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.
Vickers defends the ringfence
Sir John Vickers yesterday told parliament that the need to implement his ring-fencing reforms is as strong as ever. He told a Lords committee: “In my view the case for these measures are every bit as strong as when we published the report four years ago – in some cases they are stronger still”. He pointed out that “a large chunk of GDP has been lost forever”, adding “those costs have been passed on to taxpayers and benefit recipients on a vast scale.” HSBC retail chairman Jonathan Symonds said that the cost to HSBC of implementing the reforms would be £1.5 billion. He said: “We are devoting enormous resources to putting it in place – we’re not equivocating whatsoever” (Mail, p63).
Mr Symonds is also quoted in the Telegraph talking about the challenge of implementing the rules (B3): “I will have to move 16 million customers in an 18-month period. I have 250,000 customers who will have to change their sort codes – and just imagine how many standing orders you have. One of those has 1 million customers, I have to employ 400 to 500 people to practically do that”.
ECB could push Greek banks “over the edge”
The FT (£, p6) that the European Central Bank’s governing council could increase the amount of collateral that Greek banks need to post in order to access emergency loans which could leave some of the lenders struggling to access financing. “This is a dangerous game unless you have perfect information, and it is far from perfect,” said one official following the situation. Huw Pill, economist at Goldman Sachs and a former central bank official said: “If you raise haircuts to reflect that Greece is a country in default, then you will push Greek banks over the edge. But the ECB will be reluctant to take that step. In practice, the ECB has been quite pragmatic in the past.”
Personal borrowing reaches pre-crisis levels
The FT (£, p2) looks at the competition between high street lenders for new customers in the unsecured lending markets. It reports that prices continue to fall as borrowing reaches pre-recession levels. It quotes a recent Standard & Poor’s report which said: “We expect mortgages and consumer finance to lead net lending gains again in 2015, with approximately 2 per cent industry-wide growth in mortgage balances and 8 per cent growth in consumer credit.”
Bank bosses back bereavement campaign
Some of the UK’s leading bank chief executives have backed a campaign by Money Mail (p46) that calls on companies to make it easier for bereaved families to close loved ones’ accounts after they die. The campaign calls for: “all banks to offer direct phone numbers to bereavement specialists and information on how companies can provide support and what relatives will need to do… And we want banks to provide a Tell Us Once service — so with one visit to a bank, a relative can close all their other financial accounts including those with energy providers, utilities and other banks.”Read more
Tsipras urges Greeks to vote ‘no’
Greek prime minister Alexis Tsipras has urged voters to reject creditors’ demands in this Sunday’s referendum on a package of proposals put forward to solve the ongoing crisis, BBC News reports. The proposals include VAT reform, measures to increase the corporate income tax take and pension reform. In a televised address last night, Mr Tsipras said a clear vote against austerity would help Greece negotiate a better settlement to the crisis. He also warned that he would not stay in office to oversee more cuts.
The FT (£, p2) adds that chancellor George Osborne yesterday said the threat posed by Grexit to the wider British economy should “not be underestimated” and British tourists travelling to Greece should take with them hundreds of euros in cash amid concerns over cashpoints running dry. The likelihood of a Greek exit from the single currency knocked £34 billion off Britain’s leading companies yesterday, and has dropped by a further 1% today, the Telegraph writes.
Consequences of Bank Levy could be “terrible blow” for Britain
Ahead of the chancellor’s emergency Budget next week, the Telegraph (B5) sets out the factors that are causing concern in the business community, including the Bank Levy. The paper says the Levy has risen from 0.05% of a bank’s global balance sheet when it was introduced in 2010, to 0.21% today. BBA Chief Economist Richard Woolhouse is quoted saying: “No other financial centre has a similar levy. It acts directly against competitiveness of UK banks competing overseas with foreign banks who don’t have to pay the Levy.” The article adds that a decision by HSBC or Standard Chartered to move their headquarters out of London due to the consequences of the Levy being imposed could be a “terrible blow” for Britain’s reputation.
