway’ before Brexit 

The FT (£, p2) reports that Wall Street has told Prime Minister Theresa May that it needs a ‘long runway’ and a transition period of several years to prepare for Brexit. At a meeting in New York, executives from Wall Street banks raised concerns about losing the passporting rights to serve clients across the EU from London without having to apply for new licences. Mrs May told attendees that she wanted to understand the impact of Brexit on their businesses and which policy measures would be most important to them in the government’s negotiations with Brussels.

Banks criticised over cyber crime

The Sun (p1) reports that banks are being urged to repay all victims of cyber fraud following news that the UK’s biggest vishing scam saw customers lose £113 million. Labour MP Andrew Gwynne said: “The banks have a moral obligation to pay these businesses their money back. It’s small fry for them, but for these firms it can be the difference between life or death.” An editorial in the Sun (p10) adds that “with so much banking done online and by phone, systems must be watertight — and banks accountable for any breach.”

Mohammad Jamei, Senior Economist at the Council of Mortgage Lenders, blogs  about mortgage lending data in August.

Matt Peachey, VP/General Manager International at Pindrop, blogs about new techniques that fraudsters are using to target call centres in financial institutions.

Thousands of UK firms using EU passporting

The FT (£, p1) reports that nearly 5,500 UK-registered companies rely on passporting rights to do business in other European countries, according to figures from the Financial Conduct Authority. More than 8,000 financial services companies based in the EU or the European Economic Area also rely on passports to do business in Britain. Andrew Tyrie MP, Chairman of the Treasury Select Committee, warned that a “significant” amount of business could be at risk. He added: “None of the current off-the-shelf arrangements can preserve existing passporting arrangements, while giving the UK the influence and control it needs over financial services regulation as it develops.” A separate article in the FT (£, p4) on passporting quotes BBA CEO Anthony Browne as saying: “The passport is incredibly widely used by European banks wanting to sell services into the UK or operate in the UK. Losing the passporting provisions wouldn’t just be an issue for the City of London.”

US banks warn over Brexit impact

The BBC’s Today Programme has been speaking to a number of senior US finance figures this morning about Brexit. Colm Kelleher, President of Morgan Stanley, said: “I do believe, and I said prior to the referendum, that the City of London will suffer as a result of Brexit. The issue is how much.” He added that “clearly some size of our businesses will have to be moved out of London and into Europe with the absence of any passporting agreement.” Blackrock President Rob Kapito added: “I don’t think there’s any firm, any good firm, that has not already started looking at real estate in different areas outside the UK in case they have to move larger operations.”

Mortgage rates could fall below one per cent

The Telegraph (B1) reports that analysts at Bernstein Research have suggested that interest rates on typical mortgages could fall below one per cent in the coming months. Increasing levels of competition amongst lenders following the Bank of England’s recent interest rate cut has led to mortgage prices falling. Bernstein Analyst Chirantan Barua said: “If you have 20-30pc cash and have a good credit profile, we reckon that the day where you will be able to actually bargain out a sub-one per cent mortgage in this market is not too far off.”

Matthew Field, the BBA’s Digital Policy Adviser, blogs about the key issues that will be discussed at this Thursday’s FinTech Banking Conference.

New campaign launched to fight financial crime

Financial Fraud Action UK have launched a new campaign to raise awareness of the techniques used by scammers, as new data shows that more than one million cases of card, cheque, phone or online fraud were recorded in the first half of 2016 (BBC News). The Take Five campaign is backed by police, the banking industry and consumer groups. Katy Worobec, the director of FFA UK, said: “Last year banks stopped £7 in £10 of attempted fraud from happening. But as the banks’ systems get more advanced, fraudsters turn their attention elsewhere and sadly this often means tricking people out of their personal details and money” (Guardian, p27).

Prime Minister consults US banks on Brexit

The FT (£, p2) reports that Theresa May last night met with Wall Street banks in an attempt to reassure them that Brexit will not damage their UK business. The Prime Minister was scheduled to meet “mostly” chief executives from the finance sector as well as figures from the technology and entertainment sectors during a visit to New York. Mrs May said before the meetings she would “be talking about how we can encourage trade and investment” between the UK and the US, including “talking to them and hearing from them about what the issues are that they want us to address” in the Brexit negotiations. The Times (£, p6) notes that Prime Minister will deliver a speech focusing on Brexit to the UN general assembly later today.

