BANKING
Businesses warn against tighter SME lending rules
Business groups have warned that increasing capital requirements on SME lending will hurt economic growth and hit the small business sector. Under proposals being considered by the Prudential Regulation Authority, SME lenders will be forced to hold a higher level of capital against loans to the sector. The British Chamber of Commerce said removing the SME Supporting Factor will make “credit both less accessible and more expensive for the vast majority of businesses,” arguing that it has “underpinned a thriving challenger bank sector.” It added that to “lose or limit that now seems deeply irresponsible.” The Federation of Small Businesses has warned that removing the SME Supporting Factor "will further disincentivise the banks and depress lending activity,” adding that there is “limited data and evidence … to support the rationale of removing the SME Supporting Factor.” The Confederation of British Industry said changing the preferential treatment may result in “certain lenders withdrawing from part or all of the market which will reduce competition.” Research commissioned by SME lender Allica suggests that the proposed changes could result in a £44bn decline in SME lending.
Lloyds and NatWest announce a fresh wave of branch closures
Lloyds Banking Group and NatWest have announced plans to close another 80 branches this year. Lloyds will close 26 more branches, alongside 9 Halifax branches and two Bank of Scotland sites. NatWest is to close 40 branches, while sister bank Royal Bank of Scotland has announced five closures. The latest closures come just a week after Barclays said it intends to close 14 branches across England and Wales in June – adding to the 55 branches the bank already planned to shut this year. HSBC is planning to close 114 branches across the UK this year, while Santander has announced the closure of five branches in 2023.
Shawbrook profits soar
Shawbrook Bank saw pre-tax profit increase to a record £233m last year, from £197.2m in 2021, with higher borrowing costs boosting its margins. It also built its loan book, which was up almost 22% to about £10.5bn. Shawbrook’s net interest margin increased to 5.1% last year from 4.9% previously. Shawbrook was bought by Pollen Street Capital and BC Partners for £868m in 2017.
INTERNATIONAL
Four ex bankers convicted over accounts for Putin associate
Four former bankers with the Swiss affiliate of a key Russian bank have been found guilty of failing to properly check accounts opened in the name of Sergei Roldugin, a Russian musician with ties to President Vladimir Putin who the US Treasury Department describes as “part of a system that manages President Putin’s offshore wealth.” The case, which was heard in a court in Zurich, stems from information about secret financial flows revealed in the Panama Papers leaks in 2016. The papers suggest that associates of Mr Putin helped funnel money abroad, with financial employees potentially turning a blind eye. All four defendants denied the charges, which included allegations of violating Swiss anti-money-laundering law. Gazprombank Switzerland, which is in the process of winding down its operations, said the defendants lawyers have suggested they plan to appeal.
FINANCIAL SERVICES
FCA launches senior managers review
The Financial Conduct Authority (FCA) as launched a review into the Senior Managers and Certification Regime and is inviting stakeholders to assist in identifying potential enhancements. The FCA and Prudential Regulation Authority have published a joint paper, saying it should be read alongside a Treasury publication to understand the full scope of the legislation and regulatory requirements. As set out in the new regulation, firms must provide the regulators with certain information on senior manager functions. Additionally, senior managers need to be approved for their roles before they start to perform them – although regulators also have the power to approve a senior manager subject to conditions, or for a limited time only.
City calls for long term strategy to maintain its competitive advantage
The City of London Corporation (CLC) has warned that London’s competitive advantage is “at risk,” saying the City has work to do to regain its status as the leading global finance centre. This comes after a ranking put New York level with London, meaning the capital did not have the outright top spot for the first time. Chris Hayward, policy chair at the CLC, said that while UK “remains one of the most open and global financial centres … our competitive advantage is at risk.” Mr Hayward added that a “long-term plan to stimulate growth in the financial and professional services sector is needed.” With the Corporation suggesting that “ongoing improvements to the regulatory environment” will make the UK a more attractive place to invest, Mr Hayward said the Edinburgh Reforms “are a great symbolism for what post Brexit UK can be.” He added that the City sees the reform of financial services regulation and the Solvency II reforms “as a good starting point,” but argued there is a need for a long-term strategy.
