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.
Lending to businesses “heading in the right direction”
The Mail on Sunday reported on comments by Stephen Pegge from Lloyds Banking Group’s SME division, who predicted that the latest Funding for Lending figures published today by the Bank of England would show that “things are heading in the right direction” on business lending.
The BBA’s latest business lending figures show new lending to SMEs from the major banks in the fourth quarter of 2013 rose to more than £7 billion, an increase of 26 per cent on the same period last year. Download the full release here.
Think tank calls on TfL to launch a new banking service
In the Times (£, p39) the Social Market Foundation has suggesed that Transport for London should turn Oyster cards into fully functional debit cards and that the organisation could use this as a platform to launch a full banking service. TfL have rejected the idea, Shashi Verma, director of customer experience, said: “Our focus is on making the journeys of our customers better. Oyster has been a fantastic success. We don’t, however, intend to apply for a banking licence.”
McEwan calls for more transparency over bank charges
In an interview with the Sunday Telegraph RBS Chief Executive Ross McEwan suggested that paid for bank accounts would be “addressed in the market place”. He is quoted saying: “It’s not something that’s on our minds at the moment, but I think that’s where it’s going to end up longer-term in the industry, as customers realise they are going to pay for it in some shape or form. Again, it’s around transparency. If that’s the most transparent way of doing it, the industry will end up there.”Read more
RBS sets out plans to deliver “real change”
Ross McEwan, chief executive of RBS, delivered a major speech on results day to set out how he intends to restructure the bank into one the “taxpayers can be proud of” and that “earns customer trust” (Telegraph, B4). The bank will look to sell assets to boost its capital position and shift its operational focus on to becoming a “first-rate UK bank”. The FT (£, p22) also reports that RBS will no longer offer favourable rates to new customers, known as “teaser” rates, and plans to concentrate on improving customer service for its 16 million customers.
Base rates to remain low to protect homeowners
A member of the Bank of England’s Monetary Policy Committee has indicated that base rates are not to exceed three per cent to keep mortgage rates affordable reports the Guardian (p32). David Miles said: “The new normal for monetary policy will probably involve setting Bank rate on average at a lower level than before the crisis”.
Merkel opens door to modest reforms and calls for strong UK voice in Europe
German chancellor Angela Merkel refused to promise “fundamental reform” but expressed her support for making the EU more open and competitive, with less regulation coming from Brussels writes the Times (£, p4). Merkel used a speech at Westminster Palace to discuss the need to protect the single European market, and for the next European Commission to explicitly pursue policies to boost growth.
Businesses warn Salmond against cost of leaving the UK
Standard Life has joined a number of businesses in stating that it would transfer some of its Scottish-based operations to England if the country becomes independent. The Telegraph business leader comments on the impact a “Yes” vote could have on the credit ratings of Scottish based financial institutions. The FT (£, p3) examines the concerns raised by Standard Life on the issues of currency union, the EU, regulation and tax.Read more
BBA urges the chancellor to resurrect Britain’s lost savings culture
Anthony Browne, CEO of the BBA, encourages the Chancellor to “resurrect the savings culture” and believes that “over the past 40 years, we have morphed from a nation of savers into a nation of debtors” (CityAM, p20). The Telegraph (pB1) highlights parts of the BBA’s submission to the Budget which urge the Government to make ISAs more attractive and consider introducing a workplace savings product.
Business investment rallies as GDP figures confirm economic recovery
The second estimate of the official GDP figures shows that the economy grew by 0.7 per cent in the final three months of last year. The report also unveils that business investment grew 2.4 per cent in the final quarter of last year – it was 8.5 per cent higher than in the same period of 2012. Exports increased by 0.4 per cent while household spending growth slowed from 0.9 between July and September to 0.4 per cent between October and December, Mail (p75).
BoE sets new rules for foreign bank branches
Foreign banks operating in the UK will today meet the PRA to discuss proposed changes to their oversight regime (FT, p3). The new rules “would make it extremely difficult for banks from outside the European Economic Area to offer retail services to UK customers,” the FT says. Branches would need to be converted into subsidiaries that are subject to the full force of UK regulation, in a move that aims to balance financial stability with openness. Read the latest blog by the BBA’s Simon Hills on why getting the regulation right for overseas banks’ branches really matters.
