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.
Banking sector recognises achievements and challenges on diversity and inclusion
The BBA released its first report on diversity highlighting the current successes and the challenges that remain (FT, £, p4). Anthony Browne, Chief Executive of the BBA, said: “Our ‘Diversity and inclusion in banking’ report shows that progress on diversity can, and is, being made on a voluntary basis in the banking sector. And by voluntary, you should not read half-hearted effort – the report’s findings show that the days of the old boys club in banking are numbered.” Commenting on the report, Minister for “Women and Equalities, Nicky Morgan, said: “I’m pleased to see the banking sector has followed the recommendations in Lord Davies’ report and increased female representation at board level to 31 per cent. As a country we cannot afford to waste the talents of a single person, let alone half our population, and that is why women everywhere should be given the opportunity to fulfil their potential. We must continue to increase women’s representation in UK boardrooms and secure lasting change for the benefit of women, business and the economy.”
Read the BBA report “Diversity and Inclusion in Banking” here.
The World Economic Forum also released a report today showing that the economic gender gap has closed just three per cent in the last decade saying that progress has stalled in the last decade (FT, £, p6). Writing in the FT (£, p13), Chris Giles criticises the statistics used to analyse the gender pay gap and points to the difference in the gap between generations.
FCA to investigate the asset management industry
There is wide coverage of the competition review detailed yesterday by the Financial Conduct Authority into fees charged by the asset management industry (Daily Telegraph, B3). The review will look at how costs are controlled and the role of consultants (FT, £, p17). Calling the UK a world leader in asset management, Christopher Woolard, Director of Strategy at the FCA, said “our market study aims to ensure that both retail and institutional investors can get value for money when purchasing these services”. Several commentators have forecast a cut to industry margins as a result of boosted competition coming from the investigation (FT, £, p23).
The announcement comes as data from TheCityUK shows that the value of UK assets under management has hit an all-time high of £7.4 trillion (City A.M., p3).
European Central Bank considers further drop in rates
The FT (£, p6) covers speculation that the European Central Bank (ECB) may be considering lowering interest rates further, possibly by 10 basis points. The current rate is minus 0.2 per cent, but some cite Germany’s current government debt rate as showing that further monetary easing is already priced in (FT, £, p32). Analysts are questioning the credibility of the ECB as its forecasts continue to miss the “more stagnant reality of the data” (FT, £, p34). Lowering the rate again will further weaken the Euro and possibly boost European trade. Mr Valli, Chief Eurozone Economist for UniCredit said: “when you are in a low global growth environment, the support coming from the currency can be very important”.Read more
PRA Chief Executive appears in front of Treasury Select Committee
Andrew Bailey, Chief Executive of the Prudential Regulation Authority, told MPs on the Treasury Select Committee yesterday that the gap between challenger banks and their larger counterparts may be too big to bridge (Daily Telegraph, B1). Mr Bailey highlighted the wide range of balance sheets across the industry. He also urged banks to avoid using the press to lobby against new rules such as ring-fencing (Daily Mail, p69, paper only).
HBOS report to criticise lax regulation
The much-delayed report into HBOS will criticise the Financial Services Authority for its role in the years running up to its eventual failure in 2008, according to the Times (£, p44). The report, jointly published the Bank of England’s Prudential Regulation Authority and the Financial Conduct Authority – the two successors to the FSA – will be published tomorrow after lengthy legal wrangling. The FSA’s decision not to pursue senior figures in the HBOS boardroom – aside from former Director Peter Cummings – is expected to be a major area of the report’s focus. The Daily Mail (p67) speculates that the advisers and investment banks which were paid large fees by HBOS could also be heavily criticised.
