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.
Conservative manifesto published today
The Conservative general election manifesto will be launched in Yorkshire today. It is expected to include proposals to reform social care and reduce immigration, with new charges for firms that hire foreign workers (BBC News).
Sky News (online) reports that the manifesto is also expected to remove commitments to the pensions triple lock and previous promises not to increase income tax, VAT or national insurance. The Prime Minister will also highlight the importance of Brexit negotiations, noting that “now more than ever, Britain needs a strong and stable leadership to make the most of the opportunities that Brexit brings”.
European Commission to propose stronger links between EU27 Capital markets
The European Commission is expected to propose a number of measures to enhance the EU 27 capital markets framework after Brexit, including the creation of a passporting regime for technology firms, a stronger role for ESMA and an EU Small Listed Companies Act (Reuters, online).
Speaking to the European Parliament, the European Commission’s lead Brexit negotiator, Michel Barnier, warned that UK-based firms should, “not count on long transition periods to cushion the impact of Britain leaving the European Union” and called for firms to start preparing for the impact of Brexit now (Reuters).Read more
Relocation of Euro-clearing would damage European Economy
Relocation of the Euro-clearing market would destabilise the European economy and wider global economic system (City AM, p1).
Commenting on the measures proposed by the European Commission, City of London’s Policy Chief Catherine McGuinness said, “all the evidence points one way: that the mass uprooting and offshoring of part of the industry – of clearing of transactions in one currency – would not only be vastly complicated, but also vastly damaging…if we split off one currency, with euro clearing moving to, say, Paris, all we’ll see is systemic risk going up, liquidity going down, costs hitting the roof” (Reuters, online).
EU-Singapore free trade deal may signal ‘faster, harder’ Brexit
The European Court of Justice has ruled that a free-trade deal between the EU and Singapore will largely be agreed by the European Commission, with dispute resolution mechanism and investment portfolios the only two areas where all member states must agree on final terms (Financial Times, £, p1).
The ruling has been interpreted as a potential model for a post-Brexit deal with the UK. Bloomberg (online) writes that the judgement paves the way for a quicker but harder Brexit, noting that it “makes life easier for Commission President Jean-Claude Juncker and chief Brexit negotiator Michel Barnier, who have made it clear they want to serve the UK with a large divorce bill and harsher terms”.Read more
Labour to propose financial transaction tax and executive pay reforms
The Labour party will publish its manifesto today including a financial transaction tax of 0.5% on trading in bond and derivatives, and a 2.5% levy on employers that pay staff more than £330,000, rising to a charge on 5% for companies that pay staff over £500,000 (The Guardian, p1). The Daily Telegraph (£, B1) warns that this could increase costs for pension funds, and risks damaging the UK’s competitive position after Brexit. Laith Khalaf, Hargreaves Lansdown Senior Analyst commented that, “a lot of money invested in the City is done by pension savers. It’s very difficult to add a tax like that into the system without ultimately hitting consumers in the pockets, as all of our pensions are invested into the stock market”.
Industry calls for amendments to PSD 2
Politico (£) reports that the European Banking Federation has called for the European Commission to reject changes to the second Payments Services Directive that would allow Fintech firms to control online platforms which would grant them direct access to client data. The proposals come as banks increase their investment in cyber security, with Reuters (online) reporting that although “banks generally have more robust cyber defenses than other sectors” they are targeted far more often as hackers try to exploit weaknesses in technology.
Missed debt repayments at ten year high
The Daily Mirror (p2) reports that 300,000 county court judgments were issued against individuals who missed debt payments in England and Wales in Q1 2017, the highest level in ten years, according to data from The Registry Trust. The Guardian (p21) notes concerns over potential mis-selling of car loans have contributed to debt in low-income families, triggering an investigation by the FCA. Commenting on the data, Chair of the Registry Trust Malcolm Hurlston said, “people who don’t pay their debts are increasingly likely to be taken to courts. CCJs can seriously damage credit ratings and good lenders rightly avoid people who have shown they can’t manage debt”.Read more
Brexit could cost banking sector $1.5 billion
Consultancy Oliver Wyman has estimated that duplication of activities and capital efficiencies caused by Brexit could reduce European investment banks’ return on equity by $1.5 billion (Financial Times, £, p15). Assessing the scale of potential costs a banking source said, “if agreements allow for a set-up that enables us to contact clients out of a European entity that has European access but continue to manage risk and trading out of London, the impact would be far less”. Meanwhile Irish Central Bank Governor Philip Lane has said that “regulators across the EU are “broadly” seeking to apply the same rules in each country” amid fears that Brexit will lead to greater regulatory fragmentation across the EU 27 (Bloomberg, online).
