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.
Appeals process improves business lending process
The FT (£, p4) reports that Britain’s banks have improved how they lend to smaller businesses according to analysis by the independent external reviewer of the business finance appeals process. Professor Russel Griggs found there were more appeals in the year to the end of March, but fewer of these were upheld. Professor Griggs said that credit scoring was the main reason behind rejected finance applications. The article quotes BBA Chief Executive Anthony Browne saying: “Today’s report shows that the appeals process is working and that thousands of businesses have benefited. Seven out of 10 requests for bank finance are approved. With interest rates at historically low levels there has rarely been a better time to approach your bank for a loan.” There is further coverage in the Times (£, p45) and Independent (p 55).
To find out more about the Appeals process visit the Better Business Finance website.
Competition from challenger banks hots up
In Saturday’s Times (£, p63), Anne Ashworth wrote about the wave of new current accounts on offer from challenger banks. Terms and conditions are often so attractive on these accounts that some observers have dubbed them “pseudo savings accounts”. Further evidence of the vigorous competition in Britain’s banking sector is provided by news in the FT (£, p19) that Tungsten Corporation, Edmund Truell’s digital invoicing start-up, is set to join the small business lending market. Meanwhile, in an interview with the Observer (p46) Tesco Bank Chief Executive Benny Higgins stresses that his bank will compete by being different. He says of the banking market: “There are going to be fewer branches. It’s going to be a much more digital world and customers will have a more obvious choice.” Anthony Browne appeared on the Murnaghan programme of Sky to discuss this issue on Sunday morning.
The Sunday Times (£, p7) looked at the large number of new and growing banks in the marketplace challenging the more established players. It concludes that new technology could be more disruptive than new entrants: “The payment systems running on mobile phone networks are superseding the banking system in many emerging markets. Lurking in the background are the richest companies in the world. Apple has a long-established payment network through its iTunes operation. If Google bank were to come into being, parochial debates about high street branches could become pointless.” In El Pais ING CEO Ralph Hamers says all banks are vulnerable to companies such as Facebook and Google as they have a lot to learn on use of Internet technology.
Carney sets out shadow banking reforms
Writing in the FT (£, p13), Bank of England Governor Mark Carney sets out his plans to reform the shadow banking sector. He says: “oversight and regulation of shadow banking is being strengthened so that authorities can be alerted to the excessive growth of leverage and liquidity risks”. Another piece in today’s FT (£, p11) explores China’s shadow banks.Read more
Mansion House: interest rate rises on way and new powers to tackle housing bubbles
In his Mansion House speech last night Mark Carney warned that an interest rate rise “could happen sooner than markets currently expect”. He stressed that any rises would be “gradual and limited”. The Guardian reports that the pound has risen sharply by 1.5 cents to the dollar this morning in response.
The Chancellor announced that, “I am acting against future risks in the housing market by today giving the Bank of England new powers to intervene and control the size of mortgages compared to family incomes and house values.” He also announced changes to planning rules to speed up development of brownfield sites. In the Guardian (p4) mortgage brokers criticise the move as “jump[ing] the gun” before the impacts of the Mortgage Market Review are known.
Economist: G20 needs to take action to stop de-risking
A leader in the Economist (p18) looks at how the global crackdown on terrorist financing and the huge fines meted out to banks thought to be financing dangerous people is causing negative consequences for the world’s poor. It writes “Cut the flow of money to terrorism, their thinking goes, and it will wither… Yet there are two problems with this approach. First, the regulations are so demanding and the fines so large that banks are walking away from countries and businesses where they perceive even the faintest whiff of risk.” Secondly, “Restrictions on banks will encourage terrorists to avoid the banking system. That may hinder rather than help the fight against terrorism.” It concludes: “When the G20 meets later this year it should urge its members to accept the risk that even in well-regulated banking systems money may find its way to terrorists. Banks should be given clear guidance on necessary safeguards, but not held responsible for every breach.”
