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.
BBA raises concerns over Brexit and tax ahead of Autumn Statement
The Sunday Telegraph (B2) reports that the BBA’s Autumn Statement submission has called for clarity on possible “transitional arrangements” with the European Union as well as a transparent negotiation timetable and the “establishment of regulatory co-operation mechanisms”. The submission urged policymakers to fight for passporting rights so that banks maintain full access to the single market, while also building trading relationships outside the EU. It also highlighted the impact of banking-specific taxes, raising concerns that failing to provide a competitive tax environment could result in the UK “ceas[ing] to be the best place for banking business to be located”.
RBS Chairman calls for Brexit transition plan
The Guardian (p22) reports that the Chairman of RBS has warned banks could pull operations out of Britain without the Government drawing up transitional arrangements for Brexit. Sir Howard Davies stated that US and Japanese banks are concerned at the prospect of a hard Brexit and are drawing up contingency plans. He said: “I think it is damaging if we don’t get a transitional deal because I think you will then see banks and financial institutions making decisions on the basis of uncertainty […] they are currently making contingency plans and once you’ve got a contingency plan – hey, there is a risk you might implement it one day.”
Warning over of insider bank fraud
The Sunday Times (M1) reports that the City of London Police has raised concerns over the scale of fraud committed by staff at Britain’s banks after the newspaper undetook a freedom of information request. David Clark, head of the economic crime directorate at the City of London Police, said that the scale of frauds being committed by bank insiders is considerably higher than the number being reported. He said: “There is no compulsion for banks to report everything to the police. Sometimes [banks] do make the choice that it’s in their interests to release that person from their employment and deal with it internally. But I would say they should report it to the police, absolutely. What I wouldn’t want is for that person to go on to further employment or be pushed in a different direction to do the same again.” Separately, the Times (Saturday, £, p7) reported that the Office for National Statistics has stated that banks failed to report more than two million frauds last year.Read more
Japan warns over Brexit impact
The Japanese Ambassador has stated that global banks will face “nightmarish” decisions if the UK loses access to euro-clearing trading as part of the Brexit negotiations (Guardian, p31). Speaking to an European Union Lords select committee, Koji Tsuruoaka said: “Companies have come a long way to establish the most efficient clearing house here in London. Now to be told to go elsewhere, it would be a huge challenge […] It would be nightmarish if you think about the business decision they would be forced to make.” Meanwhile, Sky News reports that Jamie Dimon, the Chairman and Chief Executive of JP Morgan, has urged Chancellor Philip Hammond secure ensure a long transition period for the UK’s exit from the European Union. Separately, BBC News reports that a number of Liberal Democrat, Labour and SDLP MPs have said they are prepared to vote against triggering Article 50.
Home Secretary pledges to tackle money launderers
The Guardian (p32) reports that the Home Secretary has pledged to tackle the flow of criminal money into the City of London. Speaking at a conference hosted by the Financial Conduct Authority, Amber Rudd highlighted an estimate by the National Crime Agency that £90 billion is laundered via London each year. She added: “The UK is attractive to criminals and corrupt kleptocrats who steal billions from their own people, often some of the poorest people in the world. We will reduce the flow of dirty money into the City.” The Government last month published its criminal finances bill, which details measures designed to tackle financial crime.
EBA warns banks over new accounting rules
Banks in the EU are not fully prepared for new accounting rules due to come into effect in 2018, according to the European Banking Authority (Reuters). The new regulations – known as IFRS9 – will require banks to increase by nearly a third the amount of money they set aside for bad loans. The EBA said: “On the qualitative side, the report highlights that as of December 2015, when the exercise was launched, banks were, overall, still at an early stage of preparation for the implementation of IFRS 9, although larger banks seemed more advanced.”Read more
Review of branch closure protocol published
An independent report that reviews the Access to Banking Protocol – the guidelines covering how banks manage branch closures – has been published today (BBC News). Professor Russel Griggs OBE, who authored the report, said that banks were using the correct “robustness and rigour” when deciding whether to shut branches, but could “significantly improve” the way they engage and communicate with their customers over the closures. The BBA has pledged to update the protocol in response, with Chief Executive Anthony Browne stating: “As Professor Griggs recognises, we are in the midst of a consumer-led digital revolution in the way we do our day-to-day banking. However, banks are very aware no customer or business should be left behind and branches play an important role in the life of local communities.” The report is also covered by the Sun (p47, paper only), the Daily Mail (p79, paper only), FT (£, online only) and the Belfast Telegraph.
