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.
BBA reports huge increase in use of banking technology
A number of papers report on the BBA’s The Way We Bank Now study which shows mobile banking use has doubled in just 12 months. BBA Chief Executive Anthony Browne writes in the Telegraph (pB2) that these innovations in technology “give customers greater flexibility than ever before about how they manage their money”. He stresses that although the increased use in technology has resulted in a decline in footfall, bank branches will “remain at the heart of banking services for years to come”, becoming used for “big life moments” such as arranging a mortgage.
The Telegraph Business section leads with the BBA’s report, highlighting that around 1,800 transactions are made every minute on smartphones. The Times (£, p37) notes that “branches would still be important, especially for mortgages”, whilst CityAM (p7) quotes Anthony Browne who states that there is a “groundswell of people who now find that banking on the move is fast, easy and convenient”. The Independent (p13) writes that 28 million debit and credit cards have been fitted with contactless technology, whilst 450 million texts for balances were sent in 2013.
More information on The Way We Bank can be found here.
Questions mount over potential CMA investigation into banking
CityAM (p3) understands that the Competition and Markets Authority (CMA) may choose not to launch its investigation into the banking sector “leaving the industry alone for a time to let new changes come into effect”. The paper adds that even if an investigation is launched, the CMA has a “range of other tools short of breaking up banks that could encourage more competition”. This comes after CMA Chief Executive Alex Chisholm told the Sunday Telegraph that any investigation leading to the potential forced sale of bank branches would take “18 months at least” and require “a ton of work” – longer than Labour leader Ed Miliband’s target of six months.
Export figures highlight importance of EU to UK
The FT (£, p2) cites a report by the Centre for Economic and Business Research which states that exports to EU countries help support 4.2 million jobs and are worth £211 billion to the UK economy. The EU’s demand for goods and services from the UK has risen steadily, with exports to other member states worth £3,500 per head. The Telegraph (pB4) reports that out of the 4.2m jobs, an estimated 3.1m were directly supported by exports to the European Union.Read more
EU adopts plans to support the long-term financing of the European economy
The European Commission has announced its growth agenda for the next five years (FT, £, p21). The Commission proposes to bolster Europe’s securitisation market, revive lending to SMEs, strengthen the hand of alternative finance providers and support infrastructure investment. EU Commissioner for Financial Services Michel Barnier said: “Europe has large long-term financing needs to finance sustainable growth”. Commenting on the proposed changes to securitisation, the BBA’s Simon Hills said: “We have to focus on what’s going to make a difference, and in my view that’s securitisation, which includes easing capital requirements on insurers who want to invest in securitisation.” (Reuters)
Bank of England to stress test banks’ exposure to housing market
The Times (£, p1) has splashed on reports that the Bank of England’s Financial Policy Committee is concerned about the impact of rising house prices, set to rise 8.5 per cent this year. The Bank plans to stress-test lenders later this year against “a housing market shock and a snap back in interest rates” but noted that British banks’ financial health had improved since its last report in November. The news follows the results of the Federal Reserve’s latest round of stress tests, which failed some European banks. The FT (£, p19) reports that the Fed’s conclusions put pressure on the European Central Bank ahead of its upcoming stress-tests.
Osborne and Schäuble set out their vision for the EU
The British Chancellor and German finance minister have written a joint op-ed in today’s FT (£, p13) arguing that both countries have promoted substantial reforms to financial services and outline their support for a number of initiatives, such as the completion of the single market – especially in services. “Looking ahead, we can create a flexible and outward-looking EU”. The FT (£, p1) also reports that Berlin has for the first time declared that the EU must ensure that the UK is legally protected from closer eurozone integration.Read more
British banks pay 71 per cent tax on profits
New research by KPMG shows that the biggest UK banks paid 71 per cent of their combined profits in taxes last year, with 13 per cent on the bank levy (Telegraph, pB4). KPMG’s tax specialist Tom Aston said: “Our figures show the levy is now draining profits out of banks and undermining efforts to strengthen their capital base” (CityAM, p1).
