4th October 2016

Chief Executive newsletter – October 2016

Written by Anthony Browne

Welcome to my newsletter. As the weather turns cooler, a number of major issues facing the banking sector are hotting up. Brexit continues to dominate the political agenda but party conference season has also shifted the focus on to a number of other domestic matters. Meanwhile, the BBA has been busy hosting a wide range of events covering everything from FinTech to financial crime – with a packed line up still to come over the next few months.

A passport to success

A growing number of politicians and commentators have recently been calling for a ‘hard Brexit’ – an immediate exit from the single market. They claim that the impact of such an approach would be relatively limited.

Now the government has set the timetable for the Article 50 negotiations, it is critical that it gets early agreement with other EU members on the need for transition arrangements.

Getting these negotiations right is a major challenge. That is why the BBA is working to ensure the implications of complex technical issues such as passporting are understood better and more widely amid the debate over the merits of a so-called hard or soft exit.

Contrary to some recent reports, the EU’s passporting regime has been a key factor in enabling the UK to grow as the financial capital of Europe. It underpins billions of pounds of overseas income and tax revenue, as well as thousands of jobs, by enabling UK-based banks to serve customers across the single market efficiently, without duplication and at low cost. The importance of passporting is shown by the scale of it: the Financial Conduct Authority recently disclosed that 5,476 UK based firms hold 336,421 passports.

Some have argued that alternatives, such as equivalence, available to non-EU countries could provide similar access to the EU’s single market in the event of a hard exit. In truth, the alternatives are poor shadows of genuine passports. They are not available for many banking or other basic financial services, provide much more limited rights at greater cost, are uncertain, and can be withdrawn at short notice.

Passporting has been a major incentive in attracting numerous businesses with differing profiles to the UK. It is vital that the Government fights to retain it so that London can remain a gateway to Europe and beyond.

Party conference season

Brexit has inevitably been a hot topic during party conference season so far, and has remained in the spotlight as Birmingham plays host to the Conservatives this week.

Another issue that MPs have been keen to hear about is what the industry is doing to protect customers against fraud, particularly in light of a recent supercomplaint lodged by Which? The BBA has been hosting a number of fraud fringe events at part conferences with partners including Financial Fraud Action UK, Trading Standard and Age UK to explain how the industry is rising to the challenges posed by increasingly sophisticated scammers.

Tackling fraud is a top priority for the industry. Customers and businesses rightly expect high levels of security whether they bank online or in person.

Banks are investing heavily in even more sophisticated ways of preventing scammers, including using biometrics for customer authentication. These systems last year stopped £8 in £10 of attempted remote banking fraud but we cannot afford to be complacent.

Fraudsters are constantly adopting new tactics so it is critical that a joined up approach is taken to stop them ripping off individuals and businesses. The industry has been working closely with the Government and law enforcement agencies on the Joint Fraud Taskforce since its launch earlier this year.

The BBA will also be launching a new Financial Crime Alerts Service, sharing real-time intelligence from law enforcement agencies with banks to help them combat financial crime.

Focus on financial crime and FinTech

Financial crime was also the theme of a two-day conference that we held in September, featuring speakers from the US Treasury, Home Office, National Crime Agency and many more.

The discussions centred on anti-money laundering, sanctions, terrorist financing, bribery, corruption, fraud and cyber-crime.  The need to think locally and act globally on financial crime, built around improved intelligence sharing was a key theme.

On anti-money laundering, there was general agreement from across the sector, law enforcement and Government that the current regime does not work well enough with too many resources focused on low value activity. Megan Butler of the FCA talked about the need for banks to look again at compliance activity to ensure that it was proportionate to the risk and encourage banks to have a more open dialogue with the regulator on how to make the supervisory regime work more effectively.

The BBA also last month brought together regulators, policymakers and industry experts to examine how we can build on the success of the nascent FinTech sector.

Silicon Valley has long been regarded as the home of digital innovation but a recent report from EY rated the UK as the world’s leading FinTech centre.

Both Government and regulators are focused on capitalising on this success, as demonstrated by the fact that the Financial Conduct Authority has grown the team working with FinTech startups tenfold in the last two years.

Banks are keen to support the sector’s growth and a clear theme of the day was that many FinTech startups now employ a business model that requires a close collaboration with large financial institutions. A successful FinTech sector benefits the banking industry, and vice versa.

Register for the BBA’s International Banking Conference

There’s still time to register for our flagship Annual International Banking Conference on 20th October.  This event is one of the biggest in our industry’s calendar and will bring together senior executives and other opinion leaders to discuss the big issues that will shape banking over the coming years. We will be hosting a strong line-up of speakers, including Lord Mandelson, Morgan Stanley Chief Executive Robert Rooney, JP Morgan Chairman Sir Win Bischoff, and London Stock Exchange CEO Xavier RoletTo register please click here.

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