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.
Stress test results published
The Bank of England published the results of its stress tests of the UK’s main banks this morning. Following the stress testing exercise, the PRA Board judged that, as at end-2013, three of the eight participating banks (Co-operative Bank, Lloyds Banking Group and Royal Bank of Scotland) needed to strengthen their capital position further. But, given continuing improvements to banks’ resilience over the course of 2014 and concrete plans to build capital further going forward, only one of these banks (Co-operative Bank) was required to submit a revised capital plan. Commenting on the results the Governor of the Bank of England, Mark Carney said “This was a demanding test. The results show that the core of the banking system is significantly more resilient, that it has the strength to continue to serve the real economy even in a severe stress, and that the growing confidence in the system is merited.”
Following publication of the results Kamal Ahmed (BBC Online) writes that the overall message of the stress tests was that banks and building societies were stronger than when the first test was carried out in 2013. However, he notes the Bank did raise concerns that banks faced “misconduct risk” in the future. The FT (£) note that under the terms of the scenario the banks were projected to make £13 billion of cumulative losses in the first two years before returning to profit in the third year. The banks would have an additional £70 billion of impairment charges under the stresses envisioned. The Guardian is following up the results with a live blog throughout the morning.
Economic problems for Russia with falling oil prices and the threat of tougher sanctions
Russia has raised its interest rate from 10.5 per cent to 17 per cent this morning, just five days after the last rate rise and hours after the rouble suffered its worst drop since 1998. (FT, BBC). The FT (£, p1) leads on the findings of a report by Goldman Sachs which suggests more than $1 trillion of future investment in oil projects is under threat as a result of the 45% fall in prices to nearly $60 a barrel. The Times (£, p43) reports that the prospects for the Russian economy were further exacerbated on Friday when the US Congress passed a bill for tougher sanctions against Russia. President Obama has 10 days to sign or veto the bill but reports suggest he is resisting signing the law unless the EU commits to further sanctions as well (Times, £, p33).
Moscovici warns Greece against restructuring its sovereign debt
Ahead of Greece’s presidential election tomorrow, EU Commissioner, Pierre Moscovici has made a two-day trip to the country to meet with Prime Minister Antonis Samaras and his Finance Minister. Speaking during his trip, the FT (£, p10) reports that Moscovici “praised the Greek authorities and promised ‘much lighter surveillance’ of the Greek reform effort once the bail-out ends in February”. Moscovici also warned that suggestions that Greece should restructure its sovereign debt could be “suicidal, with a risk of default”.Read more
Banks and Government agree deal to help customers with basic bank accounts
The BBC reports that the main banking providers have agreed with the Treasury to do more to help basic bank account customers – including those who are vulnerable – avoid triggering fees and charges. The BBA, working closely with the nine largest personal current account providers in the UK, has developed a new industry standard for basic bank accounts in the UK in order to expand financial inclusion and give customers the confidence to use a wide range of day-to-day banking services without fear of unforeseen charges. The revised account is aimed at those who don’t currently have a bank account who might not be able to open a standard account, customers looking to switch and customers in financial difficulty. BBA Chief Executive Anthony Browne said: “These basic accounts will make it easier for more people to manage their money. They will have many features that will help people to budget, pay bills and save up.” BBA Executive Director Eric Leenders appeared on BBC Wake up to money and the Today programme to discuss the agreement this morning.
Stress test speculation
Ahead of the announcement of the Bank of England’s stress tests tomorrow, the Times (p41) reports that the number of banks to undergo stress testing next year could treble to 30. The Mail (p53) reports on speculation that Co-op Bank might not pass the tests. The FT (£, p22) reports that the Institute of Chartered Accountants in England and Wales is set to produce proposals to draw up a framework for providing assurance for banks’ capital levels and their control systems.
Carney: reforms “reinforce London’s advantage”
In an interview with the Independent (p16-17) Bank of England Governor Mark Carney says that the UK is “out at the front of the pack” in terms of making banks safer and that the Bank will focus on making markets more “fair and effective” in 2015. He says: “If we do all that, with all the human capital and the expertise here in London, it reinforces London’s advantage. It is not why we do it, we do it because we have to.”
