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BBA brief is a round up of each morning’s banking policy news prepared by the BBA’s media team. It is a selection of the articles in the papers and broadcast stories. The content does not reflect the views of the BBA.
Mortgage approvals lower in April
The BBA’s latest high street banking data shows that gross mortgage borrowing totalled £13.4 billion in April with 40,750 mortgages approved last month, 0.3% lower than the number approved in March (The Times, £, p44). Eric Leenders, BBA Managing Director for Retail Banking said, “house purchase approvals were largely in line with last year’s average, though remortgaging approvals have dipped slightly in recent months despite historically low interest rates”.
Regulators close to agreeing Basel reforms
Reuters (online) reports that regulators are close to agreeing a final package of reforms to capital regulation, with speculation that a deal could be agreed at the Basel Committee on Banking Supervision’s (BCBS) next meeting on 14-15 June. BCBS Secretary General Bill Coen said that, “the reforms package would have a lengthy implementation period, possibly running to 2025”, with discussion around the level of a minimum ‘output floor’ of 70% – 75% ( Financial Times, £, p18).
BIS publishes new code of conduct for FX markets
The BIS has published 55 principles for FX market participants, designed to enhance confidence in the market (The Daily Telegraph, £ B5). Guy Debelle, Deputy Governor of the Reserve Bank of Australia, who led the BIS’ work in coordinating the code commented that a principles-based approach had been selected as, “rules are much easier to arbitrage than principles”. However a number of commentators have suggested that the code lacks teeth, while The Economist (£, p70) underlines the importance of peer pressure in driving up standards.Read more
Re-mortgaging at a record high
CML data shows that borrowers are seeking lower cost deals, with a 21% increase in re-mortgaging activity in Scotland and Wales compared to Q1 2016, 18% in Northern Ireland and 7% in London (Daily Mail, p33). Commenting on the data, CML Director General Paul Smee said, “attractive mortgage deals aided by low interest rates appear to have sparked a resurgence in activity that has seen consecutive growth year-on-year every quarter for three years”. The full data set is available here.
ECB dismisses Brexit risk to Eurozone financial stability
The Times (£, p42) reports that the ECB has said that Brexit poses little risk to Eurozone financial stability, describing the risk to EU 27 banks as “limited”. The Financial Times (£, p6) reports that ECB Vice President Vitor Constâncio dismissed the Bank of England’s view that, “a messy UK withdrawal could leave EU companies without vital services”, saying that “Brexit is very significant for the UK, but in view of the relative size it is much less meaningful for the rest of the EU… and that financial firms were already adapting by relocating activities to Europe”.Read more
European Commission to revise MIFID II rules on SIs.
Politico (£, online) reports that the European Commission will tighten the rules for Systematic Internalisers under MiFID II, following concerns raised by ESMA that banks and other liquidity providers could undertake matched principal trading without applying the full scope of MiFID II obligations. European Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici said, “the modification will seek to prevent investment firms from replicating arrangements that MiFID II bans without proper authorization. The objective [of the rules] is to bring trading onto transparent venues. If this is not clarified, it may seriously undermine these objectives”.
UK customers keen to adopt biometric banking
The Financial Times (£, online) reports a survey of customer attitudes in 11 countries suggesting that while UK respondents were the most open to using the latest forms of biometric ID technology, such as iris verification, many customers don’t understand or trust more established technologies, such as fingerprint scanning. The survey also found that 87% of respondents said the security of their finances was as important as protecting their personal data.
One in three of those planning to retire support family financially
Sky News (online) reports that 34% of those planning to retire support other family members financially, by an average of £260 per month. Nearly half these payments are made to support their own children, although 9% use these funds to support their parents. Kirsty Anderson, a Retirement Income Expert at Prudential said, “for those providing financial support to their dependants it is likely to cost them an average of £62,000 over the course of their retirement – accounting for a significant proportion of their pension pot and impacting the income they can expect to live on”.Read more
EU agencies lay out plans for post-Brexit reform
The European Commission is to propose a Eurozone-wide fiscal union, supported by a Eurozone Treasury and unemployment fund to help combat future economic crises (The Daily Telegraph, £, B1). The full proposals, expected in June, come as Donald Tusk, the European Council President, and Jean-Claude Juncker, the European Commission President laid out their plans for moving the European Banking Authority and European Medicines Agency out of the UK following Brexit (Financial Times, £, online).
