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Daily News Roundup: Friday, 16th September 2022

Posted: 16th September 2022


Bank of England never backed bonus cap

With it reported that Chancellor Kwasi Kwarteng wants to scrap the bankers’ bonus cap amid a post-Brexit rethink of regulation, the Bank of England says it was never in support of the policy to limit earnings. A spokesperson for the Bank said there were better ways to ensure banks account for risks than the restriction, commenting: “The Senior Managers Regime and remuneration rules requiring deferral of bonus payments are more effective tools for ensuring bankers take proper account of risks.” Bank governor Andrew Bailey last year suggested that the cap is not “the best way to address remuneration” while his predecessor Mark Carney also criticised the policy. Meanwhile, Professor Len Shackleton of the Institute of Economic Affairs think-tank has argued that it “was always irrational to cap bonuses rather than total pay.” He added: “A continuing cap on bonuses will over time add to the difficulties of international recruitment and undermine the competitiveness of the UK’s financial sector.”

Brits are saving two-thirds less than last year

Analysis by Paragon Bank suggests that the amount people in the UK are saving is falling dramatically. The total saved in June was two-thirds down on June 2021’s total, with soaring living costs seemingly having an impact on the money people can set aside. The analysis shows £400m was saved in accounts with CACI member banks from May to June 2022, taking the total held in such accounts to £995.1bn. Between May and June 2021, CACI member banks -  a group of more than 30 leading savings providers - took in more than £1.2bn. The report shows that as of June, roughly half of easy-access savings accounts held £500 or less, with 37% holding £100 or less. Derek Spawling, Paragon Bank's savings director, said the data “provides further reason to believe that savings growth is becoming more challenging,” adding that inflation is “starting to hit home.”


US to boost BNPL oversight

American regulators are set to boost oversight of the buy-now, pay-later industry amid concerns over the risks certain products pose to consumers. The Consumer Financial Protection Bureau says standards for the market will be aligned with those imposed on credit card companies. The regulator is said to have concerns that consumer protections are inconsistent, with the buy-now, pay-later system engineered to encourage shoppers to purchase more and borrow more. The bureau does not currently oversee buy-now, pay-later firms or products but is preparing to revise its guidance and rules and implement appropriate supervisory examinations.

France to raise bank capital buffer to 1% in December

France plans to double the amount of capital reserves banks have to keep on hand for a downturn in the economic cycle. The Financial Stability Council said it will increase the capital buffer, currently at 0.5%, to 1% in December unless there is an unexpected downturn in banks' capacity to finance the economy. The council, which is chaired by Finance Minister Bruno Le Maire, said banks already have sufficient capital to meet the requirement.

Danske bank fined over transaction monitoring failures

The Central Bank of Ireland has reprimanded and fined Danske Bank for three breaches of Ireland's money laundering laws. The Danish bank was fined €1.82m for three breaches stemming from a failure to ensure that its automated transaction monitoring system monitored the transactions of certain categories of customers between 2010 and 2019.

China’s state banks cut deposit rates for first time since 2015

Some state-run Chinese banks have cut deposit rates for the first time since 2015, with interest rates for three-year deposits reduced by 0.15 percentage points to 2.6%.


Financial sector faces wave of brute force DDoS attacks

The UK’s financial sector is experiencing a wave of brute force Distributed Denial of Service (DDoS) attacks, Financial Conduct Authority (FCA) data obtained by cybersecurity firm Picus Security shows. DDoS attacks accounted for 25% of all hacking incidents reported to the FCA in the first half of 2022, compared to just 4% in 2021. The number of cyber-attacks involving ransomware dropped 63% in H1, while the number of phishing scams fell by 50%. An FCA spokesperson said: “Cyber-attacks continue to pose a threat to all financial services firms. Firms should be aware of the threat, able to defend themselves effectively, and respond proportionately to cyber events.”

