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.
Mortgage lending growing at fastest rate for seven years
BBA High Street Banking statistics published this morning show that gross mortgage lending in August was 14% higher than a year before – the fastest annual growth rate since 2008. Total gross borrowing stood at £12.2 billion. The number of mortgage approvals in August was 23% higher than a year ago, with remortgaging up 38% – its highest level for four years. Richard Woolhouse, the BBA’s Chief Economist, said: “People are putting their money into bricks and mortar while interest rates are low and the timing of a likely rate rise remains uncertain. Mortgage borrowing continues to pick up. The August increase is the largest in five years, although borrowing is still some way below pre-crisis levels.”
Don’t fear “honest mistakes”, says UBS chief
Sergio Ermotti, the chief executive of UBS, has urged senior bankers not to be afraid of taking risks or making mistakes – as long as they are honest ones (FT, £, p17). The head of the leading Swiss bank said in a speech that failing to show a “degree of tolerance” for errors would undermine the pursuit of legitimate business opportunities. The paper said that the scars of the financial crisis, large fines and tougher regulation had fostered a climate of “risk aversion”. In its main leader, the FT (£, p12) argues that the “negative exceptionalism” that tarnishes banking can be taken too far. Mr Ermotti’s follow similar comments last year from HSBC chairman Douglas Flint.
FCA to mull PPI time bar
The Financial Conduct Authority;s board will today consider introducing a time bar for payment protection insurance mis-selling claims, City AM (p3) and the Telegraph (online only) report. Banks and other loan providers have set aside more than £30 billion to compensate customers for PPI policies since 2010. Complaints to the Financial Ombudsman Service about these products fell by 10% in the first six months of this year.
Wages will continue to grow, says Broadbent
Bank of England deputy governor Ben Broadbent has said that pay growth will probably accelerate in the months ahead (Telegraph, B1). The economist said in a widely-reported speech that wage inflation had remained weak in recent years due to the high proportion of low-paid jobs created during the recovery. “The skew towards lower-paid jobs has diminished,” Mr Broadbent said, adding that pay packets should continue to rise as the labour market tightens and the eurozone’s economic recovery gathers pace.Read more
Digital disruptors pose €22 billion threat to banks
The FT (£, p22) reports that European banks risk losing out on €22 billion of revenues, as technology firms with more efficient digital services gain market share of retail payments. The gains are expected to come due to regulatory change to lower entry barriers, allowing digital services to provide direct bank account payments, rather than through a stored debit or credit card, which is currently the case. Research from Deloitte estimates that payments revenues represent a quarter of total revenues for European retail banks. Click here to read our report with Accenture on this topic.
“We need a better global financial safety net” – Minouche Shafik
Minouche Shafik, deputy governor of the Bank of England, said yesterday that policymakers need to enhance the “fragile” and “fragmented” financial safety net (Telegraph, B4). According to the deputy governor, the current tools available to address sovereign debt crises are “more of a patchwork than a safety net”. Among the recommendations, Dr Shafik suggested increasing the powers of the International Monetary Fund to “stress test” countries to test the risk of capital flight, particularly in emerging economies that are vulnerable.
Challenger banks call for tax level playing field
A group of CEOs from challenger banks have urged George Osborne to “level the playing field” in taxation, explaining that their lending to small businesses will be disproportionately affected by the new profit surcharge (FT, £, p4). The new tax combined with higher capital requirements for new banks, due to fewer years’ data, makes lending less economical and could restrict lending to small businesses by as much as £6 billion over this parliament, the CEOs say. As a response to Mr Osborne’s letter explaining there would be no changes to the new tax, the CEOs will write to the Chancellor to call for the creation of a working party.
London awarded 2015 top financial centre
CityAM (p1) reports today’s study from think tank Z/Yen that places London as the world’s leading financial centre. Despite concerns over the EU referendum and migration policy, the certainty following the General Election in May helped London climb 12 points, overtaking New York to take the top spot. The index, covering 98 business districts around the world, bases its results on factors including business environment, infrastructure, quality of human capital and financial sector development. London came top in every category.Read more
Chancellor unveils plans to strengthen China ties
The Chancellor is leading a five-day trade mission to China in an effort to strengthen bilateral ties (FT, £, p2). The People’s Bank of China has unveiled plans to issue short-term debt in London, for the first time outside the country. A feasibility study into linking the London and Shanghai stock exchanges was also announced. Writing in City AM (p6), the Chancellor and City Minister Harriett Baldwin state: “We want to cement London’s position as China’s partner of choice as it raises finance on international markets…Our expertise in financial regulation and our deep and liquid capital markets provide a strong foundation from which to build.”
