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 announces Brexit timetable
The FT (£, p1) reports that Theresa May yesterday announced that she plans to trigger Article 50 “no later than the end of March”. Speaking at the Conservative Party Conference, the Prime Minister stated that the UK would seek full control of immigration and refuse to accept the jurisdiction of the European Court of Justice. The Times (£, p1) reports that her speech set the country on course for a ‘hard Brexit’, with European leaders refusing to hold preliminary negotiations until Article 50 is triggered. Separately, the Times (£, p7) also notes that Brexit Secretary David Davis has been unmoved by research from Oliver Wyman that indicates a ‘hard Brexit’ could result in 75,000 job losses across the City.
Hammond’s to outline deficit plans
The Guardian (p7) reports that the Phillip Hammond will today tell the Conservative Party Conference that he remains determined to achieve a balanced budget, while reiterating that this would happen in a “pragmatic” way. The Chancellor is also expected to announce that he plans to borrow more to invest in infrastructure projects. Speaking on BBC Radio 4’s Today programme, Mr Hammond said: “Our circumstances have changed. The exit vote, the slowing of the world economy creates a new set of circumstances. And as we go into a period where inevitably there will be more uncertainty, we need to have the space to be able to support the economy through that.”Read more
Help to Buy mortgage guarantee scheme to close
The Chancellor Phillip Hammond has stated that the Government’s help-to-buy mortgage guarantee scheme designed to help first time buyers will close at the end of the year (Guardian, p6). In a letter to Bank of England Governor Mark Carney, Mr Hammond said the scheme had a “specific purpose that has now been successfully achieved”. The scheme has helped more than 86,000 households so far. Meanwhile, the FT (£, p2) reports that buy-to-let borrowers will face additional scrutiny from January because of new affordability checks and mortgage repayment “stress tests” requested by the Bank of England.
Tyrie questions regulators over banks’ IT infrastructure
City AM (p6) reports that Andrew Tyrie, Chairman of the Treasury Select Committee, has written to the CEOs of the Financial Conduct Authority and the Bank of Englands’s Prudential Regulation Authority requesting assurances high street banks are working to strengthen their IT infrastructure. Mr Tyrie said: “Banks continue to suffer failures and breaches of their IT systems, exposing millions of customers to uncertainty, disruption and sometimes distress. We can’t carry on like this. Responsibility for sound IT systems is often lacking at the highest levels of management, and ultimately customers pay the price.”
Dombrovskis pushes back on bank capital rules
European Commission Vice-President Valdis Dombrovskis has warned that Brussels is prepared to reject international plans to raise bank capital requirements (FT, £, p17). Mr Dombrovskis said that he would not accept any reforms that “lead to a significant increase in the overall capital requirements shouldered by Europe’s banking sector.” The newspaper reports that the EU and US have contrasting views on the Basel Committee’s plan to impose a so-called standardised capital floor on banks.Read more
Bank of England Deputy Governor warns of further rate cuts
The Times (£, p42) reports that Minouche Shafik, the Bank of England’s Deputy Governor, has stated that interest rates could be cut further to avoid an economic downturn after Brexit. She said: “It seems likely to me that further monetary stimulus will be required . . . to help to ensure that a slowdown in economic activity doesn’t turn into something more pernicious.” The Bank’s Monetary Policy Committee next meets on November 3. The Telegraph (B4) also notes that Ms Shafik suggested that quantitative easing should no longer “considered unconventional” as it has become a central banking policy tool that is here to stay.
FCA announces consultations on accountability regime
The Financial Conduct Authority has launched a number of consultations to bolster the provisions in the Senior Managers’ and Certification Regime, six months after the new accountability regime took effect (City AM, p4). The consultations focus on areas including whistleblowing and extending rules to non-executive directors. FCA Chief Executive Andrew Bailey said: “Generally, we have observed that firms are taking their responsibilities seriously and have broadly got the regime right […] But we recognise culture change takes time and there is still more to do. So we have to keep a watchful eye on the progress firms are making.”