The WSJ also reports that the international Financial Action Taskforce will meet next month to decide whether to blacklist Afghanistan following failure by the Afghan government to pass new anti-money-laundering laws.Read more
Chancellor to announce measures to tackle benchmark manipulation
In tonight’s Mansion House speech, the Chancellor of the Exchequer George Osborne is expected to announce tougher rules on foreign exchange, fixed income and commodities benchmark manipulation. (FT, £, p3). Speaking on the Today programme Economic Secretary to the Treasury Andrea Leadsom said that the Government wanted to “make it clear to traders that if you abuse these rules you will end up in prison”. She said that the Government would launch a “Fair and Effective Markets Review” that would “consider which benchmarks should be further regulated” and that a consultation would start in the autumn with the review concluding in a year’s time.
Also, speaking on the Today programme the BBA’s Chief Executive Anthony Browne said: “It’s absolutely true that we need good regulation, clear regulation that sets out what people can and can’t do… , we need to absolutely make sure that the bad apples are rooted out and that London should be setting the gold standard internationally for the way that its financial services work… one of the important things for what the Chancellor is planning is obviously to restore integrity to the markets, but do it in a smart way that doesn’t damage the competitiveness of London and simply drive business to other financial centres like New York or Singapore.”
The BBA’s press release in response to the Chancellor’s speech can be read here.
IMF warns about housing bubble
Data released yesterday by the International Monetary Fund showed that “house prices are well above their historical average in many countries” (FT, £, p1).This data follows suggestions by IMF managing director Christine Lagarde that Britain’s housing bubble poses risks to the country’s economic recovery.
The Times (£, p46) reports thatthe Bank of England’s new deputy governor Ben Broadbent has said that the Help to Buy scheme is safe and is not stoking a house price bubble.Read more
Bank launches cyber defence programme at BBA conference
At the BBA’s cyber conference yesterday, the Bank of England’s executive director of resolution Andrew Gracie unveiled plans which will see hackers working for security companies replicate cyber-attacks on lenders to expose vulnerabilities in their systems (Independent, p49). Mr Gracie said that the idea of the plan – known as CBEST – is “to bring together the best available threat intelligence from government and elsewhere.” The tests will take eight weeks, following which the individual banks, Bank of England and hackers will discuss problems that have been identified (CityAM, p3).
Borrowers return to fixed-rate mortgages
Bank of England statistics show that 81 per cent of mortgages approved in the first quarter of this year were for fixed-rate loans, a 10 per cent rise, as “speculation…intensified” over the timing of the first interest rate rise since 2007, writes the FT (£, p3). The Times (£, p2) reports that loans worth more than 3.5 times income coupled with a deposit of less than 10 per cent rose to 2.6 per cent of total mortgages – their highest level in five years.
UK economy exceeds pre-recession peaks
New figures from the National Institute of Economic and Social Research suggest that the economy has grown beyond its pre-crisis level, with the FT (£, p2) reporting that the economic recovery “shows signs of broadening” as manufacturing growth accelerated in April. The think tank’s analysis reveals that the economy grew by 0.9 per cent in the three months to May, with research fellow Jack Meaning noting that “there is some rebalancing towards investment activity” (Telegraph, B1).
Tesco Bank launches current account as Lloyds announces TSB share price
Tesco Bank has today released the details of its new current account product designed to compete with high street banks for retail banking customers, reports the Telegraph (B3). The move means the supermarket bank now offers the full complement of retail banking products as it tries to add to its existing six million customers. Whilst describing the new account as “fundamentally… a digital business”, Tesco intends to use its extensive network of supermarket stores to compete with more established high street banks, writes the Guardian (p20).
The announcement comes as Lloyds Banking Group issued the prospectus for the sale of 25 per cent of shares in TSB by 20 June, giving potential investors details of TSB’s asset book and revenue streams (Telegraph, B1). A number of papers report that the share price is below the market value to entice investors (FT, £, p22). TSB already has a 4.5 per cent share of the current account market and is one of a growing list of “challengers” competing for retail banking customers. Writing in the Mail (p59), Alex Brummer argues that the share sale of TSB and launch of Tesco’s current account demonstrate that “credible challenger (banks) that genuinely know something about crowd pleasing are now arriving”.
Sign up for the BBA’s competition in banking conference featuring City Minister Andrea Leadsom and Shadow Financial Secretary to the Treasury Cathy Jamieson on 24 June here.