Business Secretary calls on CBI to recognise EU’s need to change
Speaking at a key CBI dinner last night, Business Secretary Sajid Javid accused the CBI of showing its hand too early by coming out in support of Britain remaining in the EU before negotiations had even begun, the Telegraph (p2) reports. The paper quotes the Business Secretary saying: “I heard that the CBI thinks the UK should remain in the European Union no matter what. That the people of Britain should vote to stay in regardless of whether or not the Prime Minister wins the concessions that British business so badly needs…Of course you’re entirely free to come to that conclusion. But does it really make sense to say, so early in the process, that ‘the rules of this club need to change, but don’t worry – we’ll always be members no matter what’?” Mr Javid said he hoped his comments would be taken in the spirit of friendship.
Investor panic grows in China
Stocks across China – including the Shenzhen and the Shanghai composite index – fell yesterday despite efforts by the People’s Bank of China to reassure investors by cutting interest rates last weekend, the Independent reports (p49). On Saturday the central bank cut its one-year lending rate by 25 basis points and lowered its reserve requirements for some commercial banks, but this was not enough to prevent the country’s stocks turning into a bear market. The paper adds that in the past fortnight Chinese stocks traded in Shanghai and Shenzhen have lost around 16trn yuan (£1.6trn) of paper value – almost as much as the current value of the entire FTSE 100.Read more
Greece closes banks after failed weekend talks
The Greek government has shut down the country’s banks until next Tuesday and limited the amount customers can withdraw from ATMs to €60 per day (Times, £, p1). On Saturday eurozone finance ministers refused to extend the current bailout programme beyond its planned expiry on Sunday. Greek finance minister, Yanis Varoufakis, said that the closures were an essential way of fighting back against the demands of the eurozone countries and the IMF, who asked the Greek government to hike VAT and cut pensions. Mr Varoufakis said: “Greece will take pride in proving that they can assert themselves against the decisions taken by the eurogroup.” The closures come as the ECB said it would freeze the amount of emergency loans it supplied to keep the Greek banking system afloat.
The Telegraph (p10) reports that Mr Varoufakis has said that Greece will not be pushed out of the eurozone, and the planned referendum next week is on the bailout package and not the single currency. According to the Independent (p8), US president Barack Obama has contacted German chancellor Angela Merkel to express his concern about the country dropping out of the eurozone.
UK banks “slip down global league table”
A top 1,000 league table of banks published by The Banker today has seen a number of British banks slide down the rankings according to the magazine’s editor, Brian Caplen. In the Independent (p54), Mr Caplen said: “We may have seen the end of the UK-based global bank”. He continued: “With the rise in regulation and the need to allocate capital to specific jurisdictions, the disappearance of profitable areas like proprietary trading and more volatile investment banking returns the banks have had to concentrate more on where they make their money.”
New trade association for the payments industry announced
Payments UK, a new trade association for the payments industry, is being launched today. According to the announcement the new association “will provide a single, authoritative voice for the UK payments industry at home, across Europe and the globe.” Payments UK will succeed the Payments Council. Maurice Cleaves, chief executive of Payments UK, said: “Payments UK will lead the collaborative drive to ensure that payments in the UK remain world-class, meeting the needs of all those who make or receive them. In a matter of years, the sector has been transformed from just a handful of players to many hundreds and the regulatory agenda has changed significantly. Payments UK is set up to enable the industry to navigate through such change. Over the coming months Payments UK will report on the industry’s World Class Payments project, which sets out a vision of what payments of tomorrow could look like if they are built on customers’ needs.” See press release here.Read more
Tomorrow marks Greece’s “last chance”
The FT (£, p1) reports that EU leaders have set tomorrow as the final day the Greek government will be given to strike a bailout deal or “trigger a ‘plan B’ that would attempt to prevent a Greek default from damaging the rest of the eurozone”. The date was set after negotiators failed to agree a deal for the fourth time in a week. The Greek government has missed multiple deadlines to agree a reform plan that would release €7.2 billion in bailout funds. Yesterday, talks collapsed after the Greek finance minister, Yanis Varoufakis, presented his own proposals to representatives from the European Commission, International Monetary Fund, European Central Bank, described as “the creditors’ plan with edits”. The Telegraph (B1) writes that German chancellor Angela Merkel has warned that she will not be “blackmailed” and is pushing for a solution by Monday at the latest “to ensure that markets do not spiral into chaos on Monday morning”.
