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.
ECB rethinks future of cocos
The FT (£, p17) reports that the European Central Bank is reviewing its approach to contingent convertible bonds. ‘Cocos’ have been used to strengthen banks’ capital levels but concerns about losses being forced on investors sparked market volatility in February. Senior executives in the banking sector have told officials at the ECB’s Single Supervisory Mechanism that the rules for ‘cocos’ are too complicated and they could undermine a bank’s financial position rather than strengthen it in a crisis. Danièle Nouy, Chair of the ECB’s supervisory board, last month called for a change in the law to resolve uncertainty around the instruments.
Bosses ‘must disclose how pay compares to their staff’
The Times (£, p35) reports that Legal & General has called for company chief executives to be forced to disclose how many times larger their pay is than the average of their employees. It wants pay ratios to become mandatory at UK listed companies, amid concerns over rising pay levels for senior executives. Sacha Sadan, Legal & General’s Director of Corporate Governance, said he would be pushing for mandatory publication of ratios with the Investors’ Association and other bodies, saying the widening gulf between executive pay and average earnings was becoming a political and social issue as well as a concern for shareholders. The Guardian (p21) notes that the US Securities and Exchange Commission is expected to require publication of such information from next year.Read more
Government tightens money laundering rules
New anti-money laundering rules announced by the Government yesterday will require people who are suspected of criminal activity to explain before any charges how they came by their assets (FT, £, p4). The new action plan will also increase the responsibility of businesses, including banks, to report suspicious financial activity and use special measures when dealing with those designated as being “of concern in relation to money laundering”. Home Secretary Theresa May said that Britain’s financial system was “at risk of being undermined by money laundering, illicit finance and the funding of terrorism”, adding that the plan would “send a clear message that we will not tolerate this”.
Homebuyers rush to beat stamp duty changes
There was a surge in mortgage lending and house sales ahead of an increase in stamp duty on second homes, according to figures from HM Revenue & Customs (Guardian, p30). Over 161,000 property sales of £40,000 or more were registered during March, 77 per cent more than in March 2015. Separate data from the Council of Mortgage Lenders showed gross lending was up 59 per cent on last year. Lucian Cook, Head of Residential Research at property firm Savills, said: “This is clearly a one-off event and such volumes are unsustainable against a backdrop of economic uncertainty and the prospect of an increased regulatory environment for buy-to-let borrowing.”Read more
Crackdown on offshore owners of UK property
The Prime Minister is expected to today announce a new public register of offshore companies that own property (Times, £, p1). Only foreign companies listed on the register would be able to buy and sell property in the UK. The measure is designed to increase transparency in the market as well as help tackle money laundering and tax evasion. Separately, the Home Office will today put forward proposals on new “unexplained wealth orders” and powers (BBC News). This would allow authorities to designate a company as being of “money laundering concern”, which would require banks, solicitors and accountants to take special measures when dealing with them.
Investigations into Panama Papers continue
The US Justice Department has opened a criminal investigation into allegations of tax avoidance following the publication of the leaked Panama Papers (BBC News). The US Attorney for Manhattan, Preet Bharara, made the announcement in a letter to the International Consortium of Investigative Journalists. Separately, the Financial Conduct Authority has warned that prosecutions over the Panama Papers will be challenging (FT, £, p4). Mark Steward, Head of Enforcement at the Financial Conduct Authority, said: “This is very difficult territory. No one should underestimate the task. Most [authorities] are set up to do a domestic job, not to do things internationally. Collaboration is easier said than done.”
Financial services exports to climb
Exports from the UK financial services industry will more than double to over £100 billion over the next ten years, according to a new report from Barclays (City AM, p14). The City currently exports £57 billion of services. The report also finds that the value of all goods and services the UK sells overseas will rise to £633 billion by 2020 – below the Government’s £1 trillion target. Matt Tuck, Head of Global Transaction Banking at Barclays, said: “The UK will likely see slower growth in goods and services exports over the next 10 years, amid a global slowdown in trade.”Read more
MPs secure veto over FCA Chief Executive
The Treasury Select Committee has secured new powers over future appointments to the position of Chief Executive of the Financial Conduct Authority (Telegraph, B5). The Committee will be granted hearings with potential appointments ahead of formally taking on the position. They will also be able to refer the appointment for a full vote in the Commons. Andrew Tyrie, the Committee’s Chairman, said: “Parliament will now be better placed to safeguard the FCA from interference – or the perception of interference – by the Treasury or Treasury Ministers.” The changes were criticised by Simon Morris, a Partner at law firm CMS, who said: “Needing Committee approval will merely politicise the appointment, requiring the candidate to field grandstanding questions with crowd-pleasing soundbites.”
