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.
FCA consults on new credit card rules
The FCA has proposed new rules to address persistent credit card debt, requiring firms to prompt customers to make faster payments and propose a repayment plan to help customers settle their balances faster (Financial Times, £, online). Commenting on the consultation, FCA Chief Executive Andrew Bailey said, “We expect our proposals to reduce the number of customers in problem credit card debt, as well as putting customers in greater control of their borrowing.” The consultation is available here.
UK and Luxembourg oppose creation of intermediate parent undertakings
Bloomberg (online) reports that the UK and Luxembourg have opposed a European recommendation for foreign banks to create an intermediate parent undertaking, arguing that this would, “needlessly add to costs and complexity without enhancing the effectiveness of resolution strategies”. The proposal is supported by the European Central Bank and the Single Resolution Board, as a means of addressing legal and reputational risks created by complex cross-border structures
Central banks favour Sterling over Euros
The Financial Times (£, p6) reports that central banks are buying sterling-denominated reserve investments in favour of Euros, amid concerns over political instability in the Eurozone. The Daily Telegraph (£, B1) reports redirections that sterling will continue to rise if the “positive tone” adopted by the UK and Brussels over Brexit continues, and if proposed US banking reforms are delayed or partially implemented.Read more
European Council issues Brexit blueprint
Donald Tusk, President of the European Council, has set out details on how the EU intends to negotiate the UK’s departure from the bloc to EU 27 Member States today, with EU 27 leaders to meet on 29 April to agree priorities. (Reuters, online). The full text is available here, and states that transitional arrangements may be necessary.
Analysis by the Financial Times (£, online) suggests that, “before EU leaders will authorise talks about a future trade relationship, Britain must satisfy them that “sufficient progress” has been made on the issue of a financial exit settlement and on the rights of citizens.”
FCA proposes measures to tackle card fraud
The Guardian, (p19) reports that the FCA has set out measures to address fraudulent payments made on lost or stolen contactless cards. In a letter to the Treasury Select Committee the regulator noted that contactless transactions account for only 0.5% of overall card fraud The Times (£, p52) writes that banks and card companies prevented £1.4 billion of fraud last year, or £6.40 in every £10 of attempted fraud being stopped.
Basel consults on changes to G-SIB assessments
The Basel Committee has proposed a number of changes to its methodology for assessing global systemically important banks (Law360, online). Changes include revisions to disclosure requirements and changes to the definition of cross-jurisdictional activity. The consultation is available here, and closes on June 30 2017.Read more
PM triggers Article 50
The Prime Minister has triggered Article 50, which formerly starts the two year period for the UK’s exit from the EU. Reuters (online only) reports that the PM has said she aims to reach a deal on the future UK-EU relationship within the 2 year period, which would then be followed by a “phased process of implementation” in which both sides prepare for the new arrangements.
BBC News (online only) reported that the reaction from European leaders had been one of sadness, although full of warnings. French President Francois Hollande said while Brexit was “sentimentally painful” for Europe it would be “economically painful” for Britain, and German Chancellor Angela Merkel commented that “Britain’s commitments to the EU had to be dismantled before talks could move on to the future relationship”.
With Article 50 now triggered, BBC News (online only) reports that the Government is today expected to set out how it plans to remove EU law from the statute book when it publishes details of its Great Repeal Bill. Writing in the Daily Telegraph (£, B, P2), BBA CEO Anthony Browne describes this challenge as “almost certainly the most formidable legislative challenge that Whitehall and Parliament has ever faced”, and argues that what is needed now is certainty as opposed to deregulation.
Banks must act on contactless fraud, says TSC
The Times (£, p42) reports that the Treasury Select Committee has expressed concern that the majority of banks are not telling their customers when stolen cards are still being used and rely instead on customers picking up rogue transactions from statements. The committee has put pressure on the FCA to close a security loophole which allows criminals to make ‘tap and go’ payments on contactless cards months after they have been cancelled (Daily Mail, p29) City AM (p12) adds that FCA Chairman John Griffith-Jones has written to Treasury Select Committee Chair Andrew Tyrie and Payment Systems Regulator (PSR) on the issue, including a proposal that the onus should be removed from customers to identify fraudulent transactions.
