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.
Reaction to appointment of Andrew Bailey as CEO of Financial Conduct Authority
There is widespread coverage of Andrew Bailey’s appointment as CEO of the Financial Conduct Authority (FCA). The FT (£, p2) reports that Andrew Bailey is seen by some as a “safe pair of hands” and his appointment went against expectations that Greg Medcraft, Australia’s top regulator, would be appointed to the role. The Daily Mail (p61) similarly notes that Bailey “commands huge respect in the City and Westminster.” The appointment comes six months after Martin Wheatley, Bailey’s predecessor, was ousted from the role. Andrew Bailey will serve as CEO of the FCA for a five year term. Furthermore, his appointment means the Bank of England has to find a new Deputy Governor and someone to run the Prudential Regulation Authority. Writing in the Guardian (p20), Nils Pratley backs calls by Andrew Tyrie, Chairman of the Treasury Select Committee, for his committee to have a veto on senior appointments at the FCA to safeguard its independence.
Bank of England Governor urged to make decision on future
Mark Carney, the Governor of the Bank of England, has been asked to provide clarity over whether he plans to extend his term in the role (Guardian, p19). In a hearing with the Treasury Select Committee yesterday, Dr. Carney told MPs that he would make a decision on extending his five year term – which currently expires in June 2018 – by December. In response Andrew Tyrie, the Conservative MP who chairs the committee, said: “The sooner you feel able to give us this clarity the better”. Dr. Carney also said that a decision to leave the European Union could add a “risk premium” to Britain because of the size of its deficit, which could in turn push up interest rates (Times, £, p36).
Mortgage market remains buoyant in December
New data published by the BBA this morning shows that gross mortgage borrowing in December was £12.4 billion, 24% higher than a year ago (BBA website). The number of mortgage approvals in December was 24% higher than a year ago, with remortgaging up 31% and house purchase up 19%. The data also shows that the amount spent on credit cards in December declined compared to 2014. Richard Woolhouse, Chief Economist at the BBA, said: “It seems that consumers were less reliant on credit cards to fund purchases last month despite Christmas shopping and seasonal sales.”
Andrew Bailey named new FCA CEO
The Financial Conduct Authority has announced this morning that the head of the Bank of England’s Prudential Regulation Authority, Andrew Bailey, as its new CEO. Mr Bailey will remain in his current role until his successor has been appointed. Bank of England governor Mark Carney said: “Andrew is an extraordinary public servant who has devoted his entire professional life to serving the people of the United Kingdom. During his career, he has worked across all of the Bank’s policy areas, combining leadership and innovation to deliver consistently the Bank’s policy objectives” (Bank of England). Anthony Browne, BBA chief executive, said: “Andrew Bailey has shown exceptional leadership at the Prudential Regulation Authority, and has worked hard with the industry to ensure we have a stable banking sector that serves the needs of customers and the wider economy. He is highly respected both within the industry and the international regulatory community. We look forward to continue working with him in his new role at the FCA”.
Contactless cards are on the increase
British consumers are increasingly adopting contactless cards for payment according to figures from Visa Europe (Telegraph, B1). One in every seven customers now uses the technology, in stark contrast to last year when only one in every 25 customers used it (CityAM, p4). Although the increase was largely driven by Transport for London introducing contactless fares in 2014, 60 per cent of contactless transactions take place outside the M25 junction indicating the trend is sustainable. It took plastic cards 49 years to become the dominant method of payment. Contactless technology has already become a credible challenger to cash since it was introduced in 2007. Read the BBA’s report World of Change which looks at the changing way customers choose to bank.
Survey reveals majority of executives want Britain to remain in European Union
A new YouGov survey looked at the position of major executives, tech entrepreneurs and small business owners on whether Britain should remain or leave the EU (CityAM, p12). The results show that the majority of executives are personally in favour of Britain remaining in the EU. Pollsters quizzed executives from over a dozen FTSE firms and 42 “digital entrepreneurs”. Among this group the vast majority were in favour of remaining in the EU with the tech entrepreneurs particularly adamant that Britain leaving the EU would hurt its position as a “global tech gateway”. However, the results were more mixed among the 500 plus small businesses that took part in the survey with 47 per cent in favour of remaining and 42 percent in favour of exit.Read more
Andrew Tyrie demands better bank IT systems
Chairman of the Parliament’s Treasury Select Committee, Andrew Tyrie, has written to the heads of the Financial Conduct Authority and Prudential Regulation Authority to demand increased IT security and resilience (FT, £, p4). Mr Tyrie has also written to the banks that experienced IT outages, urging them to spend more on systems and hire more board directors who understand computing (Telegraph, B3). Mr Tyrie writes: “Bank IT systems don’t appear to be up to the job. This brings with it not just conduct risk, but also systemic risk…Until these [upgrades] are made, the public will remain more exposed than necessary to the risks of banking failures”.
