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.
MPs to examine “concerning” new powers for HMRC
The front page of the FT (£, p1) reports that the Treasury Select Committee (TSC) has announced that it will launch a further inquiry into the Government’s plans to give HMRC the power to dip into taxpayers’ bank accounts to recover unpaid tax. TSC chairman Andrew Tyrie said: “We must be vigilant to ensure we don’t lose the essential balance between the powers that HMRC needs and protecting individuals”. Mr Tyrie described the proposal as causing ““considerable concern”.
‘Fintech’ companies predicted to challenge established banks
The FT (£, p21) looks at the challenges that new financial technology companies dubbed “fintech” pose to the traditional banking sector. They note how the major banks all have major programmes where they seek to work with fintech entrepreneurs but report that observers are warning that “one day soon the big banks will turn round and realise that half their sector has been taken out.” The article quotes research by the BBA that found that mobile phone banking has doubled in the last year. Saturday’s Guardian also mentioned the report when looking at plans for the launch of Atom – a new digital only bank.
Andrea Leadsom takes City brief in Treasury shake-up
The new Economic Secretary to the Treasury, Andrea Leadsom, has been given responsibility for the City and financial regulation, writes the FT Weekend (£, p2). A former banker, Leadsom served on the Treasury Select Committee prior to her promotion to Government. The Financial Secretary to the Treasury, Nicky Morgan, will lead on European and woman issues.
New EU pay rules could lead to higher fixed costs at banks
The FT (£, p19) reports that some investors will register protest votes at upcoming shareholders’ meetings against banks’ decisions to increase base salaries ahead of new EU regulations on bonuses which come in next year. A separate article in the FT (£, p20) looks in more detail at plans for allowances being considered by some major banks.Read more
“Crackdown” on overdraft charges
FCA research has provoked criticism of bank overdraft charges, saying that many on low incomes see overdraft debt as “free money” (Times, £, p48). Eric Leenders, the BBA’s executive director in charge of retail, said: “Millions of people find overdrafts are an easy way to borrow money, more flexible and convenient than taking out a loan. Anyone who uses this type of borrowing receives details of how much they are charged in their accounts statements. Overdraft charges have plummeted in recent years, with estimated savings of up to £928 million for customers since 2008. But if you are unhappy with how much you are being charged, we recommend you shop around for an account better suited to your needs” (Full BBA release).
More customers switching accounts using CASS
The BBC News website reports on the increase in customers switching their accounts using the current account switching service (CASS) with a 14% increase on the same time last year. Gary Hocking, managing director of the Payments Council said: “There’s also been a noticeable surge of advertising activity from current account providers, big and small, suggesting that the new service is helping foster competition and choice for customers.” (BBC News)
EU rules could alter BoE’s position as lender of last resort
Britain has failed to secure revisions to an agreed EU “rule book on bank crises” which could mean that the bank could no longer offer covert Treasury backed emergency loans (ELA) to banks in financial difficulty. Sharon Bowles MEP, chair of the European Parliament’s committee on the regulation said: “In a systematic crisis…I am sure ELA will be done [if it is needed], not least because last time everyone was begging [the BoE] to do it” (FT, p5).
Lagarde: Negative rates or quantitative easing “just a question of time” for ECB
The head of the International Monetary Fund has said that she is ‘encouraged’ by comments made at the last board meeting of the ECB in relation to deflation within European economies which suggested the bank is “envisaging any tools to respond to the situation”. Lagarde and IMF Chief Economist OIivier Blanchard have been calling for “unconventional measures” from the ECB (Telegraph, p4)
ECB and BoE push to ease rules on “vilified” asset-backed securities
The FT reports (p1) that they have seen a draft paper from the central banks that ask for a relaxation of rules to make asset-backed securities more attractive. This forms part of a campaign by the ECB “to distinguish high-quality European debt that has been packaged up or “securitised” from more risky US loans”.Read more
BBA: “Customer complaints to banks down nearly 25 per cent in 12 months”
According to data released by the FCA, complaints about financial products dropped 15 per cent in the second half of 2013 (Herald, p13) (FT, £, p25). The Times (£, p44) reports that PPI claims in particular fell 22 per cent, the lowest six month figure since 2006. Executive Director of Retail Banking at the BBA Eric Leenders said: “Banks are determined that there will be no repeat of any of the bad practices which caused mis-selling in the past” (Herald, p13).
