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.
Bank of England proposals for structural reform
A number of the papers report on yesterday’s announcement from the Bank of England which published proposals “to improve the resilience and resolvability of deposit-takers”. The FT (£, p3), however, said that banks were still in the dark as the amount of capital a ringfenced firm has to hold remains undefined, as does the Bank’s leverage ratio. Banks have until 6 January to submit formal proposals on ringfencing. The article reports that non-executive directors will be needed to oversee the ringfenced operations, adding £1-2 million a year to banks’ running costs. Additionally, no more than a third of a ringfenced bank’s board can be employees or directors of another part of the banking group. There was an acknowledgement from the central bank that the EU’s own structural reforms might affect UK plans.
The Bank also announced that deposits of up to £1 million will be protected in certain circumstances if a bank collapses under the Financial Services Compensation Scheme. The Telegraph (B1) reports that currently the scheme protects £85,000 but it will be extended to people who temporarily have a larger amount in their account for defined reasons such as if they are buying a house, have received a life insurance payout or if they have been granted compensation.
Regulators and chief executives meet to discuss cyber concerns
New York’s banking regulators are to meet with the chief executives of a number of financial institutions to discuss the cyber threat following an attack on JP Morgan Chase’s systems on Thursday which compromised the personal details of 76 million households (FT, £, p20). Superintendent Benjamin Lawsky of New York’s Department of Financial Services said that such cybercrime “isn’t just an issue that should be on a list of problems and things to worry about and work on”. He also said that “the cyber threat has to become urgent, one of the most important issues facing financial services chief executives. It is not an IT problem, it is a bank problem”. Mr Lawsky also questioned whether, as regulators, they should be considering the cyber threat as something as fundamental to institutions as capital levels.
This year the BBA published a new paper on the issue – The cyber threat to banking: A global industry challenge – as well as holding the first in a series of conferences on the global cyber risk to banking. You can read more about the work being done in the UK here.
Rise in internet and telephone fraud
Financial Fraud Action UK published figures from the banks that show a 59% increase in telephone and internet banking fraud, with £35.9 million of losses in the first six months of the year (FT, £, p20). Following an increase in “vishing” or “voice phishing” – where criminals urge bank customers to call the number on the back of their credit card to validate the call, then keep the line open and play a dial tone to their victims so that they can pretend to be bank customer services – the banks have called upon telecoms operators to reduce the amount of time people can stay on the line. According to the article, the telecoms companies are hoping to reduce the time by next year.Read more
Private banks contribute £3 billion to UK plc
Britain’s private banking and wealth management industry (PBWM) now oversees more than half a trillion pounds, according to the BBA’s new in-depth report into the sector covered in the FT(£, p20) and the Independent. The wide-ranging report shows that the sector, including its 23,000 staff, pays £1.2 billion a year in tax and contributes more than £3 billion to the economy.
Citywire have posted a slideshow showing many of the findings of Oxford Economics research included in the study, demonstrating the wide-ranging contribution the sector makes to UK GDP. The subscriber only site Wealth Bulletin also covered the report extensively.
Anthony Browne, the Chief Executive of the BBA described the PBWM, as “one of our country’s hidden success stories. It is an area in which Britain is a world leader and which creates a wealth of opportunities for people right across the UK. Our report also shows how the benefits of private banking reach well beyond those who use these services, helping our country to attract and retain inward investors- creating jobs and growth.”
FPC takes new powers of mortgage lending, BBA welcomes faster leverage ratio timetable
The Bank of England’s Financial Policy Committee (FPC) has asked for new “powers of direction” over the mortgage market. Under its plans, it will be able to impose limits on the amount people will be able to borrow compared to their salaries and the size of their deposit. (Telegraph, B3) It will also be given powers over the buy-to-let sector for the first time. The BoE plans, which will be subject to consultation, are expected to come into force before the end of the current parliament. In its first annual assessment of the Help to Buy scheme the FPC stated that it did not believe that the scheme posed a threat to financial stability.
The FT (£, p2) reports that the FPC also said that it would bring forward the announcement of the calibration of the leverage ratio imposed on banks to the end of October. Reuters quotes BBA Executive Director Simon Hills, welcoming the move, “Addressing this issue sooner rather later will bring helpful clarity to investors as well as banks, but ultimately this will be a decision for government which should take into account the impact of the proposal on economic growth”.
