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.
Banks consider issues of EU referendum and competitiveness
Deutsche Bank has set up a working group to investigate the benefits of moving some activities to the eurozone in the event of Britain leaving the EU, reports the FT (£, p1). The paper notes that much of the bank’s investment banking operation is based in London, whilst the German lender also has an office in Birmingham. The article states that Deutsche is the first big bank to start “formally examining the consequences of a British referendum on EU membership”, and that London hosts more than 250 foreign banks.
Meanwhile, Sky News reports that the BBA has commissioned a report into the competitiveness of the UK banking sector, to be led by former Financial Services Authority CEO Sir Hector Sants and consulting firm Oliver Wyman. The review will aim to present the government with “progressive and implementable recommendations”, to ensure that the UK retains its standing as an international banking centre. The article notes that the review is expected to report back in the autumn. BBA CEO Anthony Browne said: “We want to make sure that the UK continues to benefit from the hundreds of thousands of jobs and tens of billions of taxes that are currently provided by the banking industry in this country. It is in no-one’s interest for the UK’s biggest export industry to lose its global competitiveness.” Read the full BBA press release here.
Former PM adviser calls for limits to bankers’ pay
Steve Hilton, the former Director of Strategy for David Cameron, has called fortop executives atbanks which rely on an “implicit backstop of state funding” to have their pay limited to that of civil servants, reports the BBC. He added: “The goal here is to create a much more secure financial system where you don’t have these giant companies that pose a threat to the whole economy”. Speaking on Radio 4’s Today Programme, BBA CEO Anthony Browne said that Mr Hilton’s proposals would “cause catastrophic damage to a leading sector of the British economy”. He added that remuneration in the UK banking industry had “changed dramatically” since the financial crisis and that the UK has the most “tightly controlled and regulated remuneration system in the world”. He concluded that the UK government “must make sure that banking remains internationally competitive – it’s not only good for London, it’s good for the whole UK economy”.
PPI complaints down
Customer complaints about Payment Protection Insurance have fallen to 204,943 in the year to March, down from 399,939 in the previous year (Telegraph, B4). Responding to the Financial Ombudsman Service’s figures on BBC Radio 5 live this morning, BBA Executive Director Eric Leenders said that banks have put “a lot of energy and resources into improving complaints handling”, and that there has been a reduction in the number of overall complaints at the Financial Ombudsman Service. He stated that banks have sent out letters to hundreds of thousands of customers who may have been mis-sold PPI, and he encouraged customers to deal direct with their banks or with free support agencies, rather than claims management companies. The full BBA press release can be read here.
Bank bosses’ warning on low interest rates
The FT (£, p6) writes that a number of leading financial executives have called on authorities from across the world to bolster their use of macroprudential tools “amid fears that ultra-low interest rates have increased the risks of financial instability”. The statement, co-ordinated by the World Economic Forum, states that these tools will help “to address emerging market inefficiencies in the financial system, such as over-exuberance within asset classes, for example in real estate lending”. However, the group also warned that if rules were applied too “narrowly”, that it could push risks into the shadow banking market.Read more
Bailey: HSBC review “entirely natural”
CityAM reports that Bank of England deputy governor Andrew Bailey has said it is understandable for HSBC to review whether it should move its headquarters out of the UK. He said: “It is entirely natural that as an institution your shareholders should demand that you do this assessment. As a private organisation they should do it.” The Sunday Times (£, B1) reported speculation that HSBC’s headquarters review could lead to the Government revising some of the ring-fencing rules which look to split investment banks from retail banks in the UK. However, the article quotes sources playing down the suggestion, saying: “It is hard to see a minister being able to make a good case for watering down what was one of the biggest reforms after the credit crisis”. In a separate article (£, B4) Dominic O’Connell suggests that: “Any minister would struggle to sell such an about-face to the public. The way forward might be a subtle watering-down of the proposals, enough to keep the critics content and HSBC in Britain.”
Daily Mail launches campaign against technology in bank branches
Saturday’s Mail (p4) launched a new campaign against “robo” checkouts in supermarkets and self-service machines in bank branches. In its “bring back real service” campaign the paper alleges that customers are increasingly frustrated about having to use banking machines rather than carry out basic banking with branch staff behind a counter. The article quotes the BBA saying: “High Street banks have invested millions in refurbishing their branches to install the latest technology to make them easy and accessible. This is in response to increasing public demand to use technology to speed up their transactions in branches. Branch staff are still an important part of this picture, providing customers with the choice to visit a counter or support customers in understanding the new technology in branches.” The paper runs a number of letters from readers complaining about machines in today’s paper (pp30-31).