Renzi rejects special Brexit deal for UK
Italy’s Prime Minister Matteo Renzi has said that it will be “impossible” for the Brexit negotiations to deliver more rights to the UK than others outside the European Union (BBC News). He also insisted any negotiations could only begin once the UK triggers Article 50. Meanwhile, the FT (£, p1) reports that French financial regulators are seeking to attract City firms and the Times (£, p42) notes Paris is also wooing FinTech firms.Read more
Job hiring shifting away from London
The FT (£, p14) reports that US banks are shifting their senior hiring in corporate and investment banking away from London towards Frankfurt and Paris, according to research by headhunters DHR International. Stéphane Rambosson, head of the European Financial Services practice of DHR, said: “UK candidates are increasingly making it clear that they are willing to move out of London to roles elsewhere in Europe — whilst firms are instructing us to fill roles overseas that might previously have gone to London.” Sky News notes that the report’s publication coincided with a plea from business groups, including the Institute of Directors and TheCityUK, that Government maintains access to the single market, take a “sensible” approach to immigration and reject protectionism as part of Brexit negotiations.
London Mayor pushes for post Brexit London work visas
Sadiq Khan, the London Mayor, has stated that City Hall is working on proposals for a separate work permit system for London following Brexit (Sky News). Mr Khan said that officials were “working on a model that will ensure we can carry on recruiting and attracting talent”. He added that discussions had been held with the Chancellor Philip Hammond, Brexit Secretary David Davis and Foreign Secretary Boris Johnson on the issue. Mr Khan added: “We are talking to business leaders, businesses, business representatives to see what we can do to make sure London doesn’t lose out on the talent, the innovation the partnership that has let us be the greatest City in the world.”
Moscovici calls for Brexit talks before April
Pierre Moscovici, the EU’s Economics Commissioner, has urged the UK to trigger Article 50 by the end of March (Bloomberg). Mr Moscovici said: “Let’s not take too much time because uncertainty is the worst enemy of the economy and if at one moment there is reluctance, there is no certainty, there is no predictability; then investors could start being very anxious.”Read more
BBA publishes High Street Banking statistics
The number of people taking out mortgages fell to its lowest level for 19 months in August, according to new data published by the BBA (BBC News). However, consumer credit grew by 6.4 per cent in the year to August, the fastest rate of growth for nearly 10 years. Rebecca Harding, Chief Economist at the BBA, said: “Mortgage borrowing is growing at a slower pace than it has for the last few months reflecting both the slowdown in housing market growth after the April spike and broader trends in the sector.” The Times (£, p40) also notes that remortgaging activity fell by 6.1 per cent to 23,940 loans in August from 23,940 in July.
Draghi calls for no exceptions to Single Market rules
Mario Draghi, the President of the European Central Bank, has urged that no exceptions are made to the rules of the single market during Brexit negotiations (FT, £, p8). Speaking before MEPs, Mr Draghi said: “Regardless of the type of relationship that emerges between the European Union and the United Kingdom, it is of utmost importance that the integrity of the single market is respected […] Any outcome should ensure that all participants are subject to the same rules.” He also added that data pointed “to the euro area economy being resilient to global and political uncertainty, notably following the UK referendum outcome” (Reuters).
Labour outlines new tax avoidance policy
The Labour Party outlined its economic and business agenda at its conference in Liverpool yesterday, suggesting the Party would redouble efforts to eradicate tax avoidance. Shadow Chancellor John McDonnell said: “We will rewrite the rules to the benefit of working people on taxes, on investment, and how our economic institutions work” (Reuters). The FT (£, p3) reports that the policies outlined are the most leftwing economic prospectus for a generation. In response, the British Chamber of Commerce said Labour “must remember that the state cannot control every aspect of economic or business life and stay competitive in a global economy.”Read more
City fears Number 10 is shifting towards a ‘hard’ exit from EU
The FT (£, p1) reports leading City figures are concerned that a “hard Brexit” is looking increasingly likely. John McFarlane, Chairman of Barclays and TheCityUK, said: “The danger of hard talk now is that it increases uncertainty, reduces confidence and will result in businesses triggering their exit plans from the UK.” City AM (p1) notes that International Trade Secretary Liam Fox is set to advocate that the UK pushes ahead and becomes an independent member of the World Trade Organisation, signalling his support for a quick exit from the European Union.
