We are The voice
BBA hosts Annual International Banking Conference
There is widespread coverage of the BBA’s Annual International Banking Conference. Reuters reports that Mark Garnier, Parliamentary Under Secretary of State for International Trade, said that “we have to find a mechanism that behaves like passporting and has greater security than equivalence”. The Guardian (p27) reports that BBA Chief Executive Anthony Browne said that banks were getting ready to move operations overseas, with “their hands poised quivering over the relocate button,” whilst The Times (£, p47) reports that French Ambassador Sylvie Bermann suggests Paris is poised to welcome “a lot of people”. Meanwhile, Deutsche Bundesbank executive board member Andreas Dombret stated that European banks should not blame regulators and central banks for the tough business environment (FT, £, p2). The Telegraph (B3) also reported on Dombret’s comments and suggested the repercussions of Brexit would have minimal impact of the remaining EU27 as he said: “Brexit and its possible repercussions for the City of London are unlikely to be an issue for financial stability or the financing of the EU’s real economy”.
Theresa May attends first Brussels summit as PM
The Prime Minister has pledged to continue to “work closely” with the European Union after Brexit, as she arrived for her first Brussels summit (BBC News). She told her European counterparts that the UK wants a “smooth, constructive, orderly” Brexit. Speaking to reporters at the summit, Ms May said: “I’m here with a clear message. The UK is leaving the EU, but we will continue to play a full role until we leave and we will be a strong and dependable partner after we have left.”
Brexit Committee Chair calls for transitional arrangements
Hilary Benn, the newly appointed Chair of Parliament’s Brexit Select Committee, has backed calls for the Government to deliver transitional arrangements for the City (City AM, p4). Speaking on BBC Radio 4, Mr Benn said: “One thing the Government could do now is make absolutely clear that it will seek a transitional arrangement…so that we won’t tumble out after two years on WTO terms.” He also called on the Government to share its economic impact assessments with Parliament.
Following the launch of a new white paper, Abide Financial’s Director of Professional Services Mark Kelly blogs about transaction reporting requirements.
Chancellor appears before Treasury Select Committee
Phillip Hammond has insisted that the Bank of England will retain its independence to set monetary policy (BBC News). Appearing before MPs on the Treasury Select Committee, the Chancellor said: “There will be no change in monetary policy. Monetary policy is independently determined, that will continue to be the case.” Mr Hammond also stated that retaining passporting for the financial services industry was important and “would be the ideal outcome”. He acknowledged, however, that some firms were being “realistic and are looking at other options beyond passporting to protect their interests”.
BBA calls for bank corporation tax surcharge to be phased out
City AM (p3, paper only) reports that BBA Chief Executive Anthony Browne has urged the Government to commit to phasing out the bank corporation tax surcharge “as soon as possible”. Speaking at the BBA’s Annual International Banking Conference this morning, Mr Browne called for the “normalisation of banking taxes in the UK and the removal of sector-specific tax measures.” Reuters notes the Government imposed the extra eight per cent tax on profits above £25 million earlier this year.
Mortgage arrears customers to get redress
The Financial Conduct Authority has ruled that up to 750,000 consumers in arrears on mortgage payments could be eligible for compensation from lenders (BBC News). The regulator warned that some mortgage customers had been overpaying because banks had automatically included mortgage arrears in regular monthly payments. Paul Smee, the Council of Mortgage Lenders’ Director General, said: “Those lenders who used the arrears calculation methodology now identified as problematic did so in good faith, believing that they complied with the rules and were acting in customer interests.”
Welcome to the BBA’s Annual International Banking Conference 2016 – follow all the action on our live blog and on Twitter @bbavoice #bbaintconf
FCA publishes investment and corporate banking market study
The Financial Conduct Authority has announced that it will clamp down on investment bank league tables and develop industry guidelines in order to tackle conflicts of interest and ensure clients get a fair deal (FT, £, p13). The City regulator will also increase oversight of initial public offerings. Chris Woolard, the FCA’s Head of Strategy and Competition, said: “The universal banking model clearly works well for a wide range of participants but areas such as the use of restrictive contractual clauses, league table credibility and the allocation of shares in IPOs are not always working as well as they could.”
