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.
Help to Buy to be extended
George Osborne has confirmed that the Help to Buy scheme will be partly extended to 2020. Speaking on The Andrew Marr Show ahead of Wednesday’s Budget, the Chancellor said that the initial element of the programme to offer Government-backed loans to buyers of new-build homes will continue into the next decade.
Carney plans Bank of England revamp
The Financial Times (£, p2) reports that Mark Carney will this week unveil a wide-ranging shake-up of the Bank of England. There will be more cross-department working and increased resources for the Bank’s forecasting unit, the article suggests. The changes are said to be similar to those instigated by Dr Carney when he oversaw Canada’s central bank.
Lenders urged to find alternative funders for SMEs
Mr Osborne is considering obliging banks to refer any small business turned down for finance onto an alternative provider, the Times (£, p39) writes. The same article suggests that the Chancellor may use his statement to increase the business investment tax allowance beyond the current £250,000 limit.Read more
Bank of England proposes tougher bonus rules
A number of papers discuss the Bank of England’s plan to make banks clawback the bonuses of bankers who have made reckless decisions, up to six years after they have been paid. The Telegraph (pB1) notes that these provisions go beyond the recommendations of the Parliamentary Commission on Banking Standards. The Times (£, p41) reports that the rules will also apply to senior staff who should have intervened or “set the culture”. The FT (£, p2) states that these will be “some of the world’s toughest rules on bonuses”, and quotes the BBA’s Simon Hills who states: “We should not underestimate the practical difficulties of recouping money that has already been paid.” Read the BBA’s full response here.
Bank considers re-application for senior bankers
The Daily Mail (p65) reports that the Bank of England is considering plans for hundreds of bank executives to re-apply for their jobs. Katherine Braddick, Director for Prudential Policy, Prudential Regulation Authority said: “We have to recognise that there are many people who were approved by the FSA in the past who would not receive that approval today.”
Balls admits past errors
In an interview with the Times (£, p1), Shadow Chancellor Ed Balls acknowledges that “the last Labour Government didn’t regulate the financial services in a tough enough way”, adding that lessons have been learnt on both a party and personal level.Read more
BBA calls for measures to encourage savings
Ahead of the 2014 Budget submission, the BBA calls for an individual savings account (ISA) “shake up”, that allows a fixed amount of tax free savings. Another priority for the BBA is that the Government “broadens its support for export financing” (BBC). The BBA’s Budget submission can be read here and for more information please read a blog by the BBA’s chief economist Richard Woolhouse here.
Ahead of next week’s Budget, Lloyds Group economist Trevor Williams calls Osborne to “boost the economy” and argues that: “What we want to see in the Budget are things around helping the economy to become more efficient with less burdensome regulation” (Mail, p76). In the Times (p43), Gerard Lyons, former chief economist at Standard Chartered believes that “the economy is about to surge ahead at the fastest pace since the turn of the century.”
US banks outbid UK rivals for top staff
Increasing pay in the US banking sector contrasts with the lower pay of UK rivals. Wall Street recorded high bonus figures yesterday as the recovery boosted trading (CityAM, p2). CityAM also highlights that: “US banks will be able to outbid UK lenders for top staff on Wall Street – a fear heightened by the incoming EU bonus cap.”
BoE hires Lord Grabiner QC to investigate forex allegations
The FT (p3), Guardian (p27) and the Telegraph (pB1) write that the Bank of England’s oversight committee has hired Lord Grabiner QC to lead the investigation into alleged foreign exchange manipulation. Lord Grabiner will be given unlimited access to Bank staff and has been charged with investigating whether any Bank employee attempted to manipulate or was aware of such manipulation.
The Financial Conduct Authority hires head of investment banking in its supervision division
INYT (p16) and CityAM (p8) report that the Financial Conduct Authority has hired Julia Hoggett, former Bank of America Merrill Lynch, to head investigations into market abuses and manipulation. Hoggett will work under Will Amos, the watchdog’s director of wholesale banking and investment banking.Read more
Miliband: No early EU referendum
A number of papers report today that Labour leader Ed Miliband has virtually ruled out an EU referendum if his party are voted in at the next election. The opposition leader wrote in today’s FT (£, p11) of David Cameron’s “arbitrary” timetable for a 2017 election and argued that this could distract Labour from their focus on the cost of living and the economy.
