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.
Challenger banks could quadruple market share by 2018 – “opportunity is enormous”
The three biggest challengers in the current account market are on track to open at least 2m accounts this year, according to the FT (£, p17). The article cites a recent study by Jefferies which predicted that efforts by big banks such as Lloyds and Santander to shrink their loan books would “open up a £100bn loan pool”. If challenger banks took on that lending they could quadruple their market share – to 7 per cent – within five years, it said. “Our research on the UK banking sector concludes that the utility banks will cede four points of lending market share to the challenger space over the next five years. If this group of banks takes share simply at the same rate that it has over the past two years, its market share would double by 2018. Either way, the opportunity is enormous.” In the Mail on Sunday Jeff Prestridge says this growth is “a triumph for the current account switch service introduced by the Payments Council last September to stimulate greater competition”. The front page of the Sunday Express reported that “the cost of borrowing is falling as providers battle to win new customers, with rates plummeting to record lows.” It quotes Charlotte Nelson of Moneyfacts saying: “Lenders are competing hard to offer ‘best buy’ deals in a bid to entice customers.”
BBA in the news
On Moneybox this weekend BBA Chief Executive Anthony Browne discussed issues with relatives using Powers of Attorney to do a loved one’s banking for them and stressed the complex decisions that banks need to take when trying to assist customers.
The BBA’s Irene Graham appeared on Wake up to Money and explained that most of the banks are close to completing their reviews into Interest Rate Hedging Products.
ECB and BoE plan to boost securitisation
The European Central Bank and the Bank of England set out proposals on Friday to resurrect the European Union’s market for asset-backed securities and help the flow of credit to smaller businesses. Reuters quotes BBA Executive Director Simon Hills saying: “I think this (report) is very helpful. As the economy recovers, alternative sources of finance for real-economy assets will have to be found, and securitisation is the No. 1 choice.” Today’s FT (£, p6) reports that academics have expressed scepticism about the plan. Saturday’s FT (£, p3) also notes that the Bank called for the introduction of a comprehensive business register to help boost credit for companies. There is also widespread speculation that the ECB plans to introduce a new package of monetary policy measures including reducing one of its key interest rates to below zero.
EU splits on Commission Presidency candidacy
FAZ reports that the German Social Democrats have called on Merkel to support Jean-Claude Juncker’s candidacy despite the opposition from David Cameron, whom they accuse of “not understanding Europe”. The CDU/CSU is said to be split on the issue. The Guardian (p11) reports that Angela Merkel said on Friday that “I am now conducting all of my talks in the spirit that Jean-Claude Juncker should become president of the European Commission” but that her top EU advisers are opposed to his candidacy as does Italian PM Matteo Renzi.
There is also widespread reporting of suggestions that the British PM said that if Juncker was appointed it would strengthen those campaigning for the UK to leave the EU. Juncker has accused the UK of “blackmailing” the EU and he told Bild am Sonntag that “A large majority of both Christian Democrat and Socialist heads of state and government in the European Council support me… other heads of government should come on board” in the coming weeks. He insisted that he was “confident of being chosen as the next European Commission president by mid-July”. A poll in the paper showed that 43 per cent of Germans supported Mr Juncker, while 34 per cent opposed him. Der Spiegel had an editorial stating that “the EU should no longer allow itself to be blackmailed by Great Britain”. The Sun is typically robust with the headline “stick it up your Juncker”.
The front page of the Times (£) quotes Tony Blair who has described the EU election results as a “wake up call” to EU leaders and called on them to lead by offering reform.Read more
Commercial real estate drags down net lending
There is widespread coverage of the £2.7 billion drop in net lending to businesses under the Funding for Lending Scheme. (FT, p2) As the Telegraph notes (B5) this was driven largely by “lenders winding down portfolios of commercial real estate loans”. The Telegraph quotes the BBA saying that “As few as 7pc of businesses see access to credit as a barrier to their growth and success”. The Express (p59) reports that “the British Bankers’ Association insist FLS has brought down loan costs”. The Herald (p28) quotes separate BBA research: “£6.8bn of new borrowing was approved in Q1, 10 per cent more than the same quarter of last year.” The Guardian quotes Simon Hunt from PWC saying: “There are also issues around less demand for loans directly from the banks, as alternative financing options, such as crowdfunding and peer-to-peer lending, increasingly become available to SMEs.”
