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.
BBA appoints new chair
Noreen Doyle has today been appointed as the new BBA Chair. She is the first woman to chair the BBA and the first to come from the wholesale banking side of the membership. Ms Doyle is currently Chair of the Board of Credit Suisse International and Credit Suisse Securities (Europe) Ltd, and Vice Chair of Credit Suisse Group. BBA Chief Executive Anthony Browne said: “I am delighted that Noreen has agreed to become the new Chair of the British Bankers’ Association. She brings a wealth of experience to the role which will help our industry navigate the challenges ahead.” The appointment takes effect from 17th October this year. Read the BBA’s press release here.
Chancellor seeks EU treaty change to safeguard the City
The FT (p1) writes that George Osborne is determined to ensure any renegotiation of Britain’s relationship with the European Union ensures eurozone members cannot “gang up” on the UK and undermine the City of London. Speaking to the House of Lords’ economic affairs committee the Chancellor said that “non-discrimination” against EU states outside the single currency area would need to be written into the EU treaty. The British Government has objected to several recent EU proposals that may have undermined the City, including a ban on clearing houses based outside the eurozone from trading in euro-denominated products.
Bank of England Court pledges to look again at appointments process
There is widespread reporting of the Treasury Select Committee’s evidence session with Sir Anthony Habgood, the chairman of the Bank of England’s Court of Directors. City AM quotes Sir Anthony saying that he will “give more consideration” to the way appointments are made to the MPC after concerns were voiced about the external interests of one MPC member. However, the chairman also suggested that allowing the National Audit Office to inspect the Bank’s operations may undermine independence, the FT (p3) writes.Read more
Big lenders win change to rules
The FT (£, p18) and others report on the decision of the Financial Stability Board that groups organised as subsidiaries should face the same standards as globally organised groups. The rule change addresses Total Loss Absorbing Capacity (TLAC) and caps the amount that banks with subsidiaries are required to hold so that the total is not greater than the total required for banks that consolidate their TLAC into a single point of entry.
Fed urged to hold fire on rates or risk sparking emerging market ‘panic’
TheFT (£, p8) reports that the World Bank has warned the US Federal Reserve against raising interest rates this year. Kaushik Basu, Senior Vice-President and Chief Economist at the Bank, told the FT that a US rate rise could create a “shock and a new crisis in emerging markets”. The main concern continues to be the slowdown in China with the combination of a US rate rise seen as threatening global growth prospects.
M&A shows no sign of slowdown
City AM (p1) and others report on the M&A figures released by Dealogic. The figures show $3.2 trillion in deals so far this year, the highest levels of action since 2007. There have been £260 billion worth of deals involving UK firms in 2015. The FT (£,p17) writes market volatility had no effect on deal making as companies looked to protect shareholders and create growth by purchasing competitors.Read more
Bank tax could raise up to double Treasury estimates
The Times and several other papers have reported widely that George Osborne’s proposed 8% bank surcharge tax is expected to raise twice as much as official Treasury estimates – with the likely tax-take closer to £12bn, according to a report by professional services firm EY. The BBA is quoted as saying that: “Introducing yet another new bank-specific tax will reinforce fears that Britain is becoming a less attractive place for banks to do business.”
Subprime repackaged as investors feel ready to embrace risky borrowers again
The FT splashes on reports that the subprime market is back, rebranded as a less toxic “non-prime” mortgages. The move is seen as a sign that yield-hungry investors are more confident taking on riskier borrowers, against a backdrop of tighter regulatory guidelines. Brad Friedlander, managing partner at Angel Oak Capital, said: “These are deserving borrowers that might be a 705, but not a 770 credit score. There’s no reason they shouldn’t have some type of access to credit. Lenders are still in a very restrictive mode, but I think we will see that pick up over time.”
Drop in euro banker million pay packets in 2013
The Guardian and other papers widely report the publication of European bankers pay data by the European Banking Authority. It shows that the number of bankers taking home €1m fell from 3,530 in 2012 to 3,178 in 2013. The report also shows that British bankers top the list of highest paid bankers in Europe with more bankers earning in excess of €1m than the rest of Europe combined in 2013.