IMF Chief warns of Brexit risk to global economy as Chancellor secures ‘brake’ on EU laws
Several of the weekend’s papers covered remarks given by Managing Director of the International Monetary Fund, Christine Lagarde, at the World Economic Forum in Davos. Speaking on a panel alongside Chancellor George Osborne, Ms Lagarde said Britain’s referendum on EU membership is causing turbulence in global financial markets and poses the biggest threat to the European economy (Sunday Times). Ms Lagarde also said she hoped a deal between the UK and the other members of the European Union “would be conducive to more stability and more a cohesive economic zone” (Guardian, online only). The Sunday Times reports that the Chancellor has secured a “permanent handbrake” to block legalisation that could impact the Single Market.
Increasing number of women in the makeup of financial institutions
European financial institutions are seeing an increase in the number of women at board and executive committee level, with 23% of board directors at companies and institutions in European capital markets being women and 16% of executive committee members being women (City AM, p9). Banks fare the best for women on executive boards: all banks had boards which were at least thirty per cent female. However, research shows that the averages can mask underlying inequities. Yasmine Chinwala of think tank New Financial notes that women are least represented in hedge funds and private equity firms. Read up BBA’s report on diversity in banking here.Read more
Big business set to back PM in fight against Brexit
Several papers cover the news from Davos that some of Britain’s biggest businesses have informally agreed to back Prime Minister David Cameron’s campaign to keep Britain in the EU as soon as his renegotiation package is announced. The Times (£, p47) quotes the Chairman of HSBC Douglas Flint as saying: ”I think business has a responsibility to speak up on economic matters…Britain is stronger in a reformed Europe and Europe is better with Britain”. Whilst the FT (£, p2) reports that banks are leading the business buy-in, with a number of international banks contemplating large donations to the ‘Britain Stronger in Europe’ campaign, the paper (FT, £ p12) also defends Goldman Sachs’ recent six figure contribution to the ‘in’ campaign. The Guardian (p17) also covers the news that JPMorgan has hinted it could quit the UK if Britain votes to leave the EU.
Financial sector fraud climbs by 5% in 2015
The FT (£, p2) claims that overall levels of reported fraud in the year to September have increased by 5 per cent. Online banking fraud, insurance fraud and fraudulent applications for credit in England and Wales have been driving the rise according to new figures released by the Office for National Statistics (ONS). However, the number of fraud cases is believed to be much higher than the recorded figures suggest with experts describing the data as a “very partial picture” of the true extent of these crimes. Policing Minister Mike Penning said “we recognise that crime is changing” and explained that the government has made tackling fraud a priority with the creation of the National Crime Agency and spending £860m on the National Cyber Security Programme.
For tips on how to avoid fraudsters, go to the BBA’s “Know Fraud No Fraud” campaign.
Labour would break up banks
City AM (p6) covers comments made by Labour Shadow Chancellor John McDonnell at a Co-operatives UK conference in Manchester yesterday where he indicated that a Labour government led by Jeremy Corbyn would look to break up Britain’s biggest banks. Mr McDonnell said: “small businesses in general, and not just co-operatives, face dreadful difficulties in getting the funding they need from our high-street banks. No other major developed economy has just five banks providing 80 per cent of loans. We’d look to break up these monopolies, introducing real competition and choice”. In a major inquiry into competition in the banking sector last year, the Competition & Markets Authority (CMA) rejected suggestions for breaking up big banks, saying the proposals were “not likely to be effective…in addressing competition concerns”.Read more
FCA leadership questioned by Treasury Select Committee
The Financial Conduct Authority’s (FCA) Chairman John Griffith-Jones and acting Chief Executive Tracey McDermott appeared before the Treasury Select Committee yesterday to answer questions over the regulator’s decision to halt a review into banking culture (City AM, p2). Defending their decision, Ms McDermott said that while there is “further to go” in reforming culture she felt that a thematic review “was not the right way to achieve that”. Meanwhile, Mr Griffith-Jones rejected allegations that the regulator’s independence had been undermined by political interference (FT, £, p2).