Deal between banks and Post Offices doubles branch network
An article in the Mail on Sunday looked at how deals between high street banks and the Post Office mean that customers are able to use Post Offices to do basic banking, like checking their balance or paying in cash to their account. It quotes a BBA spokesman saying: “By allowing bank customers to use post offices we would effectively be doubling the bank branch network.” The article quotes a source close to Business Secretary Vince Cable saying that the Government is working with the banks to look at how “business and personal bank customers will still be looked after if the last bank in a community closes.”Read more
New rules on current accounts for illegal immigrants come into force
Banks and building societies will face fines or criminal sanctions if they open current accounts for known illegal immigrants, under new rules which come into force today. The FT (£, p2) writes that these measures – designed by the Home Office – aim to make it harder for those who do not have leave to remain to get credit cards, mortgages or loans by denying them access to a current account.
Bank of England to become more transparent
Governor Mark Carney has announced plans to make the Bank of England more transparent in communicating voting details, reports the FT (£, p2). Following a review by former Federal Reserve Governor Kevin Warsh, the Bank will hold fewer Monetary Policy Committee meetings, and will publish transcripts of the meetings after eight years. However, the Telegraph (B5) laments that the transcript of the first day of MPC discussions, when “the most lively and arguably the most important conversations take place”, will remain unpublished. The Times (£, p54) notes that starting from August 2015, minutes of the meetings will be published concurrently with the announcement of the rate decision.
ECB moves closer to full QE
The European Central Bank looks more likely to embark on a full-scale programme of government bond purchases after poor take-up of its cheap credit, writes the FT (£, p1). However, some members of the Bank such as Bundesbank president Jens Weidmann are more hawkish. They believe that the Bank’s current measures – which include buying covered bonds and asset-backed securities – will be enough to raise inflation to the target of 2%. The Telegraph (B4) writes that these “hawks” are becoming isolated, stating “their suggestions that quantitative easing will not work because rates are already low are hard to square with orthodox monetary theory”.Read more
FCA admits reputation has “taken a knock” over media leak
Four senior staff at the Financial Conduct Authority will lose their bonuses after a report found “serious” inadequacies in the way it disclosed market sensitive information to the media. The inquiry by the law firm Clifford Chance found a series of errors in the way it briefed a Telegraph journalist whose story wiped billions off the share prices of major insurance companies. John Griffiths-Jones, the FCA’s chairman, is quoted in the Telegraph (B1), saying: “I certainly believe our reputation has taken a knock.”
Miliband to address deficit and debt
Ed Miliband will set out more of his party’s economic policies in a keynote speech in London later this morning, the BBC reports. The Labour leader is expected to say that dealing with the deficit is an “essential test” for his party. He will rule out including any uncosted spending plans in his party’s next manifesto, arguing instead for heavier taxes for the better off and higher wages for the less wealthy.
Northern Rock customers to receive £261m compensation
Around 43,000 borrowers are set to receive redress because of misleading wording in the terms of Northern Rock mortgages, City AM (p2) reports. A High Court ruling yesterday ordered Northern Rock Asset Management (NRAM), the government-owned vehicle which owns remnants of the lender, to make the payments to customers who borrowed between £25,000 and £30,000 with its Together product. NRAM is considering appealing against the decision.Read more
Wheatley under pressure ahead of Davis report’s publication
The front page of City AM reports that Financial Conduct Authority chief executive Martin Wheatley “is expected to face questions over his future today after the publication of a report into the regulator’s leak of price sensitive information concerning life insurers.” The regulator has already announced the departure of Clive Adamson, its director of supervision, and Zitah McMillan, its communications director. Earlier in the year the leak to the Telegraph concerning an investigation hit the share prices of leading insurance firms. The paper quotes one insurance executive, who said “we’d have been put in jail for something like this.”
Banks must be ready for “worst-case scenarios” on cyber security
Banks under the supervision of New York’s Department of Financial Services must view cyber security as a key part of their risk management strategy, the department’s head Benjamin Lawsky has said (FT, £, p8). In a letter to banks that have a New York state charter or licence, Mr Lawsky will say that as cyber attacks become more sophisticated, banks and their regulators need to be thinking of the “unimaginable, worst-case scenarios” for which they should all be prepared. Banks will also be given a 96-question survey to provide more details on their cyber security efforts, the paper writes.
The BBA’s report, The cyber threat to banking: A global industry challenge, is available on our website.
