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.
BBA raises concerns over Senior Managers Regime
Anthony Browne, the BBA’s Chief Executive, appears on today’s FT Banking Weekly podcast to discuss the Senior Managers Regime and Britain’s future in the single market. Mr Browne stressed that the BBA supports the Senior Managers Regime and its aims, but that it holds a few concerns over the number of staff caught by the rules and their impact on non-executive directors. “We also want to make sure that there is time to implement these rules – the current timeframe is rapid,” he said. When asked on the BBA’s attitude to concerns that Britain might leave the EU, Mr Browne added: “The single market is one of the key reasons that Britain has thrived as a financial centre in recent years. We want British leaders to be there to hold the pen when the rules of the single market are written.” You can listen to the podcast here.
Business lending increases as consumer credit growth hits eight-year high
Bank of England figures released yesterday reveal the fastest annual increase in credit growth since July 2006. The Telegraph (B5) writes that “cheap credit and fierce competition” led to borrowing rising by 6.4% in October compared to the same month last year. The Independent (p50) reports that mortgage approvals dipped to 59,426 – the lowest total since June 2013 and 22% lower than January this year. In addition, gross borrowing by SMEs in the three months to October rose 30% on the same time period a year earlier to £13.7 billion.
BBA Chief Economist Richard Woolhouse said: “These figures show a pick-up in net lending to small and medium-sized businesses, with gross borrowing hitting £5 billion for the first time in two years. At the same time a boost in demand for personal loans and credit cards indicates people are feeling confident about the economy and looking to take on new finance for bigger purchases. Another drop in mortgage approvals indicates that we are now experiencing a cooling of the housing market, which is no bad thing given previous concern about the pace of property price rises.”
Northern Ireland to gain power over Corporation Tax
In Wednesday’s Autumn Statement, Chancellor George Osborne will announce his support for the devolution of Corporation Tax to Northern Ireland, writes the FT (£, p1). The Republic of Ireland’s tax rate of 12.5% is lower than the UK’s 21%, and handing over this power to Stormont will aim to improve the performance of Northern Ireland’s private sector. Furthermore, the paper suggests that Mr Osborne’s proposal “could create the conditions for a Tory electoral pact with unionist MPs in a hung parliament”, as Stormont is unlikely to receive the power until after next year’s General Election.
However, the FT states that the Chief Secretary to the Treasury Danny Alexander has warned that handing over such powers will be seized upon by the SNP, with the party calling for Scotland to have control over its business taxes. Indeed, First Minister Nicola Sturgeon has this morning come out in support of such devolution (BBC). In addition, the Telegraph (p4) cites a report by the Nevin Economic Research Institute which claims that devolving the tax could cost the region £400 million in spending cuts.
City leaders share concerns on EU exit
In an online debate organised by the FT (£, p2), 50 leading bankers, insurers, asset managers and policymakers voiced their thoughts on the prospect of the UK leaving the EU. Former Lloyds Banking Group chairman Sir Win Bischoff wrote: “The City will lose some of its relevance and a lot of its international dominance”, if the UK decided to leave, whilst UniCredit’s Jean-Pierre Mustier stressed an exit would be “a catastrophe, though actually much more for Europe than the EU”. However, not all participants were in agreement. Investment Management Association chairman Helena Morrisey argued that “the City won’t just survive but prosper if the UK leaves the EU”. A full transcript of the debate is available here (£).Read more
Banks agree new deeds of priority protocols
The Telegraph (B3) reports that Britain’s major banks have implemented new procedures to help businesses secure alternative finance. The BBA and the four main high street lenders: Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland; have agreed a common protocol that will enable alternative lenders to more readily agree with banks standard forms of Deeds of Priority or Waivers to small businesses seeking other finance options. The measures should allow lenders to efficiently agree an order of priority of security to support their business finance arrangements.