Mixed signals on impact of Brexit vote on economy
The Telegraph (B1) reports that analysis by the Treasury has indicated that the vote to leave the European Union will not hit economic growth at all this year, in contrast to the forecasts made before the referendum. Independent economists consulted by the Treasury have provided reassurance that any economic shock was less severe than first feared. Dean Turner, an economist at UBS, said: “Following the leave vote, the economy appears to be performing better than feared thanks to a resilient consumer.” Separate research by the CBI and PwC has found that Britain’s financial services firms are becoming increasingly anxious about life after the Brexit vote (Guardian, p21).
New analysis underlines relationship between the City and EU
The FT (£, p18) has carried out new analysis that looks at “how vital the bridge between the City and the rest of Europe is — for the banks themselves, but also for UK employment, the UK Exchequer and EU capital markets.” The newspaper states that banks using the UK as a gateway to the EU employ more than 590,000 people and make annual profits of more than £50 billion. Robert Rooney, chief executive of Morgan Stanley International, said: “Anything that causes London to fragment, such as a loss of passporting, will result in higher costs, lower liquidity, more trapped capital and less-efficient capital markets. Ultimately that’s not just bad for the UK, it’s bad for Europe and the global financial system.”Read more
Call for inquiry into how banks treat scam victims
The Guardian (p8) reports that Which? has called on banks to do more to protect customers who are tricked into transferring money by fraudsters. The consumer group has lodged a ‘super-complaint’ to the Payment Systems Regulator, which is required to respond in 90 days. Alex Neill, director of policy and campaigns at Which?, said: “Unfortunately, as payment systems have developed, consumer protection hasn’t kept up […] With bank transfers at the moment, consumers have no protection whatsoever, and we don’t think that’s right” (BBC News). Katy Worobec, Director of Financial Fraud Action UK, responded: “Customers rightly expect banks to carry out transactions they have authorised, and banks will provide compensation on a case-by-case basis. However, a blanket approach is equivalent to asking an insurance policy to pay out for theft when the front door was left wide open.”
Bank of England reaffirms commitment to ‘robust prudential standards’
The Bank of England has warned that capital rules for the UK banking sector will not be watered down despite concerns over financial stability following the Brexit vote (FT, £, p2). The Bank’s Financial Policy Committee said: “Irrespective of the particular form of the UK’s future relationship with the EU, and consistent with its statutory responsibility, the Financial Policy Committee will remain committed to the implementation of robust prudential standards in the UK financial system” (Telegraph, B3). The FPC also said the UK’s financial sector has “demonstrated resilience” following the Brexit vote. The Times (£, p44) adds that the FPC announced that Britain’s largest banks will be tested on their ability a Chinese economic crash.
Draghi defends negative interest rates
Mario Draghi, the European Central Bank President, has pushed back against complaints that negative interest rates are the key challenge to profitability in the banking (Reuters). Mr Draghi instead pointed to overcapacity and inefficiency in certain national banking sectors for squeezing margins. He also said the benefits from low interest rates in terms of higher asset prices, a greater stock of lending and fewer debt defaults “tend to outweigh the impact on net interest income over the short term” (City AM, p7).Read more
Surveys show mixed Brexit economic impact
The Guardian (p1) reports that the Organisation for Economic Co-operation and Development has revised its growth forecasts for the UK in 2016 up slightly to 1.8 per cent, but halved its forecasts for 2017 to one per cent. Joe Grice, Chief Economist at the Office for National Statistics, yesterday stated that “the referendum result appears, so far, not to have had a major effect” on the UK economy (BBC News). Meanwhile, a survey of businesses by the Bank of England has found that British investment and employment are likely to be flat over the coming year following the Brexit vote (Reuters).
Wall Street calls for ‘long runway’ before Brexit
The FT (£, p2) reports that Wall Street has told Prime Minister Theresa May that it needs a ‘long runway’ and a transition period of several years to prepare for Brexit. At a meeting in New York, executives from Wall Street banks raised concerns about losing the passporting rights to serve clients across the EU from London without having to apply for new licences. Mrs May told attendees that she wanted to understand the impact of Brexit on their businesses and which policy measures would be most important to them in the government’s negotiations with Brussels.
