14th July 2016

BBA Brief – 14 July 2016

Bank of England set to make interest rate decision

The Bank of England’s Monetary Policy Committee will meet today with economists predicting that it will cut interest rates from 0.5 per cent to 0.25 per cent (BBC News). The Times (£, p41) reports that a cut would mark the first shift of the base rate since March 2009. Gerard Lyons, an Economist at Netwealth Investments, said: “There is a case for interest rates to fall. There is a need to protect against downside risk.” The Bank may also restart quantitative easing, in addition to or instead of a rate cut.

New Prime Minister appoints cabinet

Theresa May has taken over as Prime Minister and set about naming her frontbench team (Times, £, p1). Among the most notable appointments were Philip Hammond replacing George Osborne as Chancellor, Boris Johnson taking over as Foreign Secretary, and David Davis heading a new department dedicated to taking the UK out of the European Union. Mr Hammond told the Today programme (skip to 02:18:00) this morning that: “We have got to make sure in our negotiations with the European Union we have very clearly in our minds the need to ensure access to European Union Single Market for our financial services industry.” David Cameron was given a standing ovation by Conservative MPs after his final Prime Minister’s Questions yesterday (BBC News).

Homes market gives mixed message

The Times (£, p41) reports that a number of housing surveys delivered mixed messages yesterday. The Council of Mortgage Lenders said homeowners borrowed £9.4 billion in May, a 15 per cent month-on-month rise. The CML said that the property market had been “regaining some equilibrium” and that for lenders it was “business as usual”. However, the latest Royal Institution of Chartered Surveyors survey showed interest across the country falling significantly last month because of the Brexit vote. Simon Rubinsohn, Chief Economist at RICS, said: “Big events such as elections typically unsettle markets, so it is no surprise that the EU referendum has been associated with a downturn in activity.”

Latest from the BBA

David Wren, the BBA’s Tax Policy Director, blogs about a new corporate criminal offence for companies who fail to prevent tax evasion and the role of new industry guidance in the fight against financial crime.

The BBA’s Executive Director of Prudential Capital and Risk, Simon Hills, blogs about a BBA response on Leverage Ratio proposals.

Nominations are open for ifs University College and BBA 2016 Financial Innovation Awards, which seek to recognise and reward innovation in the finance sector. Click here for more details.

On the 12 September, BBA will be running a one day training workshop on the ‘Introduction to the Role of the MLRO’ for more details click here.

Join us for the BBA half-day Retail Conduct Risk Forum on 28 September. To find out more and to book your place, visit our website.

Latest from our sponsor Jaywing

Jaywing’s Data Management Practice Director, Inderjit Mund, blogs about the role of data management when it comes to regulatory compliance.

Today’s diary

Bank of England: Interest rate decision

House of Commons Public Bill Committee: Finance Bill – 11.30, 14.00

RICS: Residential Market Survey

Stat of the day

342.927 – the number of start-up businesses that were launched across the country between January and June (Startup Britain).

In brief

A Bank of England survey of credit conditions has found that Britain’s major banks expect demand for credit from businesses and households to fall as a result of post-Brexit economic uncertainty (Telegraph, B1).

The FT (£, p1) reports that the Treasury is encouraging international banks to send a positive message about the City’s future following the EU referendum.

The Daily Mail (p74) looks at the potential impact of an interest rate cut on banks, savers and borrowers.

Scottish First Minister Nicola Sturgeon has met with leading City firms to encourage them to move financial services jobs to the country from a post-Brexit London (Sky News).

European investment banking revenues have dropped to a 14-year low, according to new figures from Dealogic (City AM, p5).

Daniele Nouy, the head of banking supervision at the European Central Bank, has said the industry will be asked to hold broadly the same amount in capital buffers this year as in 2015 (Reuters).

What the commentators say

Claer Barrett, Editor of FT Money, writes that inflation could rise in coming years even as the Bank of England looks set to cut interest rates (FT, £, online only).

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