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 set to announce plans for future
The Mail on Sunday (p97) reports on speculation that Bank of England Governor Mark Carney is set to announce later this week that he intends to step down in 2018. However, the FT (£, p1) states that Mr Carney will his extend his tenure at the central bank to 2021. The Governor could reveal his decision at a news conference on Thursday following the publication of the latest Inflation Report and the outcome of the Monetary Policy Committee’s interest rate meeting. “The Governor has said he will make his decision public by the end of the year,” a Bank of England spokesman told BBC News.
Europe’s banks ‘caught in spiral of falling profits’
The Daily Telegraph (B5) reports that a new report from KPMG has stated that European banks remain trapped in a downward profitability spiral with no obvious escape route, a new report says. The report finds that moving from Basel II to ‘Basel IV’ could add almost 0.5 per cent to the overall cost of European banks’ funding. Non-performing loans have also increased from 1.5 per cent of banks’ total loans in 2006/7 to an average of five per cent today. KPMG’s Marcus Evans said: “The successful banks will restructure their balance sheets to minimise the impact of new regulations and reduce their cost‑to‑income ratios through smart use of technology […] Reversing the profitability of European banks is not a lost cause but it will certainly be a lot of hard work.”
France launches team to attract UK businesses
The FT (£, p5) reports that France is stepping up efforts to attract businesses from the UK following Brexit by appointing a team of corporate leaders and politicians to drive the campaign. The newspaper states Ross McInnes, Chairman of French engine maker Safran, is to be named the “ambassador” heading efforts to lure UK-based companies to Paris. Speaking in July, French Prime Minister Manuel Valls said: “We want to build the financial capital of the future … now is the time to come to France.”Read more
Policymakers warn over Brexit job losses
London Mayor Sadiq Khan has stated that a ‘hard Brexit’ would threaten “the prosperity of millions of people in London and across the country” (Guardian, p27). City AM (p8) notes that Mark Boleat, Policy Chairman at the City of London Corporation, also warned it is “inevitable” that the UK will lose business as a result of Brexit. Mr Boleat stated New York would most likely benefit from any jobs losses. He added: “To the extent that some activities will no longer be able to be conducted from London, there needs to be suitable transition arrangements so that there is not unnecessary harm to employment and the economy generally.” Meanwhile, European Central Bank council member Philip Lane has stated that a “significant migration of financial activity from the UK to the EU” is likely if the UK is not treated as equivalent for regulatory purposes (Reuters).
UK growth remains stable
The Daily Telegraph (B1) reports that Britain’s economy grew by a better than expected 0.5 per cent in the three months after the EU referendum, according to figures published by the Office for National Statistics. Chancellor Philip Hammond said: “The fundamentals of the UK economy are strong, and today’s data show that the economy is resilient.” Strong consumer spending drove growth even as business investment remains subdued. “We continue to expect the economy to slow markedly. The impending rise in headline inflation is set to squeeze households’ real income, thereby reducing consumer spending growth,” said Dominic Bryant at BNP Paribas.Read more
Labour warns against ‘bankers’ Brexit’
Shadow Chancellor John McDonnell will today urge the Government against carrying out a “bankers’ Brexit’, warning ministers want to turn the UK into the “Singapore of the North Atlantic” by offering “low taxes for the few” (BBC News). In a speech to the Institution of Mechanical Engineers in London, Mr McDonnell will also defend the independence of the Bank of England following recent criticism of the central bank by a number of Conservative MPs (FT, £, p2). He will say: “Labour will fight any moves by this Tory government to undermine that independence and we will resist attempts to blame the Bank of England for failed Tory economic policy.”
Regulators address annual City Banquet
In his first speech as head of the Bank of England’s Prudential Regulation Authority, Sam Woods has acknowledged that increased capital requirements and a challenging economic outlook have made it increasingly difficult for banks (Daily Telegraph, B1). Speaking at the City Banquet at Mansion House, Mr Woods said that “many banks have simply not yet adapted to the new prudential constraints or the lower-rate environment.” Separately Andrew Bailey, Chief Executive at the Financial Conduct Authority, outlined a review of the regulators’ operations at the same event (Daily Telegraph, B1). The review will look at how the FCA orders firms to pay compensation, the definition of vulnerable customers, and working out how to regulate firms in unregulated markets.
BBA publishes high street banking data
New figures published by the BBA show that consumers are taking advantage of record low interest rates to borrow at the fastest rate since December 2006 (Times, £, p47). Strong demand for personal loans as well as a steady rise in credit card spending drove up the annual pace of consumer credit up to more than 6 per cent in September. BBA Chief Economist Rebecca Harding: “Consumers are increasingly using short-term borrowing to take advantage of record low interest rates. This trend has accelerated since the Bank of England cut rates in August”. The Daily Telegraph (B5) notes that house purchase approvals were down 15 per cent year-on-year.Read more
Chancellor highlights importance of financial services in Brexit negotiations
Reuters reports that Philip Hammond has stated that the Government will put the needs of financial services businesses “at the heart of the negotiation with the European Union” over Brexit. The Chancellor said: “We understand their needs for market access. We also understand their needs to be able to engage the right skilled people” (Guardian, online only). He also added: “[…] no request for quantitative easing has ever been refused and I see no reason why circumstances would be different in future.”