MPs to get vote on Brexit deal
Downing Street has said it is “very likely” MPs will vote on the final Brexit deal agreed between the UK and the European Union (BBC News). Any vote is expected to take place after negotiations have taken place after Brexit is triggered using Article 50. Labour’s Shadow Brexit Secretary Sir Keir Starmer said: “A vote so late in the day would put MPs between a rock and a hard place. It would ask us to choose between a deal on the government’s terms or leaving the European Union with no deal at all.” Meanwhile, City AM (p1) reports that senior City figures have voiced concern over mixed messages from different Government departments on Brexit.
Adam Oldfield, EMEA financial services director at Unisys, blogs about why the rapidly changing digital landscape makes it even more important for the financial services industry to adapt to customers’ needs.
Sushil Saluja, Accenture’s Senior Managing Director for Financial Services in Europe, Africa, Middle East and Latin America, blogs about how banks need to strike the right balance between branch and digital services.
Critics target Chancellor over Brexit
The FT (£, p3) reports that Eurosceptic ministers are seeking to “isolate” Philip Hammond due to his stance on Brexit. The newspaper cites “friends of the Chancellor” as stating that negative briefings are coming from other parts of the Cabinet. A spokeswoman for Theresa May sought to defuse tensions, stating: “The Prime Minister has full confidence in the Chancellor and the work he is doing.” Meanwhile, City AM (p7) reports that Shadow Chancellor John McDonnell has criticised the Government over reports that it could pay contributions to the European Union to maintain single market access for the financial services sector.
Frankfurt opens door for British bankers
Frankfurt Main Finance, a promotional group, has predicted that banks based in London will start moving operations to the German financial centre next year to ensure full access to the European Union’s single market (City AM, p5). Chief Executive Hubertus Vaeth said: “We already see small teams, explorative teams looking into certain aspects […] We see options for real estate, and we have very, very clear indications that things will be moved, however, not entire operations.” Mark Boleat, Policy Chairman at the City of London Corporation, also noted firms were applying for licences and lining up property options as part of “contingency planning”. Separately, Paris has launched an advertising campaign to lure companies to La Défense, the city’s business district (Times, £, p45).
Cyber criminals stealing billions
A total of £10.9 billion was lost to the UK economy due to fraud and cybercrime in the 12 months to April, according to Get Safe Online (BBC News). The prevention group stated fraudulent emails and messages directing people to websites that gather victims’ personal information are the most common scam. Tony Neate, Chief Executive of Get Safe Online, said: “Online safety needs to be part of our everyday routines.” Financial Fraud Action UK last month said that a financial scam was committed once every 15 seconds on average in the first half of 2016.
Jaywing’s Managing Director, Ben O’Brien, blogs about challenges to implementing IFRS 9 ahead of its deadline in January 2018.
Government explores cost of maintaining single market access
The FT (£, p1) reports that the Cabinet is considering plans that would lead to the UK paying billions into the European Union budget after Brexit in exchange for access to the single market for financial services and other sectors. The newspaper cites several unnamed ministers as stating EU budget contributions are one option under consideration. Oliver Letwin, David Cameron’s former policy chief, added: “If we have to buy this market access by making continuing contributions to EU budgets, that may well be a price worth paying, given the number of UK jobs that are involved.”
Think tank warns banks need clarity over Brexit deal
The Guardian (p4) reports that think tank Open Europe has warned that the UK risks losing its status as a world leading financial centre unless passporting rights are made a priority in negotiations with the European Union. Vincenzo Scarpetta, Open Europe’s Senior Policy Analyst, said: “There are plans in case the UK were to leave the single market without any kind of regulatory equivalence […] These plans may be set into motion early on if the uncertainty drags on for too long.” The newspaper states that around a fifth of the banking sector’s annual revenue is estimated to be tied to the passport.
Former ECB economist warns of euro troubles
The ECB’s first chief economist, Professor Otmar Issing, has suggested the euro currency is facing strain, particularly if it is faced with another economic downturn (Telegraph B19). Having played a significant role in forming the ECB’s current monetary policy framework, Prof. Issing said: “It will be a case of muddling through, struggling from one crisis to the next. It is difficult to forecast how long this will continue for, but it cannot go on endlessly.” The Independent suggests the demise of the single currency is due to the politics of the region.
