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Daily News Roundup: Friday, 20th March 2020

Posted: 20th March 2020


Banks urged to scrap dividends, share buybacks and bonuses

The Systemic Risk Council, a group of former senior regulators and policymakers, has suggested that banks should scrap dividends and share buybacks as they look to dampen the economic damage caused by coronavirus, with it also suggested that bonuses could be withheld. Banks “should be ready to suspend bonuses to a thick layer of senior and other highly remunerated staff in order to maximise their capacity to lend”, the council said. Sir Paul Tucker, former deputy governor of the Bank of England and chairman of the council, commented: “At this stage it will be difficult for economic policymakers to get ahead of events, but obviously they must strive to do so.”

Bailey vows to help SMEs

Bank of England (BoE) governor Andrew Bailey has told small firms to approach him or the Bank if they struggle to raise debt from their lender, saying he is “more than happy to intervene” if jobs are at risk. He said that while the BoE has limited resources, he is looking to increase them, adding: “I want small businesses to feel there are people here to help." With banks pledging to offer SMEs billions of pounds of emergency loans to help them through the coronavirus crisis, the BoE incentivising lenders by offering them cheap funds and the Treasury providing loan guarantees, Mr Bailey said: “If you put together everything we've done and the Government has done it is substantial.”

Firms unsure over loan scheme

The Times looks at the Coronavirus Business Interruption Loan Scheme, the Government's emergency credit initiative for small companies that will provide firms with credit of up to £5m. Oliver Prill, chief executive of Tide, a digital bank for SMEs, warns that the scheme “will fail a significant proportion of small businesses." Frances Coulson, former president of insolvency trade body R3, comments: "It remains to be seen whether real access is given to all businesses efficiently and without lenders imposing or changing terms of existing banking." It is noted that some commentators feel the scheme is too similar to the Enterprise Finance Guarantee (EFG) - the loan scheme set up in the wake of the financial crisis, with Mark Stephens, CEO of Allica Bank, saying the EFG was cumbersome and "horrendous" in regard to its bureaucracy.

Mortgages yet to see rate cut movement

Despite the Bank of England cutting interest rates as it looks to ease the impact of Covid-19, the Mail says there has yet to be much movement in new fixed rate mortgage deals. David Hollingworth from broker L&C comments: “Lender margins have been under severe pressure and I expect that many will want to take the chance to cling onto some of that margin.” Kate Davies, director of the Intermediary Mortgage Lenders Association, said: “We know that a number of lenders have specifically said they will offer forbearance to borrowers whose income is affected by the outbreak – and that forbearance will have to be funded somehow.” The Mail notes that banks including Lloyds, Halifax and Santander have said they will pass on the cut on standard variable rates.

Mortgage support fear for some homeowners

While Chancellor Rishi Sunak this week announced that mortgage lenders will offer respite to homeowners facing financial challenges due to the coronavirus via a repayment holiday, some homeowners may miss out. Those who have slipped into arrears are not automatically eligible for support, with UK Finance saying that only customers up-to-date with their mortgages at the time the crisis hit their finances will get backing.

Lack of guidance knocks Onesavings Bank

Shares in Onesavings Bank have plummeted after the lender declined to issue-full year guidance due to “unprecedented uncertainty” stemming from Covid-19. “Whilst we entered the year with a robust pipeline, strong application levels in our core businesses and stable margins, it is too soon to say what the impact will be and we therefore consider it imprudent to provide forward guidance for 2020,” chief executive Andy Golding explained.

Banks demand rethink over post-crisis rules

Banking executives are urging policymakers including the BoE and ECB to relax or delay regulations they say are hampering efforts to address the coronavirus crisis, including the Basel IV capital rules.

Moody’s backs UK’s actions

Moody’s has said that measures introduced by the Bank of England and Treasury to support the UK economy as it grapples with the coronavirus pandemic will support British banks’ creditworthiness


3i warns of coronavirus hit

Investment manager 3i Group has warned that a few companies in its portfolio are expected to see at least a short-term impact from the coronavirus outbreak, including Action, BoConcept and Hans Anders in the retail sector, and Audley Travel and ICE in the travel industry. 3i said: “We are focused on working with our portfolio companies to support them through these unprecedented times.”

Sequoia seeks $7bn to invest in US and Asian start-ups

Sequoia Capital, an early investor in Google and PayPal, hopes to raise around $7bn for venture capital funds that will target technology start-ups in the US and south-east Asia.


Bank of America: US in coronavirus recession

Michelle Meyer, Bank of America's chief US economist, warns that the country is officially in a recession, saying that the economy is in a “deep plunge” brought on by the coronavirus outbreak. Warning that “jobs will be lost, wealth will be destroyed and confidence depressed,” she added: “When it comes to the policy response, there should be no upper bound for the size of stimulus, in our view.”

Australia takes interest rate to record low

The Reserve Bank of Australia has cut its interest rate to a new low of 0.25% and pumped record funding into the banking system, adding A$12.7bn to the A$10.7bn injected earlier in the week.

