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.
Government explores cost of maintaining single market access
The FT (£, p1) reports that the Cabinet is considering plans that would lead to the UK paying billions into the European Union budget after Brexit in exchange for access to the single market for financial services and other sectors. The newspaper cites several unnamed ministers as stating EU budget contributions are one option under consideration. Oliver Letwin, David Cameron’s former policy chief, added: “If we have to buy this market access by making continuing contributions to EU budgets, that may well be a price worth paying, given the number of UK jobs that are involved.”
Think tank warns banks need clarity over Brexit deal
The Guardian (p4) reports that think tank Open Europe has warned that the UK risks losing its status as a world leading financial centre unless passporting rights are made a priority in negotiations with the European Union. Vincenzo Scarpetta, Open Europe’s Senior Policy Analyst, said: “There are plans in case the UK were to leave the single market without any kind of regulatory equivalence […] These plans may be set into motion early on if the uncertainty drags on for too long.” The newspaper states that around a fifth of the banking sector’s annual revenue is estimated to be tied to the passport.
Former ECB economist warns of euro troubles
The ECB’s first chief economist, Professor Otmar Issing, has suggested the euro currency is facing strain, particularly if it is faced with another economic downturn (Telegraph B19). Having played a significant role in forming the ECB’s current monetary policy framework, Prof. Issing said: “It will be a case of muddling through, struggling from one crisis to the next. It is difficult to forecast how long this will continue for, but it cannot go on endlessly.” The Independent suggests the demise of the single currency is due to the politics of the region.Read more
Foreign Secretary rejects concerns over leaving single market
Boris Johnson, the Foreign Secretary, has dismissed concerns that leaving the single market as a result of Brexit would hit the UK economy (FT, £, pX). Appearing before MPs on the Foreign Affairs Committee, Mr Johnson said: “We are going to get a deal that will be of huge value, possibly greater value.” He added: “It will take time for the full benefits of Brexit to become clear.” The Foreign Secretary also stated that it would be “wrong” for the EU to punish UK financial services over Brexit (BBC News).
French Finance Minister suggests banks shifting away from London
Michel Sapin, the French Finance Minister, has said executives of major US banks have told him that they are preparing to move some operations from London to other European Union cities (Bloomberg). In a press conference in Paris, Mr Sapin said: “While in Washington I spoke to large American businesses and banks […] They are telling us clearly that there will be a transfer of activity. It’s no longer a question of if but when.” He also added that progress on a financial transaction tax in 10 EU countries was made at a recent meeting and the European Commission has now been tasked to come up with a proposal by the end of the year (Reuters). Meanwhile, European Council President Donald Tusk has said that Britain’s only real alternative to a “hard Brexit” is “no Brexit” (BBC News).
Criminal Finances Bill published
Reuters reports the new Criminal Finances Bill will give law enforcement agencies the right to require suspected criminals to explain the source of their wealth. Those who are not able to say where their wealth came from will face having their assets seized. Security Minister Ben Wallace said: “This legislation will ensure the UK is taking a world-leading role in cracking down on corruption and send a clear message to criminals – we will take your liberty and your money.” Assets that could be seized under ‘unexplained wealth orders’ include money stored in bank accounts, precious metals, jewels and works of art.Read more
Prime Minister defends Brexit planning
Theresa May has defended the Government against an accusation from Labour leader Jeremy Corbyn that they are presiding over a “shambolic Tory Brexit” (BBC News). Speaking during Prime Minister’s Questions, Mrs May insisted she wants “maximum possible access” for the UK to the single market after leaving the European Union. Ahead of a Brexit debate yesterday afternoon, Labour published a list of 170 Brexit questions for the Government covering a range of subjects including financial services.
Bank of England Deputy Governor raises concerns over passporting
Sir Jon Cunliffe, the Bank of England’s Deputy Governor for Financial Stability, has warned that British financial services firms face a “painstaking process” to maintain passporting rights amid wider Brexit negotiations (FT, £, online only). Appearing before the House of Lords EU Financial Affairs Committee, Sir John also stated that it was “highly unlikely” Paris or Frankfurt could overtake London as a financial centre in the “foreseeable future” (Daily Mail, online only). He also said any efforts by the EU to force euro clearing to take place within the eurozone – rather than the UK – could pose a risk for financial stability.