Ahead of the ECB’s decisions on interest rate later this week, the BBA’s Chief Economist Rebecca Harding blogs about the EU’s current monetary policy framework within the context of the current economic climate.
Foreign Secretary rejects concerns over leaving single market
Boris Johnson, the Foreign Secretary, has dismissed concerns that leaving the single market as a result of Brexit would hit the UK economy (FT, £, pX). Appearing before MPs on the Foreign Affairs Committee, Mr Johnson said: “We are going to get a deal that will be of huge value, possibly greater value.” He added: “It will take time for the full benefits of Brexit to become clear.” The Foreign Secretary also stated that it would be “wrong” for the EU to punish UK financial services over Brexit (BBC News).
French Finance Minister suggests banks shifting away from London
Michel Sapin, the French Finance Minister, has said executives of major US banks have told him that they are preparing to move some operations from London to other European Union cities (Bloomberg). In a press conference in Paris, Mr Sapin said: “While in Washington I spoke to large American businesses and banks […] They are telling us clearly that there will be a transfer of activity. It’s no longer a question of if but when.” He also added that progress on a financial transaction tax in 10 EU countries was made at a recent meeting and the European Commission has now been tasked to come up with a proposal by the end of the year (Reuters). Meanwhile, European Council President Donald Tusk has said that Britain’s only real alternative to a “hard Brexit” is “no Brexit” (BBC News).
Criminal Finances Bill published
Reuters reports the new Criminal Finances Bill will give law enforcement agencies the right to require suspected criminals to explain the source of their wealth. Those who are not able to say where their wealth came from will face having their assets seized. Security Minister Ben Wallace said: “This legislation will ensure the UK is taking a world-leading role in cracking down on corruption and send a clear message to criminals – we will take your liberty and your money.” Assets that could be seized under ‘unexplained wealth orders’ include money stored in bank accounts, precious metals, jewels and works of art.
Ian Davies, Deputy Chairman of BMT Group and Senior Independent Director at the Institute of Chartered Accountants in England and Wales, blogs about how criminals are trying to use directors’ personal data.
Prime Minister defends Brexit planning
Theresa May has defended the Government against an accusation from Labour leader Jeremy Corbyn that they are presiding over a “shambolic Tory Brexit” (BBC News). Speaking during Prime Minister’s Questions, Mrs May insisted she wants “maximum possible access” for the UK to the single market after leaving the European Union. Ahead of a Brexit debate yesterday afternoon, Labour published a list of 170 Brexit questions for the Government covering a range of subjects including financial services.
Bank of England Deputy Governor raises concerns over passporting
Sir Jon Cunliffe, the Bank of England’s Deputy Governor for Financial Stability, has warned that British financial services firms face a “painstaking process” to maintain passporting rights amid wider Brexit negotiations (FT, £, online only). Appearing before the House of Lords EU Financial Affairs Committee, Sir John also stated that it was “highly unlikely” Paris or Frankfurt could overtake London as a financial centre in the “foreseeable future” (Daily Mail, online only). He also said any efforts by the EU to force euro clearing to take place within the eurozone – rather than the UK – could pose a risk for financial stability.
Basel Committee defends capital rules
Bill Coen, Secretary General of the Basel Committee on Banking Supervision, has hit back at critics of the group’s plans to toughen capital rules (FT, £, online only). Appearing before a European Parliament committee in Brussels, Mr Coen insisted that the plans should not be seen as a US-backed attempt to drive up capital requirements for EU lenders. He added: “There are a lot of people around the world who have a deep seated mistrust of the use of models for regulatory capital purposes. A number of studies have found material variation in the risk-weighted asset calculations of banks.” He also added that the new rules would not be implemented for several years (Reuters).
Mark Logsdon, former AXELOS Head of Market Engagement for Cyber Resilience, blogs about data protection.
Economic Secretary prioritises Brexit deal for City
Simon Kirby, Economic Secretary to the Treasury, has stated that the Government is focused on getting the best deal for the City of London in the upcoming Brexit negotiations (Reuters). Speaking at a conference in London, Mr Kirby said: “Can the UK still be one of the best financial centres anywhere in the world, even if we’re outside the EU? Well, let me say this is an absolute priority for this government.” The Guardian (p19) notes that senior executives from US banks yesterday told a conference in London that they are considering shifting operations overseas.
