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.
Investment banks reduce staff numbers as revenues take a hit
The Telegraph (B1) reports the world’s biggest investment banks have drastically reduced the number of traders and top dealmakers in the past five years, following a report from Coalition. It shows 54,800 staff are employed across the front offices of the top 12 banks, down from 69,100 in 2011 – a fall of 21 per cent. Reuters adds that revenues have taken a sharp tumble too, as banks are “having to comply with new regulations forcing them to hold more capital, reduce risk-taking and scale back market-making activities”. The worst affected banking sector is fixed income, currencies and commodities trading (FICC), where headcount has crashed by 32 per cent, from 27,100 to 18,300.
SWIFT network to fight back against cyber-crime
Following a spate of cyber-attacks on the SWIFT messaging system in areas including Vietnam, Bangladesh and New York, the network’s chief executive, Gottfried Leibbrandt, is due to announce plans to share information, increase fraud detection and improve security (FT, £, p7). Bloomberg speculates that there are expected to be further announcements of “more [attacks on] banks than have been previously reported”. According to the Wall St Journal, “it wasn’t clear whether they [the audits] would be mandatory.”Read more
CMA comes under criticism
Labour MP Rachel Reeves has criticised the Competition Markets Authority for falling “drastically short” on its review into banking reform and overdraft charges, the Daily Mail (p63) reports. The MP, who also sits on the Treasury select committee, stated “The CMA’s monthly maximum charge remedy has been portrayed as a cap on unarranged overdrafts, yet it is difficult to see it as such when banks are allowed to set the level of their own cap.” She has advised the FCA should “take this opportunity to go further and cap the unarranged overdraft charges,” (Guardian (p17).
Deloitte study shows bleak future for P2P lenders
A new study from Deloitte has suggested that peer-to-peer lenders are unlikely to truly succeed when it comes to challenge the world’s largest banks (Telegraph, £, B3). The FT (£, p4) highlighted that P2P lenders would only account for six per cent of lending by 2025, which includes lending to individuals, small businesses and the retail buy-to-let market. Neil Tomlinson, head of UK banking at Deloitte, said: “Whilst banks are yet to replicate the benefits of the [P2P] model, we believe it is only a matter of time before they use their size and scale to overtake and sustainably underprice [P2P sites].”
Increase in cyber-crime sees more prosecutions for white-collar criminals
Bloomberg reports that the number of white-collar crime rose for the first time in five years in 2015, with cybercrime one of the key areas of growth. According to the report from law firm Pinsent Masons, there were 9,401 white-collar cases last year, up from 9,343 in 2014. The FT (£, p4) quoted Barry Vitou, partner and head of global corporate crime at Pinsent Masons, who said: “Any increase in prosecutions for economic crime represents a gain for the authorities and should be welcomed. Organisations fighting white collar crime now need to ensure momentum does not slip.”Read more
Contactless cards prove popular with over 60s
People aged over 60 are the fastest growing group of people taking to contactless card payments in the UK, according to Barclaycard (BBC News). Separate figures from the UK Cards Association show that monthly contactless spending has more than trebled in the past year to £1.5 billion, up from £431.1 million in March 2015 (FT, £, p3). Richard Koch, Head of Policy at the UK Cards Association, said: “It took almost eight years for monthly contactless spending to reach half a billion pounds – now it’s grown by the same amount in just four months. This dramatic rise shows that paying with contactless is now second nature for millions of consumers who see it as an alternative to cash.”
New York and London authorities team up in cyber-crime fight
The proceeds of New York criminals will help to fund a new initiative in London to protect the world’s two leading financial centres (FT, £, p4). The Manhattan District Attorney’s Office is giving $25 million over five years from criminal forfeits to fund the Global Cyber Alliance with the City of London Police. Cyrus Vance, the New York District Attorney, said: “If we are focusing on prevention then I think that $25 million will be one of the best investments our office ever makes in fighting crime.” The project aims to boost intelligence sharing on attacks across borders.