Greek markets fall as early presidential poll called
Greece’s stockmarket fell by nearly 13% yesterday after Greek prime minister Antonis Samaras decided to call an early presidential election (Guardian, p24). Markets feared that the news could lead to an early general election, with anti-austerity party Syriza winning power. Other financial markets reacted badly to the news, with the FTSE100 down more than 2%, Germany’s Dax dropping 2.1% and France’s Cac closing down 2.4%.Read more
Consumers take advantage of interest free credit cards
BBA credit card statistics released today show that spending on cards is 8% up on last October, and that 42% of borrowing on cards does not incur interest as consumers continue to take advantage of interest free offers.
Richard Woolhouse, Chief Economist at the BBA, said: “The number of credits cards carried by British customers has been rising by 1,000 a day.Purchases and borrowing on plastic is also growing, suggesting that consumers are feeling optimistic about their job prospects and happy to spend.It looks like retailers can expect a rather Merry Christmas and because 42% of credit card borrowing does not incur interest the January festive hangover may require a little less Alka-Seltzer than in previous years.”
All change at the Financial Conduct Authority
A number of executives will forsake their bonuses and three are set to leave the financial services regulator as part of a shake-up commissioned in November (Telegraph, p5). The move comes just two days before the publication of a report which assesses the handling of an FCA probe into life insurance companies which resulted in millions of pounds being knocked off their value. The report, commissioned by Clifford Chance and out tomorrow, is expected to criticise several individuals at the FCA. Clive Adamson, the regulator’s director of supervision, Zitah McMillan, its director of communications and international, and Victoria Raffe, the director of authorisations are all due to move on. Tracey McDermott, the FCA’s current head of enforcement, is expected to be given a bigger role.
FTT to miss deadline
The Telegraph (p4) writes that “European plans to introduce a tax on financial transactions have fallen into disarray” as year-end deadlines are missed. Finance ministers from 11 countries have been working to produce an outline for the tax but have disagreed on some of the detail, meaning that it will not be signed off this week. The paper says that it is now unlikely that the January 2016 deadline for implementation will be reached. The UK Government challenged the idea of the “Tobin tax” in the courts as the City of London is likely to feel the impact of a levy on equity and derivative transactions.
One German diplomatic source said: “The meeting finished without a result. We’ve only agreed to keep trying. But there’s no timeline, and the positions haven’t gotten closer”. (EUbusiness)Read more
Police call for new law on fraud reporting
In an interview with the Evening Standard on Friday City of London Police Commissioner Adrian Leppard said that the scale of cyber fraud in the UK is “enormous”. He said the costs were £30 billion a year and called for legislation to force banks to report all fraud. He said, “The banks will not give us information about crimes at the moment and there is no regulatory requirement to do so. I have been saying for some time that we must find ways of encouraging that. Unless the country and society can get a true feel about the nature of crime we cannot address it. I don’t think we will necessarily get the banks and industry to do that voluntarily. We should have a conversation about whether it is time to regulate that — to find some sort of means by which it is enforced.”
Today’s FT (£, p2) reports that the Treasury Select Committee has published letters that it has sent to the chief executives of the main high street banks in the UK asking for clarity over the fraud figures that they publish. National Crime Agency Director Donald Toon tells today’s Times (£, p14) that poor fraud intelligence is a “major problem”. He said: “There’s an issue about under- reporting but it’s a complicated issue. We are seeing a response from law enforcement and the government but there is still an issue of confidence in the system. That means we have a lot of development work to do to understand exactly where the risks lie.” In the Guardian (p19) Conservative MP Stephen Barclay raises concerns about anti-money laundering controls in the banking industry.
BCBS criticises EU rules on Basel III
The Basel Committee on Banking Supervision (BCBS) has graded the EU implementation of global rules on capital as being “materially non-compliant” with the Basel III agreement. In particular it criticised rules on exposure to SMEs, corporates and sovereign debt, and a section of the rules relating to the management of derivatives exposures. It ruled that eight out of 14 components examined in the review met the minimum Basel requirements. MEPs including ECON chair Roberto Gualtieri MEP criticised the BCBS, accusing it of “working without legitimacy and without any transparency”. (Weekend FT, £, p17)
BBA launches new audit confirmation service
The Telegraph (B4) reports that the BBA has launched a new online audit confirmation service with the world’s leading audit solution provider – confirmation.com . The new service should speed up auditing for hundreds of thousands of business in the UK reducing hassle and fraud.
