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.
Banking standards body line-up announced
Members of the new Banking Standards Board – a new professional body set up to improve values in the banking industry – will include a philosopher, trade unionist and a bishop, writes the Mail (p89). The announcement was made by board chairman Dame Colette Bowe, who said that the body would “shine a spotlight on competence, culture and patterns of behaviour across the whole banking industry”. From the industry, representatives from Citi, Morgan Stanley and HSBC were amongst those to join the new 14-strong board (CityAM, p1). Non-bank members include Lord John McFall who sat on the Parliamentary Commission on Banking Standards, Sir Brendan Barber, former general secretary of the Trades Union Congress, Citizens Advice chief Gillian Guy and David Urquhart, the Bishop of Birmingham.
In the Telegraph, a BBA spokesman said: “Board members are drawn from all corners of public life and will provide independent oversight and leadership. This will be integral to the new body gaining public trust. Today’s announcement also shows the diverse set of banks and building societies supporting the new body. This is a positive sign for its future success.”
Threat of Greek default
Greece has threatened to default on its loans from the International Monetary Fund (IMF) as the country’s interior minister says that the country will not respect a €450 million repayment to the bank later this month without more bailout funds (Telegraph, B1). Nikos Voutis said: “If no money is flowing on April 9, we will first determine the salaries and pensions paid here in Greece, and then ask our partners abroad to achieve consensus that we will not pay €450 million to the IMF on time”. However, a spokesman for Prime Minister Alex Tspira’s government said told Reuters that there was “no chance” the country would not meet its obligations. Yesterday the eurozone working group considered a plan of money-raising reforms put forward by the Greek government, which includes measures to crack down on tax evasion, an audit on overseas bank transfers and a “luxury tax.”
Hacking prompts “national emergency” in US
President Barack Obama has taken action to impose sanctions on overseas actors involved in cyber threats to US national security or economic health (FT, £, p1). According to reports, Mr Obama declared cyber threats a “national emergency” and has given his government new powers to target cyber crime that threatens to “affect critical infrastructure, disrupt the availability of websites or networks, or steal trade secrets or financial information, such as large troves of credit card data”. The Obama administration has encouraged more information sharing on cyber threats between government agencies and the private sector.
Read more about the UK’s Financial Crime Alerts Service, launching soon to promote effective intelligence sharing between agencies, government and banks on a wide range of financial crime, from money laundering to cyber threats.Read more
Member States push for more discretion on EU bank structural reform
The Times (£, p41) reports that Latvia, which holds the EU’s rotating presidency, is facing pressure to water down draft regulations that would limit banks’ trading activities to safeguard retail deposits from investment banking operations. Similar measures have already been adopted by the biggest lenders in the UK. The paper says that officials are also being urged to drop plans for an outright ban on proprietary trading. EU member states, including France, have allegedly pushed for rules that give more discretion to local regulators to determine which businesses should be isolated from the rest of the bank. Giving evidence to the European Parliament yesterday, president of the Supervisory Council at the European Central BankDanièle Nouy said: “The supervisor needs to have some margin of manoeuvre. Nothing should be automatic, whatever criteria is used, as it’s better when it comes to financing our economies.”
Payment Systems Regulator launches today
The Payment Systems Regulator (PSR), the body set up to regulate Britain’s payments industry, launches today (FT, £, p4). The regulator will open up access to the infrastructure that underpins a range of financial transactions, including mobile payments and house purchases, the paper reports. It quotes PSR managing director Hannah Nixon saying her organisation wants to “break open the control of payment systems, so that it’s not just the big banks that control them who can use them”.
