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.
Trump administration signals withdrawal from post-crisis reforms
Fed Chair Janet Yellen has been asked to stop US participation in negotiating Basel capital requirements. In a letter reported by The Times (£, online), Patrick McHenry, Republican Vice Chairman of the House Financial Services Committee criticised post-crisis reforms for reducing lending and economic growth by forcing US banks to hold more capital, saying “it is incumbent upon all regulators to support the US economy and scrutinise international agreements that are killing American jobs.”
Fund managers call for pay restraint
City AM (p3) reports that 13 fund management firms have agreed to curb excessive pay at the companies they invest in, noting that the deal follows the Government’s proposed reforms to the UK’s corporate governance framework. David Cumming, Head of Equities at Standard Life told the BBC’s Radio 4 Today programme that investors must do more to signal their unhappiness with “excessive” pay.
Schauble calls for “reasonable” agreement on financial services after Brexit
City AM (p1) reports that German Finance Minister Wolfgang Schauble has said that the EU should seek to agree reasonable rules with the UK on financial services after Brexit nothing that, “London offers financial services in a quality that is not found on the continent.” His full interview, with Tagesspiegel, is available here.Read more
Government publishes Brexit White Paper
The Government has published a White Paper on Brexit, which includes a commitment to, “the freest possible” trade in financial services and a “phased process of implementation” (BBC News, online). BBA Chief Executive Anthony Browne said, “The Government’s commitment to free trade in financial services and a phased process of implementation provides important clarity” (City AM, p2). The full White Paper is available here. The BBA’s Quick Briefs explain the main issues faced by banks and their customers and clients related to the UK’s exit from the EU.
Banks consider potential workarounds for UK operations
The Financial Times (£, p2) writes that banks are considering how they can apply existing arrangements to manage loss of access to the EU Single Market including internal risk transfers and delegation of business to a parent in another jurisdiction. However, regulators may raise concerns about this approach. Simon Gleeson, a regulatory partner at Clifford Chance, notes that, “from the perspective of the local regulator, back-to-backing is actually quite uncomfortable.”
Bank of England considers enforcement action over personal lending
The Times (£, p41) reports that Bank of England Governor Mark Carney has said that the Bank’s enforcement team is reviewing lenders’ behaviour to guard against “reckless” credit card and personal lending. The comments were made as the Bank published its latest growth and lending forecasts yesterday, which show consumer lending is growing at its fastest rate in 11 years. The Bank’s full inflation report is available here, and the BBA’s latest data on high street lending is available here.Read more
Government on track to trigger Article 50 by March 2017
MPs have voted in favour of a Bill that will allow the Government to trigger Article 50, with a white paper setting out the Government’s negotiating strategy to be published today (Financial Times, £, p1) The Guardian (p21) comments on a leaked report prepared for the European Parliament, which states that a, “badly designed final deal would damage both the UK and the other 27 EU member states” and notes that UK banks lend £1.1 trillion to EU 27 countries.
Financial Stability Board issues guidance on “living wills” for central counterparties
Reuters (online) report that the Financial Stability Board has published guidance designed to allow the orderly resolution of central counterparties, that would allow authorities to enforce outstanding contractual rights and require default fund contributions from non-defaulting members.
Prime Minister to propose building 300,000 new homes a year
The Sun (p8) reports that the Government is expected to publish a white paper calling for additional homes to be built in areas of high demand, with quotas to be imposed on local councils that do not meet these targets. The proposed measures will include steps to help smaller builders with limited access to credit.Read more
City warns MPs about fragmentation, deregulation and Europe losing out if financial services business leaves the UK
The Times (paper only, £, p44), The Daily Telegraph (Bp5) and CityAM (p5) report on yesterday’s House of Commons International Trade Committee on trade options for the UK beyond 2019. Giving evidence, Anthony Browne, BBA’s Chief Executive, warned against a “bonfire of regulation” and said this was not opposition to deregulation “in principle” but that global coherence to regulation is preferable to retain vital market access in the EU. Asked by MPs about the EU27 potentially taking business away from the City, Chris Cummings, Investment Association’s Chief Executive, cautioned against the “great danger” of fragmentation and Gary Campkin, TheCityUK’s Director of Policy and Strategy, said ‘ the outcome of such a move needs to be considered by both sides of the Brexit negotiating table. The biggest risk of the wrong outcome is a situation where functionality goes not to Frankfurt, not to Dublin, but to New York or Singapore […] it is the European economy that will lose as a whole.”
