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Daily News Roundup: Friday, 29th September 2023

Posted: 29th September 2023

BANKING

Bank ring-fencing reforms set for H1 2024

The Treasury has confirmed plans to reform the banking ring-fencing regime, with an aim to see the new regulations go live in the first half of next year. Ring-fencing regulation, which was introduced in 2019, separates a bank’s retail arm from its investment banking operations in an attempt to protect retail deposits from risks. The latest proposals will lift the threshold at which ring-fencing applies from £25bn to £35bn. Ministers have also proposed that banks without big investment banking operations will be taken out of the regime, removing a “barrier to growth” for small banks. There are also plans to allow ring-fenced banks to make direct minority equity investments in UK SMEs - as well as invest in funds which invest in smaller firms. City Minister Andrew Griffith said the near-term reforms represent “an important milestone in supporting the necessary evolution of the ring-fencing regime, more than four years after the regime came into effect.” Nala Worsfold, financial and risk policy principal at UK Finance, said the proposals will “enhance customer choice and improve competition.”

Average five-year mortgage falls below 6%

The average rate on a five-year fixed mortgage has fallen below 6% for the first time since early July, with data from Moneyfacts showing that the typical rate has dropped to 5.99%. The average two-year deal has a rate of 6.5%. The fall in loan rates follows the Bank of England’s decision to hold interest rates steady at 5.25% after 14 consecutive increases. Since the Bank confirmed the decision, major lenders including BarclaysHalifaxHSBCNatWest and Santander have announced rate cuts this of up to 0.6 percentage points, with this coming amid hopes that interest rates have peaked.

BNP Paribas to track staff

BNP Paribas plans to track entry-gate swipes against logins to its computer network to ensure employees meet targets for working from the office. The French bank told its London-based staff that the policy would enable it to “more accurately track space needs on a team-by-team basis” and ensure adherence to “working requirements and fairness across teams.” BNP’s memo said staff would not be able to opt out of the tracking. The bank’s offices in the US and Canada have also updated their policy to include “visibility into in-office presence of staff monitoring.”

INTERNATIONAL

SEC nearing settlements over WhatsApp probe

Sources say the US Securities and Exchange Commission (SEC) is finalising settlements with a number of Wall Street firms to resolve investigations into issues linked to record-keeping. Under the deals, the firms would pay fines, admit wrongdoing and commit to fixing the lapses. Part of this process would see them bring in independent consultants to overhaul record-keeping systems. The settlements come as part of the SEC’s two-year crackdown on Wall Street’s use of WhatsApp and other unapproved messaging apps. To date, the investigation has resulted in more than $2bn in fines.

Lombard Odier to double headcount in UAE

Swiss private bank Lombard Odier plans to double its headcount in the United Arab Emirates within three years after obtaining a license to operate from Dubai's financial centre. The bank, which has had a presence in Dubai for 17 years and a branch in Abu Dhabi since 2019, aims to tap into family wealth and a growing pool of entrepreneurs in the region.

HSBC to acquire Citigroup unit

HSBC is set to acquire Citigroup's China consumer wealth management business, which manages more than $3bn in assets. The deal adds to HSBC's moves to expand in China, one of its key markets.

FINANCIAL SERVICES

PRA to ease solvency rules for insurers

The Bank of England has outlined proposed rule changes that could unlock up to £100bn for more productive investment by Britain’s biggest life insurers. The Bank’s Prudential Regulation Authority (PRA) says changes could make it easier for insurers to hold junk bonds and assets with non-guaranteed income streams, while other reforms will look to attract more foreign insurers to the UK. In its consultation document, the PRA said the new regime would “allow the life insurance sector to play a bigger role in productive investment in the UK economy, while continuing to offer their policyholders the level of security determined by legislation.” The proposals are part of a wider rethink of Solvency II rules governing insurers across the EU, with Brexit having enabled the UK to diverge from the EU standards, replacing them with Solvency UK.