British growth returns to pre-crisis level
Figures released by the Office for National Statistics show that the British economy grew at its fastest pace for nine years in 2014, the Telegraph reports (B1). The ONS says quarterly GDP growth came in at 0.6% in the last quarter of 2014, meaning that overall yearly growth reached the same levels as before the financial crisis in 2006. The economic recovery continued to be fuelled by the services sector, and household spending recorded a rise of 0.6% in the quarter to £263.9 billion, the paper adds. Elsewhere, the Guardian (p26) writes that despite the pace of economic growth, the ONS’s economic wellbeing data showed that GDP per head was 1.2% weaker than in early 2008, suggesting that many people are unlikely to be feeling better off.Read more
Banks face global shocks in BoE stress test
The Bank of England yesterday published details of the next round of stress tests which will assess “the resilience of the UK banking system against a major external shock”, writes the FT (£, p3). The scenarios include a slowdown in growth of the Chinese economy, oil prices falling to $38 per barrel and the devaluation of emerging market currencies against the US dollar. The Times (£, p45) states that the scenarios will also test the ability of traders to cope with a drying up in market liquidity, adding that banks will have to “assume at least two of their largest and most vulnerable trading partners are unable to repay money they owe”. The FT notes that these tests will for the first time examine how banks’ leverage ratios react to a crisis, as well as their capital ratios. The results of the tests will be published in December, although the Telegraph (B1) reports that the Bank could ask lenders to increase their capital base even if they pass.
Bank figures reveal strengthening economy
Bank of England figures released yesterday reveal that lenders approved 61,760 mortgages in February, the highest level in six months (Telegraph, B5). The FT (£) notes that net lending to SMEs climbed £566 million in February, the “largest rise since the collection of this information began in May 2011”. The paper quotes BBA Chief Economist Richard Woolhouse saying: “Net lending to small businesses has increased during three of the last four months. At the same time business owners are growing in confidence with many taking advantage of alternative sources of finance.”
Complaints against banks fall
Reuters notes that complaints against banks in the second half of 2014 were 7% lower than the first half of the year, and a 12% decrease on the same time period in 2013. The FCA’s figures also show that PPI complaints fell by 14% in the second half of 2014 compared to the first (FT, £, p4). PPI cases now make up less than half (48.6%) of all complaints for the first time in three years (CityAM, p10).
Commenting on the latest figures, a BBA spokesman said: “Today’s FCA figures show that overall customer complaints to banks are down 12% on last year which shows that banks continue to make progress though the number still remains too high. We are determined that there will be no repeat of any of the bad practices which caused mis-selling in the past and have made appropriate changes. Staff are now rewarded for high levels of customer service and not sales volumes. The industry continues to work with the Financial Conduct Authority and the Ombudsman to improve complaints handling for customers.”
Clegg could back EU referendum
The Liberal Democrats are prepared to accept a referendum on the EU in the event of a second Con-Lib coalition, according to the FT (£, p1). However, the paper states that the Lib Dems are “likely to demand a series of concessions” in return, such as allowing EU citizens who live in the UK the right to vote in the ballot, a say on the timing of the vote and the question itself. The article quotes one Conservative minister saying that the level of concessions granted to the Lib Dems “depends [on] how many seats they have after May”.Read more
Final deal on clearing means business will remain in the UK
The Bank of England and the European Central Bank have agreed a deal which the FT (£, p8) sees as ending the battle over whether big euro-denominated clearing houses could remain in the City of London, rather than the eurozone. The article reports that: “The two sides settled their differences on Sunday by agreeing to extend special currency-swap arrangements that are triggered in the event of an emergency at a clearing house, essential hubs of the financial system where liquidity risk is highly concentrated. In return for providing euro funding to help cope with such a crisis, the Bank of England will grant the ECB its long-standing demand of greater information on the workings of London’s clearing houses and more influence over their supervision.“ Both sides agreed to drop their challenges to each other as a result.
Jobs in banking grow in the regions
The Sunday Telegraph (B1) reported on new figures from the BBA which showed that areas such as North Tyneside, Cardiff and Dundee are seeing large rises in the number of banking jobs, but at the same time there has been a decline in banking jobs in the UK overall. It quotes BBA Chief Executive Anthony Browne saying: “This serves as a potent reminder that a strong banking industry is in all our interests. We should be careful to protect our banks from any moves that undermine their success and thereby their potential to create employment across our country.” The figures follow warnings from business leaders that raising taxes could see the UK’s status as a financial centre threatened. The story was also picked up in this morning’s CityAM (p5).
