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 jobs on the rise in UK regions
The FT (£, online only) covers the launch of a new BBA report that finds that banking jobs are moving from London to regional cities. City AM (p11) reports that while the sector has shrunk in the capital in the past two years, jobs are on the increase in such places as Tunbridge Wells, South Gloucestershire, Chelmsford and North Tyneside. Reuters also reports that the total number of bankers employed outside the capital to 340,030.
Commenting on the report Anthony Browne, CEO of the BBA, said: “These figures show that a strong banking industry benefits the whole country, not just the capital”. Mr Browne added, “the industry is playing a crucial role in helping young people to get their foot on the careers ladder and providing highly skilled jobs for local communities”.
UK is ‘leading beneficiary’ of EU as Carney backs membership
There is widespread coverage of the Cairncross Lecture given by Bank of England Governor Mark Carney at Oxford University last night. The FT (£, p1) reports that in his speech Dr Carney supported Britain’s EU membership, saying that the UK economy had become more open to trade and so more dynamic and prosperous since it joined the EU, and that the UK is the ‘leading beneficiary’ of the formation of the European Union. He said, “the evidence suggests that the UK has successfully harnessed the benefits of openness afforded by its EU membership while avoiding some of the drawbacks of reduced flexibility from which some continental European economies suffer”. Dr Carney also put pressure on Prime Minister David Cameron to use his renegotiation of the UK’s membership of the EU to set out clear principles to safeguard the interests of non-euro member states.
Competition regulator won’t break up banks
There was widespread speculation in papers today ahead of the Competition and Markets Authority’s (CMA) publication of its provisional findings into the retail banking market published this morning. The Telegraph (p1) reported that the preliminary findings would not recommend breaking up the UK’s biggest banks. The recommendations include forcing banks to prompt customers to switch current account to their rivals if their branch is closed, if they are overcharged, or if they have experienced technological problems. Furthermore, the CMA has also decided against bringing an end to free current accounts.
Alasdair Smith, Chairman of the Retail Banking Investigation at the CMA said, “Banking is a sector of huge importance that affects every household and business in the country. We think customers need to be put in charge of their banking”. Mr Smith added, “We are considering a series of measures that will have a far-reaching impact on how banks operate and will empower account-holders to search for and switch to the account that suits them”.
Banks to face tougher stress tests
Britain’s biggest banks will face ‘a series of gruelling annual tests’ to demonstrate that they can continue to operate when faced with serve economic disasters (Times, £, p44). The hurdle to pass the annual tests will be higher and a secondary stress test will be introduced every other year to examine ‘extreme and unexpected dangers’. Contrary to speculation, the Prudential Regulation Authority (PRA) will not extend the scope of the stress tests to banks that hold less than £50 billion in retail deposits, UK-based investment arms of foreign banks, other parts of the financial system such as asset management.Read more
Bank of England Governor gives evidence to the Treasury Select Committee
There is widespread coverage of the House of Commons Treasury Select Committee’s evidence hearing with Bank of England Governor Mark Carney (Guardian, p21). Dr Carney and Deputy Governor Andrew Bailey, were questioned by MPs about changes to the Senior Managers Regime and the scrapping of the reverse burden of proof rule. The pair also defended the detail of rules enforcing the ring-fencing of high street banks, denying that the measures had been watered down.
SMEs turning to alternative finance says Monetary Policy Committee member
Ian McCafferty, external member of the Bank of England’s Monetary Policy Committee, said the rising use of “alternative” financing by SMEs sets the scene for interest rates to rise (Telegraph, p4). Speaking at a Bloomberg conference, Mr McCafferty, said that since the financial crisis there had been a rise both in large companies raising money via bond and equity finance and in small and medium enterprises turning to alternative providers such as peer-to-peer funding platforms. Coverage reports he is a lone voice in arguing that an interest rate rise should come sooner rather than later.