Andrew Bailey warns about plans for the potential Scottish independence
Deputy Governor at the Bank of England and head of the Prudential Regulation Authority, Andrew Bailey, told the Scottish Affairs Select Committee yesterday that plans for separate regulation in an independent Scotland would be different to any regime “operating in any other part of the world that has a major financial system” (CityAM, p2). In response to Alex Salmond’s plans to share a common regulator in an independent Scotland, Bailey answered: “It’s a pig that I can’t observe flying.” Telegraph (pB5).Read more
Mortgage lending rises to pre-crisis levels
Many papers report on yesterday’s high street lending statistics published by the BBA. CityAM (p5) reports that 49,972 mortgages were approved in January, with loans for house purchases rising by 57 per cent since January 2013. The Telegraph (pB1) notes that £8.4 billion was spent on credit cards in January, up 12.5 per cent on a year earlier. For the full release click here.
PRA outlines rules on foreign banks
The FT (£, p16) writes that banks from outside the European Economic Area may be forced to overhaul their legal structure or stop offering retail services, under new proposals set out by the Prudential Regulatory Authority (PRA). CityAM (p5) suggests that the implementation will aim to prevent a repeat of the instability caused by the failure of Icelandic banks based in the UK. The PRA has stated that branches will not be able to continue trading unless there is “a very high level of assurance” from their national regulator that they are capable of being resolved safely in the event of failure (Times, £, p35)
Miliband to offer EU referendum
The Times (£, p22) reports that Labour leader Ed Miliband will “seek to reform Britain’s relationship with Brussels”. A source close to the party said: “Labour are preparing to say, ‘We need treaty change. And we don’t think it will happen by 2017. But when it comes we will have a referendum.” Meanwhile, Angela Merkel is prepared to offer David Cameron limited EU opt-outs in a “sign of the lengths the German chancellor is prepared to go to ensure Britain remains in the EU”, according to the Guardian (p2).
Banks’ lending practices praised in Treasury Select Committee hearing
Professor Russel Griggs, the Independent External Reviewer of the Banking Taskforce Appeals Process, told MPs yesterday that there is now a “real understanding” between banks and business customers, reports the Times (£, p37). Professor Griggs told the Select Committee inquiry into SME lending: “There seems to be this view that all big banks are the same, but they’re not. The banks are competitive.”Read more
Mortgage lending and credit card borrowing rise
The BBA’s high street banking stats point to growing consumer confidence, with mortgage approvals now at their highest levels for six and a half years. See release here.
BBA criticises bank levy unpredictability
Both Sky News and CityAM (p3) have reported that the BBA submission to the Treasury ahead of the Budget argues that the frequent changes to the bank levy are “inconsistent with the Government’s desire for the UK to have a competitive, stable and predictable tax regime for business.”
Rise in non-bank lenders
An article in the FT (£, p30) shows the rise in the non-bank lenders, citing figures suggesting that alternative finance providers almost trebled the number of deals they did in the UK and Europe between the first and final quarters of 2013.
PRA makes it easier for banks to set up in UK
The Wall Street Journal (p20) reports that UK regulators are set to lay down new plans on supervising the UK arms of foreign banks, making it easier for them to open more branches provided that they don’t collect retail deposits and their home regulators are co-operative.
Salmond accused of endangering Scottish financial sector
The Scottish First Minister has been criticised for suggesting that Scotland might continue to use sterling should they vote for independence. The so-called ‘Plan B’ was suggested by Salmond during an interview with BBC Radio Four’s Today Programme, where he suggested that Scots would continue to use the pound if Westminster refused a currency union. Opponents argued that this would leave Scotland with no control over their monetary policy and “without a central bank to stand behind the banking and pensions industry, forcing banks to relocate south of the border.” (FT, £ p1)Read more
New lenders to enter banking market
The FT (p17) reports that Legal & General is set to begin lending to medium-sized companies by the end of the year. It would focus on “private placements”, which allow companies shut out of public debt markets to borrow sums as low as £20m, typically for up to 10 years. The article notes this move “would bolster a market that remains tiny compared to that established in the US, where some of the biggest insurers have been lending for decades”.