Political tensions grow in Brussels over Commission hearings
The French nominee to the European Commission Pierre Moscovici faced a “tough” hearing in the European Parliament yesterday as political tensions in Brussels escalated. The Guardian (p30) reports that this has led to rumours that there could be a reshuffle of portfolios for the Commissioners. The FT (£, p10) reports that Downing Street has signalled it would not accept Lord Hill being given a different portfolio.
Virgin IPO boosts Treasury coffers and banking competition
The Independent (p57) reports that Virgin Money has announced plans to float on the stock market which could return as much as £50 million to the taxpayer. Virgin said the latest contribution as a result of the flotation would take the total paid to the Treasury to £1.02 billion of the money used to purchase Northern Rock in 2011. Virgin Money said it was “uniquely placed to provide effective competition to the large incumbent banks in the UK”. (p57). In the Mail, Alex Brummer writes that, “Britain’s growing band of challenger banks that includes the recently floated TSB, Virgin and soon-to-be hived off Williams and Glyn’s have a wonderful opportunity. Faster switching means that a great deal of the hassle involved in changing banks has been removed.”
The Telegraph reports that Aldermore has unveiled its price range for its stockmarket float, valuing the lender at around £800 million. The challenger bank is looking to raise £75 million in new funds from the IPO.Read more
Lord Hill recalled for second hearing
Lord Hill has been called back for a second time at the European Parliament in an unprecedented move by MEPs. While the hearing was said to have been fairly gentle, Lord Hill was reported to have been likeable without having a detailed knowledge of his brief. The FT (£, p7) quotes one MEP saying: “It was very strange. The hearing was tame and then they all turned on him in private.” Michael Theurer MEP said that Lord Hill was “rhetorically brilliant” but “completely lacking substance”.
Fears over banks withdrawing from benchmarks
The front page of the FT (£) reports that many global banks are pulling out of providing data for benchmarks over fears of being hit by accusations of manipulation. In the paper’s Lombard column (£, p20) Jonathan Guthrie warns, “tottering benchmarks would cause turmoil for investors no longer able to price contracts worth trillions. That would be just another negative unforeseen consequence of over-regulation. The need for governments to yank on the choke chains of watchdogs such as the NYDFS is clearer than ever.”
New York vs London
The FT (£, p19) looks at the rivalry between New York and London to be the world’s leading financial centre. While New York is the “undisputed global king of equities” and has the world’s largest banks, London has the largest currency trading and over-the-counter interest rate derivatives. The article warns that more top executives are open to moving away from London following the introduction of EU bonus rules and suggests that both cities need to be on their guard for the challenges from Asian competitors.Read more
FCA gives more details of “portability” review
The Financial Conduct Authority (FCA) plans to conclude its look at the way customers move their accounts to other banks by the first quarter of next year, Reuters reported yesterday. The study will examine the success of the Current Account Switching Service launched last year and whether customers should be able to take their account number with them to a new provider – just as they can with mobile phones. The FCA said this innovation may “remove the need to change direct debits and standing order instructions, with is a key area where perceived or actual problems with switching such as missed mortgage payments can arise”. More information on the FCA’s review is available here.
M&A activity at its strongest for five years
The value of mergers and acquisitions in the first nine months of 2014 eclipsed those in the same period over the last five years, according to analysis by Thomson Reuters reported in the FT (£, p21). Meanwhile, a poll by the law firm CMS and Mergermarket reported in the Times (p36) suggests that two thirds of European executives are more “bullish” about the outlook for M&A activity now than they were this time last year.
ECB eyes junk bonds purchases to power growth
The FT (£, p1) writes that Mario Draghi will encourage the ECB to buy billions of euros’ worth of Greek and Italian “junk” bonds as part of a plan to foster economic growth. However, the paper suggests the move will increase tensions between the ECB’s president and Jens Weidmann, the Bundesbank president. Elsewhere in the FT (£, p15) Christopher Thompson and Claire Jones look at why the ECB has become more interested in buying Asset Backed Securities
RBS wipes out more than £800 million of bad debt
The decision by RBS to erase more than £800 million of bad debt from its provisions due to stronger than expected performance of its Irish operations and other subsidiaries is reported widely across newspapers. The Telegraph (Bp3) describes the bank’s latest trading statement as “upbeat”, citing the improved economic environment for the better-than-expected outlook. The Mail’s City editor Alex Brummer (p67) writes of the irony that the “worst” parts of a bank can over time “become the best”.Read more
FSB backs derivatives plan
The Financial Stability Board yesterday accepted proposals to give authorities more time to agree on a resolution plan if a bank fails. The plans – overseen by the International Swaps and Derivatives Association (ISDA) – involve the insertion of a “stay” on a bank’s derivatives if it gets into financial difficulty. The FT (£, p32) reports that regulators had become concerned over the “potential chaos” which could occur if a counterparty chose to close out swaps after a resolution authority’s decision. The FSB has now asked that these swaps contracts legally “stay alive” whilst resolution options are assessed. ISDA expects the largest banks to sign up to the agreement in the coming weeks and for institutional investors to be participating from next year.