Bank of England warns of contagion from European banking sector
Anil Kashyap, a newly appointed member of the Bank of England’s Financial Policy Committee, has warned of the risk of British banks being negatively affected by the difficulties facing their rivals on the continent (Reuters). In a written submission to the Treasury Select Committee, Mr Kashyap said: “I am particularly worried about contagion from stress coming from the European banks and whether there might be linkages – perhaps indirect – between them and the largest UK banks.” He also added that regulators had to clamp down on banks breaking rules but “it does seem a little bit arbitrary as to how big these fines are and why some firms are being asked to pay this much and others are asked that much.”
Europe finance ministers argue over bank rules
The FT (£, 5) reports that EU finance ministers are split over planned international bank capital rules. Jeroen Dijsselbloem, the Dutch Finance Minister and President of the Eurogroup, urged countries not to try to water down the rules. He said: “We’ve had this discussion … before where a number of ministers say, ‘look, whatever happens in Basel it cannot lead to higher capital requirements’, and I said then and now that I don’t think that is the right starting point.” Valdis Dombrovskis, the EU’s financial regulation commissioner, last month warned that he was prepared to reject the new Basel standards if they placed an excessive burden on Europe’s banks.
Prime Minister rejects MPs’ vote on Brexit
The Prime Minister has described demands from senior politicians that MPs get a vote on Brexit as “unacceptable” (BBC News). Theresa May’s spokesman said MPs would “debate and scrutinise” the process but not vote on plans. The spokesman added: “[…] having a second vote, or a vote to second-guess the will of the British people, is not an acceptable way forward.” Brexit Secretary David Davis yesterday told MPs there was a difference between “accountability and micro-management”. Former Labour leader Ed Miliband had earlier called for a vote to ensure suitable parliamentary scrutiny. Reuters reports that Mrs May also said that she expects to guarantee the rights of EU citizens already in Britain. Meanwhile, BBA Chief Executive Anthony Browne has written a piece for Conservative Home on the importance of passporting for the City and the UK.
‘Hard Brexit’ could hit economy
The Times (£, p1) reports that leaked Treasury forecasts have suggested that a ‘hard Brexit’ could cost the UK up to £66 billion a year in tax revenues – equivalent to 65 per cent of the annual budget of NHS England. The analysis is based on the UK leaving the Single Market and instead relying on World Trade Organisation rules. The newspaper cites senior Brexit supporters as saying the paper is “withdrawn from reality” and “not very realistic” because it did not assume the continuation of any trade deals.
Banks set targets for women in senior roles
The Times (£, p44) reports that a number of high street banks have pledged to fill 30 per cent of their senior roles with women within five years. They will also publish annual reports outlining their progress on the issue of gender balance, and make a senior member of staff responsible for achieving the target. The move has been made as part of the Treasury’s Women in Finance charter, which was launched this year following a report by Virgin Money Chief Executive Jayne-Anne Gadhia. Prime Minister Theresa May said: “I want to see a diverse sector run by talented men and women and I look forward to seeing many more businesses promoting women and helping to make the UK the best place in the world to do business.”
Ian Davies, Deputy Chairman of BMT Group and Senior Independent Director at the Institute of Chartered Accountants in England and Wales, blogs about the importance of cyber resilience for company directors.
The BBA’s Executive Director, Financial Policy & Operations, Paul Chisnall blogs about HM Treasury’s initiative to achieve UK gender diversity targets across the financial services sector.
Commenting on the figures, BBA CEO Anthony Browne said:
“Bankers and farmers could not be more different in the eyes of most people. The two sectors are typically located in separate parts of the country and play very different roles in the economy.”
“It’s important to recognise, however, that both sectors share a mutually beneficial relationship. The fresh produce that people buy in shops or get delivered to their doorstep is not only grown by farmers, it is funded by banks.
“In the face of volatile commodity prices, banks are supporting farmers in these tough times. It is vital that farmers can secure the finance that they need to invest in crops, machinery or livestock. These figures show that banks are providing this lending at record levels.
“With interest rates at an historic low, there has rarely been a better time for businesses of all sectors to borrow.”
