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.
Basel Committee to agree 75% output floor
Politico (£, online) reports that the BCBS will agree a 75% output floor for bank capital. Citing an internal document sent to governors and heads of supervisors ahead of its June meeting, Politico writes that, “support for an agreement on so-called Basel III standards has increased further… the vast majority of Committee members support an output floor of 75%.”If agreed the proposed floor is expected to be introduced on January 1, 2021 at 45%, rising by 5% every year until January 1, 2027.
Politico also notes that the committee is also considering a, “leverage ratio buffer surcharge for the most systemically important banks from 2021 [and reviewing] the impact of the leverage ratio on client clearing”. Read BBA Executive Director, Prudential Regulation and Risk Simon Hills’ blog on why regulators must take a consistent approach to introducing the new requirements.
Prime Minister ‘to recognise the City’s needs’ in Brexit talks
In an interview with City AM, Prime Minister Theresa May has said that, if elected, her Government would recognise the needs of the city and financial services in Brexit negotiations (City AM, p7). Commenting on the importance of an implementation period, she argued that it, “isn’t in anybody’s interests to simply walk towards a position where there’s a cliff edge…people will need a time to adjust”.Read more
Bank of England publishes borrowing data
Banks and building societies approved 118,370 residential mortgages in April, falling for the third consecutive month according to Bank of England Data. The Times (£, p40) attributes this to a number of factors, including changes to stamp duty and mortgage interest tax relief. EY Item Club Senior Economic Advisor Martin Beck, said “recent data on house price inflation and survey evidence on housing transactions have pointed to a distinct lack of energy in the market”. The BBA’s latest high street lending data is available here.
Debate over EBA reforms after Brexit
Speaking at a banking conference in Berlin yesterday German Chancellor Angela Merkel called for the EBA to be relocated to Frankfurt after Brexit, highlighting that Brexit “must come at a cost” to the UK (BBC Radio 4 Today’s Programme). Reuters (online) reports that the EBA has criticised the European Commission’s proposal for it to be merged with EIOPA and has asked for more powers, noting that, “since the European Central Bank, which has far greater resources, began supervising banks in the euro zone, the [EBA] has suffered a loss of visibility”.Read more
EU agrees securitisation package
Following the seventh round of discussions, the European Commission, Parliament and Council reached a political deal on Tuesday night to revive the EU’s securitisation market (Politico, £, online). Valdis Dombrovskis, Vice-President of the European Commission, remarked in response, “This agreement marks another big step towards the creation of a capital markets union…It will free up bank lending so that more financing can go towards supporting our companies and households”. Read the full press release on the agreement here.
Consumer confidence levels in the UK and Europe
British consumer confidence grew in the month of May, according to GfK’s consumer confidence index (City AM, p1, online). Optimism about personal finances and the wider economy prompted consumers to make future plans and shop, as retail sales jumped ahead of expectations. Paradoxically, euro-area confidence dropped unexpectedly in May, supporting European Central Bank President Mario Draghi’s call for sustained monetary policy support in the region (Bloomberg, online).
Global economic growth gathering pace
According to credit rating agency Moody’s, global economic growth is picking up after key threats, predicted to derail growth, failed to materialise (The Daily Telegraph, B1). Political risk, one of these key threats, diminished when Macron defeated Le Pen in France, and when the US seemingly abandoned their pursuit of protectionist policies. The G20 economies are expected to grow by more than 3% in 2017 and 2018, up from 2.6% in 2016.Read more
Election candidates discuss Brexit
Both Theresa May and Jeremy Corbyn faced questions on Brexit during a live TV debate last night, with Theresa May confirming she will not settle if the proposed deal does not suit Britain (Sky News, online). Meanwhile, Angela Merkel has warned that Europeans can no longer wholly depend on their traditional Western alliances with the US and UK following the Brexit decision (Guardian, p3, online)
Banks prepare for new EU data protection regulation
Banks have one year left to change the way in which they store and handle customer data, in order to comply with the the EU General Data Protection Regulation due to come into effect in May 2018. Failure to do so will incur significant fines. Banks have expressed concern that meeting the deadline will be a challenge, given the changes required to their ageing and complex IT systems (Financial Times, online). For more information on data protection and what the new regulation entails, take a look at our Brexit Quick Brief document here.