Basel Committee defends capital rules
Bill Coen, Secretary General of the Basel Committee on Banking Supervision, has hit back at critics of the group’s plans to toughen capital rules (FT, £, online only). Appearing before a European Parliament committee in Brussels, Mr Coen insisted that the plans should not be seen as a US-backed attempt to drive up capital requirements for EU lenders. He added: “There are a lot of people around the world who have a deep seated mistrust of the use of models for regulatory capital purposes. A number of studies have found material variation in the risk-weighted asset calculations of banks.” He also added that the new rules would not be implemented for several years (Reuters).Read more
Economic Secretary prioritises Brexit deal for City
Simon Kirby, Economic Secretary to the Treasury, has stated that the Government is focused on getting the best deal for the City of London in the upcoming Brexit negotiations (Reuters). Speaking at a conference in London, Mr Kirby said: “Can the UK still be one of the best financial centres anywhere in the world, even if we’re outside the EU? Well, let me say this is an absolute priority for this government.” The Guardian (p19) notes that senior executives from US banks yesterday told a conference in London that they are considering shifting operations overseas.
Bank of England warns of contagion from European banking sector
Anil Kashyap, a newly appointed member of the Bank of England’s Financial Policy Committee, has warned of the risk of British banks being negatively affected by the difficulties facing their rivals on the continent (Reuters). In a written submission to the Treasury Select Committee, Mr Kashyap said: “I am particularly worried about contagion from stress coming from the European banks and whether there might be linkages – perhaps indirect – between them and the largest UK banks.” He also added that regulators had to clamp down on banks breaking rules but “it does seem a little bit arbitrary as to how big these fines are and why some firms are being asked to pay this much and others are asked that much.”
Europe finance ministers argue over bank rules
The FT (£, 5) reports that EU finance ministers are split over planned international bank capital rules. Jeroen Dijsselbloem, the Dutch Finance Minister and President of the Eurogroup, urged countries not to try to water down the rules. He said: “We’ve had this discussion … before where a number of ministers say, ‘look, whatever happens in Basel it cannot lead to higher capital requirements’, and I said then and now that I don’t think that is the right starting point.” Valdis Dombrovskis, the EU’s financial regulation commissioner, last month warned that he was prepared to reject the new Basel standards if they placed an excessive burden on Europe’s banks.Read more
Prime Minister rejects MPs’ vote on Brexit
The Prime Minister has described demands from senior politicians that MPs get a vote on Brexit as “unacceptable” (BBC News). Theresa May’s spokesman said MPs would “debate and scrutinise” the process but not vote on plans. The spokesman added: “[…] having a second vote, or a vote to second-guess the will of the British people, is not an acceptable way forward.” Brexit Secretary David Davis yesterday told MPs there was a difference between “accountability and micro-management”. Former Labour leader Ed Miliband had earlier called for a vote to ensure suitable parliamentary scrutiny. Reuters reports that Mrs May also said that she expects to guarantee the rights of EU citizens already in Britain. Meanwhile, BBA Chief Executive Anthony Browne has written a piece for Conservative Home on the importance of passporting for the City and the UK.
‘Hard Brexit’ could hit economy
The Times (£, p1) reports that leaked Treasury forecasts have suggested that a ‘hard Brexit’ could cost the UK up to £66 billion a year in tax revenues – equivalent to 65 per cent of the annual budget of NHS England. The analysis is based on the UK leaving the Single Market and instead relying on World Trade Organisation rules. The newspaper cites senior Brexit supporters as saying the paper is “withdrawn from reality” and “not very realistic” because it did not assume the continuation of any trade deals.
Banks set targets for women in senior roles
The Times (£, p44) reports that a number of high street banks have pledged to fill 30 per cent of their senior roles with women within five years. They will also publish annual reports outlining their progress on the issue of gender balance, and make a senior member of staff responsible for achieving the target. The move has been made as part of the Treasury’s Women in Finance charter, which was launched this year following a report by Virgin Money Chief Executive Jayne-Anne Gadhia. Prime Minister Theresa May said: “I want to see a diverse sector run by talented men and women and I look forward to seeing many more businesses promoting women and helping to make the UK the best place in the world to do business.”Read more
Government waters down foreign workers plan
The FT (£, p2) reports that the Government has backtracked on plans to force companies to publish how many foreign workers they employ after an international outcry. Education Secretary Justine Greening yesterday stated: “This is not data that will be published. There will be absolutely no naming and shaming.” In an interview with the Times (£, p8), CBI Director-General Carolyn Fairbairn urges the Government to avoid “closing the door” on an open economy following the EU referendum. She added: “[…] it’s certainly true that 5,000 firms here trade with a passport with the EU and it will be far more difficult for them to do so without a passport and under WTO rules only, that would not exist.”