BoE to launch new facility for insurers and pension funds

The Bank of England is developing a new lending facility to support insurers and pension funds, aiming to prevent a repeat of last year's bond market turmoil. The facility will provide liquidity to non-bank financial institutions, which currently lack an equivalent tool. The move follows one-off measures taken by the Bank in response to market stress during the pandemic. The facility will initially focus on insurance companies and pension funds, including newly-resilient LDI funds. The BoE may expand the lending facility to other non-bank entities in the future. However, the programme is not intended to reduce financial firms' need to manage day-to-day risks. According to Andrew Hauser, the BoE's executive director for markets: “It is central banks' job to protect the system against genuine threats to stability. But it is firms' job to protect themselves against a wide range of less severe shocks, and we cannot afford to conflate the two.”

Lloyds and BlackRock launch ETF Quicklist

Lloyds Bank has partnered with BlackRock to launch its ETF Quicklist, a list of 16 iShares ETFs for investors. The move comes after Monzo launched its DIY service, Monzo Investments, in partnership with BlackRock. Lloyds Bank aims to make it easier for investors to choose from the many thousands of ETFs available. The launch of ETF Quicklist is part of Lloyds Bank's strategy to attract first-time investors and tap into the next generation of investors. However, experts warn that experienced investors may find the list too limited.

TPR staff to strike over pay

Staff working for The Pensions Regulator (TPR) have announced a further 14 days of strike action in a dispute over pay. More than 280 members of the Public and Commercial Services union (PCS) will take action on 11 dates in October plus three days in November. The workers went on strike earlier this month after the union accused the organisation of being the only department to refuse to implement the Government's recommended pay offer of 4.5%-5%.

London closes in on NY in financial centre rankings

London is closing in on New York as the world’s leading financial centre, according to the ZYen Global Financial Centres Index. While New York held onto top slot for a fifth straight year, London gained ground in the index which ranks cities on areas like regulation, skills depth and availability of technology. London’s rating climbed 13 points to 744 while New York was up three points to 763.

REAL ESTATE

Buyer's market sees discounts hit £12k

Analysis from Zoopla shows that buyers are taking advantage of the market and scoring discounts that average 4.2%, with £12,125 typically being shaved off asking prices. The report shows that discounts are at their highest level since March 2019. Zoopla also revealed that house prices have fallen by 0.5% in the last year, marking the first time in a decade that the property platform has recorded a year-on-year decline in prices. Zoopla believes there will be a “modest” decline in house prices in the coming months and into the start of 2024. It added that sales are set to be 20% lower this year than last.

RETAIL

John Lewis to sell Waitrose stores in £150m funding drive

John Lewis is set to sell a dozen Waitrose stores in an effort to raise up to £150m for its turnaround. The supermarkets, mostly located in the south of England, will be sold and leased back for 20 years. This move allows John Lewis to test the market and extract more cash from its valuable property holdings. The retailer has been struggling with losses and delays in its turnaround plan. Property is the largest single asset on the partnership's £6.7bn balance sheet, with its stores worth £2.9bn at the end of last year.

ECONOMY

IFS: Public borrowing could be £40bn higher than forecast by 2027

The Institute for Fiscal Studies (IFS) says there is a 90% chance that UK public borrowing will be higher than the Office for Budget Responsibility (OBR) has forecast. It says borrowing in the 2027/28 tax year is likely to be £40bn higher than the OBR forecast in March. If this is the case, borrowing would be 3.1% of GDP, far exceeding the 1.7% forecast. The OBR said there is just a one-in-ten chance that borrowing in 2027/28 will be lower than the OBR forecast. Borrowing in the 2022/23 financial year totalled £128bn, equal to 5.1% of GDP. A Treasury spokesman said: “This report reaffirms our need to taking the difficult, but necessary decisions to balance the books to halve inflation this year.” They added: “Additional borrowing right now would fuel inflation, push up mortgage rates and hike up debt interest repayments – diverting money away from our public services.”

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