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 calls for changes to visa rules and apprenticeship levy
The BBA has called on the Government to reconsider plans to tighten Tier 2 visa rules and impose a new tax for employing non-EU migrant workers (City AM, p1). BBA Chief Executive Anthony Browne said: “Banks based in the UK need to employ the best people from across the globe in order to compete internationally. Tightening visa requirements will make it more difficult for the industry to attract highly skilled individuals from overseas.”
Separately, the BBA has proposed changes to the Government’s apprenticeship levy (Times, £, p45). The BBA’s Budget submission questions “the omission of traineeships from the scope of what the levy can be spent on” and also argue that the scheme is too focused on creating apprenticeships in England, with no targets set for other parts of the UK.
Apps to drive decline in bank branch visits
The growing popularity of mobile banking will lead to a significant drop in the number of customers using the British bank branch network, according to research from consultancy firm CACI (FT, £, online only). The number of times people visit a branch is set to almost halve over the next four years, while the use of apps will more than double. Ian Goodliffe, a Partner at CACI, said: “There is certainly still a place for branches in the future […] But the format and purpose of them needs to evolve to take into account their size, facilities, staffing and opening hours.”
Bank of England rejects criticism of capital framework
Andrew Bailey, the Bank of England’s Deputy Governor, has dismissed criticism from Sir John Vickers that capital requirements for the banking industry have been watered down (Telegraph, online only). Mr Bailey said: “In aggregate terms we have not diverged, and if anything, our recent proposals put the level a little higher than that suggested, for instance, by the Independent Commission on Banking”. Reuters reports that Mr Bailey also rejected claims that large banks are too big to supervise and govern. Separately, Alex Brazier, the Bank of England Executive Director of Financial Stability, has been criticised for rejecting calls for banks to be forced to have considerably larger capital buffers (Independent, p49).Read more
Bank of England assesses impact of ‘Brexit’
Britain’s membership of the European Union has “likely increased the dynamism of the UK economy”, according to a letter from the Governor of the Bank of England (BBC News). The FT (£, p3) notes that Mark Carney also welcomed the reform settlement secured by the Government, claiming that it “explicitly recognises the needs of the UK to supervise its financial stability, while not impeding the implementation of necessary, further integration among members of the euro area.” The comments were criticised by Eurosceptic members of the Treasury Select Committee, with Jacob Rees-Mogg claiming they were “speculative and beneath the dignity of the Bank of England”.
Rebuilding reputation to ‘take a generation’
António Simões, Chief Executive of HSBC in the UK and Europe, has claimed it will take a generation before banks are once more trusted by the British public (Telegraph, B3). Speaking at the FT Banking Standards conference, Mr Simões said he believed legacy issues could be resolved by 2020 but it would take much longer to win back customers’ trust. Barclays’ Deputy Chairman Sir Gerry Grimstone added: “Cultural risk must be given equal weight to prudential risk, and I fear we have a long way to go on that.” Sir Gerry also stated that he wants to move “to a system where a large part of variable remuneration are shares that you hold in the organisation for five years or 10 years” (Guardian, online only).Read more
Banking Standards Board publishes first Annual Review
The first annual review of the Banking Standards Board has been published today (FT, £, p4). It outlines six areas of interest after the BSB sent questions to the boards of 10 banks and interviewed about 300 of their staff. The review also outlines how banks have taken different approaches in areas such as recruitment, pay and diversity. Dame Colette Bowe, who chairs the BSB, said: “I am modestly pleased that with the support of a lot of people we have got this off the ground.” Speaking separately to City AM (p3), Dame Colette added: “If you want trust, you have to become trustworthy. And you can’t become trustworthy overnight.”
Bank of England plans to boost liquidity around EU referendum
The Telegraph (p1) reports that the Bank of England plans to offer billions of pounds of extra liquidity in case markets seize up in the weeks around the EU referendum in June. Additional Indexed Long-Term Repo operations will be made available to banks, building societies and brokers. The Bank stated that it “will continue to monitor market conditions carefully and keep its operations under review.” Mark Carney, the Bank of England’s Governor, is likely to face questions on the plans when he appears in front of the Treasury Select Committee this morning (FT , £, p1).
BBA calls for newly wealthy criminals to be forced to repay unpaid debts
Prosecutors should force crime bosses who are found enjoying new wealth after their conviction to repay unpaid debts (Evening Standard, p8). In a submission to an inquiry by the House of Commons’ Home Affairs Committee into the proceeds of crime, the BBA says that preventing criminals from holding on to illicit gains is “vital to the fight against financial crime”. The committee will hold its first public evidence session on the issue later today.Read more
New regulatory regimes come into force
There is widespread coverage of the Senior Managers and Certification Regimes both coming into effect today. The Guardian (p20) reports that Tracey McDermott, the Financial Conduct Authority’s acting CEO, has rejected “any suggestion I or the organisation is going soft on banks.” Around 7,000 senior bankers and 3,500 leading insurers will be covered by the SMR. City AM (p1) quotes Chancellor George Osborne as saying the new rules “mean individuals working in UK firms face some of the toughest sanctions in the world.” Speaking to Reuters, the BBA’s Simon Hills said: “I talk to senior managers at banks who say it’s been a useful exercise, enabling banks to check and confirm they have got the right people in the right roles and clarify job descriptions where necessary.” The BBA’s Chief Executive Anthony Browne wrote about the regulatory changes in Friday’s Telegraph (B2).