The UK Cards Association has commented on the matter, saying: “The industry is not complacent and measures to address issues affecting a small number of contactless cards will be implemented by the end of June.”
Basel committee gives banks five years to adjust to loan rules
Reuters (online only) has reported that the Basel Committee is to give Banks up to five years to comply with new accounting rules that will force them to provision upfront for possible defaults on loans. The Committee has said it will retain the current accounting treatment of provisions for an interim period because applying the new rules in full from day one could trigger a “capital shock” for some lenders. The article adds that this is the latest sign the Basel Committee has become more accommodative in the face of pushback from European and U.S. governments over new capital requirements designed to avoid harming lending by banks.Read more
Article 50 triggered today
Prime Minister Theresa May will today formally trigger Article 50 , and outline her Brexit negotiation strategy in a statement to the House of Commons (The Times, £, p1). She will urge leave and remain voters to come together, and is expected to say that she will, “represent every person in the United Kingdom” (The Guardian, p1).
The Financial Times (£, p1) notes speculation that the Prime Minister has acknowledged the need for transitional arrangements to bridge the gap between the UK leaving the EU and agreeing a new trade deal. Speaking on BBC Radio 4’s Today programme Chancellor Philip Hammond said that he was confident that a deal would be reached, and noted that the letter triggering Article 50 will set out further detail on the UK’s negotiating priorities.
EU blocks Deutsche Boerse and London Stock Exchange merger
The European Commission has blocked the proposed merger between Deutsche Boerse and the London Stock Exchange (Bloomberg, online). Margrethe Vestager, the EU’s Antitrust Commissioner, commented that this $14 billion deal would create Europe’s biggest exchange and harm competition in the soon to be 27 nation EU by creating a, “de facto monopoly for clearing bonds and repurchase agreements.” (FT, £, online).
Banking productivity grew by 1% per year since 2008
ONS data shows that productivity growth in banking, telecoms, electricity and gas supplies, management consultancy, and legal and accounting services have slowed considerably since 2008. The Financial Times (£, p3) notes that banking productivity has grown at 1% every year since 2008, driven by increased regulatory requirements and compliance costs. Commenting on the figures, the BBA said it is, “unsurprising that banking sector productivity growth has yet to return to pre-crisis levels, though we have seen an improvement in recent years.”Read more
Bank of England publishes stress testing scenarios
Recession, inflation and a sharp depreciation of the pound against the dollar form key planks of the Bank of England’s latest stress testing scenarios, with results to be published in Q4 2017 (Evening Standard, p32). The Times (£, p36) reports that the Bank has expressed concerns over the rate of growth in unsecured household borrowing, and will investigate banks’ lending criteria.
New pound coin ‘most secure in world’
The new 12-sided pound coin enters circulation today. It incorporates new security features including such as holograms and micro lettering that will make the new coins the most secure in the world, according to the Royal Mint (BBC News, online). The current round pound coins continue to be valid until 15 October 2015, with The Daily Telegraph reporting Government research showing that members of the public will consider donating them to charity rather than banking or spending them before the deadline.
Government to trigger Article 50 tomorrow
The Prime Minister is expected to trigger Article 50 tomorrow and publish the Great Repeal Bill on Thursday, which will translate EU law into UK legislation. The Guardian (p8) reports that the Prime Minister has confirmed her commitment to securing a Brexit deal within 18 months. While The Daily Telegraph (£, p1) calls for the Government to reduce or remove significant amounts of EU regulations.Read more
UK to retain EU regulation after Brexit
The Financial Times (£, p1) writes that Prime Minister Theresa May may seek to retain oversight by some EU bodies after Brexit, as the UK does not have the capacity to replace them with UK bodies within two years. Bloomberg (online) reports that she intends to publish details on transposing EU law into UK legislation and ensure continuity in the Great Repeal Bill on Thursday. The Financial Times (£, p6) also reports that Brussels may publish its main Brexit negotiating positions, with draft guidelines to be made public 48 hours after the UK triggers Article 50.
