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: UK less attractive for banking
The BBA’s Chief Executive Anthony Browne has said that some banks have quietly moved business and jobs away from London in response to increasing tax and regulatory burdens, the Times (£, p37) reports. Speaking at the BBA’s annual summer reception last night, Mr Browne said that the head of one international bank told him that the Government had “acted like an African dictator” raiding banks’ balance sheets through the Bank Levy.
Mr Browne is quoted saying: “Every day I speak to banks from across the globe who have invested in the UK. They tell me that they are moving business and jobs back home or to other rival financial centres. They aren’t doing it on a whim. They give me frighteningly detailed analyses of why the UK is no longer an attractive place to do banking. What was a trickle is, I fear, turning into a flood.”
Eurozone bonds volatile as Greek talks go on
Growing fears that Greece will not agree a bailout deal at tomorrow’s finance ministers’ meeting sparked talks of an emergency weekend EU summit and caused Eurozone bonds to experience one of their most volatile days since the Greek general election five months ago, the FT (£, p1) writes. Yesterday Greek prime minister Alexis Tsipras denounced a compromise plan presented by his country’s bailout monitors as “humiliating for our people” and accused the International Monetary Fund of “criminal responsibility” for the country’s economic state.
Chancellor George Osborne has stepped up UK contingency planning for Grexit, the paper adds, and says that although he and Governor Carney believe the UK financial system can withstand a Grexit, they are worried about the knock-on effect on economic confidence.
Elsewhere, BBC News reports that the president of the European Commission, Jean-Claude Juncker, has accused Mr Tsipras of misleading voters and said that the Government had not told the truth about its bailout proposals.
Lloyds’ chief executive to speak in favour of ringfence
Lloyds Baking Group’s chief executive, António Horta-Osório, will tomorrow tell the BBA’s retail banking conference that the ringfence makes the financial system stable and as such should benefit even those banks which are feeling the pain of the structural reforms, the Telegraph reports (B1). Click here for more information about tomorrow’s conference.Read more
EU’s Bank Structural Reform proposals to respect Vickers reforms
The Independent (p51) writes that the UK “looks set to be exempt” from the EU’s Bank Structural Reform proposals due to the UK’s Vickers reforms. The draft proposals are expected to be handed to EU finance ministers on Friday. Reuters reports that under the new proposals “a bank with retail deposits of less than €35 billion will not be subject to the EU law”. The new draft is down from €50 billion under previous EU proposals.
The rise and rise of digital banking
The Telegraph (B1) reports on the rise of digital banking as Lloyds Bank announce the launch of a pilot scheme to allow customers to pay in cheques by taking a photo on their smartphone. Barclays currently has 30,000 customers signed up to use its cheque imaging service. These developments come ahead of an industry-wide cheque imaging service being launched in July 2016.
The Telegraph also reports on figures from the BBA’s latest report “World of Change” which shows that mobile apps are now the most popular way for customers to check their bank balances.
Goldman Sachs has also announced plans to launch an online business bank offering loans to consumers and small businesses in the US (FT, £, 17).
Reform on the horizon for securitisation market
The FT (£, p39) cites research by Moodys looking at investors’ concerns about securitisation. Moodys’ findings suggest that growth in the market is hampered by the current capital requirements and dependent on more bank investors joining the market. Investors want to see a “change in the capital framework for banks that hold structured finance instruments” to create more liquidity in the market.
The report’s findings come at the same time as the EU is focussing on potential reforms for securitisation as part of Commissioner Hill’s proposals for Capital Markets Union. Last week Lord Hill said the Commission would announce new proposals in September to change the requirements of capital charges on securities. Read the BBA’s latest blog on Capital Markets Union.Read more
Mobile banking overtakes branch usage for the first time
The front page of the Telegraph (B1) business section reports on latest figures from the BBA which show the rise of digital and app banking. New research from CACI for the BBA shows that customers will use mobile devices to check their current accounts 895 million times in 2015, more than the 705 million branch interactions. By 2020 they are forecasting that customers will use their mobile to manage their current account 2.3 billion times – more than internet, branch and telephone banking put together.