Bank’s risk survey shows confidence as global market volatility hits low
Economic downturn and global diplomatic tensions stemming from the Ukraine crisis were identified as the biggest risks to the British economy in the Bank of England’s twice yearly systemic risk survey, writes the Times (£, p40). Falling residential property prices accounted for the largest relative rise in risks, climbing from 25 per cent in 2012 to more than 40 per cent. Despite the concerns, survey also revealed that the Bank is more optimistic that the banking sector could weather any unexpected setbacks and bankers are confident about managing any slide in property prices (FT, £, p4).
The FT (£, p1) also reports that unconventional monetary policy and other central bank interventions have sent share prices to “record highs and interest rates to historic lows” leading to less volatility in global markets. FT reporters (£, p32) discuss the potential implications of “calm markets”, arguing that they may be a “policymakers dream” but carry dangers because “volatility ensures discipline”.
“Brexit” would leave UK needing to renegotiate trade treaties claims report
The Telegraph (pB4) reports the findings of a new study from the Centre for European Reform (CER), featuring BBA Chairman Sir Nigel Wicks, suggesting that a British exit from the EU would lead to a loss of “regulatory sovereignty” and the UK needing to renegotiate treaties with its major trading partners. This would “pose a grave threat to the UK car industry and the City of London, and see foreign investment dry up,” suggests the CER.
Elsewhere in the Telegraph (pB4) CBI director-general John Cridland argues that in order to restore growth across Europe, the EU needs a “strong and reform-minded commission president, a fundamental change in the internal governance of the commission, and a council focused strictly on growth and competitiveness”.Read more
BBA Cybercrime summit
The Telegraph (p1) reports on the forthcoming BBA study on cyber risk and speaks with Chief Executive Anthony Browne about this week’s conference on cybercrime. The article lists some of the organisations expected to attend the event – including Interpol, Europol, the United Nations and the Home Office – and quotes Mr Browne emphasising the need for more cross-industry collaboration on the issue: “We think there’s a need for an industry-wide intelligence sharing hub. The industry is fragmented in its response to this. It’s one of the biggest prudential threats to banking – a major concern at chief executive and chairman level.”
TSB share prices announced
TSB, the new challenger bank set to float later this month, has unveiled a prospective share price of between 220p and 290p (BBC). Lloyds Banking Group have said that they expect the final share prices to be confirmed around the 24 June. You can read a blog from BBA Chief Executive Anthony Browne on levelling the playing field for challenger banks here.
Analysis of ECB measures
BBA Chief Economist Richard Woolhouse was one of five experts who commented in Saturday’s International New York Times (p9) on ECB measures to combat the threat of low inflation in the eurozone. Mr. Woolhouse said that banks are likely to take advantage of the ECB’s effort to bolster lending to businesses, but warned that this may not necessarily translate to a broad boost in the real economy if demand for credit remains weak in parts of Europe.
Peer-to-peer lending consultation
FT Money (£, p4) revealed over the weekend that HM Treasury is poised to launch a consultation on peer-to-peer lending. Expected to launch next month, the consultation will look at how investors might gain access to the market through individual savings accounts and the possibility of creating a new Isa for this purpose. HM Treasury said: “The Government will consult informally on allowing peer-to-peer loans within Isas before launching a public consultation later this year.”Read more
Doubts over BBC’s PPI figures
CityAM (p15) reports that both the Financial Conduct Authority (FCA) and the BBA “do not recognise” the £1 billion worth of PPI compensation that the BBC claims has been underpaid. The newspaper states that the FCA has “not been given access to the numbers or the methodology” of the analysis, commissioned by the broadcaster from a pundit. Read BBA Director of Media Relations Rob Watts’ thoughts on why fair compensation is vital, but so is fair reporting.
ECB in historic rate cut
The FT (£, p1) leads with the ECB’s decision to cut the main interest rate to 0.15 per cent and the deposit rate to minus 0.1 per cent. ECB President Mario Draghi said that although he currently saw no signs of deflation, “we are reacting to the risks of a too prolonged period of low inflation” (Times, £, p39). The central bank also announced €400 billion (£325 billion) of cheap loans for Eurozone banks to boost business lending.