Chancellor warns of cyber-attack risks
In a speech at GCHQ yesterday, the Chancellor warned that ISIS is attempting to develop the capability to launch cyber-attacks against critical infrastructure (FT, £, p3). He outlined plans to increase funding on cyber security to £1.9 billion by 2020 and also to open a National Cyber Centre and Institute for Coding. The Independent (p10) highlights that the number of cyber threats dealt with by GCHQ every month has doubled in the space of a year. Mr Osborne said: “If the lights go out, the banks stop working, the hospitals stop functioning or government itself can no longer operate, the impact on society could be catastrophic. So government has a responsibility towards these sectors, and the companies in those sectors have a responsibility to ensure their own resilience.”Read more
Treasury Select Committee Chair reiterates ring-fence reforms
There is widespread coverage of Treasury Select Committee Chairman, Andrew Tyrie’s speech last night at City law firm Allen & Overy. He called on regulators to “not give in to special pleading from banks in implementing the reforms introduced as a result of the financial crisis” according to the FT (£, p6). Tyrie endorsed ring-fencing reforms and backed the “electrification” provision within the Banking Reform Act, which allows for full separation of a particular bank, if necessary.
He also said: “It has become clear that you can’t separate the reforms required to ensure that banks are resilient and resolvable from the reforms required to improve standards.” He suggested Banks should be forcibly broken up if they try to game the “ring-fencing” rules.
Fellow Treasury Select Committee member, Wes Streeting, Labour MP for Ilford North responded to the speech in City AM (p1), saying “some of the lessons that were drawn from the banking crisis are no longer taken with the seriousness that they deserve. We’ve got to strike the balance between unhealthy public debate that simply amounts to banker bashing with the understandable concerns that the public still have about the sustainability of the banking sector.”
Research arms prepare for MiFID deadline
According to the FT (£, p19), banks are working behind closed doors to meet a deadline for their research divisions to become compliant with MiFID 2. The new rules — expected to come into force in 2018 after the European Commission proposed a year-long delay — will change historic pricing for trading and research in the name of transparency. The paper reports that clients who want research will have to ask for it and pay for it under the new system, which industry sources anticipate will put downward pressure on demand.
The final draft of the rules could ban banks from subsidising lossmaking research divisions, which means that institutions are now focused on analysing how their clients use and value research. “While a delay would give everybody more time to iron out details, it’s unlikely to affect broader strategic thinking among research providers or consumers,” says Alan MacDonald Nomura’s Head of International Equity Research. A Research Manager at a large US bank told the paper, “We’ve suffered because of the inherent pricing model. Clients have tended to arbitrage it. We’ll probably get a better deal now.”
Government to double spending on cyber technology
According to the Independent (p11), Chancellor George Osborne will announce today that £2bn will be invested by the Government to create the country’s first “cyber force” with the express purpose of combating cyber threats. The new National Cyber Centre will be based at GCHQ and is expected to create hundreds of new jobs dedicated to tackling cyber-attacks against the UK.
Whilst the majority of work will be directed against state sponsored attacks, the effort will also address the threat of cyber terrorism. He is expected to say “When we talk about tackling Isis that means tackling their cyber threat as well as guns, bombs and knives.” Speaking at the Lord Mayor’s annual banquet last night, Prime Minister David Cameron added that “economic security and national security go hand in hand” (City AM p4).Read more
Tyrie warns Carney over bond market liquidity risk
Andrew Tyrie, Chairman of the Treasury Select Committee, will today write to Bank of England Governor, Mark Carney, to set out his concerns that a decline in bond market liquidity will pose a new threat to financial stability (City AM, p5). In particular, Mr Tyrie focuses on risk to the gilt-edged bond market.
In an open letter, Mr Tyrie will ask Dr Carney for an explanation of how the Bank of England intends to avoid “a vicious cycle of declining liquidity and financial distress among bond traders”. He will also set out some of the perceived risks including onerous regulation of the banking sector, which has “reduced banks’ capacity to act as market-makers” and “absorb fluctuations in supply and demand” (Telegraph B3).
The UK is open for business, but will it win the global race?