UK customers have downloaded banking apps on 22.9 million occasions by the end of March this year – a rise of 8.2 million in just one year. Customers moved £2.9 billion a week using banking apps in 2015 – up from £2 billion in 2014. The Guardian reports that at the same time branch footfall has fallen by 6% in the last year and that telephone banking has dropped by 43%. The story is also picked up by the FT (£) and CityAM (p8).
In a separate article in the Telegraph (B2), BBA CEO Anthony Browne looks at how intelligent use of data could radically change the way we bank. He says it will soon be possible to “marry the vast amounts of data banks hold about our spending with the GPS-enabled mobile phone. The possibilities are staggering. You wander into your favourite clothes retailer, say. Your bank knows you are a regular customer and can alert the retailer, who can then offer you exclusive extra discounts.”
Tyrie calls for clarity on Bank Levy
Re-elected Chairman of the Treasury Select Committee Andrew Tyrie has called for clarity over whether the Bank Levy should be seen by the Treasury as a tax to change behaviours or a revenue raiser. He told the Weekend FT (£, p2): “At the Budget the chancellor gave a return to profitability as one justification for putting up the levy. That suggests the contributions are no longer reflecting risk to the economy but banks’ capacity to pay. I’m not advocating a reduction in taxation but in the longer run clarity will be needed as to whether the levy should be thought of as a tax targeted at balance sheet risk or just a source of revenue.” The Sunday Times (£, B5) suggests that Chancellor George Osborne may look to reform the Bank Levy in the Budget in July.Read more
FEMR: policy makers want cultural change
Martin Wheatley, chief executive of the Financial Conduct Authority, has described the recommendations set out in the Fair and Effective Markets Review as an “important inflection point” and “the start of a change” (FT, £, p1-2). Speaking to the paper, Mr Wheatley called for “something more” than escalating fines for misconduct, adding: “The penalties aren’t enough. Cultural change – that’s really the aim of this – not to send people to jail.” FEMR examined the way that the fixed-income, currency and commodities markets rules operate and has called for a new code of conduct. The FCA estimates that 131,000 senior and certified financiers – including for the first time those at hedge funds and asset managers – would be subject to the rules. Mr Wheatley also suggested that the rules could be “internationalised”, given the global nature of FICC activities.
Also speaking to the paper, Charles Roxburgh, director general of financial services at HM Treasury said that competition was a “big theme” in the review, adding: “They are powerful laws that the competition authorities have: it’s clear they apply to these markets. We wanted to catalyse a process to ensure that everyone understands that.” Bank of England deputy governor Minouche Shafik is quoted saying that “banker bashing” will end “when banks are safe and have good standards of conduct”. Elsewhere, Reuters reports that the BBA has welcomed the widening of the rules to trading firms beyond banks. Click here to read the BBA’s response in full.
IMF negotiators pull out of Greece talks
The International Monetary Fund yesterday withdrew its negotiating team from talks with Greece over the country’s soon-to-expire €172 billion bailout, the FT (£, p1) reports. Greek prime minister Alexis Tsipras was told that his government must quickly decide whether to accede to more economic reforms or face bankruptcy. As IMF negotiators pulled out, European leaders said the time for compromise over a bailout deal had come to an end. The paper quotes Donald Tusk, president of the European Council, saying: “We need decisions, not negotiations, now. It’s my opinion that the Greek Government has to be, I think, a little more realistic.” The article says that since April, the Greek Government has promised that a deal would be agreed “within a few days”. George Pagoulatos, an economics professor at Athens Business University, adds: “There’s clearly no desire within the Syriza Government to tackle the consequences of a default – let alone a ‘Grexit’.”Read more
Fair and Effective Markets
The Governor of the Bank of England used his Mansion House speech to announce the findings of the Fair and Effective Markets Review. Declaring an end to ‘the age of irresponsibility’ and “ethical drift”, the Governor unveiled 21 recommendations to strengthen accountability in fixed income, currency and commodity markets.The FT (£, p3) reports that as part of the recommendations the new Senior Managers Regime will be extended beyond senior bankers to cover “shadow bank” participants in the fixed income markets, which is expected to include asset managers, interdealer brokers and hedge fund managers. The proposals will also create common standards for training and qualifications and see the establishment of a new industry-led market standards board to promote best practice.