FCA hires industry experts
The Financial Conduct Authority has recruited six industry experts from banking, law and regulators to join its enforcement panel. Five of those members are also joining the Payments Systems Regulator’s enforcement panel. Tim Parkes, a long-term partner at law firm Herbert Smith, will chair both panels. Former Royal Bank of Scotland executive Kevin Brown, who is now a fellow at the Chartered Institute of Bankers, is also joining both. (Daily Telegraph, online only)
Sanctions fears could drive banks away from Iran
The Independent (p49) reports that concerns over an aggressive approach from US regulators could undermine efforts to normalise trade relations with Iran and drive Western banks away from the country. International sanctions on Iran could start to be lifted next year after an agreement in July. Ross Denton, a partner at law firm Baker & McKenzie, said: “I can’t see any Western banks wanting to get involved with Iran for a long time…Jump the gun, cut corners, and you’re going to get absolutely murdered in the US.”Read more
Banks pay more than £30 billion in tax
There is extensive coverage across CityAM (p1), the Times (£, p41) and the Telegraph (B3) of the PwC total tax contribution report, published today, which finds that banks contributed £31.3 billion to the Exchequer in 2014. The study also shows that the six main banks have seen their taxes rise by 55% from 2010 to 2014.
BBA Chief Executive Anthony Browne writes in CityAM (p29): “Banks, like all businesses, need a stable and transparent tax system so that they can plan for the future. But BBA analysis shows that the UK government has introduced £40bn in additional industry-specific taxation over a period of a decade…Much of the sector is internationally mobile. Foreign-headquartered banks paid just over half of the total tax contribution last year, at £16bn, while UK-headquartered banks contributed £15.3bn.
Banking for the future
The Telegraph (p4) looks at how banking is developing technology to offer customers information about the best products, deals and even bank accounts based on analysis of their spending habits. As computing power increases banks can start to review spending habits of customers to advise them on how to save money on their energy bills or to pay car insurance by the mile using a direct debit from your bank account.
Read the BBA’s report World of Change which looks at the revolution in the way we spend, move and manage our money.
House prices continue to rise
The average house price could hit £300,000 in the next three months according to Rightmove’s House Price Index. The September figures show the biggest September rise in 13 years. (Telegraph, B3). A new report by Shelter finds that the Government’s Help to Buy Scheme has pushed up the cost of the average home by £8,250 and that total mortgage lending is 8.4% higher than it would have been without the scheme (FT, £, p4).
The Sunday Times (£, p9) reports that at least one mortgage provider is offering a 95% mortgage. Richard Woolhouse, Chief Economist at the BBA, said in the article that “a lot of ordinary people are unable to get on the property ladder without support, so there is certainly a market for high loan-to-value mortgages”.Read more
Federal Reserve holds rates at record low
The FT (£, p1) splashes on the story widely reported across all papers of the US Central Bank’s decision to hold interest rates at record lows amid fears over the global economic outlook. Despite the resilience of the US economy, the recent turmoil in Chinese markets has led the Federal Reserve Chair, Janet Yellen, to hold the federal funds target rate at 0.25%, where it has been since the financial crisis in 2008. Ms Yellen said: “Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term”. She added: “In light of the heightened uncertainties abroad … the committee judged it appropriate to wait for more evidence”. However, Ms Yellen was keen to stress that the prospect of a 2015 increase was still on the table.
Corbyn sets out commitment to keep Britain in the EU
Writing in the FT today (£, p1), newly elected Labour leader Jeremy Corbyn has ended weeks of uncertainty over Labour’s position in the upcoming referendum, pledging that his party would campaign for the UK to stay in the European Union. Mr Corbyn, who remains in favour of a £50bn EU Financial Transaction Tax, said: “We will make the case that membership of the European Union helps Britain to create jobs, secure growth, encourage investment and tackle the issues that cross borders – like climate change, terrorism, tax havens and the current refugee crisis”.
Mortgage borrowing highest since 2007
The Mail (p75) and others report a the latest data by the Council of Mortgage Lenders showing that £20bn of home loans have been approved last month, a 12% rise on last year and the highest level since the financial crisis. The strong performance was driven by a pick-up in both house purchase and remortgage lending as households prepare for a possible rate rise, predicted by some economists in the first three months of next year. Bob Pannell, CML chief economist, said: “We expect further modest growth for the rest of the year, although affordability pressures are likely to limit gains for first-time buyers and home movers”.