For the full BBA response to the Funding for Lending data see here
Help to buy boosts bottom end of the housing market
Figures release by the Treasury show on the help to buy scheme suggest that the scheme is boosting borrowing for first time buyers and those at the bottom of the market. Almost half of all completions were for properties worth less than £125,000 and take-up has been particularly concentrated in Scotland, Yorkshire and the northwest and east of England. (FT, p2). In the Guardian Larry Elliot suggests that Bank of England Governor Mark Carney should “halve the limit on Help to Buy mortgages to £300,000. It would have zero impact on transactions but would send out a strong message.”Read more
MPC’s Martin Weale warns BoE on gradual rate rise
In an interview with the FT (£, p2) Martin Weale, a member of the Bank of England’s Monetary Policy Committee, has warned that the “gradual and limited” interest rate rises proposed by the Bank could put borrowing rates up at a faster-than-expected one percentage point a year. Mr Weale suggested that interest rates should start to rise sooner if sharp increases are to be avoided later down the line. He told the paper: “If you want to have baby steps you do have to start sooner. The question is: how close are we getting to ‘soon’?” The paper emphasises the importance of Mr Weale’s comments, saying that economists believe he will be the first MPC member to vote for a rise.
ECB under mounting pressure to act to avoid deflation threat
A slump in household and corporate lending has increased pressure on the European Central Bank (ECB) to act to avoid eurozone deflation (Times, £, p43). Data from the ECB also showed that the M3 money supply – a general measure of cash in the economy – grew more slowly than annual forecasts had expected, and the three-month moving average M3 growth rate decreased to one per cent last month, far below the ECB’s four point five per cent target.Experts predict that the ECB will cut interest rates at next week’s meeting, but bank president Mario Draghi has reportedly dropped hints that some additional stimulus may also be launched with quantitative easing.
SME surveys reveal majority not looking for finance
The Times (£, p39) and the Telegraph (B3) both look at the results of the Business Banking Insight survey published yesterday by research companies ICM and BDRC respectively. The survey, commissioned by the Chancellor and launched by ICM, the Federation of Small Businesses and the British Chambers of Commerce, suggested that 85 per cent of businesses had not sought finance in the last year. The SME Finance Monitor found that 33 per cent of firms reported using external finance – which includes bank loans, overdrafts and credit cards. The Times said that opinion was divided as to whether this meant that more businesses were turning to alternative providers or whether an increase in bank deposits is lessening the need for bank finance. Commenting on the survey, the BBA said: “It’s great to see that businesses are gaining in confidence when it comes to getting bank finance and that 80 per cent are happy with their current finance arrangements. For the first time in this survey’s history as few as seven per cent of businesses see access to credit as a barrier to their growth and success.”Read more
Lagarde accuses banks of “delaying new rules”
A number of newspapers highlight comments made by the International Monetary Fund (IMF) managing director Christine Lagarde accusing the banking industry of “prizing short-term prudence, today’s bonus over tomorrow’s relationship” and saying that the industry had “not changed fundamentally in a number of dimensions”. Bank of England Governor Mark Carney echoed Lagarde’s words by saying that “demonstrations of corruption” in the financial markets had damaged the “social fabric” (FT, £, p1). The Times (£, p39) and the Guardian (p19) quote the BBA saying that: “A huge amount of work has gone into making the banking sector safer in recent years. The industry is determined that taxpayers’ money is never again used to bail out banks.” The BBA’s full press release can be read here.