Banks raise fears over Basel review
The Times (£, p38) looks at fears among investment bankers that new capital rules being drawn up by the Basel Committee on Banking Supervision could force them to make sweeping changes to their business models. The article reports that, “One executive said that his company regarded the work as one of the biggest swing factors in determining its new business model… Under the consultation, investment banks would be required to reapply to regulators for approval of the models they use to value their positions on a desk-by-desk basis, which could present some companies with problems if they were unable to convince supervisors to sign off again on their activities.”Read more
Carney calls for “appropriate speed” on referendum
Bank of England governor Mark Carney has indicated that the proposed referendum on Britain’s membership of the EU should happen “as soon as necessary” (Telegraph, p4). Mr Carney said: “We talk to a lot of bosses and there has been an awareness of some of this political uncertainty – whether because of the election or because of the referendum. What they’ve been telling us, and we see it in the statistics, is that they have not yet acted upon that uncertainty. Or, to put it another way, they are continuing to invest, they are continuing to hire”. He went on to say that he was sure that the government would act with “appropriate speed” and that the referendum would be “as soon as is necessary”. Mr Carney also remarked on the positive impact that being in the EU has on Britain’s economy.
The FT (£) reports that Foreign Secretary Philip Hammond wants a “deal as fast as possible”, signalling a possible 2016 vote. Mr Hammond also said that a major treaty change over the country’s future relationship with Europe was not, in itself, a political goal for the Government.
Competitiveness is “biggest challenge” for City
In CityAM (p14) BBA Chief Executive Anthony Browne examines the post-election environment and impresses the importance of keeping London globally competitive. He said: “International league tables show us slipping down the rankings of financial centres. Declining competitiveness is not just a concern for the industry, but for the country. The UK has now lost its number one position as a financial services exporter, overtaken by the US. Banking remains by far the UK’s biggest export industry, creating hundreds of thousands of jobs, and is by some measures the country’s biggest taxpayer. Now is the time to make sure we aren’t throwing out the baby with the bathwater.”
Lloyds to return to private ownership
Lord Blackwell, chairman of Lloyds Banking Group, told the bank’s AGM yesterday that the lender could be returned to full private ownership “within 12 months” (FT, £, p21). Six years after their £20 billion bailout by the government, Lord Blackwell said that “it’s possible and would be very desirable” for the government to finish off selling its holdings over the next year. António Horta Osório, the chief executive of the group, also told shareholders that “the group has progressed further towards full private ownership.”Read more
Bank signals that rates won’t rise until summer 2016
The Telegraph (B1) reports that the Bank of England has signalled that interest rates are unlikely to rise in the UK until next summer as predictions for UK growth were revised downwards. The Bank predicted that the UK would slip into deflation this year before rising above 1% by the end of 2015. The front page of the Mail goes with the line that the Bank has suggested that immigration has suppressed wages. Asked about the recent sell off in sovereign bonds, Mark Carney took a relaxed stance, suggesting it was more likely to be a correction rather than a panic that could affect financial stability (Independent, p55).
Entrepreneurs backing new challenger banks
The FT (£, p21) reports that a new wave of challenger banks is set to launch, backed by entrepreneurs who are trying to take advantage of a growing market. However, the paper also reports fears that challengers will never have enough scale to take on the established players as private equity houses sell down their positions in some of these newer banks.Read more
Osborne pledges to negotiate better deal from EU
Chancellor George Osborne arrived in Brussels yesterday, telling fellow EU finance ministers that the UK had “a very clear mandate to improve Britain’s relationship with the rest of the EU,” and “no one should underestimate our determination to succeed”, Bloomberg reports. However, Mr Osborne’s French counterpart, Michel Sapin, said France was not open to renegotiating treaties: “If it’s about discussing the functioning of the EU, this sort of discussion is possible. If it’s about renegotiating treaties, you know the position of France. That’s a completely different matter. In the current context, no treaty change, no constitutional debate.”
The FT (£, p1) adds that Germany said it would not be rushed into changing the EU’s treaties to meet the Government’s reform demands. Wolfgang Schäuble, Germany’s finance minister, is quoted saying: “The opinion of the German government has always been that we need treaty changes, whenever, the sooner the better. But the realistic assessment of the German government is that it is not at all certain that this can be achieved quickly.”
