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.
FCA announces investigation into investment and corporate banking services
The Financial Conduct Authority has announced plans to launch its first wholesale market study into investment and corporate banking to assess whether competition in the sector is working properly. The investigation follows a review into competition in the wholesale market sector.
Terms of reference for this study will be published in Spring. The regulator also said that it is considering undertaking a market study into asset management and related services later in the year.
Plans for Capital Markets Union delivered
The Telegraph (B4) reports that politicians and business groups – including the BBA – broadly welcomed the EU Commission’s plans for a Capital Markets Union. CityAM (p4) quotes BBA Deputy Chief Executive Sally Scutt:“We would like the final proposals to reduce fragmentation and increase the depth of Europe’s capital markets, which will lower the cost of capital, improve its allocation and ultimately better support Europe’s growth companies to create jobs. But as the capital markets union is being developed policymakers need to recognise that some of their other plans could be counterproductive. Introducing a financial transactions tax or restricting banks’ ability to conduct market making activities for their clients through further structural reform could undermine attempts to inject greater liquidity into capital markets.” CityAM describes the plans to create a “large-scale, US-style capital markets”, citing comments by EU Commissioner Lord Hill that the result could boost lending to businesses by billions of euros and aid struggling economies. The WSJ (£, p17) outlines the Commission’s plan, including reviewing investor-prospectus rules and reviving high quality securitisation – the practice of bundling loans into securities and selling them as bonds – something Lord Hill believes could boost lending and growth at the same time.
Greece negotiations continue
Officials from across the eurozone will meet today to consider a request from Greece for a new six-month loan agreement (Telegraph, B1). Greece has been resistant to a continuation of the current €172 billion (£126.6 billion) bail-out which is due to expire in 10 days, preferring short-term financing to tide the country over until the summer. According to the FT (£, p7) plans could echo proposals previously dismissed by eurozone governments, led by Germany who want Greece to stick to the terms of the bailout. The paper writes, “if Athens’ eleventh-hour request is rejected, officials said it was hard to see how Greece could be kept in an EU bailout programme after it expired at the end of the week.”Read more
Capital Markets Union proposals announced today
Lord Hill, the EU Commissioner for Financial Services, will today outline the European Commission’s proposals for Capital Markets Union and its proposals for reform to widen finance options for Europe’s businesses. In an interview in today’s FT (£, p7) Lord Hill outlines his approach to reviewing the current financial regulatory framework noting that “if you have 40 major pieces of legislation, common sense tells you – particularly when acting under great pressure in the heat of a crisis – that we might not have got everything right…a self-confident organisation ought to be pretty relaxed about having a look. I intend to find a way of doing that”. Commenting on concerns regarding the EU’s bank structural reform proposals he noted “because there are questions about too-big-to fail that are worth pursuing; we should not just accept it is all too difficult”. See the BBA’s interview with Graham Bishop at yesterday’s Brussels for Breakfast here and read the BBA’s latest blog on CMU here.
ECB meets to discuss emergency funding for Greek banks
The council of the European Central Bank (ECB) meets in Frankfurt today where they are expected to discuss the conditions on which they can continue to provide funding to Greek banks, any decisions would require a two thirds majority of the ECB council. The FT (£, p6) reports ECB policymakers fear the collapse of bailout talks could force their hand to pull emergency funding from Greece’s banks while City AM reports Nondas Nicolaides, a senior credit officer at Moody’s, believes that the ECB will maintain the emergency liquidity assistance today, and might even increase it.
The Times (£, p14) looks at the consequences for Britain should Greece leave the euro. According to the Bank of England, UK banks have exposures of $9.3bn to Greece – less than 2% of their loss-absorbing capital buffers. The Bank has said it is preparing contingency plans which the Times reports are likely to include emergency liquidity for banks.
Greece is preparing to ask for an extension to its loan agreement for a further six months after an acrimonious end to talks with eurozone leaders on Monday. The extension would not be an extension of the current bail out agreement (BBC News).
