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.
Banks call for transitional arrangement to mitigate Brexit impact
The Times (£, p36) reports that UK-based banks are calling for a “bridging agreement” lasting up to five years to deal with the consequences of Brexit. The newspaper reports that banks want a two to three-year extension on top of the two-year negotiating period that will be triggered once Article 50 is invoked, due to uncertainty around how rules on market access will change. A BBA spokesman said: “The banking sector wants an orderly transition as the UK prepares to leave the European Union, to ensure continuity to the services it provides to businesses and customers in the UK and right across Europe. This would be mutually beneficial to both sides. If necessary, transition arrangements should be in place to ensure banks can continue to serve customers until any new agreement starts.” Separately, Reuters reports that Japan has warned that the country’s financial institutions could relocate away from London if the UK loses access to the Single Market. Mayor of London Sadiq Khan has also called on the Government to prioritise financial services in the upcoming negotiations with the EU (City AM, p4, paper only).
Prime Minister attends G20 summit
Theresa May has questioned the effectiveness of a proposed points-based system for controlling immigration into the UK. Speaking at the G20 summit of world leaders in China, the Prime Minister argued “there is no silver bullet” when it comes to controlling immigration (BBC News). Meanwhile, Brexit Secretary David Davis has insisted that leaving the European Union presents “huge and exciting opportunities” (FT, £, p3). The Telegraph (B1) reports that Nobel prize-winning economist Joseph Stiglitz has also insisted that the UK can thrive outside of the EU. Philipp Hildebrand, former head of the Swiss central bank, has insisted that a Swiss-style model would not be appropriate for UK (FT, £, p2).
Services sector returns to growth
The UK’s services industry has rebounded sharply in August, according to a closely-watched survey (BBC News). Data published this morning from the Markit/CIPS Purchasing Managers’ Index showed the biggest month-on-month rise in the survey’s 20-year history. It adds to encouraging news from manufacturing and construction to suggest “an imminent recession will be avoided.” Markit’s Chris Williamson said: “It remains too early to say whether August’s upturn is a dead cat bounce or the start of a sustained post-shock recovery, but there’s plenty of anecdotal evidence to indicate that the initial shock of the June vote has begun to dissipate.”Read more
This will be the last BBA Brief until early September 2016.
Industry awaits EBA stress test results
Later today, the European Banking Authority will announce the results of its latest round of stress testing of 51 European banks. According to the FT (£, p7), the most important element of the results will show how well banks’ capital can withstand worsening economic conditions and tougher regulation. Italy’s banks are predicted to fare the worst, in particular Italy’s third largest bank, Banca Monte dei Paschi di Siena, which is already trying to raise new capital, reports the BBC.
May Brexit talks commence with Slovakian PM
As part of her European tour to discuss Brexit negotiations, Prime Minister Theresa May met with Slovak Prime Minister Robert Fico in Bratislava yesterday. According to Reuters, Ms May stressed the need to have an open mind about a potential deal saying, “we should be driven by what is in the best interests of the UK and what is going to work for the European Union, not by the models that already exist.” Slovakia currently holds the EU Council presidency and has previously voiced concern over free movement and the rights of Slovakian nationals already resided in the UK, reports the London Evening Standard.Read more
Michel Barnier appointed chief of Brexit talks
The Telegraph (p6) reports that the European Commission has appointed former French Minister, Michel Barnier, as the chief negotiator for the U.K.’s exit from the European Union. Announcing the appointment, European Commission President Jean-Claude Juncker said he “wanted an experienced politician for this difficult job” (BBC). According to the FT (£, p5), Mr Barnier will oversee a commission task force as well as preparing formal exit talks under Article 50 once it is triggered.
UK challengers weather Brexit storm
Despite profit warnings from Bank of England earlier this month, the UK’s challenger banks have reported steady profits for the second quarter of 2016 (Telegraph, online only). Chief executive Steve Pateman of challenger bank Shawbrook told the FT (£, p18) “It [Brexit] doesn’t change our strategy at all…I think it would be an entirely wrong decision [to rein lending in],” he added. Craig Donaldson, chief executive of Metro, added that he had not seen a change in customer behaviour since the UK’s EU referendum, nor any impact on business flows. The news follows a report from the Bank earlier this month which suggested challenger banks were less shielded from downturns in the commercial property sector, reports City AM.Read more
BBA High Street Banking statistics published
The Guardian (online only) reports that the BBA’s High Street Banking data for June showed that business borrowing dropped for the first time in 2016 last month, as UK companies delayed investment decisions until after the European Union referendum. Borrowing by British companies outside the financial sectors fell by £526 million in June, while house purchase approvals fell from 41,842 to 40,103. Rebecca Harding, Chief Economist at the BBA, said: “Overall, business confidence was clearly fragile in anticipation of the outcome of the vote, but these results are not a verdict on the health of the economy post-Brexit. We won’t start to see that data come through until the autumn and any trends before then should not be over-interpreted” (Telegraph, p30). The data was also covered by the Times (£, p43), City AM (p9), i (p41) and Evening Standard (p32).
