Rose begins RBS overhaul
Alison Rose, the new CEO of RBS, has begun overhauling its investment banking arm by announcing that its chief executive Chris Marks and finance chief Richard Place will stand down. Ms Rose also sought to squash speculation that NatWest Markets, which sunk to a £193m loss during the third quarter, could be sold down or closed by insisting the unit "plays a crucial role within RBS". The bank's treasurer Robert Begbie will run the business until a successor is found for Mr Marks, while RBS treasury finance director Robert Horrocks will stand in as interim finance chief.
FSB issues leveraged loan warning
The Financial Stability Board (FSB) has expressed concern over the $120bn (£92bn) of high-risk leveraged business loans held by UK banks, warning that growing stresses in the debt could cause turmoil on other markets. A new report from the FSB warned that investors holding the loans are vulnerable to sudden economic shocks. The FSB said: “A number of factors suggest that vulnerabilities in the leveraged loan and collateralised loan obligation markets have grown since the global financial crisis. These markets may be more vulnerable to macroeconomic shocks than in the past, and stress in leveraged loan markets could disrupt other markets.”
Banks to prioritise cost-cutting
Analysis considering the outlook for 2020 suggests costs need to fall by a third for banks to achieve the industry standard return on equity of 12%, with the analysis suggesting cost-cutting will remain the number one priority for banks in 2020. The report predicts that, with resiliency at the centre of their thinking, banks will continue to focus on upgrading or replacing legacy systems.
Modulr in Bacs deal
Fintech firm Modulr has taken full control of its banking infrastructure. The business-to-business fintech has become a direct participant of the Bacs payment system, removing its reliance on third-party banking partners. It says the move will enable an easier, simpler service with reduced operating costs. The firm’s boss Myles Stephenson said: “We've moved to the third stage of fintech evolution; direct access to payments systems and infrastructure."
Monzo savings appear to vanish
Monzo customers have complained that their savings appeared to vanish due to a glitch in the banking app. The Telegraph says it is understood no money went missing but customers were unable to see their savings balance because of a bug. The paper says issues with the app occurred after many customers requested to receive their wages ahead of time through a feature which allows users to access cash 24 hours before it lands in their account.
Customers hit by website and app outage
A number of HSBC and First Direct customers were unable to access their money yesterday evening due to an unspecified fault with the banks’ website and apps.
Commsworld in deal with LDC
Lloyds Banking Group’s private equity arm LDC has invested in Commsworld, a firm looking to roll out ultra-fast communications networks across the UK. The company said the deal with LDC provided an exit for the remaining non-executive directors and private shareholders. Financial details of the transaction have yet to be divulged.
Goldman Sachs in 1MDB talks
Goldman Sachs is reportedly in talks with the US government to pay a $2bn (£1.5bn) fine and admit guilt to resolve a criminal investigation into its role in the Malaysian 1MDB corruption scandal. It is understood that the bank and US officials have discussed a deal under which a Goldman subsidiary in Asia would plead guilty to violating US bribery laws The negotiations also reportedly involve Goldman installing an independent monitor to recommend and oversee changes to its compliance procedures.
Sweden ditches sub-zero rates over economic fears
Riksbank, Sweden's central bank, has ended its five-year experiment with negative rates, lifting its main rate a quarter percentage point to zero.
Japan acts to avert ETF market liquidity squeeze
The Bank of Japan has launched a lending facility for exchange traded funds which lets brokers borrow some of the central bank’s holdings in equity ETFs for up to a year.
Australian court hits Volkswagen with record emissions fine
Australia’s Federal Court has ordered Volkswagen to pay a record fine of A$125m for making false representations about its vehicles’ compliance with diesel emissions standards.
Heathrow’s third runway delayed
Heathrow has said its project to build a third runway has been delayed by "at least 12 months" after the aviation regulator rejected its spending plans. The Civil Aviation Authority (CAA) has refused Heathrow's request to lift spending from £650m to £2.4bn before it even gets planning consent. The CAA is concerned passengers will end up shouldering the cost if Heathrow does not win permission to expand. The airport now expects to complete a third runway between 2028 and 2029.
FCA investigates BoE security breach
The Financial Conduct Authority has launched an investigation into a security breach at the Bank of England (BoE) which saw hedge funds gaining early access to an audio feed of press conferences. The central bank says an internal probe shows that a back-up audio feed for press conferences had been misused by a third party supplier, adding that it has referred the matter to the financial watchdog. The BoE described the issue as “wholly unacceptable”, adding that the feed, which is up to eight seconds faster than its main feed, had been accessed without the Bank’s knowledge or consent. Danny Blanchflower, a former member of the Bank's Monetary Policy Committee, has called for the resignation of the executive responsible for protecting information, BoE COO Joanna Place. The Times, which broke the news of the security breach, reports that the US Federal Reserve is now reviewing its communications systems. It also reveals that the European Central Bank addressed a similar issue earlier this year.