End in sight for global banking reforms?
The FT (£, p20) reports that Basel Committee secretary-general William Coen has suggested that the post-crisis wave of banking regulation is coming to an end. He told the paper: “There is light at the end of the tunnel, the big pieces are there and it’s really now about getting to the finish line. We understand the importance of providing clarity and certainty and we’re working toward wrapping up as much as we can in the course of the next year.” The article also reports that an analysis by Citi shows the world’s top 10 banks now have $470.8 billion more capital than they had before the crisis. Areas of reform that are still in train include a review of market risk rules and how banks calculate their risk weighted assets. BBA Executive Director Paul Chisnall, told the paper that it was important to pause for breath. “Reforms work best if they come in stages rather than a continuous stream,” he said.Read more
Carney – risks to UK financial system “remain elevated”
In a letter to the Chancellor, Bank of England Governor Mark Carney yesterday suggested that banks may have to bolster their funds as the Bank looks at the “calibration” of capital rules for lenders, writes the Times (£, p51). Alongside the Bank’s statement from the Financial Policy Committee, Mr Carney wrote: “In 2015, the committee will consider the buffer framework for domestic systemically important banks, including institutions other than ring-fenced banks”. The Governor also pointed to international risks to the financial system such as the slowdown in the Chinese economy and the Greek debt negotiations, which could “trigger panic in financial markets, leading to severe pain in London” (CityAM, p8). In addition, the Committee warned that liquidity may have become “more fragile” in some markets (Telegraph, B4).
Ex Ofcom chief to head review into bank trade associations
Sky News reports that former Ofcom Chief Executive Ed Richards will lead a review into bank trade associations. HSBC UK CEO Antonio Simoes has led the process of recruiting a senior independent figure, and Mr Richards is seen as an “ideal person… because of his experience as a regulator.” This follows a consultation published in January looking at potential future models of the trade association landscape in the banking industry.
MPs criticise FCA over insurance probe leak
A report by the Treasury Select Committee published today calls for a senior city figure to undertake a health check of the regulator, following an investigation into a press briefing which detailed a review of certain life assurance policies (FT, £, p2). However, CityAM (p1) notes that the report does not call for any senior resignations at the regulator.
Battle for Number 10 begins
David Cameron and Ed Miliband took part in the first leg of the party leaders’ debates last night, answering questions from an audience of Conservative, Labour and undecided voters as well as being interviewed by Jeremy Paxman. The Times (£, p8) writes that both leaders used their “differing outlooks on the economy to deflect questions on a range of subjects”. The Telegraph (p1) states that both leaders “struggled” under the “bruising power” of the former Newsnight presenter. The paper notes that the Prime Minister came out on top of a snap ICM poll by 54% to 46%, although CityAM (p3) states that the Labour leader “did better at winning over crucial undecided voters”.Read more
Banks and Government work to launch new branch closure protocol…
The BBC reports that the BBA, Business Secretary Vince Cable and consumer groups have today signed a protocol to ensure that if banks decide to close local branches they will consult with local communities about alternatives that could be put in place such as new ATMs or provisions through the Post Office. BBA Executive Director Eric Leenders appeared on BBC Breakfast and BBC Five Live to discuss the deal which was also picked up in the Times (p52) and the Mail (p8).
BBA Chief Executive Anthony Browne said: “Today’s ground-breaking agreement will make sure customers still have banking services close at hand if a branch closes. Communities will be given fair notice of any closure and clarity about the alternative places and ways to bank. This includes the post office, which is an ideal shared service for customers who prefer to use counter services. The agreement will also make sure there is the right support to help customers use internet or mobile banking.”