We’re no pushover, warns FCA interim head
In her first interview since taking up the interim position of head of the Financial Conduct Authority, Tracey McDermott, reveals in the Times (£, p44) today that she hopes to stay in the role permanently. Ms McDermott said that moves to regulate banks had often moved too far to “extremes”, hinting at a more open relationship with the industry. She said: “Whoever is appointed to this role has to be there to deliver on the statutory objectives of the FCA . . . that is around not cosying up to the industry, but it is about trying to make the system work.”Read more
Carney raises concerns about “People’s QE”
The Governor of the Bank of England has suggested that one of Jeremy Corbyn’s flagship economic policies risks “imperilling price stability” and could “hurt” the poor. In comments to members of the Commons Treasury Select Committee reported in the Telegraph (p1), the Mail (p2) and other papers, Mark Carney said that the Labour leader’s proposal for a money-printing programme called “People’s Quantitative Easing” could lead to inflation and undermine the Bank’s independence. Mr Carney said: “The people who tend to get hurt the most by inflation are the poor, the elderly… that’s been the experience throughout history and I’m sure that will be the experience in the future if the Bank of England were to conduct policy not consistent with achieving its mandate from parliament.”
Business Secretary pledges to prioritise deregulation
In a wide-ranging interview with the FT (p3), the Business Secretary Sajid Javid says he will focus on pushing for reform of Britain’s relationship with the EU. He said he would not decide how he will vote in the impending referendum until that renegotiation was complete. “We’ll work hard for these reforms and hope that they bring about the changes that we want, but ultimately nothing is off the table,” Mr Javid said. The Business Secretary also told the FT (p3) that he was planning to overhaul UK Trade & Investment and bring more private-sector expertise into the agency.
Contactless on the Tube celebrates first birthday
City AM reports more than 180 million journeys on London Underground have been paid for by using contactless bank and credit cards in the year since such payments became possible on the tube. The “tap” technology now accounts for one in seven pay-as-you-go journeys on the network. London Mayor Boris Johnson said: “It is clear passengers love using the payments to travel, and why on earth not – it’s quick, it’s easy and ensures you get the best fare.”
Banks are second most-improved industry for service
The number of customers who rate banks as one of the worst industries for service has fallen sharply this year, according to research by the design consultancy Engine reported by the Telegraph (online only) and a number of other papers. Banking was rated as the second most improved sector, with only 23% of those polled highlighting poor service by banks – down from 29% the year before. Oliver King, Engine’s founder, said: “Banks have been quicker to improve customers’ digital, human and branch experiences. They’ve responded to growing consumer expectation and confidence to transact online and on mobile, but also the important role branches and call centres play in account set-up and resolving issues.” To read about how consumer-friendly banking technology is transforming the way we spend, move and manage our money read the BBA’s latest Way We Bank Now report here.Read more
Banks hit capital targets ahead of schedule
Global banks have nearly reached their 2019 capital targets already, according to the Basel Committee on Banking Supervision (Telegraph, B5). The report found that – for the first time – the 100 biggest international banks all met the capital requirements that will come into force as part of the 2019 Basel III rules. The FT (online only) reports that banks have also made considerable progress on meeting new liquidity rules.
Two million customers use switching service
The Current Account Switch Service (CASS) has been used by two million bank customers since it was launched two years ago (Telegraph, online only). The scheme was designed to make it easier for customers to move between rival providers. Harriett Baldwin, Economic Secretary to the Treasury, said: “Increasing competition in banking so that customers get a better deal is at the heart of the Government’s long-term plan. That’s why we challenged industry to make it easier for customers to switch accounts, and welcomed the launch of seven-day Current Account Switch Service in September 2013.”
Investment banks join forces on blockchain initiative
The FT (£, p32) reports that nine leading investment banks are teaming up to develop common standards for blockchain technology in an effort to widen its use. They will coordinate data, ideas and financing via R3 CEV, a New York trading and technology start-up. Christopher Murray, global co-head of FX, rates and credit at UBS, said: “If you’re looking to introduce applications with distributed ledger technologies to improve the financial markets, you can’t have each participant working to a different pattern.”Read more
Unions react to John McDonnell as Shadow Chancellor
Most papers lead today with the appointment of Jeremy Corbyn’s Shadow Cabinet and in particular the choice of John McDonnell as Shadow Chancellor of the Exchequer. The FT(£,p1) describes Mr. McDonnell as a “hardline socialist” and describes what it sees as cracks appearing in Labour over Britain’s place in Europe. The Times (£, p1) leads with concerns from trade union bosses about Mr Corbyn’s first 48 hours in office, with Dave Prentis, general secretary of Unison, noting that the leader will have to “grow into the job”.
