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.
Treasury Select Committee raises concerns with report on competition in retail banking
The BBC and others cover comments made by members of the Treasury Select Committee during its hearing on the Competition and Markets Authority’s (CMA) review of competition in retail banking. Mark Garnier MP told Alasdair Smith, Chair of the CMA’s retail banking investigation, that the interim report looked “lazy” and that the banks had “pulled the wool over your eyes and you’ve allowed them to”. The Telegraph (B1) picks up the story reporting that MPs pressed the panel hard on the ability of banks to report how much each customer account cost to operate. The paper also reports on MPs dissatisfaction with the CMAs decision to “pass the buck” on investigating the banks ownership of the payments system to the new Payment Systems Regulator.
Legal Ombudsman reports on Claims Management Company complaints
The BBC this morning covers the Legal Ombudsman report about its activities in relation to Claims Management Companies (CMC). Since the Legal Ombudsman’s CMC service opened for complaints in January, more than 9,000 have been received, 94 per cent of which were about CMCs dealing with financial product claims. These include mis-sold mortgages, investments and interest rate swaps; but the majority (88 per cent) were about mis-sold Payment Protection Insurance (PPI). Around 40 per cent of the complaints investigated were about CMC costs including unjustified fees, a failure to refund upfront fees, or contractual disputes over fees.
Interest rate expectations vary across the major western markets
There is widespread coverage of comments made by US Federal Reserve Chair during a congressional hearing yesterday. The FT (£, p8) reports Ms Yellen as saying “downside risks” to the economy had diminished and calling an interest rate rise in December a “live possibility”. In contrast, on the European side of the Atlantic the paper discuss investors apparent conviction that the European Central Bank may drive rates further into negative territory and extend quantitative easing (FT, £, p32). The report cites one economist as saying “The ECB clearly has a bias to do more and will very likely do more”.
CityAM (p14) meanwhile covers what it calls the “Super Thursday hat trick” of statistical releases from the Bank of England including the Monetary Policy Committee’s most recent interest rate decision and minutes from their last meeting. The paper reports that although the Bank is expected to maintain the current rate through the end of the year, more hawkish thinking may become apparent with as many as three members voting for a rate rise.Read more
New review calls for bonuses to be linked to gender diversity progress
A government-commissioned review led by Virgin Money Chief Executive Jayne-Anne Gadhia has recommend that bonuses for City executives should be linked to progress on appointing women to senior roles, BBC News reports. Ms Gadhia said: “It should be a wake-up call to everyone in financial services that fewer women progress to senior levels than in any other industry in the UK.” The interim recommendations will be presented today at a summit hosted by Harriett Baldwin MP, Economic Secretary to the Treasury. The full report is scheduled to be published before the 2016 Budget.
FCA raises concerns over credit card market
An interim report from the Financial Conduct Authority has found that competition in the credit card market is “working well” for customers but has called on lenders to provide more support for borrowers struggling to make repayments (FT, £, p4). Mike O’Connor, Chief Executive of StepChange debt charity, said: “Action is required on how credit card companies share data and carry out affordability checks to ensure people do not take on credit that looks cheap but will ultimately become unmanageable.” The Sun (£, p1) reports that 5.6 million people are trapped in a credit card debt cycle. The final report is due to be published next spring.
Credit Suisse warns over future of European investment banks
Tidjane Thiam, Chief Executive of Credit Suisse, has warned that Europe cannot afford to see its investment banks downsize further without it having an impact on the continent’s economy (FT, £, p18). Speaking at the Financial Times Banking Summit, Mr Thiam said: “European companies need more routes to the market and a strong European banking sector is part of that.” The article notes that US investment banks have gained ground against their European rivals as a result of stagnant growth across the continent and post-crisis regulation.Read more
Chancellor to outline his vision for a reformed EU
According to the FT (£, p2), Chancellor George Osborne is to set out the UK’s demands for EU treaty change to protect its economy, taxpayers and the City of London. In a speech in Berlin today, Mr Osborne will outline his vision for a new EU settlement that enshrines the rights of non-Eurozone countries in the 28-member club. The paper says that in exchange for these protections, the Chancellor will agree not to stand in the way if the Eurozone steps towards closer integration.The “integrity of the European single market”, provisions to ensure that that it is not distorted by Eurozone countries rigging the rules in their favour and “the recognition that the EU has more than one currency and we should not discriminate against any business on the basis of the currency [area] in which they reside”, are all expected to be on Mr Osborne’s wish list.