Trump victory could affect banking regulation
City AM (p4) reports that the election of Donald Trump as US President could lead to the Dodd-Frank reforms being shelved. Mr Trump has previously pledged to repeal the Dodd-Frank Act, which was brought in by the current President Barack Obama (FT, £, online only). The new regulations restrict banks’ ability to bet their own money and introduced capital requirements obliging banks to raise equity buffers. Bill Michael, global head of banking at KPMG, said: “Making America great again could mean expanding New York as a financial centre and giving the US banks freer rein to operate around the world.”
Law firm suggests cyber-criminals more likely to target non-banks
City AM (p19) reports that law firm RPC has stated that cyber-criminals are more likely to target non-banks despite recent incidents, with data breaches reported by the industry to the Information Commissioner’s Office halving last year, falling from 23 to 11. RPC stated that the biggest banks have invested heavily in enhancing their cyber-defences in recent years. Phil Tansley, Legal Director at RPC said: “The overall trend is for hackers to seek to exploit the path of least resistance – as banks have developed better cyber defences attackers have shifted their focus onto smaller, softer targets. The almost unlimited resources deployed by the biggest banks had been seen as displacing cyber-crime elsewhere.”Read more
Trump wins US election
Donald Trump has been declared as the winner of the US presidential election, defeating his Democrat rival Hilary Clinton (BBC News). Mr Trump’s victory came despite polls suggesting that Ms Clinton would win comfortably, and led to global markets dropping sharply. Addressing his supporters, Mr Trump said: “It is time for us to come together as one united people.” Russian President Vladimir Putin, French National Front President Marine Le Pen and UKIP Leader Nigel Farage were among those to congratulate Mr Trump on his victory.
BBA publishes report on banking sector’s tax contribution
City AM (p1) splashes on the publication of a new BBA report – based on independent PwC analysis – that highlights the tax contribution of the banking sector has risen to £34.2 billion in the year to March 2016. Taxes raised from banks now account for 5.5 per cent of Government receipts. BBA Chief Executive Anthony Browne said: “It is more important than ever that the UK remains a competitive place to do business for both domestic and foreign banks, with a proportionate and stable tax environment.” Andrew Packman, tax partner at PwC and co-author of the report, added: “It’s self-evident that, given the contribution that the banks and the broader financial services sector makes to the economy, making sure that London remains a good place to run an international banking operation from is clearly very important.”
‘Too big to fail’ rules to come into force by 2022
The Bank of England has announced new rules on bail-in debt designed to ensure UK banks are no longer ‘too big to fail’ by 2022 (BBC News). The rules are designed to ensure about 400 banks and building societies can be wound down in an orderly fashion. Bank of England Governor Mark Carney said: “The implementation of [the rules] will ensure that banks that provide essential economic functions hold sufficient resources to be resolved in an orderly way, without recourse to public funds, and whilst allowing households and businesses to continue to access the services they need.” The FT (£, online only) adds that the timetable for the final rules has been pushed back by two years.Read more
Theresa May expected to reveal more Brexit detail within weeks
The FT (£, p2) reports that the Prime Minister is likely to announce further details of her Brexit plans for financial services and other key sectors of the UK economy before Christmas. The newspaper states that the UK will seek a “hybrid” deal that would go beyond the European Union’s existing equivalence regime, with a dispute settlement mechanism that operates outside the bloc’s institutions. Mrs May has pledged to trigger Article 50 no later than the end of March and is insisting she will stick to this timetable, despite the High Court last week ruling that this requires parliamentary approval (BBC News). The Government is appealing the ruling to the Supreme Court, which is expected to hear the case in December.
CBI calls for smarter financial services regulation
The Times (£, p42) reports that the CBI has called for an overhaul of regulation affecting the financial services industry, arguing that “smarter” rules are needed following Brexit. In a report published today, the CBI argues that the Financial Conduct Authority and Prudential Regulation Authority should work together more closely. The business group also called for the impact of regulations brought in since the financial crisis to be assessed. Simon Moore, Financial Services Director at the CBI, said: “A cultural change is needed to ensure a more practical approach to regulatory shift, through collaboration and engagement, creating a level playing field between smaller firms, who are disproportionately hit by the regulatory burden, and larger companies in the sector.”
