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.
Carney pushes for transitional agreement
The Sunday Times reports that the Bank of England Governor, Mark Carney, is understood to have told City executives that the UK should retain access to the single market for at least two years after leaving they EU, to give continuity to businesses and to allow them to prepare for the withdrawal deal. The Daily Telegraph (p B1) reports that Carney is also set to warn the European Commission and heads of the EU’s top financial services bodies that a transitional agreement would be in both the UK and EU’s interests. It also notes, along with The Times (£, p11), that the British Bankers’ Association has already written to the Chancellor to call for “agreement on transitional arrangements … and confirmation of these arrangements as soon as possible”.
Banks prepare for stress tests results
The Sunday Telegraph reports that major UK banks are preparing for the results of the latest round of Bank of England stress tests, which are due to be released on Wednesday and have been considered the toughest tests yet. The results are likely to expose the firms that are most vulnerable if there was a future financial crisis. The Guardian (p22) and City AM (p13) also report on banks bracing themselves for the upcoming results.
Greater scrutiny of executive pay
The FT (£, p2) reports that Theresa May will fulfil her pledge to reform executive pay and will publish a green paper tomorrow which sets out proposals to strengthen corporate governance. Andy Haldane, the Bank of England’s Chief Economist also writes in the FT (£, p12) that “issues of corporate governance, including around executive pay, are matters of legitimate public interest, including for the bank in pursuing its statutory objectives of price and financial stability”. The Guardian (p21) reports on the IoD Director, Simon Walker, addressing the High Pay Centre in London later today; he will say it would be foolish for senior executives to attempt to defend high pay and that unless they can show they are listening to the public’s concern, the government will clamp down on excess.Read more
BBA publishes High Street Banking data
Reuters reports that new figures published by the BBA show that consumer credit is growing at seven per cent, the fastest rate since November 2006. The BBA’s High Street Banking statistics also showed that mortgage approvals for house purchase climbed to 40,851 last month, up from 38,690 in September. Rebecca Harding, BBA Chief Economist, said: “Mortgage approvals ticked up a little October. There has only been a relatively modest increase in activity since the Bank of England cut rates in August.” The Telegraph (p1) reports that low interest rates combined with high consumer confidence is encouraging debt-fuelled spending.
EU banking reform set to divide Germany and France
The FT (£, p7) reports that Germany and France are divided over a wide-ranging package of reforms to European Union banking regulations announced earlier this week. The newspaper states that policymakers in Berlin want to ensure supervisors are able to demand capital buffers – or total loss absorbing capacity (TLAC) – that are above agreed international minimum standards. Germany’s position on TLAC is reported to clash with the view in France and Italy, which want to ensure European financial institutions are not put at a competitive disadvantage by the new rules.
ECB warns that political uncertainty is a risk to Europe’s markets
CityAM (p1) and The Times (£, p57) report that the ECB has warned that the election of Donald Trump as US president has heightened risks to European financial stability, whilst also recognising the uncertainty around upcoming political events in Europe, such as the French presidential election next year. “This risk has been present for quite some time but it has been aggravated recently in particular after the US elections,” said the ECB’s Vice President, Vitor Constancio. The FT (£, p7) also reports that Constancio has raised concerns about the impact of the new US presidency on trade, he said “We are in a new phase of weaker world trade […] If, on top of that, there would be a wave of protectionist measures, world trade and world growth would suffer.”Read more
EU publishes wide-ranging package of financial reforms
The FT (£, online only) reports the European Commission has unveiled a raft of proposals that could lead to significant changes to existing banking regulations. The wide-ranging package encompasses adjustments to banker bonus rules as well as plans to require non-European Union banks to set up holding companies when operating in Europe. The European Commission has elected to modify agreements reached by the Basel Committee rather than transpose them directly into law. Valdis Dombrovskis, the EU Commissioner on financial services, said: “We have put forward new risk reduction proposals that build on the agreed global standards while taking into account the specificities of the European banking sector” (Reuters).
