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.
Chancellor outlines Brexit recovery plan
The Chancellor has pledged to cut corporation tax to below 15 per cent in an effort to encourage businesses to continue investing in the UK following the EU referendum vote (FT, £, p1). In an interview with the FT (£, p3), George Osborne said: “We’ve got to pick ourselves up and make the best of it and make the most of it. I don’t sit here feeling sorry for myself, feeling somehow that it is all going to unravel. Quite the reverse.” He also outlined plans to strengthen the UK’s relationship with China, with another trade visit planned for later this year.
Carney to encourage banks to keep lending
The Sunday Times (£, B1) reported that the Bank of England is expected to outline measures to boost lending, including loosening capital buffer requirements for the banking sector, when it publishes the financial stability report on Tuesday. The Guardian (p18) quotes economists at Investec as saying: “Tuesday’s financial stability report could prove to be significant, perhaps for a cut in the counter-cyclical capital buffer. The governor conveyed a concrete message that financial and monetary policy will act in the same direction. Presumably this applies to credit policy too, with the possibility of a widening and an extension in the funding for lending scheme.” Interest rates are also expected to be cut from their historic lows over the coming months.
Challenger banks increase competition
The Telegraph (B1) reports that twenty new banks are seeking a license from the Bank of England to launch in the UK. Six banks are part-way through the process of applying for a licence, while another 14 have held pre-application talks with the Prudential Regulation Authority. The PRA’s former Chief Executive Andrew Bailey has previously said that making it easier to secure a banking license is part of increasing competition in the sector, as well as ensuring that banks can fail without being bailed out by the taxpayer.Read more
Carney vows to take action following EU referendum vote
The FT (£, p1) reports that Bank of England Governor Mark Carney yesterday declared that the central bank would take “whatever action is needed to support growth”, which probably included “some monetary policy easing” in the next few months. Mr Carney also said a downturn was on its way and the UK was already suffering from “economic post-traumatic stress disorder”.
The Sun (p10, paper only) reports that a number of banks have this week confirmed they will remain in the UK and not move jobs overseas. At a conference organised by TheCityUK, HSBC and Barclays both confirmed they say they will stay in the UK following the Brexit vote (FT, £, p17). However, the European Banking Authority is reportedly looking to move from its Canary Wharf headquarters (FT, £, p23). The FT (£, p11) also has a special report on whether the referendum vote will lead to banks shifting activity to other financial centres.
Boris Johnson yesterday pulled out of the race to become Conservative Party leader and Prime Minister after Michael Gove withdrew support for his candidacy and instead put himself forward (Times, £, p1). Other candidates include Home Secretary Theresa May, Work and Pensions Secretary Stephen Crabb, Energy Minister Andrea Leadsom and former Cabinet Minister Liam Fox.
Banks warned over conflicts of interest by new standards board
Banks have been warned about conflicts of interest by the FICC Markets Standards Board, the new body charged with cleaning up the City, according to the FT (£, p22). A year after the Bank of England and Treasury called for its creation, the body made its first concrete proposals yesterday focussing on reference-price transactions. Elizabeth Corley, interim Chair of the board, said: “The new standard is intended to give clear guidance to traders and market practitioners about what is acceptable conduct in the context of these types of transaction and create greater clarity about what good market practice looks like and what types of practice should be avoided.”Read more
Reaction to EU referendum vote
The FT (£, p2) reports that the Bank of England called in senior executives from Britain’s biggest lenders to discuss the impact of the vote to leave the European Union. The newspaper states that officials at the central bank reassured the industry about the amount of liquidity in the system, as well as encouraging them to continue lending to consumers and businesses. Separately, the Guardian (p9) highlights a speech that Mark Carney, the Bank of England Governor, will deliver later today in an effort to calm fears over the UK’s financial system.
Speaking at the BBA’s Retail Banking Conference yesterday, BBA Chair Noreen Doyle said: “While we may have resisted some of the reforms over the past eight years, the increase in the capital in the system and the strict attention by the Bank of England to the liquidity in the system has actually reaped substantial benefits in an orderly market over the past few days, and may that continue” (Telegraph, p8). The BBA’s Chief Executive Anthony Browne added: “After this referendum result, we are where we are. Don’t let’s talk ourselves down into a recession, let’s talk ourselves up and work together to make sure Britain has a great future.”
Senior executives from the UK’s high street banks also said that they have seen an increase in customer queries about mortgages and currency following the EU referendum (FT, £, online only).