Moody’s claims passporting rights not crucial for UK

The Telegraph (B1) reports that analysts at Moody’s have predicted that the City will be able to cope with the loss of passporting rights if Britain leaves the EU’s single market. An analysis for the ratings agency stated: “The direct impact is likely to be modest […] This is credit negative but manageable. And other critical factors such as capital and liquidity, which are largely determined by global standards, are unlikely to face material changes due to Brexit per se.” Moody’s argued that the forthcoming Mifid II directive could partially compensate for the loss of passporting rights.

Stilpon Nestor, Managing Director at Nestor Advisors Ltd, blogs about how to improve corporate governance codes.

Bundesbank President warns Brexit could hit City

The Guardian (p1) reports that Bundesbank President Jens Weidmann has warned that London’s position as a financial centre would be damaged if the UK left the single market. In an interview, Mr Weidmann underlined that “passporting rights are tied to the single market and would automatically cease to apply if Great Britain is no longer at least part of the European Economic Area.” He also added that the withdrawal of passporting rights could lead to banks relocating to Frankfurt. Separately, the FT (£, p17) notes that Nobuyuki Hirano, Chief Executive of Mitsubishi UFJ Financial Group, Japan’s biggest bank, has called on the UK to engineer a ‘soft Brexit’. According to the FT (£, p2), Chancellor Philip Hammond is pushing for maximum access to the single market, in contrast to other ministers who want a “clean break” from the EU.

New fraud figures published

The Times (£, p1) reports that one in ten adults has replaced a credit or debit card after a cyberattack, identity theft or card cloning, according to research by Populus. James Daley, of the consumer group Fairer Finance, said: “These figures show that cyberfraud has become a pandemic and the lack of investment in policing the problem is increasingly difficult to justify.” The study finds that consumers are so concerned about online fraud that they are starting to avoid making online payments. Katy Worobec, of Financial Fraud Action UK, added: “Banks use robust security systems which last year stopped £6 in every £10 of attempted card fraud. Anyone who is the victim of card fraud is legally protected and will get their money back.”

Concerns raised over Chinese banking sector

There is a growing risk of a Chinese banking crisis, according to the Bank for International Settlements (BBC News). The latest quarterly review from BIS found that China’s credit-to-GDP gap hit 30.1 in the first quarter of 2016, over three times the level it considers to be a sign of potential danger. Separately, the International Monetary Fund estimates that loans worth $1.3 trillion in China are at risk of default.

Dr. Rebecca Harding, Chief Economist at the BBA, blogs about the international impact of US monetary policy.

Bank of England keeps interest rates on hold

The FT (£, p1) reports that the Bank of England’s Monetary Policy Committee yesterday voted unanimously to keep its monetary policy on hold, with interest rates remaining at 0.25 per cent. The MPC stated, however, that rates could be cut again in the coming months even though the economic impact of the Brexit vote has been less significant than previously expected (BBC News). Fabrice Montagné, an Economist at Barclays, said that while he still expected a further rate cut this year, “the likelihood of an alternative scenario where the bank keeps powder dry has increased”.

Bonuses climb above pre-crisis peak

Figures published by the Office for National Statistics show that UK employees received £44.3 billion in bonuses in the last financial year, more in cash terms than the pre-financial crisis peak  (FT, £, p2). However, bonuses remain 12 per cent lower than 2007-08 after adjusting for inflation. Matthew Whittaker, Chief Economist at the Resolution Foundation think-tank, said: “There is little appetite for a return to the pre-crisis bonus culture that appeared to characterise the excesses of the period, so we should not expect too many tears to be shed over the fact that total bonus payments remain well down on their peak in real terms.” Staff in finance and insurance now receive 31 per cent of the overall bonus pool, down from a peak of 47 per cent in 2006.

Spitch’s Sales Manager UK & Ireland, Ravi Mahadeo, blogs about the use of Speech Analytics for compliance in Retail Banking.

Simon Hills, BBA Executive Director of Prudential Capital and Risk, blogs about the BBA’s recent Foreign Banks Reception and potential Brexit offsets.

Banks told to embrace digitisation

The FT (£, p16) reports that McKinsey has found that digitisation of investment banks could increase the sector’s profitability by 20 to 30 per cent over three years. The consulting group stated that increasing low-cost electronic trading and outsourcing more activities to digital shared service platforms could cut costs across the sector, while cloud technology and machine learning could boost revenue streams. Matthieu Lemerle, Head of McKinsey’s corporate and investment banking practice, said: “The toolkit is getting richer and the willingness of banks to embrace things they never would have done in the past is really happening.” The Telegraph (B5) notes that, major investment banks earn returns on equity of seven per cent on average, which is below their cost of capital despite several years of cost cutting.