Chancellor delivers Autumn Statement
Philip Hammond has insisted that the UK economy is “resilient” despite official forecasts showing a significant deterioration in the public finances (BBC News). The growth forecast for next year was cut by the Office for Budget Responsibility to 1.4 per cent in 2017, down from the 2.2 per cent predicted in March ahead of the EU referendum. The Daily Telegraph (p1) reports that a number of Eurosceptic ministers have attacked the OBR for being overly pessimistic about the impact of Brexit. Meanwhile, the Chancellor also abolished the Autumn Statement. Instead, the UK will hold annual budgets in Autumn from 2017 and Spring fiscal statements. John McDonnell, the Shadow Chancellor, said: “This is a new Conservative leadership with no answers to the challenges facing our country and no vision to secure our future prosperity” (Times, £, p1).
S&P warns over impact of Brexit and Trump on banking sector
The Guardian (online only) reports that credit ratings agency S&P has warned that Brexit, low interest rates, Donald Trump’s election as US President and a slowdown in Chinese economic growth pose significant risks to the global banking sector. S&P said: “Weaker prospects for earnings growth globally, potential risks related to the UK’s referendum vote to leave the EU, and more generally increased political risks are constraining factors for bank ratings in 2017.” It added that more than half of the largest global banking systems face negative pressure.Read more
EU to outline first financial reforms since Brexit vote
The FT (£, p8) reports that Brussels will today outline proposals for new financial reforms for the first time since the UK voted to leave the European Union in June. The newspaper reports that the EU is expected to raise entry barriers for foreign companies operating in the market, potentially damaging the competitiveness of the UK as a financial centre. Dirk Schoenmaker of the Bruegel think-tank said: “The internal market is rife with location rules. If you are inside you don’t see them. It is when you are out that you feel the pain. And these location rules will be reinforced. There is no love lost with the UK on financial services. The positions are hardening.”
Davis meets with EU Brexit negotiator
Brexit Secretary David Davis has described a meeting with the European Parliament’s chief negotiator Guy Verhofstadt as a “good start” (BBC News). The meeting was designed to lay the ground for formal negotiations once Article 50 had been triggered, with the focus on structures and how both sides propose to approach the Brexit talks. Mr Verhofstadt said: “In the meeting I repeated what are, for us, essential key points. That is, that… these negotiations, in the interest of everybody, need to be concluded before the European elections.” The FT (£, p2) reports Manfred Weber, Chairman of the centre-right European People’s party, claimed Mr Davis told him in a separate meeting that Britain wanted to stay in the single market.
Chancellor to deliver Autumn Statement
There is widespread coverage trailing Philip Hammond’s first major financial statement as Chancellor. The Daily Telegraph (p1) reports that Mr Hammond will use his inaugural Autumn Statement to increase the national living wage, invest in delivering 40,000 affordable homes, and ease welfare cuts proposed by his predecessor George Osborne. Paul Johnson, the Director of the Institute for Fiscal Studies, said: “The Chancellor has got a very difficult task. For sure the economic numbers are going to get worse – he’s going to be borrowing more than he wanted to and he is going to be very uncertain about exactly where we will be in four or five years’ time” (BBC News).Read more
Prime Minister hints at Brexit transition arrangements
Theresa May has stated that the Government is working to avoid a “cliff edge” for businesses when the UK leaves the European Union (FT, £, p2). Speaking at the CBI annual conference, the Prime Minister hinted at a potential transitional arrangement by declaring “people don’t want a cliff edge, they want to know how things are going to go forward.” She added: “That will be part of the work that we do in terms of the negotiation that we are undertaking with the European Union” (Guardian, p7).
BBA hosts Mansion House annual dinner
City AM (p1) reports that Anthony Browne, Chief Executive of the BBA, has declared that the “the time for grieving is over” following the EU referendum. Speaking at the BBA’s annual dinner at Mansion House last night, Mr Browne said: “We should stop looking back, roll up our sleeves and look to the future […] Financial services in the UK – with the City at its heart – have weathered many changes over the years. People are always quick to write us off.” He also highlighted how the corporation tax surcharge meant that the Prime Minister’s pledge to ensure the UK has the lowest corporation tax in the G20 would not apply to the banking sector.
