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.
Prime Minister indicates that Britain may not seek to retain access to the single market
Theresa May’s interview with Sky on Sunday 8 January has received extensive coverage, particularly her indication that the government will seek a trade deal for goods and services outside of the single market. Radio 4’s Today programme highlighted May’s comments that, “the UK cannot expect to hold on to “bits” of its membership after leaving the EU”, while The Guardian (page 4) notes that “the prime minister has given her clearest signal yet that Britain will leave the single market”.
PRA raises concerns over 2019 ringfencing deadline
The Financial Times (£, page 2) reports that the Prudential Regulation Authority has written to banks for assurance that they are able to comply with the new rules on ringfencing by the 2019 deadline. The Financial Times notes the scale of the challenges facing banks as they try to meet this deadline, while Steven Hall at advisory firm KPMG said “Ringfencing is a large piece of work that needs to be undertaken at a time when banks are considering the impact of Brexit, more prudential regulation and conduct issues”. The article also highlights concerns that banks may be forced to restructure again following Brexit if the EEA are not allowed to be included within ringfenced entities.
Bonuses may fall amid economic uncertainty
The Times (£, page 1) anticipates that bonuses may fall by 10%, driven by concerns over Brexit, the Eurozone economies, and political uncertainties. The Sunday Telegraph (£, Business page 1) reports that European investment banks are likely to be at the forefront of this, quoting Jon Terry, a partner at PwC who expected that, “we’re going to see far more cases of people receiving zero or very low bonuses than we’ve ever done in the past because for European banks there’s going to be far less money around.”Read more
The BBA Brief will take a break for the Christmas period after today, and will return to your inboxes on Monday 9 January 2017. We wish you a restful Christmas and a happy New Year.
David Davis favoured EU asking for transition
The FT (£, online only) exclusively reports comments made by the Secretary of State for Exiting the European Union David Davis last month, in a meeting with the City of London Corporation on 15 November, in which he is reported to have said that he was “not really interested” in a transitional deal for the UK’s exit from the European Union. The leaked memo stated however, that a “sudden” departure could compromise the EU’s financial stability so, in order to “be kind” to the EU, Mr Davis is reported to be “more in favour” of transition if the EU were to ask for it. Mr Davis has reportedly been more receptive to a transitional arrangement to ensure a smooth Brexit for Britain’s businesses since that meeting.
Report calls for five-year cover from EU law in Brexit transition
Reuters (online only) reports that a leaked document drawn up by law firms, argues for banks to be subject to EU laws for up to five years after Brexit to allow the industry time to adapt. The report, which focuses on the legalities of an interim agreement for financial services, says that “transitional arrangements are likely to be essential” and “important in order to avoid potential damage to the ‘real economy’ that is reliant upon uninterrupted access to financial services”. The document also suggests that the European Court of Justice would most likely have to govern any disagreements that arise during the transition.
European Central Bank to scale back quantitative easing
The Times (£, p45) reports that Mario Draghi, President of the ECB, has taken the decision to extend the Bank’s bond-buying programme by nine months to the end of 2017, but to reduce the value of bonds it buys every month from €80 billion to €60 billion. Draghi said that the Bank would remain active on markets since “uncertainty prevails everywhere”. The FT (£, p1) also reports speculation that the decision to lower the rate of purchases could mean a “tapering” of the quantitative easing programme. However, Draghi rejected this claim, saying: “That’s not been discussed; it was not even on the table.”
Major banks are in the process of moving operations to Paris
BBC Newsnight (online only) last night and BBC Radio 4’s Today Programme reported that some large international banks are in advanced stages of planning to move some operations from London to Paris. Benoît de Juvigny, Secretary General of the AMF, said large banks have undertaken the due diligence needed to set up a subsidiary in Paris. ITV News (online only) reports that the French regulatory department was likely to expand in response to the expected influx of requests from other financial services wanting to move certain operations to La Défense, the city’s financial centre, in case the UK is not offered an equivalent to passporting rights post-Brexit.