More consumers switching bank accounts
The Sun (p39, paper only) says payments body Bacs has revealed that a record number of bank customers switched current accounts last month. The March switching figures were the highest recorded monthly figure since the current account switching service was launched in September 2013, and almost double the 74,723 switches seen in January. The Telegraph (B1) says more than 2.8 million customers have now used the switching service. Anne Pieckielon from Bacs said: “Market developments are driving changes, and our recent communications campaign will also have been a contributing factor in the higher levels of switching.”
Concerns over contactless cards
The Daily Mail (p17) reports that research from consultancy firm Future Thinking has found that nearly a third of shoppers do not trust contactless cards. Despite their growing popularity, some 31 per cent of shoppers never use contactless cards because of concerns over security. Some 43 per cent of the over-55s never make contactless payments compared with just 22 per cent of under-35s. The Daily Telegraph (p12, paper only) adds that Which? Chief Executive Richard Lloyd said nine in 10 of his members owned a contactless card but 40 per cent had not used it for at least a year, opting instead for chip-and-pin due to fears of potential fraud. The BBA’s World of Change report found that in 2014 there was £153,000 of fraud on all contactless cards, which represented just 0.007 per cent of all spending on these cards.Read more
Contactless payments via mobile phones to outstrip cash
Contactless payments via mobile phones are set to outstrip cash within a decade, according to a new survey from the Co-op (i, p43). The Co-op stated that while customers still used cash for 65 per cent of all transactions, contactless payments had trebled in a year as more banking cards with the technology had come into use. In response, a Royal Mint spokesman said: “The demise of cash has been predicted for a long time but it remains the currency option the general public turns to for confidence, convenience and security. Cash is still the most prominent payment method for UK consumers and global demand for coins is as strong as ever.” (Telegraph, p12).
One in four executives believes ‘corruption and bribery is rife in UK’
A survey of senior executives by EY shows that more than one in four of respondents in the UK believe corruption is widespread in British companies, up from 18 per cent a year ago (Guardian, p25). Across the 62 countries from which executives were polled, the average figure stood at 39 per cent. The survey also found that half of all respondents were prepared to justify unethical behaviour to meet financial targets. The EY report says: “Bribery and corruption continue to represent a substantial threat to sluggish global growth and fragile financial markets. Despite increased regulatory activity, our research finds that boards could do significantly more to protect both themselves and their companies.”Read more
Cheque pay-in technology faces delay
The Telegraph (p3) reports that it will be another year before customers can pay in cheques via their mobile phones. The newspaper states that a launch of the new technology had been expected in July but progress has stalled due to difficulties aligning different systems across banks. It is now expected to be launched just ahead of the legal deadline of October 2017. More than 500,000 Barclays customers have signed up to its pilot scheme, while Lloyds also ran a trial for its small business customers and its own staff. A Barclays spokesman said: “We are ready to work with any bank to make cheque imaging an industry wide service – because we continue to believe that this digital technology can make banking more convenient for customers.”
Treasury publishes analysis on EU referendum
BBC News reports that the Treasury has today published research examining the potential impact of the UK voting to leave the European Union. The Treasury’s analysis states that Britain’s national income could be six per cent smaller by 2030 in the event of a ‘leave’ vote. The BBC reports that Vote Leave dismissed the analysis as “just the latest erroneous pro-EU economic assessment published by the government over the last 40 years”.
New survey highlights gender divide
A new survey by Financial News has found that almost two thirds of women working for financial institutions in Europe feel that their gender has impeded their careers (Times, £, p36). An increasing proportion of women felt that being female had helped their careers — 12 per cent, up from four per cent in 2012 — but nearly all said that years of publicity about improving gender balance in finance had led to no change or only moderate change in their workplaces. Brenda Trenowden, Global Chairwoman of the 30% Club, described the results as “very disappointing”. The BBA published a report on Diversity and Inclusion in Banking last November.Read more
European nations launch tax crackdown
Five leading European nations have agreed to work together to identify the ultimate “beneficial owners” of companies and trusts in response to the Panama Papers (BBC News). The UK, Germany, France, Italy and Spain will share information on owners of businesses and trusts. Speaking at the annual International Monetary Fund spring meeting in Washington, Chancellor George Osborne said: “Britain will work with our major European partners to find out who really owns the secretive shell companies and trusts that have been used as conduits for evading tax, laundering money and benefitting from corruption” (Telegraph, B1). The group is now pushing for the rest of the G20 to provide similar data.