FCA warns over long-term credit card debt
The FT (£, p2) reports that the Financial Conduct Authority has criticised credit card providers for making long-term profits from consumers who make minimum repayments rather than clearing their balances. UK borrowers now have £63 billion of credit card debt – up from £61 billion in 2014 – while almost one in nine card holders have balances it would take them more than a decade to repay. Joanna Elson, Chief Executive of the Money Advice Trust, called for more to be done to help indebted individuals (BBC News). Richard Koch, of the UK Cards Association, added: “The credit card industry will continue to engage constructively with the regulator in the coming months to ensure that effective and proportionate remedies are developed for these customers.”
Negative interest rates could hit businesses
The FT (£, p2) reports that a number of banks have inserted clauses into terms and conditions that would allow them to impose charges on businesses for keeping cash on deposit if interest rates fall into negative territory. Analyst Ian Gordon said: “If a bank chose to pay negative rates and lost a slug of deposits, the bank in question wouldn’t particularly care – what they’re currently looking at is surplus deposits which they cannot deploy in new loans because there is a lack of demand” (Telegraph, p27). The Federation of Small Businesses said the idea of negative rates is “deeply concerning.”Read more
MPs criticise regulators for failures over HBOS
The Treasury Select Committee has criticised regulators for failing to prevent and subsequently adequately investigate the collapse of HBOS (Times, £, p33). The committee singled out Sir Hector Sants for “procedural failings” that enabled HBOS executives to largely avoid public censure for mismanagement. The FT (£, p2) notes that the committee also called for the Financial Conduct Authority’s enforcement division to be separated into an independent body, based on evidence of ‘highly problematic’ relations with other parts of the regulator in the past. Andrew Tyrie MP, chairman of the committee, said that creating a separate agency would “bolster the perception of the enforcement function’s independence, and provide the regulators with greater clarity over their objectives”.
Bank warns on impact of negative interest rates
The Times (£, p1) reports that business customers could be charged for holding money in their accounts if negative interest rates are introduced. In a letter to customers, NatWest said: “Global interest rates remain at very low levels and in some markets are currently negative. Dependent on future market conditions, this could result in us charging interest on credit balances. We’ll provide you with the appropriate notice before doing so, should this situation ever arise.” The Bank of England will decide next week whether to cut interest rates from their record low levels (BBC News).Read more
Chancellor outlines approach for EU negotiations
The FT (£, p4) reports that the Chancellor Philip Hammond has said the UK must adopt a realistic negotiating position with the rest of the European Union to avoid facing years of damaging economic uncertainty. Mr Hammond said: “I think what will start to reduce uncertainty is when we will set out more clearly the kind of arrangement we envisage going forward with the EU.” He also said a potential trade deal with China represented a significant opportunity in the next “couple of years” (Times, £, p2).
EBA to publish latest stress test results
The Times (£, p35) reports that the European Banking Authority will reveal the results of its latest stress tests on Friday, with the spotlight expected to focus on the state of Italy’s banks. British banks are expected to perform strongly in the EU-wide tests as they have built up their capital reserves and written down debts more aggressively than some of their continental rivals. The Guardian (online only) separately reports that UK high street banks are preparing to set out how they will respond to the interest rate cuts when they start to publish results later this week.
Foreign Secretary provides reassurance over passporting
Foreign Secretary Boris Johnson has moved to assuage concerns that the UK will lose financial passporting rights following the vote to leave the EU (Telegraph, online only). Speaking in New York, Mr Johnson said he “expected” that passporting would be maintained because it was in the interests of both the UK and the Eurozone (FT, £, online only). He also said that London would remain a world leading financial centre due to its deep pool of capital markets.Read more
BBA publishes new Way We Bank Now report
The latest BBA Way We Bank Now report – Help at Hand – has been published today. BBC News leads on how the increasing popularity of mobile banking apps has led to fewer people using internet banking, while the Guardian noting that payments via apps soared by 54 per cent in 2015. New CACI data also shows the number of visits to bank branches has fallen from 476 million in 2011 to 278 million in 2016 as more people using digital technology. This is expected to continue for the next five years, with 185 million visits in 2021.
The report was also covered by City AM (p8), the Sun (p47, paper only), the i (p51, paper only), Daily Mail (online only), Daily Mirror (online only), Banking Technology and Finextra. BBC Breakfast also ran a feature on the report.
BBA Chief Executive Anthony Browne said: “We are in the midst of a consumer-led revolution in the way we do our day-to-day banking. Customers love the new technology that is allowing us to bank round the clock.
“You can set up standing orders while standing in the queue for the bus and check your balance while checking in at the airport. The choice now on offer from banks, from state-of-the-art branches to cutting edge apps, has put customers firmly in the driving seat on the way we bank.”