CMA delays retail banking probe
The Competition and Markets Authority has extended the deadline for its investigation into UK retail banking (FT, £, online only). The agency says the extension, with a new statutory deadline of August 12, will provide more time to consider industry’s responses to its proposals. The CMA’s latest proposals include a monthly cap on fees, letting customers choose not to have the option of an unauthorised overdraft, and extending the period between dropping from an authorised into an unauthorised overdraft.
Lack of faith in central banks threatens global economy
The credibility of central banks has been damaged by their inconsistent policy responses to the global economic slowdown, according to a leading economist (Telegraph, B2). In a report published by the Institute of Economic Affairs, John Taylor warned that “erratic” decisions from central banks have undermined confidence in policymakers and called for them to have less discretion. Bank of England Chief Economist Andy Haldane argued that central banks needed to be flexible when exercising their powers rather than following “a single simple rule.” A separate report from the Bank for International Settlements has warned that the global economy is heading for a “storm” as faith in central banks declines (Times, £, p1).Read more
Jeremy Corbyn calls for banking sector to be reformed
The Labour leader Jeremy Corbyn has warned banks not to treat consumers as simply a source of profit (BBC News). Speaking at the British Chambers of Commerce annual conference, Mr Corbyn called for the sector to be reformed with more support for credit unions and small businesses. He said: “Finance must support the economy, not be an extractive industry treating consumers, entrepreneurs and businesses as cash cows.” Mr Corbyn’s speech comes the day after Joseph Stiglitz, one of the party’s economic advisers, said banks are making excess profits due to weak regulation (Bloomberg).
New data on bank lending to SMEs published
Net lending to SMEs stood at £2.1 billion in 2015, according to new data published by the BBA (Times, £, p46). This was the first annual rise since the BBA started recording this data in 2011. Mike Conroy, the BBA’s Managing Director of Business Finance, said: “More than eight in ten applications [for loans and overdrafts] are approved, so the fact that more than £6 billion of new lending was approved quarterly last year and there was positive net lending across 2015 are encouraging signs.” Separate figures from the Bank of England show that net lending to SMEs from high street banks that participate in the funding for lending scheme fell by £200 million in the final quarter of last year (City AM, p14).Read more
Bank of England highlights potential impact of digital currencies
The shift towards bitcoin-style digital currencies could have a significant impact on banks, investment and growth (Telegraph, B5). In a speech at the London School of Economics, the Bank of England’s Deputy Governor Ben Broadbent highlighted how such a move could impact on “the funding of banks and the supply of credit.” He also noted that digital currencies could cut the costs of financial transactions (Guardian, online only). Mr Broadbent said: “The hope is that, by displacing these various middlemen, a distributed ledger would result in a cheaper and more secure system for providing these services.”
FCA criticised by MPs over bank culture probe
Tracey McDermott, the acting Chief Executive of the Financial Conduct Authority, has been criticised by MPs for the regulator’s decision to drop a probe into bank culture (Times, £, p3). Speaking before the Public Accounts Committee, Ms McDermott stated that other bodies, such as the Banking Standards Board, were better placed to undertake such work. She also denied that there had been any political pressure to ease up on banks (Independent, p57).
Free banking described as a ‘con-trick’
BBC News looks at personal current accounts ahead of the Competition and Markets Authority’s final recommendations on the retail banking market. The article highlights low levels of switching among consumers and banks’ average revenue from each current account customer. Andrew Tyrie, Chairman of the Treasury Select Committee, described free banking as “not just misleading, it is a con-trick.” He added: “The consumer, in my view, should have an opportunity to find out how much they are paying, as they expect to do with any other good and service.”Read more
European Commission reviews bonus cap rules for smaller banks
Lord Hill has stated that the European Commission has launched a review on whether smaller banks should be exempted from bonus cap rules (FT, £, p16). Speaking before the Treasury Select Committee, Lord Hill said the Commission is “looking at the question of the bonus cap from the point of view of proportionality, and whether in future it would make more sense for it to be applied in a uniform way to all kinds of sized credit institutions” (Guardian, p22). He also said that the bonus cap, under which all bonuses must be no bigger than fixed pay or up to twice that amount with shareholder approval, was a mistake.