… And a new price comparison tool
The Guardian (p31) reports that the major UK banks, working with the Government and the BBA, have today launched a service called midata, which will allow people to compare different bank accounts and their charges, interest and rewards to see which would suit them best. The service allows people to download a file containing 12 months of their transaction history from their bank’s website. Customers can then upload this to a comparison website – the first being Gocompare. The tool will look at all the accounts on the market and present the individual with a personalised table showing how much money they could save by moving to another bank or building society account, based on their actual spending habits. Treasury Minister Andrea Leadsom said that the innovation “could transform the current account market”.
Anthony Browne said: “This is an exciting innovation that will give customers more help when searching for the best current account for them from more than 200 on the UK market. Harnessing this data should allow some of us to pay less for our banking and others to earn more interest on their money, as well as highlighting the range of offers, such as cash-back, that are available just now. However, this is potentially valuable data so it is important to be careful who you share it with and only upload it to websites you trust.”
Bank Levy – “good politics but terrible economics”
The New York Times ran an interview with BBA Chief Economist Richard Woolhouse responding to the declaration by the Chancellor, George Osborne, that the Bank Levy is “here to stay”. He said: “It’s still perceived to be good politics to extract money from banks in a punitive way in spite of the fact that it is terrible economics. The bank levy disadvantages UK-domiciled global banks competing with people not paying it, and it acts as a deterrent for activities to move to London.”Read more
Consumers take advantage of mortgage deals
The BBA’s High Street Banking Statistics were released this morning, revealing an increase in mortgage approvals and more growth in unsecured lending like loans and credit cards. You can read the release here.
Richard Woolhouse, Chief Economist at the BBA, said: “The increase in mortgage approvals is welcome news and a sign that the housing market is beginning to improve. We’re seeing stronger demand for mortgages as consumers take advantage of some of the very competitive deals currently available. Demand for loans and other types of personal borrowing is rising at its fastest rate since the financial crisis. Consumers are feeling increasingly confident about buying big ticket items, such as cars or home improvements, as the recovery really begins to take hold. Personal deposits grew very slowly as alternative savings vehicles remain attractive, particularly the new pensioner bond.”
Bank Levy “here to stay”, says Osborne
The FT (£, p2) and CityAM (p3) both report comments made by the Chancellor to the Treasury Select Committee (TSC) yesterday, where Mr Osborne said: “I think the Bank Levy is going to be here to stay. It is perfectly reasonable as a society to ask the banking sector to make a contribution”. He rejected the suggestions made by TSC chair Andrew Tyrie that the levy be scaled back as banks became less dependent on an implicit state guarantee. According to the FT, the tax rise is expected to bring in more than £3 billion for the Government next year. The paper quotes BBA chief executive Anthony Browne’s comments on the levy: “The Bank Levy imposes a significant cost on banking businesses in the UK, which is making many banks move work and jobs to other parts of the world, and is deterring international banks from investing in the UK. This will further disadvantage UK headquartered banks by increasing tax on their overseas activities, while their competitors do not pay this tax at all.”
Investigation into “dark pools”
According to its business plan, in the next financial year. The Financial Conduct Authority (FCA) will conduct an investigation into “dark pools” – private trading venues that compete with exchanges (FT, £, p2). The regulator stated that it would “continue to increase our knowledge of the conflicts of interest that may be inherent in the operation of dark pools and explore how firms are managing them”. US authorities have also increased their scrutiny of dark pools as part of investigations into high-frequency trading.
The Times (£, p47) writes that financial crime has replaced rapid house price growth on the regulator’s “watch list” as this is also added to the 2015-16 plan. The FCA has said that it will be focussing on company controls to prevent money laundering, including terrorist financing and sanctions, bribery and corruption, and consumer fraud.Read more
Banks must harness a range of digital technologies or risk losing customers to new competitors, a major new report by the BBA and Accenture has warned. Digital Disruption, which is published today,says digital innovation offers banks the chance to offer better and more personalised services to their customers, as well as an opportunity to cut costs.
In an article for the Daily Telegraph (B6, paper only), BBA Chief Executive Anthony Browne says many banks are rethinking the way they do business, with digital transformation projects to ensure they embrace new opportunities. He writes that digital firms are not regulated in the same way that banks are, and says the activities of these firms should be subject to future-proof regulation for the digital age.
