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.
BoE pushing for change to capital rules for challengers
The Sunday Telegraph (B1) reported how at a recent BBA conference on increasing competition in the banking sector the Bank of England called for a relaxation of capital rules for smaller banks. It quotes Martin Stewart from the Prudential Regulatory Authority saying, “There is clearly a strong body of evidence that there should be some change. We have taken it to the latest round of Basel negotiations that there should be an alternative.” A separate article (B5) in the paper looked at how new entrants were shaking up the banking market in the UK. The FT (£, p20) notes the BBA’s latest competition report which calls for challenger banks to be given access to average internal risk weights for bigger lenders. This would allow them to hold less capital against safer loans. In a comment piece (B2) James Quinn, Business Editor at the Sunday Telegraph, takes a cautionary note, warning “the recent history of smaller banks with smaller balance sheets in this country does not make for pleasant reading.”
Forex traders offered immunity deals by US
The front page of the FT reports that investigators from the US Department of Justice are offering junior traders immunity deals in exchange for information about senior colleagues. One lawyer told the paper that the investigations were “well advanced” but another lawyer said that while the DoJ had offered immunity deals to a number of traders, most had so far declined as they did not have “killer evidence” to trade against leniency. Read the BBA’s response to the launch of the Treasury’s review in to strengthening standards in financial markets here.
Debate over the future of bank branches continues
The Weekend FT (£, p3) looked at how the traditional bank branch is changing. It quotes BBA Chief Executive Anthony Browne saying, “Branches are being reinvented, the death of the branch has been much exaggerated.” It reports, “The industry group says that 2,274 branches have been refurbished in the past two years. That compares with the near 600 branches that have been closed by the four biggest high street banks since the start of 2013.” Alex Brummer wrote in Saturday’s Mail (p89) that while some “traditionalists” will push back against how the bank branch is changing, “The reality, as the British Bankers’ Association has pointed out, is that banking transactions, worth nearly £1bn a day, are carried out electronically.”However, a survey published by Accenture today (Times p40, Telegraph B3) suggests that bank branch usage is actually increasing. It also found that a quarter of people would be happy to have an internet only bank in the future. In a letter to the Sunday Telegraph Age UK Charity Director Caroline Abrahams warns that there is a proportion of the population that will never access banking services online.
BoE looks at varying leverage ratio
Reuters reports that the BBA raised concerns about the Bank of England’s plans to allow it to vary the leverage ratio in the future. BBA Executive Director Simon Hills said: “Adding in complexity runs the risk of creating its own distortions and penalising safer lending. Our members will work with the regulator to identify problematic areas a more complex leverage ratio would introduce.” The Weekend FT (£, p17) reported that the proposals may limit the ability of a bank to use coco bonds when calculating its leverage ratio. Read Simon Hills’ blog on this issue here.
FCA to cap payday lenders
The Financial Conduct Authority (FCA) is set to introduce a cap on the amount payday lenders can charge for credit – expected to be set at £30 for every £100 lent. The Consumer Finance Association says it expects the sector to shrink about half in the coming years. The association said its members, nine of the UK’s biggest payday lenders, had lent 50 per cent less in the past three months than in the same period last year. (FT, £, p2)Read more
FPC looks at toughening up the leverage ratio
The Bank of England’s Financial Policy Committee (FPC) has today released a consultation paper on a review of the leverage ratio. The consultation will report back fully in November but the FPC is consulting on whether it should be given the power to vary the leverage ratio over time as a key tool of macroprudential policy. The FPC also states that it is “minded to recommend to HM Treasury that it be granted powers of Direction over all components of the leverage ratio framework that are not harmonised under European Union (EU) legislation…The leverage ratio framework could be applied to a subset of firms only, during any transitional period.” (Reuters)
Fines should not damage stability, says Bailey
Andrew Bailey, head of the Bank of England’s Prudential Regulation Authority, spoke out yesterday to say that fines imposed on banks for misconduct should not “undermine financial stability” (FT, £, p3). His comments came in the wake of US fines on BNP Paribas totalling $8.9 billion (£5.2 billion). Mr Bailey said that he was working with his counterparts in the FCA to assess what fines were coming down the line, but there was some difficulty gauging the impact of penalties when stress-testing banks’ financial strength. Answering questions after a speech in London, Mr Bailey said: “We do have to be very clear that actions are taken which do not undermine the stability of the financial system.”