Writing in the Telegraph (B2) today Anthony Browne, CEO of the BBA, explains that the UK is at a tipping point in its future as a global banking sector and that the Government needs to act to establish a “clear vision for the role of international banking within the UK economy that is underpinned by joined-up policymaking…to ensure that industry, regulators and government can work together to ensure that damaging uncertainty and unintended consequences are avoided”.
His comments come after the BBA published its ”Winning the Global Race” report on Friday, outlining key threats to the UK as a centre for wholesale banking. The report found a 12 per cent reduction in assets in the UK banking sector since 2011, compared with rises in the US (+12%), Hong Kong (+34%) and Singapore (+24%). Mr Browne identifies the threats facing the sector, such as “bank-specific taxation, extraterritorial regulation and uncertainty over future access to the European single market”, and argues that failure to address these now “will mean that the red carpet will be increasingly threadbare in the years to come”.
Economic concern affects market sentiment in Northern Europe
There is widespread coverage of the Deloitte report published today which analysed the views of 1300 Chief Financial Officers (CFOs) across 15 European Countries. The report finds that confidence and risk appetite in European businesses has fallen over the past six months, reflecting concerns over global economic, market and currency weaknesses (FT, £, p6). Sentiment has fallen most in the northern European countries, including the UK, Germany, France and the Netherlands, but risen in the Southern countries.
Ian Stewart, Chief Economist at Deloitte, said: “concerns about global growth have had a marked effect on sentiment in northern Europe, but we are seeing a rebalancing of prospects within Europe from north to south”. Almost 30% of UK Chief Financial Officers feel less optimistic about the financial prospects of their business than three months ago, but remain among the most positive in terms of risk appetite, hiring intentions and revenue growth when compared to European colleagues (City AM, p8).Read more
BBA launches report on UK competitiveness in wholesale banking
There is widespread coverage of the BBA’s “Winning the Global Race” report on the international competitiveness of the UK as a wholesale banking centre, which was led by ex FSA boss, Sir Hector Sants, now Vice Chair of Oliver Wyman. City AM (p3) quotes BBA CEO Anthony Browne saying “We have now reached a watershed moment in Britain’s competitiveness as an international banking centre. The balance of push and pull factors, including tax and capital treatment, unilateral and extraterritorial regulation and overall uncertainty, are weighing heavily in boardrooms across the industry.” You can also listen to Anthony’s interview in the business section of BBC Radio 4’s Today programme here.
The Daily Mail (p77) explains that the report cites ‘worrying trends’ including an eight per cent drop in employment in the banking sector since 2011, while UK banking assets have fallen 12 per cent despite rising in Hong Kong and Singapore. The FT (£, p4) focuses on the report’s recommendations to increase competitiveness, including calls for the creation of a new independent body responsible for penalty and redress decision making, and a multi-bank regulatory reporting utility to help meet different demands. The Telegraph (B1) quotes the report saying “uncertainty arising from the rapidly changing tax regime and EU referendum are inhibiting business planning and discouraging investment”.
Bank of England’s Chief Economist comments on regulation and interest rates
The Bank of England’s Chief Economist, Andy Haldane, says regulators and bankers still have a long way to go before the financial system is fully reformed. Mr Haldane told Radio 5 Live Wake up to Money “There has been a vast raft of regulatory initiatives over the course of the past few years, which is a reflection of just how vast the failings were during the course of the crisis. We have seen changes of culture, people have learned their lessons to some degree. Do we think as regulators, as bankers, that the system is now as good as it can be? I think that would be extraordinary, actually, if after all this change we thought we’d landed in a perfect spot.”
Separately the BBC also reports that in a speech to the TUC last night, Mr Haldane warned that the UK’s “economic aircraft appears to be losing speed on the runway”. Mr Haldane indicated that the next rate move could equally be a cut rather than a rise and cautioned that a rate rise would “increase unnecessarily the chances of the economy falling below critical velocity”.