The report also warns that banks are becoming increasingly vulnerable to liquidity crises as the advance of digital money threatens to hasten runs on savings, the Telegraph (B1) writes.
City AM (p10) says the report highlights the queues of customers outside Northern Rock as people withdrew their money during the financial crisis, and this was before the arrival of Faster Payments and digital apps. Also writing about the report, the FT (£, p3) says the BBA has dismissed the idea of “account number portability” – whereby customers could switch current accounts and retain the same account number – as a “costly and unnecessary distraction. The paper quotes Mr Browne saying that “regulators need to be aware of the risk that the ability to withdraw money quickly and move it somewhere else could make a run on a bank more likely”. Mr Browne also suggests that a “break mechanism” could be introduced into account number portability if a certain number of deposits are withdrawn.
The report says regulators must ensure that they do not damage consumer protection, the fight against crime or financial stability by squeezing misconduct or prudential risk out of the regulated banking sector into the non-regulated digital sector. It goes on to make six recommendations for the banking industry, which can be read in full on our website.
UK inflation falls to zero
The rate of UK inflation has hit 0% for the first time since the Consumer Price Index was created in 1989. The Office for National Statistics has attributed the fall to food prices, which fell by 3.4% in the year to February and the cost of fuel, which has fallen by 16.8% due to a sharp fall in oil prices (Guardian).
Tsipras visits Berlin for euro talks
German Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras met in Berlin yesterday to discuss Greece’s efforts to renegotiate the terms of its international bailout (BBC News). Both leaders remained vague on how they would prevent Athens from running out of money. The BBC quotes Mrs Merkel saying: “We want Greece to be strong economically, we want Greece to grow and above all we want Greece to overcome its high unemployment.” The Guardian (p19) says Mr Tsipras has demanded repatriations from Germany for Nazi atrocities in his country, but the Chancellor remained uncompromising and said the issue of repatriations “is politically and legally closed”.
Cameron “rules out” a third term in office
The FT (£, p1) reports that David Cameron has unexpectedly revealed he will not seek a third time as prime minister. Yesterday he told the BBC that he would not continue in 10 Downing Street after the 2020 general election if he wins this May, and singled out Home Secretary Theresa May, Mayor of London Boris Johnson and Chancellor George Osborne as possible successors. The Times, (£) also leads with the news, and says Mr Cameron has fired the starting gun on a Conservative leadership race and risks “blowing the Tories’ election campaign off course”. Aides have said the declaration was unplanned, the paper adds.Read more
Concerns grow that Bank Levy will force large players to exit UK
The Times (£, p41) reports that the annual combined cost of the Bank Levy to Standard Chartered and HSBC will rise to $2billion (£1.34 billion) after George Osborne raised the tax in his Budget last week. The paper says the banks’ shareholders may call for fresh studies into whether the benefits of operating in the UK are outweighed by the costs. Meanwhile, the Sunday Telegraph carried comments by Legal and General’s chief executive, Nigel Wilson, who warned that some of the country’s largest financial institutions may choose to leave the UK if politicians continue to use the sector to “extract funds”. The Bank Levy has risen by 320% since 2010 – now bringing in as much as £3.8 billion a year for the Treasury.
Judge to decide on scope of swaps payouts
A senior judge will next month rule on whether there should be a judicial inquiry into the Financial Conduct Authority’s compensation scheme for interest rate hedging products, the Times (£, p46) reports. More than £1.8 billion of redress has already been accepted by small businesses and other customers who were sold the products. The paper says that if the judicial review is given the go-ahead the number of customers entitled to redress could rise – as could the size of the payouts. The Mail (p26) writes that members of the Treasury Select Committee are “furious” that the City watchdog “failed to protect” small firms from such products. Nearly 16,000 customers have received offers of redress so far.