All 24 members of the governing council agreed to the package, whilst Mr Draghi suggested that quantitative easing would be considered if ultra-low inflation persisted. The Independent (p1) writes that these actions “reflect the fact that the continent has still not recovered from the crisis that pushed the single currency to the brink of collapse two years ago”. Read BBA Chief Economist Richard Woolhouse’s views on the ECB’s actions here.
TSB reveals reward policy for staff
TSB CEO Paul Pester has announced that all 8,600 of its staff will be given £100 worth of shares in a move which he explains is “key to delivering a consistently great customer service”, writes the FT (£, p18). The Times (£, p44) notes that bonuses at the ‘challenger’ bank will be limited to 100 per cent of an employee’s salary. Economic Secretary to the Treasury Andrea Leadsom said that it was important that “banks have pay policies which are fair, proportionate and reward performance”.
The BBA’s Competition Conference – at which both Ms Leadsom and Shadow Financial Secretary to the Treasury Cathy Jamieson will speak – will discuss the rise of challenger banks such as TSB. Register for the event here.
Debate continues over EU
During the G7 summit in Brussels, President Obama stressed that US interest remained in a “united” UK which remained a full member of the EU (FT, £, p1). Meanwhile, the Telegraph (p4) states that Prime Minister David Cameron has warned that Britain risks “drifting” towards an EU exit if Jean-Claude Juncker is elected as head of the European Commission, adding that “it is important that we have people running institutions of Europe who understand the need for change”. However, Mr Juncker replied that he would “not be forced to get on my knees before the British” (Times, £, p1).
BBA CEO in charity run
The Evening Standard notes that BBA Chief Executive Anthony Browne was one of 10,000 who yesterday participated in Run2work day. The event – which was also attended by MPs, Olympians and Para-Olympians – encourages people to run their commute and donate their saved fare to charity.Read more
PPI could have been under-compensated up to £1 billion
According to a BBC News investigation, people mis-sold Payment Protection Insurance could have potentially been under-compensated. The allegations are reported in the Telegraph (p12) and the Mail (p25), who suggest that the shortfall is due to fees and charges attached to the mis-sold policies which haven’t been included in the compensation calculations. In response, a spokesman for the BBA said: “Any mis-selling of any financial product is wrong. That’s why banks worked hard with regulators to ensure the right compensation scheme was introduced for anyone who has been mis-sold Payment Protection Insurance. More than £14 billion of redress has already been paid and billions more is expected to be distributed in the coming months. If you feel you did not receive the compensation you deserve from a PPI claim, we urge you to get in touch with your bank at the earliest opportunity.”
Queen’s speech announces pensions and small business reforms
The Queen’s Speech announced that the Coalition’s last year of government will focus on pensions. New “Dutch-style pensions” will be launched also known as collective defined contribution (CDC) schemes (Telegraph, p5). These pensions allow thousands of people to pay into the same retirement scheme and also share the risk. The Queen also announced a Small Business, Enterprise and Employment Bill which will help small businesses start, grow and employ people through support for those which wish to export and frequent review of regulation.The BBA’s Chief Executive Anthony Browne welcomed the Bill by saying: “It’s great to see a Bill devoted entirely to supporting smaller businesses. This could give a shot in the arm for entrepreneurs up and down the land” (Independent, p8). The BBA’s briefing for members on the Queen’s Speech can be read here.
ECB likely to loosen monetary policy
The ECB will meet on Thursday to discuss how to tackle the eurozone’s low rate of inflation. According to Eurostat, GDP in the EU expanded by 0.2 per cent in the first three months of 2014 (Guardian, p27). This news was followed by a “worse than expected” drop in Eurozone inflation to 0.5 per cent in May and the key purchasing managers index results showed that although the EU is on track for its best economic growth since 2011, the recovery is still fragile. Meanwhile, the ECB has kept interest rates low since November, “repeatedly promising to act if necessary to avert a bout of destructive deflation” (Telegraph, B4). Read BBA’s chief economist Richard Woolhouse’s blog will the ECB “do what it takes” to support the economy and raise inflation?Read more
Low inflation increases pressure on ECB
Eurozone inflation fell unexpectedly last month to 0.5 per cent – under the target rate of 2 per cent – further increasing pressure on ECB president Mario Draghi to act (FT, £, p1). Mr Draghi is now expected to introduce a package of measures which could include quantitative easing as well as incentives for banks to increase business lending. The President had previously stated that he would wait until June when the ECB updates its forecasts to make any decision on what action to take. Economists have said that weak inflation could exaggerate the debt burden in the region and lead to further instability (Times, £, p37).
