BANKING
MPs call for probe over savings rates
Savers have missed out on an estimated £8.6bn in interest payments this year because the big banks have failed to pass on the full interest rate rises since last December, according to broker Hargreaves Lansdown. The figures have prompted MPs from all parties to call for urgent action from the Financial Conduct Authority. Savers can now earn 1.54% in interest on the average easy-access account, according to Moneyfacts. This may be up from 0.2% at the beginning of December 2021, when the Bank Rate was 0.1%. But it is still well below the Bank Rate, which reached 3.5% on Dec 15. Sarah Coles, a personal finance expert at Hargreaves Lansdown, said: "The high street banks have us over a barrel. They know that millions of people are prepared to leave their cash languishing in an account paying next to nothing, because they're wary of newer and smaller banks, so they're paying a fraction of 1%."
BoE supports innovation with crypto technology
The Deputy Governor of the Bank of England has said he supports the idea of creating a regulatory framework for cryptocurrencies, backing Rishi Sunak's plan to make Britain a digital currency superpower. Sir Jon Cunliffe said he believed there was a “real benefit for the UK in terms of the technology” behind crypto assets and that, despite the collapse of FTX, trading in crypto should be regulated rather than forbidden. Sir Jon added: “If we're going to get sustainable innovation, things that are really useful, and that can last, the developers have to know what the regulatory framework is.” The Bank of England is also continuing with its development of a digital currency of its own, dubbed Britcoin.
INTERNATIONAL
ECB revokes license of RCB Bank
The European Central Bank (ECB) has withdrawn Cypriot lender RCB's banking license. The move comes after RCB Bank struck a deal in March with Hellenic Bank for the sale of a performing loan portfolio valued up to €556m. The ECB permitted that deal but restricted the rest of the bank's business. On Thursday, the ECB said the decision the withdraw the bank’s license follows the completion of RCB's voluntary phasing out of its banking operations.
VTB to buy rescued Otkritie Bank for $4.7bn
Russia’s central bank has agreed to sell bailed-out Otkritie Bank to the country's No.2 lender, state-owned VTB, for 340bn roubles ($4.7bn). The Bank of Russia bailed out Otkritie in 2017 and the lender had previously been linked with a possible sale to Italy's UniCredit before sanctions hit.
German regulator rebukes Standard Chartered over European operations
Germany’s financial watchdog has told Standard Chartered to hold extra capital for its European business after it identified serious organisational flaws that increased risk.
FINANCIAL SERVICES
FTX founder Sam Bankman-Fried released on $250m bond
The founder of the collapsed cryptocurrency exchange FTX, Sam Bankman-Fried, will be released on $250m bond after returning to the US to face fraud charges. Federal prosecutors charged Bankman-Fried last week with eight counts — including conspiracy to commit wire fraud on customers and lenders, money laundering and violations of campaign finance laws. Meanwhile, two of Bankman-Fried’s closest colleagues pleaded guilty to fraud charges related to FTX on Wednesday. Caroline Ellison, who ran FTX’s trading affiliate Alameda and was Bankman-Fried’s ex-girlfriend is cooperating with law enforcement along with Gary Wang, FTX’s former chief technology. The Securities and Exchange Commission and the Commodity Futures Trading Commission have also filed civil lawsuits against Ellison and Wang, accusing them of fraud. Mr Wang allegedly built a system which allowed Alameda “to secretly and recklessly siphon FTX customer assets from the FTX platform.” This gave Alameda an “essentially unlimited line of credit” on the exchange, giving it an “unfair advantage” over regular depositors. The SEC claims that Ellison and Bankman-Fried “schemed to manipulate the price of FTT”, a crypto token issued by FTX, against which Alameda had taken out large loans. “Ms. Ellison and Mr. Wang played an active role in a scheme to misuse FTX customer assets to prop up Alameda and to post collateral for margin trading,” SEC Chair Gary Gensler said. “When FTT and the rest of the house of cards collapsed, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang left investors holding the bag.”
SEC increases scrutiny of audits for crypto firms
The Securities and Exchange Commission is stepping up its scrutiny of the work audit firms are doing for cryptocurrency companies. The regulator is worried in particular about so-called proof-of-reserves reports, which aim to show that the crypto company has sufficient assets to cover customers’ funds. Companies have moved quickly to produce these reports in recent weeks, using the credibility of audit firms to try to reassure customers spooked by the collapse of crypto exchange FTX.
Letter: Financial services has an issue when it comes to diversity
Catherine McGuinness agrees that more working class talent should be employed in financial services and encourages the sector to act on the recommendations of the Socio-Economic Diversity Taskforce.
LEISURE & HOSPITALITY
The Restaurant Group amends and extends debt facilities
The Restaurant Group has confirmed that it has successfully amended and extended its debt facilities. The owner of the Wagamama and Frankie & Benny’s said the new deal comprised of a £220m term loan facility and a £120m revolving credit facility with its existing lenders. The new terms represented an early repayment of its previous facilities by around £21m. The company said it continues to have a "strong" liquidity position with over £140m of cash headroom. It added: "This provides the group with an additional two years of debt facilities with the maturities of the term loan and the RCF extended to April 2028 and March 2027, respectively."