The FCA said that in 2013-14 it levied fines totalling £425 million – a record for the regulator.
In the US (FT, £, p22) banks are facing new uncertainty after the BNP Paribas case revealed some divergence between enforcement officials on how penalties are determined, making sanctions hard to predict and creating new risks for banks. Though the US Treasury Department’s Office of Foreign Asset Control (Ofac) would ordinarily administer policy in this area, including calculating fines, the BNP case saw other agencies like the Department for Justice “ratchet up their penalty in unprecedented ways.”
Andrew Bailey also said that the Bank would step in if lenders were deemed to be underestimating how risky their loans are. Mr Bailey said that banks with inadequate risk weights may have to cede power to the regulator (FT, £, p5).
Banks update branches in-line with consumer behaviours
The FT (£, p4) reports on Barclays’ plans to modernise branches by giving 6,500 cashiers new positions focused on giving customers advice about their finances. Staff will still be on-hand to process transactions for those who prefer not to use digital or self-service machines. The move comes as a result of banks noticing a change in behaviour from customers who are increasingly using their branches for bigger decisions such as mortgage applications and investments rather than day-to-day transactions.
The article goes on to quote the BBA’s new report It’s In Your Hands – released earlier this week – revealing that internet banking transactions are now worth almost £1 billion each day. You can read the latest The Way We Bank Now report here.
Portuguese bank troubles international markets
Shares in one of Portugal’s biggest banks – Banco Espirito Santo – slumped by 19% before the country’s regulator suspended trading yesterday. International bond and share markets felt the reverberation as investors lost faith in the lender, sparking a sell-off and fears of a new eurozone crisis. According to the FT (£, p1) the Bank of Portugal has said that “the solvency of Banco Espirito Santo is solid”. The sell-off also prompted the International Monetary Fund to issue a statement: “The Portuguese banking system has been able to endure the crisis without significant disruption, aided by substantial public capital support and extraordinary measures from the ECB. However, as the Bank of Portugal acknowledges, pockets of vulnerability remain” (Times, £, p37).Read more
FCA launches wholesale markets competition review
The Guardian (p21) reports that the Financial Conduct Authority (FCA) “will investigate allegations that high frequency traders unfairly steal a march on rival investors” as part of its wider competition review into wholesale markets announced yesterday. The FCA’s Director of Competition Mary Starks said the FCA had launched an “exploratory” exercise into competition in high speed trading because “wholesale financial markets play a crucial role in the economy, and the UK plays a key role in the international markets”. Commenting on the announcement, a BBA spokesman said: “The industry supports more competition in all banking markets. Competition between wholesale banks for business is already intense and the FCA’s review will help ensure markets are working effectively. That means fair prices, innovative players and plenty of choice for customers.”
Banks waiting for inquiry results
The Competition and Markets Authority (CMA)is preparing to release the results of its study into competition in banking next week (FT, £, p2). According to the FT, the CMA is expected to launch a formal investigation into this area in the autumn which could potentially change the landscape of the banking sector before May’s general election. The FT references the BBA arguing: “It is too early to investigate competition in banking because the industry is in the middle of a fundamental overhaul. Technology is changing how consumers interact with banks, a new current account switching service was launched last September, and both RBS and Lloyds are being forced to spin of part of their retail networks to create new ‘challenger banks’.”
For further information about the way we bank now read the BBA’s latest report It’s in your hands.
