17th February 2016

BBA Brief – 17 February 2016

Banks playing increasing role in peer-to-peer lending

Banks now account for a quarter of the lending on peer-to-peer websites, according to a new report the University of Cambridge and innovation charity Nesta (FT, £, p2). It finds that the alternative finance market grew 84 per cent last year, to £3.2bn. Stian Westlake from Nesta said: “Banks can learn about both cost-effective loan origination and data-driven due diligence from the P2P platforms. I think most of the banks are sniffing around for acquisitions.” Lord Turner, former Chairman of the Financial Services Authority, recently warned that insufficient credit checks by peer-to-peer sites could lead to big losses over the next decade.

New Federal Reserve policymaker warns banks are still too big to fail

The US Federal Reserve’s newest member, Neel Kashkari, has called for “bold, transformational” rules that go further than the Dodd-Frank reforms, including possibly breaking up the nation’s largest banks (Reuters). He said Congress should consider compelling banks to hold so much capital that they “virtually can’t fail,” effectively treating them like public utilities. The Wall Street Journal (£, online only) highlights how Mr Kashkari’s comments contrast with those of the Fed’s Chair Janet Yellen, who told the Senate last week that the US now has “a much more resilient and stronger, better-capitalized, more liquid banking system.”

Housing market growth slows

House prices in the UK rose by 6.7 per cent in 2015, down from 9.8 per cent the previous year, according to the Office for National Statistics (BBC News). The average price of a house at the end of December was £288,000. Separately, new data from the Council of Mortgage Lenders showed that lending to buy-to-let investors dropped by three per cent in December (City AM, p21). The newspaper notes that buy-to-let activity is expected to slow further this year due to policy changes, including a three per cent stamp duty surcharge and new tax on mortgage interest.

Latest from the BBA

Gareth Wilson, the Accenture Banking Practice lead for the UK & Ireland, blogs about new research that provides an insight into the digital capability of consumers across the country.

Register now for the BBA forthcoming webinar on ‘Top Risks for 2016’ which will take place on Thursday 25th February. Click here to register your free place.

On 15th March, the BBA is again running its popular one day workshop on ‘Enhancing Your Sanctions Compliance Programme’. Fully updated to incorporate the recent lifting of sanctions on Iran, this workshop will provide you and your team with a solid knowledge and understanding of sanctions. Click here to register.

Latest from our sponsor Jaywing

The IFRS 9 deadline is closer than you think… Read a blog by Jaywing’s Risk Practice Director, Ben O’Brien’s, on how the IFRS 9 deadline is drawing closer, what is holding firms back and how can organisations succeed.

Today’s diary

ONS: Regional labour market stats Feb. 2016

ONS: UK GDP and labour market update

Stat of the day

13 per cent – the proportion of lending from peer-to-peer sites to businesses with a turnover of less than £1m a year (Source: University of Cambridge and Nesta).

In brief

The FT (£, p3) analyses the contrasting claims of the Bank of England and Sir John Vickers when it comes to capital requirements on banks. In a letter to the newspaper (p10), Andrew Bailey and Sir Jon Cunliffe insist the Bank has gone beyond the proposals of Sir John’s Independent Commission on Banking.

Fraudsters have been posing as Money Saving Expert founder Martin Lewis to drafud elderly and vulnerable people out of thousands of pounds (ITV News).

‎A PwC survey has found that 70 percent of bank chiefs plan to undertake further cost cutting over the next 12 months (City AM, p1).

John McDonnell, the Shadow Chancellor, has suggested that the Treasury could be broken up into an Economic Ministry and a Finance Ministry in a speech at the London School of Economics (Times, £, p2).

The Guardian (online only) looks at whether open banking is going to lead to the industry facing its “Uber moment” as technological advances empower consumers.

The UK’s inflation rate has increased to a 12-month high but has now stayed for a full two years below the Bank of England’s target (FT, £, p4).

China’s banks granted loans at the fastest pace on record in January, suggesting that the Government is loosening monetary policy to boost the slowing economy (FT, £, p8).

What the commentators say

Writing in the Telegraph (B2), Jeremy Warner focuses on Europe’s banking system and says “the regulatory crackdown is in danger of becoming a bigger problem than the one it was meant to be addressing.”

Martin Wolf claims that “banks are still the weak links in the global economic chain” and argues they remain highly leveraged (FT, £, p11).

Writing in the FT (£, p11), John Kay urges caution when analysing balance sheets due to accounting practices that only provide superficial information.

In the Times (£, p39), Katherine Griffiths says that peer-to-peer lending is “flawed”, claiming “it is remarkable that there is little focus on the untested credit analysis of most peer-to-peers.”

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