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.
FCA set to examine competition in the mortgage market
Most papers this morning cover the decision by the Financial Conduct Authority (FCA) to begin preliminary work on a full market study into competition in the mortgage market, planned for 2016. The FT (£, p2) reports that the regulator is seeking to understand whether there is sufficient clarity and competition in the market. Christopher Woolard, the FCA’s Director of Strategy and Competition, said: “If you want innovation in a market you have to accept that people will come along and do things that don’t fit the existing model. The question is can you make transparent to consumers what the pricing is for those products?”. He also added it was a “very big jump” to suggest that asking for information signalled a future crack down on the sector.
IMF signals increased risk of financial crisis
The Times (£, p42) and others pick up stark warnings from the International Monetary Fund (IMF) ahead of its meeting in Peru this week that another potential financial crisis could be looming due to a slowdown in emerging market economies and a decline in world trade. It said the scale of borrowing by emerging market countries, reaching $3trillion, meant policymakers needed to act quickly to shore up the financial system. José Viñals, the IMF’s financial counsellor, said the threat of instability and recession hanging over China, Brazil, Turkey and Malaysia was one of a “triad of risks” that could knock 3% off global GDP. Mr Viñals said “Vulnerabilities in emerging markets are important, given their significance to the global economy, as are the roles of global markets in transmitting shocks to other emerging markets and to advanced economies. The recent financial market turmoil is a demonstration of this materialisation of risks.”
London is tech venture capital of the UK
CityAM (p1) splashes on the news that venture capitalist firms are pouring a record £1.4bn into UK tech companies, a tenfold increase on 2010 and with over three quarters of the investment (£1bn) going to London-based firms. Eileen Burbidge, partner at Passion Capital and the Government’s special envoy for fintech, said: “Today’s figures and the fact that London is home to more software developers than anywhere else in the world, validate the fact that London’s tech sector is maturing and is one of the world’s leading tech hubs”. An Accenture report also showed how last year fintech really caught the imagination of investors around the world, after $12.2bn was poured into groups applying new technology to the world of finance. Observers point to the rise of the sector is due to the rise of mobile technology which has led consumers to organise parts of their life online, as well as low interest rates which have made start-ups a more attractive investment for those with capital at their disposal.
Read the BBA’s digital disruption report here.Read more
IMF cuts its global growth forecast
CityAM (p1) leads with the International Monetary Fund warning that a slowdown in emerging markets is dragging down global growth. The fund cut its forecast for global growth for 2015 and 2016 to 3.1 per cent and 3.6 per cent respectively, down 0.2 per cent. The report pointed to falling commodity prices and weak demand in emerging markets as the cause of the cut. The IMF called on Germany to do more to stimulate growth in Europe while also saying that the US and the UK would lead economic growth among major developed nations. The UK’s growth forecast was raised slightly from 2.4 per cent to 2.5 per cent. The FT (£, p4, 6) reports the IMF’s Chief Economist Maurice Obstfeld as saying that the positive figures for the UK could signal an imminent rate rise.
New whistleblower rules for financial firms
The Times (£, p36) and others report on new whistleblowing rules for financial firms announced yesterday by the Financial Conduct Authority and the Prudential Regulatory Authority. The rules require firms to name a “whistleblowers’ champion” as well as to tell their staff how to whistleblow on bad behaviour, however, they stop short of the American system which offers financial compensation to whistleblowers. The rules were a recommendation of the Parliamentary Commission on Banking Standards and will come into effect in September 2016.