PM loses key Commons vote over EU referendum rules
The FT and other papers report David Cameron’s first defeat as Prime Minister in a majority Tory Government yesterday night over the rules governing the upcoming EU referendum. Opposition parties joined together to force the Government to change the rules covering next year’s proposed referendum on Britain’s EU membership. The Government will now be forced to apply similar rules during the run-up to the referendum as those applying before general elections, barring ministers from using the civil service machinery to make any pronouncements that might influence the way people vote.Read more
Growing challenges for the Government on the proposed corporation tax surcharge
The FT (£, p22) writes that some challenger banks are warning that the surcharge could mean payday lenders and peer to peer lenders are at an advantage over challenger banks. Commenting on the proposals, chief executive of Secure Trust Paul Lynam said “all of these entities are much less heavily regulated and now also have a huge tax advantage”.
Ahead of Tuesday’s parliamentary debate on the budget the Sunday Times (£, B1) writes that Labour and the SNP are looking to “scupper” the Chancellor’s new bank tax as amendments have been put forward that would spare small challenger banks and building societies from having to pay the 8% surcharge. Commenting on the proposed 8% surcharge and its impact on challenger banks Chris Leslie the Shadow Chancellor said “Osborne’s current proposals could harm competition and diversity in the sector — the very things he once briefly claimed to champion”. The Sunday Times (£, p6) also looks at the growing competition coming from the challengers.
Chancellor: The City has made progress now for the next ten years
The Chancellor George Osborne writes in City AM (p5) about his ambition for the UK’s financial services industry. Looking at the Government’s reforms and priorities for the future he writes: “I want Britain to have the best and most competitive financial services in the world. Part of this is making sure that we have the best regulated industry, with the highest standards of conduct. There is no trade-off between high standards of individual conduct and the City’s competitiveness.”
Commenting on the UK’s renegotiation with Brussels the Chancellor places financial services at the centre of the discussions noting that “one of the greatest threats to the City’s competitiveness comes from misguided European legislation, so a central demand in our renegotiation will be that Europe reins in costly and damaging regulation”.
No.10 calls on businesses to remain quiet on EU referendum
As the UK Parliament is set to consider the remaining stages of the EU Referendum Bill today, the FT (£, p1) reports that Prime Minister David Cameron and his closest aides are calling on businesses who support Britain remaining in the EU to stay silent until after the renegotiation discussions have been completed. This warning follows a new poll by Survation published on Sunday which suggests the public is becoming increasingly Eurosceptic with 51% saying they would vote to leave the EU (Daily Mail, p1).
The Sunday Times also reports that there are growing concerns amongst “No” campaigners that the Government will try bring in new rules to enable the referendum campaign to be kept to just a four week short campaign.Read more
Smaller firms continue to borrow
The amount of lending provided by banks and building societies taking part in the Bank of England’s Funding for Lending scheme rose by £490million between April and June as business confidence continued to improve, reports the Times (£, p44). Net lending was £648million in the first quarter of 2015 – putting the overall figure for the year at over £1billion. Commenting on yesterday’s figures, BBA Executive Director of Business Finance Irene Graham said: “These new figures underline that banks are helping smaller businesses do what they do best — drive economic growth and create jobs.”
ECB raises spectre of more QE
The European Central Bank has cut its forecasts for growth and inflation (FT, £, p1). ECB President Mario Draghi suggested that there could be further quantitative easing should global risks affect the eurozone’s recovery. He highlighted lower oil prices and the slowdown in China as major factors behind the revised forecasts. The ECB currently plans to buy about €60billion worth of mostly government bonds each month until September 2016.
Property market is ‘dysfunctional’
Britain’s property market is “dysfunctional” and building more homes will not resolve its problems, the Council of Mortgages Lenders’ chief economist has said. BBC News reports that Bob Pannell’s blog states that house sales remained “sluggish”, stuck at levels last seen in the mid-90s. He writes that the market is being stymied by high numbers of older people not downsizing to smaller properties and an increase in buy-to-let landlords.Read more
Huge take up in pensioner bonds sparks fear about unfair competition for savers
Building societies have criticised the Government’s drive to increase the take up of pensioner bonds for distorting the savings market. National Savings and Investments (NS&I) took in £5.4 billion in the three months to June – more than double the £2.1 billion inflow in the same period the year before. David Cutter, the chief executive of the Skipton Building Society and chairman of the Building Societies Association, said: “It’s clearly unwelcome. From our point of view, it’s not a level playing field. It makes it harder for other deposit-takers to compete. That has an impact on growth plans and mortgage affordability.” The Times (£, p37) reports that some deposit takers have argued that NS&I posed unfair competition because it was able to offer tax-free rewards and a government guarantee and had been instructed by the Chancellor to offer pensioner bonds carrying far higher interest rates than the market rate.
