The BBA is now integrated into UK Finance. Please go to www.ukfinance.org.uk for new content and updates from UK Finance.
Material published by BBA prior to 1st July 2017 is still available on this website.
From 1 July 2017, the finance and banking industry operating in the UK will be represented by a new trade association, UK Finance. It will represent around 300 firms in the UK providing credit, banking, markets and payment-related services. The new organisation will take on most of the activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association.x
BBA brief is a round up of each morning’s banking policy news prepared by the BBA’s media team. It is a selection of the articles in the papers and broadcast stories. The content does not reflect the views of the BBA.
Lords to debate Brexit Bill
The House of Lords will today begin debating the Bill that will allow the Government to trigger Article 50. Cross-bench and opposition peers are expected to seek guarantees about the treatment of EU citizens in the UK (BBC News, online). The Times (£, p12) reports that a group of 92 business leaders, MPs, Lords and lawyers have called for MPs to be given powers to block an “unpatriotic Brexit” with an option to extend negotiations to secure a better deal. The Financial Times (£, online) writes that the EU’s negotiating team is unlikely to participate in trade talks until after Christmas 2017, as its immediate focus is on negotiating the UK’s exit arrangements and the rights of EU citizens.
Borrowing down ahead of Budget
The Guardian (£, p44) reports EY data predicting that the UK’s Office of Budget Responsibility (OBR) will say borrowing requirements are likely to fall by £3 billion to £65 billion ahead of the Budget in March. EY notes that the likely length of transitional and customs arrangements after Brexit are the biggest gaps affecting future forecasting (The Daily Telegraph, £, B1).
US Administration seeks greater control of Fed
The Times (£, p20) writes that the US Federal Reserve may face curbs on its powers as the US Dodd-Frank Act is reviewed. Ian Shepherdson, Chief Economist of Pantheon Economics, notes that, “there is no evidence that loan growth has been constrained by regulation”. The Financial Times (£, online) reports that 5-6 positions on the Fed’s Board of Governors will become vacant over the next 12 months, with prospective new appointments likely to depart from the Fed’s current approach to monetary policy and bank regulation.Read more
May says UK won’t “cherry pick” from EU benefits after Brexit
UK Prime Minister Theresa May has said that the UK will not seek to cherry pick elements of EU single market access, ahead of a meeting with French Prime Minister Bernard Cazeneuve today (Sky News, online). Writing in Le Figaro she committed to prioritising a reciprocal deal to protect the rights of UK and EU nationals working overseas, and highlighted the need for continued cooperation on security and defence.
US banks call for overhaul of AML regime
The Clearing House group of US banks has called for the US Treasury’s Financial Crimes Enforcement Network to be given oversight of banks AML compliance, while banks should investigate transactions based on specific concerns made by law enforcement agencies (Financial Times, £ online). Reuters (online) reports that the current system incentivises banks to file a high volume of low value reports on potentially suspicious transactions.
City supports reforms to corporate governance
The Daily Telegraph (£, B1) covers the BBA’s response to the Government’s consultation on reforms to corporate governance, noting that the banking sector believes that it may be too early for a further revision to the remuneration regime.Read more
French Senate sets out red lines for Brexit deal
A cross-party report by the French Senate has concluded that no deal with the UK is preferential to the UK securing a Brexit deal that leaves it better off than it is now (The Guardian, p9). The report describes freedom of movement in goods, people, services and capital as inseparable, noting that, “it must not be possible for Britain to segment access to the tariff-free single market for certain sectors” (The Independent, online only).
Customers willing to queue for up to three minutes at ATMs
Research by University College London has found that customers consider a wait of up to three minutes at ATMs and four minutes and twelve seconds at bank branches to be “reasonable”. They are unlikely to join a queue of more than six people (The Daily Telegraph, £, p3). The BBA’s Way We Bank Now report describes consumers’ changing interaction with banks.
Fall in EU nationals working in the UK
The Financial Times (£, p3) notes that the number of EU nationals employed in the UK fell by 19,000 to 2.2 million last quarter, driven by concerns over Brexit. The Chartered Institute of Personnel and Development’s Labour Market Adviser, Gerwyn Davies, commented that, “the figures . . . offer further evidence that Brexit has had a discernible impact on the allure of the UK as a place to live and work.” Reuters (online) reports that large banks are not scaling up the size of their trading teams, despite recent increased revenue.Read more
FCA consults on changes to listing rules
The FCA has proposed changes that would allow overseas companies to list in London without meeting the requirements on ownership and control required under the current regime for a premium listing. The consultation paper notes that “a highly international market like the UK should be at the centre of listing activity, supporting dynamic and emerging economies” (Financial Times, £, p18). City AM (p10) also reports that the regulator is considering measures to increase retail participation in debt capital markets. The consultation is available here.
