6th July 2016

BBA Brief – July 2016

Bank of England highlights financial stability risks

The Bank of England has outlined a number of risks to the UK economy following the European Union referendum vote (BBC News). Governor Mark Carney said there was a “challenging” outlook ahead, with yesterday’s Financial Stability Report raising concerns over the commercial property market and household debt. The Bank’s Financial Policy Committee also relaxed capital requirements for banks to ensure the availability of credit for households and businesses. Mr Carney said: “If there is a slowdown in credit, it will be demand driven, not supply driven. It’s important to ensure that there is no question about the availability of credit. It is the one thing we want to take off the table.” (FT, £, p2). The Bank also intends to encourage “the Basel Committee to review carefully any possible unintended effects of forthcoming leverage ratio standards” on market liquidity (FT, £, pX).

First round of voting in Conservative Party leadership election

Theresa May last night secured a clear winning margin over her rivals in the first round of voting to become the next Conservative Party leader and Prime Minister (Times, £, p1). The Home Secretary polled more votes from MPs than the other four candidates combined, leading to Liam Fox being automatically eliminated and Stephen Crabb deciding to pull out of the contest. A second ballot tomorrow will decide the final run-off, with either Andrea Leadsom or Michael Gove expected to be eliminated. The contest will be decided by more than 150,000 Tory members.

Business Secretary calls for emergency tax cuts

Sajid Javid, the Business Secretary, has called for urgent tax cuts to boost the economy following the EU referendum vote (FT, £, p2). Mr Javid admitted that a new fiscal stimulus could lead to the budget deficit widening but said it was necessary to encourage investment. He also urged the UK to take advantage of cheap borrowing rates to create a ‘Growing Britain’ fund worth up to £100 billion.

Latest from the BBA

David Northern, Partner at Parker Fitzgerald, blogs about the potential changes to the landscape for UK based banks following the vote to leave the European Union.

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: Senior Managers’ Regime Four Months on Forum

BBA: Bank Treasurers’ Forum

ONS: Economic Review July

Bank of England: Narrow money and reserves balances for June and Housing Equity Withdrawal for Q1

Stat of the day

£5.7 billion – the amount by which the Bank of England relaxed capital requirements for banks yesterday to boost credit availability (Source: Bank of England).

In brief

The pound has slumped to its lowest level against the dollar since September 1985 (BBC News).

The Telegraph (B1) reports that the Bank of England will cut interest rates next week to help boost the economy.

People are not being given the tools they need to protect themselves from fraud and cybercrime, according to a report from the Fraud Advisory Panel (City AM, p16).

The FT (£, p2) reports that small banks and building societies in the UK are vulnerable to downturn following the Brexit vote, according to the Bank of England.

A Government consultation on reforming insolvency rules close today, with the creation of a moratorium period for businesses among the proposals (City AM, p12).

The European Commission has agreed plans for EU member states to work together in the fight against cyber crime (City AM, p16).

What the commentators say

Writing in the Guardian (p21), Nils Pratley welcomes the Bank of England’s decision to reduce the countercyclical capital buffer for banks but argues that growth is a bigger problem than credit availability.

Philipp Hildebrand, Vice-Chairman of BlackRock, argues that “Europe has a banking sector problem” and that structural reforms are needed to boost the continent’s economic recovery (FT, £, p11).

Writing in the Times (£, p43), Philip Aldrick is critical of the banking sector for still being reliant on public subsidies through schemes run by the Government and Bank of England.

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