European Court of Justice rules against ‘safe harbour’ data transfers
Papers report widely the European Court of Justice ruling that a legal provision (Safe Harbour) which allows the transfer of personal data by firms between Europe and the US is invalid (FT, £, p1, 5). Privacy campaigners celebrated, but businesses warned that the ruling would impose steep costs on technology companies and could threaten the creation of a European digital market. The ruling is being described as particularly harsh because it does not allow a grace period. Companies that rely on US servers to store European data will now have to find a work around in short order.Read more
Chancellor’s speech at Conservative Party conference
There is widespread coverage of George Osborne’s speech at the Conservative Party conference yesterday. The speech included the announcement that Government would sell off the final tranche of its holdings in Lloyds Banking Group, in parallel offerings to retail investors and institutional investors. Osborne set out plans for devolution of business rates to councils, which would see local authorities retain up to £26 billion in taxes in exchange for new responsibilities. He also signalled the creation of a National Infrastructure Commission to be chaired by Labour peer Lord Adonis (FT, £, p3). The FT described the speech as “a coherent manifesto, poaching Labour turf” that “put purpose behind [his] ambition” to be leader.
New OECD proposals on multinational tax avoidance
More than 60 Governments have agreed on new OECD proposals to cut global tax evasion, led by G20 members (Times, p38). The culmination of two year’s work to update the rulebook has been described as a “once in a generation change.”Under the new scheme, companies will be required to reveal their earnings and activities by jurisdiction. Countries will also introduce rules to guard against multinationals building cross-border structures to exploit differences between jurisdictions. The full package will be presented to Finance Ministers at the OECD meeting in Peru this week.
Institute of Directors publishes productivity report
Ahead of its annual convention today, new Institute of Directors research, reported in CityAM (p15), argues that ministers should focus on promoting business “agility” rather than looking at single metrics. In the Business Beyond Boundaries report, IoD Chief Economist James Sproule, calls for the Government to invest more in STEM education, commit to flexible labour market practices and put in place regulations that support entrepreneurialism and innovation.Read more
HM Treasury announces Lloyds public share sale
The Government has unveiled plans to exit its holding in Lloyds Banking Group by selling shares worth at least £2bn to private investors next spring. The Treasury announced that it intends to sell its remaining 12% stake in the coming months (BBC News). Members of the public will be offered a 5% discount to Lloyds’ market price and small investors seeking shares worth less than £1,000 will get priority. Speaking to Sky News this morning, the Chancellor said: “I want them [the shares] to go to members of the public, people watching this programme and others. So our offer is this: Buy Lloyds shares. We’ll favour small investors, we’ll favour those who hold the shares for a long time. You’ll get a discount. And we’ll help create that share-owning democracy that we want to see in this country.”
Foreign banks forced to capitalise UK subsidiaries
A number of foreign banks have been forced to inject additional capital into their UK subsidiaries as a result of tighter regulations imposed by the Bank of England (FT, £, p17). Foreign banks offering retail services to UK consumers have been forced to overhaul their structure, with up to 50 lenders expected to be required to establish more heavily regulated subsidiaries. Sanjiv Chadha, UK Head of State Bank of India, said: “In some ways it is unfortunate. But it is an incremental cost that we will absorb and we will move on. While we could have done without it, we don’t see it as discriminatory.”
FCA consults on PPI compensation deadline
There was widespread coverage of the Financial Conduct Authority’s announcement on Friday that it is consulting on a possible 2018 deadline on personal payment insurance (PPI) compensation. FT Weekend (£, p1) reported that claims management companies are expected to lead a surge in claims ahead of the deadline. Richard Lloyd, Executive Director of Which?, was quoted in the Times (Saturday, £, p45) stating: “Efforts must be redoubled to ensure that anyone mis-sold PPI is given fair, speedy compensation so that people get back what they’re rightly owed.”Read more
FCA to consult on PPI time barring
BBC news and other online outlets widely report the announcement this morning by the Financial Conduct Authority (FCA) to consult by the end of the year on the introduction of a deadline for claims over mis-sold payment protection insurance (PPI). The FCA intends to consult on a two year deadline from when the ruling comes into force (anticipated by early next year) – which could give consumers until the spring 2018 to complain. The FCA cited “increasingly stale” evidence from a high number of customers who are pursuing older cases. It also said claims management companies are costing customers too much in legal fees.