European Banking Authority updates on use of allowances under remuneration rules
There is widespread coverage of yesterday’s publication by the European Banking Authority (EBA) of a follow-up report on the use of role-based allowances in remuneration packages. The report found attempts to circumvent the EU ‘bonus cap’, which limits variable pay to 100% of fixed pay or 200% with shareholder approval, by passing off extra awards and shares as fixed pay (Times, £, p50). The EBA and the Prudential Regulation Authority reached an agreement that such lump-sum allowances were bonuses and so should count towards the EU cap but that fixed, role-based allowances not related to risk-trading can still be paid
The FT (£, p4) reports a BBA spokesperson as saying “The British banking industry has made great strides in recent years to reform the way in which highly paid staff are remunerated. This has included deferring bonuses, paying more in shares and being able to claw back bonuses if it subsequently emerges that they were not deserved…any move which increases fixed costs and reduces the ability to use these tools seems counterintuitive”.Read more
Chancellor sets out fintech vision at Bank of England Open Forum
There is widespread coverage of the Bank of England’s Open Forum, which took place yesterday. The Daily Mail (p10) leads with the Chancellor’s comments that rogue bankers should be treated like shoplifters and thrown into jail. Bank of England Governor, Mark Carney, also vowed that the age of “heads-I-win, tails-you-lose capitalism” was coming to an end, promising to root out the “bad apples” still working in the financial services industry. Tracey McDermott, acting Chief Executive of the FCA added: “I am not going soft on the banks… if we take the stick away the carrot won’t be useful.” (Guardian, p34)
The Chancellor also outlined his plan to ensure that the UK leads the world in fintech (The Times, £, p54). He told the audience at the Guildhall that: “I want the UK to be the global centre of fintech. We will go out of our way to do that. The race is on but we are determined to win it.”
New European rules on capital requirements and deposit insurance unveiled
The European Central Bank has outlined a new proposal to harmonise banking rules across the Eurozone’s 19 member states (FT, £, p8). Ignazio Angeloni, a member of the ECB’s supervisory board, unveiled the proposals yesterday and stated that a lack of integration was “affecting banks’ ability to compete across Europe.” Aligning capital requirements across the single currency area will be a major focus of the initiative, with the intention of boosting cross-border lending.
Meanwhile, Brussels is also planning to introduce a new Eurozone-wide deposit insurance system over the next decade (FT, £, p8). The article reports that the proposed European Deposit Insurance Scheme would initially serve as a back-up for national guarantee funds before replacing them by 2024. Germany has previously lobbied against the plans due to concerns over their impact on its own fully-funded national deposit guarantee scheme.
Indian PM begins visit to UK
The Indian Prime Minster, Narendra Modi, will today begin a three-day visit to the UK (BBC News). Trade deals of up to £10 billion are expected to be announced during the trip, which comes shortly after a recent visit by the Chinese President. Mr Modi is expected to have lunch with the Queen, deliver an address to Parliament and hold a rally at a packed Wembley Stadium. The FT (£, p2) highlights that India accounts for only £2.2 billion of British exports, lagging far below countries such as Belgium, the Netherlands and Switzerland.Read more
PM to drop benefits pledge in latest EU renegotiations
Most papers cover Prime Minister David Cameron’s EU speech delivered yesterday. The FT (£, p1) reports the him as saying he is “open to different ways of dealing with the issue” of controlling migration, which was a key Conservative manifesto pledge in May. The change came as David Cameron formally launched his European renegotiation after publishing a letter to Donald Tusk, the President of the European Council, in which he outlined Britain’s demands. The Times (£, p18) reports Margaritis Schinas, a spokesman for the European Commission, as saying: “We see a number of elements that appear to be feasible, like finding ways to increase the roles of national parliaments. Some issues which are difficult…and things that are highly problematic as they touch upon the fundamental freedoms of our internal market.“
Bank of England drops hints at fresh lending curbs
The Bank of England’s Deputy Governor, Sir Jon Cunliffe, warned in a speech in Geneva last night that the Bank was prepared to act swiftly to limit excessive lending. Sir Jon is reported in the FT (£, p4) as saying “I think we will need to consider whether and how risks are building in the financial system and how they should be addressed”. Expectations are rising that the Bank will either seek to make lending generally more expensive for banks or address specific risks such as rapidly rising lending in unsecured and buy-to-let lending. The Deputy Governor also warned that falling house prices and higher rates “could cause a substantial number of buy-to-let landlords to seek to exit the market, put material downward pressure on house prices, [and] amplify an adverse shock to the housing market”.