If you want to read more about competition in banking read BBA’s Media Relations Adviser Tommy Ricketts’ blog A level playing field, not silver bullets.
Dame Clara Furse: “Securitisation may be the key”
In the Times (£, p37), Financial Policy Committee (FPC) member Dame Clara Furse writes that the FPC is focussing on ways of ensuring that the supply of credit to good borrowers is maintained by improving the diversity and robustness of the market-based finance in the UK. Ms Furse writes that: “Securitisation has the potential to ensure a more constant, reliable source of credit and can provide an important source of funding for mortgages, business lending, credit cards, car finance and other lending. Importantly, it provides a channel to transfer the risk of lending away from the banks, drawing in a wider range of investors for the provision of credit to the economy.”
Cable orders a review into state asset sell-offs
The Business Secretary announced that former City Minister Lord Myners will lead a panel of experts to investigate alternatives to initial public offerings for privatising state assets. The announcement was made ahead of the results of a report investigating last year’s privatisation of the Royal Mail, which is expected to be published next week. The FT (£, p1) writes that this report is expected to argue that the flotation of the postal service could have achieved better value for the taxpayer.Read more
Beware unintended consequences of regulation, says the BBA’s Anthony Browne
The Telegraph (B1) and CityAM (p3) quote extracts from BBA Chief Executive Anthony Browne’s speech at Mansion House last night warning against poorly thought-out regulations. Anthony reiterated comments made in the BBA’s competition report, arguing that breaking up Britain’s biggest banks could backfire and undermine the universal service they offer. His speech also discussed the implications of new international regulations that were causing banks to “de-risk” and retreat from offering services in developing economies.
The speech comes after the release of the BBA’s second Way We Bank Now report, It’s in your hands, examing the effects of digital technologies on consumer trends in retail banking. Yesterday, Anthony featured on Channel Five news, BBC News 24, BBC Breakfast and the Today Programme to discuss its findings.
FCA interim report calls for better rates and more competition for savers
A number of newspapers report the findings of an interim report by the Financial Conduct Authority (FCA) into competition in the cash savings market. The report argued that “while some aspects of the cash savings market are working well”, most account holders are not capitalising on the best deals available to them (FT, £, p2). The Mail (p43) suggests that savers are losing £3.74 billion a year in interest.
Responding to the FCA’s interim report, a BBA spokesman said: “Banks are making it easier for customers to find out which savings product is best suited for them. Banks notify customers in advance of any significant reduction in their interest rate. Where a bonus rate is about to end the banks also advise customers before the change takes place. As more new players enter the savings market banks competition for customers is hotting up all the time. If you do not think you are getting the best possible deal we would encourage you to shop around as there is lots of choice out there.”
MPs attack HMRC over plans that “go against the Magna Carta”
The Treasury Select Committee criticised HM Revenues & Customs chief executive Lin Homer at an evidence session yesterday on proposals to use new powers to access bank accounts (Times, p1). The measures would allow the tax authority to use the past twelve months of personal bank statements of alleged tax avoiders to work out how much money they could take from their account without causing “hardship” (FT, £, p4). The Mail (p4) reports comments made by Lord Thurso MP, who said the move goes “against the Magna Carta” by allowing the state to seize a bank account without judicial process.Read more
Customer revolution sweeping personal banking
Mobile and internet banking is now being used for transactions worth nearly £1 billion a day, according to a major industry-wide report into consumer-friendly technology by the BBA and EY released today. Banking apps for mobiles and tablets have now been downloaded more than 14.7 million times, internet banking services typically receive 7 million log-ins a day and spending on contactless cards is expected to rise to £6.1 million a week this year – up from £3.2 million in 2013. BBA CEO Anthony Browne commented: “This report shows just how enthusiastically the British public is embracing mobile banking, contactless cards and a range of other consumer-friendly banking technologies. The way we bank now has made it a lot easier for us to keep track of our finances, with far more options about how we spend our money and talk to our bank.”