Old technology leaves firms vulnerable to financial crime
A report by LexisNexis risk solutions has found 92% of financial services professionals believe cybercrime is the biggest risk for their companies, as technology cannot keep pace with evolving criminal methods. Geopolitical changes constitute the second biggest future financial crime risk. Study participants included nearly 200 senior professionals working in retail and investment banks, as well as asset management firms (City AM, p13, online).Read more
Mortgage approvals lower in April
The BBA’s latest high street banking data shows that gross mortgage borrowing totalled £13.4 billion in April with 40,750 mortgages approved last month, 0.3% lower than the number approved in March (The Times, £, p44). Eric Leenders, BBA Managing Director for Retail Banking said, “house purchase approvals were largely in line with last year’s average, though remortgaging approvals have dipped slightly in recent months despite historically low interest rates”.
Regulators close to agreeing Basel reforms
Reuters (online) reports that regulators are close to agreeing a final package of reforms to capital regulation, with speculation that a deal could be agreed at the Basel Committee on Banking Supervision’s (BCBS) next meeting on 14-15 June. BCBS Secretary General Bill Coen said that, “the reforms package would have a lengthy implementation period, possibly running to 2025”, with discussion around the level of a minimum ‘output floor’ of 70% – 75% ( Financial Times, £, p18).
BIS publishes new code of conduct for FX markets
The BIS has published 55 principles for FX market participants, designed to enhance confidence in the market (The Daily Telegraph, £ B5). Guy Debelle, Deputy Governor of the Reserve Bank of Australia, who led the BIS’ work in coordinating the code commented that a principles-based approach had been selected as, “rules are much easier to arbitrage than principles”. However a number of commentators have suggested that the code lacks teeth, while The Economist (£, p70) underlines the importance of peer pressure in driving up standards.Read more
Re-mortgaging at a record high
CML data shows that borrowers are seeking lower cost deals, with a 21% increase in re-mortgaging activity in Scotland and Wales compared to Q1 2016, 18% in Northern Ireland and 7% in London (Daily Mail, p33). Commenting on the data, CML Director General Paul Smee said, “attractive mortgage deals aided by low interest rates appear to have sparked a resurgence in activity that has seen consecutive growth year-on-year every quarter for three years”. The full data set is available here.
ECB dismisses Brexit risk to Eurozone financial stability
The Times (£, p42) reports that the ECB has said that Brexit poses little risk to Eurozone financial stability, describing the risk to EU 27 banks as “limited”. The Financial Times (£, p6) reports that ECB Vice President Vitor Constâncio dismissed the Bank of England’s view that, “a messy UK withdrawal could leave EU companies without vital services”, saying that “Brexit is very significant for the UK, but in view of the relative size it is much less meaningful for the rest of the EU… and that financial firms were already adapting by relocating activities to Europe”.Read more
European Commission to revise MIFID II rules on SIs.
Politico (£, online) reports that the European Commission will tighten the rules for Systematic Internalisers under MiFID II, following concerns raised by ESMA that banks and other liquidity providers could undertake matched principal trading without applying the full scope of MiFID II obligations. European Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici said, “the modification will seek to prevent investment firms from replicating arrangements that MiFID II bans without proper authorization. The objective [of the rules] is to bring trading onto transparent venues. If this is not clarified, it may seriously undermine these objectives”.
UK customers keen to adopt biometric banking
The Financial Times (£, online) reports a survey of customer attitudes in 11 countries suggesting that while UK respondents were the most open to using the latest forms of biometric ID technology, such as iris verification, many customers don’t understand or trust more established technologies, such as fingerprint scanning. The survey also found that 87% of respondents said the security of their finances was as important as protecting their personal data.