IMF warns against rate rises
Ahead of the G20 Finance Ministers meeting this weekend the International Monetary Fund has warned against raising interest rates as it is worried about faltering global growth (FT, £). It also suggests that the European Central Bank (ECB) should expand its quantitative easing (QE) programme. The Telegraph (B4) looks at the five things that will affect the ECB’s thinking on whether further QE is necessary or not. Reuters predicts that the ECB is set to cut its inflation forecasts today because of falling oil prices and China’s economic slowdown, and that it will probably promise to beef up its bond-buying programme if prospects weaken further.Read more
New accounting rules “fundamentally flawed”
Major European banks could be forced to recognise loan losses of as much as €61 billion due to new accounting rules, according to a Barclays study reported by the FT (£, online only). Barclays’ analysts found that the rules would cause an increase of around 34% in loan loss provisions across the group, as well as lower bank valuations and more volatile earnings. The paper adds that the Local Authority Pension Fund Forum has described the new rules on the financial instruments “fundamentally flawed” and its lawyer, George Bompas QC, believes that the new regime would still not give a “true and fair” view of banks’ financial position.
Stock market volatility continues
Volatility in Asia’s stock markets has continued this morning, with Shanghai opening down more than 4%, BBC News reports. Yesterday US stocks closed down nearly 3% after economic data was released suggesting that China’s manufacturing sector had contracted at its fastest pace for three years. The country’s official manufacturing purchasing managers’ index hit a three-year low of 49.7 in August, down from 50 in July, sparking a global market sell-off. CityAM (p2) quotes Naeem Aslam, chief market analyst at AvaTrade, saying: “The manufacturing PMI data is the measure of large state-owned firms and the reading not only fell short of expectations, but it also dipped into a negative territory and this makes the headline which traders certainly do not like at all.”
Personality tests for credit mooted by researchers
Some customers looking to borrow from their bank or building society might face psychometric tests to determine their chances of repaying the credit, according to the Daily Mail (p35). Research from the University of Edinburgh Business School has suggested that such tests can be effective. The paper quotes BBA Executive Director for Retail Banking Eric Leenders, saying: “I can never see psychometric testing replacing the straightforward affordability tests. However, it is possible that in some cases tests of this kind might be able to help determine whether a customer is vulnerable and needs extra support. It’s right that banks take a look at new types of technology that could perhaps benefit consumers.”
Challengers to meet Government over tax surcharge
The Daily Mail (p7) quotes Paul Lynam, chief executive of Secure Trust Bank and chairman of the BBA’s Challenger Bank Panel, describing the 8% corporation tax surcharge as “completely at odds” with the Government’s claim it supports challenger banks. The Mail also quotes BBA figures which show that banks will pay £39.35 billion in bank-specific taxes between 2010 and 2021. Yesterday it was reported that a group of challenger banks is to meet Charles Roxburgh, director general of financial services at the Treasury, to discuss the tax.Read more
Banks challenge Treasury over profit surcharge
Chief executives of the UK’s largest challenger banks will meet with Treasury officials this week to discuss concerns over the impact of the corporation tax surcharge, the Sunday Telegraph (B1) reported. Ahead of the meeting, a letter from the Chancellor to the challenger banks suggests the Government does not intend to make any swift changes, but states: “However, I want to take the time to listen to your concerns, carefully consider alternatives you put forward and give these serious consideration.” The 8% surcharge, set out in the Summer Budget, affects a wider range of institutions than the Bank Levy.
Writing in CityAM (p23), Shadow Economic Secretary to the Treasury Alison McGovern states that the surcharge “risks stifling competition and acting as a restraint on sensible lending”. She warns that the “consequences for the long-term health of the financial services sector and the wider economy could be seriously damaging”.