MPs vote to support the Government’s timeline on Brexit
All papers report that MPs last night voted in favour of the Government’s timeline on Brexit (Telegraph p1, FT £ p1, the i p1). The non-binding vote was carried by 448 votes to 75, a majority of 373. This vote follows the Prime Minister’s plan to be more transparent in her Brexit negotiations, which Labour’s shadow Brexit Secretary Keir Starmer said are likely to include plans for the Single Market and Europe’s Customs Union. When asked about whether the UK would remain in the Customs Union. The Secretary of State for Exiting the European Union, David Davis, suggested that there are still many options for the UK to consider, noting that “This is not a binary option. There are about four different possibilities and we are still assessing that… I will notify parliament in detail when we come to the decision on Customs Union.” David Davis also used his remarks in parliament to reiterate that it was “inconceivable” that MPs would not get a vote on the final Brexit deal (Times, £, p4-5).
Ministers consider a second Scottish Referendum
The Times (online only) reports that UK Ministers are considering a deal to allow Scottish First Minister Nicola Sturgeon to hold a second Scottish independence referendum. However, the paper reports that Ministers will make the timing of the referendum a “red line” in any agreement, arguing that the Brexit deal must be secured first so that voters in Scotland will know what they are voting on.Read more
Theresa May agrees to clarity on Brexit plans
Most papers report that the Prime Minister Theresa May will reveal her strategy for Brexit prior to triggering Article 50 (City AM, p1and FT p1). Conservative MP Anna Soubry said: “British businesses want a plan, because they need that certainty. So we’re moving in the right direction.” The Guardian (p9) reports that the decision comes as Michel Barnier, the European Union’s chief negotiator, proposes an October 2018 deadline on negotiations for the UK leaving the EU.
FCA targets risky investment products
Papers also widely report (FT, £ p19 and Telegraph B1) that the FCA has announced plans to increase regulation on spread-betting investment products which are “akin to gambling,” because, it says, retail clients might not understand the risks. The Guardian (p21) says that the industry lost £1.5 billion in stock market value in reaction to the news.
Increased charges for withdrawing money on credit cards
The Daily Mail (p49) reports on increased fees for consumers who, according to official figures, are collectively withdrawing up to £12 million per day from ATMs. The paper also argues that, in some cases, interest rates for repaying credit are nearing 30%. This comes at a time when household debt in the UK is growing at its fastest rate in ten years, and credit card cash withdrawals continue to grow. It quotes the BBA as saying that in September, customers took out £400 million in the last year, compared to £347 million the year before.Read more
Government working on a “smooth and orderly” Brexit for the City
The FT (£, p1) reports that Chancellor Philip Hammond and Secretary of State for Exiting the European Union David Davis yesterday promised financial services representatives a “smooth and orderly transition” when Britain leaves the EU. Mark Carney, Governor of the Bank of England, on Monday repeated his view that it was “absolutely desirable” for financial services firms to be given a period of time to adjust and “to restructure after the deal is agreed with the EU.” David Davis, who had previously expressed scepticism about granting UK banks passporting rights, reportedly seemed “not dismissive.” The Telegraph (B1) also reports that Ministers are keen to balance the needs of the financial services sector against others and avoid any perception of “impartial treatment.”
Financial services contribute £71.4bn in tax
The front page of City AM reports that the UK’s financial services firms, including the City’s banks, paid £71.4bn in taxes to HM Treasury for the year to 31 March according to a study published today by PwC and the City of London Corporation. According to the i (p43, print only) this accounts for 11.5 per cent of the UK’s total tax receipts. A key component of this figure comes from a BBA report (also in collaboration with PwC) last month stating that £34.2bn of the total tax paid by financial services total is paid by the banking sector.
Mark Carney on the negative effects of globalisation
The Guardian (p24) reports that Governor of the Bank of England Mark Carney yesterday spoke in Liverpool about the sense of “isolation and detachment” felt by many people in the UK caused by “uneven distribution in gains in global trade and technology.” The FT (£, online only) reports how he responded to the Bank of England’s decision to hold interest rates at a historic low and defended the Bank’s monetary policy which “has been keeping the patient alive, creating the possibility of a lasting cure through fiscal and structural operations.”Read more
One in five over-55s is target for fraud
The Telegraph (p10, print only) reports that according to research from the Financial Conduct Authority, more than one in five over-55s and one in three over-75s, suspect they have been targeted by investment fraudsters in the past three years. The FCA strongly advises over-55s to check that investment “opportunities” are legitimate before committing. Mark Steward, Director of Enforcement at the FCA, said: “Fraudsters are targeting our growing over-55 population because they are more likely to have money to invest…Be sceptical. Be suspicious. Ask questions and get answers that you can verify” (Daily Mail p24).