US urges European banks to reengage with Iran
The US and its partners in the Iranian nuclear agreement have urged European banks to facilitate trade with Islamic Republic (Daily Mail, online only). US Secretary of State John Kerry, and the Foreign Ministers of the UK, France and Germany issued a joint statement yesterday stating that: “We will not stand in the way of permitted business activity with Iran, and we will not stand in the way of international firms or financial institutions engaging with Iran, as long as they follow all applicable laws.” Reuters reports European banks are holding back from business with Iran partly due to worries they might breach remaining sanctions. Justine Walker, the BBA’s Director of Financial Crime, is quoted.Read more
Europe lenders press US for delay on living wills
The FT (£, p16) reports that large European banks are pushing US regulators to extend a July 2 deadline to submit the next versions of their ‘living wills’. The European banks have yet to receive the results of their 2015 submissions and have therefore asked the Federal Reserve for an extension. They want to be able to take into account regulators’ feedback on their previous living wills before drafting a new version.
Bank of England orders cyber security review after SWIFT heist
Reuters reports that the Bank of England has ordered UK banks to outline the steps they have taken to secure computers connected to the SWIFT messaging network. The move comes after $81 million was stolen from the Bangladesh Central Bank in a cyber heist in February. Banks have reportedly been asked to check whether they are following security practices recommended by SWIFT.
Haldane says banks must do more to win back ‘social licence’
Andy Haldane, the Bank of England’s Chief Economist, has said that banks must bridge the “great divide” with public perception to maintain a well-functioning financial system that supports growth. He said: “[…] a lack of trust in finance potentially hobbles both economic growth and financial stability. That lack of trust is the mirror-image of the perception gap between the financial sector and wider society.” Separately Mr Haldane said that he cannot make “the remotest sense” of the complex pensions system (Telegraph, p1).Read more
Mixed reaction to CMA provisional remedies for retail banking market
There is widespread coverage of the Competition and Markets Authority’s provisional remedies for the retail banking market. Gillian Guy, Chief Executive of Citizens Advice, welcomed the action on overdrafts, saying that high charges “can quickly push people into cycles of dangerous debt” (FT, £, p13). However Alex Neill, Director of Policy and Campaigns at Which?, criticised the inquiry saying: “Steps to stimulate switching are welcome but the chance to deliver better banking for all consumers has been missed” (Guardian, p24). Paul Lynam, CEO of Secure Trust, stated the CMA had not addressed “the principal factors” – capital requirements and funding cost disadvantages – that make it difficult for smaller banks to compete in the market (Evening Standard, p32). BBA Chief Executive Anthony Browne was interviewed yesterday on the BBC One O’clock News, ITV Evening Bulletin, and BBC Radio 5 Live Drive.
ECB warns over banks’ profitability
Peter Praet, the European Central Bank’s Chief Economist, has warned that increasing levels of bad loans and higher costs mean Europe’s banks are at risk of a “severe profitability shock” (FT, £, online only). Speaking at a conference in Brussels, Mr Praet also called for new rules to address risks posed by low interest rates (Reuters). He said: “Interest rate risks in banking is something that is still missing in the regulatory environment and should be a priority in the present context.”
Financial groups warned over cyber-attack insurance
Insurance broker Marsh has warned that financial services companies greatly overestimate how much insurance they have against a cyber-attack (FT, £, p18). Mark Weir, the company’s UK Head, said 50 per cent of financial executives surveyed last year thought they had insurance against a cyber-attack, but only 10 per cent were actually covered. A report produced by Marsh on behalf of TheCityUK called for tax breaks to boost investment in cyber defences.Read more
CMA publishes provisional remedies for retail banking market
The Competition and Markets Authority has this morning published its provisional decision on remedies for the retail banking market. The report states that banks should cap unauthorised overdraft fees and warn customers before they go overdrawn (BBC News). Alasdair Smith, Chair of the Retail Banking Investigation, told BBC Radio 4’s Today programme: “The banking market is not working well for customers or for small businesses at the moment, primarily because it’s very hard for customers to work out what their bank really costs them.” Paul Pester, the Chief Executive of TSB, said: “Today’s report falls a long way short of introducing the radical reforms the banking industry needs.” BBA Chief Executive Anthony Browne said: “The industry supports the CMA’s aim to deliver good outcomes for customers as banks are pro-competition. The package of measures outlined in the provisional findings give individual customers and businesses greater power to choose the product and services that are best for them.”