Commenting on the proposals in the Times (£, p42) the BBA’s Chief Executive Anthony Browne noted that the industry would examine the details of the review, adding: “It’s vital that London once again sets the gold standard for fair dealing and integrity in financial markets. We welcome the intention to extend regulation from banks to other types of trading organisations. This should give customers greater clarity and protection.”
A world leading industry
Chancellor George Osborne used his annual Mansion House speech to put forward his vision for UK financial services. Five years from now, he called on the industry to be “the best regulated in the world, with markets of unquestioned integrity and the highest standards of conduct.” He added: “There will be more competition, more innovation and more players in retail markets – offering customers a better service.” Responding to his speech, BBA CEO Anthony Browne welcomed the Chancellor’s words, stating: “We share his ambitions for a City that is the best regulated in the world and has the highest standards for conduct, with greater innovation and more competition.” However, he cited growing concerns about the competitiveness of Britain as a place to do business. “That’s why we have called for – and will continue to call for – the Government to carry out a strategic review into the taxation of banks in the UK”.
Sale of RBS
The Chancellor also announced that the Government will start selling it’s £32 billion stake in RBS, noting that any further delay would be bad for the economy, the taxpayer and the bank. The Chancellor revealed he had been advised by Bank of England Governor Mark Carney that it was “in the public interest for the government to begin now to return RBS to private ownership” (FT, £, p1). The Times (£, p1) reports the share sale to City institutions will go ahead within months.Read more
Mansion House speech speculation
The Independent (p6) writes that the Chancellor will not “retreat” over the levy, but will instead announce that there will be no “further increases”, arguing that banks’ tax burden has reached an “appropriate level”. However, the Times (£, p39) reports that Chancellor George Osborne will use his Mansion House speech to announce that the Bank Levy will be “phased out in its current form”. The article states that the levy will be replaced by a “new corporation tax surcharge levied solely on UK assets”.
Lord Mayor Alan Yarrow will make a “hard-hitting” speech, stating that those who misbehave must face punishment, writes CityAM (p1). He will say: “It’s like a supermarket with no security cameras – if you take something without paying, it is theft. People should uphold professional standards, irrespective of whether the regulators are there or not. It’s up to managers to set that tone.”
The FT (£, p1) reports that the Chancellor will announce legislation which will ensure that future governments run budget surpluses in “normal conditions”. Mr Osborne will say: “In the Budget we will bring forward this strong new fiscal framework to entrench this permanent commitment to that surplus, and the budget responsibility it represents.”
“Treaty change” door opens for Cameron
Prime Minister David Cameron will be able to “exploit plans to change EU treaties” in time for a 2017 referendum, according to a document seen by the Times (£, p15). The report, prepared for Commission president Jean-Claude Juncker, sets out a “two-stage process to rewrite the EU rules between now and mid-2019”. The article suggests that Cameron could attach his demands to the first step of this process which involves a “tidying-up exercise” by spring 2017, including limited treaty change. This would then be followed by a “big revision” in 2019. Open Europe’s Stephen Booth said that the proposals gave the UK Government a chance “to remould the EU and establish different levels of integration for those outside the single currency”.
Anti-money laundering review delayed
A government review into anti-money laundering laws has been delayed until the end of year, writes the FT (£, p3). The Financial Action Task Force is expected to launch its own review of the UK’s laws in early 2016. The article suggests that rules around Politically Exposed Persons (PEPs) “could be tightened”. In a separate report, corruption watchdog Transparency International has described the current methods for seizing corrupt assets in the UK as “not fit for purpose” (FT, £, p3). The report states that the police lack the necessary resources as they acted on only seven out of 14,000 tip-offs last year, and concludes that legal processes are “woefully inadequate” (Independent, p49).Read more
HSBC reshapes business
HSBC plans to reshape, reducing in size by 10% in order to cut costs and simplify its business (BBC). News of these plans – which include a sale of HSBC’s businesses in Turkey and Brazil, and reducing UK-based jobs by 8,000 – came ahead of a presentation to be given by bank chief executive Stuart Gulliver. Mr Gulliver said in a statement: “We recognise that the world has changed and we need to change with it. That is why we are outlining the following… strategic actions that will further transform our organisation.”