Concerns for emerging markets ahead of Fed decision
Several papers discuss the uncertainty over a possible interest rate rise from the US Fed. The Telegraph (B1) reports on research by Fitch that emerging markets are particularly vulnerable to a rapid rate rise. However, CityAM (p2) reports a rise will not be the end of emerging markets as predicted. The FT (£, p7) writes that the mixed signals in the US are causing Fed officials to question the wisdom of a rate rise despite unemployment of just 5.1%.
McKinsey report on the future of bank branches
A new report by McKinsey suggests that as many as 2,400 bank branches could close over the next five years as customers choose to move their banking online (Telegraph B1).The report also shows that branches remain popular with customers for larger more complicated transactions. Read more about how technology is changing banking for customers in the BBA’s World of Change report.Read more
Corbyn appoints John McDonnell as Shadow Chancellor
There is widespread coverage over the weekend and today (BBC News) as the new leader of the Labour Party, Jeremy Corbyn puts the finishing touches to his Shadow Cabinet. Mr Corbyn was elected as leader of the Labour Party with a landslide majority of 59% of the vote (more than Tony Blair in 1994). Following his election several senior Labour figures resigned from the Shadow Cabinet including Chuka Umunna and Yvette Cooper. John McDonnell has been appointed as the Shadow Chancellor, Seema Malhotra Shadow Chief Secretary to the Treasury and Angela Eagle becomes Shadow Business Secretary and Shadow First Secretary of State (Telegraph, p1).
There has been a mixed reaction from business leaders to the election of Jeremy Corbyn as Labour Leader. The IoD has warned that his policies “would undermine our open and competitive economy” while the CBI urged Jeremy Corbyn to support “a pro-enterprise agenda”. One FTSE 100 Chairman warned that he feared that the Conservative Party would react by a move to the right (Sunday Times, £).
Schauble to press for EU wide financial transaction tax
The German Finance Minister Wolfgang Schauble has said that the Financial Transaction Tax which is currently being considered by 11 member states, including France and Germany, should be seen as a first stage. Mr Schauble said he believed that an FTT across only 11 member states did not sit well against the EU’s Capital Market Union proposals.
The proposed FTT was discussed by the 11 participating states at an informal meeting of finance ministers in Luxembourg on Saturday. Commenting on the discussions, the European Commissioner for Economic Affairs Pierre Moscovici said: “We made important if not decisive progress…This deal is possible, and more than possible, if we go on working with ambition.” (FT, £, p8)
Bank for International Settlements warns debt levels are higher than pre-crisis peak
The Bank for International Settlements’ (BIS) quarterly review, published today, warns that total debt ratios are now higher than they were at the peak of the last credit cycle in 2007. BIS’s Chief Economist Claudio Borio commenting on the market fluctuations of recent weeks and the growing concerns regarding capital outflows in China said: “We are not seeing isolated tremors but the release of pressure that has gradually accumulated over the years along major fault lines”. (Telegraph, B1)Read more
Chairman of the Treasury Select Committee criticises bank surcharge
Andrew Tyrie, chairman of the Treasury Select Committee, has criticised the bank tax surcharge, warning that it could have a negative impact on competition in the sector and suggesting that the Competition and Markets Authority should look at its impact (Guardian, p33). Paul Lynam, chief executive of Secure Trust Bank and chairman of the BBA’s Challenger Bank Panel, was interviewed on the issue by BBC Radio 4’s Today programme this morning (7.20am). Defending the government’s position, a Treasury spokesperson is quoted in City AM (p1) stating: “We have introduced a range of measures to support challenger banks: we’ve put competition at the heart of the regulatory system, significantly reduced barriers to new banks entering the market, and made sure that all banks – big or small – can access the payments system.”
New BBA Chair appointed
There is widespread coverage of the appointment of Noreen Doyle as the new BBA Chair. The FT (online only) states that the appointment reflects “the predominantly international profile” of the BBA’s membership. City AM (p9) notes that Ms Doyle is the first woman to chair the organisation. Commenting on her new role, she said: “Rebuilding the trust of customers, driving up standards in the industry and working with government and regulators to ensure our banks remain globally competitive are some of the issues I look forward to working on with Anthony Browne and his team.”Read more