“Unprecedented” demand for high-interest pensioner bonds
The Times (£, p40) reports that the demand for high-interest pensioner bonds has led the government savings bank that handled them to come in more than £3 billion above target last year. The Treasury considered the bonds to be a way of helping elderly savers who have lost out after years of low interest rates, but the bonds have been criticised by those who say they drive investment from banks and building societies. More than a million over-65s took advantage of the scheme which launched in January. Richard Woolhouse, BBA Chief Economist said: “Savvy savers appear to be continuing to take advantage of good deals, such as pensioner bonds, which is why we’re seeing weaker bank deposits”.
PM pleased with EU negotiations
Prime Minister David Cameron has said that he is “delighted” that EU renegotiations are underway after setting out his aims to EU leaders in Brussels (BBC). According to the BBC, Mr Cameron wants an opt-out on the core EU aim of “ever closer union”, to boost the sovereignty and powers of national parliaments, to safeguard the City of London, to curb internal EU immigration by cutting benefits and to make the EU more streamlined and competitive. The European Council’s president, Donald Tusk, has said that there is a will to help the UK.
However, the Prime Minister also appears to have acknowledged that treaty change may not be possible before the end of 2017. The BBC reports that Mr Cameron has instead argued for “irreversible” and “legally binding” guarantees that EU law will be changed, in case treaties can’t be changed in time before the in/out referendum.Read more
BoE grants licence to online bank
The Times (£, p43) and a number of the other papers report that Atom Bank – Britain’s first digital only bank – has been granted a banking licence “in the latest sign that some people no longer regard branches as essential”. The article adds that Atom plans to be a full-scale bank with current accounts and mortgages, and advisors available through instant messaging or video link. The Telegraph (B3) writes that “Atom’s licence comes with restrictions because its systems need further testing before regulators let the new bank go live”, adding that “it also needs to finish raising the £75 million required to meet regulatory capital rules”. In the article Atom Bank chairman Anthony Thomson cites BBA research published last week, commenting that “mobile banking has overtaken branches, telephones and even internet transactions”. Read our latest Way We Bank Now report, World of Change, here.
Standard Chartered to move power to regional hubs
Standard Chartered’s new chief executive Bill Winters is reportedly planning an overhaul of the emerging markets bank “to shift capital and power to regional hubs” (FT, £, p19). According to the paper Mr Winters is expected to hand more power to a handful of regional subsidiaries in key markets, such as Hong Kong, Singapore, India, the United Arab Emirates and Africa. Mr Winters apparently intends to concentrate capital and liquidity in regional hubs as opposed to centralising control in London, which would be in line with what local regulators have been requesting. A full strategic plan is expected to be unveiled at the end of the year.
Fears that Greece will fall short on debt deal
The Telegraph (B1) reports that Greece’s future in the eurozone was thrown into “fresh turmoil” yesterday as late night talks took place between the country’s prime minister Alexis Tsipras and European Commission president Jean-Claude Juncker. The International Monetary Fund (IMF) and European Central Bank (ECB) had laid out a series of proposals for Greece that asked for further spending cuts in order to pay down the country’s debts, as well as asking the Greek government to abolish exemptions on VAT and implement an overhaul of state pensions. The paper reports that they were quick to reject the demands as “absurd”. The Times (£, p41) reports that markets in Europe and the United States slipped yesterday amid fears that the country will fail to strike a debt deal “potentially sending the country spinning out of the eurozone and triggering broader investor panic across the Continent”.