Surprise boost for manufacturing
The pound rose half a cent against the euro and the dollar yesterday after Markit’s survey of the manufacturing sector revealed that there was a rise in new orders last month, the Telegraph (B1) reports. The paper says the manufacturing purchasing managers’ index (PMI) jumped to 55.5 in October, a 3.7 point rise from last month. Markit has described the rise as “one of the steepest registered” since the survey began in 1991. The Guardian (p18) adds that yesterday’s PMI report showed export and domestic orders picked up across all parts of the industry, and there was improved demand from the Middle East, East Asia and the US. Rob Dobson, a senior economist at Markit, is quoted saying: “The start of the final quarter saw UK manufacturing spring back into life and record its best month of factory output growth since June 2014. The revival provides a tentative suggestion that the manufacturers are pulling out of their recent funk, having been dogged by recession since the start of the year, and may help boost economic growth in the fourth quarter.”
Financial Transaction Tax “a bad idea”
Reuters reports that Stefan Ingves, Sweden’s Central Bank Governor and Chairman of the Basel Committee on Banking Supervision, has told a conference in Madrid that a Financial Transactions Tax is “a bad idea” and it will be difficult to introduce variations in the tax. He also said that the Basel Committee’s review of sovereign risk issues will take several years.Read more
Britain best place in the EU to start business
There is widespread coverage of the Legatum Institute’s annual Prosperity Index, which is released today (Telegraph, B3). The Index names the UK as the best place in the European Union in which to start a business and places it as the 15th most prosperous country of those investigated. The report uses a combination of official statistics and public polling to rank 142 countries across eight different categories, including the economy, entrepreneurship and opportunity, education and health. Britain’s successful climb to its highest level of economic success ever recorded was largely down to its performance since the financial crisis, the ease of starting a business and the number of people in full-time employment. Click here to see our report entitled “Banking on British Jobs”.
British and US Governments plan cyber security test
The Bank of England and US counterparts are arranging a desktop exercise, known as Operation Resilient Shield, to talk through how regulators, government agencies and banks on both sides of the Atlantic would respond in the event of a cyber-attack (City AM, p18 – print only). The joint operation, coordinated by the Governments’ Computer Emergency Response Team (CERT), will simulate a major cyber-attack on the financial sector in order to test the lines of communication between the US and the UK (Times, £, p50).
Mark Carney, Governor of the Bank of England, has highlighted cyber-attacks as a significant risk to the financial sector, calling for cyber defences to be “regularly assessed” to cope with the “adaptive nature of the threat” (Telegraph, B1). The joint statement from CERT on behalf of Bank of England, BBA and HMT is as follows: “As announced by the Prime Minister and President Obama in January, the UK and US governments plan to hold a joint exercise to test cyber response arrangements and information sharing systems. While this exercise involves leading global financial institutions, it is not intended to test those institutions’ own responses. The exercise is part of on-going engagement between the UK and US on this issue and further information will be released in due course.”