Carney appears before House of Lords Economic Affairs Committee
Bank of England Governor Mark Carney has insisted that the decision on whether to extend his stay at the central bank will be determined by personal reasons, not politics (Guardian, p27). Mr Carney is expected to say before the end of the year whether he will leave in 2018 or take up an option to stay until 2021. He also defended the Bank’s independence, stating: “That process has stood the test of time. That process is the process that the BoE is following and if it were to be called into question, one would expect to see the emergence of a risk premium around a range of UK assets, it would be most prominent around the currency, in gilt markets, in inflation expectations.” The Daily Mail (p4) also notes that Mr Carney said global banks in the City may “adjust some activity over the course of the next year”.Read more
Sturgeon underlines second referendum plans
Scottish First Minister Nicola Sturgeon has warned that she is not “bluffing” over her pledge to hold a second independence referendum if the UK’s Brexit negotiations fail to take into account her country’s interests (BBC News). Speaking after a meeting with Prime Minister Theresa May and the first leaders of Wales and Northern Ireland, Ms Sturgeon said: “At the moment it doesn’t appear to me that there is a UK negotiating strategy” (Bloomberg). She added: “I’m not going to stand by and watch Scotland driven off a hard Brexit cliff-edge. Scotland’s vote to stay has to be respected.” The Evening Standard (p2) also reports that Scottish Brexit Minister Michael Russell yesterday said that he told his counterpart David Davis that “it’s a rather strange world in which you would have special arrangements for bankers but not special arrangements for nations.”
Welby tells regulators to ‘practise what they preach’
The FT (£, p2) reports that the Archbishop of Canterbury, Justin Welby, has called on the UK’s financial regulators to improve their culture following the publication of a report by think tank New City Agenda. It warns that reforms introduced after the financial crisis are “already being watered down”, while the Financial Conduct Authority is in danger of turning “into a timid and cowed regulator”. Mr Welby said: “New City Agenda’s report into cultural change in the UK’s financial regulators is an important piece of work which reminds us that restoring trust requires regulators to practise what they preach.”Read more
BBA CEO warns banks planning to shift operations overseas amid Brexit debate
The Observer (p40) reported that banks are preparing to relocate operations out of the UK over the coming months amid concerns about the Brexit negotiations. Writing a column in the paper (p40), BBA Chief Executive Anthony Browne states: “Most international banks now have project teams working out which operations they need to move to ensure they can continue serving customers, the date by which this must happen and how best to do it. Their hands are quivering over the relocate button.” The Daily Mail (p8) notes that a number of Tory MPs have dismissed the suggestion that banks will start relocating jobs overseas.
Banks prepare for Q3 results
The Times (£, p38) reports that leading banks are expected to increase provisions for PPI compensation this week because of the longer time allowed for new claims. The Q3 results will be scrutinised for the impact of Brexit on the economy, with the weakening pound expected to have an impact on results for a number of banks. Ian Gordon, an analyst at Investec, said that the tough interest-rate environment had “put some downward pressure on margins” but said it was “not as dramatic as people think”.Read more
BBA hosts Annual International Banking Conference
There is widespread coverage of the BBA’s Annual International Banking Conference. Reuters reports that Mark Garnier, Parliamentary Under Secretary of State for International Trade, said that “we have to find a mechanism that behaves like passporting and has greater security than equivalence”. The Guardian (p27) reports that BBA Chief Executive Anthony Browne said that banks were getting ready to move operations overseas, with “their hands poised quivering over the relocate button,” whilst The Times (£, p47) reports that French Ambassador Sylvie Bermann suggests Paris is poised to welcome “a lot of people”. Meanwhile, Deutsche Bundesbank executive board member Andreas Dombret stated that European banks should not blame regulators and central banks for the tough business environment (FT, £, p2). The Telegraph (B3) also reported on Dombret’s comments and suggested the repercussions of Brexit would have minimal impact of the remaining EU27 as he said: “Brexit and its possible repercussions for the City of London are unlikely to be an issue for financial stability or the financing of the EU’s real economy”.
Theresa May attends first Brussels summit as PM
The Prime Minister has pledged to continue to “work closely” with the European Union after Brexit, as she arrived for her first Brussels summit (BBC News). She told her European counterparts that the UK wants a “smooth, constructive, orderly” Brexit. Speaking to reporters at the summit, Ms May said: “I’m here with a clear message. The UK is leaving the EU, but we will continue to play a full role until we leave and we will be a strong and dependable partner after we have left.”
