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.
CBI calls for the Government to prioritise jobs in Brexit deal
The CBI has warned that public discussion over the scale of a potential Brexit payment is distracting from the priority issues of maintaining trade flows, securing jobs and maintaining economic growth (The Daily Telegraph (£, B1). CBI Director General Carolyn Fairburn has called for the Government to ensure “robust interim transitional arrangements are in place as soon as possible” and called for continued access to skilled labour (The Times, £, p40).
Public still hold £150 million worth of paper £5 notes
BBC News (online) reports that over £150 million worth of paper five pound notes – equivalent to three per adult in the UK – remain in circulation. Shops will no longer have to accept them from Saturday, although customers will be able to exchange them for new polymer five pound notes with the Bank of England.
Disagreements over future European supervisory model
Politico (£, online) notes that French former Central Bank Governor, Jacques de Larosière, has warned against merging the EBA and EIOPA – reported to be the model favoured by German authorities – after the UK leaves the EU. Meanwhile, Sweden’s Financial Supervisory Authority has argued that the Italian debt crisis shows that a single EU rulebook does not work, and called for regulators to move away from greater harmonisation of capital requirements (Bloomberg, online).Read more
EU to publish Brexit guidelines
The European Commission is expected to publish draft guidelines on Brexit negotiations today (Politico, £, online). The Financial Times (£, p1) speculates that EU negotiators are likely to raise the UK’s bill for leaving the EU to €100 billion which includes administration costs and farm payments, while The Times (£, p1) notes that Prime Minister Theresa May will be unable to negotiate Brexit terms directly with her EU counterparts, with talks to be held with the European Commission’s chief negotiator, Michel Barnier.
Over 65s to borrow mortgages worth £39.9 billion by 2030
BBC Radio 4’s Today programme reports that 1.42 million homeowners aged 35 to 64 will not have paid off their mortgage by the time they retire, according to the International Longevity Centre and Building Societies Association. Homeowners over 65 currently borrow £19 billion, but this is expected to rise to £39.9 billion by 2030. The report warns that, “ economic trends such as house price inflation, tighter credit conditions and low real growth means we can expect to see a significant shift in the customer base over the next thirteen years” ( Daily Mail, online).
ECB calls for final agreement on Basel
Danièle Nouy, Chair of the ECB’s Supervisory Board, has called for global supervisors to agree a minimum ‘floor’ for capital requirements for banks (Politico, £, online). Commenting on the regulation, Nouy said, “the final design and calibration of the floor are still being discussed, and the intention is to avoid significantly increasing the overall capital requirements for banks. It is crucial that an agreement is reached as quickly as possible. We have to finalize the entire Basel III package to ensure that a global standard is in place.” The full speech is available here.Read more
UK criticised over tone of pre-Brexit talks
There is widespread coverage of the Prime Minister’s meeting with European Commission President Jean-Claude Juncker last week. The Guardian (p1) reports EU sources have criticised the tone of the discussion, suggesting that the chances of the negotiations failing are now greater than 50%, while the Prime Minister has sought to downplay the remarks (Reuters, online). BBC News (online), notes that the most contentious issues are agreeing EU citizen’s rights, parallel trade negotiations and any outstanding financial commitments.
European Commission to propose centralised supervision of euro clearing
The European Commission is expected to propose “more centralised supervision” of central clearing houses that provide critical capital markets functions to EU countries in June (Financial Times, £, p1). The regulations may force euro clearing activities to relocate to the EU ahead of the UK’s exit from the EU, with EU officials warning that there is little point in, “wasting time on unrealistic ideals in Brexit talks”.
Bank of Mum and Dad lends £6.5bn to homebuyers
Financial contributions from parents, family members and friends to help home-buyers purchase a property have risen to £6.5 billion, up 30% from last year, supporting 26% of all UK transactions according to L&G (Financial Times, £, p1). The under 30s benefit most from this, receiving 79% of funding, with average contributions to rise from £17,500 to £21,600 (City AM, p15).Read more
BBA High Street Banking statistics – March 2017
The Financial Times (online) reports that consumer credit growth slowed in March 2017, with fewer than expected new house purchase approvals also recorded, according to the latest BBA High Street Banking statistics. Although net mortgage borrowing was 2.2% higher than a year ago, consumer growth dropped to 6.1% in March, compared with 6.5% in February 2017. Commenting on the statistics, Eric Leenders, BBA Managing Director for Retail Banking said: “In March, annual growth in consumer borrowing from the main high street banks slowed, perhaps mirroring the dip seen in retail sales volumes as price rises appear to have started biting into consumers’ spending. House purchase approvals were largely in line with last year’s average, broadly reflecting a steady housing market. Business lending increased in March across a number of sectors including construction, manufacturing, retail and wholesale, and utilities”.
Venture Capital funding to fintech companies in Europe jumps
FinExtra (online only) reports on the latest figures from CB Insights which shows that VC funding to fintech companies in Europe spiked in Q1. Amid upcoming legislation that could open the door for fintech companies to challenge incumbent banks, Europe saw Q1 funding to VC-backed fintech companies jump 222% sequentially. The statistics show that, in total, fintech startups in Europe raised $667 million across 73 deals in Q1, a rise 121%, while deals rose 38%. The increase in activity in Europe is in sharp contrast to a more subdued outlook in US markets, where deal activity dropped nine percent sequentially and funding fell eight percent. BBA CEO Anthony Browne has discussed the future of financial technology in the latest edition of Raconteur, which you can find here.