Government waters down foreign workers plan
The FT (£, p2) reports that the Government has backtracked on plans to force companies to publish how many foreign workers they employ after an international outcry. Education Secretary Justine Greening yesterday stated: “This is not data that will be published. There will be absolutely no naming and shaming.” In an interview with the Times (£, p8), CBI Director-General Carolyn Fairbairn urges the Government to avoid “closing the door” on an open economy following the EU referendum. She added: “[…] it’s certainly true that 5,000 firms here trade with a passport with the EU and it will be far more difficult for them to do so without a passport and under WTO rules only, that would not exist.”
UK to take part in international bank ‘war game’
Bank of England Governor Mark Carney and Chancellor Philip Hammond will be tested today on their reaction to the failure of a major international bank as part of efforts to end ‘too big to fail’ (Daily Telegraph, B3). Officials from the European Central Bank and US Federal Reserve will join them in a ‘war game’ aimed at improving how regulators would work together to protect the financial system in a crisis. The exercise builds on an exercise in 2014 when regulators conducted a similar exercise examining the failure of a Wall Street bank with UK operations and a UK bank with an American business. No individual banks will be discussed and no specific scenarios are planned.
Banks prepare to refer loan applications
The Times (£, p45) reports that high street banks will redirect all small business loans they reject to independent finance portals as part of a Treasury initiative. The move is aimed at boosting competition in the small business lending market, and is scheduled to be implemented in the next three months. Conrad Ford, Chief Executive of Funding Options, said that “the referral scheme has big potential.” Companies that agree to the service will be contacted with offers from alternative lenders, ranging from online platforms to traditional independent finance firms. The plans were announced two years ago.
Dr Rebecca Harding, Chief Economist at the BBA, blogs about striking the balance between monetary and fiscal policy.
Following an update on the Senior Managers and Certification Regime, the BBA’s Executive Director of Prudential Capital and Risk, Simon Hills, blogs about how UK initiatives might be impacted following the UK’s decision to leave the bloc earlier this year.
The BBA’s Senior Policy Director of Capital Markets, Andrew Rogan, blogs about the next steps for the wholesale banking sector following the UK’s decision to leave the EU.
Templar Executives Director Anu Khurmi blogs about the evolving risks of cyber-crime, and the need for greater resilience.
Chancellor discusses Brexit and immigration
The FT (£, p2) reports that Philip Hammond has moved to reassure Wall Street that the UK will seek a special deal for financial services when exiting the European Union. The Chancellor also stated that new immigration rules would not affect “highly skilled and highly paid bankers”. Meanwhile, the Daily Telegraph (B1) notes that Mr Hammond has pledged to fight for the UK to remain the global hub for clearing euro-denominated derivatives. He also said that he would welcome a decision by Bank of England Governor Mark Carney to extend his tenure until 2021 (FT, £, p2).
Banking complaints fall
The Times (£, p51) reports that the number of people complaining to the Financial Conduct Authority about their bank dropped during the first half of 2016. The fall was mainly driven by a decline in payment protection insurance claims and fewer complaints about current account services. Christopher Woolard, Director of Strategy and Competition at the FCA, said: “Firms still need to continue to ensure they are doing all they can do to reduce consumer dissatisfaction but the figures show firms are taking our feedback seriously.” The speed at which complaints were resolved also improved, with 93 per cent of complaints closed within eight weeks – up from 91 per cent.
Sterling slumps amid Brexit volatility
The pound dropped sharply against the US dollar on the Asian markets with automated trading being blamed for the volatility (BBC News). At one stage, it dropped more than six per cent to $1.1841 – the biggest move since the Brexit vote and the currency’s lowest level since May 1985 – before recovering most of the losses. Analysts blamed algorithms used for automated trading responding to a news story on Brexit for the extreme fluctuation.
The BBA’s Digital Policy Adviser Matt Field blogs about the rise of FinTech and its role in the BBA’s upcoming International Banking Conference.
Alternatives are poor substitute for passporting
City AM (p7) reports that BBA Chief Executive Anthony Browne has warned that the alternatives to passporting are not viable replacements. Writing in his monthly newsletter, Mr Browne noted that the passporting rules have “been a key factor in enabling the UK to grow as the financial capital of Europe”. He added: “Some have argued that alternatives, such as equivalence, available to non-EU countries could provide similar access to the EU’s Single Market in the event of a hard exit. In truth, the alternatives are poor shadows of genuine passports.” Mr Browne was also interviewed on Newsnight yesterday (skip to 30:00) as part of a package on the topic of passporting.