Regulators seek to help challenger banks
Andrew Bailey, Chief Executive of the Prudential Regulation Authority (PRA), has stated that the regulator is working to help challenger banks fulfil capital requirements without inhibiting lending (FT, £, p4). Challenger banks typically use a “standardised” approach to calculate their capital requirements against different types of loans, from mortgages to credit cards. This approach can require more capital to be set aside than the internal “advanced” model used by larger banks. Mr Bailey told the FT: “There are intermediate positions between pure standardised and pure advanced models.” Separately, the PRA and the FCA yesterday launched the New Bank Start-up Unit to assist new banks to enter the market and improve the authorisation process (Reuters).
Bank account switching falls in 2015
Fewer people chose to switch bank accounts in 2015, according to new figures published by the Current Account Switching Service (CASS). A total of 1.03 million customers moved their bank account to another provider last year, compared with 1.15 million in 2014 (Daily Telegraph, online only). However, CASS said switching rates climbed by 11 per cent in the last quarter of 2015 due to a high profile publicity campaign (BBC News). Richard Neudegg, Head of Regulation at price comparison site uSwitch, said: “These figures show customer apathy towards current account switching remains entrenched […] A quicker, more efficient switch alone is not enough to encourage customers to change banks or to improve competition.”Read more
Bank of England pushes back the timetable for an interest rate rise
The Governor of the Bank of England, Mark Carney, delivered a speech yesterday in which he said that “the year has turned and, in my view, the decision has proved straightforward: now is not yet the time to raise interest rates” (FT, £, p1). Mr Carney went on to explain that “the world is weaker and UK growth has slowed”. Just hours before Carney’s announcement, the International Monetary Fund (IMF) cut its global growth forecasts for the next two years citing fears over the Chinese economy and falling oil prices (Times, £, p35). His speech comes as the World Economic Forum meets in Davos with leading economists there saying the world is balanced between recovery and the third leg of the global financial crisis (FT, £, p6).
Concerns raised over tax on companies employing migrant workers
Leading trade organisations including the BBA have warned against introducing a tax on companies with skilled workers from outside of the European Economic Area, saying it would damage the global competitiveness of British business (City AM, p2). The Migration Advisory Committee (MAC) published proposals yesterday to impose a £1,000 annual “immigration skills charge” for every migrant on a Tier 2 visa (Guardian, p9). MAC also advised raising the minimum salary for skilled migrant workers from £20,800 to £30,000, a move that would bar one in five of the 150,000 skilled workers arriving each year from outside of the EU (Telegraph, p10). Yesterday’s report did contain some positives for the industry as MAC stepped back from automatic sunsetting of jobs on the Short Occupation List. The BBA’s Winning The Global Race report called for the Home Office to reconsider Tier 2 visa limits.
George Osborne announces closer ties with India on infrastructure and financial services
The Chancellor George Osborne and Indian Finance Minister Arun Jaitley announced yesterday a number of agreements to build on the economic relationship between the UK and India – focussing on financial services, infrastructure and technology (Telegraph, online only). The new deal included the announcement that the Indian Railway Finance Corporation would be the first public body to issue a rupee bond in London, with the corporation saying that the deal “demonstrates the UK’s position as a business partner of choice” (Economic Times). In an interview with the Telegraph, Chairman of Standard Life Sir Gerry Grimstone said “to prosper, London has to stay in the flows of capital from the big countries of the world – part of our function here is to intermediate in those flows”.Read more
Bitcoin technology could revolutionise welfare
A new government report suggests that people could pay their taxes, receive welfare payments and even vote through the technology behind Bitcoin (Times, £, p17). Experts have hailed the technology as having the potential to give rise to the biggest social changes in 800 years. In the report from the Office of Science, the idea of a “benefit coin” would replace welfare payments in sterling with a digital currency. The outcome could potentially result in significant savings for the taxpayer, most of which is lost to fraud and error each year. Separately, London has been listed fifth in a list of Bitcoin friendly cities (City AM, p9).
Policy-makers aim to secure ‘fairer’ capital framework
UK and German officials have called for a “more proportionate” capital framework for smaller and less complex banks (Reuters, online only). In a paper sent to the European Commission, both countries argue that the European Union’s bank capital rules are making it difficult for smaller lenders to compete and should be scaled back. The paper also notes that complexity in the regulatory framework is a significant barrier to entry. Meanwhile, a new study from Oliver Wyman has suggested that global banks will have to spend between €40 million and €120 million each to implement regulators’ latest rules on trading book capital (FT, £, online only).
