6th November 2015

BBA Brief – 6 November 2015

Treasury Select Committee Chairman urges bank tax review

Andrew Tyrie, Chairman of the Treasury Select Committee has written to the Competition and Markets Authority to call for a review of the new Corporation Tax surcharge on bank profits, the FT (£, online only) reports. The Chancellor announced the 8% surcharge on banks’ profits earlier this year. In a letter to the CMA, Mr Tyrie called on the watchdog to report findings of a review on the impact of the surcharge “well ahead” of next year’s Budget in March, the paper writes. He is quoted by the FT saying that it is crucial the surcharge did not get in the way of government efforts to increase competition. Paul Lynam, Chief Executive of Secure Trust Bank and Chair of the BBA’s challenger bank panel, said smaller banks “punch significantly above their weight” in small and medium business lending, the paper adds.

Single capital threshold will not form part of European stress tests

Bloomberg reports that the European Banking Authority announced yesterday that its 2016 stress test will not judge banks against a single capital threshold. Bloomberg says last year banks had to maintain a ratio of capital to risk-weighted assets of 8%, and the ratio was 5.5% in the “adverse scenario” which allowed lenders to run down capital buffers. Fifty-three EU banks will undergo the test. In a statement, the EBA said: “The objective of the EU-wide stress test is to provide supervisors, banks and other market participants with a common analytical framework to consistently compare and assess the resilience of the EU banking system to shocks.”

“Super Thursday” sees possible rate rise postponed

The Bank of England yesterday nudged down its UK growth forecast by 0.1 of a percentage point for 2015, 2016 and 2017 and warned that a global slowdown was weighing on the recovery, the Times (£, p43) reports. The Bank also said that inflation is not expected to return to its 2% target until the end of 2017, even with interest rates remaining at their current level until Q2 of 2017. The news caused the pound to slide 1.5 cents against the euro and 1.7 cents against the dollar. This morning Bank of England Deputy Governor Dame Nemat Shafik told BBC Radio 5live’s Wake Up to Moneythat interest rates should not be used “to deal with problems in the housing market,” and, if necessary, the Bank could cut interest rates below the current record low of 0.5% (BBC News).

Today’s diary

ONS: UK trade September

REC/KPMG: monthly jobs report

ONS: UK industrial production

OECD: state of public finances report launch

US employment figures

Stat of the day

1.9% – the percentage at which the economy of the EU is set to grow this year, according to the European Commission’s autumn 2015 economic forecast.

Latest from the BBA

Apps that remember where you buy your groceries, high-tech bank branches and a digital revolution that bears the hallmarks of historic revolutions that have gone by – we heard it all at the BBA’s Digital Banking Conference yesterday, writes Emily Hoquee.

SMR Responsibility Mapping Workshop, 17 November. Under the new accountability regime, the regulator requires each bank to maintain and update a document that describes each bank’s management and governance arrangements. This workshop shows you how to understand, apportion and map your responsibilities. To register your place, click here.

In brief

Bank of England Governor Mark Carney has not ruled out a second term in the role. Asked yesterday by Bloomberg Television about the possibility of spending more than five years at the Bank, Dr Carney said “I’m not even half way into my five years so it’s far too early to answer that,”(Reuters).

Small companies have been reassured by Ministers that they will not be subject to the new “apprenticeship levy”, whereby a company paying £100,000 to the Government will receive at least £100,000 worth of vouchers in return to pay for apprenticeship training providers (FT, £, p6).

In a new report, John Longworth, Director-General of the British Chambers of Commerce, has said that the “demonisation of debt” by politicians has made justification for public investment “more difficult in the current economic climate” (FT, £, p4).

JP Morgan Chief Executive Jamie Dimon and Managing Director of the IMF Christine Lagarde have said that unregulated virtual currencies are flawed and will struggle to be accepted by the mainstream (Telegraph, online only).

Research by comparison website GoCompare has revealed that a minimum household income of £50,000 is needed to buy a property. The average UK salary is £22,000 (CityAM, p8).

In its latest three-year economic health check of Europe, the European Commission has discounted the economic effects of Brexit and has assumed that Britain will still be a member of the EU by the end of 2017 (Telegraph, B4).

A vote by Britain to leave the EU could cause trade flows between the UK and Ireland to shrink by a fifth, the Dublin-based Economic and Social Research Institute think-tank has warned (FT, £, p8).

A report released today by the Recruitment and Employment Confederation and KPMG has found that the proportion of recruiters whose permanent job placements had increased during the last month was the highest it had been since June (CityAM, p12).

The European Commission has warned that a new data transfer agreement with the US to replace the Safe Harbour provisions is “months away” (Financial Times).

According to the US Labor Department, American workers increased their hourly output by 1.6% in the third quarter of 2015 compared with the second, but despite the surprise the trend remains weak  and on an annual basis productivity rose by only 0.4% (Times, £, p45).

What the commentators say

In CityAM (p19), the Institute of Directors’ Chief Economist James Sproule says a delay in an interest rate rise is “bad news”. He adds: “[Governor] Carney cannot wait forever – at some point he will have to cast off into open water. The longer he leaves it, the harder it will be.

Writing in the Mail (p73) Alex Brummer says that markets have been taking Governor Carney at his word, so it is not surprising that yesterday’s “remarkably cautious” Bank of England Inflation Report caused a stir.

In an article for The House magazine, Mark Field, Conservative MP for the Cities of London and Westminster says the EU’s Single Market is the biggest market around for UK exports of financial services, responsible for a third of the UK’s surplus in financial services in 2012.

Please register or login to add this to your interests.