UK launch for Apple Pay in July
Apple Pay has announced that it will come to the UK next month and be available in more than 250,000 locations (Guardian, p19). Participating retailers include M&S, Costa and Waitrose, as well as Transport for London. Britain is the first country outside of the US to have access to Apple Pay, which will be compatible with 70% of credit and debit cards. The new payment method allows customers to make purchases using a phone or watch using the same technology as contactless cards. Google’s recently launched Android Pay is expected to rival Apple Pay and, according to reports, won’t charge credit card issuers fees in the way Apple Pay does (Payments Cards & Mobile).
Basel propose capital rule for interest rate risk
The Basel Committee has published a document setting out two proposals obliging banks to set aside capital to cover the risk of interest rate changes to their earnings and core financial cushions (Reuters). Though banks do already set capital aside, there is currently no fixed global capital rule to cover interest rate risk. BBA Executive Director of Prudential Capital and Risk, Simon Hills said: “Different banks have different business models so a “one-size-fits-all” Pillar 1 approach could be difficult to apply. It might also mean that all banks choose to use the same mechanism for managing interest rate risk, which is likely to reduce diversity and customer choice. We’re pleased that the committee has acknowledged that an alternative Pillar 2 approach will be possible.”Read more
Rumours that Government could announce Bank Levy review
The front page of the Weekend FT reported that Chancellor George Osborne would signal an end to “banker bashing” in his Mansion House speech this week. “We have reached a position that is sensible — there is a sense that this is a settlement,” said an Osborne aide. “We are in a stable position.” The Sunday Times (£, B1) reported on speculation that the Chancellor might announce a review into the Bank Levy on Wednesday.
Bloomberg reported that the BBA had written to Treasury Minister David Gauke asking the Government to launch a review into bank taxes in the UK. In the letter BBA Chief Executive Anthony Browne said: “The time is overdue for a strategic review of the Government’s policy for taxing banks, to ensure that the tax regime for banking remains competitive.” The letter was picked up by the Times (£, p40), FT (£, p1) and the Guardian (p20). Appearing on CNBC this morning, Mr Browne said: “The Bank Levy is not the only issue making the UK a less attractive for banks to do business. There are also wider concerns about regulation and moves on remuneration – there is an understanding of this in Government. We can’t throw the baby out with the bath water.”
Fair and Effective Markets Review to “say quite significant things”
Reuters also looks ahead to the Mansion House speech and the announcement of the results of the Fair and Effective Markets Review. It anticipates announcements on tougher sanctions for wrongdoing and making it more difficult for “rogue traders” to move to a new company unchallenged. It quotes Martin Wheatly, chief executive at the Financial Conduct Authority saying: “It is going to say some quite significant things about what the scope of regulation should be for asset classes that historically have not been heavily regulated”.
In an interview with the Independent (p50) Lord Mayor Alan Yarrow said that he hoped the new rules would be developed collaboratively: “If someone spends their time just shoving rules down people’s throats no one will go with the spirit of it. What is critical about this is that it is made not just about a regulator coming down from on high and dumping regulation without any consideration about what has been happening to the market. The regulator is always behind the curve. So you need to have management properly engaged, knowing fair and clean markets are what we need to maintain in everybody’s interests.
“I want to hear about a Fair and Effective Markets Review done not only with consultation from the industry – which I think has been done – but with support for the changes they are recommending, which I expect to hear more about this week. I would like to see that there is full agreement with the companies involved to what changes take place; in other words, they have been party to the decisions. We have suffered from a distancing of the practitioner from the regulator.
Our City is a very important economic engine, and it is vital to the future of this country. We need to get people in the same room to get a sensible, pragmatic approach so the regulator is up to speed with what’s happening next in the City. This is in everyone’s interests.”