ECB finds €14 billion shortfall in Greek banks
This week Greece’s four biggest banks are set to finalise their recapitalisation plans to raise €14.4 billion (FT, £, p10). After months of stress testing, the European Central Bank has calculated that the four biggest lenders would need an additional €14.4 billion of capital under the ‘adverse’ scenario, where banks must be able to withstand a worsening of economic and financial conditions. The capital shortfall falls to €4.4 billion under the ‘baseline’ scenario, which assumes the economy will return to robust growth by 2017. The banks have until the end of the week to finalise the plans, allowing for the Greek government to put in place plans to recapitalise the sector by the end of the year.Read more
The Chancellor seeks safety ‘brake’ on EU laws to protect City
The FT (£, p1, 2) reports that several of the Chancellor’s desired EU reforms have come to light. An “emergency brake” for non-euro countries is reported as being at the top of the list. Citing European ministers and officials, the paper says that a change to the so-called “Ioannina compromise” is Mr Osborne’s biggest priority as he seeks to protect the City of London. The proposed reforms would give countries outside of the Eurozone the power to delay a vote that threatened the single market, forcing additional consultations on the law at the level of EU leaders. Other measures reported to be on the Chancellor’s wish list include non-discrimination against financial groups on the ground of where they are located, a demand to resolve the battle with the European Central Bank over clearing houses in London and the recognition of the EU as a multi-currency union.
The news comes on the back of an announcement by rating agency Standard & Poor’s yesterday, which warned that a Brexit could see Britain’s credit rating cut by as much as two notches (Daily Telegraph, B1). Meanwhile, a US trade official has cautioned that the US would be in no hurry to negotiate a trade deal with the UK, saying that the US was “not particularly in the market for FTAs with individual countries” (CityAM, p14).
MEPs reach compromise on the EU Bank Structural Reform
There is widespread coverage of the deal reached between representatives of the two largest political parties in the European Parliament. The FT (£, p.6) reports that agreement has been found “by Gunnar Hökmark, a Swedish centre-right MEP who is leading parliament’s work on the law, and Jakob von Weizsäcker, a German MEP representing the parliament’s centre-left Socialists and Democrats group”. According to Mr Hökmark, the deal stops short of automatically forcing separation of investment and retail banking, leaving discretion to supervisors to act after scrutinising if any bank is a threat to financial stability.
Slowdown in US growth figures mask underlying strength
CityAM (p3) and others report on the slowdown in US growth. Third quarter growth slowed to an annualised 1.5 per cent, down from 3.9 per cent in the second quarter. The slowdown is being blamed on stock reduction as consumer spending remained strong.
Elsewhere, the US Federal Reserve has given its clearest signal yet that a rate rise is likely before the end of the year (FT, £, p10). The statement, made after the Fed’s policy meeting on Wednesday, made an instant impact on financial markets and revealed a shift in the Fed’s focus from emerging to the domestic market. The dollar climbed on the news reaching its highest level since August (FT, £, p31).Read more
Fed could decide on rate rise by end of the year
The FT (£, p1) today splashes on reports that the US Federal Reserve, which has not lifted rates since 2006, has left the door open to a rise in short-term rates by the end of the year. Despite striking a more cautious tone for months on the state of the US and global economy, a statement released yesterday after the penultimate meeting of the Federal Open Market Committee this year said that whilst there had been a slowing in the pace of job growth, activity was expanding at a “moderate pace” and there were solid gains in US household spending and investment.
“The Fed is doing everything it can to try to keep a 2015 rate increase on the table,” said Kevin Giddis, head of fixed income at US wealth manager Raymond James. The Times (£, p39) also reports Ian Shepherdson, Chief Economist at Pantheon Macroeconomics, saying that “we’re leaving December as our base case, though it is by no means a done deal”. The paper also notes that a December rate rise would raise the possibility of the Bank of England following suit shortly afterwards.
FTSE boards told to aim for one third women by 2020
A number of outlets, including the BBC, cover the final Women on Boards report by Lord Mervyn Davies, who has recommended that the representation of women on the boards of FTSE 100 companies should reach one third in the next five years. Speaking on the Today Programme, Lord Davies said there had been a “steady and sustained increase” in the number of women serving on FTSE 100 boards since 2011, when he began his review at the request of the then Business Secretary, Vince Cable. At the time, women made up just 12.5% of FTSE 100 board members. But to reach his stated target, Lord Davies today rejected the introduction of legally binding quotas which he described as “unwarranted”. He also said there should be a “substantive and sustainable improvement in women’s representation on boards of FTSE 350 companies. All FTSE-listed companies should be taking action”.