ICAEW sets out guidance on capital ratios
The Institute of Chartered Accountants in England and Wales (ICAEW) will today publish new guidance for auditors assessing banks’ reported capital ratios (Financial Times, £, p20). Commenting on the standards, Iain Coke, ICAEW Head of Financial Services, said that banks investors were “more confident than they should be” about this data, noting that calculation of capital ratios is subject to a greater degree of user error and bias than conventional balance sheet reporting. The BBA said the publication of regulatory capital data “shows how the industry’s capital position has been steadily improving – our banks today are stronger than they have ever been and better able to withstand any shocks to the financial system”.
Europol praises banks’ cyber resilience
Europol Chief Executive Rob Wainwright has praised the banking sector’s approach to managing cyber crime, following a series of high profile ransomware attacks last week (City AM). Speaking to ITV on Sunday, Wainwright noted that, “very few banks in Europe, if any, have been affected by this and that’s because they’ve learned through painful experience about being the number one target in cyber crime, the value of having a strategy in place”. Reuters (online) reports that G7 Financial Ministers have strengthened their commitment to closer cooperation on cyber crime and terrorist funding.Read more
UK Rate rises ‘depend on Brexit deal’
Bank of England Governor Mark Carney has said that interest rates could be back to “normal” levels within three years depending on the outcome of Brexit negotiations (Financial Times, £, p1). Traders interpreted his comments as a signal that rates are unlikely to rise before 2019, while the Bank lowered its GDP prediction for 1.9% reflecting weaker than expected Q1 economic growth (The Times, £, p40).
FCA to review retail banking business models
The FCA has published details of its review into the ongoing sustainability of retail banks, building societies and credit unions’ business models in a low interest rate environment (Reuters). The review is expected to look at the provision of free in credit banking, with findings to be published in Q2 2018. Commenting on the announcement, the BBA said, “the BBA welcomes the FCA’s commitment to ensuring that its regulatory approach remains fit for purpose and helps the sector deliver the right outcome for customers. We look forward to engaging with the regulator to help inform this review”.
US regulator to consider modifying Volcker rule
The Wall Street Journal (£ online) writes that acting Comptroller of the Currency Keith Noreika will consider relaxing restrictions on banks’ trading activity by, “cataloging types transactions or investments, then evaluating whether to grant regulatory exemptions for those activities”.Read more
Bundesbank won’t seek to attract UK banks after Brexit
Bundesbank Board Member Andreas Dombret has said that the German authorities will not seek to attract UK banks to relocate after Brexit, commenting that, “we will not be calling banks, we will not be giving discounts or goodies, we will not allow shell companies” (Politico, £, online). He also promised to offer resources to European regulators in other jurisdictions, noting that, “it is in everybody’s interests that we don’t have a cliff-edge effect. I am enough of a European that to me, the issue of which city hosts [the relocating banks] is of secondary nature.”
Bank of England to publish interest rate decision
The Bank of England will today publish its quarterly inflation report setting out its outlook for the UK economy, as well as its latest decision on interest rates. The Financial Times (£, online) speculates that, while interest rates are widely expected to remain unchanged, more members of the Monetary Policy Committee could vote for a rate rise. The Independent (online) summarises analyst predictions, noting that many expect the Bank to lay the groundwork for future increases.