IMF: “EU’s banking system is a serious threat to global financial stability”
The International Monetary Fund warns in its Financial Stability Report of the “dangers of bringing monetary policy back to normal” (FT, £, p12). The Guardian (p27) writes that the report is optimistic about the “Goldilocks” recovery and highlights IMF’s Financial Counsellor José Viñals saying: “After a turbulent start, the normalisation of monetary policy has begun. But a bumpy exit is possible.” The Times (£, p41) focuses on the IMF’s warning on Britain’s gross debt despite its previous prediction that “Britain would grow faster than any other advanced nation this year”.
Launch of digital-only bank
Following last week’s report by the BBA on mobile banking, the former Chairman of Metro Bank Anthony Thomson has announced intentions to create an online-only bank called Atom (FT, £, p24). Mr Thomson commented: “Branch usage has fallen off a cliff and telephone-based banking is in decline. All the explosive growth is in digital generally and mobile in particular” (Telegraph, pB3).Read more
Banking industry published latest postcode data
The BBA and Council for Mortgage Lenders have published the second set of industry-wide data revealing details of borrowing to individuals and businesses classified by more than 9,000 postcode sectors. Participating lenders also published their own figures on their websites. The Guardian (p24) reports that a suburb in Bath topped the tables for personal loans per person. BBA Chief Economist Richard Woolhouse said of this data: “This data is complex and it remains very difficult to draw firm conclusions about lending at a local level.
IMF predicts UK will grow fastest of any G7 economy in 2014
A number of newspapers report that the International Monetary Fund (IMF) has raised its forecast for UK growth to 2.9 per cent this year – the fastest of any country in the G7 group of leading economies (FT, £, p1). The upward revision comes as the National Institute of Economic and Social Research estimated that the economy grew at 0.9 per cent in 2014 Q1. Manufacturing grew at 1 per cent and industrial production rose 0.9 per cent January to February 2014 (FT, £, p2). UK economist for Deutsche Bank George Buckley said: “Q1 looks set to be another stellar quarter of growth for the UK.”
Metro founder set to launch new digital bank
Anthony Thomsom, founder and ex-Chairman of Metro Bank, intends to launch a new digital-led national retail and business lender called Atom, according to Sky News. Mr Thomson is reported to be close to submitting a licence application to the industry’s regulators. The new business is not expected to have any physical branches and will be primarily accessible through the internet and digital apps. Last week, the BBA published research showing that UK-based customers conducted almost 40m mobile and internet banking transactions each week last year.Read more
Bank of England to back export finance
On a visit to Rio de Janiero, George Osborne announced that the Bank of England will support the UK’s export finance in a step to drive down Britain’s trade deficit – a policy outlined in the BBA’s Budget Submission. The Chancellor said: “Banks will now have access to a special Bank of England facility [the sterling monetary framework] that will make it much less risky for them to extend loans to our exporters” (FT, £, p2). The Telegraph (pB5) adds that it has the “potential to reduce the cost of export loans”. The Guardian (p24) writes that this is the second part of a package that included the doubling of the UK Export Finance lending facility to £3 billion announced in last month’s Budget.
ONS changes system of measuring Britain’s economy
The FT (£)leads with the ONS announcing that it will overhaul the way it measures the economy, resulting in the doubling of the official measure of household savings and the overall size of the economy being as much as five per cent bigger than previously thought. The savings measurement will now include funded defined benefit pension rights as if they were present income. The new global accounting standards, which will be introduced in September, follow similar changes introduced in the US, Canada and Australia. Support for savers was a central issue in the BBA’s Budget Submission.