A new study out today from executive search firm Audeliss also warned that the percentage of female non-executive directors is at risk of dropping over the next 18 months. Helena Morrissey, founder of the 30% Club, said the study was a “timely reminder of the need to keep up the momentum and source more talented women who can serve on boards”.
Affordable homes to drop in view of proposed benefit reforms
The Times (£, p39) reports that one of the biggest housing associations plans to cut the number of affordable homes it builds each year, as papers also report today that the average house price in London has now reached half a million pounds. Neil Hadden, the Chief Executive of Genesis Housing Association, which operates in London and the East of England, said it would cut the number of affordable homes his organisation builds each year and those for social rent to about 100. The Housing Association is reviewing the effect that the new Universal Credit and caps on housing benefit will have on tenants as there was “no point” in building houses for people who can’t afford to pay the rent. Registrations with the National House Building Council, for public sector house building were down 4 % compared with the same period a year ago. “Experts in the housing industry have attributed the drop in public sector registrations to many housing associations holding back on developments in light of welfare reforms and the cap on rental increases,” the NHBC said.Read more
Prime Minister rules out Norwegian model for UK membership of EU
Several newspapers including the FT (£, p2) report that Prime Minister, David Cameron is today expected to rule out a ‘Norway model’ for the UK outside the EU, setting out his objections to the idea that Britain could adopt a similar stance. Attending a Nordic and Baltic leaders summit in Iceland, Mr Cameron will highlight the issues that Britain would face if it sought a Norwegian style relationship with the EU trading bloc. In particular a spokesman for Number 10 said the Prime Minister is concerned that the UK would “still have to follow EU rules but with no votes or say over how they’re set.”
Growing industry calls for greater clarity on CMU implementation, as European Commission publishes work programme.
The FT (£, p32) looks at the European Commission’s plans to make asset-backed securities more attractive to investors by reducing the capital they must hold against those that can be classified as “simple, transparent and standardised”. However, there are growing concerns in the market that the long list of criteria for the standardised product may be open to interpretation and there have been calls for a third party authority to ascertain what meets the criteria. The FT reports that a commission official said of supervisory approval of STS: “Following the public consultation, we did not take up the option of public authority certification since stakeholders were concerned about the risk of having a too slow approval system and some national supervisors were also against this approach.”
Separately BBC Radio 4’s Today Programme interviews Frans Timmermans, first Vice-President of the European Commission, as the Commission publishes its work programme. On the need to relieve the regulatory burden on SMEs, Mr Timmermans said member state governments “get away too often with blaming red tape on the EU” rather than admitting their own responsibility for “gold plating” regulations.
ECB considering rate cut
European Central Bank Executive Board member Benoît Cœuré yesterday indicated that the Central Bank may have to reduce its deposit rate further if Eurozone inflation were to rise to the 2% target in a much more sluggish way than previously expected, Reuters reports. Cœuré, however, clarified that such a move is still an open discussion. Meanwhile, Deutsche Bank and BNP Paribas forecast that the ECB may cut its deposit rate to negative 0.3% from the current negative 0.2% as bonds advanced across the euro area yesterday, Bloomberg News writes.Read more
French regulator warns on Capital Markets Union proposals
The Managing Director of France’s markets regulator the AMF, Guillaume Eliet, has warned that the EU’s Capital Markets Union proposals aimed at setting standard criteria for the securitisation market “lacks a crucial element” that could hold back the market (FT, £, p32). Mr Eliet has said the proposals lack a regulatory authority to decide on whether a securitisation meets the criteria set out by the new rules. Commenting on the proposals, Mr Eliet said: “There should be a regulated entity to manage the vehicle in the interest of investors at every step and to make sure there is no conflict of interest.”
Commenting on Lord Hill’s horizontal review of EU financial regulation, Mr Eliet cautioned: “It is not the right time to say that we have gone too far, but it is the right time to correct inconsistencies, gaps and overlaps.”