Greece pays the IMF
Greece yesterday made a €650 million payment to the IMF after using funds from its “Special Drawing Rights” account held at the fund, which were provided by the IMF itself, the Times (£, p35) writes. The account, which is a reserve asset created by the IMF, is usually available for short-term liquidity or currency exchange emergencies faced by central banks. The paper quotes one bank official saying: “It was either that or seeing Greece default and joining Somalia, Sudan and Zimbabwe as the only countries currently in arrears with the fund. The downside, now, is that there’s no money left for another emergency situation.”
Elsewhere, the Telegraph (B3) says Greece is in “the classic throes” of a bank run, and car sales jumped by 47% last month as worried consumers see motor vehicles as the asset of choice.
Republicans reveal proposals for banking regulation
The Republican Party has unveiled its first big piece of financial legislation since taking control of the US Senate at the start of this year, the FT (£, p8) reports. The draft Financial Regulatory Improvement Act of 2015 includes provisions to help small community banks by reducing costly Dodd-Frank regulatory requirements – such as exempting them from the Volcker rule on derivatives trading. The Bill also proposes to raise a threshold above which banks are designated as systemically important and become subject to tougher regulation. However, it notes that the Bill’s chances of becoming law remain doubtful and Democrats have refused to engage so far.Read more
Bank Levy “ripe for reform”
Chancellor George Osborne must “resist the temptation…of milking the banks even harder, via the cash cow of the Bank Levy”, writes Patrick Jenkins in the FT (£, p18). He states that the policy is “so flawed that it may threaten the long-term interests of the banks, the broader business community that they should be serving, and the taxman.” Although a number of European countries have imposed their own bank levies, Germany’s raises a tenth of the UK’s in revenue, with Jenkins adding that banks “cannot be vilified forever”.
He suggests two reforms to the tax. Firstly, align the levy with ring-fenced entities, thereby removing foreign banks and UK’s foreign operations from the scope of the tax. Secondly, make other financial institutions subject to the levy in order to ensure the “safety and soundness” of the system.
Cameron’s reshuffle signals era of “blue-collar Conservatism”
Prime Minister David Cameron continued his cabinet reshuffle yesterday as he looked to replace ministerial positions vacated by the Liberal Democrats. Former banker and Treasury minister Sajid Javid has been appointed Business Secretary, with one of his allies stating that “deregulation will be the top of his agenda” (FT, £, p1). The Guardian Online suggests that he will face pressure from business groups on the implications of an EU referendum.
Former Parliamentary Private Secretary to George Osborne and Deputy Whip Greg Hands has been promoted to Chief Secretary to the Treasury, former investment manager Harriet Baldwin has been appointed as City Minister and Anna Soubry has moved from the MoD to become Minister for Small Business. A BIS spokesperson told CityAM (p12) that it was unclear whether Ms Soubry would have the same responsibilities as her predecessor, Matthew Hancock.
PM hopes to bring EU referendum forward to 2016
The Guardian front page leads with the Conservatives looking to draw up plans to bring the EU referendum forward to 2016 “to avoid a politically dangerous clash with the French and German elections in 2017”. Government sources indicated that key factors which would allow an earlier vote include the Conservatives’ majority in the Commons, the early introduction of the referendum bill and peers not holding the bill up in the House of Lords. The paper suggests that David Lidington – who has held the position since 2010 – will be reappointed as Europe Minister.
Greece completes loan instalment payment to IMF
The Greek finance ministry has ordered a payment of €750 million to the IMF, ending speculation that it would use it as a “bargaining chip” with its creditors (FT, £, p7). Eurozone finance ministers welcomed the announcement, but sources close to the negotiations stated that “differences between Athens and its bailout monitors remain on nearly every major issue”. The Times (£, p44) notes that markets did not react positively, with European government borrowing costs rising and the euro falling 0.24% against the dollar.Read more
Industry concern over Bank Levy, whilst MPs call for reform
The FT (£, p19) reports that foreign banks operating in the UK are “plotting a managed retreat” from operations that could expose them to the UK Bank Levy, which now stands at 0.21% following a further increase in this year’s Budget. Commenting on the impact of the increased levy, BBA Chief Executive Anthony Browne said: “The levy means it is becoming uneconomic to do some of this business in the UK”, commenting that repo and international trades that have traditionally been booked in London are now being moved elsewhere.Lord Mayor Alan Yarrow has told the Times (£, p42) that businesses moving their headquarters overseas would “seriously damage Britain’s reputation as a good place to do business and to locate banks”.
