25th February 2016

BBA Brief – 25 February 2016

Mortgage borrowing rises ahead of tax changes

Gross mortgage borrowing by high street banks climbed to £13.6bn in January, the highest level since mid-2008 (BBC News). The number of mortgages approved for house purchases was 27 per cent higher than a year earlier. The Guardian (p23) reports that average value of loans approved for house purchase rose to £178,900, while the average remortgage grew to £181,800. Richard Woolhouse, Chief Economist at the BBA, said: “The start of the year has seen a significant rise in mortgage borrowing. It seems that this has been driven, in part, by borrowers looking to get ahead of the increases in stamp duty for buy-to-let and second-home buyers scheduled to come into effect in April.” The High Street Banking data is available here.

Global banks could face higher levy bill than expected

The Government’s plans to modify the bank levy could lead to global banks being hit with a higher than expected tax bill (FT, £, p6). The re-scoping of the bank levy consultation, published in December, states that “liabilities of a UK banking entity that relate to the funding of their overseas subsidiaries” would “remain within the scope of the levy”. The newspaper reports that this could lead to global banking groups paying hundreds of millions of pounds more than was initially suggested. The Chancellor announced last year that the levy would be gradually reduced and no longer apply to banks’ global businesses from 2021. BBA Chief Executive Anthony Browne said: “We welcome the objective of the Chancellor to protect UK competitiveness and his commitment to make sure the levy no longer applies to worldwide balance sheets. There are some key issues that need addressing as part of the consultation process to ensure the levy is genuinely and solely focused on UK activities.”

EBA stress tests ignore negative interest rate risk

The European Banking Authority has announced that its annual stress test programme – which covers leading UK banks – will assess banks’ resilience against a global economic slowdown, falling commodity and property prices and further regulatory fines. (Guardian, p25). The EBA has not included negative interest rates in its scenario. The Telegraph (B4) criticises the “watered-down stress tests” for being impossible to fail and only examining 51 banks, compared to 130 banks in 2014.

Latest from the BBA

In the latest blog from governance risk and compliance specialists Hitec, journalist Gaynor Pengelly highlights the steps organisations can take to implement a single global standard of business practice that is dynamically communicated, strictly enforced and passed on to employees, suppliers and agents.

Are you ready for the new individual accountability regime? On 7th March, the Senior Managers Regime (SMR) comes into effect. To help you meet the requirements to train staff, NEDs and Senior Managers, the BBA eLearning Academy has developed a number of new eLearning titles on the New Conduct Rules and SMR. Click here to view.

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Today’s diary

ONS: revised GDP figures Q4 2015

ONS: UK monthly service sector figures

ONS: business investment provisional results Q4 2015

PwC: biennial global economic crime survey

ECB: monetary developments in the euro area

techUK: roundtable: blockchain and beyond in FS

Stat of the day

55 per cent – the proportion of UK firms that have fallen victim to economic crime in the past two years (Source: PwC).

In brief

Businesses around the globe have lost more than £2bn in just over two years to a scam involving fraudsters impersonating the email accounts of chief executives (FT, £, p1 and p11).

There has been a 130 per cent jump in cyber-crime against UK businesses over the past two years, according to a PwC report (City AM, p1).

David Cameron has stated that he will ensure the Treasury and Bank of England set out the economic facts around Brexit (FT, £, p3).

In a new report out today, Moody’s said challengers are likely to use securitisation to compete for a bigger share of the UK mortgage market (City AM, p2).

According to a new survey from the Chartered Institute for Securities and Investment, half of British-based bankers said it will take more than a decade for the banking industry to regain the public’s trust (City AM, p5).

The Public Accounts Committee has said the £130m settlement between Google and HMRC “seems disproportionately small” (BBC News).

Business Secretary Sajid Javid has said that the steel industry cannot expect to be bailed out in the way the banking sector was (Telegraph, B1).

Sterling slipped to a seven-year low on Wednesday as companies and investors rushed to insure themselves against the chances of a British exit from the European Union (Reuters).

What the commentators say

Nils Pratley criticises the European Banking Authority stress tests (Guardian, p24). He argues: “It is unlikely that any investor will be reassured by a process that doesn’t look robust and won’t reach firm conclusions that all can see.”

Writing in the Independent (p52), James Moore says that the National Audit Office’s report into the mis-selling of financial products raises serious questions for the Financial Conduct Authority and the banking industry.

Imran Gulamhuseinwala, Head of FinTech at EY, writes about how the Government needs to take action to support the FinTech sector (Telegraph, B2).

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