Following proposed changes in the bank levy announced in last week Budget, Shadow Financial Secretary to the Treasury Cathy Jamieson said: “George Osborne must come clean and explain what impact this banding will have on revenues from the bank levy in future years”. A spokesman for the Treasury said: “The Government has no plans to reduce the amount of money the levy raises” (Telegraph, pB4).
Brussels to ease rules on securitisation
European regulators are planning to halve the capital requirements on asset-backed securities in a bid to boost lending to small businesses. The capital requirements would be sliced from 4.3 per cent to 2.1 per cent; these changes of the Solvency II rules will only affect Type 1 securities. This move is part of a wider strategy to support financing to EU’s businesses (FT £, p9).
US accused of influencing British banks
Senior politicians in Westminster yesterday accused US banks of influencing British peers into refusing legal exports to Iran, costing British companies sales. Former foreign secretary Jack Straw said: “the pressure on [British] banks is intense” and that “the impact…of the US is discriminatory, especially against UK based financial institutions” (FT £, p2).Read more
Mortgage lending up
Many of the newspapers including the Guardian (p27) reported on the BBA’s High Street Lending figures, published yesterday. The figures showed that mortgage lending in February was up 47 per cent on the same time last year.
Commenting on the statistics BBA Chief Economist Richard Woolhouse said:
“These encouraging figures show that the demand for finance is broadening out across both the consumer and commercial markets, with mortgage approvals and lending to many types of business on the up.” See the full stats and press release here.
More of Lloyds Banking Group to become private
The Government is to sell £5.35 billion of its shares in Lloyds, according to the frontpage of the FT (£, p1). The Telegraph (p1) quotes Lloyds chief executive, Antonion Horta-Osorio: “I am pleased that the Government intends to sell a further stake in Lloyds Banking Group and allow taxpayers to get more of their money back. I believe this reflects the hard work undertaken over the last three years to make Lloyds a safe and profitable bank that is focused on helping Britain prosper.”
In the FT (£, p2) there is speculation over possible changes to the bank levy. The article says that the “government may shift the burden of its bank tax on to foreign institutions and away from the UK retail banks” and goes on to reference the BBA’s recent Budget submission which argues that the levy is “inconsistent with the Government’s desire for the UK to have a competitive, stable and predictable tax regime.”Read more
Russia suspended from G8 as Western sanctions ratchet up
The leaders of the G7 economies are to boycott a proposed G8 meeting with Russia in Sochi and meet in Brussels instead in a move to isolate the Russian President Vladimir Putin, according to the Guardian (p1). Russia’s deputy economy minister expects the threat of sanctions to have caused £50 billion of capital to flow out of Russia in the first quarter of 2014, writes the FT (£, p1). The Times examines the impact of restrictions on the £14 billion trade between Russia and UK (£, p40).
Businesses embrace new wave of funding
A supplement in today’s Times (£) looks at funding options for small and medium-sized enterprises in Britain. The leading article cites research by the British Bankers’ Association showing that £7.1 billion of new borrowing to SMEs was approved in the last quarter of 2013, a 26 per cent rise on the same period the year before. BDRC Continental research shows that seven out of ten businesses applying for bank loans are successful, but many business owners are not seeking bank finance.
National Audit Office study shows “inexperienced” regulatory staff
A report published today by the National Audit Office has stressed the important of effective oversight of the financial sector after investigating the level of experience and performance at City regulators – the Financial Conduct Authority (FCA) and Prudential Regulatory Authority (PRA) (Independent, p50). The research suggests that a third of staff at the FCA have less than two years’ experience while a quarter of the PRA’s “top performers” have resigned or retired. A FCA spokesperson said the regulator was focused on creating the “right team” citing recent high-profile hires and the broadening of their remit. Fees from regulated firms rose 24 per cent last year to £664 million.Read more
Government launches scheme to guarantee loans to small businesses
The FT (£, p4) writes that the Government will launch a “wholesale guarantee scheme” which will share the burden of losses on some small business loans. The scheme, run through the British Business Bank, aims to make it easier and cheaper for lenders to offer finance to SMEs by reducing the amount of capital banks have to hold against their SME loans. Banks will have to absorb initial losses up to an agreed threshold in order to avoid excessive risk-taking.