Fed rate rise risks emerging markets capital flight
The FT’s (£, p1) front page today reports how emerging markets such as China and Brazil could be hit by a net outflow of capital investment this year as the spectre of a Fed rate rise looms large. The subject is likely to feature highly at the annual meeting of the IMF and World Bank in Lima next week. “Flows to [Emerging Markets] have weakened sharply in volatile market conditions and a jump in risk aversion,” said Charles Collyns, chief economist at the Institute of International Finance, adding “we now project overall negative flows for the first time since the emerging markets concept was first devised in the late 1980s”. Mr Collyns noted that, unlike the crisis of 2008, the factors driving capital flows this year were largely internal to emerging markets.
Bank of England could raise capital buffers
City AM (p6) and other papers report that the Bank of England is considering raising the countercyclical capital buffers (CCBs) in small increments, which have been at zero since they were introduced in 2013. The minutes of the Monetary Policy Committee suggest that while the overall resilience of the British financial system has improved, fears loom over the global economic outlook. The committee also expressed concerns over the level of credit in the UK’s banking system which is still at a historical high. However, the Bank of England intends to postpone any potential decision on raising CCBs until the results of the 2015 bank stress testing exercise have been completed.Read more
EU’s CMU proposals welcomed by UK businesses
British businesses and business groups welcomed the Capital Markets Union action plan launched by Lord Hill yesterday. The proposals, which are aimed at making it easier for markets across the EU to raise funds included a new consultation into post-crisis financial regulation. Commenting on the proposals in CityAM (p13) the BBA’s Chief Executive, Anthony Browne said: “We welcome the pragmatic balance between legislative and non-legislative approaches within the action plan”.
The Telegraph (£, p5) writes that the action plan aims to ease funding costs for small businesses with proposals to reform the Prospectus Directive so that they are “affordable for SMEs to produce”.
FCA sees rise in current account complaints
The FCA’s latest quarterly complaints data receives broad coverage. The FT (£, p6) reports that although PPI complaints are falling the industry saw a 31% increase in complaints on current accounts in the first six months of this year. Director of Strategy and Competition at the FCA Chris Woolard called for companies to “take action” to address the issue.
Commenting on the latest figures a spokesperson for the BBA said: “Banks have redoubled their efforts to ensure that any packaged account bought by a customer is right for their individual needs” (BBC News).
Growing concerns about a global slow down
The World Trade Organisation cut its global trade forecasts yesterday from 3.3% to 2.8% amid concerns about the health of the Chinese economy and emerging markets and the possibility of further “ructions” from a rate rise by the US Federal Reserve (Independent, p49). The IMF also warned of a slow-down in global growth as the IMF’s Managing Director Christine Lagarde said forecasts to be published next week would show the weakest growth in activity since the financial crisis (Guardian, p26).
Calling for a “policy upgrade” to meet the current global challenges, Lagarde said: ““At the global level, there is a pressing need to complete and implement the regulatory reform agenda – with a special focus on improving the transparency and oversight of non-banks, or shadow banks. And we still have another major upgrade ahead of us – the resolution framework for systemic, globally active financial institutions remains inadequate.”Read more
Commission to publish Capital Markets Union Action Plan today
The FT (£, p6) previews the publication of the European Commission’s Capital Markets Union Action Plan today, describing Lord Hill as “presenting a proudly workmanlike agenda” and “at pains to avoid a regulatory blunderbuss”. Writing for the paper, Lord Hill, says the benefits of stronger capital markets are clear but that he has no intention of disrupting markets in pursuit of “some theoretical perfection.”
He argues the CMU action plan could give Europe’s businesses more choices over funding, help them to invest and grow; increase investment in infrastructure; draw in more funding from outside the EU; help businesses sell into bigger markets; and help those saving for their old age.
Jeremy Corbyn gives first conference speech as Labour Leader
There is widespread coverage of the Jeremy Corbyn’s first conference speech as Labour Party leader. Mr Corbyn used his hour long speech to call for a politics that is “kinder and more inclusive” (Guardian, p1). The new leader also used his speech to call for statutory maternity and paternity pay for the self-employed and reiterating his personal view that Trident should not be renewed. (Times, £, p7)
The FT (£, p3) reports that there was concern that Mr Corbyn did not speak about the deficit and commenting on the speech Director General of the CBI, John Cridland said: “You could argue that it was an unbalanced speech. There was a lot about values and human rights but not a lot about the private sector.”
