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.
BBA publishes membership survey on EU referendum
The BBA has today published the results of its membership survey of 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 (Reuters). Of those who had a position, 98 per cent said the UK remaining in the EU was in the bank’s best interest.
Anthony Browne, BBA CEO said: “Our survey shows there is almost no appetite from banks for the UK to leave the EU. The majority of our members who responded to the survey also think that if the UK were to leave the EU, their business would be harmed.” 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 on whether the UK should vote to remain in or leave the EU (FT, £, online only).
Metropolitan Police calls for banks to review fraud compensation
Sir Bernard Hogan-Howe, Commissioner of the Metropolitan Police, has stated that victims of online fraud should no longer be refunded by banks if they fail to protect themselves (Times, £, p1). Sir Bernard called for the public to be incentivised to update anti-virus software and ensure passwords were safe. He said: “If you are continually rewarded for bad behaviour you will probably continue to do it but if the obverse is true you might consider changing behaviour.” Sir Bernard’s comments were criticised by consumer groups. James Daley, of Fairer Finance, said: “Removing the burden of responsibility to compensate their customers would only discourage them [banks] from investing in security.”
Mayor of London questioned by Treasury Select Committee
Boris Johnson has told MPs that “there aren’t any good economic arguments for staying in the European Union” (Daily Mail, online only). Appearing before the Treasury Select Committee, the Mayor of London stated that several leading bankers were in favour of ‘Brexit’ and that he believed it would not damage London’s standing as a financial centre. He also argued that polls showing more Londoners want to stay in the EU were no “impediment” to him backing the leave campaign (Evening Standard, p8). Andrew Tyrie, the Committee’s Chairman, criticised Mr Johnson for only offering a “busking and humorous” approach to vital questions about Britain’s future.Read more
Challenger banks raise concerns over Senior Managers Regime
Challenger banks have warned that a one-size fits all approach to regulation – particularly the Senior Managers Regime – is undermining efforts to boost competition in the sector (Reuters). Senior executives at these banks highlighted how the SMR is driving up pay across the sector for non-executives. Paul Lynam, Chief Executive of Secure Trust Bank, said: “[Challenger banks] are having to pay more to attract NEDs to their boards due to the competition with the larger banks for the limited pool of NEDs with relevant experience and willingness to join a bank’s board.” Shawbrook Chief Executive Steve Pateman added that the compliance cost of the SMR “was huge, both relative to our size and relative to the damage or harm that we could do to the economy if we got it wrong.”
Moody’s warns on profitability across banking sector
A new report from Moody’s claims that profitability in the banking sector will continue to be hit by misconduct fines, compensation and related legal costs for at least another two years (FT, £, p23). Litigation and misconduct charges climbed 40 per cent to £15 billion in 2015, compared with a year earlier. Laurie Mayers, an Associate Managing Director at Moody’s, stated that the significant rise in conduct litigation charges in 2015 show that they “continue to present considerable tail risk” for the sector (City AM, p5).Read more
Women in Finance review published
There is widespread coverage of the publication of a review of women in finance. The Times (£, p2) reports that the review recommends that financial service firms link parts of remuneration packages for executives to their gender balance targets. Virgin Money Chief Executive Jayne-Anne Gadhia, who led the review, said: “It’s very encouraging that a number of major financial services companies have already agreed to implement our recommendations.” Newton Investment Management chief exec Helena Morrissey, who founded the 30% Club, told City AM (p1) she was “concerned the focus on bonuses may backfire”. The FT (£, online only) quotes the BBA’s Chief Executive Anthony Browne as saying “more needs to be done” to ensure more women reach the top of the corporate ladder.
CMA urged to provide more support for challenger banks
A group of challenger banks has called on the Competition and Markets Authority to press the Treasury to review the incoming corporation tax surcharge on banks (Telegraph, B4). In a letter to the CMA, the ten challenger banks argue the surcharge undermines competition in the sector. They also call for the CMA to “go beyond its current draft remedies and make concrete proposals addressing the core underlying impediments to competition around capital, access to funding, access to payment systems and proportionate regulation.” Meanwhile, Llloyds Banking Group has warned that some key parts of evidence used in the CMA probe are “wholly unreliable” and “profoundly unsuitable.”
New reports highlights potential impact of ‘Brexit’
UK banks would be negatively affected by restrictions on cross-border business if Britain left the European Union, according to a report from lobby group Association for Financial Markets in Europe (Reuters). However, the Telegraph (B1) notes the AFME report states that if the UK remained in the European Economic Area in the event of ‘Brexit’, banks based in the UK would still have access to EU markets on similar terms to today. The newspaper also cites an analysis from credit ratings agency Moody’s, which says: “Although there are clear downside risks to the City of London’s standing as a global financial central in our central scenario we do not see Brexit materially damaging its strong position.”Read more
Bonuses could be linked to gender diversity targets
The Sunday Times (£, B1) reports that a new gender equality review will recommend that senior executive have their bonuses cut if they fail to meet targets for diversity. The review, which has been led by Virgin Money Chief Executive Jayne-Anne Gadhia, is scheduled to be published on Tuesday. Women now occupy more than a quarter of non-executive roles at FTSE 100 companies but the proportion of female executives is considerably lower. Separately, Francesca McDonagh, who runs HSBC’s retail operation in the UK, said female representation at senior levels of the industry is “quite shocking” (Daily Mail, p66).