“Brexit” could cost UK economy £56 billion – report
Think tank Open Europe has predicted that the UK economy could lose 2.2% of GDP – or £56 billion – by 2030 if it leaves the European Union, City AM reports. In a new report, the think tank also claims that the negative effects of “Brexit” would not be entirely offset by a new free trade agreement. It adds that in order to be competitive outside the EU, Britain would need to keep a liberal policy for labour migration.Read more
Bank Levy causes fears for UK industry
The FT (£, p3) writes that figures published by ratings agency Standard & Poor’s (S&P) have raised doubts about George Osborne’s assertion that UK banks can afford to make a higher contribution to the public purse, as some of the country’s leading banks saw a fall in pre-provision operating profits. The ratings agency said that although underlying progress had been made on improving operating performance, this was offset by the “drag of exceptional expenses and restructuring costs”. Giving a forecast of £13.8 billion for one-off costs, S&P said of the banks: “These exceptional expenses, along with ringfencing and other regulatory changes, could make achieving their return on equity targets challenging.”
Also in the FT (£, p19), two big investors in Standard Chartered Bank have reportedly asked the group to consider moving its domicile away from London following the Chancellor’s decision to raise the bank levy to 0.21% of balance sheet. One of the top-20 investors implied that Hong Kong and Singapore should be considered as alternatives. In the Telegraph (B1, B4), the Institute for Fiscal Studies is reported as having doubts about the impact of the increased levy, saying that in combination with restrictions on tax breaks it could affect investment decisions. The think-tank also warned of a “tipping point” that would lead to banks moving their wholesale operations overseas.
Shadow Chancellor Ed Balls said that his party would hit the City with further hikes to the bank levy “over and above” those announced by Mr Osborne. Following Wednesday’s Budget, the Labour Party will announce tax rises to plug the £1.5 billion gap left in their spending plans after the Chancellor used the money to “fund his own giveaways” for savers, workers and first-time buyers (Times, £, p9).
Capital Markets Union “vital means of unlocking investment and providing finance”
The House of Lords EU Sub-Committee on Economic and Financial Affairs has today released its report on the European Commission’s proposal for a Capital Markets Union in Europe. The report finds that the Union could be a “major engine for stimulating growth in Europe”, adding that the UK should use its expertise and share best practice with other member states. The Committee’s Chairman, Lord Harrison, said: “Of course we need to tread carefully – a move to more diversified sources of funding needs to go hand-in-hand with improved investor protection, and greater clarity for the consumer. But overall we envisage that a robust, properly assessed Capital Markets Union could be a vital key to securing a long-term, sustainable economic recovery.”
Banks to share more data
In further efforts to increase levels of transparency and promote competition, UK banks will allow technology groups to use the information that banks hold to make it easier for customers to get the best products (FT, £, p2). Not only is a tool being launched by banks and the Government next week to allow customers to search for the most appropriate deal based on their banking history, new digital platforms could allow customers to view all of their finances securely in the same place. Banks also have plans for a platform that allows them to refer small business to alternative lenders when they are unsuited to bank finance. The BBA has been involved in the development of these data-sharing initiatives, commenting on the forthcoming Midata project: “This is an exciting innovation that will give customers more help when searching for the best current account for them from more than 200 on the UK market. Harnessing this data should allow some of us to pay less for our banking and others to earn more interest on their money. It will also highlight the range of offers, such as cash-back, that are available to customers at the moment. However, it is very important to be very careful who you share this personal data with and only upload it to websites you trust.”
New rules on economic crime
A new offence of corporate failure to prevent tax evasion is to be introduced by the Government and will mean that banks and accountants could face criminal charges should they fall foul of the rules (Telegraph, p5). A Treasury document said: “We will be increasing financial penalties, including a penalty linked to the underlying asset for those who enable evasion…for both evaders and enablers of evasion, we will extend the scope for HMRC to publish their names, exposing them to public scrutiny”. Chief Secretary to the Treasury Danny Alexander said: “Tax evasion is a crime like any other. If people help a burglar, they are accomplices and criminals, too. Now it will be the same for those that help tax evaders.”Read more