IMF issues a warning on emerging markets
The FT (£ p1 and p7) covers the IMF Global Financial Stability report highlighting that rising global interest rates could prompt a new credit crunch in emerging markets. With the US Federal Reserve expected to raise interest rates in the next few months, business debt as a share of economic output grew from less than half in 2004 to almost 75%. Debts of non-financial firms in emerging markets have more than quadrupled over the same period. The IMF warned that emerging market governments should ready themselves for an increase in corporate failures as firms struggle to meet higher borrowing costs.
The report also urged regulators to take action to address the risk reduced liquidity in financial markets, to mitigate consequential impact on prices, Guardian (p21).Read more
McDonnell sets out plans to reform the BoE and HMT
Shadow Chancellor John McDonnell used his speech to the Labour Party conference yesterday to set out plans to reform the Bank of England (BoE) and HM Treasury (FT, £, p2). Mr McDonnell would maintain independence of the BoE, but overhaul its 18-year-old mandate to focus on growth, jobs, wages and inflation. Similarly, Mr McDonnell has asked Lord Kerslake, who until last year was head of the civil service, to review the operation of HM Treasury which he believes to be excessively focused on public spending cuts and insufficiently interested in growth.
Mr McDonnell also pledged a series of tax reforms, including plans to raise the top rate of tax to 50p or 60p, cut tax breaks for buy-to-let landlords, and force companies to “pay their fair share” (Telegraph, p4).
Swiss regulators launch bank investigation on metal market manipulation
The Swiss competition authority, Weko, has launched an investigation into some of the world’s biggest banks over the pricing of metals (FT, £, p32). The investigation comes after similar investigations by the European Commission and the US Department of Justice. The investigation focuses on suspicions that the banks may have colluded on the level of bid and offer prices. A spokesman for Weko has said that the investigation is likely to be concluded either next year or 2017 (CityAM, p17).
Bank of England probed over advice to lenders
The FT (£, p1) reports that the Serious Fraud Office (SFO) has launched an investigation into the advice given by the Bank of England to lenders during financial crisis emergency auctions. In particular, the SFO will investigate whether banks and building societies were told to bid at a certain rate, and not to over-pledge collateral during the auctions so as not to add to market volatility. The auctions allowed banks and building societies to pledge assets as collateral to gain access to emergency liquidity. An institution over-pledging could have been seen as a sign of weakness. The SFO will decide if there is a public interest test to pursue the case by the end of the year.Read more
Labour to set out its economic plan
Labour’s new Shadow Chancellor, John McDonnell, will address his party’s annual conference in Brighton today. This morning Mr McDonnell told Sky News he plans to launch a review into “all taxation policies” and financial institutions. He confirmed that he will conduct a review of HM Revenue and Customs, but denied that he plans to introduce a Financial Transaction Tax. The Guardian (p6) says Mr McDonnell will call for the Bank of England’s mandate to be broadened so that it has a wider brief to achieve economic growth. His aides insist its independence would not be interfered with. On Sunday BBC News reported that the Shadow Chancellor had announced the appointment of six economists to advise the party on economic policy, including Nobel Prize-winning economist Joseph Stiglitz and author Thomas Piketty. Mr McDonnell’s economic plan will also include a sharp rise on income tax, scrapping the Conservative inheritance tax reforms and increasing corporation tax, according to the Telegraph (p1).