US banks face higher costs after tit-for-tat Brussels blow
The FT (£, p1) reports that Brussels is considering tightening regulatory oversight over overseas banks operating in the EU. The European Commission is today expected to outline proposals that reflect US “intermediate holding company” rules that ringfence foreign bank capital. The EU complained of “protectionism” when the US introduced its rules in 2014. If implemented, the proposals would force US banks to have additional capital and liquidity in the EU so their subsidiaries can better withstand a crisis and be separately wound up if needed by European authorities.
Prime Minister hints at corporation tax cuts
The Daily Telegraph (p1) reports that the Prime Minister will today pledge to cut Britain’s corporation tax to the lowest in the G20. In a speech at the Confederation of British Industry annual conference, Theresa May will suggest that the Government will cut corporation tax further and faster than expected, potentially lowering it below the 15 per cent rate pledged by Donald Trump ahead of the US presidential election. The Prime Minister is also expected to water down plans for workers to be installed on company boards. CBI’s Director-General Carolyn Fairbairn backed proposals to have “the voice of workers heard more clearly in the board room” (BBC News).
Spotlight on Autumn Statement
The Chancellor has acknowledged he is facing a “sharp challenge” ahead of Brexit and that he needs “headroom” in the public finances to deal with the economic impact of leaving the EU (Guardian, p6). Speaking on the Andrew Marr Show yesterday, Philip Hammond said: “We have to maintain our credibility. We have eye-wateringly large debt, we still have a significant deficit in this country and we have to prepare the economy for the period that lies ahead.”
ECB insists no Brexit first-mover advantage
Bloomberg reports that European Central Bank officials have told banks that there will be no first-mover advantage when it comes to gaining regulatory approvals. The article suggests that EU policymakers could allow banks to use their existing UK internal risk models until regulators on the continent are in a position to perform their own assessments. Sabine Lautenschlager, Vice Chair of that ECB’s supervisory board, last week said that the organisation has “a task force which looks into all of the different scenarios, thinking about what does this mean with regard to passporting or no passporting, what does it mean with the whole question of authorisations and model approvals.”Read more
Germany takes hard line on Brexit
The FT (£, p1) report that Wolfgang Schäuble, Germany’s Finance Minister, has adopted a tough stance on the Brexit negotiations with the UK. Mr Schäuble insisted the UK would not get special treatment on migration if it wanted to remain in the single market. He said: “Without membership of the internal market, without acceptance of the four basic freedoms of the internal market there can, of course, be no passporting, no free access for financial products or for financial actors.” Mr Schäuble also said companies based in London had made “very many requests” about potentially relocating parts of their business to Frankfurt.
Ratings agency suggests euro clearing shift unlikely
S&P Global Ratings has cast doubt on whether EU authorities could move euro clearing activity from London to the continent after Brexit (FT, £, online only). The ratings agency said that any attempt to shift clearing would impose a “massive extra burden of margin collateral” on market participants, adding that such a policy shift would be “unparalleled among major global markets” (City AM, p1). An EY report released earlier this week warned that 83,000 jobs could be lost if euro clearing was forced away from London.
Focus on revenues at investment banks
Strong third quarter results by the world’s biggest banks were driven by a surge in revenues from debt trading, according to consultancy Coalition (FT, £, online only). The combined revenues of the 12 biggest investment banks — including fees for trading stocks and bonds and advising companies on mergers and fundraising — jumped to $40.4 billion, up 13 per cent on a year earlier. The newspaper reports that the spike in revenues from fixed income – up 36 per cent – can be partly attributed to the UK’s vote to leave the EU, which led to heightened trading activity following the referendum.Read more
Senior banker backs London’s future as capital markets hub
The Telegraph (B1) reports that Jes Staley, the Chief Executive of Barclays, has said he expects London to retain its “gravitational pull” as a leading centre for global capital markets despite concerns over the impact of Brexit vote. Mr Staley said: “The users of capital find the providers of capital, not the other way around, and the providers of capital, by and large, are resident in London and New York.” He also said that Brexit could take longer to execute than originally planned, noting that it “is so complicated” and “is confusing for all of us” (FT, £, online only). Separately, Eurogroup President Jeroen Dijsselbloem has said Brexit negotiations could “take a lot longer than two years” (Reuters).