First time buyers increasingly rely on family support
34% of first time buyers rely on contributions from family members to help purchase their first home, according to research from the Social Mobility Commission (BBC News, online). First time buyers that receive financial help from their families are, on average, able to buy a home 2.6 years earlier than the national average and 4.6 years earlier in London (The Guardian, p7).
House of Lords calls for more basic bank account provision
Reuters (online) reports that the House of Lords Committee on Financial Exclusion has called for regulators to establish new duty of care requirements for banks. Commenting on the issues raised, Eric Leenders, BBA’s Managing Director of Retail and Commercial said that the BBA will consider the report’s recommendations in detail and reflect on how they might be adopted by the industry going forward.Read more
BBA’s latest high street banking data
Reuters (online only) reports on the BBA’s latest high street banking data, which shows that banks approved the fewest mortgages in three months in February and consumer credit growth slowed slightly despite an increase in credit card borrowing. Commenting on the latest statistics Eric Leenders, BBA Managing Director for Retail Banking, said the “Elevated approval volumes for house purchases and re-mortgaging experienced during the winter months fell back in February, to average levels seen throughout most of last year. He adds that “Businesses continue to exercise a cautious approach to borrowing, using cash reserves and alternative lending sources to finance their operations.”
No Brexit punishment – Jean-Claude Juncker
BBC News (online only) has reported on its interview with EU Commission President Jean-Claude Juncker, during which he insisted that Britain’s EU exit bill will reflect “former commitments” by the British Government, explaining that “there will be no sanctions, no punishment, nothing of that kind”. When asked about the exact amount of any bill, Junker said that “we have to calculate scientifically what the British commitments were and then the bill has to be paid.” When asked about potential negotiating tactics, Juncker said the EU was not in a hostile mood when it comes to Brexit because it wishes to have a friendly relationship with Britain in the next decades.
In other Brexit related news, Reuters (online only) has reported that the European Commission could introduce EU passporting and lower regulatory requirements for financial technology firms, which could undercut London’s leading position in “Fintech” as Britain gets ready for Brexit. The EU executive’s vice president Valdis Dombrovskis is quoted saying that the Commission is considering how to regulate the expanding sector to encourage its development in Europe, while protecting consumers from risks that may emerge.
Inflation may not lead to rate rise
The Times (p42) reports on Office for National Statistics figures which show increased footfall on the high street in February. But it was not enough to prevent retail sales from recording their biggest quarterly fall in nearly seven years. Rising inflation and higher fuel prices in particular, ate into households’ disposable income, leaving less for other purchases.
The Times (p40) also reports on comments from MPC member Gertjan Vlieghe who has said that rises in inflation will not make him consider raising interest rates. The article outlines Vlieghe’s view that much of the inflationary pressure is the result of sterling’s devaluation and the consequent rise in prices of products such as fuel and food. He expects inflation to head towards three per cent by the end of the year before starting to fall. However, Ben Broadbent, the Bank’s deputy governor for monetary policy, who has raised the prospect of faster interest rate rises than the market was expecting. “It’s quite possible that interest rates could go up. It’s quite possible. Our forecast was conditioned on pretty gentle rises but rises nonetheless,” he said. The article also states that markets expect a first rate rise in the second half of next year.Read more
Tyrie urges government to have a single official responsible for managing cyber threats
Treasury Select Committee Chairman Andrew Tyrie has called on the Government for a clearer chain of command for managing cyber threats. The Treasury Committee chair published correspondence with the Chancellor calling for the Government to appoint a single official responsible for managing cyber-attacks against financial firms, who would be accountable directly to a single Minister (Telegraph, £, B1). Tyrie writes in his letter that “it is essential that the intelligence community, regulators and wider government are coordinated in making sure that financial cyber crime has a high priority, and is not subordinate to other work. Such a lack of coordination will inevitably lead to greater opportunities for criminals to exploit vulnerabilities in the banking industry’s IT systems” (CityAM, p4).