Labour and Conservatives propose debt suspension measures
BBC News (online) reports that both the Conservatives and Labour have promised to introduce a legal right for borrowers in financial difficulty to apply to have interest charges and debt collection suspended for six weeks, allowing time for them to set up debt advice and a repayment plan. The proposals follow investigations by the FCA into credit card and car financing, with the Bank of England also warning of over rising personal debt levels. StepChange Chief Executive Mike O’Connor, said: “the next government should commit to action to prevent the 8.8 million people currently showing signs of financial difficulty from falling into serious hardship”.
Online fraudsters steal an average of £600
Research by comparethemarket.com has found that consumers lost an average of £600 through online fraud, with 90% of those who had money stolen from them saying that this prompted a change in the way they manage their finances (The Times, £, p14). The survey also found almost 5.5 million customers had to cancel a credit or debit card over the past year due to fraudulent activity with payment fraud accounting for almost 50% of incidents reported.Read more
Brexit and the cost of relocating Euro clearing activity
EU Ministers will meet in Brussels today to finalise their Brexit negotiating position, ahead of the start of formal negotiations with the UK (Bloomberg, online). The meeting follows warnings that moves to relocate Euro clearing out of the UK could increase costs for investors by €100 billion over five years (The Times, £, p37). The Times (£, p43) also reports speculation over whether banks’ existing branch structure could be used to continue to offer services for clients across the EU post-Brexit, with additional EU staff and trades booked in the UK.
UK house prices continue to rise
Asking prices for residential property rose by 1.2% last month, according to Rightmove, with the average asking price now £317,281 despite uncertainty over the impact of Brexit and the UK general election (The Guardian, p21). Commenting on the data, Brian Murphy, Head of Lending for Mortgage Advice Bureau, said “this month’s report points to the majority of movers being nonplussed about the election, with their moving plans being driven by circumstantial factors that can’t wait, eg a growing family”.
European Commission asks EBA to give Fintechs more access to banks’ data
Reuters (online) reports that the European Commission’s Vice President Valdis Dombrovskis has asked the EBA to review its proposed restrictions on Fintech firms accessing bank customer details. The rules, introduced under the second Payments Services Directive, are designed to increase competition in banking services, however regulators have raised concerns over cybersecurity and client confidentiality.Read more
Business reaction to Conservative manifesto
The Times (£, p41) writes that business groups have criticised a number of measures in the Conservative party’s general election manifesto, raising fears that they will increase costs and reduce access to skilled labour. City AM (p1) reports that the manifesto also pledged to increase the remit of regulators and consumer bodies in addition to reforming the rules on executive pay and share buy-backs. Commenting on the proposals, Director General of the Institute of Directors Stephen Martin said, “we have been promised a ‘Global Britain’ after Brexit, but these policies are pulling in the opposite direction”.
Brexit Secretary sets out negotiation approach
Speaking to the Daily Express (p1) David Davis, currently Secretary of State for the Department of Exiting the EU, has said that while his priority will be “preserving as much as we can of our current markets within Europe”, half his time is allocated to planning for the possibility of the UK leaving the EU without agreeing an exit deal. Bloomberg (online) reports that the Conservative manifesto seeks public backing for leaving the EU without a deal if both sides are unable to agree on new arrangements.
President Trump ‘will not break up big banks’
The Wall Street Journal (£, p5) reports that US Treasury Secretary Steven Mnuchin told the US Senate banking committee that the Trump administration does not support a separation of retail and investment banks, citing risks to “financial stability… the economy and liquidity”. The Wall Street Journal notes that a number of potential options for reforming banking regulation have emerged in recent weeks, including use of the existing regulatory framework to restrict transactions between subsidiaries within the largest banking groups.Read more
Conservative manifesto published today
The Conservative general election manifesto will be launched in Yorkshire today. It is expected to include proposals to reform social care and reduce immigration, with new charges for firms that hire foreign workers (BBC News).
Sky News (online) reports that the manifesto is also expected to remove commitments to the pensions triple lock and previous promises not to increase income tax, VAT or national insurance. The Prime Minister will also highlight the importance of Brexit negotiations, noting that “now more than ever, Britain needs a strong and stable leadership to make the most of the opportunities that Brexit brings”.
European Commission to propose stronger links between EU27 Capital markets
The European Commission is expected to propose a number of measures to enhance the EU 27 capital markets framework after Brexit, including the creation of a passporting regime for technology firms, a stronger role for ESMA and an EU Small Listed Companies Act (Reuters, online).
Speaking to the European Parliament, the European Commission’s lead Brexit negotiator, Michel Barnier, warned that UK-based firms should, “not count on long transition periods to cushion the impact of Britain leaving the European Union” and called for firms to start preparing for the impact of Brexit now (Reuters).Read more
Relocation of Euro-clearing would damage European Economy
Relocation of the Euro-clearing market would destabilise the European economy and wider global economic system (City AM, p1).