For more information on the service see www.bbaconfirmations.com
BoE – higher income families to be hit harder by rate rise but vast majority could cope with an increase to 2.5%
Several papers lead with the Bank of England’s annual survey of household finances and the effect that an interest rate rise could have on mortgage borrowers. The Mail (p2) says that “300,000 families would struggle to pay their mortgages if rates rose from 0.5 per cent to 2.5 per cent overnight” and that this would hit the younger generation hardest. The front page of the Times reports that the middle classes will be the most affected by any rate rise. It quotes figures from the report which show “ that a one percentage point increase in interest rates would lead to the highest earners’ income falling by 0.3 per cent after tax. Their spending would drop by 0.8 per cent, it said. In contrast, the post-tax income of the lowest earners would rise by 0.2 per cent and spending would fall by 0.2 per cent.”
However the front page of the FT adopts a less cautious stance, saying that: “the vast majority of mortgage borrowers could handle interest rate rises of up to 2 percentage points”. It interprets this as a shift in tone from the Bank which “suggests that the UK central bank might be thinking of raising rates before next autumn — earlier than markets expect.” It quotes BoE staff saying, “These results do not imply that increases in interest rates from their current historically low level would have unusually large effects on household spending.”
Read the full Bank of England report here.
BoI claims to have biggest branch network in the UK following deal with Post Office
In the Mail on Sunday Bank of Ireland chief executive Des Crowley says that due to his bank’s deal with the Post Office his bank now has the biggest branch network in the country. He says: “The way we have chosen to go to market in the UK is not to build our own branch system, nor are we intending to acquire branches from other people. Our strategy is to look for other people who are trusted in this market and the Post Office is the most trusted brand in financial services.”Read more
EU considers dropping bank structural reform plans
The FT (£, p18) reports that EU Commissioner Lord Hill is considering withdrawing controversial EU plans to change the structures of banks in Europe. In a private letter to fellow Commissioner Frans Timmermans he says: “Member states are pulling in different directions in opposition to it, so withdrawal could be an option next year if member state support does not pick up.”
Read the joint BBA/ FBF letter to the EU Commission calling them to look again at the proposals.
CMA warns BBA conference that it will take action on competition if necessary
At the BBA’s better banking conference yesterday, Alex Chisholm, the chief executive of the Competition and Markets Authority (CMA), has denied that the body’s decision to launch an inquiry to the UK retail banking market was due to political pressure. However, he warned the industry that: “the CMA has powers, following a market investigation, to order remedies to any adverse effects on competition that might be identified, rather than merely to make recommendations.” CityAM (p8) reports that he also made it clear that the CMA would also be able to look at wholesale banking markets if it felt it necessary. Reuters reports that BBA Chairman Nigel Wicks told the conference that progress had been made to improve culture in the banking industry but that more needed to be done.
Adamson to leave the FCA
The Times (£, p57) reports that Clive Adamson is set to step down from the Financial Conduct Authority days before Clifford Chance publishes its report into the investigation about a newspaper interview on the insurance industry that caused the share prices of many of the big firms to tumble. His decision to step down is said to be unconnected to the report.
In the Guardian, Nils Pratley argues that “clarity is still required. Clive Adamson, head of supervision, is reported to be leaving the FCA but his departure is said to be unconnected with the inquiry. Let’s have that possible complication removed by the time the FCA speaks. If Adamson did nothing wrong, the regulator must say so out loud.”Read more
Autumn Statement fallout
Following on from yesterday’s Autumn Statement he front page of the FT declares that the Chancellor has “laid out a battleground” ahead of the next election, with the banks and multinational companies amongst his targets. The article refers to the announcement that banks will be limited in their ability to use losses to reduce future tax bills, with only up to 50% of profits to be offset by losses carried forward. The Telegraph (B1) estimates that the total cost of what they call Mr Osborne’s “raid on business” will be around £8 billion, with £3.9 billion of that coming from the banks, and the rest coming from multi-national business and other tax clampdowns. The FT (£, p5) describes the measures affecting banks as the single biggest revenue raiser laid out by the Chancellor, but reports that it caused only a brief drop in bank share prices. The Independent (p10) described the changes as amounting to “a US style mega fine”.