Lord Hill promises to work to keep UK in a stronger EU
David Cameron’s nominee to oversee financial markets for the new European commission has pledged in his written answers to the European Parliament to work to keep Britain in a stronger Europe, writes the Guardian. In his answers he wrote: ”This commission takes office at a crucial moment for the relationship between the EU and the UK … I am keen to play my part in making the argument that the UK is stronger as part of a stronger EU”. Although the issue of bankers’ bonuses does not fall within his portfolio, he has promised to clamp down on those who try to get around the EU cap. He wrote: “If a member state does not comply with EU rules, or tries to circumvent them, I will ensure that full use will be made of the various enforcement tools available. I will support, whenever necessary, investigations on alleged breaches of EU law.” Lord Hill’s hearing with MEPs takes place tomorrow.
BoE’s stats suggest cooling housing market
Statistics published by the Bank of England yesterday revealed a drop in mortgage approvals for the third successive month. The Guardian (p21) suggested this provided “fresh evidence of a slowdown in the housing market”. The number of mortgages fell from 66,100 in July to 64,212 in August, although analysts had expected 65,000. The Telegraph (B3) quotes Capital Economics’ Matthew Pointon who argues that the slowdown in demand for homes is due to “higher prices for already very expensive homes. However, the Nationwide House Price Index released this morning reveals a 0.2% drop in national prices in September.Read more
Jourová takes over on City pay
Saturday’s FT (£, p2) reports that Věra Jourová of the Czech Republic could be confirmed as EU justice commissioner next month, making her responsible for remuneration rules in the City of London. According to the article, Ms Jourová’s party is on the centre left but sits within the Liberal bloc of the European Parliament and her views on pay and the City are, as yet, unknown. Overseeing pay in financial services originally belonged within the financial services portfolio of Britain’s Lord Hill but was carved out last week by Commission President Jean-Claude Juncker.
Global economists warn on interest rates
A report to be published today is to warn that the global economy could be heading for another crisis (FT, £, p6). In the 16th Annual Geneva Report, commissioned by the International Centre for Monetary and Banking Studies, senior economists warn that interest rates will have to stay low for a “very very long time” in order to give companies, households and governments time to service their debts and avoid another crash. Though there is an acknowledgement that financial sector debt is falling and household debt has stopped rising, the report highlights the rapid rise of public sector debt in places like China. The authors warn of: “…[the] poisonous combination of high and rising global debt and slowing nominal GDP, driven by both slowing real growth and falling inflation.” They continue: “Contrary to widely-held beliefs, the world has not yet begun to delever and the global debt-to-GDP ratio is still growing, breaking new highs.”
Appeals Process has led to fewer mistakes
CityAM (p10) writes that external reviewer Professor Russel Griggs’ latest report on lending to small businesses shows that the UK’s main high street banks have “slashed” the number of errors they make. This is due to a drop in the number of successful appeals made by businesses who have their finance applications declined. The external Appeals Process reviewer said: “I am hopeful that this is the start of us all beginning to see the positive outcome of the process changes. I and my team have been working with all the banks to make their decision-making process better both for the SME and importantly themselves”. In the Independent (p51) though David Prosser argues that Professor Griggs’ view is an optimistic one and says that the number of successful appeals should be declining at a faster rate as the Professor’s report still shows that some businesses are being unfairly turned down for finance.
Card fees to cost shoppers £785 million each year
The Mail on Sunday (p93) looks at the EU’s proposed cap on the “interchange” fees charged by credit card companies and the potential impact on customers. The article warns that banks would be looking to make up costs as they are hit with a £785 million bill from card issuers. Speaking with the paper, the BBA said that banks are wary of threatening higher banking fees, but: “Inevitably somebody has to pay for increases in costs caused by regulation and that can mean consumers”. The piece goes on to say that the BBA are in talks with Brussels about the plan.Read more
FCA holds forex discussions with banks
On Sky News, Mark Kleinman reports on speculation that “some of the world’s biggest banks” have met with the Financial Conduct Authority (FCA) to discuss a settlement for the manipulation of global foreign exchange markets. The article says that the regulator has agreed with the banks an eight week “consultation period” so that they might reach a deal on penalties by the end of November. According to the article the penalties handed out could be higher than the FCA’s fines for Libor.