He added: “The next Labour government will legislate for a new lock: there would be no transfer of powers from the UK to the EU without a referendum on our continued membership of the EU.”
Industry responds ‘constructively’ to OFT review
Articles in the Times (£, p38) and the FT (£, p4) this morning note yesterday’s announcement from the Office of Fair Trading on the SME lending market. Though the OFT raised concerns about the difficulties facing new entrants to the lending market, they praised the BBA for responding “constructively” to their review. You can read the BBA response to the announcement here.
The Times also reports that a groups of 8 alternative lenders – Crowdcube, Funding Circle, Market Invoice, Platform Black, Seedrs, Zopa and Pensionledfunding.com – have launched their own referrals website, www.alternativebusinessfunding.co.uk.
Carney to appoint City deputy
Bank of England Governor Mark Carney is to appoint a deputy governor with specific responsibility the BoE’s relationship with the City, according to today’s FT (£, p1) and Telegraph (p1). The comments were made during a five hour hearing with the Treasury Select Committee where the Governor remarked that the new deputy would be responsible for undertaking a “root and branch” investigation into market intelligence in the financial sector.Read more
CMA announces review of SME and current account markets
The Competition and Markets Authority (CMA) has today announced that it will conclude the Office of Fair Trading’s (OFT) market study into banking for small and medium-sized enterprises (SMEs). It will also carry out a short update of the OFT’s 2013 review of personal current accounts. The CMA will consult on its provisional decision on whether to launch a full market investigation into both markets during this summer with a final decision expected by the autumn. Read the BBA’s response to the announcement here.
Bank looks to business investment, productivity and exports to sustain recovery
Bank of England Deputy Governor Charlie Bean outlined the Financial Policy Committee’s priorities for how to sustain the economic recovery, reports the Times (£, p40). Britain needs to move away from a reliance on “higher spending and housing investments” towards rising business investment, productivity and exports. Mr Bean added that the recent appreciation of sterling could damage UK exports but there were signs that business investment was picking up.
Labour will tax bonuses to support youth jobs, says Balls
The FT has splashed with Labour’s plans to re-introduce the bonus tax, raise the top rate of income tax and launch a mansion tax to bring down long-term youth unemployment. Shadow Chancellor Ed Balls said the bonus tax would only be introduced in 2015-16 despite suggestions that a Labour Government would make the tax permanent. The Telegraph’s editorial (p21) acknowledges the need to tackle joblessness but questions “the proposed financing of [Labour’s] programme”.Read more
BBA calls for more help for exporters
The FT (£, p4) reports that the BBA has called on George Osborne to give more support to exporters in next week’s Budget. The BBA’s submission to the Treasury ahead of the Budget suggests that the Government should look to develop a supply chain finance scheme, expand country risk coverage and to benchmark the performance of UK Export Finance against other export credit agencies.
The BBA’s Budget submission can be downloaded here.
Paym – new mobile payments to launch soon
Paym, the new mobile payments system, is set to be launched in the coming weeks according to the FT (£, p15). The new system, set to be unveiled today, will allow customers of nine of the biggest banks to pay each other through their smartphones.
Labour pledges new bonus tax will run until at least 2020
The Mirror (p2) reports that the Labour Party will extend a jobs guarantee for 16-24 year olds who are long-term unemployed to five years. The scheme – to be funded by a tax on bank bonuses – will give a paid job to everyone who has been out of work for more than a year. Labour had initially only pledged to bring the scheme in for one year but Ed Balls will today make a manifesto commitment to it lasting until 2020. The Mail (p4) reports that Labour had previously pledged to fund ten different policies through the new tax on bank bonuses, which is expected to raise up to £2 billion, but that the tax will now solely be spent on the jobs guarantee. Mr Balls will say: “After the global banking crisis and with bank bonuses soaring again this year, it’s fair to pay for our jobs plan with a repeat of Labour’s tax on bank bonuses.”Read more
Lending market will be subject to full review by CMA
The Independent (p55) reports today that the small business lending market is expected to be the subject of a major investigation by the Competition and Markets Authority (CMA) when it takes over from the OFT next month, with an announcement expected today or early next week. According to the report the OFT review concluded that a “full-scale enquiry is required by the CMA”.
