5th September 2016

Chief Executive newsletter – September 2016

Written by Anthony Browne

Welcome to my newsletter – I hope you have had a good break. This summer has been exceptionally busy for the BBA, as the industry gets ready for the UK’s exit from the European Union. UK-based banks want an orderly transition so they can continue to serve customers and businesses across Europe. Preparations for Brexit are likely to accelerate now that the UK Parliament has returned from recess so it is crucial the industry works together with Government over the coming months to secure the best possible deal for the UK.

An orderly transition

It is now over two months since the UK voted to leave the EU. Whilst it is still early days, the economy has so far proved to be resilient following the referendum, despite initial market volatility.

This is positive, but we cannot afford to be complacent. It is crucial that the UK and EU27 strike a new, mutually beneficial partnership that allows as much as possible of the business as usual that currently takes place between European countries and the UK, to continue.

The banking sector unequivocally wants this new partnership to maintain full access to the EU market so that businesses and customers across Europe can continue to be served by UK-based banks. This is in the interests of all concerned because market access underpins jobs and growth on both sides of the Channel.

London is Europe’s financial capital, providing funding for business not just in the UK but across the continent. Banking is our biggest export industry by far, winning work from across the EU and bringing it back here, creating jobs across the UK – two thirds of which are outside London. Without the exports from banking, our national trade deficit would be twice as big.

The only way to guarantee that UK-based banks can carry on providing the financing the European economy needs – and for European corporates to carry on accessing London’s capital markets – is for the UK to retain full access to the single market.

To help achieve that outcome, it is important that the UK commits to regulatory stability, rather than a bonfire of red tape. Tearing up EU regulations ahead of negotiations with the EU27 on our future relationship would seriously damage the prospects of getting a win-win deal for both sides.

Getting these negotiations right is a major challenge. The BBA is working to deliver an orderly transition and minimise potential disruption for customers and businesses.

Parliament returns 

Brexit will be high up the agenda in Parliament today – and for the foreseeable future – as MPs return from the summer recess. The Cabinet met at Chequers last week and set out their intention to seek a “unique” deal for the UK.

Away from European issues, a number of other issues are likely to rise in prominence over the coming months. The Better Markets Bill is expected to give consumers more power to switch providers in a number of different sectors, including banking.

Separately, the Criminal Finances Bill will play an important role in refocusing the Suspicious Activity Report regime to help tackle money laundering, while it will also make it easier for police to recover illicit assets and create a new offence making companies liable for failing to prevent staff facilitating tax evasion.

Banks are firmly committed to the fight against financial crime and we want to work with Government and law enforcement to make sure the new regime rises to the challenge posed by increasingly sophisticated criminals.

Finally, the first Autumn Statement delivered by Chancellor Philip Hammond will set out the Government’s new fiscal priorities. This will be particularly important at a time when the economy is facing a number of headwinds.

A consumer-led revolution

Retail banking is in the midst of a consumer-led revolution. The third iteration of the BBA’s Way We Bank Now report, published this summer, demonstrated that customers are embracing mobile banking with apps being used more than 7,610 times a minute – or 4 billion times a year. With mobile apps becoming more popular, internet banking logins declined for the first time suggesting that we’re at a tipping point.

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Many of us are choosing to use technology to manage our money on the move. We have more choice than ever before about how, when and where we manage our personal finances. As a result we’re now interacting with our banks far more than previous generations.

It’s easy to assume that technology only appeals to customers of a certain demographic but in fact digital innovation has the power to help some of the most vulnerable people in our society.

For example, 9,000 ATMs across the UK are now equipped with ‘audio assistance’ to help the visually impaired. Biometric identification, video conferencing and cheque-imaging are other innovations from banks making life easier for customers and empowering communities.

This is not innovation for innovation’s sake – it is technology designed to help make managing our finances easier and make our money go further.

Consumer impacts

The summer saw a number of major announcements that directly affect banks and their customers, including the Competition and Markets Authority’s retail banking market investigation and the Financial Conduct Authority setting a deadline for payment protection insurance compensation claims. The former will give individuals and businesses greater power to pick the products that are best for their needs, while the latter will provide further clarity for consumers on the proposed timeframe for making PPI complaints.

Perhaps the most significant announcement however came from the Bank of England, with the decision to cut interest rates to the historic low of 0.25%, heading off concerns of an economic slowdown following the EU referendum. The base rate had already been at a record low since 2009 so while this cut is good news for borrowers it is also painful for many savers. The low interest rate environment makes for a challenging business environment for banks but the industry is committed to supporting the economy in these uncertain times.

Upcoming events

The BBA will be hosting a wide range of events over the coming months. Our flagship Annual International Banking Conference on 20th October will feature a number of senior executives, regulators and policymakers. I hope to see many of you there. Meanwhile, the Cyber Resilience Conference on 10th November will be a key part of CyRes Week, which aims to improve cyber security and share best practice from across the banking sector.

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