BBA stats show mortgage approvals up
Many of the papers reported the BBA’s High Street Banking statistics, which showed that mortgage lending was at its highest level in more than a year. The Times (£, p46) writes that “the general election removed the uncertainty that had dampened the mood of the housing market”, adding that “would-be buyers were tempted to step on to or up the property ladder by fierce competition between lenders, which resulted in more record-low mortgage rates.” Richard Woolhouse, Chief Economist at the BBA, said: “Household borrowing remains robust and this is indicative of the wider recovery we’re seeing in the economy. The increase in mortgage approvals this month is consistent with the trend we’ve seen since the start of the year. The numbers show that the property market remains buoyant after the general election. Fierce competition between lenders means that there are some great mortgage deals available from the high street banks. Personal borrowing by British families also seems to be strong – the uptake of personal loans and credit card borrowing is further proof of consumers’ confidence.”Read more
Property market buoyant as mortgage approvals increase
High Street Banking Statistics published by the BBA today show that mortgage approvals rose again in May for the fifth month in a row. Unsecured borrowing stands at its highest rate since autumn 2010, and is growing at an annual rate of 5%. Commenting, Richard Woolhouse, Chief Economist at the BBA, said:
“Household borrowing remains robust and this is indicative of the wider recovery we’re seeing in the economy. The increase in mortgage approvals this month is consistent with the trend we’ve seen since the start of the year. The numbers show that the property market remains buoyant after the general election. Fierce competition between lenders means that there are some great mortgage deals available from the high street banks. Personal borrowing by British families also seems to be strong – the uptake of personal loans and credit card borrowing is further proof of consumers’ confidence.”
Regulators seek bonus clawback for up to a decade
The Prudential Regulation Authority and the Financial Conduct Authority have unveiled proposals to clawback the bonuses of senior banking executives for up to ten years, in the event of wrongdoing. The rules will apply to those working at banks, building societies and PRA-designated investment firms. The Scotsman says the plans will give Britain “the toughest banking pay regime in the world”, after regulators.
Treasury Select Committee chairman Andrew Tyrie described the plans as a “step forward”, but suggested the deferral period could go further. He is quoted by the Guardian (p21) saying: “The regulators themselves identified that attempts to manipulate the foreign exchange markets dated back to January 2008 – over seven years ago – when recently fining the banks. There remains a need, in a minority of cases, for even longer deferral.” CityAM (p1) and the Times (£, p37) quote BBA Executive Director Simon Hills saying:
“It is right and proper that designated senior managers should be subject to a further 3-year clawback period where there are outstanding internal or regulatory investigations at the end of their normal seven-year deferral period.”
Click here to read the BBA’s response in full.
Pressure mounts on Tsipras
The FT (£, p8) reports that pressure is mounting on Greek prime minister Alexis Tsipras to build support for his concessions to his country’s creditors. The paper says Greece’s parliament will have only a few days to pass the economic reforms promised by Athens in order to secure bailout aid. Mr Tsipras’ reform plan will be presented to eurozone leaders tomorrow. A government spokesman is quoted saying that forcing a vote next week increases the odds that the prime minister could lose his majority.
Elsewhere, the Telegraph (p1) predicts that millions of British tourists could pay higher prices in Greece under Mr Tsipras’ plans to increase taxes for holidaymakers travelling to the country. Proposed reforms include the abolition of the Aegean Islands’ current tax exemptions.Read more
Regulators to “reject ban on bonus buyouts”
The Prudential Regulation Authority and Financial Conduct Authority will today announce that they will not block banks from buying out employees’ bonuses when they move from a rival institution, according to Sky News. Sources said that an outright ban would have an “unacceptable impact on the City’s competitiveness” and would “likely drive up levels of fixed pay in UK firms as they fought to attract staff”.
Greece offers concessions as hopes grow for bailout deal
The Greek government presented concessions to its creditors yesterday, in a sign which eurogroup ministers described as a “positive step” (FT, £, p1). According to those who have seen the Greek plan, proposals include savings in the pension system and tax increases of almost €2 billion (Times, £, p8). However, they arrived too late for the emergency eurozone summit, and talks have now been postponed until Thursday.