Treasury consults on cashing cheques by app
CityAM (p10) reports on a consultation launched by HMT on whether new technology that allows users to cash cheques via apps would save customers time and money. The idea is backed by charities and small business groups who believe it will help cash-flow. The Financial Secretary to the Treasury, Sajid Javid, said: “New technology has the potential to deliver real benefits for customers. That is why we’re creating a new payments regulator and why we’re consulting on speeding up the cheque clearing process.”
FCA lays out new regulations for crowdfunding
A number of papers report this morning on the new rules for crowdfunding as outlined by the regulator. In the Guardian, Barry James, Founder of the Crowdfunding Centre, warned that rules for a 10% cap on investments from investors would take the “crowd out of equity crowdfunding” (p30). In the Times (£, p42) it is also reported that the rules will limit the marketing that crowdfunding companies can send to retail clients and force platforms to keep debt payments going even if they collapse. The FCA said that consumer protection was at the heart of the measures (FT £, p4).
Tyrie criticises BoE’s oversight structure
The chair of the Treasury Select Committee, Andrew Tyrie, has said that the Bank of England needs a board “worthy of the name”, criticising the bank’s oversight amid allegations of forex manipulation (FT, p2). Next Tuesday the committee will question BoE governor Mark Carney and Paul Fisher, the bank’s director of markets.Read more
BoE launches new investigation into foreign exchange manipulation
The Bank of England has suspended a member of staff and opened an internal investigation due to allegations of forex fixing (FT, p1). According to the BoE, the person who had been suspended “may have failed to keep adequate records of meetings at which senior traders discussed practises around the fixing”. CityAM (p3) highlights the BoE’s statement: “The Bank of England does not condone any form of market manipulation in any context whatsoever.”
The Telegraph (pB1) writes that Mark Carney will appear in front of the Treasury Select Committee next Tuesday to explain the Bank’s involvement in the forex manipulation. Pat McFadden, a Labour member of the Committee said this issue “could not be more serious” and that “the reputational risks of the Bank of England in this matter are enormous.”
Banks speed up compensation to small firms
According to the Financial Conduct Authority, Britain’s banks have accelerated compensation payments to small firms who were mis-sold interest rate products, CityAM (p10). The total redress paid by the end of February is £482m, up from £306.3 in January and out of the 18,800 firms covered by the FCA review 11,700 are already in redress phase.
EU bonus rules advantage Asian and US banks
According to the FT (p23), British banks claim new EU rules on remuneration give advantages to Asian and US banks. Tom Gosling, head of PwC’s reward practise argues: “It is absolutely true that the market in the US is still fiercely competitive…US banks are not pulling out of this game, they see the industry as highly profitable and are continuing to aggressively go after the best staff.”
Banks may have to leave Scotland if Scotland voted “yes”
The Times (£p2) and FT, write that under an EU directive from 1995, RBS and Lloyds Banking Group would have to move from Edinburgh to London if Scotland voted for independence. Lloyds argued that the EU law could force it to shift its legal domicile to London if the “Yes” vote won. However, it pointed out that the law was relatively untested and it was unclear what it would mean for the future of the bank.Read more
Bonuses under the spotlight
Governor of the Bank of England Mark Carney has written a letter to the Treasury Select Committee, announcing that the Prudential Regulatory Authority (PRA) will start consulting this month on strengthening rules on clawing back bankers’ bonuses, according to the FT (£, p4). The PRA will also consult on other recommendations from the parliamentary commission on banking standards such as extending the period for bonus deferral beyond the current three to five years; Mr Carney wrote in his letter that he was “confident that most of the recommendations from the commission…could be put into practice.”