Boris Johnson rejects paying for EU single market access
Following Exiting the European Union Secretary of State David Davis’ comments last Thursday that the UK Government would consider contributing to the EU budget in exchange for EU market access, the i (p4, print only) reports that Foreign Secretary Boris Johnson has dismissed this idea. The Telegraph (p4) reports Johnson as telling BBC One’s Andrew Marr that David Davis is considering EU contributions for single market access, but that “there is no reason why payments to the EU should be large.” The Times (£, p1) reports that other ministers support Johnson’s view, including Trade Secretary Liam Fox.
Mortgage loan-to-income ratios hit record high
The Sunday Telegraph (p.2) reports that homeowners are accruing record-high levels of mortgage debt despite the Bank of England’s attempts to limit the number of loans that banks can make to home buyers who want a mortgage 4.5 times bigger than their incomes. A Bank of England study of the most indebted 50pc of borrowers found the average mortgage is 4.1 times a homeowner’s income, the highest level on record and up from 3.6 times in 2009. Mark Carney, the Bank’s Governor, said “it was important to keep the borrowing restrictions in place to try to stop over-indebtedness becoming a problem.”Read more
UK Government could pay for access to single market
The FT (£, p1) reports that the UK Government has acknowledged the possibility of the UK continuing to make a contribution to the EU budget in exchange for access to the single market. Exiting the European Union Secretary David Davis said “the major criteria here is that we get the best possible access for goods and services to the European market.” The Chancellor Philip Hammond also said “I think David Davis is absolutely right not to rule out the possibility that we might want to contribute in some way.” The Guardian (p2) reports that German MEP Reimer Böge, a former chair of the European Parliament’s budgets committee, has estimated the UK’s contribution at £4.2bn. The Telegraph (B1) and the FT (£, p28) report that the pound has risen to a three-month high following the news.
Bank card details are easily acquired by criminals
The Telegraph (p15, print only) and the Times (£, p6) report that fraudsters can work out the card number, expiry date and security code for a Visa debit or credit card in six seconds using “distributed guessing attack.” The criminals use a method called “distributed guessing attack” to electronically enter hundreds of combinations simultaneously. The Times article reports that Visa, working closely with card issuers and acquirers to make it very difficult to obtain and use data illegally, said “for consumers, the most important thing to remember is that if their card number is used fraudulently, the cardholder is protected from liability.”
Branch access users offered lower interest on cash savings
City AM (p10) reports that banks are offering higher interest rates for online access to savings accounts. The FCA released the data as new rules come into force for UK banks to provide easier to understand information on interest rates, so customers can make better judgements when opening accounts. The Daily Mail (p8) reported that older savers are most impacted by the lower rates offered in branches and quoted a BBA spokesperson:
“The needs of vulnerable people and the cost of providing account access are important factors which providers consider when competing for business. With the Bank of England Base Rate at a record low of 0.25% the environment has not been easy for many customers to bear. While this has been good news for borrowers it has also led to tough times for many savers. We always encourage customers to shop around so that they get the best deal.”
Mark Carney warns EU on loss of City services
Following Mario Draghi’s comments to a European Parliament Committee on Monday that Britain will first and foremost feel the pain of Brexit, the FT (p2) and the i (p1, print only) report on the Governor of the Bank of England’s response that the EU would lose “crucial” financial services if it denied the UK European business. Carney said “The UK is effectively the investment banker for Europe. More than half the equity and debt raised (for European governments and business) is raised in the UK, quite often from investors based in the United Kingdom” (the Guardian p28).