FCA calls for Lifetime Isa warnings
The Financial Conduct Authority has raised concerns about Lifetime Individual Savings Accounts (Lisa) and whether consumers will fully understand the new product (BBC News). Launching a 10 week consultation, the FCA warned that investors may not understand the difference between a Lisa saving and saving in a pension or appreciate the impact of the early exit charges. The regulator also said providers should offer cancellation rights for 30 days after selling a Lisa. Lisas – which offer a bonus for those using the money to save for a home or retirement – are due to launch in April 2017.
New rules for buy-to-let investors
The Chancellor has announced new mortgage affordability tests in the buy-to-let market, which will see property investors being able to borrow far less to fund their purchase (Telegraph, p1). The Treasury is giving the Bank of England additional powers the size of loan relative to the value of a property and also limit the size of loans relative to the amount of rent landlords receive to cover interest payments (Guardian, p31). Philip Hammond said: “Expanding the number of tools at the [Bank of England’s] financial policy committee’s disposal will ensure that the buy-to-let sector can continue to make an important contribution to our economy, while allowing the regulator to address any potential risks to financial stability.”Read more
Carney highlights banks’ Brexit contingency plans
Reuters reports that Bank of England Governor Mark Carney has stated that banks based in the UK could start to relocate activities to other countries 18 months before the country leaves the European Union if a ‘hard Brexit’ looks likely. Speaking to MPs on the Treasury Select Committee, Mr Carney underlined that banks and insurers are putting contingency plans in place to ensure they are prepared if the UK loses access to the EU’s single market. He added: “It is very early days. So planning makes sense; action, in most cases, in general, is precipitous” (Bloomberg).
Mortgage costs at record low
The average homeowner is paying the lowest amount of his or her monthly income on mortgage repayments since records began, according to the Council of Mortgage Lenders (BBC News). The improvement in affordability comes after the Bank of England cut interest rates to 0.25 per cent in August. Paul Smee, the Director General of the CML, said: “Mortgage affordability reached an historic low in September, for both first-time buyers and home movers, which partly reflects the re-pricing of mortgages following August’s base rate cut. This should help turn strong appetite for home-ownership into a reality as we approach the closing months of the year.” Meanwhile, the Daily Telegraph (B8) reports that new figures from the Office for National Statistics have shown that growth in house prices in the UK slowed to 0.2 per cent in September.
Brits saving less money for future
The Daily Mail (p19) writes that a report by the Social Mobility Commission has found that a third of Britons do not save any money each month. Some 31 per cent have nothing left to put in the bank when the month is over, while half of the population save £100 or less. Only 23 per cent save £200 or more. Britons are currently saving only 5.1 per cent of their disposable income. This compares to 7.4 per cent only two years ago, according to official figures.Read more
Global banks cut Asia headcount
The FT (£, p15) reports that the world’s biggest banks have cut up to 15 per cent of their Asian investment bankers since 2012 due to low M&A fee levels in the region compared to western clients. New data from industry benchmarking firm McLagan shows that the cuts were deepest in Hong Kong, which saw a 25 to 30 per cent reduction in staff levels. Separate data compiled by Dealogic shows that Asian clients are paying about 50 per cent less for advice on deals than clients in the US and Europe.
Leaked memo highlights Brexit tensions
The Times (£, p1) reports that a leaked memo has suggested that the Government has “no common strategy” for Brexit, with individual departments struggling to cope with the additional workload since the June referendum. The memo suggests Whitehall is working on more than 500 Brexit-related projects and could need to hire 30,000 extra civil servants. It also states that it will take another six months before the government decides precisely what it wants to achieve from Brexit or agrees on its priorities (BBC News).Speaking on BBC Radio 4’s Today programme, Transport Secretary Chris Grayling said the document was not a Government memo and rejected its contents.
Prime Minister gives speech on foreign policy and trade
Theresa May has stated that post-Brexit Britain has an “historic” opportunity to take on a new role as the global champion of free trade (BBC News). Speaking at the annual Lord Mayor’s Banquet at Guildhall, the Prime Minister pledged to make globalisation “work for all”. Carolyn Fairbairn, CBI Director-General, said: “It’s encouraging to see the government make a robust case for free trade. Working with business, it can ensure that the benefits help drive productivity, and increase living standards in all parts of the country.”Read more