Labour to promise tax and pay reforms
A number of papers, including The Daily Telegraph (£, p1), Daily Mirror (p1) and BBC (online), have published exclusive details of a draft version of Labour’s election manifesto, which includes pledges to rule out a “no deal” outcome on Brexit, increase corporation tax and introduce a levy on firms that offer “very high pay”.Read more
Banks set out Brexit contingency plans
More than a quarter of financial services firms are planning to move some of their staff or operations out of the UK after Brexit, according to EY (Financial Times, £, p2), with 21 of the 47 investment banks it surveyed setting out some detail on their contingency plans in recent weeks. Omar Ali, EY’s UK Financial Services Leader said, “the more complex the organisation, the longer it is going to take to create workable contingency options, and so investment banks in particular are putting their plans on record”.
Reuters (online) also reports that French authorities are expected to step up efforts to attract banking business from the UK. Arnaud de Bresson, Chief Executive of Paris Europlace estimated that Paris could attract 20,000 workers from Britain, noting that “Macron will personally make it his mission to convince the international banks as well as investors of the benefits of Paris”.
House prices fall by 0.2% in Q1 2017
House prices were 0.2% lower in the first quarter of 2017, the first fall since November 2012, according to Halifax data (The Daily Telegraph, £, B1). Commenting on the data, Halifax Economist Martin Ellis said, “signs of a decline in the pace of job creation and the beginnings of a squeeze on households’ finances as a result of increasing inflation may also be constraining the demand for homes” (The Times, £, p40). The Daily Mail (p21) notes that the Bank of England is expected to warn of further downward pressure on household income in its inflation report, to be published on Thursday.Read more
Judicial Review of PPI time bar
City AM (p15) reports that a claims management firm will bring a judicial review against the Financial Conduct Authority, following the regulator’s decision to set a two year time limit for customers to make PPI claims. The Sunday Times (£, online) notes that, “lenders have paid out nearly £30bn to compensate customers who were mis-sold PPI”. Under the FCA’s proposals customers have until August 2019 to submit a claim.
Bank of England publishes bailout requirements
The Bank of England has published MREL requirements – the minimum amount of its own funds and eligible liabilities – that banks must hold to cover losses in the event of failure (Financial Times, £, online). Reuters (online) notes that banks are working towards an interim MREL target which applies from 2020. Simon Hills BBA Executive Director, Prudential Capital, Risk and Regulatory Relationships, noted that: “it would be very helpful if the Bank of England and authorities around the world were very clear that there is a transition period to getting to the TLAC end state”.
Two years ‘not long enough’ to adjust after Brexit
Policy-makers should commit to a phased implementation period that lasts for more than two years, to allow financial services firms to ensure continuity of service for their clients after Brexit, according to a Freshfields report for TheCityUK (The Guardian, p40). Commenting on the report, Miles Celic, Chief Executive of TheCityUK, said: “The UK-based financial and related professional services industry has long been a driver of growth and job creation on both sides of the Channel. It is in our common interest that this role is not just preserved, but promoted”.Read more
Mortgage approvals fall in March
Mortgage approvals fell to 66,837 in March, the lowest level since September 2016 according to data published by the Bank of England (Sky News, online). This mirrors the BBA’s latest high street lending figures, which show mortgage borrowing in March was 2.8% lower than February (The Times, £, p44). Commenting on the mortgage market, Kay Daniel Neufeld, of the Centre for Economics and Business Research, said, “the numbers paint a sobering picture. [The UK property market] has been struggling to gather momentum in 2017”.
EU considers new Euro clearing regulation
The European Commission has suggested that the UK will not be able to retain Euro clearing activity, worth €1 trillion, after Brexit and is considering imposing “location requirements” and enhanced oversight of clearing activity (Politico, £, online). Vice President of the European Commission, Valdis Dombrovskis, said: “The bulk of EU-denominated derivatives are cleared in the UK and therefore we need to assess what implications it has for financial stability” with further legislative proposals expected in June (The Times, £, p41).
Fraudsters ‘imitate bank domain names’
Criminals are targeting online banking customers by setting up websites that mimic banks’ domain names to persuade them to hand over personal details or download malicious software (Daily Mail, online). Kyle Wilhoit, Senior Security Researcher at DomainTools warned that customers “should remember to carefully inspect every domain they are clicking on”, adding that common warning signs included website addresses with, “added letters, dashes, reversed letters, and a plural or singular form of the domain name”.Read more