EU recommendations on bank allowances
The FT (£, p1) reports that Jean-Claude Juncker, president of the European Commission, has removed Lord Hill’s responsibility for overseeing financial sector pay if he is accepted as Commissioner for Financial Stability, Financial Services and Capital Markets Union. The article speculates that this is intended to head off objections in the European Parliament. The report also looks at the European Banking Authority’s proposals that would push British regulators to tighten rules on banks’ plans to pay their staff allowances. The paper writes that to be excluded from the EU bonus cap, the draft report concludes that “allowances must be awarded over a set period, include no forfeiture provisions if a person hands in their notice, and be impossible to adjust midterm without staff consent. Fixed allowances would be expected to be assigned to particular positions rather than individuals, meaning that bankers or traders with the same role should receive the same allowance, regardless of performance.”
Chancellor allows regulators to police benchmarks
In a consultation yesterday the Treasury said that seven market benchmarks are to be newly scrutinised by regulators (FT, £, p3). Under rules proposed by the Treasury, the FCA would be the responsible regulator with powers to impose criminal sanctions on those creating false or misleading impressions in the financial markets. Andrea Leadsom, the Economic Secretary to the Treasury, said: “Ensuring that the key rates that underpin financial markets are robust and that anyone who seeks to manipulate them is subject to the full force of the law, is vital.”
Commenting a spokesman for the BBA said: “We welcome these moves to introduce clear, robust regulation of benchmarks with tough criminal sanctions. This did form part of the announcement of the Fair and Effective Market Review and will only enhance London’s reputation as a safe place to do business. We also believe it is absolutely right that anyone who has been found guilty of manipulating market benchmarks should be properly punished.” The consultation paper can be read here.
Interest rates rises around the corner
Bank of England Governor Mark Carney has said that the strength of the recovery has put the UK in a position to cope with higher interest rates (Times, £, p43). The Governor restated that any rise would be “gradual and limited” and he emphasised that rate rises would be lower than those seen in the past. Mr Carney said that keeping rates too low for too long could encourage risks to build up in the financial system – including the housing market, which he said posed the biggest risk to the economy (Telegraph, p1). In a separate interview with the Yorkshire Post, Minouche Shafik the Bank’s deputy governor for markets and banking said policymakers might have to raise rates more quickly if pay rises aren’t matched by higher productivity.
New rules on buy-to-let mortgages
The Telegraph (p1) reports how new EU affordability rules are being extended to buy-to-let homeowners. The new measures, to be introduced in March 2016, will now impact “accidental landlords” including those who have inherited property or rent out their home after being unable to sell it. The Council of Mortgage Lenders estimated that these accounted for less than 20% of the buy-to-let market. The rules for ordinary mortgage borrowers require lenders to assess their incomes and spending habits in great detail to ensure that they can afford the loan, which could impact upon older landlords as some companies require mortgages to be paid off before retirement.Read more
FCA reveals fall in complaints to banks and other financial services firms
The number of complaints received by the Financial Conduct Authority concerning financial services companies was 5% lower in the first six months of this year, the regulator has announced this morning. These figures continue to be dominated by Payment Protection Insurance (PPI) products, which were down by 11% on the second half of 2013. Christopher Woolard, the regulator’s director of policy, risk and research, said that it was “encouraging” that complaints were falling, but that there was still “further work to be done” to ensure that consumer interests came first. The data can be found here.
Cable announces more help for small businesses
A new Government scheme launched by the Business Secretary Vince Cable to encourage banks to lend to businesses is reported widely across the media. The FT explains that from October the British Business Bank will guarantee some loans made to smaller businesses, aiming to focus on underpinning finance deals offered by challenger banks. The scheme aims to cut the amount of capital smaller lenders have to hold, thereby allowing them to lend more and grow their market share. The BBA’s report on promoting competition in the banking industry, which sets out a series of policies to help challengers grow, can be read here. If you’re looking to raise business finance, you can assess your options at the Better Business Finance website overseen by the BBA.