Falling pound slows household borrowing
New figures from the Bank of England released yesterday showed that the monthly rate of consumer credit growth was 0.5 per cent between November and December, down from 1 per cent the previous month. This was the slowest rate of household borrowing for two and a half years, signalling consumers may be reigning in spending as they begin to feel the effects of the falling pound (The Times, £, p40). “We are always hesitant to call a trend from one month’s data, but the drop in consumer credit growth in December was sizeable,” said Liz Martins, UK Economist at HSBC, in The Financial Times (£, p3).
Germany is exploiting undervalued euro – Trump adviser
Peter Navarro, the head of Donald Trump’s new National Trade Council, told The Financial Times (£, p1) that Germany is using a weak euro to “exploit” both the US and the EU to get a competitive trade advantage. He also said the euro was like the “implicit Deutsche Mark” and that Germany was the main obstacle to a future US/EU trade deal (The Daily Telegraph, p1). In response to these comments, German Chancellor Angela Merkel clarified that Germany could not influence the euro and “is a country that has always called for the European Central Bank to pursue an independent policy, just as the Bundesbank did that before the euro existed. Because of that we will not influence the behaviour of the ECB. And as a result, I cannot and do not want to change the situation as it is” (Guardian, p22)Read more
MPs to debate Brexit
MPs are to begin a two day debate on the Bill that would enable the Government to trigger Article 50, with a vote scheduled tomorrow evening according to BBC News (online). The Guardian (p13) writes that the Bill is likely to pass without significant opposition, but notes that some MPs are likely to call for quarterly updates on the negotiations. The BBA’s Quick Briefs explain the main issues faced by banks and their customers and clients related to the UK’s exit from the EU.
EBA calls for EU ‘bad bank’
The European Banking Authority (EBA) has said that the EU’s level of bad debt poses an urgent problem, with lenders facing over €1tn of non-performing loans (Financial Times, £, p6). EBA Chairman, Andrea Enria, suggested one solution might be a taxpayer-backed fund to buy bad loans, ahead of a formal report on how to address this issue by the European Council, expected in March. The EBA’s analysis is available here.Read more
BBA calls for Brexit transitional arrangements
Speaking to BBC Radio 4’s Today programme BBA Chief Executive Anthony Browne highlighted the importance of post-Brexit arrangements that allow UK-based banks to continue to serve their clients based inside the EU, and allow EU based banks to access UK markets, with phased implementation to avoid disruption to markets. Sky News (online) also reports that the BBA has called for a dedicated parliamentary sub-committee on Brexit to ensure EU banking legislation can be translated into UK law ahead of Brexit, to avoid a regulatory vacuum.
Banks face curbs to unsecured lending
The Bank of England is considering measures to reduce the amount of unsecured personal lending and credit card borrowing, following concerns that household debt is growing too quickly (Mail on Sunday, p89). The BBA’s most recent High Street Lending Statistics showed consumer credit grew by 6.6% in December 2016.
FSCS limit increased to £85,000
The Financial Services Compensation Scheme (FSCS) will protect deposits worth up to £85,000 from today. The scheme had been reduced to £75,000 in line with European rules, but has now been revised back to £85,000 following the recent marked fall in the value of the pound (City AM, p9). More information on the FSCS is available here.Read more
Andrew Bailey calls for free trade in financial services
Andrew Bailey, CEO of the Financial Conduct Authority has called for financial institutions that meet globally agreed standards to access the European single market after Brexit, noting that “open financial markets are the best way to support trade in goods and services” (Financial Times, £ p3). The full speech is available here.
Theresa May and Donald Trump to discuss trade and foreign policy
Prime Minister Theresa May will meet President Donald Trump in the White House today, where they are expected to discuss a range of policy issues, including trade and the UK-US special relationship (The Times, £, p1). The Guardian (p7) reports that a suggested relaxation of the US regulatory regime for financial services may help compensate UK firms for a lower level of access to European markets.