Banks may have “one board” under ringfencing structure
Yesterday’s Sunday Times (£, p2) reported that the Governor of the Bank of England, Mark Carney, is considering allowing the retail and investment arms of banks to be controlled by one board under ringfencing proposals, rather than the two separate entities that were initially proposed. Dr Carney will start a consultation on the new rules in the middle of next month, the paper says. Today’s CityAM (p1) adds that some lenders say the ringfencing structures would disrupt business practices and diminish directors’ accountability to shareholders. It quotes Chancellor George Osborne, saying that the decision is for regulators. He adds: “Broadly speaking we should let a lot of this banking regulation settle down. I would include the ringfencing legislation.” The ringfencing structure is set to take effect in 2019.
Senior Managers Regime could affect small number of top executives
The Senior Managers Regime – which comes into force in March 2016 – will affect the top 15 executives in some of the largest banks in the UK, the FT (£, p2) reports. Banks and regulators are currently discussing which staff will be labelled “senior manager” and captured by the new rules, which are designed to make individuals working in the banking sector more accountable. The number is lower than some banks had expected, the paper writes. It quotes the BBA saying that it was good the number was so low because it meant that the regime was “not too burdensome for small banks”. A final list of those captured by the regime must be drawn up by February, the paper adds.
Elsewhere, CityAM (p8) reports that employment law firm GQ Employment Law has warned that the Senior Managers Regime could lead to pre-emptive firings, as managers need to demonstrate they have taken “reasonable steps to prevent the breach of regulatory requirements”. This could result in an increase in the number of legal claims over dismissals, the paper says.
Regulator delays PPI ruling
The Mail on Sunday (p89) yesterday reported that the Financial Conduct Authority has delayed the release of its interpretation into the Supreme Court’s ruling on Payment Protection Insurance commissions paid to staff who sold the policies. A decision on whether to set a deadline for all outstanding PPI claims is now expected to be announced either this week, or when the FCA’s board next meets in a month’s time.Read more
France calls for common European treasury
Emmanuel Macron, the French economy minister, has proposed the creation of a common treasury so that wealthier eurozone members can channel funds to countries in difficulty, the FT (£, p8) reports. Mr Macron is quoted saying: “From a competitive and fiscal point of view we have to reconverge. Without any change the eurozone cannot survive.” Mr Macron believes that the current system, involving last-minute summits, is not sufficient to guarantee the long-term survival of the currency union and instead says countries should set up a structure of permanent fiscal transfers to reduce the divergence caused by policies, the paper writes.
Warning over new banker rules
Senior lawyers have warned that new rules that govern the Senior Managers Regime, which comes into effect in March 2016, may breach human rights laws, the Times (£, p51) reports. The new rules will shift the burden of proof for serious failures so that bankers could be regarded as guilty until proven innocent. The lawyers have said that any attempt by the Prudential Regulation Authority to adopt this approach would be challenged in court under the Human Rights Act. Barney Reynolds, a partner at law firm Shearman & Sterling, is quoted describing the approach as “novel and untested by case law”. He adds: “I think it is essential that the PRA flesh out in its rulebook what is meant by presumption of responsibility in a way that is objectively fair, reasonable and realistic.”
Osborne plans Iran delegation
Chancellor George Osborne has told the FT (£, p1) that in 2016 he wants to take what is expected to be Britain’s biggest ever trade delegation to Iran. Mr Osborne said he was prepared to take risks to boost the economy. He is quoted saying: “Assuming that Iran honours the nuclear deal, and it’s properly verified, I think there will be growing potential to do business with Iran.”
Mortgages at pre-crisis high, say BBA figures
The BBA’s August High Street Banking Statistics, published yesterday, are widely reported in today’s papers. The Telegraph (B3) says that house buyers borrowed more last month that at any time since the financial crisis in 2008. Mortgage lending jumped by 14% on the year, the paper adds. BBA Chief Economist Richard Woolhouse is quoted saying: “People are putting their money into bricks and mortar while interest rates are low and the timing of a likely rate rise remains uncertain. Remortgaging numbers also continue to be strong, as shrewd homeowners snap up competitive deals.” Mr Woolhouse’s comments are also quoted in the FT. The Times (£, p16) adds that the number of mortgage approvals in August was 23% higher than a year ago, with remortgaging up 38 per cent.Read more