Reaction to lowest inflation level on record
Inflation fell to just 0.3% in January – its lowest level since records began in 1996.The FT (£, p1) reports that the Governor of the Bank of England sought to dampen concerns yesterday saying that a period of low inflation would be “unambiguously good” for the UK economy. The Chancellor, George Osborne, sought to portray falling inflation as vindicating the Government’s stance on the economy ahead of the General Election. “Today we see the lowest CPI inflation ever – a milestone for the British economy…Although the low inflation is, as the Bank of England confirmed last week, driven by lower food and energy prices rather than damaging deflation, we will remain vigilant to all risks, particularly when the global economic situation is so uncertain” (Guardian, p7).Read more
Greek bailout talks collapse
Greek finance minister Yanis Varoufakis yesterday rejected calls from eurozone finance ministers to sign abailout extension proposal, describing it as “absurd” and “unacceptable” (FT, £, p1). Mr Varoufakis objected to demands for Greece to prolong the bailout and implement economic reforms required in the bailout programme. The paper states that this could soon leave Greece with “no European financial backstop”. The Telegraph (B1) describes the situation as “the most serious political crisis since the launch of the single currency.”
Following the debt talks, Mr Varoufakis revealed that he had been prepared to sign a plan presented to him prior to the meeting by Pierre Moscovici, the European Commission’s economic chief, for a four-month delay. However, the finance minister claimed that this was replaced with a document which asked Greece to extend the current programme.
Edward Scicluna, the finance minister of Malta, said “that would be it; it would be a disaster” if Greece failed to extend the bailout. CityAM (p1) notes that the European Central Bank decides tomorrow whether to extend emergency funds to Greek banks.
Bank fraud in the spotlight
Kaspersky Lab, which yesterday claimed to have uncovered one of the largest bank thefts in history, has outlined details of the cyber-attack, reports the Times (£, p35). The Lab states that up to 100 financial institutions were targeted in over 30 countries, with Russian banks overwhelmingly the most affected. Meanwhile, the Telegraph (B5) cites a PwC survey which shows that cyber-attacks are “one of the most pressing concerns for banking chief executives”. However, a survey by accountants BDO suggests that the value of reported financial services fraud in the UK dropped 56 per cent in 2014 compared to the previous year, its lowest value since 2008 (FT, £, p2).
UK inflation at record low
UK inflation fell to 0.3% in January, down from 0.5% recorded in December last year. This is the lowest annual rise in consumer prices since records began in 1989. The ONS attributes this to falling prices in motor fuel (-16.2% yoy) and food (-2.8% yoy). Together, these two groups reduced the annual inflation rate by 0.9 percentage points.Read more
BNP chairman warns against undermining European banking markets
In an interview with the FT (£, p17) BNP Paribas Chairman Jean Lemierre warns European politicians not to put the “the horse behind the cart”. He describes plans for a capital markets union as a “key agenda” for Europe but warns that other policies that are being pursued, such as plans for bank structural reform and the financial transactions tax, could hamper its effectiveness. “How can you wish [for] a market-funded system without respecting the market-making activities? In my view, the market-making activities in corporate banking are absolutely crucial in the process… A securitisation system has been developed in the US. It has taken 60 years, 70 years.. We are still waiting for this… We are at the very beginning and I think that could be a massive input of Commissioner Hill into the system.”
Banks develop branch closure protocol
The Sunday Times (£, p18) reported that the BBA has been working with consumer groups and the Government to draw up proposals for a protocol that will ensure that if a bank decides to close a branch the local community still has access to banking services. It quotes BBA Chief Executive Anthony Browne saying: “Banks are determined that no customer is left behind. That’s why they are drawing up guidelines to ensure that when some branches do need to close there are adequate services in place.” BBA Executive Director Eric Leenders appeared on Saturday’s ITV News at Ten to discuss the issue.