New entrant could float
Both City AM (p8) and the FT (£, p18) note Shawbrook Bank’s £16.8 million profit and speculate whether this new “challenger” bank could be set to float next year, as OneSavings and TSB are scheduled to list over the next few weeks. The FT also names Aldermore and Virgin Money amongst other newer entrants expected to launch a public offering in 2015. You can listen to an interview with the chief executive of Shawbrook, Richard Pyman, on this morning’s episode of Radio 4’s Today Programme here (1:16).
See BBA Chief Executive Anthony Browne’s blog on levelling the playing field for new and growing banks.
Drop in ISA deposits
The Telegraph (p2) reports on the drop in ISA deposits this April, speculating that savers are holding back cash until new measures announced in the Budget are implemented. The Bank of England have revealed that the amount households deposited in ISAs during April dropped at the fastest monthly rate since the accounts were introduced in 1999. In July new measures will be introduced to allow savers to receive tax free returns on deposits up to £15,000 and the 10p starting rate of tax on income savings will also be abolished in April 2015.
You can read BBA Chief Executive Anthony Browne’s thoughts on how the Chancellor could rebuild a savings culture in the UK here, and learn more about how you can contribute to our consultation on savings here.Read more
Chancellor expected to announce tougher forex rules
It is widely reported that George Osborne will use his Mansion House speech on 12 June to announce new oversight of foreign exchange trading (Guardian, p25). The FT (£, p2) writes that one option is to replicate changes made to Libor by bringing the forex benchmark within the scope of statutory regulation, which would make manipulation a criminal offence. The move could give the Financial Stability Board new powers over the market as the Government seeks to improve the City’s image and retain the UK’s position as the leading centre for the £4 trillion international market. In a blog, BBC business editor Kamal Ahmed argued: “There is a wider political point… If the public is to regain trust in the financial system, then people must have faith that the markets are operating fairly.”
European Commission urges UK to curb housing market as support for Juncker grows
The UK Government should raise taxes on high value houses and rein in their Help to Buy mortgage assistance scheme to guard against a destabilising property bubble, according to a new European Commission report (Times, £, p1). The proposals form part of a wider document setting out country-by-country ideas on how to generate stronger and more sustainable growth across Europe. A Government source quoted in the Telegraph (p1) said: “The European Commission is right that more effort is required across Europe to secure growth… That is why the UK will continue to work through our long-term economic plan.” The intervention comes as German Chancellor Angela Merkel publically back Jean-Claude Juncker saying “I am working to ensure [Juncker] gets the necessary majority in the council, in order to become the next president of the European Commission”.
In the European press, Tony Blair used an interview in Le Monde to label David Cameron’s strategy of “threatening with British exit was counter-productive”, adding: “The key for winning the debate on the future of Britain is to win the debate on the future of Europe itself.” Meanwhile Belgian paper La Libre leads with claims that “Merkel wants to keep the UK in the EU”.
Economy broadening out as mortgage approvals fall and manufacturing output increases
The UK economy is experiencing a balancing out of growth as mortgage approvals fell for the third consecutive month (FT, £, p2) and British manufacturing production and employment increased for the 15th and 13th consecutive month respectively. The Bank of England’s May 2013 Bankstats showed that mortgages fell to a nine-month low of 62,918, possibly as a result of banks adjusting to the new Mortgage Market Review rules (Times £, p40), while the MARKIT/ CIPS UK manufacturing purchasing managers’ index remained steady at 57.
Latest Nationwide figures show that house prices rose by 0.7 per cent in May, up from 1.2 per cent the month before. In a blog, BBC business editor Kamal Ahmed writes that the building society has suggested that a natural “correction” is due and that the market is already slowing. Commenting on the mortgage figures, BBA Chief Economist Richard Woolhouse said: “These figures pour cold water on claims that Britain is experiencing an overblown housing boom. As the BBA’s figures for the same period have already shown mortgage approvals fell in April for the third consecutive month.”Read more