CityAM splashes with calls from a number of Conservative MPs to end “banker bashing” and “rein back punitive taxes aimed at banks”. Mark Garnier MP, who sat on the Treasury Select Committee during the last parliament, said: “Getting stuck into the Bank Levy every so often to demonstrate that our bank bashing is as good as their bank bashing is not the way forward… We need to give the City the space to implement changes we made over the last five years.” Mark Field MP echoed Mr Garnier’s sentiments, warning that the UK is nearing a “tipping point” with the Bank Levy. “I would very much hope that insofar as we have future levies, we aren’t looking to squeeze a little bit too much out of the banks,” he added.
City’s attention turns to EU referendum
Following the market’s strong performance on Friday after a definitive election outcome, the FT (£, p23) writes that the “euphoric market reaction “could fade quickly as investors start considering the risks associated with potential “Brexit” and an EU referendum. According to the front page of today’s Telegraph, the Prime Minister has already started making calls to European leaders as officials are considering bringing the referendum forward to 2016. Writing in CityAM (p19) Mark Boleat comments that while “Europe was the dog that didn’t bark in the election”, the business view is clear – that Britain needs to be in the EU. He notes that what is needed now is quick negotiation focussing on reform for the EU itself, not just British terms.Read more
Conservatives will be biggest party as results continue to come in
The Conservative Party look to be on course to form a majority government as the results of the UK general election continue to come in (BBC). Ahead of a final result, BBC Political Editor Nick Robinson writes: “Personal triumphs for David Cameron and Nicola Sturgeon will not just reshape British politics but could perhaps reshape the future of the United Kingdom itself” (BBC). CityAM writes that the feeling amongst economists is that “a Tory government without a formal coalition will bring more stability to the economic outlook.” The Telegraph reports on the market response, saying “sterling storms at the prospect of five more years of Conservatives.”
No agreement on derivatives rules
The FT (£, p30) reports that US and European regulators have failed to come to a consensus over recognition of each other’s rules on clearing houses. The European Commissioner for Financial Stability, Jonathan Hill has been in discussions with Timothy Massad, chairman of the US Commodity Futures Trading Commission (CFTC) in order to harmonise rules to prevent banks and hedgefunds from moving jurisdiction according to where they receive the most favourable treatment. Talks have been continuing for two years now with no sign of a resolution, the EU arguing that the CFTC’s approach is “less stringent”, according to the report. Both said that they hope to come to an agreement on approach by the summer.
Optimism grows for Greece agreement
The Greek deputy prime minister, Yannis Dragasakis, has said that his government is approaching “common ground” in talks with creditors (Guardian, p29). He is reported as saying: “Talks, so far, have shown that there is common ground in changes and political measures and, therefore, I believe a deal is possible in the interests of everyone”. The country’s government are putting together a package of reforms to present to the European Union and International Monetary Fund (IMF) in order to unlock €7.2 billion in rescue loans. The Telegraph reports the suggestion from one of the board members of the European Central Bank, Yves Merch, that Greece could use a “parallel currency” to pay civil servants, should then run out of euros. He told Spanish newspaper La Vanguardia: “”There are intermediate solutions circulating, such as the issuance of a parallel currency or IOUs. All these measures are among the exceptional tools that any government can consider if it has no other options. But all of them have a high cost.”Read more
Warnings sounded over impact of uncertain election result
Reuters reports concerns in the City over whether the uncertainty over a tight general election could impact on business, particularly if the country does not have an effective government for a prolonged period of time. It says that senior bankers have warned about the dangers of a “period of ‘drift,’ that no outright winner will produce a lack of confidence and uncertainty that will last for weeks.” However it cites the BBA saying that it would be uncertainty and caution among borrowers that would be more likely to affect lending volumes, rather than any reluctance by banks to lend. “As we stand now I don’t think that there’s any evidence that the supply side of the lending equation has been impacted at all by the political uncertainty,” said the BBA’s Chief Economist Richard Woolhouse.
In a roundup of what business leaders want to see from the political parties after the General Election, CityAM (p4) reports that most wanted to see a greater focus on entrepreneurship and cites BBA Chief Executive Anthony Browne’s call for greater focus on financial education in schools.
Sell-off in government bonds spooks markets
The FT reports that European stocks have fallen this morning because “investors remain spooked by the battering meted out to government bonds”. The value of sovereign bonds has fallen by £223 billion this week and Bill Gross, the bond trading veteran, has said that German 10-years, or bunds, look to be “the short of a lifetime”. Today’s FT leader (£, p12) is worried “that bond markets no longer have the capacity to behave rationally”.