UK leads on banking and technology developments
The Times (£, p39) writes that the UK is second only to South Korea in the development of Open Banking standards that allow third parties to provide retail banking services. The paper notes that innovation charity Nesta has launched a £5 million bank-funded prize to encourage the development of banking apps for small businesses. The Financial Times (£, online) notes that banks in other jurisdictions have adopted consumer-tech features, for example, “opening up Facebook branches, or allowing users to swap instant messages with their bank manager via Messenger.”
Yellen signals US rate rise
BBC News (online) reports that US Federal Reserve Chair Janet Yellen has said that it may be appropriate to raise interest rates ahead of the Fed’s next monetary policy meeting in March. City AM (p1) notes that this caused the dollar to rise against a number of other currencies, including sterling, while The Times (£, p35) writes that her comments were a, “thinly veiled warning” to President Trump that his economic plans will have a significant negative impact on the US fiscal position.Read more
Firms face cyber-threat staff shortage
Sky News (online) reports that 66% of British companies do not employ enough specialist staff to deal with cyber security risks. Chancellor Philip Hammond is expected to call for businesses to do more to guard against cyber threats at today’s launch of the National Cyber Security Centre, noting that although 65% of large firms reported a cyber-attack in the last year, only one in ten has an incident management plan (The Daily Telegraph, £, online).
Investors consider creating new US banks
The Financial Times (£, p16) reports that the US Federal Deposit Insurance Corporation is considering applications for six new bank charters, prompted by the prospect of stronger economic growth and lower taxes. Molly Flater, Chair of newly-opened US institution Blue Gate Bank noted that the outlook for banks of all sizes has improved, citing potential interest rate rises and more relaxed US regulation.
European Commission raises UK GDP projections
The European Commission has revised its growth forecast for the UK up to 1.5% this year, but warned of a likely slowdown in business investment driven by uncertainty over the post-Brexit deal in 2017 (The Times, £, p38). Meanwhile, City AM (p7) notes that UK firms relying on trade agreements between the EU and third countries may need to wait until equivalent deals are in place after Brexit.Read more
FTSE 100 companies consider measures to curb executive pay
One in ten FTSE 100 companies may replace long-term incentive schemes with share-based bonuses or extend vesting dates in response to investor demands to reduce executive pay (Financial Times, £, p1). The Investment Association has called for the introduction of a “sin bin” for companies that repeatedly fail to engage with shareholders on executive pay, The Sunday Telegraph (£, online). The Sunday Telegraph also notes that, “as well as the “sin bin”, some institutions are expected to push for radical reform of Britain’s stock exchange listing rules”.
85% of banks ‘do not expect’ to move staff out of the UK following Brexit
Data from EY shows that the majority of banks do not plan to make major changes to UK staffing following Brexit, although 15% of 222 firms surveyed did expect to move some staff (The Daily Telegraph £, B3).
Commenting on the findings, EY’s UK Financial Services Leader Omar Ali said, “The number of financial services companies who have publicly said that they are making wholesale changes to their London operations is relatively small given the huge number of firms that comprise the sector”.
Banks face barriers to adopting cloud technology
Banks are turning to cloud technology to help meet demand for more innovative digital products and services, but face challenges around data security and regulation according to a report by the BBA and Pinsent Masons (City AM, p15). The BBA has established a working group to help address these issues. Read the full report is here.Read more
Dombret warns on equivalence and Euro clearing
Andreas Dombret, who sits on the board of Germany’s Bundesbank, has warned that a post-Brexit deal based on equivalence would be a poor substitute for passporting, noting that, “equivalence decisions are reversible, so banks would be forced to adjust to a new environment in the event that supervisory frameworks are no longer deemed equivalent” (BBC News, online). He also said that without oversight by the ECJ, the bulk of Euro clearing activity was likely to move into the Eurozone.