IMF urges banks to carry out reforms
The International Monetary Fund has stated that European banks should carry out “deep rooted reforms” to reduce risks to financial stability rather than complain about negative and low interest rates (FT, £, p4). Peter Dattels, Deputy Director of the monetary and capital department of the IMF, said: “There are simply too many branches with too few deposits and too many banks with funding costs way above their peers.” Meanwhile, European Banking Authority Chairman Andrea Enria has called on regulators to “step up” pressure on banks to dispose of bad loans (FT, £, online only).
Chancellor heads to Wall Street
The Daily Telegraph (B1) reports that Philip Hammond is visiting Wall Street to stress that Britain remains open to foreign businesses and workers after the Brexit vote. The Chancellor will today pledge to seek a deal with the EU that will allow Britain’s “financial services sector to continue to have good access to European markets” and aims to convince bankers that “the UK will continue to be an outward looking and globally-minded nation”. He will add: “I will do everything I can to ensure the City of London retains its position as the world’s leading international financial centre.” Meanwhile, the FT (£, p2) reports that the Institute of Fiscal Studies has warned that the UK’s tax revenues would be hit significantly if financial services jobs are lost as a result of Brexit.
David Ebstein, EMEIA Digital Financial Services leader at EY, blogs about how banks can restore consumer trust in their services.
Oliver Wyman report shows potential Brexit impact
A report from consultancy Oliver Wyman has suggested that £10 billion in direct tax revenues and 71,000 direct jobs could be lost in the worst-case scenario EU exit scenario for the financial services sector. In contrast, it states that if the UK maintains similar access to the single market the impact would be restricted to £500 million a year in direct revenues and 4,000 jobs. Sir Hector Sants, one of the authors of the report, said: “It would be fair to say in the event of a long period of uncertainty, you would expect adverse impact to accrue, which would be over and above whatever the impact is of the final conclusion of the process.” Bloomberg quotes BBA CEO Anthony Browne as saying: “”What we want is to have as full access to the single market as we have at the moment so that banks in the UK can carry on serving customers in the EU 27.”
Government focuses on interim Single Market deal
The FT (£, p2) reports that ministers are planning to negotiate a transitional trade deal with the EU that would include access to the single market. “We are working to deliver the best possible exit from the European Union and it is completely wrong to suggest we have ruled in or out transitional arrangements,” a Government spokesman said. The newspaper reports that one option under consideration is that the UK could temporarily continue making contributions to the EU budget in exchange for single market access.
IMF warns over global growth
The International Monetary Fund has warned that the global economic recovery remains “weak and precarious” (BBC News). The IMF also raised its forecast for UK growth this year to 1.8 per cent, but cut its 2017 figure to 1.1 per cent. Chief Economist Maurice Obstfeld said: “Taken as a whole, the world economy has moved sideways. Without determined policy action to support economic activity over the short and longer terms, sub-par growth at recent levels risks perpetuating itself.” The Telegraph (B1) notes that the UK will be the fastest growing major economy this year, in contrast to the IMF’s pessimistic forecasts ahead of the EU referendum.
Capital Markets Policy Adviser Sam Mannion blogs about how the sector is creating a more secure and transparent trading environment through improvements to over-the-counter derivative reforms.
Spitch’s Sales Manager UK & Ireland, Ravi Mahadeo, blogs about how banks can benefit from operational efficiencies through the use of speech analytics.
Welcome to my newsletter. As the weather turns cooler, a number of major issues facing the banking sector are hotting up. Brexit continues to dominate the political agenda but party conference season has also shifted the focus on to a number of other domestic matters. Meanwhile, the BBA has been busy hosting a wide range of events covering everything from FinTech to financial crime – with a packed line up still to come over the next few months.
European banks cut jobs
City AM (p1) reports that European banks are set to cut over 20,000 jobs amid a tough economic environment and higher capital requirements. Analysts pointed towards negative interest rates as being a major driver behind the cost cutting. Simon French from Panmure Gordon said: “I think problems facing the European banking sector are symptomatic of a Eurozone monetary policy which isn’t appropriate for large parts of the economy. In an ideal scenario monetary policy would be a lot looser for the southern periphery and quite a lot tighter for Germany.” Bloomberg reports that headcount across 26 European banks has fallen by more than 150,000 to 2.1 million staff since the end of 2007. Meanwhile, James Bardrick, UK Country Officer for Citi, has said jobs in London’s financial sector will move to countries inside the European Union after Brexit (Reuters).