Tax avoidance ruling expected from Commission
The European Commission publishes today its ruling on tax arrangements made between the Netherlands Government and Starbucks, as well as the Luxembourg Government and Fiat. So called ‘comfort letters’, from tax authorities that reassured Starbucks and Fiat that their tax arrangements would not be subject to state aid are overruled by the Commission. The ruling could result in tens of millions of euros in additional taxes being owed (Guardian, p23).Read more
Mark Carney to speak on Brexit
The FT and others report that Mark Carney will intervene in the Brexit debate tomorrow (£, online only). On Wednesday the Bank of England will release a report which was led by Deputy Governor Sir Jon Cunliffe on the impact the UK leaving the EU would have on the Bank’s ability to meet its objectives of monetary and financial stability. The Governor will give a speech in Oxford on the same day addressing the effects of the EU on the Bank of England’s functions and Brexit. Commenting when the review was launched, the Bank said “It should not come as a surprise that there are a range of economic and financial issues that arise in the context of the renegotiation and national referendum. It is one of the Bank’s responsibilities to assess those that relate to its objectives.”
London short-term debt release in renminbi could be imminent
The FT (£, online only) reveals the prospect of a short-term debt issuance in London from China’s central bank as early as today. The sale is expected to raise Rmb5bn (£509m) although the report suggests this could end up being higher depending on demand. According to analysts, the move by the People’s Bank of China will help set benchmarks against which other renminbi bonds in London could be priced and thus encourage other issuers. China’s finance ministry is expected to follow suit once a foundation has been laid. The move is key to China’s plans to develop its currency with an analyst saying “London’s support is also critical to encourage more trade and investment to be settled in renminbi and for more financial products to be issued in the currency.”
Mixed Chinese growth figures
The papers cover yesterday’s figures for Chinese growth which showed economic output rising by 6.9 per cent in the third quarter (Telegraph, B1). The figures were a mixed bag, with growth higher than the forecast 6.8 per cent but still at their lowest since early 2009. A stronger than expected rise in services and consumer spending is being taken by commentators as a positive sign that China’s transition to a service economy is well underway. However, the Times (£, p45) runs with the warning that the figures may not be trustworthy.Read more
Newspapers speculate on CMA review findings
The provisional findings of the Competition and Markets Authority’s investigation into personal current accounts and SME banking services – due to be published on Thursday – were widely trailed in the weekend newspapers and also feature prominently today. The Daily Telegraph (Saturday, p1) led with a report that banks could be told by the CMA to introduce charges for current accounts or improve transparency on fees. The FT (£, p3), quotes Jayne-Anne Gadhia, Chief Executive of Virgin Money, saying: “Many customers who think they have free banking often do not. Many suffer penalty charges for breaching terms and conditions. Most carry credit balances that are not paid a fair rate of interest.”
Work and Pensions Committee warns over Government reforms
A report from the Work and Pensions Committee has warned that there is a risk of a mis-selling scandal following the recent pension reforms (FT, p3). The Committee’s report states that the official Pension Wise website is “not fit for purpose” and “a lack of clarity” is putting pension savers at risk. Chairman Frank Field said: “These reforms have been in operation for six months: long enough for the scammers to get going defrauding people out of their life savings – it should be long enough for Government to have published some data about how the reforms and the attendant guidance and advice are working.”
Concerns over consumer data security
An investigation by the Sun (£, p4-5) finds that personal data – including bank details – of payday loan applicants is being sold on to scammers by an Indian company. These individuals have been bombarded with calls, texts and emails. Labour MP Stella Creasy said: “The law should be changed so people are the owners of their data and nobody is allowed to sell it on without their direct consent.” The Financial Conduct Authority is investigating the allegations.Read more
Bank of England provide further clarity on “ringfencing” rules
There is broad coverage of yesterday’s announcement by the Bank of England that banks will be able to transfer capital from their ringfenced retail arms to other non-ringfenced parts of the business in the form of dividends (FT, £, p1). The Bank also estimated that an additional £3.3 billion in capital would be required to be held across the new ringfenced institutions.