Business Banking Insight launch
A new website that will allow companies to see how banks’ services are rated by other SMEs will be launched today, reports the FT (£, p4). This initiative has been designed to boost competition and supported by the Federation of Small Businesses, British Chamber of Commerce and the BBA. Commenting ahead of making a speech at the launch, BBA Chief Executive Anthony Browne said: “Whether large or small, every bank will want to be at the top of these ratings, so this can only help spur competition between banks, leading to even more innovation, new products and better service for businesses.”
BBA high street stats show that the value of mortgages is at the highest in six years
The FT (£, p 20) reports that the BBA’s high street lending stats, released yesterday, show that the value of mortgages taken out in April has been the highest in six years. The Times (£, p38) highlights that the number of approvals for house purchases has fallen to an eight month low despite it still being higher than pre-crisis levels. The Telegraph (B5) asserts the reasons behind the fall in mortgage approvals are “new rules introduced by the Financial Conduct Authority last month that were designed to ensure borrowers are issued with mortgages they can afford”. Commenting on yesterday’s stat release, BBA’s Chief Economist Richard Woolhouse said: “Our figures show that housing market is mixed. The value of mortgages taken out in April was the highest for six years however looking ahead mortgage approvals have fallen three months in a row. The amount of borrowing is however still well below the levels we were seeing before the financial crisis.” The BBA’s full press release can be read here.Read more
BBA high street lending stats shows highest monthly mortgage lending since August 2008
The BBA has today released the high street lending statistics for April 2014. The figures show that new mortgage lending was 52 per cent higher than a year ago at £12.2 billion. Commenting on the release, BBA Chief Economist said: “Our figures show that housing market is mixed. The value of mortgages taken out in April was the highest for six years however looking ahead mortgage approvals have fallen three months in a row. The amount of borrowing is however still well below the levels we were seeing before the financial crisis.”
Government to include proposals for new referrals systems in Queen’s speech
The Telegraph (B1) reports that the Government is set to announce measures in the Queen’s speech which would ask banks to refer any business that they turn down for a loan to an alternative lender. The BBA already runs a similar scheme where major lenders refer businesses to Community Development Finance Institutions – for more information click here.
The Sunday Telegraph (B1) reported that the Federation of Small Businesses and the British Chambers of Commerce will tomorrow launch a new website which will rank banks for business customer satisfaction on their products and customer service. The Sunday Telegraph (B3) reported that campaigners have criticised the banks for not having paid out more in consequential loss claims to businesses sold interest rate hedging products. The BBA is quoted saying that the majority of claims will be settled on time and that: “Additional claims for consequential loss are dealt with on a case-by-case basis and in accordance with guidance laid out by the Financial Conduct Authority.”
Treasury maintains support for Help to Buy despite unease from the Bank
Chief Secretary to the Treasury Danny Alexander has indicated that the Treasury will continue to support the UK’s housing market via Help to Buy, despite signs of a price “bubble” in London (Sunday Telegraph). Danny Alexander said: “It would be a tragic mistake to allow the tail of London to wag the dog of the housing market in the rest of the country.” The intervention follows comments made by Bank of England Governor Mark Carney, who said “deep, deep problems” in the housing market represented the biggest risk to the country’s financial stability. Elsewhere, Monday’s FT (p1) led with the news that Lloyds and RBS have both cut mortgage lending in London as concerns grow that borrowers are becoming overstretched.
Lloyds announces 25 per cent floatation of TSB
Sky News has confirmed reports in this morning’s newspapers that Lloyds Banking Group will today sell 25 per cent of TSB as part of the £1.5 billion initial public offering on the London Stock Exchange. The relaunched bank serves more than 4.5 million customers via 631 branches. Commenting on the sale, Lloyds chief executive Antonio Horta-Osorio said: “It is already operating on the UK high street and is proving to be a strong and effective challenger, further enhancing competition in the UK banking sector.”