CML data shows repossessions at record low
Housing repossessions have fallen to their lowest level for 35 years due to record low interest rates (The Times, £, p44). Data from the CML Lenders also shows that mortgages in arrears of over 2.5% fell by 7% last year. The Financial Times (£, online) reports that Paul Smee, CML Director-General warned that customers, “need to be ready for a time when the outlook may not be so benign, with pressure on real incomes increasing and as interest rates begin to move upwards again.”
Carney calls for BoE clearer communication
Bank of England Governor Mark Carney says that winning back public trust in banking will require the Bank to engage with a wider group of stakeholders using less technical language (City AM, p3). Speaking at a Bank event on diversity, he said: “to communicate to both the City and the country, the salon and the suburb, we need to create content that engages different audiences.”Read more
European Commission considering options for UK access to EU financial markets
Valdis Dombrovskis, the European Commission’s Vice President responsible for financial services, has said that the City will continue to be a global financial centre after Brexit. Speaking to City AM (p1), he said the European Commission, is “looking at equivalence” and asking firms to establish, “substantial presences in the EU to maintain EU passporting” to ensure that the UK will retain access to EU financial markets.
Bank of England warns on risks of global fragmentation of regulatory standards
BBC News (online) reports that Sir Jon Cunliffe, the Bank of England’s Deputy Governor for Financial Stability, has warned that moves to reduce regulation introduced after the 2008 financial crisis could undermine financial stability, commenting that, “in order to have a resilient financial sector and consistent regulation internationally we need international standards.” Sky News (online) summarises recent proposed changes to US banking regulation, noting that it would be impossible to come up with meaningful international rules on bank capital without the US.
Sir Mervyn King calls for hard Brexit
Former Governor of the Bank of England, Sir Mervyn King, has called for a hard Brexit, saying that the UK’s decision to leave the EU offers “real opportunities” for economic reform and that the UK would be better off if it also left the customs union (The Daily Telegraph, £, B1). He attributed the result of the referendum to the UK’s political system, which he said “does not give people a chance to vote on issues they really care about.”Read more
MPs set for final vote on Brexit deal
MPs will have a final vote on the Brexit deal negotiated by the Government, however, the Prime Minister will not seek further talks with the EU leaders if Parliament rejects the deal (The Guardian, p1). Brexit Minister David Jones commented that, “there will be a meaningful vote…to accept the deal that the government will have achieved, or no deal” (City AM, p3).
Bank of England and ECB differ on Brexit risk
The Financial Times (£, online) also reports comments from Bank of England Governor Mark Carney, who warned that a severe Brexit could hurt EU 27 countries more than the UK, and remarks made by ECB President Mario Draghi who told told EU 27 negotiators that, “Brexit costs will be containable and concentrated in Britain”.
Unauthorised overdraft charges compared to fees for high cost short term credit
Which? Has compared fees for unauthorised overdrafts and payday loans, and called for the FCA to introduce a cap on unauthorised overdraft fees (The Sun, p28). The Times (£, p12) notes that banks have invested heavily in technology that warns customers about their financial position. Commenting on the data, the BBA said, “we would always encourage customers who think they might need to borrow money to speak to their bank to pre-arrange an overdraft facility, so they can be certain that payments will be made and keep borrowing costs down.”Read more
Securitisation reforms stall over disagreements on equivalence
The Financial Times (£, online) writes that new rules designed to support the EU’s securitisation market are at risk of delay. Member states disagree over equivalence provisions that would grant non-EU companies the ability to create securities that comply with the new rules, subject to agreed levels of regulation in their home countries. A European Commission official said,“our original proposal was designed to turbo-charge STS securitisations in the EU. That’s why we wanted to keep the market access as open as possible to potential investors.”
Government announces new housing strategy
The Times (£, p1) reports that the Government has called for 250,000 new homes to be built each year, with a promise to, “tackle failures at every point in the system” as it launches a new housing strategy today. This will introduce a range of new measures, including new powers for local councils to force developers to build and reducing the time allowed between obtaining planning permission and the start of building BBC News (online).
Draghi criticises US protectionism
ECB President Mario Draghi has criticised President Trump’s plans to deregulate US banks, saying that, “The idea of repeating the conditions that were in place before the crisis is something that is very worrisome” (Sky News, online). He also said that the central bank remains ready to increase its quantitative easing programme if needed, citing weak economic growth in the Eurozone (City AM, p3).Read more