The New York Times (p23) says that senior figures from across the financial markets are warning that “the world’s bond markets… are in danger of breaking down.” The Telegraph (B4) quotes Federal Reserve chair Janet Yellen saying that there could be sharp adjustments in global bond markets when US rates rise. The falls in bond prices are said to be caused in part by steep rises in the oil price, which is now at $68 a barrel. Timothy Adams, the chief executive of the IIF, has warned about the lack of liquidity in bond markets, saying that “there’s just less capacity for making markets”. Hamish McRae (p67) says in the Independent that “if European bond prices crash, other bond prices are likely to fall as well and I suppose you could go on to argue that equity and property markets are likely to be hit, too.”
The BBC reports that Ms Yellen has also raised the alarm over the record high levels of stock markets in the US and the UK, which she said presented “potential dangers”.
Standard Chartered “listening carefully” to investors over HQ move
Standard Chartered chairman Sir John Peace has told investors that the bank is “listening carefully” to them over whether it should move its headquarters. He said that the board would be monitoring the “impact on group costs” of further expected rises in the Bank Levy The Times (£, p44) reports that Aberdeen Asset Management, the bank’s second biggest shareholder, has said that a move away from the UK should be consideredRead more
Polls open tomorrow
Less than 24 hours remain until the polls open for the general election, as party leaders make their final campaign push. City AM reports that the gap between the Conservatives and Labour has narrowed, according to the latest national polling by Lord Ashcroft. The poll found that the Conservative lead fell to 32%, placing the party two points ahead of Labour on 30%. Labour leader Ed Miliband yesterday told the BBC that his plans to abolish non-dom tax status were non-negotiable, and he did not accept an assessment made by the Institute for Fiscal Studies which said debt would be £90 billion higher in 2019-20 under his plans.
In the FT (£, p3), constitutional expert Vernon Bogdanor explores how each party would attempt to form a minority government, and says that if either is unable to command support for its programme in the Commons, there could be a second election. Professor Bogdanor stresses that today there is “no reason to believe that a second election would yield a notably different outcome”, and suggests that the multi-party system is perhaps a permanent feature of the landscape. “If that is so, our institutions, include the first past the post system, will have to accommodate themselves to that transformation and the Cabinet Manual will have to be rewritten.”
In its leading article, the Times (£, p35) said this election is “certainly the first test of a new era of multi-party British politics and could be the last in the history of a truly United Kingdom”.
IMF and EU “implacable” over bailout negotiations, says Greek government source
The Guardian (p21) quotes a senior Greek government source claiming that serious disagreements and contradictions between the IMF and EU are creating obstacles in negotiations over bailout talks. The source adds that both lenders were digging in their heels and effectively enforcing “red lines everywhere”. The paper also quotes Greece’s health minister, Panagiotis Kouroumblis, saying the creditors were “implacable” and made Greece feel as though “they are impossible to satisfy”. Greece’s bailout programme ends in June and if an agreement cannot be reached then its economy could collapse.
Yesterday Greece announced that it is to levy a €1 fee for every €1,000 withdrawn from its ATMs in a bid to raise revenue and stop money from leaving the country, the Times adds (£, p37). The paper quotes a senior finance ministry official saying: “The surcharge is just one of a grab bag of measures we are considering if things get tough. We need cash fast.”
HSBC HQ review will “take months not years”
HSBC chief executive Stuart Gulliver yesterday said that the bank’s headquarters domicile review would “take months not years”, the FT reports (£, p1). In a call yesterday to discuss quarterly results, Mr Gulliver said the bank’s UK strategy would depend on the final rules on ringfencing regulations, control of its dividend and the accountability rules in the new Senior Managers Regime. The Guardian (p21) adds that Mr Gulliver cited the Bank Levy as one key concern over keeping HSBC’s headquarters in London. More information on the methodology in comparing HQ locations will be set out on a strategy day on 9 June.
Growth forecast cut
The National Institute of Economic and Social Research (NIESR) has cut its forecast for Britain’s economic growth this year from 2.9% to 2.5%, the Guardian (p21) reports. The paper says the move comes after weaker than expected GDP figures for the first quarter of this year, and the biggest single uncertainty facing the economy is how quickly productivity can be improved. Elsewhere, the Independent (p57) reports that growth in new orders in the construction industry has fallen to its weakest level since June 2013, figures from financial data firm Markit have suggested. “The uncertain general election outcome appears to have put some grit in the wheel of decision-making,” said Markit’s senior economist, Tim Moore.Read more