Chancellor faces black hole in public finances
The FT (£, p3) reports the Institute for Fiscal Studies has said that Philip Hammond will face a large black hole in the public finances in his first Autumn Statement later this month as growth and tax revenues fall short of projections. The Institute for Fiscal Studies states that higher public borrowing will only be partially offset by savings from the UK no longer contributing to the EU budget. Matthew Whittaker, Chief Economist at the Resolution Foundation think-tank, said: “The first fiscal event for any new chancellor of the exchequer is a big deal, setting the tone for what is to follow […] The central question he [Mr Hammond] faces is how to respond to a significant expected deterioration on the economic and public finance forecasts.”Read more
EU reconsiders financial market access rules
The FT (£, p1) reports that the European Commission is considering plans that would tighten access to the existing equivalence regime for financial services, which is designed to extend market access to non-European Union jurisdictions. The newspaper cites a senior EU official as saying equivalence “is not automatic and is not a right” and was bound to be re-examined in light of Brexit. A senior French official added: “The equivalence rules were never envisioned for the City.”
Prime Minister visits India
Theresa May has rejected calls to relax Indian visa rules, stating that the UK has a “good system” for applications during her first overseas trade mission since becoming Prime Minister (BBC News). Speaking in Delhi, Mrs May said: “Nine out of 10 visa applications from India are already accepted.” The Prime Minister is being accompanied by representatives from 33 UK companies on the visit, with a number of deals expected to be confirmed.Read more
Government loses Brexit court case
A landmark ruling from the High Court has stated that Theresa May cannot trigger Article 50 – the mechanism to leave the European Union – without a vote in Parliament (Sky News). Lord Chief Justice Thomas ruled in favour of investment manager Gina Miller, who brought the case, and noted there was no precedent for ministers to fundamentally change UK people’s rights without approval from MPs. The Government intends to appeal the ruling to the Supreme Court, which is expected to hear the case next month (BBC News). Labour leader Jeremy Corbyn said: “This ruling underlines the need for the Government to bring its negotiating terms to Parliament without delay.” Nigel Farage added: “I now fear that every attempt will be made to block or delay the triggering of Article 50. If this is so, they have no idea of the level of public anger they will provoke.”
FCA to examine competition in current account market
The Financial Conduct Authority has announced that it will take steps to improve competition in the current account market, including potentially re-examining the decision by the Competition and Markets Authority not to impose a cap on overdraft charges (Guardian, p31). Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said the regulator “will continue to look more broadly at how well these markets work, with a particular focus planned on high-cost credit including overdrafts.” Gillian Guy, Chief Executive of Citizens Advice, added: “An unplanned expense that pushes someone into their overdraft by just a few pounds can lead to them being trapped in a cycle of daily charges.”
Inflation forecast to jump in 2017
The Bank of England has significantly revised its forecasts for inflation next year upwards, predicting the rate will almost triple, and ruled out the prospect of further interest rate cuts (BBC News). The Bank’s Monetary Policy Committee now expects inflation to climb to 2.7 per cent in 2017, up from the current rate of one per cent. It also raised forecasts for economic growth next year to 1.4 per cent from 0.8 per cent, but cut expectations for 2018 to 1.5 per cent from 1.8 per cent. The MPC said: “Monetary policy can respond, in either direction, to changes in the economic outlook as they unfold to ensure a sustainable return of inflation to the 2 percent target […] There are limits to the extent to which above-target inflation can be tolerated” (Reuters).Read more
City urged to welcome escape from EU rules
A new report published by think-tank Politeia has argued that the City of London should welcome Brexit as an opportunity to escape the burden of “excessive” European Union rules (FT, £, p3). The report argues the City should push for a form of “enhanced equivalence” that extends the existing regime into areas such as wholesale lending, mortgage provision and payment services. This should be capped with a bilateral UK-EU deal that would pledge not to politicise equivalence decisions, and a mutual recognition of each other’s court judgments. Barney Reynolds, head of financial services at law firm Shearman & Sterling, said: “Unburdened from the shackles of European social policy [the UK could] rethink its regulatory framework entirely and move to better, more targeted regulation.”