CBI warns on ‘Brexit’ impact
The Guardian (p1) reports that the Confederation of British Industry has published a new report that suggests ‘Brexit’ could lead to 950,000 job losses and leave the average household £3,700 worse off by 2020. Carolyn Fairbairn, the CBI’s Director General, said: “This analysis shows very clearly why leaving the European Union would be a real blow for living standards, jobs and growth.” The analysis was rejected by Vote Leave’s Matthew Elliott, who argued: “The EU funded CBI are desperate to recreate the same scare stories they spread when they urged Britain to scrap the Pound and join the Euro. They were wrong then and they are wrong now” (Sun, p2).Read more
Chancellor “running out of wriggle room” on surplus target
The Institute for Fiscal Studies has warned that the Chancellor has just a 50 per cent chance of meeting his £10 billion surplus target on the public finances by 2020 (BBC News). The think tank warned that further spending cuts or tax rises could be required if the economy slowed down, meaning the Chancellor “is running out of wriggle room”. IFS Director Paul Johnson also expressed concern about downgrades to the UK’s potential productivity growth (Guardian, p6). He said: “If the OBR is right about that we should all be worried. This will lead to lower wages and living standards, not just lower tax revenues for the Treasury.”
Consumers hit by rise in fraud
Fraudsters managed to steal £755m from British consumers and financial institutions during 2015, according to figures published by Financial Fraud Action UK (Times, p14). This represents a 26 per cent increase on the year before and was largely driven by a jump in remote banking fraud, which typically sees fraudsters posing as bank staff in a bid to con people into sending them money via online banking. Katy Worobec, Director of Financial Fraud Action UK, said: “Everyone should be cautious about giving out personal or financial information, and organisations holding data need to do all they can to protect people’s private details.” The figures show bank and card company security systems prevented the equivalent of £7 in every £10 of potential fraud (Daily Mail, online only).
Challenger banks hoping for loosening of capital rules
Challenger banks have welcomed the Chancellor’s pledge in the Budget to “pursue more proportionate capital requirements for small banks and building societies in the EU” (Telegraph, B5, paper only). Paul Lynam, Chief Executive of Secure Trust, said: “In the US, the Basel requirements are only imposed upon the systemic banks, and the smaller banks are regulated on a more bespoke basis. In Europe, the European Banking Authority mandates that all of the 28 states have to impose Basel in full.” The Times (£, p51) also notes that Mr Lynam has also urged the Competition and Markets Authority to revisit its earlier recommendations. Separately, City AM (p1) splashes on the increasing success of challenger banks due to low interest rates and changes to the regulatory regime.Read more
Budget fallout dominates headlines
The Chancellor described his eighth Budget yesterday as putting “the next generation first”, with most newspapers splashing on a new ‘sugar tax’ on fizzy drinks (Sun, p1). Other measures announced by George Osborne included cutting corporation tax to 17 per cent by 2020 (City AM, p17) and restricting the ability of banks to offset profits against past losses when calculating corporation tax payments (Telegraph, B4, paper only). The BBA’s Chief Executive Anthony Browne called for certainty on tax so banks can plan for the long-term: “Banks contributed £31.3 billion to Treasury coffers in 2014. The changes to the corporation tax rules on losses are the sixth change to banking taxes in five years.”
The Chancellor also set out plans for selling £17.5 billion of former Bradford & Bingley loans over the next two years (FT, £, p13). Separately, the Financial Conduct Authority will assume oversight of about 1,700 claims management companies from the Claims Management Regulator, part of the Ministry of Justice, and make their leadership subject to the Senior Managers Regime (FT, £, online only). A new ‘Lifetime Isa’ was also announced to help savers buy a first home or save for retirement (Telegraph, p7).
Federal Reserve keeps US interest rates on hold
The US Federal Reserve has decided to hold interest rates at between 0.25 per cent and 0.5 per cent (BBC News). The US central bank last raised rates in December, and at the time said it expected to raise rates four times in 2016. It has now revised this forecast down to just two further rate rises this year. Chairman of the Federal Reserve, Janet Yellen, said: “Proceeding cautiously will allow us to verify that the labour market is continuing to strengthen given the economic risk from abroad.” The Telegraph (B9) notes that core inflation in the US is at its highest level in four years, heightening expectations of an interest rate hike.Read more
Chancellor prepares to deliver Budget
There is widespread speculation about the measures that the Chancellor will announce in the Budget later today. The FT (£, p1) states that George Osborne will admit he has broken two out of three of the fiscal rules he set down after last year’s election due to a weaker economic outlook. The newspaper also reports that he will announce the Money Advice Service is to be scrapped. Meanwhile, the Times (£, p1) notes that local education authorities are to be dismantled and all English state schools required to become academies by 2022.