BBA Executive Director Irene Graham welcomed the news saying: “We want to make sure businesses trying to get a loan have certainty on security arrangements as quickly as possible so we are really pleased the banks have now implemented the agreed protocols. Banks already have several hundred of these agreements in place but public standard documents should speed matters up for new lenders. Businesses should ensure all necessary information is provided to support these requests. With all information present, the banks are committed to respond to all but the most complex of requests within seven working days which should allow businesses certainty on their new finance arrangements as quickly as possible.”
Banks to launch video banking services
Barclays and Coutts have announced plans to launch a new video banking service for customers. Barclays said that if the pilots run well it plans to roll out a 24/7 service to all of its retail customers by the end of 2015. Steven Cooper, chief executive of personal banking at Barclays said: “We’re trying to give customers a choice of when, where and how they bank with us but with the added comfort of a human face… We will have fewer branches, but the branch network will always exist and this is just about developing extra services on top of it to complement the branches”. (FT, £, p18)
Read more about the future of banking in the BBA’s way we bank now reports.
Tyrie criticises bank lobbyists
Treasury Select Committee chairman Andrew Tyrie has criticised bank lobbying on the new senior managers regime after publishing correspondence with HSBC chairman Douglas Flint over reports that two HSBC non-executive directors planned to resign over the rules. Mr Tyrie said: “Banks should certainly speak up when they think regulators are getting it wrong. But they should do so clearly and openly, and on the basis of the facts. To do otherwise gives the impression of bankers attempting to put pressure on regulators by the back door.” (FT, £, p2)
Banks step up surveillance of traders
The FT (£, p24) looks at how banks are using increasingly sophisticated technology to ensure that traders are not breaking the law. One unnamed US lawyer told the paper, “The holy grail is marrying up the communication surveillance with trading surveillance.” Brandon Daniels, president of Clutch says: “This is the zeitgeist… Everyone will be monitored.”Read more
New figures reveal pick-up for SMEs
The Times (£, p67) reports the Bank of England’s Funding for Lending figures which show that net lending through the scheme has fallen by over £100 million in the last quarter, but notes that “the pace of decline has started to slow”. Meanwhile two thirds of small businesses told the Q3 SME Finance Monitor survey that they are aiming to pay off their debts, rather than borrow more (Reuters). The article quotes a BBA spokesman as saying: “Although most firms are happy with their current arrangements, more of those seeking funding are having their applications approved and reporting that the process was fast and hassle free” . The BBA also released statistics on bank support for small businesses, revealing that banks approved £7.9 billion of new lending in Q3 – up 13% on the same quarter last year. The figures also show that SME cash holdings are rising strongly and now exceed borrowing by £48 billion.
Commenting on FLS & BBA statistics on lending, BBA Executive Director of Business Finance, Irene Graham said:
“BBA figures out today continue to show a pick-up in borrowing by small and medium sized businesses. The Funding for Lending Scheme has played its part in that. Companies are also increasing their cash reserves, which suggests that the sector is in a healthy position. The majority of businesses that approach their bank for finance are successful and if they are not there is a process in place that allows them to appeal the decision. We would encourage business owners thinking about borrowing to approach their bank.”
Hundreds of thousands of jobs at risk from structural reform
Plans to restructure the banking sector could cost as many as 316,000 jobsacross Europe, according to the Telegraph (B3). The articlereports on claims made in a paper by PwC stating that “the European Commission’s plans could also force several banks to exit certain markets, as well as having a knock on effect on mortgage costs”. The study also warns that additional regulatory costs could force banks to charge customers and businesses more for services. The paper writes: “PwC estimated that the higher cost of companies raising debt (estimated at €5 billion (£4 billion) across the EU); the burden of dealing with multiple banks if they want services from institutions inside and outside the ringfence; and the shrinkage of the financial sector itself, would lead to a permanent €19.4 billion (£15.4 billion) reduction in EU GDP – equivalent to 0.15% of output.”
Draghi “steps up” call for economic union
ECB president Mario Draghi has reportedly started to push harder for Brussels to be handed powers to set economic policies for eurozone members. The FT (£, p8) writes that, “…the remarks are the boldest call yet by the European Central Bank president for decision-making in the single currency area to be wrested out of the hands of national governments.” The article goes on to say that the centralisation of monetary policy was not enough as each strand of decision-making interacts with one another. A fiscal union would seek to stop measures taken at a national level from undermining the overall health of the eurozone, it adds.