Government urged to avoid rushing Brexit

The Telegraph (B3) reports that two senior bank leaders have called on the Government to formulate a clear Brexit plan and provide the City with several years to adjust to any changes. Speaking before a House of Lords committee, Bank of America Merrill Lynch’s European President Alex Wilmot-Sitwell said: “That process is very dangerous, it is fraught with risk because the materials that are being moved are risky materials, and you don’t move nuclear waste in a race – you do it in a very carefully coordinated and managed process.” HSBC’s Chairman Douglas Flint added: “Without knowing where you’re trying to go to and what happens from the point of exit to that point, how do you make a decision? Given the time it would take to establish a different model and set up branches or subsidiaries elsewhere, these things need to be known sooner rather than later.”

Mortgage lending falls following Brexit vote

The Times (£, p42) reports that the number of mortgages advanced for house purchases fell in July, the first full month after the UK voted to leave the European Union. Figures published by the Council of Mortgage Lenders showed that first-time buyers and homeowners took out 58,100 loans, worth a total of £10.6 billion in July. The number of loans dropped by 14 per cent compared with June, while the value was 13 per cent lower. Paul Smee, Director-General of the CML, said: “It is hard to determine whether these figures reflect a first uncertain reaction to the referendum vote or are a sign of a market that was already cooling.”

Spitch’s Sales Manager UK & Ireland, Ravi Mahadeo, blogs about the role of analytics in Retail Banking.

JAYWING’s Managing Director Ben O’Brien explains what the PRA consultation paper for residential mortgage risk weights could mean for mortgage lenders.

Cabinet Minister outlines risk of leaving EU without trade deal

The Guardian (p5) reports that David Davis has acknowledged that the UK could have to revert to World Trade Organisation tariffs if it leaves the European Union without a trade deal. The Secretary of State for Exiting the European Union also highlighted one “obvious negotiating risk” is that the European Commission could win a power struggle with leaders of individual member states, who are likely to be more accommodating. Meanwhile, Reuters reports that Guy Verhofstadt, the new Brexit negotiator for the European Parliament, has warned “if the UK wants to remain a part of the single market, it will also have to accept the free movement of our citizens”.

Call for inquiry into Bank’s ‘tax on savers’

The Telegraph (p4) reports that the Bank of England is being pressed to launch an inquiry into the impact of low interest rates and quantitative easing on savers. Former Pensions Minister Baroness Altman claims such policies hit those on modest and middle incomes like an extra tax, as well as hitting their pension funds. Labour MP Chris Leslie has backed calls for an inquiry into the impact of the Bank’s monetary policy. Separately, the Times (£, p35) reports that the UK bond fund M&G Investments has suggested that low interest rates mean investors would be better off sticking their money under the bed than investing in bonds.

European banks meeting capital requirements

The FT (£, online only) reports that the European Banking Authority has found that the continent’s banks have the smallest shortfall on record under Common Equity Tier 1 rules. As of the end of December 2015, the EBA said 227 lenders across the European Union had a shortfall of €0.4 billion. The largest banks across the EU reported an average CET1 ratio of 12.4 per cent, while the second-tier of banks reported an average of 13.6 per cent. Both were well above the international minimum level set by the Basel Committee on Banking Supervision.

Vishal Khosla, Partner, People Advisory Service at EY, blogs about how the regulatory environment is changing the role of the HR professional in Financial Services

New ‘plastic’ £5 notes issued

The Bank of England has begun issuing the new plastic £5 note in England and Wales today (BBC News). ATMs in London, Manchester, Birmingham, Leeds, Hull and Cardiff will be among the first to stock them. The polymer notes are expected to last an average of five years – compared to the current note’s two years. Victoria Cleland, the Bank’s Chief Cashier, said: “Although there are lots of alternative ways to pay out there we are still seeing strong demand for cash and so that’s why we think it’s really important to make sure it’s fit for the modern age” (Guardian, p4). The old fiver will continue to be valid until 5 May 2017, by which time the Bank expects most of them will have been removed from circulation.

Prospects of Fed rate rise recede

The FT (£, p1) reports that the prospects of a Federal Reserve interest rate rise this month receded further yesterday after a senior policymaker argued against rushing into an increase. Lael Brainard, a Fed Governor and permanent member of the Federal Open Market Committee, said: “To the extent that the effect on inflation of further gradual tightening in labour market conditions is likely to be moderate and gradual, the case to tighten policy preemptively is less compelling.” The Fed will next decide whether to raise rates at a meeting on September 21.