Anthony appeared this morning on Wake up to Money, the Today Programme and BBC Breakfast. BBA Director of Media Relations Rob Watts discussed the report on BBC Wales, BBC Ulster and BBC WM. The report was covered in the Telegraph (B5), Reuters and the Guardian (p25).
Download the full report – It’s in your hands – here
New banks waiting in the wings set to increase competition for customers…
The Telegraph (B5) reports that 25 new banks are preparing to enter the UK market after regulators changed the rules to make it easier to set up a new banks. The relaxation of rules around capital levels for new banks and a new fast-track process “have been positive for new entrants and will make a contribution to increasing competition and thus benefit customers” according to the chief executive of the Prudential Regulatory Authority (PRA) Andrew Bailey. The article quotes BBA Executive Director Simon Hills urging the regulators to go further, by reducing the amount of capital a so-called “challenger” bank must hold against certain loans. “The PRA should allow smaller banks to hold less capital against the safest forms of lending”, he said.
As the Big banks up their game
According to research by Grant Thornton, customer perceptions of services delivered by the biggest banks, and their subsequent loyalty towards them, has largely increased. The survey of 4000 customers found that five out of the biggest banks in the study improved their ranking, with the remainder remaining largely unchanged.Read more
BBA report highlights the changing nature of retail banking
BBA CEO Anthony Browne writes in the Sunday Telegraph (p6) that the age of “Captain Mainwaring-style banking” has been superseded by technological advances which have made banking for customers “far easier and faster”. The article appears ahead of Tuesday’s annual Mansion House dinner, at which the BBA will launch its second ‘Way We Bank Now’ report which will show how digital banking, such as mobile apps and contactless cards has “transformed speed of service” of retail banking. Mr Browne adds that bank branches will remain integral for big decisions such as taking out a mortgage, but notes how digital innovation not only improves service for consumers, but also increases competition on the high street as banks look to attract customers with the latest technology.
In a separate article the Sunday Telegraph’s (p1) James Quinn notes that some banking models such as Metro Bank and Handelsbanken focus on bank branches, and that where there are branch closures alternatives such as mobile vans or the Post Office network are available for consumers. Mr Browne appeared on the Sky News Murnaghan show to discuss the report, whilst last night BBC London Radio’s Nikki Bedi discussed whether “Captain Mainwaring-style banking” was still in demand. In response to Mr Browne’s article, Jane Warren writes in the Daily Express (p25) that although online banking is on the rise, the “personal touch” of “Captain Mainwaring-style banking” is what many people still look for.
Competition and innovation in the banking sector heats up
In an interview with the Telegraph (B5) Santander UK CEO Ana Botin discusses how “being different is critical” to challenging the more established banks, citing the bank’s partnership with Funding Circle. In Saturday’s Telegraph (p34) Jeremy Warner argues that competition rather than regulation will improve conduct in the banking sector. In addition, following the comparison website uSwitch’s survey on current accounts, the Mail of Sunday’s (p82) Jeff Prestridge states that “the dominance of the big banks is under threat like never before”. Read the BBA’s Promoting competition in the UK banking industry report here.
The Sunday Times (£, p3) reports that industry body Innovate Finance will launch this month to promote Britain’s role as a global centre for financial technology. The Guardian (p43) looks at Osper, a mobile-only banking service designed for eight to eighteen year olds, which aims to “instil good money habits earlier in life”. The paper (p42) also points to Barclaycard which has just launched its bPay contactless payment wristband.
BBA to address phone banking fraud
The Mail on Sunday (p77) reports that there has been a rise in the number of cases of “vishing”, where bank customers are duped into giving their account details to fraudsters over the phone. The BBA will meet with Conservative MP Sam Gyimah – who is campaigning on the issue – to discuss what more banks can do in this area. A BBA spokesman said: “The BBA will be launching a campaign later in the year to provide vital tips on what customers can do to avoid being caught out by these clever scams.”