This push comes as Vítor Constâncio, the ECB’s vice-president, urges policymakers to do all they can to boost eurozone inflation “in spite of warnings that any extension to the ECB’s bond-buying spree could increase risks for the bloc’s financial system”. (FT, £, p6).Read more
Horta-Osório criticises plans for ANP; defends free in credit banking
The FT (£, p20) reports that Lloyds banking group chief executive Antonio Horta-Osório has hit out at suggestions that the banking industry should introduce account number portability. He said: “From a customers’ view, I don’t see anyone giving their account number to anyone – most people don’t even know their current account number. So, does it increase the easiness of switching providers? I don’t think so.” He estimated that if implemented it could cost £5 billion. He instead called for the industry to focus on perfecting the seven-day switching service. Reuters reported that Mr Horta-Osório also defended the free in credit model of banking, saying that it was “evidence of competition and customers love it, so I do not intend to change it”.
Half of big banks could exit business lines due to EU reforms
A study by PwC for the Association of Financial Markets in Europe has found that nine out of 18 globally systemic important banks could have to exit key business lines such as rates, commodities and securitisation if the EU presses ahead with its bank structural reform plans. It found that banks could face extra funding costs of €16 billion a year, plus €5.3 billion of one-off costs to implement the changes (FT, £, p16).
In a separate letter to the FT (£, 10) Benoît Lallemand from Finance Watch has criticised the BBA and FBF letter to the EU Commission which called for the proposals to be looked at again. Mr Lallemand calls on “EU policymakers to resist special pleading designed to protect subsidies and national champions”.
Diamond: Basel III causing Western banks to retreat from Africa
Bob Diamond told an FT (£, p16) conference yesterday that the retreat of global banks from markets such as Africa is creating a “once in a lifetime” opportunity for investors. He said: “For 20 or 30 years the buyers of financial assets were always big financial companies. Basel III [capital rules] and too big to fail regulation have changed that and they are now completely off the stage… Money is being pulled back to home markets by banks in the US, UK and Europe because of Basel III. Global banks not in Africa are not looking at it all.” His new venture, Atlas Mara has invested in three banks so far in southern Africa, Rwanda and Nigeria and has not had to compete against any banks when doing those deals.
Metro: challenger banks “going to get their share”
On the FT website, Vernon Hill, the chairman of Metro Bank criticises the technology platforms used by the big UK banks. He says: “In the US, they [banks] outsource the IT systems. We outsource, using a Swiss company. Otherwise you can’t deliver service.” He told the paper that Metro is working on digital technology that will mean customers are instantly recognised when they walk into a branch, allowing staff to access certain data to serve them faster. The article quotes BBA research that shows that branch transactions are falling by about 10% a year but notes that Metro is bucking the trend and has plans to open 12 new “stores” next year on top of the 31 it already has. Mr Hill concludes that the challenger banks are “going to get their share”.
Read the BBA’s report on promoting competition in the UK banking industry.Read more
“Cooling” UK housing market
Many of today’s paper’s report on the BBA’s high street banking statistics, which were published yesterday. The Guardian (p28) says the figures showed a slowdown in mortgage approvals, with the number of approvals for house purchases hitting a 17-month low of 37,076 in October. The paper adds that cooling in the housing market is a result of the Bank of England’s mortgage market requirements, high prices, the uncertainty caused by the 2015 general election and the prospect of higher interest rates next year.
Changes due for current account switching service
The Chancellor is to announce changes to the Current Account Switching Service (CASS) in his Autumn Statement on 3 December, according to Sky. Sky sources report that George Osborne will announce an extension of the service to small businesses with a turnover of up to £6.5 million. The banks are expected to extend the two-year period in which they will guarantee the redirection of payments to a customer’s new bank account to 36 months.