ECB allows banks to set NPL targets

Eurozone banks will get to set their own targets for cutting the €900 billion of bad loans left over from the financial crisis (Reuters). New guidance by the European Central Bank will require banks to set their own targets for the levels on non-performing loans, with only “significant” deviations triggering regulatory action. Sharon Donnery, the Irish Deputy Governor who chaired the ECB’s working group on bad loans, said: “If there were significant gaps, then obviously we would be discussing with the bank how they would move close toward compliance with the guidance, particularly the time frame over which that was going to happen.”

Peter Chapman, Senior Associate at Clifford Chance, blogs about a response to a European Securities and Markets Authority consultation on distributed ledger technology.

Government to launch crackdown on white collar crime

The Times (£, p1) reports that the Government is set to announce a crackdown on white collar crime. Company boards could face prosecution for failing to prevent their staff from committing money-laundering, false accounting and fraud as part of a new Criminal Finance Bill. Jeremy Wright, QC, the Attorney-General, said last week at a symposium in Cambridge on economic crime that ministers would consult on the plans with a view to introducing legislation.

Central bankers endorse Basel capital rules

The Group of Central Bank Governors and Heads of Supervision has “endorsed the broad direction” of the Basel Committee’s reforms to capital rules (Reuters). The central bankers also urged the Basel Committee to avoid any further large increases in requirements. A statement issued following a meeting on Sunday said: “The GHOS discussed the Basel Committee’s ongoing cumulative impact assessment and reaffirmed that, as a result of this assessment, the committee should focus on not significantly increasing overall capital requirements.”

County Court Judgments criticised

An investigation in the Daily Mail (p1, p6) looks at a number of county court judgements being brought by banks, utilities and parking firms which can, in extreme cases, lead to bankruptcy for people unaware that the cases are proceeding. The newspaper finds that the number of CCJs has risen by more than a third in just three years – almost 900,000 were issued last year, and 85 per cent were uncontested. Courts Minister Sir Oliver Heald said: “These are serious claims which will be looked at urgently. Our legal system is world-leading and we are determined to ensure that it is not open to abuse.”

Dr. Rebecca Harding, Chief Economist at the BBA, blogs about the low interest rate environment and what it means for households and the economy.

David Wren, the BBA’s Interim Tax Policy Director, blogs about a response to a OECD consultation that could affect the tax deductibility of interest expenses for banks and insurance firms.

Mike Conroy,  the BBA’s Managing Director of Business Finance, blogs about the changing SME finance landscape following the publication of two new sets of data.

Chancellor provides reassurance on potential free movement restrictions

The Chancellor has stated that any possible restrictions on the freedom of movement following the Brexit negotiations will not prevent financial institutions from hiring “highly skilled” individuals (Telegraph, p4). Mr Hammond told a House of Lords committee: “We cannot accept uncontrolled free movement of people. That’s the political outcome of the referendum […] We will use it [control over free movement] in a sensible way that will facilitate the movement of highly skilled people between financial institutions and businesses to support investment in the UK economy.” He also added that any attempt to take euro-denominated clearing away from London would harm Europe, with business shifting to New York (FT, £, p1).

Dombrovskis warns over passporting rights

Valdis Dombrovskis, European Union Commissioner for financial services, has said that the City of London will lose the right to grant access to the single market if free movement of people is rejected after Brexit (Times, £, p44). Mr Dombrovskis said: “If Great Britain no longer wants to permit freedom of movement for people, then we will have to limit capital movements in return. British financial institutions will then no longer have free access to the single market.” Dombrovskis’ comments came after BBA CEO Anthony Browne said Britain should negotiate transitional arrangements to avoid “cliff edge” disruption to financial markets (Evening Standard, p45).

European regulator to clampdown on capital rules

The European Supervisory Authorities – a committee of groups that oversees the EU’s financial regulators – has said it is planning to tighten oversight on capital rules after the UK’s vote to leave the bloc (FT, £, online only).  Gabriel Bernadino, Chairman of the joint committee, said: “We are considering the possibilities for further enhancing monitoring of financial industries, reinforcing adequate capital or risk buffers as well as ensuring adequate resolution arrangements for affected sectors.” The ESA’s report also said that non-performing loans threatened the bloc’s financial stability.