Brussels considers delay to implementation of financial markets regulation
European policy-makers are considering delaying by up to a year the second Markets in Financial Instruments Directive (MiFID II), which governs everything from derivatives trading, transparency in bond pricing, and transaction reporting. MiFID II is one of the EU’s most ambitious and complex pieces of legislation, and there are concerns the current timeframe will not allow industry to meet the current implementation deadline for 3rd January 2017. As CityAM (p2) reports, Steven Maijoor, Chairman of the European Securities Market Authority told MEPs on Tuesday that “the timing for stakeholders and regulators alike to implement the rules and build the necessary IT systems is extremely tight. There are areas where the calendar is already unfeasible.”Read more
Banks told to raise over one trillion in convertible debt in an attempt to end “too big to fail”
There is widespread coverage of the Financial Stability Board’s final proposals for Total Loss Absorbing Capital (TLAC). According to the FT (£, p17) TLAC will put the onus on creditors rather than tax-payers by requiring banks to raise significant levels of debt which can be converted to equity when a bank fails. The FSB will give its plan to the G20 this month which contains recommendations for TLAC to be set at 16 per cent by 2019, rising to 18 per cent by 2022. Commenting on the proposals, Mark Carney, Chair of the FSB and also Governor of the Bank of England, said “these proposals will help change the system so that individual banks as well as their investors and creditors bear the costs of their own actions”.
The Telegraph (B1) says that the requirements will be felt most by banks in emerging markets like China if their regulators abide by the new proposals.
Prime Minister sets out his EU reform agenda
The Prime Minister David Cameron set out his EU reform agenda this morning in a speech at Chatham House (BBC). The speech comes ahead of a letter which will be sent to Donald Tusk, European Council President. The Prime Minister said that EU reform is “not an impossible task” and laid out four objectives that lie at the heart of the UK’s renegotiations: protecting the single market, boosting competiveness, exempting Britain from “ever closer union” and restricting EU migrants access to in-work benefits.
Several papers cover the Prime Minister’s speech at the CBI’s annual conference yesterday during which he was interrupted by two protestors connected to the Vote Leave campaign (FT, £, p3). Writing in the Telegraph, Chuka Umunna accuses Brexit campaigners of “behaving like gangsters, trying to close down the debate with behaviour that has no place in public life” (Telegraph, online only).
Worries about cyber security increase in wake of GCHQ warnings
The FT (£, p2) covers warnings from GCHQ director, Robert Hannigan, that the market for cyber security may be failing to address the challenges facing western countries. The paper reports that Mr Hannigan will say “it is time to take a hard look at whether the international market for cyber security is working sufficiently well”. The Daily Mail (p12) looks at the increase in attacks on targets with national security importance which has doubled since last month.
The warnings come as Apple CEO Tim Cook has weighed in on the debate over the level of access which security agencies should be granted saying “any back door is a back door to everyone” (Telegraph, p1).Read more
Further speculation over EU referendum date
Prime Minister David Cameron could hold the referendum on Britain’s membership of the EU in June 2016, if other leaders agree to his reform package at a summit next month, reports the Times (£, p1). Others still believe that September 2016 is the more likely date. In a speech to be delivered tomorrow, the Prime Minister will describe the choice to leave or remain in the Union as “the biggest we will make in our lifetimes”, and will present the decision on Britain’s membership as “not just a matter of jobs and trade but of the safety and security of our nation”.