Basel consider new rules on risk
The Basel Committee may propose changes to make it harder for banks to understate the riskiness of their assets. According to Europe’s Wall Street Journal (£, p1), the Committee is likely to suggest risk-weighting “floors”, which would set minimum risk weights for certain classes of assets.Read more
Barclays creates the Compliance Career Academy
Barclays has created a Compliance Career Academy in partnership with Cambridge University to improve staff training. Barclays’ chairman Sir David Walker said: “This new training will ensure that compliance staff could go a step further and mentor traders and other colleagues to improve culture and behaviour at the bank” (Telegraph, B1). The FT (£, p15) highlights Sir David saying that the foreign exchange market is in need of “fine tuning” rather than heavy-handed reform. The Guardian (p30) reports Barclays’ chairman saying: “We want people to conduct themselves, that has to be embedded in the business. If we can’t embed it from the top to the bottom we will have failed.”
For further information on banking standards please read the BBA’s Executive Director of Financial Policy and Operations Paul Chisnall’s blog on better banking standards here.
BoE: housing market could be a risk
In a speech at yesterday’s International Festival for Business in Liverpool, Deputy Governor of the Bank of England Sir Jon Cunliffe warned about high household debt after figures from Nationwide showed that the average price of a property in London had risen by more than a quarter over the past year. Sir Jon said that the steps taken last week by the Financial Policy Committee towards limiting risky mortgage lending “are insurance against the possibility of a sustained boom in the housing market…that could make a crash more likely and more severe” (Guardian, p29).
“Cash has had its day”
The Express (p20) writes about the fast growing behaviour towards paying with “plastic” and contactless payments. The newspaper writes: “three quarters of retail spending is on ‘plastic’” and “71% of British people admit to carry less than £20 in cash at any time”. For further information on the new bank payment services and technology developments in banking please read the BBA’s Banking on the move. The BBA will also publish a more in depth report called “It’s in your hands” next week.Read more
Labour appeals to business
Ed Miliband will today seek to strengthen his party’s relationship with the business world by telling a Policy Network conference that he wants to see “the great, dynamic businesses of our country being enabled to build the wealth, create the jobs and make the profits that will help them succeed”. Mr Miliband will also use his speech to outline plans for a National Infrastructure Commission (CityAM, p1).
However, the FT (£, p2) reports that the Labour leader will still look to break up markets such as banking and energy which he views as uncompetitive. Speaking on Newsnight, BBA CEO Anthony Browne said: “I think they [banks] need reassuring about what Labour’s intentions are about whether they have a positive vision about banking and the role that banks can play in the economy and society.” The BBA’s report into promoting competition in the banking industry can be read here.
House prices rise to pre-crisis levels
Data from Nationwide Building Society reveals that average UK house prices have risen above their 2007 peak (Times, £, p4). The Guardian (p24) reports that London property prices have increased by 26 per cent over the past year, with the average price of a house in the capital topping £400,000 for the first time. Scotland saw the slowest annual growth of 5.4 per cent, writes CityAM (p3).
Bank robbery numbers fall
The Times (£, p15) cites BBA figures which show that bank robberies in the UK have declined from 847 in 1992 to 108 in 2012. In London, there were 291 raids in 1992 compared to just 26 in 2012.Read more
Number of Post Offices with bank accounts set to double
The Post Office will be doubling the number of branches that offer current accounts according to the Guardian (p22). By the end of September 239 local Post Offices will offer access to the organisation’s three accounts, all run through a partnership with the Bank of Ireland. According to the article: “Since it introduced the accounts, competition has heated up in the market, with Tesco recently launching an account, TSB releasing a new deal following its demerger from Lloyds, and M&S overhauling its range”. The Post Office described its products as “a real challenger [to] the high-street banks”.
Last week the BBA published a new report on growing competition in the UK market and what can be done to encourage and strengthen new banking entrants.