Mike Conroy, the BBA’s Managing Director for Business Finance, said:

“Banks are firmly committed to helping SMEs do what they do best – drive economic growth and create jobs right across the country.

“This data shows that there has been a continued net expansion in SME borrowing this year, with around £6 billion of new lending approved each quarter.

“The first half of this year saw a drop in loan applications amid uncertainty around the EU referendum, and lower business and consumer confidence. SMEs increased their cash deposits as a buffer in response to this uncertainty.”

EU Financial Affairs Sub-Committee takes evidence on Brexit

BBA Chief Executive Anthony Browne gave evidence to the House of Lords EU Financial Affairs Sub-Committee yesterday (BBC News). He called for “some form of transitional arrangements” for the financial services industry to avoid “cliff edge” effects as the UK prepares to leave the European Union. Mr Browne also said that UK-based banks have not decided whether to move operations overseas after Brexit, stating “there is a ‘wait and see’ at the moment”. Meanwhile, the FT (£, p2) notes that a number of senior banking figures met with Chancellor Philip Hammond yesterday. After the meeting, Mr Hammond said: “I understand the scale of the potential impact leaving the EU could have for parts of the financial services industry. That is why I am determined to listen to what the industry has to say on key issues, like access to the single market.” Meanwhile, Sir Charlie Bean, a former Deputy Governor of the Bank of England, has said London is likely to lose its dominance in the clearing of euro-denominated financial contracts following a Brexit (Times, £, p46).

Bank of England questioned by Treasury Select Committee

Bank of England Governor Mark Carney has stated that the economy has proven resilient following the EU referendum “because the bank took timely, comprehensive and concrete action and that action has had an impact” (FT, £, p1). Mr Carney warned, however, that the UK faces a significant slowdown and that the central bank was prepared to cut interest rates further. He was also questioned by members of the Treasury Select Committee about whether banks were passing on the August interest rate cut to borrowers as quickly as they reduced rates for savers (Daily Mail, p70). Mr Carney added: ”We would expect the full amount to be passed on in the next few months.”

Prime Minister highlights Brexit trade opportunities

Theresa May said the UK could become “the global leader in free trade” as she faced calls to clarify the government’s post-Brexit vision (BBC News). The Prime Minister also told the Commons that “we will not reveal our hand prematurely and we will not provide a running commentary on every twist and turn of the negotiation.” It comes as Mrs May meets European Council President Donald Tusk for the first time (Sky News). Mr Tusk told the Prime Minister that “the ball is now in your court” and that negotiations would only begin once Article 50 had been triggered.

Chancellor to meet with bank leaders

City AM (p2) reports that members of the newly-created trade body European Financial Services Chairman’s Advisory Committee will meet with Chancellor Philip Hammond today to discuss Brexit and his upcoming Autumn Statement. Mr Hammond said: “We want to ensure the continued investment that creates jobs and supports wage growth throughout this period of uncertainty ahead of the UK formally leaving the European Union.” Meanwhile, the Prime Minister’s spokeswoman has said that comments from Brexit Secretary David Davis suggesting it was “very improbable” the UK would remain in the single market were not Government policy (FT, £, p3). Separately, Australia and the UK are to hold “preliminary discussions” about a post-Brexit trade deal (BBC News).

Treasury Select Committee members criticise overdraft fees

Two members of the Treasury Select Committee have criticised the Competition and Markets Authority’s proposals on restricting overdraft fees for not going far enough (Reuters). Andrew Tyrie, the committee’s chairman, said: “The CMA’s proposed remedies, which include a self-regulated maximum monthly charge, don’t appear robust enough to deal with this serious problem” (Telegraph, B3). Labour MP Rachel Reeves added: “It [the CMA] must step up to the challenge and take necessary action, for example by imposing a monthly maximum charge on overdrafts, to ensure that those who are most financially vulnerable are protected.” The committee also published a series of letters from high street banks outlining their overdraft fees.

Banks ‘becoming more like utilities’

A feature in the FT (£, p9) explores whether banks are becoming more like utilities amid increased regulation and a low growth environment. The article examines how return on equity had dropped since the financial crisis, with increasing competition and regulatory requirements narrowing margins in payments and other business lines. Sir Philip Hampton, Chairman of GlaxoSmithKline and former Chairman of RBS, said: ““Banks look increasingly like competitive utilities […] There are ever-higher levels of regulation and relatively low utility-like returns.” Separately, researchers from JP Morgan have claimed European banks have more in common with low-returning Japanese institutions rather than their Wall Street rivals (FT, £, p15).