Business groups raise concerns over tax deductibility restrictions
Plans to restrict the tax treatment of interest costs could have a negative impact on the UK’s competitiveness according to a report in the FT (£, p3). Professional bodies and business groups have voiced fears about the restrictions that are soon to be introduced as part of a global crackdown on corporate tax avoidance. The FT reports that CBI said in its submission to the Treasury consultation that “the UK’s competitiveness would be undermined if the UK were to act hastily or without due care and attention to the impact of the proposals relative to the responses being made by other countries”.Read more
Bank of England focus on boosting competition
Writing to Andrew Bailey, Deputy Governor at the Bank of England, Treasury Select Committee Chairman Andrew Tyrie MP has asked for the Bank to reveal how much more capital challenger banks are required to hold in comparison to larger competitors. Mr Tyrie writes that “this would help parliament and the public to quantify the competitive disadvantage under which new banks have to operate” (CityAM, p1).
Over the weekend it was reported that Bank of England Governor Mark Carney is set to launch a bank start-up division in an attempt to boost competition, according to the Sunday Times. The Sunday Times (£, B2) reports he will announce the details later this week.
Remaining Iran sanctions pose concern for the banking sector
Middle East stock markets saw more than £27 billion wiped off their value following concerns that a flood of Iranian oil onto the market will depress prices further than expected (Telegraph, B1).
The FT reports (£, p7) many European banks will be wary about conducting business in Iran despite some sanctions being lifted over the weekend. Despite the US lifting sanctions that effectively banned international banks from Iran related activity there are still sanctions in place that prevent business being carried out with anyone doing business with companies connected to Iran’s Revolutionary Guard. Commenting on these concerns one senior EU official said “there is going to be this large grey area that will scare European banks”.
Hopes of an EU agreement in February
The FT (£, p1) reports there is an increasing likelihood of a deal on migrant benefits at February’s European Council meeting. It is understood that at least five EU countries could look to take advantage of a compromise proposal. Jean-Claude Juncker, President of the European Commission, has said the UK’s renegotiation of its European Union membership is “entering a very delicate period”, as leaders prepare for the February summit (Bloomberg, online only), but that he expects a deal to resolve the UK’s demands will be reached next month, opening the door for a referendum in June (City AM, online only).
Over the weekend the Sunday Times (£) reports that the Prime Minister is aiming to announce three surprises as part of his renegotiations including an agreement signed by the other 27 leaders to rebrand the UK as a different sort of member state in the outer circle of a two-tier Europe. As speculation for a summer referendum grows the Mail on Sunday reports a Survation poll showing a six point lead for the out campaign and Lord Lawson appears to confirm in the FT (£, p2) that the “VoteLeave” campaign will be led by a Cabinet Minister if it is designated as the official campaign.Read more
Basel Committee softens capital rules
The FT (£,p16) reports that the Basel Committee on Banking Supervision has “softened” new rules forcing investment banks to hold more capital against their trading books. The new rules, published on Thursday, will require the amount of capital banks are required to maintain for their trading books to be on average 40 per cent higher than they hold now, as opposed to a weighted average of 74 per cent proposed before. Commenting on yesterday’s announcement Rob Smith, Banking Director at KPMG, said: “In spite of the fact that capital requirements are lower than expected, there is still a huge amount of work to be done by the banks. KPMG, estimates it would cost banks an extra $100m-$150m each to implement the new rules over three years.
As renegotiation progresses, the Chancellor confirms no contingency plans for Brexit
Ahead of the European Council on 18th February the FT(£,p2) reports that EU officials are expecting a negotiating text in early February that will not involve immediate treaty change but will be based on binding agreements that promise future revisions to the treaty. This is an approach previously used by Denmark and Ireland. The Times (£, p14) and BBC News reports that Jonathan Faull, who is leading the Commission’s negotiations with the UK, said that there was “a very good prospect” of agreement and “pretty strong” political will for a deal.
CityAM (p3) reports that the Government has been criticised by Labour Treasury Select Committee member Wes Streeting MP for not making contingency plans for a possible Brexit. The criticism came after Chancellor George Osborne told BBC Newsnight that the Treasury is not planning for Brexit. The Chancellor said his department is “100 per cent now focused on achieving the renegotiation”. The Chancellor’s comments follow similar statements made by the Prime Minister on the Andrew Marr Show (transcript, p7) earlier in the week.
FCA launches inquiry into bank review leak
Following the publication yesterday of the FCA’s review into its board effectiveness, the FT (£,p4) reports that the review acknowledges that the FCA’s board could be subject to political interference, noting “recent interventions by Treasury and other bodies which have raised questions from directors regarding the board’s independence”. The FT also reports that the FCA has launched a leak inquiry into how internal documents regarding the decision not to continue the review of banking culture were received by the paper.Read more