High Court to rule on Article 50 legal case
The FT (£, online only) reports that the High Court in London will this morning rule on a landmark legal case about whether Theresa May can trigger the process for the UK leaving the EU without a parliamentary vote. The losing side is expected to appeal the decision to the Supreme Court, which is likely to hear the case in December. Separately Lord Kerr, the Scottish cross-bench peer who wrote Article 50 – the procedure by which the UK would leave the EU – has called for either Parliament or the public to be given a chance to stop Brexit (BBC News).
Fox highlights efforts to boost Iran trade
Reuters reports that International Trade Secretary Liam Fox has stated that trade between Britain and Iran is growing as the Government works to address the concerns of the banking sector. Mr Fox said: “Slowly but with increasing enthusiasm, British companies are starting to do business with Iran again […] The banking sector’s ongoing concerns about facilitating payments or providing financial services means that the benefits of sanctions relief are not yet being fully realised, resolving these problems remains a priority for this government.” Hamid Baeidinejad, Iran’s Ambassador to Britain, added that the banking problems were “highly troublesome” for his country and said the United States was “disappointed” with the situation.Read more
MPs criticise CMA over retail banking market investigation
The Guardian (p21) reports that MPs on the Treasury Select Committee yesterday accused the Competition and Markets Authority of complacency and missing an opportunity to overhaul high street banking following its two-year inquiry into the sector. Chairman Andrew Tyrie said the CMA had “dropped the catch” despite support from politicians, academics, consumer groups and the media for a tougher stance. Labour MP Rachel Reeves criticised the CMA for a “dereliction of duty” after decided against capping unauthorised overdraft charges (BBC News). However Alasdair Smith, who led the CMA investigation, said: “I am confident that the work of our group will result in a major change for the better”.
Inflation forecast to rise next year
A report from the National Institute of Economic and Social Research has predicted that the falling pound will drive a sharp rise in inflation to four per cent next year (FT, £, p2). The think tank has calculated that this would generate a decline in real per capita income of around 0.5 per cent. NIESR’s Simon Kirby called the depreciation of sterling the “most striking feature of the post-referendum economic landscape” which will “weigh on the purchasing powers of consumers over the next couple of years”. Separately, the Times (£, p35) adds that the CBI cut its GDP growth forecast for 2017 from two per cent in May to 1.3 per cent. The Bank of England will publish its official quarterly inflation report tomorrow with updated forecasts for growth and inflation for the next two years.
Chancellor to create ‘headroom’ to let deficit rise if Brexit hits growth
The FT (£, p1) reports that the Philip Hammond will adopt a flexible fiscal framework in this month’s Autumn Statement in order to ensure he has room to manoeuvre if the economy slows. The newspaper reports the Chancellor will announce a modest fiscal stimulus, with a new programme of infrastructure spending running to the low billions of pounds annually. Following a Cabinet meeting, Theresa May’s spokeswoman said the “importance of continued fiscal discipline” and “the need to drive up productivity” were discussed.Read more
Carney to remain at Bank of England until 2019
Mark Carney has announced that he will step down as Governor of the Bank of England in June 2019, extending his tenure for an additional year but short of the usual eight year term (Daily Telegraph, p1). In an exchange of letters with Chancellor Philip Hammond, Mr Carney pointed to “personal, family considerations” and also “the importance to the country of continuity during the UK’s Article 50 negotiations” as being major factors behind his decision. Andrew Tyrie, Chairman of the Treasury Select Committee, added: “The decision requires a good deal of examination and explanation, which the committee will seek when it next sees the Governor” (FT, £, p1). Earlier, Theresa May’s official spokeswoman had said the Prime Minister was “supportive” Mr Carney of remaining in post until 2021 (BBC News).
Small businesses show appetite for credit
Figures from the Bank of England have shown that credit for small and medium-sized businesses rose by £842 million in September (Times, £, p37). The figure was 2.1 per cent higher compared with the same month last year, representing the fastest annual growth in lending since the Bank’s records began four years ago. Scott Bowman from Capital Economics said: “The fact that lending growth [to small and medium-sized businesses] has held up well since the referendum suggests that the Brexit vote hasn’t hit appetite for debt too hard.” The Daily Mail (p19) separately notes that the Bank of England data showed that total amount owed by households on credit cards was up 8.4pc over the past year, the highest annual growth rate since November 2008.Read more