Regulator launches investigation into credit card market
The Financial Conduct Authority (FCA) has begun an in-depth investigation into the UK’s credit card market. (Telegraph, B3). The paper quotes Christopher Woolard, the FCA’s director of policy, risk and research, who said: “The credit card market is well-established and hugely important for UK consumers, who hold around 70% of all credit cards in Europe. We want to understand in more depth what drives consumers to make the choices they do and how firms develop the services they offer. We want to make sure that the market works well for all consumers and that card-holders get a fair deal.”
Carney says UK economy needs monetary stimulus
Appearing before the Treasury Select Committee yesterday, Bank of England Governor Mark Carney insisted that monetary policy will not be loosened further, but said that the British economy still needs monetary stimulus despite an expected growth rate of 3.5 per cent this year (City AM, p2). He told MPs “the [Bank’s] next move in policy is going to be an increase”. Also giving evidence, Monetary Policy Committee member Kristin Forbes said the fact that measures of domestically generated inflation were low should continue to keep inflation contained for now. She added that deflation was unlikely.Read more
BBA stats show cooling housing market
High Street Banking statistics released this morning by the BBA reveal a continued cooling of the housing market, with house purchase approvals 16% lower than in October last year. However, annual growth in unsecured borrowing is running at 2.8%, the highest rate since 2008. BBA Chief Economist Richard Woolhouse said:
“Today’s figures suggest that the cooling of the property market has continued in recent weeks. Approvals were 16% lower in October than in the same month last year – the corresponding figure for September was a 10% decline. Despite a softening in the housing market, consumers continue to show confidence in the economy with unsecured borrowing at its highest growth rate in years. At the same time we all continue to make the most of new ISA rules, stashing more in our savings accounts over the course of the last year.”
BoE: Larger buffers for clearing houses
David Bailey, the Bank of England’s Head of Markets Infrastructure and Policy, said yesterday that clearing houses may require bigger capital buffers to prevent them needing government bailouts. Citing the FSB’s recent total loss absorbing capacity announcement, Mr Bailey told a conference that “we will need to consider carefully whether and how this concept could be effectively translated to CCPs [central counterparties]” (FT, £). Mr Bailey also called for CCPs to show regulators clearer stress tests, stating: “There is no requirement for CCPs to disclose the details of the stress tests which they use…it may be difficult for participants to fully compare the level of stress that CCPs can withstand” (CityAM, p14).
Juncker to unveil stimulus package
European Commission President Jean-Claude Juncker will announce €21 billion (£16.6 billion) in EU seed money tomorrow to help resuscitate Europe’s economy, the FT (£, p8) writes. The European Fund for Strategic Investment will be used to raise funds worth an estimated €315 billion for higher-risk projects by seeking to “leverage small amounts of public money to attract large amounts of private capital”. The plans will not be finalised until it is endorsed by the 28-member Commission, however it has seen resistance from some northern countries such as Britain, who have “emphasised that the scheme must not lead to an increase in the EU budget” (Guardian, p21). Officials hope to have it fully approved by mid-2015.Read more
London falls further behind New York in global rankings
The Telegraph (B1) reports that London has fallen further behind New York in a survey of financial services professionals. Kinetic Partners’ survey of 300 finance professionals found that 59% thought New York was the world’s number one financial centre and 38% thought it was London. This is a complete reversal in just two years when nearly two thirds of respondents saw London as the pre-eminent financial centre in the world. 53% of respondents said that Shanghai would be the leading emerging market centre in five years’ time.
In a comment piece Ben Wright argues that “at least part of the City’s fall from grace on the global stage is the unseemly spat between Brussels and London over banker pay. One bank chief executive said last week that the new pay rules are not yet damaging his firm’s ability to retain staff. But it is making it harder to attract talent… This is how a potential exodus of bankers will happen – not in a rush, but slowly as replacements for old jobs based in London are filled in Hong Kong or New York.” (Telegraph, B2)
BBA calls on EU to reconsider structural reform proposals
The FT (£, p18) reports that the BBA and its French counterparts, the FBF, have written to EU Commissioner Frans Timmermans calling on him to look again at proposals to change bank structures across Europe. Mr Timmermans is in charge of reviewing EU regulations to see if they need adapting. The letter says: “We believe there to be grounds for considering, as part of your better regulation review, whether the case for structural reform at a European level has been proven and whether the proposal can be said to pass your test of subsidiarity… There is a serious risk that the structural reform measures, as currently proposed, would constitute a considerable handicap in financing European companies.” According to the article the EU is unlikely to withdraw the measure but it is expected to be watered down, although the ban on “proprietary trading” is likely to remain.