The Sunday Times (£, p6) ran an interview with Nigel Terrington the Chief Executive of Paragon which has just been granted a banking license and will focus on car loans, savings accounts and small business loans.
The Independent on Sunday looked at the possibility of more banking activity taking place in supermarkets in the future.
Merkel flies in for key talks on EU reforms
Various newspapers look ahead to Angela Merkel’s visit to the UK this week in which she is predicted to support David Cameron’s moves to renegotiate Britain’s relationship with Europe.
The Mail (p2) reports that William Hague, the Foreign Secretary, said yesterday that the German Chancellor is set to support two of Mr Cameron’s goals – tighter controls of the rights of migrants and greater controls by national parliaments. Meanwhile, the Guardian (p13) suggested that the “key issue” for the British Prime Minister will be whether he can force concessions on the EU’s “freedom of movement” principle – considered by Jose Manuel Barroso, the European Commission President, as non-negotiable.
IoD warns mansion tax could hit business lending
Plans to impose a mansion tax could undermine Britain’s entrepreneurs, the Institute of Directors (IoD) warns in the Times (£, p40). Labour and the Liberal Democrats have both proposed introducing a 1 per cent annual levy on the value of any property above £2million. The IoD said that the charge would make it harder for directors to secure bank loans, thereby hindering investment and the economic recovery.Read more
Banking industry focus on EU elections
A blog from the BBA website is the central focus of an article in the FT this morning (£ p3) which reflects on the efforts of the banking industry to engage with the forthcoming EU elections, writing to MEPs and candidates in efforts to manage a “potential populist surge” within the parliament.
Rise in interest rates predicted
Most of today’s papers pick-up on the comments of MPC member Martin Weale speaking to Sky News in an interview where he told the channel that he expected interest rates to rise next year. Mr Weale said, “I think it is very helpful if we try and explain that the most likely path for interest rates is that the first rise will come perhaps in the spring of next year” (FT, £ p4). An analyst tells the Mail that guidance on interest rates ‘does not get any more specific than that’.
Mortgage lending hit £15bn
Both the FT (p4) and CityAM (p2) note a report by CML which says that mortgage lending this January was up 33 per cent on the previous year hitting £15bn, though the organisations chief economist warned against assumptions that that the property market would accelerate sharply. The CityAM article notes that banks and building societies gave out £177.4bn in home loans in 2013, up 23 per cent on 2012 and the highest since 2008. Meanwhile the Guardian (p31) featured an article stating a rise in homes bought for cash, citing figures from the Intermediary Mortgage Lenders Association that found that the proportion of homes funded by mortgages dropped to 62 per cent last year, the lowest since 2005.
More funding from British Business Bank
Funding Circle, the peer-to-peer lending platforms, is to receive £40m of investment from the British Business Bank according to an article in the FT (C&M, £ p23). The article quotes Vince Cable in reference to the high street banks: “If we’re to have a properly functioning business lending market, they need to be challenged by new banks, peer-to-peer lenders and other alternative providers.”Read more
France and Germany pledge to agree on FTT plan by end of May
The FT (p7) reports that Paris and Berlin are pushing for a European Financial Transaction Tax to be agreed upon before the European Parliament elections in May. German Chancellor Angela Merkel said: “If things move, certain countries may lose their reticence”. The countries are looking to agree on a stamp duty tax on equities and equity derivatives as a first step, which could be expanded later. French President Francois Hollande is quoted saying: “I prefer an imperfect tax to no tax at all.” Leaders of business groups in nine of the eleven EU states who support the tax wrote to the European Commission to express their “strong opposition” to its introduction.
“Recovery still at risk”, says Osborne
The Chancellor of the Exchequer George Osborne will today give a keynote speech in Hong Kong warning that Britain’s recovery is fragile and that economic shocks overseas could still knock it off course writes the Times (p2). Osborne is expected to say: “I’m now the first to say that the recovery is not yet secure and our economy is still too unbalanced.” The speech comes as the Bank of England declared that Britain’s recovery is becoming “more entrenched and broadly based” Telegraph (p5).