BBA working with government to help foreign businesses struggling to open an account
The increased regulatory checks that banks have to make to combat money laundering and fraud are making it difficult for some foreign companies to open up bank accounts according to the FT (£, p4). The article reports that the BBA and the Government are working together to try to provide more information for businesses and that the BBA is today launching a new guide to opening a business account with UK banks.Read more
Labour to extend bonus clawback
The Labour Party has announced plans to extend existing “clawback” rules so that bank workers found guilty of misconduct would have to pay back bonuses received up to ten years ago (BBC). The current rules capture bonuses paid within the last seven years, an increase on previous timeframes, which was implemented at the beginning of the year by the Bank of England who argued that misconduct could often take some time to emerge. The Shadow Chancellor Ed Balls said: “As we have seen in recent days, wrongdoing can take years to uncover. The current proposals to claw back bonuses are too weak and do not cover a long enough period of time. We will ensure that people involved in misbehaviour would have to give back their bonuses for at least a decade after they’ve been paid out” (FT, £, p2). Mr Balls also endorsed a recommendation of Bank of England governor Mark Carney, who said that the rules should also cover fixed pay now that bonuses are subject to an EU cap.
Proposals will also include previously announced plans to require banks to publish the number of employees earning more than £1 million, and a reintroduction of former chancellor Alistair Darling’s 50% bonus levy from 2009.
Big banks give £1 billion to charity
A new study from the BBA has revealed that in 2013 banks gave in excess of £1 billion to good causes, and the largest six UK high street retailers also volunteered 1.1 million man hours. CityAM (p8) commented that “financial education is a major focus of many of the programmes, which clearly both plays to the strengths of banks’ staff and will give them a more educated future customer and workforce”. The report was compiled with the help of a number of BBA members, ranging from US investment banks to regional high street banks.
BBA Chief Executive Anthony Browne said: “Philanthropy is no longer an extra-curricular activity for banks. Increasingly it is built into their DNA as socially aware businesses. Though giving money remains an important part of how they contribute, banks also offer their employees’ time and valuable skills through volunteering. This arrangement isn’t just good for society. There are also clear advantages for banks – a motivated workforce with broader experience and, in the long-term, the payoff of a financially inclusive society.”
Positive news for UK households
Bank of England governor Mark Carney has released his latest inflation report and heralded a good year for the UK with families reaping the benefits of plummeting oil prices (Times, £, p1). Declaring the economy “robust”, Mr Carney said “the most likely next move in policy is an increase in interest rates”. The Bank also upgraded its growth forecast for 2016 from 2.6% to 2.9%. The market responded by pricing an earlier rise in interest rates and bidding up the pound.Read more
Eurozone talks over Greece break down
Negotiations between eurozone finance ministers over the Greek bailout programme broke down last night after a six hour session which did not even come up with a plan for how to continue the talks. The FT (£, p6) reports that the failure: “appeared to dash the hopes of many in Brussels that a deal could be reached on at least a “technical” extension of the current bailout at the end of the month. Instead, Athens is now likely to head into March without any bailout assistance for the first time in nearly five years — an outcome that many in Brussels worry could spark market turmoil and potentially a run on deposits at Greek banks.” The Guardian (p25) quotes German Finance Minister Wolfgang Schäuble saying: “We have a programme. The programme is either brought properly to an end or there is no programme.”
Hedge funds highlight tax contribution in row with Labour
The trade body for hedge funds, the Alternative Investment Management Association, has responded to the Labour Party’s criticism of the industry and plans to make it pay more tax by stressing that the sector paid £4 billion in UK tax last year, up £1.9 billion since 2009. The (Telegraph, B1) reports that the opposition party has said that it wants to close a £145 million “loophole” used by hedge funds by removing stamp duty reserve tax on UK authorised funds.
Safer mortgage rules could reduce options for first-time buyers
Bank of England rules which limit banks’ exposure to riskier borrowers could lead to young home-buyers finding it more difficult to get a mortgage, according to the Telegraph (p2). The article reports that some major banks have cut their lending criteria for first time buyers from five times to four-and-a-half times their salary.Read more
“Help to Grow” plans for small businesses unveiled
The Prime Minister has announced a new “Help to Grow” initiative that will help businesses to secure financial support to make the jump from “small to medium size”, (Telegraph, B1). David Cameron told the British Chambers of Commerce’s annual conference yesterday that the Government needed to help small firms across “this ‘valley of death’ funding gap.” Under the initiative, 500 firms each year will receive financial support through the British Business Bank, the paper writes. The Times (£, p43) adds that Help to Grow is to be set up in the Budget next month and Mr Cameron wants Britain to have “its own version of the German Mittelstand”.