Reform of new Senior Manager’s Regime rules
Continuing from yesterday, there is further analysis of the Government’s announcement that it will legislate to remove the “reverse burden of proof” from the new Senior Managers Regime. Using the new Bank of England and Financial Services Bill, the Government will changing the wording of the current legislation so that bankers have “duty” rather than a “presumption of responsibility for their actions” (Times, £, p41).
Commenting on the change in position, Treasury Select Committee member Mark Garnier MP said “You’ve got to be able to judge what is taking a sensible lead and what is overenthusiastic. With reversal of burden of proof, [we] got a bit overenthusiastic” (FT, £, p1).
National Risk Assessment considers high risk of money-laundering
Following the publication of the first National Risk Assessment yesterday, the Guardian (p29) reports that the UK financial system is at high risk of being used to launder billions of pounds of corrupt cash through “enablers” in the legal and property professions. The report emphasised that there are “significant intelligence” gaps about the scale of corrupt money moving in and out of the UK but that “hundreds of billions of pounds of international criminal money” is laundered through British banks every year (Times, £, p18).
Criticising the report the President of the Law Society, Jonathan Smithers said: “Shortcomings in the intelligence gathering in preparing this report have resulted in what we believe is a misleading assessment” (FT, £, p2).
New crime figures show scale of cyber-crime
There is broad coverage of yesterday’s Office for National Statistics crime figures, which included fraud and cyber-crime for the first time. The Independent (p1, paper only) writes that one in 12 adults was a victim of fraud in 2014, with one in 22 people suffering from a cyber-crime attack.
Commenting on the figures, Commissioner of the City of London Police Adrian Leppard said: “This is new crime and it brings new challengers for policing in prosecuting offenders and protecting victims. Notwithstanding the cuts to police budgets, we must find ways of responding to the needs of victims of fraud.”Read more
Changes made to Senior Managers Regime
The Treasury is to abandon the “reversal of burden of proof” principle that would have applied to the Senior Managers’ Regime, the FT (£, p3) reports. Under the plans, executives would have had to prove that they had taken all reasonable steps to prevent breaches, rather than the regulator proving its case. The paper says that now as part of the Bank of England and Financial Services Bill to be introduced in the House of Lords, senior managers will have a statutory duty to take all appropriate steps to prevent regulatory breaches from occurring, but it will be up to the regulator to prove that such steps were not followed. In a statement, acting Chief Executive of the Financial Conduct Authority Tracey McDermott said: “While the presumption of responsibility could have been helpful, it was never a panacea… The Senior Managers’ and Certification Regime is intended to deliver better decisions to help avoid problems arising. We remain committed to holding individuals to account where they fail to meet our standards.”
Elsewhere, CityAM (p1) quotes Andrew Bailey, Chief Executive of the Prudential Regulation Authority, saying: “The introduction of the ‘duty of responsibility’ in place of the ‘presumption’ makes little difference to the substance of the new regime.” The new regime will be extended to cover fund managers, mortgage brokers and consumer credit firms from 2018, the paper adds.
Investment in London FinTech scene has increased 20-fold since 2010
CityAM (p10, paper only), reports that research by EY has revealed £312 million of venture capital funding went into London’s FinTech sector in the first half of 2015 – a huge increase from the £24 million invested over the whole of 2010. The paper says much of this investment came from international investors, and the surge is partly the result of high uptake of FinTech products among wealthy young people in the UK. It quotes Imran Gulamhuseinwala, Head of European FinTech at EY, saying: “At approximately £20 billion of revenues, the UK has a world leading FinTech footprint. Our analysis found that the UK is a very attractive location for FinTech start-ups. We think there’s potential for the UK FinTech industry to generate an additional £16 billion of revenues by 2020.”