Commenting on the measures proposed by the European Commission, City of London’s Policy Chief Catherine McGuinness said, “all the evidence points one way: that the mass uprooting and offshoring of part of the industry – of clearing of transactions in one currency – would not only be vastly complicated, but also vastly damaging…if we split off one currency, with euro clearing moving to, say, Paris, all we’ll see is systemic risk going up, liquidity going down, costs hitting the roof” (Reuters, online).
EU-Singapore free trade deal may signal ‘faster, harder’ Brexit
The European Court of Justice has ruled that a free-trade deal between the EU and Singapore will largely be agreed by the European Commission, with dispute resolution mechanism and investment portfolios the only two areas where all member states must agree on final terms (Financial Times, £, p1).
The ruling has been interpreted as a potential model for a post-Brexit deal with the UK. Bloomberg (online) writes that the judgement paves the way for a quicker but harder Brexit, noting that it “makes life easier for Commission President Jean-Claude Juncker and chief Brexit negotiator Michel Barnier, who have made it clear they want to serve the UK with a large divorce bill and harsher terms”.Read more
Labour to propose financial transaction tax and executive pay reforms
The Labour party will publish its manifesto today including a financial transaction tax of 0.5% on trading in bond and derivatives, and a 2.5% levy on employers that pay staff more than £330,000, rising to a charge on 5% for companies that pay staff over £500,000 (The Guardian, p1). The Daily Telegraph (£, B1) warns that this could increase costs for pension funds, and risks damaging the UK’s competitive position after Brexit. Laith Khalaf, Hargreaves Lansdown Senior Analyst commented that, “a lot of money invested in the City is done by pension savers. It’s very difficult to add a tax like that into the system without ultimately hitting consumers in the pockets, as all of our pensions are invested into the stock market”.
Industry calls for amendments to PSD 2
Politico (£) reports that the European Banking Federation has called for the European Commission to reject changes to the second Payments Services Directive that would allow Fintech firms to control online platforms which would grant them direct access to client data. The proposals come as banks increase their investment in cyber security, with Reuters (online) reporting that although “banks generally have more robust cyber defenses than other sectors” they are targeted far more often as hackers try to exploit weaknesses in technology.
Missed debt repayments at ten year high
The Daily Mirror (p2) reports that 300,000 county court judgments were issued against individuals who missed debt payments in England and Wales in Q1 2017, the highest level in ten years, according to data from The Registry Trust. The Guardian (p21) notes concerns over potential mis-selling of car loans have contributed to debt in low-income families, triggering an investigation by the FCA. Commenting on the data, Chair of the Registry Trust Malcolm Hurlston said, “people who don’t pay their debts are increasingly likely to be taken to courts. CCJs can seriously damage credit ratings and good lenders rightly avoid people who have shown they can’t manage debt”.Read more
Brexit could cost banking sector $1.5 billion
Consultancy Oliver Wyman has estimated that duplication of activities and capital efficiencies caused by Brexit could reduce European investment banks’ return on equity by $1.5 billion (Financial Times, £, p15). Assessing the scale of potential costs a banking source said, “if agreements allow for a set-up that enables us to contact clients out of a European entity that has European access but continue to manage risk and trading out of London, the impact would be far less”. Meanwhile Irish Central Bank Governor Philip Lane has said that “regulators across the EU are “broadly” seeking to apply the same rules in each country” amid fears that Brexit will lead to greater regulatory fragmentation across the EU 27 (Bloomberg, online).
ICAEW sets out guidance on capital ratios
The Institute of Chartered Accountants in England and Wales (ICAEW) will today publish new guidance for auditors assessing banks’ reported capital ratios (Financial Times, £, p20). Commenting on the standards, Iain Coke, ICAEW Head of Financial Services, said that banks investors were “more confident than they should be” about this data, noting that calculation of capital ratios is subject to a greater degree of user error and bias than conventional balance sheet reporting. The BBA said the publication of regulatory capital data “shows how the industry’s capital position has been steadily improving – our banks today are stronger than they have ever been and better able to withstand any shocks to the financial system”.
Europol praises banks’ cyber resilience
Europol Chief Executive Rob Wainwright has praised the banking sector’s approach to managing cyber crime, following a series of high profile ransomware attacks last week (City AM). Speaking to ITV on Sunday, Wainwright noted that, “very few banks in Europe, if any, have been affected by this and that’s because they’ve learned through painful experience about being the number one target in cyber crime, the value of having a strategy in place”. Reuters (online) reports that G7 Financial Ministers have strengthened their commitment to closer cooperation on cyber crime and terrorist funding.Read more