UK to take part in international bank ‘war game’
Bank of England Governor Mark Carney and Chancellor Philip Hammond will be tested today on their reaction to the failure of a major international bank as part of efforts to end ‘too big to fail’ (Daily Telegraph, B3). Officials from the European Central Bank and US Federal Reserve will join them in a ‘war game’ aimed at improving how regulators would work together to protect the financial system in a crisis. The exercise builds on an exercise in 2014 when regulators conducted a similar exercise examining the failure of a Wall Street bank with UK operations and a UK bank with an American business. No individual banks will be discussed and no specific scenarios are planned.
Banks prepare to refer loan applications
The Times (£, p45) reports that high street banks will redirect all small business loans they reject to independent finance portals as part of a Treasury initiative. The move is aimed at boosting competition in the small business lending market, and is scheduled to be implemented in the next three months. Conrad Ford, Chief Executive of Funding Options, said that “the referral scheme has big potential.” Companies that agree to the service will be contacted with offers from alternative lenders, ranging from online platforms to traditional independent finance firms. The plans were announced two years ago.Read more
Chancellor discusses Brexit and immigration
The FT (£, p2) reports that Philip Hammond has moved to reassure Wall Street that the UK will seek a special deal for financial services when exiting the European Union. The Chancellor also stated that new immigration rules would not affect “highly skilled and highly paid bankers”. Meanwhile, the Daily Telegraph (B1) notes that Mr Hammond has pledged to fight for the UK to remain the global hub for clearing euro-denominated derivatives. He also said that he would welcome a decision by Bank of England Governor Mark Carney to extend his tenure until 2021 (FT, £, p2).
Banking complaints fall
The Times (£, p51) reports that the number of people complaining to the Financial Conduct Authority about their bank dropped during the first half of 2016. The fall was mainly driven by a decline in payment protection insurance claims and fewer complaints about current account services. Christopher Woolard, Director of Strategy and Competition at the FCA, said: “Firms still need to continue to ensure they are doing all they can do to reduce consumer dissatisfaction but the figures show firms are taking our feedback seriously.” The speed at which complaints were resolved also improved, with 93 per cent of complaints closed within eight weeks – up from 91 per cent.
Sterling slumps amid Brexit volatility
The pound dropped sharply against the US dollar on the Asian markets with automated trading being blamed for the volatility (BBC News). At one stage, it dropped more than six per cent to $1.1841 – the biggest move since the Brexit vote and the currency’s lowest level since May 1985 – before recovering most of the losses. Analysts blamed algorithms used for automated trading responding to a news story on Brexit for the extreme fluctuation.Read more
Alternatives are poor substitute for passporting
City AM (p7) reports that BBA Chief Executive Anthony Browne has warned that the alternatives to passporting are not viable replacements. Writing in his monthly newsletter, Mr Browne noted that the passporting rules have “been a key factor in enabling the UK to grow as the financial capital of Europe”. He added: “Some have argued that alternatives, such as equivalence, available to non-EU countries could provide similar access to the EU’s Single Market in the event of a hard exit. In truth, the alternatives are poor shadows of genuine passports.” Mr Browne was also interviewed on Newsnight yesterday (skip to 30:00) as part of a package on the topic of passporting.
IMF urges banks to carry out reforms
The International Monetary Fund has stated that European banks should carry out “deep rooted reforms” to reduce risks to financial stability rather than complain about negative and low interest rates (FT, £, p4). Peter Dattels, Deputy Director of the monetary and capital department of the IMF, said: “There are simply too many branches with too few deposits and too many banks with funding costs way above their peers.” Meanwhile, European Banking Authority Chairman Andrea Enria has called on regulators to “step up” pressure on banks to dispose of bad loans (FT, £, online only).