New figures show higher fraud levels
New figures from the Office for National Statistics have revealed that almost six million fraud and cyber crimes were committed last year in England and Wales (BBC News). The official crime survey showed that fraud is the most common type of crime. The FT (£, p3) notes that half of the three million cases of bank fraud came through the internet. Brandon Lewis, policing minister, said: “As crime falls, we know that it is also changing. Fraud and cyber offences are not a new threat and the government has been working to get ahead of the game, committing to spend £1.9bn on cyber security and cyber crime over the next five years.”Read more
FCA may intervene on overdraft fees
Andrew Bailey, Chief Executive of the Financial Conduct Authority, has stated that the regulator may investigate possible “consumer detriment” caused by overdraft charges (Times, £, p41). Mr Bailey said that the FCA “can do more than the CMA [Competition and Markets Authority]”, which is set to publish its final report on the retail banking sector next month. He described recent research by Which? that found overdraft costs could be higher than payday loans as a “useful point”. Mr Bailey also raised concerns over the peer-to-peer lending sector (FT, £, online only).
Tyrie claims Brexit could boost smaller banks
Andrew Tyrie, Chairman of the Treasury Select Committee, has stated that Brexit could benefit smaller banks because of the “one size fits all” approach of European Union regulation to capital and other requirements (Reuters). Mr Tyrie said: “The Bank of England and the government both now need to consider whether the opportunity afforded by Brexit could enable the development of a regulatory regime less prejudicial to small and challenger banks.” A group of seven smaller lenders wrote to Mr Tyrie after Britain voted last month to leave the EU to highlight “major barriers to effective competition” (City AM, p8).
BT fault hits bank customers
A number of BT customers experienced problems with its broadband and telephone services yesterday, which in turn led to temporary disruption of online banking services at several lenders (BBC News). A BT spokeswoman said: “Around 10 per cent of customers’ internet usage was affected following power issues at one of our internet connection partners’ sites in London. The issue has now been fixed and services have been restored.” The fault came a day after BT’s Openreach internet infrastructure business was criticised by MPs over its alleged failure to “adequately” invest in fast fibre.Read more
Bank of England says no ‘sweeping solution’ for banks after Brexit
Bank of England Deputy Governor Sam Woods has warned that relying on MiFID II – the European Union’s securities rules that come into force in 2018 – to allow banks access to the single market after Britain leaves is not a “sweeping solution” (Reuters). Speaking before MPs on the Treasury Select Committee, Mr Woods said: “It would be hard to be confident that would be a sweeping solution for everything, partly because of the scale of this activity at the moment […] “While I think it’s important, it wouldn’t place too much weight personally on the fine specificities of MiFID II or indeed any other one piece of the passporting regime.”
Bailey outlines plans for FCA
Andrew Bailey, the new Chief Executive of the Financial Conduct Authority, has said that the regulator will continue to apply all European Union rules until there is clarity on future relations with the bloc and that there would be no “bonfire of regulations” (Reuters). Mr Bailey also told his first annual meeting that the FCA is working on a new mission statement which it hoped to publish in the early autumn for consultation. He also insisted that there was “no agenda” to bring back light-touch regulation amid criticism over how he was appointed without an interview after Martin Wheatley was sacked from the regulator (Times, £, p36).
IMF warns of Brexit ‘spanner in the works’ of global growth
The Guardian (p1) reports that the International Monetary Fund has cut its forecasts for the UK economy next year after Britain’s vote to leave the EU and also warned it has “thrown a spanner in the works” of the global recovery. The IMF is now forecasting UK growth of 1.3 per cent – down from 2.2 per cent – in 2017. It also highlighted the potential stresses that Brexit may cause within the European banking system, particularly in Italy and Portugal (BBC News).Read more
FCA highlights savings account interest rates
The Financial Conduct Authority has published a list of savings accounts that pay the lowest interest rates to consumers (FT, £, p3). Christopher Woolard, Director of Strategy and Competition at the FCA, said: “In a well-functioning market, providers should be competing to offer the best possible deal to consumers. Our Sunlight Remedy data shows that some consumers could be better off by opening a different account.” The Telegraph (p1) notes customers who get poor rates of interest on their savings accounts could soon receive texts or emails to make them aware of better deals (BBC News).
MPs call for post Brexit digital plan
City AM (p3) reports that the Business Innovation and Skills Committee has warned that the UK’s position as a world leading centre for fintech is at risk following the vote to leave the European Union. The committee’s report highlights the importance of the EU’s Digital Single Market, stating: “We could have led on the Digital Single Market, but instead we will be having to follow. The government must address this situation, to stop investor confidence further draining away.” A separate report from Barclays has found the UK is lagging behind other countries when it comes to digital skills (Guardian, p24).
List of banking ‘conduct costs’ published
The Guardian (online only) reports that the cost of fines, legal bills and customer redress for the world’s 20 biggest banks over the five years to the end of 2015 totalled £252 billion, according to new data published by the CCP Research Foundation. Roger McCormick, CCP’s Managing Director, said: “It remains to be seen whether banks can truly claim that these problems are now behind them (whether or not the costs themselves may be) and reassure us that they are legacy issues.” Fines imposed by the Financial Conduct Authority dropped more than 99 per cent in the first half of 2016 to £7.2 million from £819 million a year earlier.Read more