Banks take action following stress test results
All papers, including the Telegraph (B1), report on the results of the Bank of England’s stress tests yesterday measuring banks’ resilience in hypothetical adverse global financial conditions. They report that all banks that originally did not meet their hurdle rate have reassessed their capital plans to address the situation. The FT (p21, print only) reports that for the first time next year banks will be subjected to additional exploratory stress tests measuring capital strength against “slow-burn” issues, for example a seven-year period against “a weak global supply growth,” to probe business model resilience.
Rate rise could cause severe problems for households
The Times (p44, print only) reports that the Bank of England has warned that households could face huge debts if unemployment and interest rates rise. “Consumers are drawing down savings and borrowing for the first time since the crisis”, the Bank said in its Financial Stability Report yesterday. However, City AM (p8) reports that the FCA is considering relaxing certain mortgage lending rules, allowing consumers access larger loans based on their income.Read more
Bank of England publishes stress tests results
Sky News, BBC and the Guardian (online only), report on the Bank of England’s results of its annual test of banks’ resilience in hypothetical adverse financial conditions. Measuring the balance sheet strength of seven of the UK’s biggest banks, it modelled how banks would cope in a situation in which UK GDP shrinks by 4.3% amid a worldwide recession, unemployment adds 4.5 percentage points, and house prices plunge by 31%. The Financial Policy Committee has judged that, as a consequence of the stress test, the UK banking system is, in aggregate, capitalised to support the real economy even under a broad, severe and synchronised stress scenario.
UK must abide by EU rules to remain UK financial centre
The FT (£, p9) reports that the City of London risks losing its role as the continent’s premier financial centre unless the UK agrees to fully apply EU regulations post-Brexit. Dutch Finance Minister Jeroen Dijsselbloem said to members of the European Parliament in Brussels “we can’t allow the financial service centre for Europe and the eurozone to be outside Europe and the eurozone, and to go its own way in terms of rules and regulation requirements.”
FCA looks to increase regulation on subprime credit industry
City AM (p8) reports that the FCA launched a consultation yesterday calling for evidence on products where the cost to consumers might outweigh the benefits, including doorstep lending, catalogue credit, rent-to-own agreements, and, according to the Times (£, p49) and Telegraph (B3), unarranged overdrafts and high-interest payday lenders. It reports FCA CEO Andrew Bailey as saying “we have already taken many steps to address the risk of consumer harm by putting in place new rules for high-cost, short-term credit firms and taking action against non-compliance across all credit markets.”Read more
ECB argues Europe should not weaken the Single Market for the UK’s benefit
City AM (p4) reports that Mario Draghi, the ECB President, has argued that Europe should not weaken the Single Market for the UK’s benefit, arguing that it is “imperative that its integrity and the homogeneity of rules and their enforcement will be preserved”. Draghi has said “there should be no backward steps concerning the regulatory, supervisory and oversight framework”. The FT (£, p1) also reports that the ECB president has warned Britain rather than the Eurozone will “first and foremost” feel the pain of Brexit, as he called for greater clarity over the negotiation process.
Leaked memo allegedly detailing Britain’s Brexit negotiating position
The Telegraph reports on a handwritten memo allegedly detailing Britain’s negotiating position in regards to Brexit. This story which was also covered by The FT (£, p2) and The Times (£, p1), claims that the photographed memo – carried by an aide to Conservative Party vice-chairman Mark Field MP after a meeting in No 10 – details Britain’s position as “have [your] cake and eat it” and that it is “unlikely” that Britain will be given the chance to remain in the Single Market after it leaves the EU. A government spokesperson denied this document represented the UK’s position ( The Guardian, p1, 7).
Fresh legal challenge to the Government on the Single Market
The Times (£, p4) reports on a fresh legal challenge the government is facing over whether the UK should remain inside the single market post Brexit. Cross-party think tank British Influence has taken to the courts to argue that leaving the EU does not automatically take Britain out of the European Economic Area (EEA), in which the single market operates. Their lawyers will argue that the decision to leave must be decided separately from any vote to trigger Article 50. However, the article also reports that the government insists EEA membership would end automatically when the UK leaves the EU because it had joined in its capacity as a member.Read more