SFO drops foreign exchange market investigation
The Serious Fraud Office has closed a criminal investigation into allegations of price-rigging in the foreign exchange market (BBC News). In a statement, the SFO said that despite there being “reasonable grounds to suspect the commission of offences involving serious or complex fraud” it had concluded “that there is insufficient evidence for a realistic prospect of conviction”. The Times (£, p35) notes that the US Department of Justice and the Financial Conduct Authority are continuing their investigations into the alleged rigging.Read more
New Basel Committee rules could push up cost of mortgages
The Council of Mortgage Lenders has warned that mortgages for homeowners and buy-to-let landlords could become more expensive under new rules being imposed by international regulators (City AM, p15). The CML said new rules being introduced by the Basel Committee would require lenders to hold bigger capital cushions against home loans. The trade body claimed that “capital requirements that are excessive relative to the risk of the underlying assets are likely to affect the cost and availability of mortgages.” The Guardian (p20) notes that the Bank of England said in December that it was reviewing the buy-to-let market with a view to taking action to rein in such lending.
Germany calls for MiFID II delay to be reviewed
The German Finance Ministry has said proposed delays to MiFID II rules do not go far enough in giving nations and banks time to adjust (Bloomberg). In a leaked paper, German policymakers expressed concerns that the delay does not take into account uncertainty over when the rules will be finalised. It cites “significant delays” and technical challenges that call for a longer phase-in process, including a nine-month transition period for nations to adapt the EU rules into national law. Verena Ross, a director at the European Securities and Markets Authority, said: “Our problem is that we can’t start designing the computer systems” […] “We are waiting to get some clarity from the EU Commission – if we don’t get some clarity soon, time is running out.”
CBI backs EU membership
The Telegraph (B1) reports that the Confederation of British Industry has said a “clear majority” of its members believe EU membership benefits their businesses and the economy. Just five per cent of the CBI’s members said they would be better off outside the EU. However, the CBI’s Director General Carolyn Fairbairn has said the business group has no plans to formally register with the Electoral Commission. Vote Leave criticised the methodology of the CBI’s poll for ignoring “the view of the vast majority of British businesses in favour of a few multinationals” (Times, £, p37).Read more
Chancellor looks to close gap in the public finances
The newspapers speculate that George Osborne will announce a number of new spending cuts and revenue raising measures in the Budget. The FT (£, p1) reports that the Chancellor will announce £4 billion of new spending cuts on Wednesday. The newspaper also highlights revenue from bank taxation could be significantly higher than forecast. A BBA spokesperson said: “We hope there will be more transparency around the surcharge, as government estimates are quite wide of the mark of what the banks are actually paying.” Separately, the Government has today announced a new Help to Save scheme and plans to increase the the national minimum wage from October (BBC News).
Financial Advice Market Review published
The FT (£, online only) reports on the publication of the Financial Advice Market Review this morning. The newspaper notes the Government and Financial Conduct Authority have found there is a “clear need” for them to intervene to address concerns about the affordability and accessibility of financial advice and guidance, particularly regarding the ‘advice gap’. The FCA has found that two thirds of retail investment products in Britain are now purchased without the customers having taken professional advice, up from just one third in 2007. The FAMR has recommended the government narrow the definition of regulated financial advice to leave firms more scope to offer guidance to customers (Guardian, online only).Read more
ECB announces new stimulus measures
The European Central Bank has cut its main interest rate to a new low as part of a package of measures intended to revive the eurozone economy (BBC News). The ECB also decided to expand its quantitative easing programme from €60 billion to €80 billion a month. The FT (£, p1) notes that Mario Draghi, ECB President, said that while rates would stay low for “an extended period of time”, he did not anticipate taking them deeper into negative territory, partly because of the impact on banks. The Times (£, p41) quotes Investec Economist Philip Shaw criticising Mr Draghi for shooting “down his own bazooka”, adding: “To us this is the worst of both worlds, taking the deposit rate further below zero but with verbal interventions unwinding positive market effects.”
Buy-to-let loans surge ahead of tax rise
The Guardian (p30) reports that new data from the Council of Mortgage Lenders shows that the number of buy-to-let mortgages rose 22 per cent in January as landlords rushed to pre-empt upcoming tax changes. Around 9,500 loans were taken out by buy-to-let borrowers in the month, up from 7,800 in January 2015. The Times (£, p49, paper only) notes that the CML figures show remortgaging also rose, with the amount lent up to £5.8 billion, a 32 per cent year-on-year rise. The number of first-time buyers rose 14% to 21,400. Separately, the estate agency Savills has claimed that the property market will slow over the coming months due to the EU referendum and changes to stamp duty (Times, £, p49).Read more