Banks look to coco bonuses as the EBA sets new standards for their use
European banks are expected to pay bonuses in contingent convertible bonds (cocos) writes CityAM (p7) as the European Banking Authority (EBA) set out new standards on the instruments. Cocos only have a value when the bank is strong, but if its capital position deteriorates the bond is wiped out.Read more
Paragon given licence in boost for competition for UK banking
The decision by the Prudential Regulatory Authority (PRA) to grant Paragon a banking licence has been reported across the media (FT, p22). The new bank said it made the decision after the PRA made the licencing process less onerous and that it would launch a range of “straight-forward and competitive products this year”. It has no plans to enter the current account or mortgage markets. Nigel Terrington, chief executive of the Paragon Group, said: “Significantly, banks used to be required to have all their longer-term capital in place in cash on day one – but now [the regulator] requires one year [upfront] and more over time as the balance sheet gets formed.” The announcement forms part of a wider trend of new lenders entering UK banking markets to compete with big banks for savers and loans. Read BBA Chief Executive Anthony Browne speech on competition in banking delivered on 4 February 2014.
Fed pushes on with new rules for overseas banks
The FT reports that the Federal Reserve is pressing ahead with plans to subject the US operations of overseas banks to tougher capital requirements and annual stress tests, despite offering modest concessions. Banks with at least $50bn in global consolidated assets will fall under the new rules which are expected to impact about 100 foreign banks, in addition to 24 US bank holding companies. Daniel Tarullo, the Fed governor in charge of regulation said: “We have to recognise that – notwithstanding all the international co-operation – we do retain the responsibility of maintaining the stability of the US financial system, as do our brethren maintain that responsibility for their own country.”
Senior US and EU officials pledge to push on with Transatlantic Trade Partnership
Negotiations on a transatlantic trade agreement took a step forward yesterday as officials on both sides of the Atlantic agreed to give proceedings “a jolt” reports the FT. EU Trade Commissioner, Karel De Gucht, said: “Our message to the negotiators now is that we need to step up a gear. The marked-out areas are still larger than the common ground. But we now have a clear picture of the whole field.” On-going talks centre on access to markets, raising standards and harmonising regulatory regimes.
Inflation falls below two per cent as expectations of wage increases rises
The Times leader column argues that with inflation below two per cent, the Bank of England’s policy of low rates has been vindicated. The Guardian (p2) quotes leading economists on the implications of low inflation on wages. Samuel Tombs, UK economist at Capital Economics, said: “This should enable real earnings to rise… and allow the Bank’s monetary policy committee to keep interest rates on hold until well into next year.”Read more
Bank of England tells households to plan for future increases in interest rates
The Mail (p65) reports comments made by David Miles, member of the Bank’s monetary policy committee, on the impact of future interest rates rises on household borrowing costs. Mr Miles said: “Interest rates will not remain at this level for many years to come… [families] need to think very carefully what’s going to happen when the cost of that mortgage moves up.” The comments come after Graham Beale, Chief Executive of Nationwide, warned that “a whole generation of borrowers have never experienced increases in their monthly mortgage payments.”
Financial Transaction Tax would cost UK savers £3.6 billion
A report released today by London Economics found that the Financial Transaction Tax would cut the value of household savings in Britain by £3.6 billion pounds because of its effects on the value of property prices and bond holdings. The publication comes as France and Germany are expected to renew efforts to introduce the tax, reports Reuters.
Top EU official warns Brexit would hinder the City and limit British trade
Outgoing vice-president of the European Commission Viviane Reding yesterday warned that the City would “lose its unhindered access to the single market in the case of an exit” limiting its role to one of an “offshore financial centre”, states the FT (p2). The comments were made as Ms Reding challenged claims from British politicians that leaving the EU would not hinder European trade. She also used the speech to call for the creation of a United States of Europe.
Alex Salmond suggests Scotland could keep the pound and join the European Union
There was broad coverage of Scottish First Minister Alex Salmond’s flagship speech in Aberdeen yesterday, including the Telegraph. Mr Salmond challenged claims by leading British politicians that an independent Scotland would not be allowed to keep pound sterling as its currency. He claimed that such a move would result in a “George Tax” that would raise the cost of buying goods in Scotland for English consumers. The Scottish National Party leader also countered the suggestion by President of the European Commission Jose Manuel Barroso’s suggestion that an independent Scotland would be denied entry to the European Union.Read more