Greek bank shares jumped 20% at the news of a possible deal, but German finance minister Wolfgang Schäuble “pushed for curbs on emergency liquidity for Greek banks unless capital controls were imposed”. The FT (£, p6) reports that the European Central Bank has raised the cap on the amount of emergency funding available to Greece’s banks by €2 billion to give lenders a further 24 hours before they risk being unable to honour withdrawals. The Times (£, p33) notes that an estimated €6 billion has been withdrawn from Greek banks in the past week.
Clearing houses: a welcome innovation, but not a “panacea”
Writing in the FT (£, p13), Goldman Sachs president and chief operating officer Gary Cohn praises the innovation of clearing houses, but warns that although they reduce risk, they do not eliminate it. He welcomes the new focus on recovery and resolution, but calls on regulators and industry to ensure that the failure of a clearing house “never becomes a real possibility”. He cites three factors which would help: product suitability, robust risk management and governance structures that put “systemic stability ahead of competitive concerns”. This would allow clearing houses to be an “innovative source of risk reduction that promotes systemic safety”.Read more
Hampton: “No point whingeing” about ring-fencing
In an interview with the FT (£, p15) RBS chairman Sir Philip Hampton has warned that ring-fencing legislation could put UK banks at a disadvantage compared to their foreign rivals, particularly when trying to cross-sell products like interest rate swaps. He said, however: “There is no point whingeing about it. It had massive cross-party support in parliament so the banks have just got to get on with it.” The Mail on Sunday (p88) picked up on comments by Financial Conduct Authority chairman John Griffith-Jones at a BBA conference last week: “Banks are asking, ‘If I have a customer on both sides of the ring-fence, can I cross-sell, can the two banks have the same brand, do we have to issue two engagement letters?” The Weekend FT (£, p3) looked at how the legislation will impact banks differently and could lead to higher costs for customers. It quotes BBA Executive Director Paul Chisnall saying that it “isn’t an easy process”. While banks have started work on complying with the law, they were “dependent on getting more clarity from regulators on some of the detail”, he said.
Business leaders call for more EU protections for the City
The Telegraph splashes on a new study called “Change, or Go” by a number of leading business people which calls on Prime Minister David Cameron to either secure a number of key reforms to the EU or to be prepared to leave altogether. It calls for a “reversal” of damaging laws for financial services firms and a British veto on future financial services legislation. It also calls for “a permanent mechanism for protecting the non-eurozone states” to ensure the UK Government can never be out-voted by countries belonging to the single currency.
Hopes grow over Greek deal
The Guardian reports that the Greek Government has presented last minute concessions to its creditors ahead of meetings of the heads of eurozone governments this evening. Greece’s international creditors are looking at a deal that would extend the country’s bailout by six months and supply up to €18bn (£12.9bn) in rescue funds.
The Foreign Office and the Association of British Travel Agents have discussed plans to evacuate British holidaymakers from Greece in the event of the country leaving the euro and defaulting on its debts, according to the front page of the Express. Holidaymakers have been advised to carry extra cash with them if they are travelling to Greece.Read more
European Finance Ministers agree on bank structural reform
Today European Finance Ministers have agreed on a general approach on bank structural reform which recognises the UK’s ringfencing reforms as sufficient. The Commission welcomed the Latvian Presidency compromise and called on to the European Parliament to agree on its position as soon as possible. (Council press release here – just out)
In response the French Banking Federation released a statement warning that the sector risked losing out to the US and UK if exemptions were allowed. Marie-Anne Barbat Layani, chief executive of the French Banking Federation, said: “If the draft proposal is adopted in its current form, this would one of the most shocking financial scandals in European history. French banks are being removed from the market and the funding of French companies is being placed in the hands of other players. Such an exemption is not only unacceptable in terms of the most basic principles of competition, but also contradictory with the very objective of a European regulation, in other words ensuring a level playing field” (Reuters).
Retail banks now “get it”, says top regulator
John Griffiths-Jones, the chairman of the Financial Conduct Authority, has said he is convinced that senior executives in retail banks are committed to rebuilding trust with the customer, the Telegraph (B1) reports.