Investment banks face falling revenues

Revenues at the world’s largest investment banks dropped by 15 per cent in the first half of 2016 – the biggest drop since the financial crisis, according to analytics firm Coalition (FT, £, p15). Banks’ revenues from trading stocks and bonds, and advising companies on mergers and capital raising, amounted to $79 billion in the first half, down from $93.3 billion last year. George Kuznetsov, Head of Research and Analytics at Coalition, said: “Investment banks are realising there is no top-line relief, capital allocation from [parent companies] probably won’t change much, and regulations won’t change much. So improvement in returns becomes dependent on optimising the cost base or grabbing market share.”

Government plans to consult on Brexit plans

Sky News reports that the Chancellor is to host a meeting on Wednesday with the heads of major banks, insurance companies and asset managers to discuss the UK’s exit from the EU. Among the issues expected to be discussed is how best to protect the financial services sector’s access to Europe’s “passporting” framework. Meanwhile, City AM (p1) reports that Brexit Secretary David Davis will hold a series of roundtables to consult business leaders from October. In a statement in Parliament, Mr Davis said: “We are going to listen and talk to as many organisations, companies and institutions as possible – from the large PLCs to small business, from the devolved administrations through to councils, local government associations and the major metropolitan bodies.” MPs from Labour, the Liberal Democrats and the SNP criticised the statement for lacking detail.

Slight increase in complaints

The Financial Ombudsman received 169,132 complaints in the first half of 2016, up three per cent on the previous six months (BBC News). Payment protection insurance accounted for 54 percent of new complaints with 91,381 new cases, down slightly from the second half of 2015 (Reuters). Chief Financial Ombudsman Caroline Wayman said: “Although it is a few years now since PPI complaints peaked, we have been receiving over 3,000 a week for six years running – despite wider expectations that numbers will fall. We are continuing to deal with the issues and uncertainties around PPI which remain a significant challenge for everyone involved.”

Banks call for transitional arrangement to mitigate Brexit impact

The Times (£, p36) reports that UK-based banks are calling for a “bridging agreement” lasting up to five years to deal with the consequences of Brexit. The newspaper reports that banks want a two to three-year extension on top of the two-year negotiating period that will be triggered once Article 50 is invoked, due to uncertainty around how rules on market access will change. A BBA spokesman said: “The banking sector wants an orderly transition as the UK prepares to leave the European Union, to ensure continuity to the services it provides to businesses and customers in the UK and right across Europe. This would be mutually beneficial to both sides. If necessary, transition arrangements should be in place to ensure banks can continue to serve customers until any new agreement starts.” Separately, Reuters reports that Japan has warned that the country’s financial institutions could relocate away from London if the UK loses access to the Single Market. Mayor of London Sadiq Khan has also called on the Government to prioritise financial services in the upcoming negotiations with the EU (City AM, p4, paper only).

Prime Minister attends G20 summit

Theresa May has questioned the effectiveness of a proposed points-based system for controlling immigration into the UK. Speaking at the G20 summit of world leaders in China, the Prime Minister argued “there is no silver bullet” when it comes to controlling immigration (BBC News). Meanwhile, Brexit Secretary David Davis has insisted that leaving the European Union presents “huge and exciting opportunities” (FT, £, p3). The Telegraph (B1) reports that Nobel prize-winning economist Joseph Stiglitz has also insisted that the UK can thrive outside of the EU. Philipp Hildebrand, former head of the Swiss central bank, has insisted that a Swiss-style model would not be appropriate for UK (FT, £, p2).

Services sector returns to growth

The UK’s services industry has rebounded sharply in August, according to a closely-watched survey (BBC News). Data published this morning from the Markit/CIPS Purchasing Managers’ Index showed the biggest month-on-month rise in the survey’s 20-year history. It adds to encouraging news from manufacturing and construction to suggest “an imminent recession will be avoided.” Markit’s Chris Williamson said: “It remains too early to say whether August’s upturn is a dead cat bounce or the start of a sustained post-shock recovery, but there’s plenty of anecdotal evidence to indicate that the initial shock of the June vote has begun to dissipate.”

Welcome to my newsletter – I hope you have had a good break. This summer has been exceptionally busy for the BBA, as the industry gets ready for the UK’s exit from the European Union. UK-based banks want an orderly transition so they can continue to serve customers and businesses across Europe. Preparations for Brexit are likely to accelerate now that the UK Parliament has returned from recess so it is crucial the industry works together with Government over the coming months to secure the best possible deal for the UK.