European Council President Donald Tusk has insisted that “there will be no single market a la carte” for the UK, (City AM, p4). European Commission President Jean-Claude Juncker echoed those comments, stressing that all of the EU’s four freedoms – goods, services, people and capital – must be accepted. However, the French Finance Minister Michel Sapin has said everything will be on the table in the negotiations. Meanwhile, the FT (£, p2) reports that the UK will be sidelined from the Capital Markets Union initiative that was originally put forward by Britain’s Commissioner Lord Hill.
Michael Gove and Theresa May have this morning announced their intention to run to be the next Conservative Party leader and Prime Minister (BBC News).Read more
EU referendum vote fallout
Business Secretary Sajid Javid has urged employers not to cut jobs because of the vote to leave the European Union and argued they could “take advantage” of Brexit once the Government has strengthened its team of trade negotiators (Times, £, p44). Speaking after a meeting with business leaders yesterday, Mr Javid said: “The biggest issue raised was the need to secure continued access to the Single Market. While I am not in any position to make promises, I assured everyone that my number one priority will be just that in the negotiations to come” (City AM, p1)
Jeremy Corbyn yesterday lost a vote of no confidence, with 172 Labour MPs backing the motion (BBC News). The result, which is not binding, increases pressure on Mr Corbyn following a string of resignations from the shadow cabinet. The Labour leader said the vote has “no constitutional legitimacy.”
The FT (£, online only) looks at the potential impact on the regulatory framework, quoting the BBA’s Chief Executive Anthony Browne. He said: “It is important that we do not have a bonfire of EU red tape, because it could damage our relations with the EU.”
The Times (£, p44) reports that senior City lawyers believe that warnings international banks will move thousands of jobs away from London are misplaced. They argue MiFID II rules that come into force in January 2018 should make it straightforward to gain passporting rights, even if the UK has left the EU. French President François Hollande has that it would be unacceptable for clearing of euro-denominated trades to continue taking place in the UK (FT, £, online only).
The Bank of England yesterday carried out the last of its three scheduled special repo auctions announced before the UK referendum (FT, £, online only). The central bank provided £3.1 billion of additional liquidity to lenders, having received bids amounting to £6.3 billion.
World banking list published
The UK has been ranked seventh in a league table of countries’ banks by total pre-tax profits, according to new research published by trade magazine The Banker (City AM, p2). British banks’ profits fell by 22 per cent to £18.9 billion last year, even though challenger banks moved up the table. Brian Caplen, Editor of The Banker, said: “Before the financial crisis, we had a banking sector that was obviously very large compared to the size of our economy because it was an international banking sector […] But now, if you switch on 10 years later, what the banks have been doing is pulling back from a lot of businesses.”Read more
EU referendum vote fallout continues
The UK has been downgraded by credit ratings agencies Standard & Poor’s and Fitch following the country’s vote to leave the European Union (BBC News). S&P described the result of the vote as “a seminal event” which would “lead to a less predictable, stable and effective policy framework in the UK” (Guardian, p9). The downgrade comes as expectations rise that the Bank of England will cut interest rates to stimulate the economy.
The FT (£, p19) reports that the world’s biggest banks are pushing regulators and politicians for answers so they can plan for the future of their London operations following the vote. Meanwhile, the Conservative’s 1922 Committee of senior backbench MPs has recommended that a new Prime Minister and Conservative leader should be in place by 2 September. Labour MPs will separately vote on a motion of no confidence in their leader Jeremy Corbyn (BBC News).
Business Secretary Sajid Javid will today hold a meeting of UK business groups to discuss what the UK’s relationship with the European Union should look like in the future. (BBC News).
City AM (p9) reports that Germany, France and Italy have said the EU will not hold talks with the UK on ‘Brexit’ until Article 50 has been triggered. European Commission President Jean-Claude Juncker has urged UK to “clarify its position” on Brexit as soon as possible (BBC News).
Italy resurrects plans to support banking sector
The FT (£, p5) states that Italy is considering a rescue plan for the country’s banks, using the market turbulence to circumnavigate EU rules against state support for lenders. Italian Prime Minister Matteo Renzi latest plan would reportedly seek to waive EU state aid curbs on grounds of “financial stability”. Mr Renzi said: “Today the rules are very difficult, nonetheless all that needs to be done to give tranquillity and confidence to citizens will be given attention by European institutions and national ones, starting with the Italian government.”Read more
Reaction to EU referendum vote
In a speech this morning, George Osborne has said the UK is ready to face the future “from a position of strength” after voting to leave the European Union (BBC News). The Chancellor indicated there will be no emergency Budget until a new Prime Minister is in place. He also said the UK should only trigger Article 50 “when there is a clear view about what new arrangements we are seeking with our European neighbours.”
