5th July 2016

BBA Brief – 5 July 2016

Bank of England set to publish Financial Stability Report

There is widespread coverage anticipating measures that the Bank of England may take when it publishes the Financial Stability Report later this morning. The Chancellor yesterday stated that the Bank and the Treasury could pump up the Funding for Lending Scheme in an attempt to boost the economy after the Brexit vote (Telegraph, p4). The Guardian (online only) also reports that the Bank could reverse plans to increase the countercyclical capital buffer for banks to 0.5 per cent of risk-weighted assets from March 2017.

London’s role in euro clearing in the spotlight

The FT (£, p32) looks at the potential impact on London’s role in euro clearing if passporting rights are withdrawn following the European Union referendum vote. Dirk Schoenmaker, Senior Fellow at think-tank Bruegel, said: “The potential impact for the City of London is that up to 69 per cent of its interest rate derivatives market could move to continental Europe after Brexit.” Euro-denominated swaps trading represents a third of the global interest rate derivatives market, according to data from the Bank for International Settlements. The UK is home to the majority of the euro business.

Investment banking fees drop

Investment banking fees in the UK and Ireland dropped by more than a quarter in the first half of 2016, according to Thomson Reuters (City AM, p2). UK and Ireland fees totalled $2.5 billion in 2015, down 28 per cent, while Europe as a whole was down 26 per cent. Ian Gordon, Investec’s head of banks research, said: “[It] provides a foretaste for an extremely challenging outlook for IB revenues going into the second half of this year and beyond – which will be met by further rounds of rationalisation and cost reduction.” He also highlighted the decline in mergers and acquisitions activity and initial public offerings.

Latest from the BBA

Dr. Rebecca Harding, Chief Economist at the BBA, blogs about what the EU referendum vote means for monetary policy in the UK ahead of tomorrow’s Financial Stability Report.

Bring a colleague along for free to the BBA’s July’s training workshops on Financial Promotions, SMF Roles – Your Senior Management Responsibilities, Cyber Security: What Every Bank Needs To Know . For more details contact Philip Allen.

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

BBA:  Interest Rate Risk in the Banking Book Forum

BBA: Cyber Security Workshop

Bank of England: Financial Stability Report

Bank of England: Systemic Risk Survey Results and UK International Reserves for June

Conservative Party: leadership election MP ballot – first round

House of Lords Financial Exclusion Committee: Money Advice Trust, MyBnk, Young Enterprise – 10.30am

Stat of the day

57 per cent – the increase in the number of victims of identity theft last year (Source: Cifas).

In brief

Uncertainty in the run-up to the EU referendum vote slowed service sector growth last month to a three-year low, according to the Markit/CIPS (BBC News).

Nigel Farage has announced that he is stepping down as leader of the UK Independent Party (BBC News).

Ross McEwan, the Chief Executive of Royal Bank of Scotland, has said the Government’s planned sale of its controlling stake in the lender has been delayed by at least two years because of the EU referendum vote (FT, £, p2).

The FT (£, p20) highlights nine ways that the Brexit vote will affect global banks, including trading revenues and interest rates being lowered.

Reuters reports that central banks increased scrutiny of currency markets to unprecedented levels around the EU referendum, demanding detailed updates from major trading desks every six hours throughout last week.

What the commentators say

Writing in the FT (£, p18), Patrick Jenkins argues that “bail-in rules will prove flawed in any systemic crisis” and calls on policymakers to rethink the existing EU rules.

Writing in the Times (£, p36), Patrick Hosking looks at some of the areas that the Bank of England’s Financial Stability Report may focus on including bank capital and the Funding for Lending Scheme.

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