Foreign funds’ access to UK to be simplified
The Government is to streamline how foreign funds can be sold to UK consumers as it looks to ensure the country remains a major asset management centre once it exits the EU. The process that allows overseas investment funds to be sold in the UK is to be simplified, with the move designed to maintain the UK’s “position as a centre of asset management,” and provide more choice for consumers. Asset managers in Britain collectively manage over £7.7trn for customers.
Redington set for bumper investment
Private equity outfit Phoenix Equity Partners is set to invest in Redington in a deal that could value it at £50m. The deal creates a partial exit for entrepreneurs Dawid Konotey-Ahulu and Rob Gardner, who left Merrill Lynch in 2006 to form Redington, where revenues last year hit £22.5m. The firm advises pension fund trustees how to ensure the savings pots they oversee will be able to pay scheme members when they retire, and is also one of the few financial services firms lauded for having no gender pay gap.
Government to legislate for auditing reform
The Government has announced that the UK will strengthen supervision of accountants after a number of high profile corporate scandals and collapses undermined trust in auditing. Setting out its new legislative agenda in the Queen's Speech on Thursday, an outline of an Employment Bill said the Government will develop proposals on company audit and corporate reporting, including "a strong regulator" with the necessary powers to reform the sector. This comes after three Government-backed reviews proposed reform.
Halifax predicts low price growth in 2020
Halifax expects house price growth to remain subdued at between 1% and 3% in 2020, saying that increases will remain low in a market where young buyers are held back by large deposit requirements. Halifax’s forecast for 2019 had suggested prices would rise by 2% and 4%, with prices subsequently climbing 2.1% over the year to November 2019. Russell Galley, Halifax’s managing director, said 2019 saw modest price growth supported by falling mortgage rates and a low volume of houses for sale, which “helped to underpin a degree of resilience in the market.” Prospects for 2020 appear “a bit brighter”, he added, “with uncertainty in the economy falling back somewhat, transactions volumes anticipated to pick up and further price increases made possible by growth in households’ real incomes.”
Retail sales slip in November
Figures from the Office for National Statistics show that retail sales fell in November, with the amount spent in the three months to November down 0.3% compared to the previous three months. The analysis, which was adjusted to account for Black Friday falling later than last year, shows 0.5% less was spent in November than in October. This marks the fourth consecutive month without growth – the longest such run since the data started being collected 23 years ago. Shoppers also purchased less, with sales volumes down 0.4% on a quarter-by-quarter basis and 0.6% month-on-month. Aled Patchett, head of retail and consumer goods at Lloyds Bank Commercial Banking, commented: “It’s disappointing that early discounting was not enough to get consumers spending to boost the coffers of many retailers in November”. Karen Johnson, head of retail and wholesale at Barclays Corporate Banking, added that with Black Friday coming at the end of the month and not covered by this reporting period, “it’s reasonable to assume that many shoppers held on to their cash to splash out on the bargains.”
BoE holds interest rates
The Bank of England (BoE) has held interest rates at 0.75% as it warned there was little chance of significant economic growth this quarter. The BoE’s Monetary Policy Committee (MPC) voted 7-2 in favour of maintaining the rate, as it did at its previous meeting in November. The monetary policymakers did point out that both sterling and the FTSE had rallied in the last month, with the pound’s exchange rate appreciating by around 2%. Jonathan Haskel and Michael Saunders voted to cut rates by 0.25%, citing the weakness of the economy as reason to reduce the rate 0.5%. The BoE says it expects GDP to grow by 0.1% in Q4, while the 0.3% growth in Q3 was "a little weaker" than the MPC expected at its November meeting. It added that while some company spending plans put on hold since the EU referendum could be reinstated by the end of next year, uncertainty over the future trade deal with the EU could continue to weigh on the economy. The MPC expects inflation to remain below its 2% target next year.
FCA’s Bailey set for BoE role
Financial Conduct Authority chief executive Andrew Bailey has emerged as the leading candidate to be the next governor of the Bank of England, with his appointment reportedly set to be announced as early as today. If appointed, he will succeed Mark Carney on January 31. While Mr Bailey, a former deputy governor at the central bank, has emerged as the front-runner, the Telegraph says the Chancellor “could still spring a surprise”, noting that in 2012 Mr Carney was announced despite having said publicly that he was out of the running. It was previously thought that Mr Bailey’s chances of landing the role had been hurt by the collapses of Neil Woodford's empire and savings business London Capital & Finance, which have occurred during his time heading the City watchdog.