Warning shots of a banking exodus
The Sunday Telegraph reports that Britain’s leading fund managers have warned that London risks losing its place as Europe’s financial centre if investment banks fall victim of public anger over bonuses. Gerry Grimstone, chairman of TheCityUK and Standard Life, told the paper: “If Britain wants to be part of the global financial services sector it has to have the people within it that can run these businesses.” Financial News states that any banking exodus will be gradual so that “politicians won’t notice it’s happening – until it has”.
Help to Buy boosts housing market
The Guardian (p12) reports on figures released by the Government which state that 17,000 homes have been bought under the Help to Buy scheme, with 80 per cent of those bought by first-time buyers. The Independent on Sunday addressed concerns that the scheme is driving up prices, arguing: “Help to Buy had such a dramatic initial impact due to pent-up demand from those previously shut out of the property market, and that this clamour may now be beginning to fade.” However, the Labour Party warned that “rising demand must be met with increased housing supply for people to afford it”. (BBC News)Read more
Deal on Banking Union
Many of the papers reported yesterday’s new agreement on European banking union, meaning that the ECB will have the power to decide when a bank has failed and it should be resolved through a new Single Resolution Board (Telegraph, p4). Those in banking union countries will also contribute to a “common rescue fund” – the Single Resolution Mechanism (SRM) – that will see Eurozone banks build up a fund of €55bn (£45.9bn). (City AM, p5).
Further speculation over interest rates
The Times (£,p39) writes today that Martin Weale, an external member of the Monetary Policy Committee, has indicated that interest rates may “rise sooner than some of his colleagues have pencilled in”. Mr Weale said that spare capacity in the economy is likely to be 0.9 per cent of GDP, which is lower than the Banks’s official forecasts of 1.5 per cent which could lead economists to believe capacity is running out, prompting the need for an interest rate rise to control inflation.
Budget business incentives
The Institute for Fiscal Studies has criticised the Budget, saying that the policies announced fail to provide long term investment incentives (Telegraph, pB1). Helen Miller of the IFS is quoted: “The really unwelcome theme to these [measures] is many are temporary in nature and frequently changed. That adds uncertainty and fundamentally detracts from the positive effects that they’re trying to have on investment.”
The article does go on to report how business leaders largely praised measures to double UK Export Finance’s direct lending programme to £3bn and cut the interest rates it charges in half.Read more
The FT (£ p1) labelled yesterday’s Budget: “The biggest pensions revolution for almost a century”. Help for savers was placed at the core of George Osborne’s statement, with desires to make it easier and cheaper to withdraw money from pension pots. The Chancellor also changed the limit for tax-free ISAs, with anyone now able to save £15,000 annually from July onwards. The Chancellor said: “The message from this Budget is this: you have earned it, you have saved it, and this Government is on your side” (Telegraph, p1).
A series of measures were announced to stimulate investment and promote the economic recovery. The Government is to publish a consultation on legislation for banks to refer small and medium-sized enterprises that have been turned down for finance to alternative funders (Times, p10 & p11).
Responding to the Budget, BBA Chief Executive Anthony Browne praised the tailwind for export finance, saying: “We are pleased that the Government has listened and applaud the aim to give the UK one of the most competitive export financing regime in the world” (Scotsman, p4). However, the BBA expressed its concerns after Budget documents unveiled legislation to require banks to share information on their small business customers with other lenders through credit reference agencies. Many banks already do this and any [new] legislation should not cut across those relationships (FT, £ p16).