The FT (£, p2) adds that Mr Cameron will argue that Britain can survive outside the EU because “it is a great country” and the decision will be a matter for voters, not politicians or lobby groups. The Prime Minister will today address the CBI’s annual conference. BBC News reports him saying that the issue is not whether the UK can survive outside the EU, but whether it would be more successful.
Chancellor to confirm further spending cuts
BBC News reports that four central government departments – including the Treasury – have agreed to cut their spending by an average of 30% over the next four years. The savings will be made by cutting day-to-day spending and closing low value programmes. The Chancellor will deliver his Comprehensive Spending Review on 25 November. BBC News says the Chancellor will confirm the news in a speech in London later today. He will also warn that if the Government does not control spending there is a risk of a loss of confidence in the economy.
Mixed picture for the number of jobs in financial services
The Times (£, p43) says that the Treasury faces losing “hundreds of millions of pounds” in revenue because several of the City’s largest employers have announced redundancies. CityAM (p5) quotes BBA figures, which revealed that over 2014 London lost 4,854 banking jobs, a 2.8% year-on-year fall. The paper also cites figures from recruitment consultancy Morgan McKinley, which found that the number of new vacancies in financial services in London rose by 7% to 9,480 in October, compared to the month before. The article acknowledges that the financial services industry is increasingly looking for staff beyond the capital, and cites figures from the BBA which show that 2,450 new positions in the banking sector were created outside of the capital in 2014. Our report, Banking on British Jobs, which highlights the growth in regional banking jobs against a decline overall in the sector, is available on our website.Read more
Treasury Select Committee Chairman urges bank tax review
Andrew Tyrie, Chairman of the Treasury Select Committee has written to the Competition and Markets Authority to call for a review of the new Corporation Tax surcharge on bank profits, the FT (£, online only) reports. The Chancellor announced the 8% surcharge on banks’ profits earlier this year. In a letter to the CMA, Mr Tyrie called on the watchdog to report findings of a review on the impact of the surcharge “well ahead” of next year’s Budget in March, the paper writes. He is quoted by the FT saying that it is crucial the surcharge did not get in the way of government efforts to increase competition. Paul Lynam, Chief Executive of Secure Trust Bank and Chair of the BBA’s challenger bank panel, said smaller banks “punch significantly above their weight” in small and medium business lending, the paper adds.
Single capital threshold will not form part of European stress tests
Bloomberg reports that the European Banking Authority announced yesterday that its 2016 stress test will not judge banks against a single capital threshold. Bloomberg says last year banks had to maintain a ratio of capital to risk-weighted assets of 8%, and the ratio was 5.5% in the “adverse scenario” which allowed lenders to run down capital buffers. Fifty-three EU banks will undergo the test. In a statement, the EBA said: “The objective of the EU-wide stress test is to provide supervisors, banks and other market participants with a common analytical framework to consistently compare and assess the resilience of the EU banking system to shocks.”
“Super Thursday” sees possible rate rise postponed
The Bank of England yesterday nudged down its UK growth forecast by 0.1 of a percentage point for 2015, 2016 and 2017 and warned that a global slowdown was weighing on the recovery, the Times (£, p43) reports. The Bank also said that inflation is not expected to return to its 2% target until the end of 2017, even with interest rates remaining at their current level until Q2 of 2017. The news caused the pound to slide 1.5 cents against the euro and 1.7 cents against the dollar. This morning Bank of England Deputy Governor Dame Nemat Shafik told BBC Radio 5live’s Wake Up to Moneythat interest rates should not be used “to deal with problems in the housing market,” and, if necessary, the Bank could cut interest rates below the current record low of 0.5% (BBC News).Read more