BBA asks public for ideas on how to promote a better savings culture
The Saturday Telegraph reported the launch of the BBA’s savings consultation, which seeks ideas for how to halt the “sharp decline in savings levels” which has been gathering pace “since the late 1970s”. The proportion of disposable income currently saved by British households is lower than France and Germany, with only those in the US saving less. One of the ideas proposed is the introduction of a “workplace Isa” that would allow employees to automatically set money aside from their wages unless they opted out.Read more
Sustained rise in UK business investment
Both the FT (£, p2) and the Telegraph (p1) report that business investment is at its highest level since 2008, with the longest period of sustained growth for 16 years according to ONS data. The figures show that investment rose 2.7 per cent compared with the previous quarter and was 8.7 per cent higher than a year ago. The Telegraph notes that business investment has now grown for five consecutive quarters, the longest period of expansion since 1998.
Alternative lenders increase share of new commercial loans
According to the FT (£, p20), alternative lenders – including insurance companies, debt funds and asset managers – are increasingly expanding into the commercial property market, with nearly a quarter of new UK commercial property loans coming from non-bank lenders according to a report from De Montfort University. Bill Maxted, one of the academics who conducted the research said: “There are more lenders in the market and there is real competition, with interest rate margins falling and loan-to-value ratios rising.”
Plastic banknotes introduced in Scotland
Approximately two million plastic banknotes will be introduced next year by Clydesdale Bank ahead of the Bank of England’s plans to introduce them in 2016 (Telegraph, B5). The limited edition £5 notes will feature an image of the Forth Bridge and be smaller than existing currency. The bank is one of three in Scotland authorised to issue banknotes, but has said that they have no plans to issue plastic notes generally.Read more
Bank of England to raise interest rates earlier than expected
Minutes from the Bank of England’s latest Monetary Policy Committee meeting show that the Bank is close to increasing interest rates above 0.5 per cent earlier than expected. The minutes, released yesterday, show “a variety of views on the appropriate path of monetary policy”. Governor Mark Carney argued that keeping rates lower for longer create “a greater risk of a build-up in financial imbalances” (Telegraph, p4), while Deutsche Bank UK economist George Buckley said: “[the debate was] clearly shifting in favour of moving rates in the not too distant future” (FT, £, p1).
Meanwhile, Mark Carney has written an op-ed in today’s Times (£, p37) outlining plans by the Bank to ensure that the insurance sector, which it also supervises, is properly pricing the risksthat they are selling.
CML figures show 36 per cent increase in mortgage lending
Data released by the Council of Mortgage Lenders shows that gross lending in April totalled £16.6 billion, up from £12.2 billion in the same month last year making it the highest monthly figure in six years. The news comes as banks have indicated they are considering whether to tighten borrowing requirements to reduce their exposure to unsafe lending ahead of the Bank taking measures to rein in the housing market (Telegraph, B1).
The Mail (p40) reports new research from the National Association of Estate Agents showing that 94 per cent of homebuyers last month were aged 31 or over, adding “homebuyers under the age of 31 have become an endangered species”. Forecasts by PwCsuggest that by the end of next year the average UK house price will be £285,000, whereas London prices average £560,000.Read more
Speed mentoring for businesses
The Sun reports that the BBA participated in a speed mentoring event at the London Chamber of Commerce, which saw 40 entrepreneurs meet with experienced business owners to gain guidance and advice (Sun, p43). Ruth Torjussen, owner of 21st Century Film said: “I’ve had one conversation with a mentor and it’s been brilliant…he’s advised on overall strategy and we’re meeting again next week”. More information can be found at mentorsme.co.uk.
Banks halt fines for bouncing payments
MoneyMail (p47) reports that banks are axing large one-off fines for borrowers who make a payment when overdrawn due to fears that it “might be judged unfair” following scrutiny by the Financial Conduct Authority (FCA) into overdrafts. A banking source told the paper: “There’s no way a £25 penalty for not processing a payment can be justified.”