BBA supports the Business Banking Insight programme
The programme aims at discovering what micro, small and medium-sized businesses think of banking services. Business Banking Insight is carried out by the Federation of Small Businesses and the British Chamber of Commerce and supported by Treasury. The programme involves 5,000 businesses that will examine the performance of banks and will publish the results on a website in May. The BBA is part of the advisory group that supports this programme (FT, £ p26).Read more
“One Bank” under Carney
A number of publications comment on the change in personnel at the Bank of England. The FT (£, p3) profiles Nemat Shafik, who takes the new position of Deputy Governor for Banking and Markets. The Times (£, p35) reports that Dr Carney said that the central bank’s previous concentration on inflation had been “fatally flawed”, and that the Bank’s monetary and bank regulation functions needs to be united. The FT (£, p1) leads with the Bank of England Governor warning that “risks were building in housing markets and the international financial system” because of the period of ultra-low interest rates.
The Times (£, p38) questions whether the new-look Monetary Policy Committee will have an implication for future interest-rate policy. The Telegraph (pB1) quotes Mark Carney who argued that with low interest rates potentially encouraging complacency and excessive risk-taking, “it doesn’t take a genius to see that…risks exist today”.
Eurozone threat to City prosperity
The FT (£, p2) cites a report by CityUK which warns that the single supervisory mechanism will see “banks from outside the UK come under pressure to repatriate much of that business to the eurozone”, and calls for British authorities to “adopt a more muscular defence of the UK’s financial sector”. CityUK chief executive Chris Cummings said: “Europe needs to work better as a multicurrency union.” The report states that the City could lose as many as 200,000 jobs because of “protectionist financial regulations in European countries”, according to the Times (£, p40). Meanwhile, CityAM (p3) writes that Michel Barnier, the EU financial services commissioner, has warned that banks side-stepping the EU bonus cap by awarding monthly allowances will be examined by the European Banking Authority, stating yesterday that the regulator “needs to assume its responsibility and react”.
The FT (£, p2) and Telegraph (pB4) have produced outlines of what to expect in today’s Budget, covering issues such as business investment, exports and personal finances. Read the BBA’s Budget submission here.Read more
New York overtakes London as top financial centre
The Independent (p56) reports that London has fallen to second place in the latest Global Financial Centres Index behind New York. The study attributed the decline to uncertainty over EU membership, the Scottish independence vote, regulatory creep and “conservatism”. The announcement comes as Robert Talbut, chief investment officer at Royal London Asset Management, warned that the bonus backlash was making UK investment banks uncompetitive (Times, p25). He said: “This will not eliminate remuneration that some find unacceptable but will simply mean that we become dependent upon banks from other regions.”
Carney to modernise Bank of England
A number of papers report that Bank of England Governor Mark Carney will today use his annual Mais lecture to announce a big shakeup at the Bank (Guardian, p.25). He will create new, cross department roles to align the Bank’s new monetary and regulatory responsibilities following a review by consultancy group McKinsey (CityAM, p1). The Governor is also set to announce the replacement of Charlie Bean, the retiring deputy governor for monetary policy, as well as a fourth deputy governor for markets and banking.
Elsewhere, deputy governor Sir John Cunliffe warned that major banks were still “too big to fail” and he was not confident that “[we] could resolve a failing global giant”. He also added that differences on international standards between the EU and US “have threatened to Balkanise what is now a global market” (Telegraph, B1/ B2).
Firms confident of more exports as Budget set to focus on trade
A survey by HSBC found that UK exports are expected to increase by five per cent in each of the next two years and confidence amongst exporters is at its highest since 2009, according to the Times (£, p41). However, the bank’s research suggests that UK businesses are underinvesting in research and development. The FT (£, p2) reports that the Budget will focus on helping medium-sized companies export more and notes a range of policies promoted in the BBA’s Budget submission.Read more