Rail strikes hit hospitality sector sales
Hospitality leaders have warned that rail strikes could cost the sector over £1.5bn in lost sales amid an epidemic of cancelled bookings and customer no-shows. Several regions have reported shortfalls in takings of at least 40% last week, while takings at pubs and restaurants in central London tumbled to almost half pre-Covid levels during last week's run of strikes and businesses are bracing for further disruption early in the new year. Kate Nicholls, chief executive of UKHospitality, the trade body, said: "The most severe impact we're seeing now is on consumer confidence and the growing cancellations businesses are seeing as a result of the strike.”
MANUFACTURING
Britain joins EU in criticising Biden’s green subsidies package
UK trade secretary Kemi Badenoch has joined the EU in criticising US green subsidies, arguing they are protectionist and will “harm multiple economies across the world and impact global supply chains in batteries, electric vehicles and wider renewables," especially those located in Britain.
MEDIA & ENTERTAINMENT
TikTok employees hacked accounts of Western reporters
ByteDance has admitted that employees hacked the TikTok accounts of two journalists in an attempt to trace the source of a leak from the Chinese company. Financial Times reporter Cristina Criddle and former Buzzfeed writer Emily Baker-White - who now works for Forbes - had their IP addresses tracked to see if they had been in proximity with any ByteDance employees. The individuals were part of a team that monitors employee conduct. They have since been fired and the team no longer has access to US data. ByteDance CEO Rubo Liang revealed the findings in an email to employees, reportedly telling them: “I was deeply disappointed when I was notified of the situation...The public trust that we have spent huge efforts building is going to be significantly undermined by the misconduct of a few individuals.”
REAL ESTATE
House prices increase by 7.2% across the year
Zoopla has revealed that property values rose by 7.2% across the year, meaning house prices are almost £17,500 higher on average than at the start of 2022. The property website said weaker demand from higher mortgage rates, cost-of-living pressures and low consumer confidence is hitting price growth. Zoopla found that demand in some coastal and rural areas, including parts of mid-Wales and the Lake District, has weakened amid higher prices and economic uncertainty. However, buyer interest in affordable, accessible urban areas is holding up better, including in places such as Bradford, Swindon, Coventry, Crewe, Southend and Milton Keynes. Zoopla added that flats have underperformed compared with the rest of the market and are likely to see increased demand in 2023 as buyers seek better value for money. Richard Donnell, executive director at Zoopla, said: “We expect buyers to return to the market in the new year, but they will be far more cautious and price sensitive.”
RETAIL
Superdry secures new loan facility as revenues rise
Superdry has secured an £80m new loan facility for the next three years, after telling investors that group revenues lifted by 3.6% over the six months to October 29, compared with the same period last year. It said the growth was driven by its stores, which posted a 14.4% year-on-year jump in revenues following the easing of pandemic restrictions. The company said the refinancing, which it has agreed with lender Bantry Bay Capital, will replace a £70m scheme due to end in January and in will include higher interest rates.
Shapps urges fuel retailers to give drivers a fair deal
Grant Shapps has warned fuel retailers they could face state intervention unless they give drivers a fair deal on prices at the pumps this Christmas. The business secretary wrote a letter to them demanding that they come clean on their pricing formula after RAC data revealed record high prices in spite of rapidly falling overheads and a 5p cut in fuel duty.
ECONOMY
UK economy contracts by more than expected in third quarter
New data from the Office for National Statistics (ONS) show the UK economy contracted by more than first thought between July and September and growth has been weaker than estimated. UK output fell 0.3% between the second and third quarter, more than initial estimates of 0.2%. The economy was 0.8% smaller in the third quarter of 2022 than in the final quarter of 2019. By contrast, in the three months to September, the US economy was 4.3% larger than in the fourth quarter of 2019, while eurozone output was up 2.2%. Gabriella Dickens, UK economist at the consultancy Pantheon Macroeconomics, warned: “We expect Britain to suffer the deepest recession among major advanced economies in 2023, due to the severity of the headwinds from both monetary and fiscal policy.” The ONS data also showed real disposable income fell 0.5% between the second and third quarter while the saving ratio was up from 1.3% in Q2 to 1.8% in the third quarter as people become more cautious. Real household income was down 2.9% on the third quarter of 2019 - the largest decline over that time period since records began. Household spending fell by 1.1% in the third quarter, the first drop since the beginning of 2021 when the country was in lockdown.
Private sector activity in rapid decline
New figures from the Confederation of British Industry (CBI) showed private sector activity fell 13% in the three months to December, a much steeper fall that the 7% drop seen in the previous month. This is the fifth consecutive quarter of decline with activity expected to fall even faster in the next three months. The CBI predicts activity will fall 22% in the next quarter due to faster declines in business and professional services at 17% and distribution sales at 30%. Martin Sartorius, principal economist at the CBI, said: “The decline in private sector activity over December extends a downward trend that looks set to deepen going into 2023. Businesses continue to face a number of headwinds, with rising costs, labour shortages, and weakening demand contributing to a gloomy outlook for next year.”