Many of the articles quoted BBA Chief Executive Anthony Browne: “Banks contribute more than £25 billion each year to the nation’s public finances – enough to pay the salaries of around half a million nurses. It is absolutely right that this important industry pays its fair share of tax, but it is important to note that where banks have offset losses they have done so legally, just as all other businesses can.
“The industry will work with the Treasury to implement these new rules.” See his full statement here.
In the Mail, Ruth Sunderland calls the Autumn Statement a “pre-Christmas package of goodies” for small firms, referring to the additional £900 million to be made available through the British Business Bank with extensions to the Enterprise Finance Guarantee Scheme and the Enterprise Capital Funds. There will also be £61 million made available to catapult centres – technology and innovation hubs – to develop innovative ideas, support for export and a one-year extension of the Funding for Lending Scheme.
In addition to these announcements, there will also be changes to the Current Account Switch Service which opens it up to 99% of all SMEs, with an extension to the redirection service to 36 months (Telegraph).
BBA Chief Economist Richard Woolhouse wrote a reaction to the Autumn Statement for the International Business Times, arguing that “the measures George Osborne announced will barely touch the big numbers that shape our public finances.”
Hackers steal cash from banks and customers
The Times (£, p58) reports figures from the FCA, released under the Freedom of Information Act, that show 18 hacking incidents were reported to the regulator because they had “a material impact” on business operations. The article states that this means “significant disruption affecting customers or clients”. The FCA report apparently details the use of a virus to infect an institution’s systems and empty customer accounts, which would then have to be refunded by the bank. A report by Kaspersky Lab – a security company that develops technology to defend against cyber threats – suggests that these criminals are becoming bolder “shifting from attacks on the customer, previously seen as the weak link, to hit the institutions themselves”. This research also describes how once a hacker has infiltrated a bank’s network they can remotely control cash machines, causing them to spew out money. It also identifies Apple Pay as a potential future target.
See the BBA’s report on cybercrime and the millions spent by the banks defending their systems from it – Cyber Threat to Banking.
Non-execs deterred by regulation
The FT (£, p27) writes that increased regulation is putting candidates off taking non-executive positions on bank boards. The report says: “Now increasing regulatory focus, requirements for deeper involvement and new rules on personal accountability are raising the stakes for candidates considering whether to take up positions”. New rules introduced as part of the Senior Managers Regime will place an onus on senior staff taking adequate steps to prevent breaches of regulation and failing to do so could lead them to being guilty of misconduct.
Treasury Select Committee chair Andrew Tyrie has denied these measures will act as a deterrent, and BBA Chief Executive Anthony Browne told the paper he wasn’t aware of any resignations as a result of the proposals.Read more
Small business support to be announced in Autumn Statement
Chancellor George Osborne will deliver his Autumn Statement to the House of Commons today. The Financial Times (£, p1) says the Chancellor will announce £1 billion of support for small businesses, with additional powers being made available to the British Business Bank. Mr Osborne is set to announce £400 million for the business bank’s venture capital programme and £500 million of new lending guarantees for its enterprise finance guarantee scheme. Measures to help people in the housing market are expected, including reforms to stamp duty. The Government has already announced that it will commission directly the building of homes on state-owned land. The Independent (p47) adds that the Treasury and Bank of England confirmed last night that the Funding for Lending Scheme (FLS) will be extended for a further year.
Eurozone banks ready for more mergers and acquisitions
The new co-ordinated approach to European regulation has made it easier to do business across borders, City AM reports (p5). The paper says that banks are preparing for a “wave” of mergers and acquisitions, as Eurozone banks have been through stress tests and are less worried about picking up a bank which is full of unforeseen bad debts. It adds that new technology will also help manage cross-border business and cut barriers to entry.
Household spending rises
Average household spending rose to £517 per week last year, up from £501 in 2012 and £209 in 2011, according to figures from the Office for National Statistics (Times, £, p17). The ONS found that householders are increasing their spending on big ticket items such as cars and holidays, despite the increased cost of housing, fuel and power. Earnings growth overtook inflation earlier this year, with wages up 1.3% and prices up 1.2%, the paper writes.Read more