New leverage ratio for US banks
In the US a new leverage ratio is expected to be finalised today, according to the FT (£, p16). US regulators have proposed minimums of 5 per cent equity against total assets at the holding company level and 6 per cent at the bank level.Read more
Optimism returns: Survey point to surge in confidence by FTSE FDs and SMEs
Finance directors of Britain’s largest firms are more confident than that any point for six and a half years, according to a closely followed survey by Deloitte (£, p39) reported in The Times. The study is one of a number of indicators reported across the media today that suggests Britain’s economic recovery is gathering pace.
The professional services group’s poll found that 71 per cent of 126 FTSE chief finance officers surveyed said that now was a good time to take risk onto their balance sheets – compared with 34 per cent a year ago.
Meanwhile, a report by GE published in the same newspaper suggests that small and medium-sized businesses will create 660,000 jobs and spend £58.6 million on machinery and other equipment over the next year.
The Times also reports that research by accountants UHY Hacker Young (£, p43) showing that 76 companies have floated on the Alternative Investment Market raising £2.2billion in the past 12 months – three times as much as in the previous year.
However, The Times’ (p42) does publish figures compiled by the Labour party that show that not a single business has applied to use the Export Refinancing Scheme, which was designed to help British firms trade. Another initiative that aims to help foreign firms buy from UK exporters has had just one successful application.
Rise of non-bank lending to European SMEs
The WSJ reports that loans by nonbank lenders to European companies more than tripled to 56 in the fourth quarter of 2013 from 18 in the first quarter, according to a recent study by Deloitte. According to the article, this new direct lending growth in Europe is dominated by U.S. funds that raised money in 2011 to invest in European assets in an expected fire sale by banks. However, the ECB offered cheap, emergency loans in December 2011 and February 2012, which enabled banks to cope with the crisis better than expected, and left the U.S. funds looking for alternative investment opportunities in Europe. They claim to have found a niche “serving as miniature banks, lending to small businesses across Europe.”
MPs urge support for Wheatley
The Independent (p54) reports that MPs on the Treasury Select Committee have warned privately that putting too much pressure on Financial Conduct Authority Chief Executive Martin Wheatley could create instability in the financial system. An analysis piece in the Weekend FT (£, p9) reports that the Chief Executive of the Prudential Regulation Authority Andrew Bailey “went ballistic” when the FCA’s briefing to a newspaper caused insurance companies’ share prices to fall.Read more
Businesses borrowing more to fund M&A
The Bank of England’s Credit Conditions survey reported that businesses are borrowing more to fund investment and new mergers and acquisitions in a further sign of returning economic confidence. The Telegraph quotes BBA Chief Economist Richard Woolhouse saying: “Businesses are priming themselves to either acquire other companies or invest in new equipment or staff. This is good news and suggests the recovery is broadening out.”
Osborne criticises FCA’s “egregious error”
CityAM (p2) reports that during his appearance before the Treasury Select Committee yesterday Chancellor George Osborne criticised the Financial Conduct Authority (FCA) for making an “egregious error” for briefing a newspaper on its new insurance probe before telling the industry or the markets. The FT (£, p2)reports that the FCA had informed the Association of British Insurers ahead of the announcement.
The Telegraph (pB4) reports that Osborne also said that he did not put pressure on the Co-op to acquire branches from Lloyds Banking Group.
FCA launches credit card probe
The FCA is set to launch a new enquiry into credit card providers according to the Mail (p2). It will look at whether firms are selling suitable products to customers, whether the costs of credit are made clear at the outset, and how they deal with those who fall behind on repayments.Read more
Paym service launched
The Mirror (p58) and the Times both write that the Payments Council has announced that people can now register for Paym, a service which offers a new way of sending and receiving payments directly to current accounts by using a mobile number. Payments Council Chief Executive Adrian Kamellard said: “Paym will give people a new option of quickly and securely paying someone.”