BBA calls for workplace ISA scheme
The Sunday Times (£, M6) reported on BBA proposals for employees to be given new workplace savings products to help them become more “financially resilient”. It quoted Anthony Browne, chief executive of the BBA, saying: “It is often life’s uncertainties that get people into financial trouble. Too many do not have those rainy day funds to call on if they lose their job, the boiler breaks or the car dies. Without those emergency pots, many of us can find ourselves forced into the arms of payday lenders, or worse. A work-based Isa that is transferable from job to job could help millions to cope better with life’s ups and downs.”
Claims companies making millions out of PPI compensation
The Times (£, p44) reports that the biggest claims management companies have made over £150 million in fees from PPI compensation in the last year. The paper quotes Richard Lloyd, from Which saying: “Consumers should avoid using claims firms that charge hefty fees for PPI complaints they could easily do themselves for free.”Read more
HMT U-turns on tax powers
The front page of the Telegraph reports that the Treasury has watered down its plans to give HMRC powers to take money directly out of people’s bank accounts without permission if they are believed to owe tax. The new safeguards will ensure that taxpayers have to have a face-to-face meeting first and that they will have the right of appeal through the county courts. Crucially the plans will not now be put into primary legislation until after the general election.
The BBA raised concerns about the proposals in the summer and signed a letter to the Sunday Times along with a broad coalition of groups such as Liberty and the Law Society – calling them a “power too far”.
HMT gives up on bonus cap challenge
Following on from the news that the EU Advocate General had ruled against the UK legal challenge to the EU bonus cap, the UK Government has decided to withdraw its case. Chancellor George Osborne is quoted in the FT (£, p2) saying: “I’m not going to spend taxpayers’ money on a legal challenge now unlikely to succeed. The fact remains these are badly designed rules that are pushing up bankers’ pay, not reducing it. These rules may be legal but they are entirely self-defeating, so we need to find another way to end rewards for failure in our banks.” In a letter to Mark Carney in his role as chairman of the Financial Stability Board the Chancellor urges him to push for global standards including looking at the idea of performance bonds: “I was interested by some of the ideas floated by President William Dudley of the New York Federal Reserve which would increase accountability by putting more of senior bankers’ remuneration at risk.”
The article quotes the BBA saying: “We believe that shareholders should be given powers to determine staff pay – not politicians. We believe this law runs counter to recent reforms and will make the system less robust by incentivising firms to increase fixed pay. It also puts European banks at a disadvantage when competing with firms in other parts of the world.”
US warns on EU benchmark plans
The US could be forced into tougher regulation if proposed European rules on benchmarks prevent access for EU banks and asset managers to US markets, reports the FT (£, p30). Timothy Massad, chairman of the Commodity Futures Trading Commission warned senior US policy makers that the European Commission’s tougher oversight of benchmarks could have “adverse markets consequences”. EU proposals seek to prohibit European-supervised banks and asset managers from using benchmarks outside of the EU. In a letter seen by the FT, Mr Massad wrote: “The US does not have such a supervisory regime and in the absence of any changes, the third-country equivalency requirement would prohibit EU institutions from hedging using thousands of products traded on US futures exchanges and swap execution facilities”.