Prospect of Chinese deflation rears its head
Pressure is mounting on Beijing to inject more stimulus into the Chinese economy as inflation in China hits a five-year low (Telegraph, B4). The paper reports that Chinese consumer prices were 0.8% higher in January than they were in the same month a year ago, and are just shy of the 1% rise expected by economists. The news raises fears of deflation in the world’s second-largest economy and sent oil prices down amid concerns of falling demand from China. The Telegraph quotes Julia Wang, an economist at HSBC, who said: “Today’s data confirmed the economic slowdown in January, while intensifying disinflation will weigh further on firms’ profit margins. This increases the need for further monetary easing. We continue to expect another 25 [basis point] cut to the policy rate in Q1.”
Hopes of Greek deal grow
Greek bank shares soared 20% yesterday after the country’s finance minister, Yanis Varoufakis, confirmed he was seeking a bridging loan that would give him six months to negotiate new terms with creditors (Guardian, p21). The news caused financial markets to rally ahead of a meeting of the eurozone finance ministers that will take place in Brussels today, the paper says. Mr Varoufakis told the Guardian: “Because we are committed to finding a solution we will do what we can to achieve a mutually beneficial solution.” The FT (£, p29) cites unconfirmed reports in the Greek media which suggested that Athens would propose a four-part plan to the Eurogroup meeting today in which it would scale down some of its demands.Read more
“Grexit” talks held at No.10 as Syriza toughens stance
David Cameron held a special meeting in Downing Street yesterday on contingency plans for “Grexit” amid rising concern that Greece could leave the eurozone as the new Syriza government takes an increasingly hard line (FT, £, p2). The talks examined the knock-on effects of a Grexit for the British economy, including implications for the City. Senior officials from the Treasury, the Bank of England, the Foreign Office and the Department for Business, Innovation and Skills were present. The Guardian (p21) quotes Greece’s finance minister Yanis Varoufakis as saying: “Anybody can compile contingency plans, but I don’t know what that means. I can’t even begin to imagine what preparation [Mr Cameron] is putting in.” German Chancellor Angela Merkel has struck down Greek efforts to end its bailout and strike a new deal with its creditors, after saying the current programme would form the basis of any discussions (FT, £, p6).
Carney calls for “big push” on regulatory reform
Speaking ahead of a meeting of G20 finance ministers and central bankers, Bank of England Governor Mark Carney has called on governments to mount a “big push” to implement global regulatory reforms (Guardian, p25). Dr Carney says he is concerned about “reform fatigue” amongst G20 governments after numerous rule changes since the financial crisis six years ago. The Telegraph (B1) adds that the summit will discuss whether there are “unintended consequences” from the new rules over the financial system, as well as the collapse in the oil price and the threat of the strengthening dollar to financial stability.
EU delays Russia sanctions
European foreign ministers have agreed to delay further sanctions against Russia for a week, as peace talks are held in the Belarussian capital, Minsk (EU Observer). Ministers had agreed to subject 19 individuals and nine entities to visa bans and asset freezes, including Russian deputy defence minister Anatoly Antonov. However, if a breakthrough is reached at the Minsk talks the sanctions will be lifted. UK foreign secretary Philip Hammond is quoted saying that he and his EU counterparts have sent a signal that they value the political process.
Business leader calls for “swift” EU referendum campaign
John Longworth, director-general of the British Chambers of Commerce, has told the FT (£, p3) that businesses would like a swift EU referendum campaign and a vote on the UK’s membership of the EU as early as summer 2016. The paper says his remarks are a blow to the Labour Party, which believes that its refusal to offer an EU referendum will help it win support from the business community and compensate for claims that it is hostile to wealth creation. The FT quotes Mr Longworth saying: “Chamber members fundamentally support the Prime Minister’s objective of Britain in a reformed Europe. More than any repatriation of powers, businesses want to know that the UK has safeguards against being drawn even closer to the eurozone.”Read more
BBA: greater banking competition is bringing real changes for customers
In an article in the Telegraph (B2) BBA Chief Executive Anthony Browne argues that the banking industry is becoming ever more competitive. He writes: “There’s no doubt that banking needed to change after the events of the last decade. When I speak to my friends and family they often roll their eyes when I try to suggest that is starting to happen. But for those of us working for the banks this is an exciting time full of innovation and reform. A number of those new banks are focused on giving customers something very different. New ways to pay could even make cash redundant in our lifetimes, as that digital revolution that has already changed all of our lives now sweeps through the banking world. There are now more than 50 providers of current accounts, 60 institutions where you can take out a mortgage and more than 100 places where you can apply for a personal loan. This is real choice for customers and more is on the way.”