Banks prepare for EU referendum outcome
The Times (£, p35) reports that the Bank of England is holding “daily conversations” with banks to ensure they could cope with any market volatility in the event of a vote in favour of Britain leaving the EU. Andrew Bailey, Deputy Governor of the Bank of England and Chief Executive of the Prudential Regulation Authority, said all banks were looking closely at their plans ahead of the June referendum. Highlighting that there has been no sign of stress so far, Mr Bailey added: “We have not seen any evidence of sterling funding issues at all. Generally the challenge for banks these days is to get a return on funding rather than finding funding.”
FCA calls for greater competition in mortgage market
The Times (£, p38) reports that the Financial Conduct Authority has warned that lenders are at risk of becoming too reliant on computers to decide who should be accepted for a mortgage. The FCA said it accepts that lenders have engaged positively with its responsible lending rules, but argued there is room for improving consumers’ ability to make better choices about their mortgage deals. FCA Director of Strategy and Competition Christopher Woolard said: “For millions of consumers a mortgage is one of the biggest financial transactions they will enter into in their lifetime so it’s encouraging to see firms embrace the spirit and the letter of our rules. At the same time, there appears to be more to be done to improve competition in the mortgage sector” (FT, £, online only).Read more
Banks risk losing out from apps revolution
The FT (£, p3) reports that UK banks could lose over £1 billion in payment revenues over the next few years as a result of growing competition from mobile apps developed by retailers. A report from consultancy Accenture finds that the apps will erode about 33 per cent of online debit card transaction volumes by 2020, and 10 per cent of credit cards. Jeremy Light, a Managing Director at Accenture, said UK banks were “at a critical juncture” and faced “a defining moment at which changes in the payments industry are forcing them to make a key strategic decision: whether to become a banking ‘utility’ supporting other providers’ customer-facing solutions, or an ‘everyday bank’ playing a central role in customers’ daily lives”.
CMA to publish provisional remedies for retail banking market
The Times (£, p41) reports that UK banks are to be ordered by the Competition and Markets Authority to fund a competition for technology companies to develop new ways to help small businesses to change accounts. The search for the best ideas from financial technology companies is expected to be run by the charity Nesta. The Sunday Times (£, B1) reports that the Competition and Markets Authority will require banks to fund a price-comparison service that will make it easier for customers to find cheaper overdrafts and loans. The CMA’s final recommendations are due out by 12 August. Separately, new research from Triodos Bank has found that 77 per cent of UK adults say that greater competition from challenger banks should be encouraged (City AM, p2).
Bank of England warns over household debt
The Bank of England’s Governor Mark Carney has warned that the scale of the UK’s household debt is at risk of compounding an economic downturn (Daily Telegraph, B1). Speaking on the BBC’s Andrew Marr Show on Sunday, Mr Carney said: “The challenge is to ensure that not too many members of the British public are over-borrowed because that will make a downturn that much more severe.” Last month, the Office for Budget Responsibility raised its forecast for household borrowing this year from £41 billion to £58 billion.Read more
BBC looks at UK bank branch closures
Research carried out by BBC News has found that more than 600 bank branches have closed across the UK in the last year. Parts of Wales, Scotland and the South West of England lost the most branches per head of population. The data – obtained by BBC Breakfast – came from the big six High Street banks: Lloyds, Royal Bank of Scotland, HSBC, Santander, Barclays and the Co-operative. BBA Chief Executive Anthony Browne was interviewed live on BBC Breakfast this morning at 7.50am and 8.45am on the story.