Savers hope for impending rate rise
Analysis by Moneyfacts suggesting that ISA rates have fallen to their lowest levels since they were introduced 15 years ago features in the Mail (p28) and several other newspapers. There are nearly 300 different saving products in the UK, the newspaper reports. The Bank of England’s base rate has remained at an historic low of 0.5% since March 2009. The Mail suggests that savers can hope for an initial rise early in 2015. Read the BBA’s thoughts on how to rebuild Britain’s savings culture here.Read more
Miliband pledges to “break up the banks” and close tax loopholes
The Leader of the Opposition, Ed Miliband, renewed promises to “break up the banks” to promote competition and said he would use funds from a mansion tax, levy on tobacco companies and closing a tax loophole on Eurobonds and hedge funds to invest in the NHS (FT, £, p1). Speaking at the last Labour Party conference before next year’s general election, the Labour leader promised to raise £2.5 billion to spend on thousands of new staff for the NHS (Guardian, p1). The Telegraph reports that senior city sources responded to the move to end an exemption on stamp duty for hedge funds by arguing it could reduce stock market liquidity and increase the cost of credit for consumers and small businesses (Telegraph, B1). The FT (£, p2) notes that a consultation by the former Labour government examined the issue of “Eurobond exemptions” and concluded that changes to the legislation were not required.
BBA launches platform to counter cyber crime
The FT (£, p4) reports that the banking industry, government and several law enforcement agencies have launched a pioneering Financial Crime Alerts Service in a bid to boost cyber security. The BBA, working with preferred technology partner BAE Systems Applied Intelligence, will launch the service as the industry comes together to spot emerging problems and threatening criminal trends. The initiative will pool intelligence from 12 governmental bodies, including the National Crime Agency, in order to provide information to help banks safeguard the accounts of millions of customers.
Commenting on the launch, BBA Chief Executive Anthony Browne said: “This alerts system is a powerful new weapon against fraudsters, cyber criminals and other crooks intent on stealing our customers’ money. This service is a shining example of how banks and government can work together to benefit all customers.” The full press release can be read here.
Andrew Bailey calls for greater consultation between international regulators
Speaking at the BBA’s Financial Crime and Sanctions conference, Deputy Governor of the Bank of England Andrew Bailey called on more structured and formal dialogue between global regulators before fines are handed out to banks (FT, £, p4). Mr Bailey, who is also the Chief Executive of the Prudential Regulation Authority, warned that if fines were too high they could “have real or potentially negative effects on the safety and soundness of the firms we regulate”. The comments follow a number of high profile and heavy fines imposed on non-US banks by US regulators.
Mortgage approvals slow as business borrowing picks up
A number of newspapers report the BBA’s monthly High Street Banking statistics, which revealed that the number of mortgage approvals fell from last month despite overall lending to homeowners up 15% on this time last year. A total of 41,588 mortgages were approved in August compared to 42,715 in July (CityAM, p7). However, the Times (£, p42) reports that net lending to businesses grew by £1.5 billion in August, reversing last month’s fall of £900 million. The jump was the biggest monthly increase in nearly a year. The full BBA press release can be read here.Read more
BBA stats reveal rise in consumer optimism
Today’s BBA High Street Banking stats show that new mortgage lending is 15% higher year-on-year, with approvals for house purchases up 6%. The figures also reveal a strong rise in unsecured personal loans. BBA Statistics Director David Dooks said: “These products are often used to finance bigger purchases such as cars or major home improvements – the sort of spending we often put off until we feel confident about our financial circumstances.” The full press release can be read here.
Aldermore to float on stock market
Aldermore has announced that it will list on the London Stock Exchange this October, writes the FT (£, p22). According to a statement from the lender, it intends to issue £75 million in new shares and have a free float of 25%. The paper writes that the bank – which focuses on asset and invoice financing for small businesses and commercial and residential mortgages – has no branches but 12 regional offices and 14,000 intermediary agents, a model which CEO Philip Monks has “no intention to change”. CityAM (p7) notes that the bank is “leading a new charge” of IPO’s following the Scottish referendum. Mr Monks told the paper: “The UK is recovering strongly, and there is good resurgence in demand from small businesses.” Read the BBA’s Promoting competition in the UK banking industry report here.
Draghi gives evidence to ECON committee
ECB president Mario Draghi told the European Parliament’s Economic and Monetary Affairs (ECON) Committee yesterday that the poor uptake of cheap loans by Eurozone lenders was “within the range of take up values” that the central bank had expected, writes the FT (£, p6). He added that the first tranche of loans should be assessed alongside the second offer in December, for which he expects higher demand. However, Mr Draghi admitted that the recovery is “losing momentum” and that the central bank was ready “to use additional unconventional instruments within our mandate”, reports the Times (£, p41). He added that “courageous structural reforms and improvements in the competitiveness of the corporate sector” are needed to improve the business environment (CityAM, p3).Read more