City divided over EU membership
The front page of the FT (£) looks at how the City of London is divided over Britain’s EU membership and suggests that while investment banks are very supportive of staying in the single market, hedge funds are less keen and are worried about over-regulation from Brussels. It quotes Michael Sherwood and Richard Gnodde, the co-chief executives of Goldman Sachs International, saying that European banks will move “in very short order” if Britain votes to leave the EU (FT, £, p3). An unnamed senior banker said: “Once some part of the financial services tapestry gets pulled just a little bit, then over time the entire fabric weakens.” In a separate article (FT, £, p2) it is reported that the Conservatives might look to hold their planned EU referendum in 2016 – although this is seen as an ambitious timeline. Researchers at ING have calculated that the uncertainty caused by holding a referendum could cut UK economic growth by half a percentage point a year in the run up to the vote (Euractiv)
BBA warns on infrastructure investment
In an interview with the Sunday Times (£, B3) BBA Chief Economist Richard Woolhouse warned that up to £80 billion of infrastructure projects could be at risk unless the Government can encourage investors to finance them. He warned: “Failing to clear the blockages in the UK pipeline of projects threatens to hinder our economy for decades to come”.
Read more in our report Financing the UK’s infrastructure needs.
Study finds that regulation impacts smaller US banks the most
A study has found that small US banks have lost significant market share since the introduction of the Dodd-Frank regulations. Marshall Lux, a Harvard academic and the author of the study, said: “What if Dodd-Frank created a too-small-to-succeed problem in addition to the too-big-to-fail problem? This research suggests it has” (FT, £, P18).Read more
Banks make 2014 the best ever year for deals
Challenger banks and new technology helped make last year the busiest year on record for mergers and acquisitions activity in the banking industry, according to research compiled by the accountants BDO Corporate Finance (CityAM). The index found that 27% of the 4,936 deals made last year were in the financial services sector. It also suggested that uncertainty around the general election is not dampening any appetite for M&A activity at the start of this year.
Greece and Germany remain at loggerheads over debt deal
The new Greek finance minister has called on the German government to end the “gross indignity” of Athens’ austerity programme. However, Yanis Varoufakis was told by his German counterpart Wolfgang Schäuble that any debt repackaging deal for Athens was not on the table. The Guardian (p1) reports that Mr Varoufakis warned of the rise of nazism in his country “if the eurozone fails to heed the democratic voice of Greek voters”, referring to the far right Golden Dawn party – the third largest political group in Greece. After a two hour discussion Mr Schäuble said that the pair had “agreed to disagree” after repeating his earlier offer to send in 500 German tax collectors to help the Greek government collect taxes from wealthier citizens. Meanwhile, the FT (£, p7) reports that the European Central Bank (ECB) was split in its decision to ban Greece using debt as collateral for the central bank’s funds.
Wonga escapes criminal investigation over legal letters
The Telegraph (B1) reports that the City of London police has decided not to launch a criminal investigation into Wonga after the payday lender was found to have sent letters to customers from fictitious law firms. The correspondence was designed to encourage customers struggling to meet repayments to send the payday lender money. The police said that the letters in question did have small print explaining that they were in fact from Wonga. Back in June the Financial Conduct Authority ordered the company to pay £2.6 million for letters sent to 45,000 customers between 2008 and 2010. At the time customers were charged £9 per letter, and last year Wonga pledged to pay this back with interest to all customers, along with £50 compensation.Read more