Bank of England split on borrowing rules
The Telegraph (p3) and the FT (£, p3) report on the minutes of the last Financial Policy Committee meeting which revealed that some members were concerned that setting a high loan-to-income (LTI) cap on mortgage lending might imply that the Bank endorsed borrowing at this level. These members thought that it might be preferable to lower the LTI multiple and open mortgage lending out to more borrowers. Last week the committee agreed to recommend that lenders should not issue more than 15 per cent of new mortgages worth more than 4.5 per cent of the borrowers income. The minutes also revealed that there was some division on whether a cap should be set on the volume or the value of mortgages, with members believing that “neither was ideal in isolation” but agreeing that a dual measure would be too complicated.
FCA warn of possible fines over swaps mis-selling
Yesterday, Nausicaa Delfas, head of the FCA’s specialist supervision department, told the Treasury Select Committee (TSC) that the regulator has not ruled out taking “enforcement action” against banks following the mis-selling of interest rate hedging products. The Times (£, p42) reported comments made by Ms Delfas at a TSC hearing yesterday, where she told the committee that the FCA would consider whether further measures were needed once the voluntary redress process is completed.
At the same evidence session on SME lending the FCA’s Chris Woolard, director of risk and research policy, suggested that the regulator could create a nursery for new banks to help them deal with rules on risk and capital and improve competition in the SME market (CityAM, p12)Read more
Savers expected to deposit £1 billion into new ISA regime
The Government’s new rules for the ISA regime come into force today, allowing savers to deposit up to £15,000 tax-free in either cash accounts or stocks and shares, or any combination of the two. The Telegraph (p1) writes that savers have reportedly held off depositing in ISAs since the Chancellor announced the reforms in the Budget and suggests that pent up demand could lead to more than £5 billion being deposited by the end of the month.
Since the moves were announced in the March Budget banks have been getting ready to help customers take advantage of the new regime and support moves to promote a nation of savers. BBA Retail Policy Director Peter Tyler explains what banks have done to make it easy to switch in his latest blog.
Mortgage approvals fall to lowest levels since June 2013
A number of newspapers report Bank of England data showing that approvals for mortgages were down 18.7 per cent in May 2014 from their recent peak in January 2014 (Independent, p47). The news that approvals had fallen for the fourth consecutive month comes after last week’s intervention from the Bank’s Financial Policy Committee to cap high value mortgage lending and may reflect the effect of the new Mortgage Market Review guidelines, according to the Telegraph (B1).
Commenting on yesterday’s Bank of England data, the BBA’s Chief Economist Richard Woolhouse said: “Today’s data shows that mortgage approvals fell for the fourth consecutive month in a row to a level 20% below their January peak – still around half the pre-crisis level. This provides the strongest evidence so far that the housing market is cooling and suggests that the Mortgage Market Review is having an impact. Meanwhile, there’s good news on the lending front too. New business borrowing in the past three months was 19% higher than over the same period last year.”
Large banking sector would pose “a big risk” to an independent Scotland
A survey of the 1,000 biggest banks by The Banker suggests that the an independent Scotland could have responsibility for regulating a banking sector 12 times the size of its economy, writes the Guardian (p28). Commenting on the findings, Banker editor Brian Caplen said: “This would be even larger than the 10:1 ratio that proved so ruinous in Iceland and presents a significant risk for the country’s economic stability.” Responding, a Scottish government spokesman said: “These figures are outdated and do not reflect the reality of Scotland’s financial sector”.
Elsewhere, the Times (£, p1) reports that 54 per cent of Scottish voters will say no and 35 per cent will say yes to independence in the upcoming election, according to the latest YouGov poll. Forty nine per cent think that Scotland would be worse off if it becomes independent compared to 27 per cent who think it will be better off. The Times’ editorial (£, p24) argues that whilst the Better Together has not been impressive, the polling shows that the campaign’s fundamental arguments are strong.Read more