Lloyds limit high income-to-loan mortgages
Lloyds has announced that it will limit a mortgage to no more than four times the customer’s income for a loan of over £500,000. Stephen Noakes, director of mortgages at the bank said: “This is a targeted response to an issue largely in the upper tiers of the London housing market.” (Times, £, p2)
The move comes after Bank of England Governor Mark Carney indicated concerns over the weekend that some borrowers were overextending themselves, with the FT (£, p1) stating that the Financial Policy Committee is “expected to consider further tightening affordability tests for new mortgages”. Meanwhile David Cameron told the Today programme that he would consider reining in the Help to Buy scheme if the Bank of England advised as such, before adding that both he and Mr Carney agreed that the scheme was “well targeted” (Guardian, p4).Read more
FOS reports rise in complaints over packaged accounts
The Financial Ombudsman’s annual complaints data shows that complaints about packaged accounts tripled to 5,667 in the year to the end of March, up from 1,629 the previous year, reports the Mail (p19). Total complaints were up 1 per cent on the previous year, with the vast majority legacy complaints relating to the mis-selling of PPI.
Commenting on the data, the BBA said: “All banks now ensure that any packaged account that is bought by a customer is right for their individual needs. Banks have been responding quickly to this increased level of complaints to resolve any issues for customers. Packaged accounts can be a convenient and cost effective product when you take advantage of the add-on services but it’s always a good idea to consider how many of the benefits will be directly of use to you, particularly if your circumstances have changed. If you have any doubts you should shop around and see if there is a product that more precisely fits your needs.”
PM downplays concerns about rising house prices
David Cameron has defended the Government’s Help to Buy scheme and suggested that house prices will not achieve pre-crisis levels until 2017/18, according to the Telegraph (p2). Responding to Bank of England Governor Mark Carney’s suggestion that the housing market was the “biggest risk” to the economic recovery, speaking on the Today Programme the PM said: “Help to Buy was not a return to irresponsible lending practices… [and] has made a difference”. Elsewhere, a new study by the Resolution Foundation predicts that 770,000 householders are at risk of becoming “mortgage pensioners” if interest rates rise because more than a third of their disposable income would be going on repayments (Independent, p1).
Senior ECB official signals shift in policy to tackle deflation
The Times (£, p40) reports that Yves Mersch, board member of the European Central Bank, has indicated that the bank would be willing to deploy both conventional and unconventional measures to tackle very low inflation in the Eurozone. Speaking in Munich, Mr Mersch said: “The likelihood that the governing council will already act at its next meeting in June has grown substantially.” The comments follow a recommendation by ECB chief economist Peter Praet to cut interest rates by 10 basis points.Read more
Lambert announces new Banking Standards Review Council
Sir Richard Lambert has announced his plans for a new Banking Standards Review Council (BSRC) this morning. The body, which will be independent of the banking industry, will require participating banks and building societies to commit to a programme of continuous improvement under the headings of culture, capability and customer outcomes, and to report back on their performance to the public every year. Bank of England Governor Mark Carney will chair a selection panel charged with finding the new Chairman and ratifying the new Chief Executive. Sir Richard will stay on as interim Chairman until a successor is found.
Commenting BBA Chief Executive Anthony Browne said: “This is an important step in the road to rehabilitating the UK’s banks. Changing the culture of an industry will not happen overnight but the focus on transparency and regular progress reports will help to drive continuous improvement. We have stressed the need for this body to be fully independent of the industry. The appointment of the Governor of the Bank of England to lead the selection process for the new Chairman sends a powerful signal about the clout that the new body will have. The work to drive up standards by concentrating on culture, capability and customer outcomes will not be a straightforward task. We have made this a key strategic priority for the BBA and we stand ready to assist the new Banking Standards Review Council to help it bring about the improvements in standards we all want to see.”
Sir Richard’s full report can be downloaded here. The BBA’s response to the initial consultation from February can be found here. The BBA’s submission to the Parliamentary Commission on Banking standards, which called for the introduction of the BSRC can be seen here.
Carney calls for vigilance on Help to Buy
All the papers report on comments by Mark Carney that the overheating property market represents “the biggest risk to financial stability”. He also stressed the need to be “vigilant” over the effects of Help to Buy. He also revealed that the Bank might introduce new curbs on high loan to income mortgages. (Times, £, p1)Read more