Chancellor heads to Wall Street
The Daily Telegraph (B1) reports that Philip Hammond is visiting Wall Street to stress that Britain remains open to foreign businesses and workers after the Brexit vote. The Chancellor will today pledge to seek a deal with the EU that will allow Britain’s “financial services sector to continue to have good access to European markets” and aims to convince bankers that “the UK will continue to be an outward looking and globally-minded nation”. He will add: “I will do everything I can to ensure the City of London retains its position as the world’s leading international financial centre.” Meanwhile, the FT (£, p2) reports that the Institute of Fiscal Studies has warned that the UK’s tax revenues would be hit significantly if financial services jobs are lost as a result of Brexit.Read more
Oliver Wyman report shows potential Brexit impact
A report from consultancy Oliver Wyman has suggested that £10 billion in direct tax revenues and 71,000 direct jobs could be lost in the worst-case scenario EU exit scenario for the financial services sector. In contrast, it states that if the UK maintains similar access to the single market the impact would be restricted to £500 million a year in direct revenues and 4,000 jobs. Sir Hector Sants, one of the authors of the report, said: “It would be fair to say in the event of a long period of uncertainty, you would expect adverse impact to accrue, which would be over and above whatever the impact is of the final conclusion of the process.” Bloomberg quotes BBA CEO Anthony Browne as saying: “”What we want is to have as full access to the single market as we have at the moment so that banks in the UK can carry on serving customers in the EU 27.”
Government focuses on interim Single Market deal
The FT (£, p2) reports that ministers are planning to negotiate a transitional trade deal with the EU that would include access to the single market. “We are working to deliver the best possible exit from the European Union and it is completely wrong to suggest we have ruled in or out transitional arrangements,” a Government spokesman said. The newspaper reports that one option under consideration is that the UK could temporarily continue making contributions to the EU budget in exchange for single market access.
IMF warns over global growth
The International Monetary Fund has warned that the global economic recovery remains “weak and precarious” (BBC News). The IMF also raised its forecast for UK growth this year to 1.8 per cent, but cut its 2017 figure to 1.1 per cent. Chief Economist Maurice Obstfeld said: “Taken as a whole, the world economy has moved sideways. Without determined policy action to support economic activity over the short and longer terms, sub-par growth at recent levels risks perpetuating itself.” The Telegraph (B1) notes that the UK will be the fastest growing major economy this year, in contrast to the IMF’s pessimistic forecasts ahead of the EU referendum.Read more
European banks cut jobs
City AM (p1) reports that European banks are set to cut over 20,000 jobs amid a tough economic environment and higher capital requirements. Analysts pointed towards negative interest rates as being a major driver behind the cost cutting. Simon French from Panmure Gordon said: “I think problems facing the European banking sector are symptomatic of a Eurozone monetary policy which isn’t appropriate for large parts of the economy. In an ideal scenario monetary policy would be a lot looser for the southern periphery and quite a lot tighter for Germany.” Bloomberg reports that headcount across 26 European banks has fallen by more than 150,000 to 2.1 million staff since the end of 2007. Meanwhile, James Bardrick, UK Country Officer for Citi, has said jobs in London’s financial sector will move to countries inside the European Union after Brexit (Reuters).
UK banks underrate fintech potential
City AM (p22) reports that banks are underestimating the potential application of fintech in capital markets, according to a report from the Boston Consulting Group. The research finds that investment in this area is lagging behind its potential to cut costs, with most fintech disruption taking place in retail and corporate banking. Just four per cent of venture capital money going into fintech makes its way to capital markets startups and only seven per cent of fintech startups are active in the capital markets space. The report states: “Banks must take action now both to protect their own interests and to boost the capital markets fintech ecosystem as a whole.”
ECB says low rates are here to stay
European Central Bank executive board member Peter Praet has said that interest rates will remain low until inflation returns to target (Reuters). Mr Praet stated that it was not up to the central bank to shore up bank balance sheets. He said: “A durable improvement in the prospects of the euro area banking system requires further efforts outside the realm of monetary policy. These include, most notably, a swift and stringent completion of banking union and additional adjustments in the banking sector towards greater cost efficiency and business models that remain viable in the new regulatory and macroeconomic environment.”Read more