Financial watchdogs will cost £100 million more
The Times (£, p37) reports that regulating the banking industry will cost £100 million more a year. The combined funding for the PRA and the FCA will reach £673 million, £100 million more than before the financial watchdog was divided. Regulators said that this increase in fees reflected bigger responsibilities and an expanded workload. The watchdogs also argued that this was part of a “transition period” of creating the new regulator to the industry in five annual £14.8 million instalments.
However, the Telegraph (p5) writes that the PRA has ended its first 12 months of operating with a £20 million surplus and has decided to cut its budget by 4 per cent to GBP 227 million for 2014-2015.
CityAM (p2) reports that the FCA may have broken its own market abuse rules when it briefed the media about a pending investigation into the insurance sector last week and the FT (£, p2) writes that the FCA will be moving its headquarters from Canary Wharf to Stratford when its current lease expires.
Changes in interest rates proposed
The Times (£ p43) highlights Cristine Lagarde warning that the Eurozone faces mounting pressure from slowing inflation. The Head of the International Monetary Fund believes that although the global economy had stabilised, the recovery was still “too weak for comfort” and new risks are emerging including “prolonged lowflation”.
In addition, CityAM (p2) reports that economists have warned Mark Carney about the risks of not increasing interest rates, arguing that the British economy could “overheat” as a result.Read more
Osborne accuses the FCA over “damaging” leaks
The front page of the FT (£, p1) reveals George Osborne’s “fury” over the Financial Conduct Authority’s announcement of market sensitive probe into the insurance industry. In a letter to FCA Chairman John Griffith-Jones he said that the episode had been “damaging both to the FCA as an institution and to UK’s reputation for regulatory stability and competence”.
In the Independent (p 51) Chris Blackhurst remarks: “I cannot recall seeing a ministerial letter that is so pointed and leaving so little room for ambiguity and escape”. In the Guardian (p 30) Nils Pratley warns that the incident “does not look good for the job prospects of Martin Wheatley, chief executive of the Financial Conduct Authority”.
PayM registration launches
The Independent (p48) reports that people are now able to register for the new mobile payments system PayM which launches on 29 April. For more information click here.Read more
Lending to SMEs and spending confidence grow
The Telegraph (pB4) reports that the Bank of England’s Bankstats for February 2014 show “an encouraging improvement in the small and medium-sized business sector”. Lending to small businesses rose by £159 million compared to last month, while mortgage lending fell to its lowest rate since October 2013. The statistics also reveal that net lending to individuals increased by £2.3 billion suggesting rising confidence is encouraging increased borrowing. Responding to the Bankstats, BBA chief economist Richard Woolhouse said: “[Yesterday’s] figures show that gross lending to small and medium-sized enterprises (SMEs) has been growing for nearly a year now. New borrowing was 22.3 per cent higher for the latest three months of data compared to the same period a year earlier.”
FCA publishes 2014/2015 business plan
The Financial Conduct Authority (FCA) has published its business plan for the upcoming year. The plan includes details of an inquiry into the potential manipulation of benchmarks (FT). The review will take place later this year and assess whether banks have “learnt lessons” from the Libor controversy in other benchmarked markets, such as commodity prices and forex. Other initiatives include a review into banks’ treatment of fraud victims and a review of how organisations offering consumer credit treat struggling borrowers (Telegraph, pB4).
IMF report to say big banks still “too big to fail”
The International Monetary Fund’s (IMF) twice-yearly Global Financial Stability Report is set to highlight the failure of post-financial crisis reforms to solve the problem of “too big to fail”, according to the FT (£, p45). The IMF estimates that the largest banks in the UK receive an implicit subsidy of £12 – £70 billion, but acknowledges that implicit government-backing has fallen since 2009. Senior IMF analyst Gaston Gelos said: “Progress is under way but… the issue is still very much alive.”Read more