BBA: Borrowers benefiting from cheap mortgage deals
The BBA’s September High Street Banking Statistics are widely reported in today’s papers.CityAM (p6) says that while the figures showed that the number of approvals dipped slightly in September from the previous month, borrowing numbers were 24% higher than a year ago as buyers try to secure mortgages before a possible interest rate rise. Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics, is quoted saying: “Mortgage rates are still close to record lows, banks are becoming more willing to lend and consumer confidence is still high by past standards. Meanwhile, the macroprudential safeguards introduced by the Financial Policy Committee in June 2014, which limit the number of mortgages banks can underwrite at a loan-to-income ratio of more than 4.5 times to 15 per cent of all new loans, are still not close to biting.”
Elsewhere theGuardian (p26), which describes the BBA’s figures as a “good guide” to trends in the Bank of England’s lending data due on Thursday, says the lack of homes on the market is being blamed for the fall in the number of mortgages approved by British banks in September. It quotes BBA Chief Economist Richard Woolhouse saying: “Borrowing figures in the mortgage market remain strong as customers take advantage of record low interest rates. In particular, remortgaging remains high as savvy customers secure attractive deals ahead of a possible rate rise.”
TalkTalk cyberattack triggers ministerial and parliamentary scrutiny of companies’ cyberrisks
According to theFT (£, p1) Telecoms Minister Ed Vaizey has said he will write to all FTSE 350 companies to ensure they have ‘robust procedures’ in place as a result of the attack. Speaking in Parliament yesterday, Mr Vaizey said the Financial Conduct Authority was not “aware of any unusual activity” caused by the TalkTalk attack but that he would meet the Information Commissioner about compensation and issues around customer protection. Mr Vaizey also said that: “companies should encrypt their information” and suggested a kitemark could be used to highlight those with good privacy practices.The Guardian (p1, p4) also reports that an inquiry into the hack will be launched by Jesse Norman MP, Chair of the Culture, Media and Sport Select Committee.
TalkTalk has insisted hackers could not access bank account details but legal experts have warned that customers could seek compensation. The group is still assessing how many of its past and present customers were affected. The latest customer advice for TalkTalk customers is here.Read more
Concerns over TalkTalk customer data continue
The cyber-attack on TalkTalk and its impact on customers was widely covered in the weekend papers. The Times (Saturday, £, p1) states that consumers have been reporting suspicious activity on their bank account, calls from fraudsters claiming to be from TalkTalk, and a number of phishing emails asking for further personal details. The FT Weekend’s leader column (£, p10) warns that other UK businesses may also be vulnerable to hackers given that nine out of 10 large UK companies have been targeted by an online attack. TalkTalk’s Chief Executive Dido Harding has insisted that the company’s cyber-security is “head and shoulders” better than its competitors (Guardian, p9).
Government introduces new rules to narrow gender pay gap
The Times (Saturday, £, p3) reports that a Government-backed report will set out new targets to get more women into leading business jobs by 2020. Lord Davies of Abersoch, the Government’s adviser on gender equality in British boardrooms, is this week expected to recommend that 25 per cent of executive director positions in FTSE-100 companies are filled by women by 2020. Meanwhile, CityAM (p2, paper only) reports that under new rules set out yesterday large employers will be required to publish information about bonuses paid to men and women as part of gender pay gap reporting.
Carney suggests rate rise is not guaranteed
The Governor of the Bank of England, Mark Carney, has suggested that an interest rate rise is “a possibility not a certainty” despite urging households to prepare for an increase in an extended interview with the Mail on Sunday (p5). He stated: “While there’s been a lot of progress paying down debt, there’s still a substantial proportion of British households carrying a lot of debt. […] If we think there is a prospect, a possibility – that’s a possibility not a certainty – of rate rises, then that is far, far better to let the British people know so they can prepare.” Carney also defended his right to comment on the UK’s relationship with the European Union, stating: “The British people would expect me to have something to say.”