Banks criticised over cyber crime
The Sun (p1) reports that banks are being urged to repay all victims of cyber fraud following news that the UK’s biggest vishing scam saw customers lose £113 million. Labour MP Andrew Gwynne said: “The banks have a moral obligation to pay these businesses their money back. It’s small fry for them, but for these firms it can be the difference between life or death.” An editorial in the Sun (p10) adds that “with so much banking done online and by phone, systems must be watertight — and banks accountable for any breach.”Read more
Thousands of UK firms using EU passporting
The FT (£, p1) reports that nearly 5,500 UK-registered companies rely on passporting rights to do business in other European countries, according to figures from the Financial Conduct Authority. More than 8,000 financial services companies based in the EU or the European Economic Area also rely on passports to do business in Britain. Andrew Tyrie MP, Chairman of the Treasury Select Committee, warned that a “significant” amount of business could be at risk. He added: “None of the current off-the-shelf arrangements can preserve existing passporting arrangements, while giving the UK the influence and control it needs over financial services regulation as it develops.” A separate article in the FT (£, p4) on passporting quotes BBA CEO Anthony Browne as saying: “The passport is incredibly widely used by European banks wanting to sell services into the UK or operate in the UK. Losing the passporting provisions wouldn’t just be an issue for the City of London.”
US banks warn over Brexit impact
The BBC’s Today Programme has been speaking to a number of senior US finance figures this morning about Brexit. Colm Kelleher, President of Morgan Stanley, said: “I do believe, and I said prior to the referendum, that the City of London will suffer as a result of Brexit. The issue is how much.” He added that “clearly some size of our businesses will have to be moved out of London and into Europe with the absence of any passporting agreement.” Blackrock President Rob Kapito added: “I don’t think there’s any firm, any good firm, that has not already started looking at real estate in different areas outside the UK in case they have to move larger operations.”
Mortgage rates could fall below one per cent
The Telegraph (B1) reports that analysts at Bernstein Research have suggested that interest rates on typical mortgages could fall below one per cent in the coming months. Increasing levels of competition amongst lenders following the Bank of England’s recent interest rate cut has led to mortgage prices falling. Bernstein Analyst Chirantan Barua said: “If you have 20-30pc cash and have a good credit profile, we reckon that the day where you will be able to actually bargain out a sub-one per cent mortgage in this market is not too far off.”Read more
New campaign launched to fight financial crime
Financial Fraud Action UK have launched a new campaign to raise awareness of the techniques used by scammers, as new data shows that more than one million cases of card, cheque, phone or online fraud were recorded in the first half of 2016 (BBC News). The Take Five campaign is backed by police, the banking industry and consumer groups. Katy Worobec, the director of FFA UK, said: “Last year banks stopped £7 in £10 of attempted fraud from happening. But as the banks’ systems get more advanced, fraudsters turn their attention elsewhere and sadly this often means tricking people out of their personal details and money” (Guardian, p27).
Prime Minister consults US banks on Brexit
The FT (£, p2) reports that Theresa May last night met with Wall Street banks in an attempt to reassure them that Brexit will not damage their UK business. The Prime Minister was scheduled to meet “mostly” chief executives from the finance sector as well as figures from the technology and entertainment sectors during a visit to New York. Mrs May said before the meetings she would “be talking about how we can encourage trade and investment” between the UK and the US, including “talking to them and hearing from them about what the issues are that they want us to address” in the Brexit negotiations. The Times (£, p6) notes that Prime Minister will deliver a speech focusing on Brexit to the UN general assembly later today.
Moody’s claims passporting rights not crucial for UK
The Telegraph (B1) reports that analysts at Moody’s have predicted that the City will be able to cope with the loss of passporting rights if Britain leaves the EU’s single market. An analysis for the ratings agency stated: “The direct impact is likely to be modest […] This is credit negative but manageable. And other critical factors such as capital and liquidity, which are largely determined by global standards, are unlikely to face material changes due to Brexit per se.” Moody’s argued that the forthcoming Mifid II directive could partially compensate for the loss of passporting rights.Read more