Foreign investors back Brexit Britain
The Daily Telegraph (B1) reports on figures from the Organisation for Economic Co-operation and Development (OECD), which suggest that Britain is the number one destination in Europe for foreign direct investment, with a surge in inflows to levels not seen since before the financial crisis. According to the OECD, UK FDI inflows rose to $253.7bn (£197bn) in 2016, up from £33bn the previous year, with Britain climbing above Ireland, Switzerland, the Netherlands and France to become the top destination for inward FDI across Europe and second only to the US in the OECD club of 35 rich economies. The OECD highlighted that the massive surge in FDI inward flows to the UK was driven by a handful of significant deals.Read more
The euro clearing market debate continues
The ‘battle’ for London’s euro clearing market has gained pace, City AM writes (p1, online). French finance minister Michel Sapin told BBC News (online) that in order to uphold the security of European monetary markets, clearing houses cannot stay in London after Brexit. In conversation with The Telegraph (B1, online), Michael Spencer, chief executive of Nex Group, said such a move would be ‘protectionist’ and ultimately, a dangerous act. Markets will stay in Britain post-Brexit if the UK has a ‘swagger’ and is ‘open to business’, said ICE CEO Jeff Sprecher (Reuters, online).
Code of Conduct launched by Bank of England
The Bank of England has launched a new voluntary code of conduct designed to promote ‘fairness and integrity’ in UK money markets (Financial Times, £, online). Although not legally binding, it is hoped senior managers will oversee the code’s implementation within financial firms. The code sets out key behavioural principles around ethics, information-sharing and trade execution, and helps to build trust and transparency; ‘cornerstones’ of financial transactions (City AM, p21, online).
Tories expected to change ECHR manifesto pledge
Theresa May met with Michel Barnier, Jean-Claude Juncker and other Brexit negotiators last night during which May reiterated her commitment to the UK’s ‘deep and special relationship’ with the EU (Financial Times, p3, £, online). Meanwhile, the Conservatives are expected to drop their pledge to withdraw the UK from the ECHR. According to The Daily Telegraph (p1, online), leaving the ECHR would ‘distract’ from Brexit negotiations, so Britain can expect to be bound by European human rights laws for another five years.Read more
Tyrie stands down from Parliament
Conservative MP and Chairman of the Treasury Select Committee Andrew Tyrie has announced he will not stand for Parliament in the upcoming election. Tyrie reflected on his time in parliament as ‘exhilarating’ and counted shaping a ‘more trusted and resilient financial sector’ among his accomplishments (Financial Times, p2, £, online). FCA Chief Executive Andrew Bailey commended Mr Tyrie for his role in ‘enhancing the accountability of economic and financial policy’ (The Independent, online).
Account switching increases, as customers abandon cash for card payments
The payment body BACs has revealed that 248,302 customers changed banks between January and March 2017, a fifth more than the same time last year (The Sun, p41). As well as switching accounts, the way customers make payments is also changing. A study by ING shows that most customers prefer using card over cash, with 21% of those surveyed admitting they rarely carry notes or coins and 29% saying they would be happy to abandon cash altogether, due to developments in financial technology (fintech) and peer-to-peer lending (Bloomberg, online).
Basel Committee outlines annual commitments
The Basel Committee on Banking Supervision (BCBS) has outlined its strategic priorities for 2017 – 2018 including a “greater focus on supervision” and continued monitoring of “emerging cyclical and structural risks”. The Committee will hold off from launching ‘new projects’ until it has finished assessing reforms introduced in the near-decade since the financial crisis (City AM, p3, online). The industry has welcomed these proposals, with Bank of England Governor Mark Carney highlighting the continued need to “resist regulatory fatigue”, especially amid economic uncertainty surrounding Brexit and Trump’s attempts to pursue deregulation (Financial Times, £, online).Read more
Eurozone ‘pop-up branches’
It could take up to a year to secure a license that will allow UK banks to operate in the eurozone post-Brexit, the ECB has warned, prompting concern that they won’t be ready to leave the EU by 2019 (Financial News, p19, £, online). The Times (p. £, online) reports that US banks have proposed ‘pop-up branches’ that will enable them to provide services to the eurozone, while keeping the majority of staff and work in London, as a means to minimise financial disruption. Regulators are concerned that ‘pop-up branches’ will mean banks won’t have a ‘proper presence’ in European countries. In other Brexit news, the EU has ring-fenced UK financial services from a future trade deal to ‘safeguard financial stability in the Union’ (Bloomberg, online).
Election campaigns in the UK and France continue
Sir Keir Starmer, Shadow Brexit Secretary, will reveal the Labour party’s Brexit manifesto today (i paper, p4, online). If elected, the party has pledged to scrap the Great Repeal Bill in favour of legislation that protects EU workers’ rights and environmental standards, and prioritise UK access to the single market during exit negotiations. Meanwhile, the French Presidential contest continues as Macron’s success prompted $290 billion to be added to the global market (City AM, p1, online). His opposition, Marine Le Pen, has stepped down as leader of the National Front in a bid to widen her voter appeal (BBC News, online).