Brexit Committee Chair calls for transitional arrangements
Hilary Benn, the newly appointed Chair of Parliament’s Brexit Select Committee, has backed calls for the Government to deliver transitional arrangements for the City (City AM, p4). Speaking on BBC Radio 4, Mr Benn said: “One thing the Government could do now is make absolutely clear that it will seek a transitional arrangement…so that we won’t tumble out after two years on WTO terms.” He also called on the Government to share its economic impact assessments with Parliament.Read more
Chancellor appears before Treasury Select Committee
Phillip Hammond has insisted that the Bank of England will retain its independence to set monetary policy (BBC News). Appearing before MPs on the Treasury Select Committee, the Chancellor said: “There will be no change in monetary policy. Monetary policy is independently determined, that will continue to be the case.” Mr Hammond also stated that retaining passporting for the financial services industry was important and “would be the ideal outcome”. He acknowledged, however, that some firms were being “realistic and are looking at other options beyond passporting to protect their interests”.
BBA calls for bank corporation tax surcharge to be phased out
City AM (p3, paper only) reports that BBA Chief Executive Anthony Browne has urged the Government to commit to phasing out the bank corporation tax surcharge “as soon as possible”. Speaking at the BBA’s Annual International Banking Conference this morning, Mr Browne called for the “normalisation of banking taxes in the UK and the removal of sector-specific tax measures.” Reuters notes the Government imposed the extra eight per cent tax on profits above £25 million earlier this year.
Mortgage arrears customers to get redress
The Financial Conduct Authority has ruled that up to 750,000 consumers in arrears on mortgage payments could be eligible for compensation from lenders (BBC News). The regulator warned that some mortgage customers had been overpaying because banks had automatically included mortgage arrears in regular monthly payments. Paul Smee, the Council of Mortgage Lenders’ Director General, said: “Those lenders who used the arrears calculation methodology now identified as problematic did so in good faith, believing that they complied with the rules and were acting in customer interests.”Read more
FCA publishes investment and corporate banking market study
The Financial Conduct Authority has announced that it will clamp down on investment bank league tables and develop industry guidelines in order to tackle conflicts of interest and ensure clients get a fair deal (FT, £, p13). The City regulator will also increase oversight of initial public offerings. Chris Woolard, the FCA’s Head of Strategy and Competition, said: “The universal banking model clearly works well for a wide range of participants but areas such as the use of restrictive contractual clauses, league table credibility and the allocation of shares in IPOs are not always working as well as they could.”
MPs to get vote on Brexit deal
Downing Street has said it is “very likely” MPs will vote on the final Brexit deal agreed between the UK and the European Union (BBC News). Any vote is expected to take place after negotiations have taken place after Brexit is triggered using Article 50. Labour’s Shadow Brexit Secretary Sir Keir Starmer said: “A vote so late in the day would put MPs between a rock and a hard place. It would ask us to choose between a deal on the government’s terms or leaving the European Union with no deal at all.” Meanwhile, City AM (p1) reports that senior City figures have voiced concern over mixed messages from different Government departments on Brexit.Read more
Critics target Chancellor over Brexit
The FT (£, p3) reports that Eurosceptic ministers are seeking to “isolate” Philip Hammond due to his stance on Brexit. The newspaper cites “friends of the Chancellor” as stating that negative briefings are coming from other parts of the Cabinet. A spokeswoman for Theresa May sought to defuse tensions, stating: “The Prime Minister has full confidence in the Chancellor and the work he is doing.” Meanwhile, City AM (p7) reports that Shadow Chancellor John McDonnell has criticised the Government over reports that it could pay contributions to the European Union to maintain single market access for the financial services sector.
Frankfurt opens door for British bankers
Frankfurt Main Finance, a promotional group, has predicted that banks based in London will start moving operations to the German financial centre next year to ensure full access to the European Union’s single market (City AM, p5). Chief Executive Hubertus Vaeth said: “We already see small teams, explorative teams looking into certain aspects […] We see options for real estate, and we have very, very clear indications that things will be moved, however, not entire operations.” Mark Boleat, Policy Chairman at the City of London Corporation, also noted firms were applying for licences and lining up property options as part of “contingency planning”. Separately, Paris has launched an advertising campaign to lure companies to La Défense, the city’s business district (Times, £, p45).
Cyber criminals stealing billions
A total of £10.9 billion was lost to the UK economy due to fraud and cybercrime in the 12 months to April, according to Get Safe Online (BBC News). The prevention group stated fraudulent emails and messages directing people to websites that gather victims’ personal information are the most common scam. Tony Neate, Chief Executive of Get Safe Online, said: “Online safety needs to be part of our everyday routines.” Financial Fraud Action UK last month said that a financial scam was committed once every 15 seconds on average in the first half of 2016.Read more