Mortgage approvals continue to climb
The BBA has today published its High Street Banking Statistics for September 2015, which shows that the number of mortgage approvals in September was 24% higher than a year ago, with remortgaging up 40% and house purchases up 14%. Richard Woolhouse, Chief Economist at the BBA, said: “Borrowing figures in the mortgage market remain strong as customers take advantage of record low interest rates. In particular, remortgaging remains high as savvy customers secure attractive deals ahead of a possible rate rise.”Read more
Banking beyond borders
Senior executives from the banking industry gathered in London yesterday for the BBA’s Annual International Banking Conference, “Banking behond borders”. The FT (£, p3) reports that in a speech to delegates, Sir Jon Cunliffe, Deputy Governor of the Bank of England, indicated that the Bank’s Financial Policy Committee is nearing a decision to increase the “counter-cyclical buffer”. This allows the Committee to increase banks’ capital requirements when the financial cycle enters a more risky phase, the paper writes. Sir Jon is quoted saying that the UK economy had moved from “a very muted phase of the credit cycle” into “a more normal phase of the cycle”. He also said that as the memories of the financial crisis fade, the Bank “will not reset our underlying tolerance of risks to financial stability.”
The FT also reports Barclays Chairman John McFarlane’s views on bank bonuses, and quotes him saying that eliminating “geared incentives in retail or investment banking” would “remove the temptation to cut corners”. Elsewhere, the Telegraph (B1) quotes Mr McFarlane saying his personal preference is to reward people “…at the end, once you know the results sometimes three or five years down the road”.
Transparency push in CMA recommendations
The Competition and Markets Authority yesterday published the provisional findings of its investigation into the current account and business banking market. The CMA has called on the banking industry to make it easier for customers to “take charge of their accounts” and said that many customers fear that switching their current account to a new bank will be “complicated, time-consuming and risky”. The Mail (p8) quotes BBA Chief Executive Anthony Browne responding by saying that the recommendations “build on existing measures”. Mr Browne also told ITV News that it was good the recommendations were “customer focused”.
CityAM (p4) reports that Shadow Chancellor John McDonnell said he supported “many of the report’s recommendations around transparency for customers”. The Telegraph (B4) says that appearing before the Treasury Select Committee yesterday, Chancellor George Osborne told MPs he believed the Government had “got it right” over the £25m threshold for the Corporation Tax surcharge on banks’ profits. The surcharge has been criticised by challenger banks who say it will constrain lending and prevent a level playing field.
Customers urged to be vigilant after cyberattack
BBC News reports that police are investigating a “significant and sustained cyberattack” on the website of phone and broadband provider TalkTalk. The firm has said it is too early to know what data had been stolen, but in a statement it said personal information – including customers’ credit card details and/or bank details – may have been stolen. TalkTalk has advised customers who see anything unusual on their accounts to contact their bank and Action Fraud as soon as possible.
The Press Association quotes Benjamin Harris, Managing Security Consultant of MWR InfoSecurity, saying that a denial of service attack, which sees hackers crash a site, would not have exposed personal information. He added that such an attack would not lead to a compromise of credit and debit card data. The BBA’s Know Fraud, No Fraud campaign offers useful information how to identify a fraudster’s tactics, including listing eight things your bank will never ask you to do but a fraudster might.
“Intensity and volume of regulatory activity is not sustainable,” says Tracey McDermott
Tracey McDermott, the interim Chief Executive of the Financial Conduct Authority, yesterday told senior financiers that the “intensity and volume of regulatory activity is not sustainable”, the Times (£, p42) reports. Addressing guests at the Mansion House, Ms McDermott added that some rules introduced by authorities since the financial crisis could be dropped. The paper quotes her saying: “We are often told boards are now spending the majority of their time on regulatory matters. This cannot be in anyone’s interests. If that continues, we will crowd out the creativity, innovation and competition, which should present the opportunities for growth in the future.”Read more