Wise shareholders warned over FCA probe into CEO

Shareholder advisory group Glass Lewis says investors in money-transfer firm Wise “should be concerned” by the regulatory investigation into chief executive Kristo Kaarmann, warning that it threatens to “dampen shareholder value.” The Financial Conduct Authority opened an investigation into the CEO in June after tax authorities ruled that he deliberately defaulted on a £720,000 tax bill in 2021. Glass Lewis said it would back Mr Kaarmann’s re-election as a director at next week’s shareholder meeting but warned this may change if any bosses are implicated in legal proceedings.


Queen’s funeral drives surge in demand for London firms

London businesses are set to see a surge in demand as visitors descend on the capital ahead of the Queen’s funeral. Richard Burge, chief executive of the London Chamber of Commerce and Industry, said: “The influx of mourners into London from across the UK and internationally means businesses are seeing an increase in footfall and revenue,” noting that this is “particularly the case for the hospitality and service industry.” UKHospitality chief executive Kate Nicholls said hotel operators in London have experienced “a surge” in bookings since the Queen’s death was announced, with demand “certain to remain high right up until next Monday’s state funeral.”


Microsoft's Activision Blizzard deal faces competition probe

Microsoft's £50bn takeover of video game maker Activision Blizzard has been referred for an in-depth probe by the Competition and Markets Authority (CMA). The competition regulator has launched a phase-two investigation after Microsoft failed to put forward potential remedies to address competition concerns. The CMA had voiced concern that the deal could “substantially lessen competition” in the gaming market if Microsoft refused rivals access to Activision titles.


John Lewis suffers first half loss as inflation hits trade

The John Lewis Partnership has reported pre-tax losses of £99m for the six months to July 30 compared with losses of £29m a year earlier. The retailer said while its number of shoppers had increased on last year, customers were spending less. Sales at John Lewis rose by 3% to £2.1bn, but fell 5% to £3.6bn at Waitrose. 

H&M feels squeeze as shoppers look to save

H&M has reported lower than expected quarterly sales as shoppers looked for savings to deal with the cost of living crisis. Excluding currency shifts, revenues dropped 4% in the three months to the end of August. Analysts had predicted a decline of 1.4%.

Wickes builds strong H1

Wickes has posted strong revenue and profits for H1. The home improvement specialist had a 1.3% rise in revenue in the first six months of the year, with profit before tax up 6.2%. Its like-for-like sales were up 0.8% on a year earlier.


Mini Budget set to deliver tax cuts

Chancellor Kwasi Kwarteng is expected to deliver a mini Budget on September 23, with the "fiscal event" set to outline tax cuts promised by Liz Truss during her leadership campaign. The Prime Minister has vowed to cut taxes to boost the economy and help those hit by the soaring cost of living, with a reversal of this year’s 1.25% National Insurance increase among measures she pledged to deliver. Ms Truss has also said her government will cancel a planned rise in corporation tax. Mr Kwarteng could also detail the estimated cost of plans to cap energy prices. The scheme, which will mean typical energy bills of around £2,500 a year until 2024, could cost up to £150bn. The Chancellor is also expected to provide details of a separate scheme to limit energy price rises for businesses.

Trust in Bank’s efforts to tackle inflation falls

Trust in the Bank of England’s ability to keep inflation under control has fallen to a record low. The Bank’s latest Inflation Attitudes Survey shows that the balance of those satisfied with its action on the cost of living crisis dipped from -3% to -7% in August. Myron Jobson, senior personal finance analyst at Interactive Investor, said the results will “turn up the heat” on the Bank’s Monetary Policy Committee. The rate-setting committee has made six consecutive hikes to interest rates since December 2021 and is expected to increase rates again next week. Inflation stood at 9.9% in August and while this was down from July’s 10.1%, it remains far above the Bank’s 2% target.

World Bank economist concerned over stagflation

World Bank chief economist Indermit Gill has voiced concern over stagflation, pointing to the possibility of low growth and high inflation in the global economy. Saying that six months ago the Bank was “really concerned” about a slowing recovery and very high prices of some commodities, he noted that it is now “much more concerned about a generalised stagflation,” saying it “brings back really bad memories of the mid-1970s and the lost decades.” Mr Gill also warned that a growing number of middle-income countries are under pressure and face high debts, adding that the current economic climate means poverty reduction has dropped.

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