One in three of those planning to retire support family financially
Sky News (online) reports that 34% of those planning to retire support other family members financially, by an average of £260 per month. Nearly half these payments are made to support their own children, although 9% use these funds to support their parents. Kirsty Anderson, a Retirement Income Expert at Prudential said, “for those providing financial support to their dependants it is likely to cost them an average of £62,000 over the course of their retirement – accounting for a significant proportion of their pension pot and impacting the income they can expect to live on”.Read more
EU agencies lay out plans for post-Brexit reform
The European Commission is to propose a Eurozone-wide fiscal union, supported by a Eurozone Treasury and unemployment fund to help combat future economic crises (The Daily Telegraph, £, B1). The full proposals, expected in June, come as Donald Tusk, the European Council President, and Jean-Claude Juncker, the European Commission President laid out their plans for moving the European Banking Authority and European Medicines Agency out of the UK following Brexit (Financial Times, £, online).
Labour and Conservatives propose debt suspension measures
BBC News (online) reports that both the Conservatives and Labour have promised to introduce a legal right for borrowers in financial difficulty to apply to have interest charges and debt collection suspended for six weeks, allowing time for them to set up debt advice and a repayment plan. The proposals follow investigations by the FCA into credit card and car financing, with the Bank of England also warning of over rising personal debt levels. StepChange Chief Executive Mike O’Connor, said: “the next government should commit to action to prevent the 8.8 million people currently showing signs of financial difficulty from falling into serious hardship”.
Online fraudsters steal an average of £600
Research by comparethemarket.com has found that consumers lost an average of £600 through online fraud, with 90% of those who had money stolen from them saying that this prompted a change in the way they manage their finances (The Times, £, p14). The survey also found almost 5.5 million customers had to cancel a credit or debit card over the past year due to fraudulent activity with payment fraud accounting for almost 50% of incidents reported.Read more
Brexit and the cost of relocating Euro clearing activity
EU Ministers will meet in Brussels today to finalise their Brexit negotiating position, ahead of the start of formal negotiations with the UK (Bloomberg, online). The meeting follows warnings that moves to relocate Euro clearing out of the UK could increase costs for investors by €100 billion over five years (The Times, £, p37). The Times (£, p43) also reports speculation over whether banks’ existing branch structure could be used to continue to offer services for clients across the EU post-Brexit, with additional EU staff and trades booked in the UK.
UK house prices continue to rise
Asking prices for residential property rose by 1.2% last month, according to Rightmove, with the average asking price now £317,281 despite uncertainty over the impact of Brexit and the UK general election (The Guardian, p21). Commenting on the data, Brian Murphy, Head of Lending for Mortgage Advice Bureau, said “this month’s report points to the majority of movers being nonplussed about the election, with their moving plans being driven by circumstantial factors that can’t wait, eg a growing family”.
European Commission asks EBA to give Fintechs more access to banks’ data
Reuters (online) reports that the European Commission’s Vice President Valdis Dombrovskis has asked the EBA to review its proposed restrictions on Fintech firms accessing bank customer details. The rules, introduced under the second Payments Services Directive, are designed to increase competition in banking services, however regulators have raised concerns over cybersecurity and client confidentiality.Read more
Business reaction to Conservative manifesto
The Times (£, p41) writes that business groups have criticised a number of measures in the Conservative party’s general election manifesto, raising fears that they will increase costs and reduce access to skilled labour. City AM (p1) reports that the manifesto also pledged to increase the remit of regulators and consumer bodies in addition to reforming the rules on executive pay and share buy-backs. Commenting on the proposals, Director General of the Institute of Directors Stephen Martin said, “we have been promised a ‘Global Britain’ after Brexit, but these policies are pulling in the opposite direction”.
Brexit Secretary sets out negotiation approach
Speaking to the Daily Express (p1) David Davis, currently Secretary of State for the Department of Exiting the EU, has said that while his priority will be “preserving as much as we can of our current markets within Europe”, half his time is allocated to planning for the possibility of the UK leaving the EU without agreeing an exit deal. Bloomberg (online) reports that the Conservative manifesto seeks public backing for leaving the EU without a deal if both sides are unable to agree on new arrangements.
President Trump ‘will not break up big banks’
The Wall Street Journal (£, p5) reports that US Treasury Secretary Steven Mnuchin told the US Senate banking committee that the Trump administration does not support a separation of retail and investment banks, citing risks to “financial stability… the economy and liquidity”. The Wall Street Journal notes that a number of potential options for reforming banking regulation have emerged in recent weeks, including use of the existing regulatory framework to restrict transactions between subsidiaries within the largest banking groups.Read more