Speaking at the BBA’s Retail Banking Conference yesterday, Mr Griffiths-Jones said: “I think the retail banking sector has really got it. It will take time to work through, and I say it on trust, but… [I think the executives] really mean it.”
He added that the onus should be on wholesale banks to reform themselves, rather than the regulator to do so. “We need the industry players to do it themselves, with oversight,” he added. “I hope the message has got through to the wholesale industry, and they can get on and do it themselves.”
In a speech at the same event, Antonio Horta-Osório, the chief executive of Lloyds Banking Group, said new regulation would only stop when the public is certain banks have cleaned up their act.
Greek banks teeter on the brink, EU officials warn
With talks between EU leaders and the Greek government still in deadlock, some European officials have warned that the country’s banks may not open next week, City AM and other newspapers report. The Mail (p81) reports that sterling has strengthened to a seven-month high amid the Greek crisis.
The BBA has issued the following statement on what the situation means for UK banks and their customers: “The UK banking industry has very low exposures to Greece and we are confident that Greece’s decision will have a minimal impact on banks and their customers in the UK. Anyone who is on holiday or working in Greece and fears that they might be affected should contact their bank in the first instance. If they have concerns relating to travel they should contact their travel insurance provider.”
New private bank to focus on digital offering
Hampden and Co today becomes the UK’s first new private bank for 30 years, the FT (£, p21) reports. The start-up will focus on providing better digital services than its peers. Graeme Hartop, Hamden’s chief executive, said: “There is no doubt new players coming in are having an impact on the wider market place and it is bringing in effective competition.” He said existing wealth managers were facing increased competition from low-cost alternatives. You can read the BBA’s report on the contribution made to the UK economy by the private banking industry here.Read more
Customers able to access banking services in more ways than ever before
Mobile and internet banking, alongside banking services offered through the Post Office, means that banks customers are “better served than ever before”, according to research published by the BBA. The Telegraph (B4) notes that 99.9% of customers live within a 20-minute drive of a bank branch or Post Office. The article quotes BBA Chief Executive Anthony Browne, saying:
“It is now easier than ever for people to do their banking. You can check your balance, pay back a friend digitally or speak to your bank for advice 24/7. That means we are all in touch with our banks now more than ever before. But technology is not for everyone which is why all the major banks have done deals to allow you to do basic banking through Post Office branches. That means there are now more places where you can bank than ever before.”
Read the BBA’s full press release here.
Ahead of today’s BBA Retail Banking Conference, Mr Browne appeared on 5live’s Wake Up to Money (36:00) and Radio 4’s Today programme (19:00) to discuss the widening access to banking services and digital banking. He noted that banking is going through a “digital revolution”, and that mobile and internet banking is “driven by customer demand, it’s what customers want”. However, he added that the bank branch is not dead, with a number of banks upgrading their branches and expanding their branch network.
Bank stress tests criticised
An Adam Smith Institute report has called for the Bank of England’s stress tests to be scrapped, describing them as “fatally flawed”, writes the FT (£, p2). The report, written by Durham University’s Professor Kevin Dowd, argues that the tests are “worse than useless” as the Bank set the bar “too low for minimum capital requirements and left itself open to banks manipulating their risk-weighting models”. The report notes that the tests “failed to apply a minimum ratio of capital to leverage”, and that they are “sleep-walking” the banking sector into another financial crisis (CityAM, p10). In response, the Bank declined to comment but pointed to evidence given by BoE official Alex Brazier to the Treasury Select Committee, in which he described the programme of tests as “really tough” and “a big step forward for macroprudential policy”.
Fed set to raise rates
The US Federal Reserve has signalled a possible rise in interest rates as soon as September, reports the FT (£, p1). The committee expressed “cautious optimism” for the US economy, but indicated that the pace of tightening would be slow. 15 of the 17 officials at the central bank expected a rate rise by the end of the year, however the committee appear to be “heavily divided” as to whether there would be one or two increases in interest rates in 2015. The Times (£, p39) notes that the Fed lowered expected rates at the end of 2016 to 1.625% from 1.875%, and at the end of 2017 to 2.875% from 3.125%.Read more