UKIP wins second by-election
UKIP have won the by-election in Rochester and Strood. Former Conservative MP Mark Reckless won by 2,920 votes. The Green Party came fourth, while the Lib Dems got their lowest total ever (BBC).Read more
EU Advocate General says bonus cap law is valid
Niilo Jääskinen, the EU Advocate General, has this morning said that the EU law to restrict bankers’ variable pay is valid. George Osborne, the Chancellor, launched a legal challenge to the rule which aims to restrict bonuses to 100% of salaries – or 200% if a bank’s shareholders approve. Mr Jääskinen’s statement said: “Given that the variable component of remuneration impacts directly on the risk profile of financial institutions, it can affect the stability of financial institutions who can operate freely across the EU, and in consequence that of the financial markets of the EU.” The Advocate General’s opinion is not binding, but the ECJ rarely goes against it. The ECJ’s final decision will be made next year.
Shafik – bankers who fixed foreign exchange should pay back bonuses
Nemat Shafik, the recently appointed Bank of England Deputy Governor, has suggested that the threat of jail would be a better deterrent to keep rogue bankers in check than large fines, the Guardian (p30) reports. The economist also said she expected those banks with staff found to be involved in the manipulation of foreign exchange markets would pare back bonuses to such individuals. Speaking to members of the Treasury Select Committee yesterday, Ms Shafiq said: “Individual accountability, particularly criminal sanctions are the most powerful inducements to better behaviour.”
MPC increasingly divided over economic outlook
Most newspapers report the increasing divergence of opinions on the Bank of England’s Monetary Policy Committee. Although the margin of members voting for a rate rise remained split at 2-7, the minutes from this month’s meeting record a “material spread of views” amongst those pushing for a hold. The Daily Mail (p78) suggests that concerns over the strength of output, employment growth and consumer spending could lead the MPC to move on rates before the end of next year.
European Commission announces new transparency drive
EU Observer reports that the European Commission has announced a new transparency drive, promising that contacts with lobbyists will have to be publicly recorded and documents relating to an EU-US trade are made available to all MEPs. Commission Vice-President Frans Timmermans is quoted as saying: “I think we have moved from a time where government had an attitude towards the public of ‘trust me’ to a situation now where the public says to government ‘show me!’ And we want to show you.”
Under the plans, Commissioners, members of their cabinets and the heads of the various departments of the Commission will all have to make public their meetings with lobbyists and other pressure groups, the article writes.Read more
City at risk to ISIS cyber attack, warns police
Adrian Leppard, the City of London Police Commissioner, has warned that there is a “very strong likelihood” that jihadis will launch a cyberattack on the City unless more is done to protect against online incursions, the FT reports (£, p3). Mr Leppard singled out the Islamic State of Iraq and the Levant as a potential perpetrator, and told the paper that western societies needed to balance the benefits of technological progress with the “huge harm” an attack could wreak. The BBA’s report “The cyber threat to banking: a global industry challenge” is available online.
Women’s enterprise celebrated
The BBA and its partners celebrated the successes of female business owners in London last night at the Excellence in Women’s Enterprise Mentoring Awards. Nominees and their business mentors were honoured at the BT Tower at a ceremony attended by more than 60 people. The winners were:
Growth – Hadland Care Group
Start Up – Black Energy Renewables
Export and Innovation – Dunnet Bay Distillers
Best Mentor – Chelsey Baker and Jeanette Forbes
Digital Enterprise (sponsored by BT) – REALsafe Technology
Coco bonds nearly triple this year
The number of contingent convertible bond deals has nearly tripled this year, as banks have issued bumper volumes of riskier but higher-yielding debt in the current low-interest-rate environment (FT, £, p30). European financial institutions’ issuance for coco bonds stands at $31.8 billion (£20.3 billion) via 20 deals for 2014, compared with $15 billion (£9.6 billion) and 14 deals in 2013, the paper writes, adding that coco issuance accounts for just under a tenth of all subordinated bank debt issues in Europe this year.
S&P warn Bank of England on UK recovery
Standard and Poor’s says the Bank of England has greatly underestimated the degree of slack in the British economy and risks killing the recovery by tightening too soon, the Telegraph writes (B4). The paper quotes S&P’s chief European economist Jean-Michael Six: “We don’t see any tangible signs of a housing bubble…the UK is cooling off. It is nothing to be alarmed about, but we think a premature rate rise could put the recovery in jeopardy. There is a long way to go before deciding the horse is going too fast and needs to be reined in.”Read more