Jeremy Corbyn has rejected calls for him to resign after a number of senior shadow cabinet members stepped down in protest at his leadership (Guardian, p1). The Labour leader has this morning published a list of new shadow cabinet appointments even as further resignations are announced.
The FT (£, p3) features an interview with departing EU Financial Services Commissioner Lord Hill. He said: “The nature and the shape of the financial services industry in France or in Germany — from the banking and any other point of view — is pretty different from what it is in the UK. So the direction of how policy will evolve will reflect those different voices, without the British voice in there to balance.” Sadiq Khan, the Mayor of London, has vowed to fight for the City’s access to the Single Market (City AM, p1). He said the loss of passporting would be “a disaster”.
The FT (£, p3) reports that banks are already shifting operations out of the UK following the EU referendum, but will wait several months before making major staffing decisions. A survey from the Institute of Directors has found that a quarter of its members are planning to freeze recruitment, with five per cent planning to cut jobs. Two-thirds said the vote was negative for their business.
Markets have opened down this morning, with sterling also slipping against other currencies (BBC News). The BBA’s Chief Executive Anthony Browne spoke to BBC Radio 5 Live (skip to 01:53:30) this morning to discuss the impact of the EU referendum vote on the banking sector.Read more
Reaction to EU referendum vote
The fallout from the UK’s vote to leave the European Union continues to dominate the news agenda. Hilary Benn, the Shadow Foreign Secretary, has been sacked after expressing concern over the leadership of the Labour Party by Jeremy Corbyn (Sunday Times, £, p1). The BBC reports that up to half the Shadow Cabinet is set to resign in a bid to force Mr Corbyn to step down.
Scotland’s First Minister Nicola Sturgeon yesterday said she is seeking “immediate discussions” with Brussels to “protect Scotland’s place in the EU” (Mail on Sunday, p1). However, the newspaper reports that the European Commission has ruled out allowing Scotland to remain within the bloc even if it votes to break from the UK.
Lord Hill, the UK’s European Commissioner in charge of financial services, resigned yesterday after saying that “what is done cannot be undone” (BBC News). He will be replaced by Latvian Valdis Dombrovskis, currently European Commissioner for the Euro. BBA Chief Executive Anthony Browne is quoted as saying:” “He worked hard to ensure a more stable and customer-focused banking sector, helping our industry play its full role in promoting economic growth.”
Separately, Villeroy de Galhau, the Governor of France’s central bank, also warned that UK-based banks would lose their EU passport rights unless the country something similar to “the Norwegian model of the European Economic Area, that would allow Britain to keep access to the single market but by committing to implement all EU rules” (Sunday Telegraph, p8). European Commission President Jean-Claude Juncker said “it is not an amicable divorce, but it was also not an intimate love affair” (Sunday Times, £, p4). Foreign ministers of the EU’s six founding nations called on the UK to accelerate its timetable for leaving the bloc.
Moody’s has cut the UK’s credit rating outlook to “negative” following the referendum result (BBC News). The Sunday Telegraph (B1, paper only) reports that global central banks are expected to unleash a fresh wave of stimulus before the end of the year as they deal with the impact of the Brexit vote. The Mail on Sunday (p14, paper only) adds that the City of London could see up to 100,000 job cuts in the wake of the EU referendum vote.
The BBA’s Chief Executive Anthony Browne was interviewed on BBC Radio 5 Live (skip to 38:00) yesterday to discuss the impact of Brexit on personal banking.Read more
Reaction to EU referendum vote
The newspapers are dominated by reaction to the UK’s vote to leave the European Union. The resignation of Prime Minister David Cameron leads the coverage, with the FT (£, p1) reporting that yesterday’s result “swept away 50 years of foreign policy”. In a statement yesterday, Mr Cameron said: “I will do everything I can as prime minister to steady the ship over the coming weeks and months. But I do not think it would be right for me to try to be the captain that steers our country to its next destination.” Mr Cameron added that his successor should be in place by October and that Article 50 of the Treaty on the European Union – the mechanism for triggering the two-year negotiating process – would not be activated until then at the earliest (BBC News).