Denmark raises key interest rate

Denmark's central bank has raised its key interest rate from a record low as it looks to ease downward pressure on the Danish crown. The certificate of deposit rate was raised by 15 basis points to -0.60% from a record low of -0.75%.

Credit Suisse quarterly profit rises

Credit Suisse is on course to deliver strong results for the first quarter despite market volatility related to the coronavirus pandemic. Credit Suisse said its private banking business had recorded improved revenues compared to the same period a year ago, benefitting from higher transaction revenues as the market rout led some of its high net worth clients to offload assets. It expects quarterly profits to exceed the £940m it reported before tax in Q1 2019.

Swedbank fined $400m

Swedbank has been fined a record $400m after Sweden and Estonia’s financial regulators found deficiencies in its anti-money laundering controls, uncovering weak processes, routines and control systems.

UniCredit to shut 70% of branches

Unions in Italy have welcomed a decision by UniCredit to shut down 70% of its branches due to coronavirus. In a joint statement, unions representing UniCredit employees said they welcomed the bank’s move, as well its decision to have workers who cannot operate remotely put on paid leave.

Goldman Sachs employees contract coronavirus

Several employees at Goldman Sachs’ New York HQ are believed to have contracted the coronavirus. Over the past two weeks, employees at JPMorgan Chase & Co, Morgan Stanley, Barclays and BlackRock have all reported confirmed cases among their New York-area staff.


Ford borrows $15.4bn to manage plant shutdown

Ford, which has shut plants in North America and Europe due to the coronavirus pandemic, has drawn down $15.4bn from two credit lines, borrowing from JPMorgan Chase, Bank of America and Citi.


EasyJet CEO expects ‘a lot of airline failures’

EasyJet CEO Johan Lundgren has said he expects “a lot of airline failures” as demand diminishes due to the coronavirus pandemic. Mr Lundgren explained that the airline has cancelled 14,000 flights so far this month and expects the situation to get much worse. He backed Lufthansa’s warning that airlines would go bust if governments did not step in. His counterpart at Lufthansa, Casten Spohr, said: "The spread of the coronavirus has placed the entire global economy and our company as well in an unprecedented state of emergency. At present, no one can foresee the consequences.”


Crest Nicholson cancels dividend

Crest Nicholson has cancelled payment of its final dividend and withdrawn its full-year financial guidance. The company also said it would draw down all of a £250m credit facility to help cope with the hit to its business from Covid-19 related shutdowns.


FCA warns insurers over coronavirus claims

The Financial Conduct Authority (FCA) has told insurance companies to be flexible with customers impacted by the coronavirus outbreak, saying firms must be clear and fair and recognise customer behaviour is changing. The watchdog says it would not expect car and home insurers to reject claims due to a “consumer’s understandable temporary change in how they use their vehicle and their home address, in response to government advice and the emerging coronavirus situation.” Christopher Woolard, the interim chief executive of the FCA, said: “We would not expect to see a customer’s ability to claim affected by circumstances over which they have little control.”


Manufacturers call on ministers to defer tax bills

Manufacturing trade body Made UK has called on ministers to defer manufacturers’ tax bills as firms are hit by the fallout of the coronavirus crisis. It has called on the Government to immediately defer VAT, PAYE, and national insurance payments for at least three months. Made UK CEO Stephen Phipson said there are “alarm bells going off right across the manufacturing sector,” saying firms need “urgent measures which will have an immediate impact on the ability of companies to stay afloat during this crisis and retain staff.”


2.7m properties dragged into higher stamp duty band

Zoopla analysis shows that 2.7m more properties are in the 5% stamp duty price band than in 2015, with house prices rising while thresholds for paying the levy have not changed.


Government relaxes supermarket competition rules

Environment Secretary George Eustice says the Government will relax competition laws in order to allow supermarkets to pool resources in responding to the effects of the coronavirus outbreak. The crisis has sparked panic buying and stockpiling, leaving store shelves empty and online deliveries with weeks-long delays. Supermarkets had called for rules preventing them from working together to be relaxed. Legislation temporarily amending parts of the Competition Act 1998, which will be implemented next week, will allow retailers to share staff, delivery depots and vans. Stores nearby to one another will also be able to coordinate opening and closing hours to give workers more time to restock.

Next preparing £1bn sales hit

Next CEO Simon Wolfson has warned that the high street is facing crisis that is “unprecedented in living memory”. Next, he revealed, was planning for up to a £1bn hit to sales in the year ahead as the UK prepares for lockdown to try to slow the spread of the coronavirus. His comments came as the retailer reported 0.8% rise in pre-tax profits to £728.5m for the year to January, while total full-price brand sales increased by 4%.


Interest rates cut to record low

The Bank of England has cut interest rates again in an emergency move as it tries to support the UK economy in the face of the coronavirus pandemic. It is the second cut in interest rates in just over a week, bringing them down to 0.1% from 0.25%. Interest rates are now at the lowest ever in the Bank's 325-year history. The Monetary Policy Committee decided on the 0.15 percentage point cut at an emergency meeting where it also announced it would buy £200bn in bonds as part of expanded quantitative easing measures, taking its QE programme to £645bn.

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