Public Accounts Committee criticises CMCs
The Public Accounts Committee has published a report stating that millions of customers who were mis-sold Payment Protection Insurance should have got an extra £5 billion that went to claims management companies (BBC News). Meg Hillier, Labour MP and the PAC’s Chair, said: “The problem of claims management companies taking too much of the compensation intended for victims of mis-selling was entirely predictable […] Collectively, the public bodies involved in the PPI scandal – the Treasury, the Ministry of Justice, the FCA and the Ombudsman – have been too slow in taking responsibility for this situation, and too passive in allowing it to happen” (Telegraph, p1).
Rate rise back on cards as Bank cuts forecasts
The Times (£, p37) reports that the Bank of England has cut its forecasts for UK economic growth, and signalled that interest rates may rise earlier than expected. It also forecast that inflation would rise above the two per cent target within two years. The forecasts were complicated somewhat by uncertainty brought about by the UK’s EU referendum. The Bank of England’s Monetary Policy Committee warned that “a vote to leave the EU could materially alter the outlook for [economic] output and inflation . . . [which] could lead to a materially lower path for growth and notably higher path for inflation” (BBC News).Read more
PM to announce corporate liability reforms
The Times (£, p1) reports that banks and multinationals will be held criminally responsible for employees found to have embezzled funds, laundered money, and helped clients evade tax under reforms to corporate liability laws to be announced today. The Prime Minister is expected to outline a new criminal offence for businesses which fail to prevent their employees from colluding in fraudulent activity at an anti-corruption summit in London. Writing in the Guardian (p32), David Cameron also reveals plans to require all foreign companies buying property in the UK to disclose their true owner in a public register for the first time.
Banks meet to discuss Iran and US sanctions
The FT (£, p2) reports that major European banks are to resist political pressure to do more business in Iran when they meet John Kerry, the US Secretary of State, and Philip Hammond, the Foreign Secretary, today. The newspaper cites concerns over remaining US sanctions encompassing Iran. The Foreign Secretary said: “We want our banks to be able to support British companies working in Iran.” Standard Chartered told the FT it would be “happy to share the practical and legal considerations behind our stated position regarding Iran: we will not accept any new clients who reside in Iran, or which are an entity owned or controlled by a person there, nor will we undertake any new transactions involving Iran or any party in Iran”.
SWIFT tells banks to secure systems
SWIFT has told banks that they are responsible for securing computers used to send messages over its global network (Reuters). A letter from the messaging service said: “As a SWIFT user you are responsible for the security of your own systems interfacing with the SWIFT network and your related environments. We urge you to take all precautions.” The statement comes after $81 million was stolen from a Bangladesh central bank account at the New York Fed in February.Read more
Contactless payments soar over past 12 months
Visa Europe has reported that contactless payments tripled to 153 million transactions in April 2016 from 51 million in the same period the year before (City AM, p13). Richard Koch, Head of Policy at the UK Cards Association, said: “With contactless cards, rather than cash, becoming the preferred way to pay for smaller purchases, there has been a dramatic drop in the average value of a card transaction in recent years”. The Times (£, p40) notes that Visa also reported that more than three billion contactless transactions have been made in Europe over the past year.
Bank of England warns over cyber risks
Will Brandon, the Bank of England’s Chief Information Security Officer, has highlighted cyber attacks as an ongoing danger for firms (Bloomberg). In a speech at the City Week conference, Mr Brandon identified staff as a potential source of cyber vulnerability. He said: “Attackers tend to exploit the credulity or laxity of their targets to achieve their ends. And while some can and do develop highly technical attacks, for the most part these are facilitated in some way by people or process weaknesses in their victims’ defences.” Separately, City AM (p1) reports that cyber experts at the Open University have warned that British businesses are not doing enough to protect their systems.
ECB asks eurozone banks to detail EU referendum plans
Reuters reports that the European Central Bank has asked large eurozone banks to outline how they are preparing for Britain potentially leaving the European Union. An ECB spokesman said: “ECB Banking Supervision is engaging with the relevant banks to ensure they are adequately assessing the risks and are prepared for all possible outcomes”. The report cites a source at a large German bank that states the ECB had asked about its exposure to sterling, as well as its wider exposure to Britain in its fixed income, equities and loans portfolios.Read more