Lending to farmers increases at record pace
Britain’s farmers successfully applied for £12.4 billion in credit in 2014, the highest annual increase since records began, reports the Telegraph (B3). BBA figures show that total lending to farmers and rural businesses rose from £11.1 billion in 2013 and £10 billion the previous year. Farmers in northern England and the south east enjoyed the largest increase in loan approvals of 15% in 2014. BBA Chief Executive Anthony Browne said: “An appetite to borrow is an important barometer of business optimism. With rates still low and a wide spread of lenders, there has rarely been a better time for businesses of all sectors to borrow.”
Government launches review into anti-money laundering rules
The Government last week announced a review to “improve the effectiveness of rules designed to prevent money laundering and terrorist financing”. The Weekend FT (p3) quoted Business Secretary Sajid Javid saying: “This new review is about making sure the rules we have to protect our strong financial services industry from abuse are not unintentionally holding back new and existing British business.” He added that the review would look at the implementation of existing legislation, and was not about “scrapping rules”. The article noted that the BBA welcomed the initiative, stating: “We want to make sure the system is targeted against criminals while not impacting disproportionately on genuine customers.”
Growth in contactless payments
The growth in use of contactless cards is expected to accelerate from today, the Times (£, p7) reports, as the limit for a single transaction rises from £20 to £30. CityAM (p9) quotes new figures from The UK Cards Association which show that spending on contactless cards rose to £2.5 billion in the first six months of 2015, with monthly spending almost doubling over that period. Saturday’s Mail (p34) reported that all retailers will have to provide contactless payment technology by 2020 under new rules introduced by Visa and Mastercard. BBA figures released in June revealed that consumers using contactless cards have together saved over 90 years of time since they were introduced.Read more
The BBA Brief will return on Tuesday 1 September.
IMF unlikely to play a role in next Greek bailout
The International Monetary Fund has announced that it will not decide whether to agree to a new bailout programme for Greece for months – potentially into next year, the FT (£, p4) reports. The Fund’s board was told on Wednesday that Athens’ high debt levels and poor record of implementing reforms disqualify the country from a third IMF bailout, the paper says. According to documents seen by the FT, the IMF will “participate in policy discussions” to ensure the eurozone’s new bailout “is consistent with what the fund has in mind”. But negotiators “cannot reach staff-level agreement at this stage”. The documents also revealed that the IMF will decide whether to take part only after Greece has “agreed on a comprehensive set of reforms” and after eurozone bailout lenders have “agreed on debt relief”.
RBS prepares to sell shares
The Times (£, p1) has learnt that the sale of RBS shares is to begin “within days”, and reports that bankers acting for the Government began to contact potential investors this week in preparation for a sell-off, that could come “as early as Tuesday”. The paper adds that Chancellor George Osborne has pledged to sell three quarters of the UK’s 70% holding in RBS within this parliament.Read more
Mortgage and SME lending on the rise
Bank of England data released yesterday reveals that net lending for mortgages in June rose to its highest level since mid-2008 whilst mortgage approvals for new house purchases increased to 66,582. The FT (£, p4) notes that households are currently paying “record low mortgage rates”, with the average quoted rate on new mortgages falling to 2.56%. In addition, lending to SMEs rose by £353 million in the same month (Telegraph, p29).
Although lending to non-financial businesses fell, BBA Statistics Director David Dooks told the FT and Times (£, p37) that this was down to “good housekeeping by large corporates”, and that a number of bigger firms had turned to equity and bond markets rather than banks for lending. Repaying debt in the expectation of a rise in interest rates may also have been a factor.
Call for bank capital ratios to be audited
The Times (£, p43) reports that the ICAEW is calling for banks’ capital ratios to be audited in order to “improve the credibility” of the figures. PRA chief executive Andrew Bailey said that introducing an audit check could strengthen trust in the banking industry, adding “we need capital ratios to be credible”. The paper notes that giving responsibility to accountants to check banks’ capital ratios “could prove controversial” given erroneous audits of institutions in the run up to the financial crisis.
Fed still set for rate rise
The FT (£) leads with the US Federal Reserve’s statement which signals that it remains “on course to lift interest rates this year”. Following its latest policy meeting, the central bank stated that there had been “solid” growth in the jobs market alongside “moderately” expanding activity with “nearly balanced” risks to the economic outlook. However, Fed Chair Janet Yellen did not give exact timings on the rise. The Times (£, p42) notes that policymakers are seeking “further improvement in the labour market” and signals that inflation will rise towards its 2% target.Read more