Referendum campaign period begins
There is widespread coverage of the official start of the EU referendum campaign today. BBC News reports that there will be a number of events and rallies from leading campaigners on both sides. The official campaigns – Stronger In and Vote Leave – will be allowed to spend up to £7 million. They will also receive £600,000 in public funds.
The BBA last month published the results of its membership survey on the EU referendum. Almost 60 per cent of banks that responded to the survey on the EU referendum believe Brexit would have a negative impact on their organisation, with 26 per cent saying the impact would be significant. The majority (63 per cent) of those who responded said that their bank does not hold a position on whether or not the UK should remain in the EU. As a result, the BBA as an organisation has taken a neutral position.Read more
FCA announces Tracey McDermott departure
Tracey McDermott, the Financial Conduct Authority’s Acting Chief Executive, will leave the regulator once Andrew Bailey takes over in July (FT, £, p2). John Griffith-Jones, the FCA Chairman, said: “Tracey has done a terrific job leading the FCA over the last seven months, building on the enormous contribution she has made in her various roles over the previous 15 years.” Separately, the FCA published an investment and corporate banking market study (City AM, p4, paper only). Anthony Browne, the BBA’s Chief Executive, said: “It is vital London sets the gold standard in financial markets and it’s encouraging that the FCA has found clients are getting the service they want. Banks will work with the FCA to continue to ensure the IPO process is effective, competitive and works for all market participants.”
IMF warns of new financial crisis
The International Monetary Fund has warned that the global economy is at risk of a new financial crisis (Guardian, p23). In its global financial stability report, the IMF stated that approximately 15 per cent of banks in advanced economies faced significant challenges in attaining sustainable profitability without reform, rising to one third in the euro area. The IMF also said “financial and economic stagnation” could take hold unless governments prevented a “pernicious feedback loop of fragile confidence, weaker growth, low inflation and rising debt burdens” from taking hold (Telegraph, B1).
Banks’ profitability under pressure
A new report from KPMG has found that profitability in the banking sector dropped sharply in 2015 while redress costs jumped 35 per cent (City AM, p1). KPMG’s Banking Partner Tim Howarth said: “It’s clear that banks are still fighting the problems of the past […] Banks are finding it harder to make money while the costs just keep coming.” Mr Howarth added that he hoped to “see more detailed and structured investment in technology” by banks as they strive to cut costs (FT, £, p2).Read more
Banks introduce innovative security measures
A feature from BBC News explores how banks are developing new security measures to protect customers from fraudsters. Biometric technology such as voice recognition and fingerprint identification is increasingly being rolled out. Tom Patterson from tech consultancy Unisys said: “[…] whilst biometrics provide great opportunities to deliver frictionless services to customers, there is no silver bullet in banking security.” A total of £755 million was lost through financial fraud in the UK last year.
FCA publishes investment and corporate banking market study
The Financial Conduct Authority has published an interim report of its investment and corporate banking market study, as well as a discussion paper on the initial public offering process, this morning. Reuters reports that the FCA is calling for an end to certain contractual clauses that could limit clients’ choice of financial services providers in future transactions, such as IPOs on the stock market. Christopher Woolard, Director of Strategy and Competition at the FCA, said: “Our study shows that many investment and corporate banking clients are getting a service they want, but we have also identified some areas where improvements could be made.”Read more
Fintech firms raise funds to challenge banks
Technology companies raised almost $1 billion of investment last year to compete with UK banks, according to a report from Accenture (FT, £, p4). The bulk of the investment raised went to fintech firms that are seeking to directly challenge traditional lenders. This trend is in contrast to the US, where 83 per cent of investment went into fintech companies seeking to collaborate. The report also showed that banks participated in less than 10 per cent of all reported fintech deals, totalling less than $5 billion. Separately, City AM (p6) notes that the Financial Conduct Authority has launched a ‘sandbox’ project for fintech firms, which will attempt to boost innovation in a similar way to already established tech accelerators and incubators.
Financial abuse against the elderly on the rise
An investigation by the Times (£, p1, p6-7) focuses on financial abuse against the elderly. It finds that the number of theft and fraud cases involving the elderly doubled in a year. Ray James, President of the Association of Directors of Adult Social Services, said: “Theft is always reported to the police but whether or not they prosecute comes down to the availability of evidence. The combination of vulnerable elderly people who have informal arrangements with carers to get them cash and who know their PIN makes it hard to get evidence.” The newspaper also highlights concerns that reforms to Lasting Power of Attorney have actually left elderly people more vulnerable to fraud (Times, £, p7).Read more