Mortgage approvals rise as UK GDP grows 0.6% in Q4 2016
Data published by the Council of Mortgage Lenders (CML) shows mortgage borrowing totalled £245.7bn in 2016, up 12% from the previous year (The Daily Telegraph, £, Business p3), although the number of housing transactions fell after the EU referendum in June. The CML’s Senior Economist Mohammad Jamei said, “approvals for house purchase have recovered strongly of late, and this should feed through to lending figures in the early months of 2017.”Read more
Carney warns that banks’ use of FinTech poses systemic risk
Bank of England Governor Mark Carney has warned that the use of innovative technology in banking could create new systemic risks (City AM, p3). Speaking at the G20 conference in Germany, he said that regulators are likely to consider whether more of these activities should be regulated, with a focus on capital requirements and management of operational and cyber security risks (The Financial Times, £, online).
Government to publish Article 50 legislation and Brexit plan
BBC News (online) reports that the government will publish legislation to allow the triggering of Article 50 within the next few weeks, and will also set out negotiating priorities for Brexit in a separate white paper. The Financial Times (£, p3) examines potential amendments to the bill, concluding that it is unlikely that there will be a parliamentary vote on the final deal, or that the legal status of EU citizens currently living in the UK will be confirmed before negotiations start.
BBA data shows a rise in borrowing
BBC News (online) reports that consumer credit grew by 6.6%, despite weak retail sales. Describing the data, the BBA’s Chief Economist Rebecca Harding says, “overall we’ve seen high levels of consumer and business borrowing, although there are early indications that 2017 could see softer demand for credit from business and households, as they anticipate future interest rate rises and wait for further clarity on Brexit.” Click here for the full BBA data.Read more
Supreme Court rules that Parliamentary vote needed before triggering Article 50
The Independent (p5) reports that Brexit Secretary David Davis has announced that the Government will publish a “short and straightforward” Brexit Bill following yesterday’s Supreme Court ruling. The BBC (online) notes that a number of MPs have called for the Government to publish a white paper detailing negotiating priorities ahead of a Parliamentary debate on Brexit.
Industry calls for higher standards of corporate governance
The Financial Times (£, p3) reports that industry bodies representing company directors, trade unions and investors have written to the Prime Minister to appeal for measures to strengthen oversight of corporate governance, including a new regulator and a solution to “the problem of executive pay”. Reuters (online) reports that three of the five biggest investors in FTSE 350 companies have or intend to set out new guidance on pay ahead of annual general meetings later this year.
Survey reveals low levels of household saving and retirement concerns
Research by ING has found that one in four Britons do not have any savings, while one in three have access to savings worth less than three month’s pay. One in five also report concerns about how they will manage their finances once retired (Daily Mail, p22). Commenting on the findings, Ian Bright, a Senior Economist at ING said, “people across Europe are feeling the strain of lower interest rates – and losing motivation to save.”Read more
Government loses Supreme Court decision on Article 50
The Supreme Court has today ruled that the government must consult Parliament before triggering Article 50, by 8 votes to 3 (BBC News). Speaking to Bloomberg TV, BBA Chief Executive Anthony Browne underlined the importance of ensuring an effective transition for financial services following Brexit, highlighting the need for clarity and phased post-Brexit arrangements to avoid any cliff edge effects. The BBA’s Brexit Quick Briefs summarise the major issues facing the banking industry and its customers in the UK and EU.
Banks and Post Office work together to increase over-the-counter services
The Financial Times (£, online) reports on an agreement between banks and the Post Office that will allow a significant proportion of personal and small business customers to access banking services via a local Post Office branch. Commenting on the decision, Margot James MP, business minister, said the development marked “the biggest expansion in branch banking services in a generation”. Commenting on the new agreement in the Telegraph (£, online) Anthony Browne said ““Nine out of 10 people now live within 20 minutes’ walk from a bank or a Post Office where they are able to do banking face-to-face with another person,”
European Union considers stress testing banks’ resilience to cyber attack
Reuters (online) reports that the European Union is considering introducing stress tests to assess banks’ ability to withstand cyber-attacks. The test would be introduced in addition to the stress testing carried out by national competent authorities, and could include, “cyber-threat information sharing or penetration and resilience testing of systems.”Read more