Key arrest made after malware attack
The National Crime Agency is investigating the theft of £20 million from British bank accounts after a criminal gang used malware – malevolent software – to steal the details of customers using online banking, the Mirror (p25) reports. A least one “significant” arrest has been made and customers are being urged to ensure they have up-to-date antivirus software to prevent attacks. The paper quotes a BBA spokesperson saying: “Banks spend hundreds of millions of pounds each year on sophisticated systems to protect customers from fraud and cybercrime, but some ruthless criminals continue to target savers directly.”Read more
China to issue government debt in London
The FT (£, p1) reports that China will choose London as the first foreign financial centre in which to open a sovereign debt market. The move comes as China pushes to internationalise its currency. A source told the FT that the move is designed not to raise funds but to open an offshore market. The announcement is expected next week during a visit to the UK by China’s president, Xi Jinping, and is being seen as an important win for the UK in the effort to attract Chinese investment. An initial launch of a few billion renminbi in short-term debt is expected but reports suggest that Beijing is already planning a second wave of bonds to be issued in London.
Cyber-crime set to become the most common offence
Ahead of new figures to be released by the Office of National Statistics (ONS) on Thursday – which will include cyber-crime for the first time – the Telegraph (£, p1) is reporting that cyber-crimes will become the country’s most common offense. Estimates cited in the report range from 6.8 to 12.5 million cyber-crimes committed every year which, when added to the crime statistics, will have the effect of changing the trend in crime overnight. The Times (£, print only, p2) also reports on warnings from the National Crime Agency that fraudsters have already stolen up to £20 million from UK bank accounts.
The BBA launched the “Know fraud, no fraud” campaign to help fight customer fraud. Find the campaign here.
The impact of start-ups on traditional banking explored
The FT is running a special report on FinTech and the potential threat it poses to high street banking. The articles focus on the legacy systems being operated by most banks and the struggle to invest in new technology. One article covers six promising start-ups and another looks at the leading role of mobile payments systems in the developing world in leading innovation in the field. An analysis of blockchain technology points to the ways banks can use it to reduce costs and increase profits.
The BBA released the report Digital Disruption which discusses the ways digitisation is changing the banking industry. See the report here.Read more
Prudential Regulation Authority seeks to quash fears over rules on bank ringfencing
The FT (£, p4) reports that the Bank of England’s Prudential Regulation Authority will on Thursday seek to reassure the City that the separation of retail and investment banking activities will not cause capital to be trapped. The PRA is expected to say that new rules will not prevent ringfenced entities from paying dividends to parent companies and their shareholders. The announcement on Thursday is also expected to resolve key questions about capital and liquidity requirements.
Prime Minister encouraged to spell out EU reform wish list
European diplomats have said Brussels, Berlin and Paris want David Cameron to spell out Britain’s wishes on European Union reform within a month if he wants a deal by Christmas. (FT, £, p1). The paper also reports that the House of Lords will consider allowing 16 and 17 year olds to vote in the forthcoming referendum, during the second reading of the EU referendum bill today (p2).
Speaking in front of the House of Lords European Union Committee yesterday, Europe Minister, David Lidington also indicated that the timeframe for the referendum might be brought forward in order to avoid complicating the U.K.’s presidency of the European Union in the second half of 2017. Although there is precedent – with Denmark having held a referendum during its Presidency in 1993. (Bloomberg)
Shadow Chancellor signals policy shift on ‘fiscal charter’
There is widespread media coverage of the announcement yesterday by Labour Shadow Chancellor, John McDonnell, reversed his previously held position in support of the Government’s Charter for Budget Responsibly – that commits to balance the books by 2018 (FT, £, p2). Ahead of a key House of Commons vote tomorrow, McDonnell argued that the new position would “underline our position as an anti-austerity party” and that the party would set out its alternative plan for “tackling the deficit by ending unfair tax cuts to the wealthy, tackling tax evasion and investing for growth.” Reports indicate that there was strong dissent within the Parliamentary Labour Party meeting last night where McDonnell encouraged colleagues to follow his lead, as well as criticism from political opponents for the rapid reversal.Read more
European banks warn US rivals are stealing a march
New rules could leave European investment banks lagging behind their US counterparts, according to two senior industry figures (FT, £, p1). In an article for the FT (p11), Frédéric Oudéa, Chief Executive of Sociéte Générale, notes that US banks have increased their share of the global wholesale market from 48 to 59 per cent in the past five years, while the share of the top five European banks has dropped from 35 to 31 per cent. Barclays Chairman John McFarlane has raised the prospect of potential industry mergers to create a European regional champion: “If the European politicians and banks are really serious they can’t just sit there and throw bricks, they have got to do something about it.” However, Mr McFarlane added that he does not see much appetite for creating a regional champion.