UK banks underrate fintech potential
City AM (p22) reports that banks are underestimating the potential application of fintech in capital markets, according to a report from the Boston Consulting Group. The research finds that investment in this area is lagging behind its potential to cut costs, with most fintech disruption taking place in retail and corporate banking. Just four per cent of venture capital money going into fintech makes its way to capital markets startups and only seven per cent of fintech startups are active in the capital markets space. The report states: “Banks must take action now both to protect their own interests and to boost the capital markets fintech ecosystem as a whole.”
ECB says low rates are here to stay
European Central Bank executive board member Peter Praet has said that interest rates will remain low until inflation returns to target (Reuters). Mr Praet stated that it was not up to the central bank to shore up bank balance sheets. He said: “A durable improvement in the prospects of the euro area banking system requires further efforts outside the realm of monetary policy. These include, most notably, a swift and stringent completion of banking union and additional adjustments in the banking sector towards greater cost efficiency and business models that remain viable in the new regulatory and macroeconomic environment.”
Latest GB borrowing details for individuals and businesses are available for more than 9,000 postcode sectors. The industry-wide data is compiled jointly by the BBA and the Council for Mortgage Lenders. Participating lenders also publish their own figures on their websites.
Latest Northern Ireland borrowing details for individuals and businesses are available for more than 9,000 postcode sectors. The industry-wide data is compiled jointly by the BBA and the Council for Mortgage Lenders and complements existing publication of data for postcode sectors in Great Britain. Participating lenders also publish their own figures on their websites.
Mark Foster, Partner Kreab Brussels, blogs about a new regulatory agenda that has been dubbed “Basel IV”.
Prime Minister announces Brexit timetable
The FT (£, p1) reports that Theresa May yesterday announced that she plans to trigger Article 50 “no later than the end of March”. Speaking at the Conservative Party Conference, the Prime Minister stated that the UK would seek full control of immigration and refuse to accept the jurisdiction of the European Court of Justice. The Times (£, p1) reports that her speech set the country on course for a ‘hard Brexit’, with European leaders refusing to hold preliminary negotiations until Article 50 is triggered. Separately, the Times (£, p7) also notes that Brexit Secretary David Davis has been unmoved by research from Oliver Wyman that indicates a ‘hard Brexit’ could result in 75,000 job losses across the City.
Hammond’s to outline deficit plans
The Guardian (p7) reports that the Phillip Hammond will today tell the Conservative Party Conference that he remains determined to achieve a balanced budget, while reiterating that this would happen in a “pragmatic” way. The Chancellor is also expected to announce that he plans to borrow more to invest in infrastructure projects. Speaking on BBC Radio 4’s Today programme, Mr Hammond said: “Our circumstances have changed. The exit vote, the slowing of the world economy creates a new set of circumstances. And as we go into a period where inevitably there will be more uncertainty, we need to have the space to be able to support the economy through that.”
Dr Rebecca Harding, Chief Economist at the BBA, blogs about trends in world trade and export finance.
Help to Buy mortgage guarantee scheme to close
The Chancellor Phillip Hammond has stated that the Government’s help-to-buy mortgage guarantee scheme designed to help first time buyers will close at the end of the year (Guardian, p6). In a letter to Bank of England Governor Mark Carney, Mr Hammond said the scheme had a “specific purpose that has now been successfully achieved”. The scheme has helped more than 86,000 households so far. Meanwhile, the FT (£, p2) reports that buy-to-let borrowers will face additional scrutiny from January because of new affordability checks and mortgage repayment “stress tests” requested by the Bank of England.
Tyrie questions regulators over banks’ IT infrastructure
City AM (p6) reports that Andrew Tyrie, Chairman of the Treasury Select Committee, has written to the CEOs of the Financial Conduct Authority and the Bank of Englands’s Prudential Regulation Authority requesting assurances high street banks are working to strengthen their IT infrastructure. Mr Tyrie said: “Banks continue to suffer failures and breaches of their IT systems, exposing millions of customers to uncertainty, disruption and sometimes distress. We can’t carry on like this. Responsibility for sound IT systems is often lacking at the highest levels of management, and ultimately customers pay the price.”