Employment in the financial services sector
City AM reports (p1, online) that the financial services sector employs 7.3% of the UK’s working population, and workers in the sector contribute 1.5 times more to the economy than the average UK employee. In the year to March, financial services salaries rose by 3.5%, four times faster than other professional industries, as employers seek to secure top talent (City AM, p7, online). Meanwhile, a study by Boston Consulting Group has found the most efficient way to achieve workforce gender diversity is to promote women already working in the company, as opposed to relying on a ‘scattergun approach’. Robust flexible working schemes, clear targets and visible role models also help (Financial Times, p17, £, online).Read more
Macron and Le Pen in final round of Presidential race
Centrist Macron will face far right Front Nationale candidate Le Pen in the final round of the French presidential contest, following yesterday’s vote (BBC Radio 4 Today Programme, online). Despite a boom in the value of the euro following the first round result, analysts predict that the future of the French economy remains uncertain, prompting the ECB to confirm it will support national banks with cash if needed (Reuters, online).
The future of Fintech
The future of financial technology or ‘fintech’ requires effective and ‘agile’ regulation that can keep pace with technological developments, BBA Chief Executive Anthony Browne writes in Raconteur (p6, online). Fintech continues to attract top talent as MBA graduates are increasingly picking jobs at startups as opposed to banks, a Goldman Sachs survey has found (Financial Times, p, £, online). Meanwhile, Barcelona has announced its eligibility as a new location for Fintech companies wishing to leave the UK following Brexit (La Vanguardia, online).
The City backs plans to keep European Court of Justice jurisdiction
A proposal by the UK government to keep the European Court of Justice as the ‘ultimate authority in financials services’ for up to five years after Brexit could maintain UK access to the single market, The Times reports (p39, online). A survey by GW Employment Law, however, has found that 70% of financial services firms in the UK wish to change EU law in regards to employment protections (Independent, online). As Brexit proceedings continue, the US commerce secretary Wilbur Ross has told the Financial Times that the US is willing to strike a deal with the EU, a shift in tone from the Trump administration’s previous attempts to strike bilateral deals with EU members as opposed to the bloc in its entirety (p5, £, online).Read more
Government scraps probate plans
Government plans to replace the existing probate scheme with a ‘sliding scale’ based on estate value have been scrapped due to time constraints before the general election, said the Ministry of Justice (BBC News, online). The ‘death-tax’, so-called by critics, would have increased probate fees to as much as £20,000, prompting MPs to question the legality and social consequences of the proposal (Daily Mail, p1, online).
Election manifestos outline key policies
Theresa May has pledged to reduce net migration in the Conservative party’s manifesto in an attempt to appeal to Northern Labour voters, The Daily Telegraph (p1) reports.Meanwhile, the Guardian writes that ‘the most important election for Britain is the presidential contest in France’, the first round of which takes place on Sunday. The result may ‘put Brexit in the shade’ or impact our own election result (The Guardian, p30, online).
Brexit negotiation guidelines revealed
Leaked European Commission negotiating guidelines reveal Brussels’ requirement that the UK remain subject to European Court of Justice laws post-Brexit (The Times, p1, £, online). Any exit deal that does not uphold EU citizen rights will be vetoed as part of this ‘hard line approach’, warned European parliament chief Antonio Tajani (Financial Times, £, online). The guidelines also say the UK must pay all Brexit costs and ‘bear the currency risk’ (Politico, online). Tajani added, however, that Britain would be welcomed back if a new UK government reversed Brexit after the general election (The Guardian, p1, online).Read more
EU “administrative chill”
An internal memo sent by senior European Commission officials to all EU staff highlights a growing “administrative chill” ahead of Brexit proceedings (Financial Times, £, online). Staff were told to prepare for UK agencies to be disconnected from “sensitive databases” and reminded staff that legally, contracts can only be awarded to parties established in the EU. The memo follows a statement from Margaritis Schinas, spokesperson for the European Commission, who said the UK will have “no say” in the relocation of the European Banking Authority (Bloomberg, online).
Fintech growth continues
UK fintech startups received £177 million in investment during the first three months of 2017, confirming the UK as the European Fintech capital (CityAM, p11). The Telegraph reports (B1, £, online), however, that the UK faces growing competition from China due to their looser regulation standards and the $7.1billion rise in funding for Asian fintech companies last year. Similarly, Level39, a fintech accelerator, urges banks to invest in startups that offer the technology they need or else they may face a ‘cliff-edge’ (The Times, p50).
General election campaigns gather pace
MPs backed Theresa May’s proposal for a general election on June 8 by a 509 majority. The Daily Mail reports that the conservative manifesto will commit the party to ending EU free movement and leaving the single market and European Court of Justice (p1, online). Jeremy Corbyn is expected to announce a manifesto that is “heavy” on big businesses that act “in an irresponsible way” (The Times, online).Read more