Banks focus on blockchain technology
The technology behind Bitcoin could improve the profitability of investment banks by speeding up payments and removing the need for an intermediary, according to senior figures at Goldman Sachs and UBS (Times, £, p44). Speaking in Peru, Goldman Sachs’ Chief Operating Officer Gary Cohn said: “Think of a dollar-yen transaction. I deliver yen in dollars 19 hours later and have that credit exposure sit on my balance sheet, which I have to capitalise. With blockchain technology you settle that in real time simultaneously, free up regulatory capital and everything else.” Last month nine investment banks joined forces with R3, a digital currency business, to draw up common industry standards.
Government launches consultation on financial advice
A three-month consultation into access to affordable financial advice has been launched by the Government. The Sunday Telegraph (B2) reports that the consultation will examine how access to financial advice can be “radically improved” as part of the first stage of the Financial Advice Market Review. Commenting on the consultation, Harriett Baldwin, Economic Secretary to the Treasury said: “A key part… is making sure that people can access high-quality, affordable, tailored advice and guidance to help them make informed financial decisions, whether that is saving for their first home, taking out a mortgage, buying a car, or saving and investing for the future.”Read more
Treasury Select Committee Chairman voices concerns over corporation tax surcharge and competitiveness
Andrew Tyrie, Chairman of the Treasury Select Committee, has called on the Prudential Regulation Authority (PRA) to ensure that the corporation tax surcharge on bank profits does not damage customer choice by making it too expensive for challenger banks to compete, the Times (£, p51) reports. The paper says that in a letter to PRA Chief Executive Andrew Bailey, Mr Tyrie acknowledged that the regulator had helped challenger banks establish themselves, but said small banks are pressing for more reforms to help them compete with bigger players. The FT (£, p4) adds that the letter comes just weeks after the Treasury refused smaller lenders relief from the charge. In it, Mr Tyrie said it was essential that the tax “does not obstruct parliament’s efforts over the past four years to increase competition in the banking sector”.
CityAM (p2) quotes Paul Lyman, Chief Executive of Secure Trust Bank and the Chair of the BBA’s challenger banks panel, saying: “Andrew Tyrie is one of the few politicians thus far who are taking a holistic view of the ineffective competition across the UK banking market. Our position as a collective of challenger banks is very straightforward: we don’t mind being on the same tax structure, so long as we create a level playing field for banks of all sizes.”
“Vote Leave” campaign launches
The Telegraph (p1) splashes with the news that a cross-party group calling for the UK to leave the European Union has the backing of some of the country’s most successful entrepreneurs. Vote Leave, which launched last night, has the support of former Conservative Party co-treasurer Peter Cruddas, John Mills, the head of television shopping firm JML, and Stuart Wheeler, a UKIP donor and former party treasurer. The paper says the group believes EU red tape is damaging businesses and that it “cannot cope” with the “technological and economic forces” that are changing the world. It adds that David Cameron will tonight host German Chancellor Angela Merkel at Chequers, where he will try to secure support for his EU reform agenda.
Banks asked to check commodities exposure
The PRA has asked the UK’s big banks to disclose their full exposure to commodity traders and falling prices of raw materials, the FT (£, p18) reports. The request was prompted by concerns over the impact of the oil and metals slump, although it was not in response to any immediate concerns of a default, the paper writes. It adds that the regulator is checking that banks know what their exposures are to individual commodity houses and they are aware of the wider consequences if a larger commodity trader were to collapse.Read more