Government set to miss export target
The Chancellor’s target of increasing exports to £1 trillion by 2020 will be missed by 14 years, MPs on the Business Select Committee have been told (Times, £, p35). Adam Marshall, Policy Director of the British Chambers of Commerce, said that he did not expect the goal to be hit until 2034. Lee Hopley, Chief Economist of the EEF, added: “UK net trade is woeful and something needs to change.” Concerns were also raised over the high turnover of UKTI Chief Executives and Trade Ministers in recent years. Eric Leenders, the BBA’s Managing Director of Retail and Commercial Banking, also appeared before the committee. The full session is available to watch again here.
EU banking regulator calls for limits on sovereign debt holdings
The head of the Single Resolution Board, Elke Koenig, has stated that eurozone banks should have limits set on their sovereign debt holdings (Reuters). Currently most eurozone sovereign bonds are treated as risk free and are exempt from exposure limits imposed on banks’ balance sheets. The European Union is currently examining whether to change the status of such holdings. Mr Koenig said: “Putting in place limitations on exposure to any single counterparty, including sovereigns, makes perfect sense.”Read more
Regulators reject bank bonus cap extension
The Bank of England and Financial Conduct Authority have confirmed that they do not intend to extend the EU bonus cap to smaller firms, as had been proposed by the European Banking Authority (Telegraph, B1). The regulators stated that all large and systemically important banks must continue to comply with the cap, under which all bonuses must be no bigger than fixed pay – or up to twice that amount with shareholder approval. The Guardian (p24) quotes Andrew Bailey, Deputy Governor of the Bank of England and Chief Executive of the Prudential Regulation Authority, as saying: “We have followed the principle of proportionality, which in practice means that smaller firms which pose less risk to the safety and soundness of the financial system face lower regulatory requirements. This is a sensible outcome.”
CMA refutes concerns over corporation tax surcharge
The Competition and Markets Authority (CMA) has stated that its retail banking market investigation has found “no strong evidence” that the bank corporation tax surcharge would deter new entrants, stifle growth or force small lenders out of business (FT, £, p2). Challenger banks have raised concerns that the surcharge would hit them disproportionately due to the £25 million threshold but the CMA has argued that this has led to “many smaller banks and most mutuals being exempt”. Reuters quotes Rishi Khosla, CEO and founder of OakNorth Bank, as saying: “Any new player considering entering the market, or any investor considering investing in the sector, will be deterred because it has suddenly become 8 per cent less attractive.”
Consumer borrowing on the rise
New figures from the Bank of England have shown that consumer borrowing rose by 9.1 per cent year-on-year in January, the second-highest level for more than a decade (BBC News). The data also showed that the number of people taking out mortgages rose to a two-year high in January. The Guardian (p3) quotes Howard Archer, Chief UK Economist at IHS Global Insight, as saying: “January’s spike back up in unsecured consumer credit may fuel concern that consumers are borrowing more and saving less to finance their spending.”Read more
Lord King warns over new financial crisis
The former Governor of the Bank of England, Mervyn King, has cautioned that the world faces another crisis because regulators have failed in their attempts to reform the financial system (Sunday Telegraph, B1 and B7). Lord King highlighted the “self-defeating spiral of complexity” of the regulatory system, pointing out that the rule books of the Prudential Regulation Authority and the Financial Conduct Authority exceed 10,000 pages. He has also called for the Eurozone to be broken up (Telegraph, B1). Separately, EY Item Club has warned that British households will enjoy one “last hurrah” this year before their incomes are hit by rising inflation and tougher austerity measures (City AM, p1).
G20 urges governments to boost global growth
Finance ministers have pledged to use fiscal policy “to strengthen growth, job creation and confidence” at a G20 meeting in Shanghai (Bloomberg). The G20 also noted that “monetary policy alone cannot lead to balanced growth.” In a separate statement, George Osborne said that finance ministers and officials were unanimous that ‘Brexit’ would pose one of the “biggest economic dangers” to the global economy this year (Guardian, online only).Read more
Regulator calls on banks to sell stake in payments system
The Payments Systems Regulator (PSR) has called on banks to loosen their grip on the system behind the way consumers pay for things (BBC News). In a new report, the PSR highlighted ownership of VocaLink – which processes over 90 per cent of salaries – by a small number of banks. Hannah Nixon, Managing Director of the PSR, said: “The evidence we have gathered shows that common ownership is hampering competition and the speed of innovation in the market.” The FT (£, p4) states that the regulator is also calling for greater transparency to boost alternatives to Vocalink.
EU reconsiders scope of bank bonus rules
The FT (£, p1) reports that brokers and smaller banks are set to be excluded from EU rules on banker bonuses. The newspaper states that Věra Jourová, the member of the European Commission in charge of the pay rules, has concluded that they will either have to be applied more flexibly or redrafted to make them more proportional. The original proposals closed current exemptions, which means that UK regulators would have had to apply the new bonus rules to 1,000 brokerages and other finance companies supervised by the Financial Conduct Authority, as well as to a further 200 banks overseen by the Prudential Regulation Authority.Read more