Barnier warns of the risks of a disorderly Brexit
In a speech to EU regional officials the EU Commission’s Brexit negotiator Michel Barnier warned that a disorderly exit would lead to “total uncertainty” for citizens and breakdowns in trade links for consumers and businesses (Politico, online only). Barnier also used his speech to state that guaranteeing the rights of European citizens, in the long term, will be an “absolute priority from the very start of the negotiations” (Reuters, online only). In his wide ranging speech he also supported the UK Prime Minister’s call for a bold free trade agreement but the EU negotiator warned that any new partnership would “take time” and that transitional arrangements may be necessary (FT, £, p7). Bloomberg (online only) reports that according to a leaked memo EU officials are also preparing for the UK to walk out of the Brexit negotiations.
Cheques will be cleared within one day
The Telegraph (p13) and the i (p40) report that the time in which it takes for cheques to be cleared will be reduced to within one working day. Under the new arrangements, co-ordinated by the Cheque and Credit Clearing Company, banks will be able to clear cheques by exchanging pictures of them, which mean customers will no longer need to go to a branch to pay in their cheques. BBC News (online only) adds that the changes will be phased in from October 2017 although it will be the second half of 2018 before all UK banks and building societies are able to offer the faster service.Read more
City backs drive to push women into senior roles
The FT (£, p2) reports that an extra 33 firms, employing 33,000 staff, have recently signed up to the Women in Finance Charter. The total number of committed firms now stands at 122, with a collective staff of over half a million – half of the country’s finance workers. The Charter, launched a year ago, calls for financial service companies to commit to hard targets for promoting women and to publish how they progress towards those targets. Baroness Neville-Rolfe, Treasury commercial secretary, commented that the initiative has “made a strong start” but that the figures were “just the beginning”.
House of Lords warns of need for free-trade agreements for services sectors
City AM (online) writes about a research paper published by the House of Lords EU Internal Market Sub-Committee, which argues the Government must seek a comprehensive free-trade agreement for non-financial services sectors. The paper says that failing to do so would “undermine” any agreement secured for the financial sector. “Walking away from negotiations without a deal would badly damage U.K. plc,” said Lord Whitty on the BBC Today programme.
Mark Carney addresses banks’ loss of public trust
At a Banking Standards Board event yesterday, Mark Carney, the Governor of the Bank of England, recognised that in the past decade, “banking has suffered twin crises of solvency and legitimacy”. He praised efforts by the Bank, the FCA and the Treasury to improve compliance and conduct regulation. He argued, however, that improvements to regulation could only extend so far, and that the financial services sector should place a “greater emphasis on more compelling ex ante incentives for individuals” to behave ethically. (The Financial Times, £, p3)Read more
May to launch Brexit talks on Wednesday 29 March
Many of the papers (including The i p1, Guardian p1) carry on their front page the announcement by the PM that Article 50 will be triggered on Wednesday 29 March. The FT (£, p1) adds that Tim Barrow, the UK’s Ambassador to the EU, informed Donald Tusk of the news on Monday morning, to which he responded by saying draft Brexit guidelines would be issued to the remaining EU27 members within 48 hours of receiving the formal notification. In other Brexit related news, the Daily Telegraph (£, p1) reports that MPs from both sides of the debate, have warned the BBC that it risks undermining Brexit, and damaging the UK’s reputation, with its “pessimistic and skewed” coverage.
High street banks ‘exploited’ by Russia to launder $740m
The Guardian (p.1) reports that 17 UK-based banks, or with branches here, are among those facing an investigation into what they knew about an international money-laundering scheme run by Russian criminals and why they did not take more preventative measures and reject the funds (The Times, £, p2).
Bad bosses blamed for holding back UK Growth
The Daily Telegraph (BP, £, p1) reports on comments from the Bank of England’s Chief Economist Andy Haldane, who has warned that bad managers are “holding back economic growth in the UK by undermining productivity, preventing pay and living standards rising”. He adds that most companies do not even realise they are performing poorly, and suggests potentially high returns from policies which improve the quality of management within companies.Read more