Dombrovskis pushes back on bank capital rules
European Commission Vice-President Valdis Dombrovskis has warned that Brussels is prepared to reject international plans to raise bank capital requirements (FT, £, p17). Mr Dombrovskis said that he would not accept any reforms that “lead to a significant increase in the overall capital requirements shouldered by Europe’s banking sector.” The newspaper reports that the EU and US have contrasting views on the Basel Committee’s plan to impose a so-called standardised capital floor on banks.
Dr. Juan Licari, Managing Director, Head of Economics & Consumer Credit Analytics (EMEA) at Moody’s Analytics, writes about the role that macroeconomic forecasts can play with regard to IFRS 9.
With the implementation of IFRS 9 on the horizon, Jaywing Managing Director Ben O’Brien, delves into the key challenges firms are facing and how early adopters are getting ahead.
Bank of England Deputy Governor warns of further rate cuts
The Times (£, p42) reports that Minouche Shafik, the Bank of England’s Deputy Governor, has stated that interest rates could be cut further to avoid an economic downturn after Brexit. She said: “It seems likely to me that further monetary stimulus will be required . . . to help to ensure that a slowdown in economic activity doesn’t turn into something more pernicious.” The Bank’s Monetary Policy Committee next meets on November 3. The Telegraph (B4) also notes that Ms Shafik suggested that quantitative easing should no longer “considered unconventional” as it has become a central banking policy tool that is here to stay.
FCA announces consultations on accountability regime
The Financial Conduct Authority has launched a number of consultations to bolster the provisions in the Senior Managers’ and Certification Regime, six months after the new accountability regime took effect (City AM, p4). The consultations focus on areas including whistleblowing and extending rules to non-executive directors. FCA Chief Executive Andrew Bailey said: “Generally, we have observed that firms are taking their responsibilities seriously and have broadly got the regime right […] But we recognise culture change takes time and there is still more to do. So we have to keep a watchful eye on the progress firms are making.”
Renzi rejects special Brexit deal for UK
Italy’s Prime Minister Matteo Renzi has said that it will be “impossible” for the Brexit negotiations to deliver more rights to the UK than others outside the European Union (BBC News). He also insisted any negotiations could only begin once the UK triggers Article 50. Meanwhile, the FT (£, p1) reports that French financial regulators are seeking to attract City firms and the Times (£, p42) notes Paris is also wooing FinTech firms.
Job hiring shifting away from London
The FT (£, p14) reports that US banks are shifting their senior hiring in corporate and investment banking away from London towards Frankfurt and Paris, according to research by headhunters DHR International. Stéphane Rambosson, head of the European Financial Services practice of DHR, said: “UK candidates are increasingly making it clear that they are willing to move out of London to roles elsewhere in Europe — whilst firms are instructing us to fill roles overseas that might previously have gone to London.” Sky News notes that the report’s publication coincided with a plea from business groups, including the Institute of Directors and TheCityUK, that Government maintains access to the single market, take a “sensible” approach to immigration and reject protectionism as part of Brexit negotiations.
London Mayor pushes for post Brexit London work visas
Sadiq Khan, the London Mayor, has stated that City Hall is working on proposals for a separate work permit system for London following Brexit (Sky News). Mr Khan said that officials were “working on a model that will ensure we can carry on recruiting and attracting talent”. He added that discussions had been held with the Chancellor Philip Hammond, Brexit Secretary David Davis and Foreign Secretary Boris Johnson on the issue. Mr Khan added: “We are talking to business leaders, businesses, business representatives to see what we can do to make sure London doesn’t lose out on the talent, the innovation the partnership that has let us be the greatest City in the world.”
Moscovici calls for Brexit talks before April
Pierre Moscovici, the EU’s Economics Commissioner, has urged the UK to trigger Article 50 by the end of March (Bloomberg). Mr Moscovici said: “Let’s not take too much time because uncertainty is the worst enemy of the economy and if at one moment there is reluctance, there is no certainty, there is no predictability; then investors could start being very anxious.”
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.
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