Regulators back plans to make the UK a net-zero financial hub
The UK's financial regulators have welcomed the Government's updated framework for the UK to become the world's first net-zero financial centre, with the Financial Conduct Authority, Pensions Regulator, Financial Reporting Council and the Bank of England declaring their support for the updated Green Finance Strategy. The updated strategy sets out plans on how to position the UK at the forefront of the global green finance market. Policies include rolling out sustainability disclosure requirements and enforcing the International Sustainability Standard Board.
City watchdog sounds alarm over Revolut advert
The Financial Conduct Authority (FCA) has ordered payments app Revolut to amend or withdraw an advert, review all financial promotions and report back on “why non-compliant promotions are in circulation.” The City watchdog declined to give details of the Revolut ad or why it was seen to breach its rules. Meanwhile, the All-Party Parliamentary Group (APPG) on Fair Business Banking has warned that granting Revolut a banking licence would present a risk to the UK’s banking sector.
RETAIL
Morrisons sees sales and revenue climb
Morrisons, which plans to make savings of £700m over the next three years, has reported a 0.1% rise in like-for-like sales, excluding fuel and VAT, in the 13 weeks to the end of January, while total revenues rose by 3.4% to £4.7bn. Morrisons said the rise was primarily due to the higher prices of goods rather than a rise in sales volumes. Food inflation at a 45-year high of 18% continues to weigh on the volume of goods sold.
H&M reports healthy sales figures
H&M's operating profits rose to £58m in the three months between December and February, while Sales rose by 12% to £4.3bn in the quarter. Chief executive Helena Helmersson noted that H&M is planning to open around 100 new stores, primarily in growth markets, while closing 200 in long-established ones.
SPORT
Premier League clubs accused of tax avoidance
Financial experts estimate that Premier League football clubs may have avoided paying £250m in tax between 2019 and 2021. The Tax Policy Associates think-tank looked at how agents are often paid to represent both players and clubs in negotiations, including transfers, saying the practice reduces the amount of tax paid on agent payments. If the agent's fee is picked up solely by the player, HMRC can expect to receive around 60% of the total payment in tax. However, this falls to about 30% if the fee is split between the player and the club using dual representation. Tax Policy Associates estimates the practice may have saved players, agents and their acquiring clubs £81m in 2019, £91m in 2020 and £81m in 2021.
ECONOMY
UK-Asia trade deal to boost UK economy
The UK has signed a deal to join a trade pact with 11 Asia and Pacific nations, with the trade area covering a market of around 500m people. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which was established in 2018, includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Together, the 11 members account for about 13% of the world's income. Prime Minister Rishi Sunak said the deal demonstrated the "real economic benefits of our post-Brexit freedoms." He added: “As part of CPTPP, the UK is now in a prime position in the global economy to seize opportunities for new jobs, growth and innovation.” Business and Trade Secretary Kemi Badenoch said joining the CPTPP would "support jobs and create opportunities for companies of all sizes and in all parts of the UK." Government analysis suggests that membership of the bloc will add 0.08% to the size of the UK economy.
OTHER
Business optimism increases
British businesses are more confident than in any month since May last year, according to Lloyds Bank's latest Business Barometer. The index rose by 11 points to 32% in March, with this driven by rising optimism about the outlook for the economy. While wage expectations increased slightly in March, Lloyds said it detected signals that they had peaked from last year's highs. Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, commented: “Business confidence has seen a surge this month with economic optimism and trading prospects bolstering firms.” He added: “With hiring intentions improving, we may see employment growth picking up in the coming months. Tentative signs of easing wage pressures suggest that businesses' difficulties in finding staff may have started to ease."