Lord Wallace has warned that he and other Liberal Democrat peers could hold up the referendum bill’s passage through parliament, telling the Times (£, p4) that the Salisbury Doctrine did not mean that the Lords had to approve all manifesto commitments: “In an exceptional circumstance, the Lords can say no,” he said. David Cameron has threatened to sack any Ministers who call for an “out” vote in the upcoming EU referendum (Guardian, p1). Leading candidates for the Treasury, Foreign Affairs and BIS select committees have all suggested that they will undertake a review of the costs and benefits of EU membership, according to the Independent (p54). Conservative eurosceptics have expressed “outrage” at the Government’s decision to scrap purdah rules limiting government spending during the referendum campaign (Express, p1)Read more
IMF urges Fed not to raise rates
Christine Lagarde, managing director of the IMF, has urged the US Federal Reserve not to hike interest rates until next year. The IMF has predicted that the US economy should grow 2.5% this year, but said the time was not right for a rate rise and that the central bank should be mindful of the potential consequences for the rest of the world. The FT (£, p5) writes of these effects: “Central banks in emerging markets are braced for the possibility of large scale capital outflows, as investors pull their money from Latin America and Asia and return it to higher-yielding US assets”.
Payment processer Worldpay to float
The FT (£, p15) reports that Worldpay – previously part of RBS – has appointed Bank of America Merrill Lynch, Goldman Sachs and Morgan Stanley as global co-ordinators as the payment processing company prepares to float in London. The paper says that the company is seeking a valuation of around £6 billion, which would make it one of the biggest UK IPOs this year. It is likely to be marketed as a fintech provider. The article goes on: “Payment processors hope to take advantage of the consumer shift to online payments that accompanied the advent of widespread broadband and smartphone use. European regulators have been trying to increase competition in the sector and encourage participation in the payments industry from non-banks”.
Credit ratings agency warn over investor confusion
Analysts at credit ratings agency Fitch have said that too much variability in the way that banks report their numbers means that investors cannot fairly compare banks’ capital buffers and financial soundness (CityAM, p4). The company criticised the Basel Committee on Banking Supervision’s Regulatory Consistency Assessment Programme (RCAP), saying it is “making slow progress in reducing risk weighted asset variability and there is limited transparency on which banks’ ratios might be overstated”.
Greece to skip IMF payment
The Greek government will not make the €300 million payment due to the International Monetary Fund (IMF) today, choosing instead to bundle all debts due in June together and pay them at the end of the month – a total of €1.6 billion. The Telegraph (B1) reports that this will be the first time that a developed country has ever missed a payment to the IMF since the creation of the Bretton Woods institutions at the end of the Second World War.Read more
BBA voices concerns over proposed remuneration rules
The BBA’s response to the EBA consultation on pay rules argues that the proposed changes would be “disproportionate” as they would cover companies which are not systemically important, reports the FT (£, p4). The EBA’s proposals would see more than a thousand of the UK’s smaller banks, asset managers, hedge funds and brokers be subject to remuneration rules which would require them to cap staff bonuses at twice fixed salary, defer 40% of bonuses for three years and seek board and regulatory approval for pay packages. The BBA argues that this would hurt competition as it would be “harder for new and challenger banks to compete for the best staff”. The BBA also warns that the new rules could lead to non-EU banks with small branches leaving the UK, which could “further undermine London’s position vis-à-vis other international banking centres”.
Contactless cards and online shopping fuel increase in payment by plastic
Figures from the UK Cards Association have revealed that UK consumers spent £19,000 every second using credit, debit and charge cards in 2014, the Guardian reports. The figures mean that the number of purchases grew by more than a tenth, and total spending on UK-issued cards rose by 8.2% last year to reach a record £600.3 billion. The paper adds that three in every four pounds spent at UK retailers were on a debit or credit card, and this was fuelled in part by contactless low-value payments and online spending. Dave Hobday, managing director at card processing company Worldpay UK is quoted saying: “Consumers demand convenience, and contactless offers this beyond any other payment method. It makes paying for your morning coffee or a well-deserved glass of wine after work faster than ever before, while helping businesses cut queues at peak times.”
Shortage of properties for sale drives price growth, says Halifax
Britain’s biggest mortgage lender has said the number of homes up for sale is at its lowest level for many years, the BBC reports. Halifax said the shortage of properties on the market explains why house prices rose by 8.6% in the year to the end of May, with the average value now standing at £196,067. Martin Ellis, the bank’s housing economist, suggested that the imbalance between supply and demand would drive prices higher in the months ahead. However, Mr Ellis added: “Looking further ahead, the increasing level of house prices in relation to earnings is expected to dampen house price growth.” Halifax’s house price index press release can be read here.Read more