However, the Times (£, p38) states that Mr Carney warned the Committee that proposals to cancel the pensions of bankers whose banks receive taxpayers cash “could fall foul of European laws”. Mr Carney wrote that the “scope for taking action in respect of pension rights will require very careful legal analysis”.
The announcement came as the European Commission approved rules identifying which bankers would be included in the bonus cap (EU Observer). The Guardian (p21) reports that Belgian MEP Philippe Lamberts, who helped devise the cap, has called for the European Commission to sue the UK Government, after accusing the Coalition of having no interest in halting “absurd remuneration packages”. EU commissioner for the single market Michelle Barnier, said some banks were “doing their utmost to circumvent remuneration rules” (FT, £, p4).
The Telegraph Business section leads with an interview with Barclays Chief Executive Anthony Jenkins, who reveals that the decision to increase bonuses at Barclays last year was to avoid “a situation where the business begins to contract”, after 700 staff left the US investment bank after compensation was cut.
Claims managements companies reap rewards of PPI compensation
The Guardian (p24) cites a report from Citizens Advice which states that claims management firms have pocketed £5bn of the compensation paid out to those who were mis-sold PPI. The report also found that four in ten of those who made claims did not know that they could make one without the use of a claims management firm. The Mail (p28) states that these firms made the claims “without being clear that they would take up to 25 per cent” of the redress.
Lenders could face tougher capital rules
Stefan Ingves, head of the Bank of International Settlements, has called for a regulatory floor to be set to stop banks underestimating their risks and so holding insufficient capital buffers against some loans, according to CityAM (p8).
Banks revise sales incentives
A Financial Conduct Authority (FCA) report has found that all the big retail banks have either replaced their incentives schemes or had made substantial changes to them, notes the FT (£, p4), with frontline staff being rewarded for customer service rather than volume of sales. The Times (£, p37) quotes Chief Executive of the FCA Martin Wheatley, who said: “We’ve seen some good progress but it is going to take time to see whether the changes firms have made to incentive schemes and their controls stick.”Read more
Bank culture is changing says regulator
The Telegraph (pB5) reports that retail banks have “listened” and taken action to change their bonus culture, according to a Financial Conduct Authority (FCA) review. FCA Chief Executive Martin Wheatley said: “Large numbers of firms are changing the way they reward sales staff and advisers to motivate better behaviour.”
Meanwhile, the latest complaints data from the Financial Ombudsman Service shows complaints were 38 per cent higher in 2013, but those unrelated to PPI fell by 11 per cent. Eric Leenders, the BBA’s executive director in charge of retail banking, said: “Banks have been working hard to deliver the service their customers expect and deserve.”
Sir Richard asks for views on new professional standards for banks
Writing in CityAM, Sir Richard Lambert states that banks will be obliged to commit to a “programme of continuous improvement in their standards of behaviour” with annual progress reports, under the new professional standards body being set up by the former CBI director general. Banks will be obliged to provide annual updates on whistleblowing, diversity and discipline. Sir Richard’s consultation ends on Friday.
Funding for Lending to concentrate on supporting business
Banks drew a total of £41.9 billion from the Bank of England’s Funding for Lending Scheme (FLS) since its launch in 2012, writes the Times (p39). Net lending to SMEs was slightly down as businesses continued to pay off debts and build up cash reserves, but the Bank’s data shows that new lending increased by 27 per cent over the past quarter compared to the same quarter last year.
Cable considers options to increase the number of women in top City jobs
Business Secretary Vince Cable has asked the Equalities and Human Rights Commission to advise him on the legality of obliging major businesses to introduce all-female shortlists for top executive jobs, the Guardian (p. 26) reports. A study he commissioned is expected to say that a database of “board-ready” women should be drawn up and given to major City firms, with headhunters required to put at least one strongly-recommended woman on the shortlist for all board positions.Read more