11th November 2015

BBA Brief – 11 November 2015

PM to drop benefits pledge in latest EU renegotiations

Most papers cover Prime Minister David Cameron’s EU speech delivered yesterday. The FT (£, p1) reports the him as saying he is “open to different ways of dealing with the issue” of controlling migration, which was a key Conservative manifesto pledge in May. The change came as David Cameron formally launched his European renegotiation after publishing a letter to Donald Tusk, the President of the European Council, in which he outlined Britain’s demands. The Times (£, p18) reports Margaritis Schinas, a spokesman for the European Commission, as saying: “We see a number of elements that appear to be feasible, like finding ways to increase the roles of national parliaments. Some issues which are difficult…and things that are highly problematic as they touch upon the fundamental freedoms of our internal market.“

Bank of England drops hints at fresh lending curbs

The Bank of England’s Deputy Governor, Sir Jon Cunliffe, warned in a speech in Geneva last night that the Bank was prepared to act swiftly to limit excessive lending. Sir Jon is reported in the FT (£, p4) as saying “I think we will need to consider whether and how risks are building in the financial system and how they should be addressed”. Expectations are rising that the Bank will either seek to make lending generally more expensive for banks or address specific risks such as rapidly rising lending in unsecured and buy-to-let lending. The Deputy Governor also warned that falling house prices and higher rates “could cause a substantial number of buy-to-let landlords to seek to exit the market, put material downward pressure on house prices, [and] amplify an adverse shock to the housing market”.

Brussels considers delay to implementation of financial markets regulation

European policy-makers are considering delaying by up to a year the second Markets in Financial Instruments Directive (MiFID II), which governs everything from derivatives trading, transparency in bond pricing, and transaction reporting. MiFID II is one of the EU’s most ambitious and complex pieces of legislation, and there are concerns the current timeframe will not allow industry to meet the current implementation deadline for 3rd January 2017. As CityAM (p2) reports, Steven Maijoor, Chairman of the European Securities Market Authority told MEPs on Tuesday that “the timing for stakeholders and regulators alike to implement the rules and build the necessary IT systems is extremely tight. There are areas where the calendar is already unfeasible.”

BBA diary

House of Lords: Bank of England and Financial Services Bill Committee Stage 2

House of Lords: rises for Autumn Recess

Bank of England: Open Forum with Governor Mark Carney, George Osborne and Mario Draghi

Bank of England: Agents Summary of Business Conditions – November

ONS: UK GDP and labour market update – July to Sept. 2015

CML: monthly lending trends

Latest from the BBA

BBA Executive Director for Prudential Capital and Risk Simon Hills was in Amsterdam this week, meeting banking colleagues to discuss Europe’s latest plans for simple, transparent, standardised securitisations (STS). Read his views on the proposals here.

Latest from our sponsor – Jaywing

Ben O’Brien, Risk Practice Director at Jaywing, writes about the annual cyclical stress test by the Bank of England.

Stat of the day

122 – The number of banks directly supervised by the European Central Bank (Reuters).

In brief

The Guardian reports remarks made this morning at the Bank of England Open Forum, where Governor Mark Carney has said “financial services could increase from six to nearly 15 times UK GDP by 2050”. George Osborne also has said at the event “We want to be the home of the world’s biggest banks. But we also want them to be safe.”

The FT (£, p2) reports that the Conservative Party ‘truce’ over Europe is falling apart as one third of the parliamentary party is expected to campaign for Brexit.

The departing Lord Mayor Alan Yarrow is reported in the FT (£, p2) to have advised the Square Mile to recapture its ‘swagger’ over how much it gives back to society.

The Telegraph (p B5) covers remarks made at its Festival of Business, that challenger banks should act over the current account ‘closed shop’, even if regulators have ‘missed a trick’ by maintaining the prevailing rules on free bank accounts.

Latest figures from the ONS show that a majority of Britons are pinning their pension hopes on bricks and mortar as the best way to make money for retirement (FT, p 3).

In his inaugural address as the new Chairman of CityUK, John McFarlane is set to warn policy-makers that they should team up with senior financial figures to help promote the benefits of the City (CityAM, p3).

The FT (£, p8) features the attack by American Democratic senator Elizabeth Warren on the repeal of the Dodd-Frank legislation designed to reform the swaps trade market.

The Telegraph (p B1) reports that the business community, which appears to be divided on Europe, is urging the Prime Minister to renegotiate the European ‘’bureaucratic Frankenstein’.

European banks are preparing to seek billions in capital from equity investors, as the next phase of the sector’s recovery from intertwined banks and sovereign debt crises begins (FT, p28).

German Chancellor Angela Merkel reacts positively to David Cameron’s demands for reform saying “a deal is possible”. Other EU leaders were reportedly not as enthusiastic (Frankfurter Allgemeine Zeitung).

Renewed uncertainty about the outlook for China’s economy is providing a negative backdrop for global stock markets, with ‘core’ government bond yields pushed lower (FT, £, p 29).

The Daily Mail explores how interest free credit cards could be fuelling an addiction to debt (p 49).

The FT (£, p1) reports how European bank chiefs are being paid less than half their US peers. Average remuneration in Europe fell 6% between 2010 and 2014, but grew 15% in the United States.

What the commentators say

In his Times (£, p45) column, Philip Aldrick explains why taking measures in the mortgage lending market could shift credit back to the productive area of the economy.

The FT explores how Bitcoin’s liabilities have been exposed by the ‘pyramid effect’ (£, p30).

CEO of the London Stock Exchange Xavier Rolet writes in the Telegraph (p20) that he believes business and innovation should be financed by equity, as is the case in the US.

If you have 5 minutes….

The FT (£, p6) explains more detail about MiFID II and why we should care about delays.

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