The Telegraph (p1) reports that in a “statesmanlike address” Boris Johnson argued that the decision to leave the “does not mean that the UK will be in anyway less united, nor indeed does it mean that it will be any less European.” The Times (£, p1) notes that the “Brexit earthquake” led to Scotland’s First Minister Nicola Sturgeon stating that a second Scottish independence referendum is now “highly likely”, while Labour MPs have submitted a motion of no confidence in the party leader Jeremy Corbyn (BBC News).
German Chancellor Angela Merkel expressed “great regret” at the outcome, and EU chiefs said they expected the UK to begin negotiations to leave “as soon as possible, however painful that process may be” (Guardian, p5).
Bank of England Governor Mark Carney reassured markets over the health of the UK’s financial system, highlighting the fact that “the capital requirements of our largest banks are now ten times higher than before the crisis” (BBC News). He added the Bank “stands ready to provide more than £250bn of additional funds through its normal facilities.” Economists predicted that UK interest rates would be cut to zero in the coming months (BBC News), and that house prices could fall by 10 per cent (Times, £, p17).
The BBA’s Chief Executive Anthony Browne is quoted in the FT (£, p17, paper only) saying that “It is clearly not good for London as an international financial centre. But it does retain lot of strengths it has always had, like deep pools of talent, language, timezone and rule of law.”
The Times (£, p50) reports that more than 50,000 jobs could leave the City of London as financial companies move activity to European Union countries.Read more
EU referendum result announced
The UK has voted to leave the European Union by a margin of 52 per cent to 48 per cent (BBC News). More than 30 million people voted – or 72.1 per cent of eligible voters – in the highest turnout since 1992 election (Sky News). The pound dropped 11 per cent to its lowest level in more than three decades, and the FTSE 100 also fell sharply (FT, £, online only). In a statement, David Cameron has announced that he is resigning and that a new Prime Minister should be in place by the start of the Conservative Party conference in October. Mark Carney, the Bank of England Governor, said the central bank “will not hesitate to take additional measures” as the UK economy adjusts.
BBA Chief Executive Anthony Browne said: “Customers should rest assured their banking services will continue as normal. People will be able to take money out of cash machines, exchange currency and have full access to their banking services. Any consequences of the referendum result will take some time to resolve and any changes to banking will take place over several years.
“A significant amount of contingency planning has already been undertaken and the industry is very well prepared, and have increased capital and liquidity. Banks will now assess what the result means for their customers and staff in the long term.
“We also believe that Government should have time to plan the UK’s approach to any Exit Treaty and lay the ground for an effective negotiation with EU partners. It is important therefore that the Government only triggers the Article 50 process after careful deliberation on its aims and negotiating strategy.
“It is now important that we have as orderly a transition as possible to minimise the impact on customers both in the UK and the rest of the EU, and to limit any effect on the economy”.
BBA publishes High Street Banking statistics
The BBA has today published its High Street Banking Statistics for May 2016. Gross mortgage borrowing of £12 billion in the month was 10 per cent higher than in May 2015. Borrowing in the first five months of 2016 was £67.5 billion compared with £51.7 billion in the same period of 2015. Dr Rebecca Harding, Chief Economic Advisor at the BBA, said: “Mortgage approvals have bounced back following the sharp drop in April, caused by the initial reaction to the stamp duty surcharge. This increase suggests that claims of a slowdown in house price inflation may be premature.”Read more
Voters head to the polls for EU referendum
The referendum on membership of the European Union dominates media coverage today. The Telegraph (B1) highlights how holidaymakers rushed to change travel money yesterday ahead of expected volatility in the exchange rate. The Times (£, p39) reports that a number of banks with London operations have written to clients instructing them to prepare for disruption following the announcement of the result. The FT (£, p1) states that regulators have told banks to stress test for a 20 per cent fall in sterling. The Telegraph (B1) reports business group TheCityUK has prepared a document setting out a list of “key policy asks” that it will put to the Government in the event of a Leave vote.
ECB offers new round of cheap loans
The Times (£, p47) states that the European Central Bank has launched a new round of ultra-cheap loans for banks, in a renewed bid to boost credit flows and inflation in the Eurozone. Luca Cazzulani, a UniCredit analyst, estimated that banks could borrow between €400 billion to €450 billion as they prepare for market turbulence in the event of Britain potentially leaving the European Union. The money will be offered at a basic rate of 0 per cent, but in certain cases the rate could sink as low as -0.4 per cent, effectively meaning that banks receive money for borrowing from the ECB.Read more