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Daily News Roundup: Friday, 8th December 2023

Posted: 8th December 2023

BANKING

Banks and building societies to assess gaps in access to cash

Banks and building societies in Britain will be required to assess gaps in access to cash under new rules proposed by the Financial Conduct Authority (FCA). The assessments will consider local factors such as demographics and transport. If gaps in access to cash are identified, banks and building societies will have to address them. The FCA expects to finalise the rules by summer 2024. "We know that, while there is an increasing shift to digital payments, over 3m still rely on cash – particularly people who may be vulnerable – as well as many small businesses," said Sheldon Mills of the FCA. Cash transactions increased 7% year-on-year to hit £6.4bn in 2022, according to a report from UK Finance. A separate study by the British Retail Consortium estimated that cash was used in 19% of transactions last year, up from 15% the previous year.

London’s small investment banks eye possible partnerships

Small UK investment banks and brokers could be facing a period of consolidation as IPOs and dealmaking dries up. Neil Shah, head of research, at investment analysis firm Edison, says: “It feels like there’s too much capacity out there. I do see the possibility of more M&A activity, more consolidation in the space.” Peers FinnCap and Cenkos agreed an all-share tie-up earlier this year and Deutsche Bank snapped up Numis in April after its profits slumped by more than half. Alasdair Steele, a deals lawyer at CMS, suggests the remaining standalone players may find it difficult to find the right partner. “They all do largely the same thing. And they’re largely competing for the same business,” he explains. Other than “taking a bit of back-end cost out”, he argues the rationale may in some places be lacking.

Nationwide cuts mortgage rates again

Nationwide has once again reduced its mortgage rates, bringing the cheapest deal on the market down to 4.29%. This marks the eleventh consecutive round of rate cuts in four months, making Nationwide's rates almost 1% lower than the Bank of England base rate. The building society will be reducing rates by up to 0.31 percentage points across its fixed rate product range. Henry Jordan, a director at Nationwide, stated that they aim to remain competitive for first-time buyers, home movers, and those looking to remortgage.

PRIVATE EQUITY

Smart Metering Systems recommends KKR offer

The American private equity firm KKR has made a £1.3bn takeover bid for Smart Metering Systems, valuing the London-listed firm at 40% more than its stock market value. Shares in Smart Metering Systems rose by 41.2% on the news. The company has recommended that its shareholders accept the cash offer, stating that it represents a significant premium and allows them to realise immediate and attractive value.

INTERNATIONAL

Global regulators to review bank capital rules for stablecoins

Global banking regulators are set to review the bank capital rules for stablecoins. The Basel Committee will consult on potential revisions to the criteria for stablecoins that claim to have a stabilisation mechanism. The committee will also consult on technical amendments to promote a consistent understanding of the standard. Additionally, the committee will review the risks associated with banks providing cryptoasset custody services. They will also consult on policy options to prevent "window dressing" by banks, which seeks to temporarily reduce banks' perceived risk profile. 

SocGen to sell two African subsidiaries to Vista Group

Société Générale, France's third-biggest listed bank, has agreed to sell its African subsidiaries, Société Générale Burkina Faso and Banco Société Générale Mocambique, to pan-African banking groups Vista Group. This move follows the bank's decision to sharpen its use of capital and is in line with other banks, including BNP Paribas. The financial details of the deals were not disclosed, but Société Générale will remain in 10 African countries after the sales.

FINANCIAL SERVICES

FCA slammed for slow response to illegal crypto kiosks

The Financial Conduct Authority (FCA) has been criticised for its slow response to illegal crypto kiosks in the UK, according to a report by the National Audit Office. The report highlights concerns about the regulator's sluggishness in tackling new financial threats. It points out that there can be a significant delay between the FCA identifying an issue and taking action. The FCA only began enforcement action against illegal operators of crypto ATMs and shut them down in February 2022, despite requiring crypto asset companies to comply with anti-money laundering rules since January 2020. The report also raises concerns about high staff turnover at the FCA and difficulties in hiring crypto experts.

Treasury under fire for lack of progress on post-Brexit reforms

The chair of the Commons Treasury select committee has accused the Government of exaggerating its progress on reforming City rules and urged new City minister Bim Afolami to speed up progress. Following a formal review into the Edinburgh reforms launched a year ago, the committee said: “From what has been completed so far, the subcommittee is of the view that none of the achievements to date will make a substantial difference to the UK economy.”

Rees-Mogg's investment management firm to wind down

Somerset Capital Management is to be wound down after its largest client, St James's Place, dropped the boutique fund management house due to poor performance. The firm’s UK funds, including its Somerset Asia Income Fund and Somerset Emerging Market Dividend Growth Fund, along with their key investment teams, are now “seeking to transition to a new investment adviser”. Somerset was co-founded by Tory MP Sir Jacob Rees Mogg and two other colleagues in 2007.

Sir Chris Hohn’s pay more than halves to £276m

British hedge fund manager Sir Chris Hohn took a £276m dividend from his fund, TCI, this year, far less than the £574m he paid himself last year. Profits fell by 48% at TCI Fund Management, which has around $50bn AUM and has generated approximately $40bn in profits for its investors since it was set up by Hohn in 2003.

LEISURE & HOSPITALITY

WFH blamed for Leon losses

A rise in working from home has held back Leon’s post-Covid recovery, the billionaire Issa brothers have said, as losses mount at the fast food chain. The rise in hybrid working has also led rival Itsu to turn some central London restaurants into three-day operations while Pret A Manger has been forced to switch its focus from city centre sandwich shops to more suburban sites.

REAL ESTATE

House prices rise 0.5% in November

House prices rose by 0.5% last month, according to the Halifax, the second increase in a row as lower mortgage rates boosted buyer confidence amid a shortage of sellers. Economists had forecast a rise of 0.3% after October’s 1.2% increase. The price of a typical home increased by £1,300 in the month to £283,615, just 1% below where they were this time last year. Kim Kinnaird, of Halifax, said: “The resilience seen in house prices during 2023 continues to be underpinned by a shortage of properties available, rather than any significant strengthening of buyer demand.” She added: “With mortgage rates starting to ease slightly, this may be leading to increased buyer confidence, seeing people more inclined to push ahead with their home purchases.”

SPORT

PSG sells minority stake to Arctos Partners

Paris Saint-Germain has announced the sale of a minority equity stake to American fund Arctos Partners. The deal will provide funding for the development of the club's stadium and training ground, as well as drive growth in the US and globally. The terms of the deal were not disclosed, but it is reported to value the club at over €4bn.

ECONOMY

Vacancies declining as growth falters

The Recruitment and Employment Confederation (REC) has warned that demand for permanent hiring in the UK has dropped at the second fastest rate since the pandemic. The REC's monthly snapshot of the jobs market revealed that while the availability of new job candidates increased, permanent staff appointments decreased significantly. The Bank of England is closely monitoring the jobs market for signs of inflation persistence. However, the latest figures show little evidence that the jobs market will contribute significantly to inflation. Starting salary inflation is at a 32-month low and job vacancies have declined for the second time in three months. Recruiters attribute the decline to economic uncertainty and a slowdown in growth. Neil Carberry, chief executive of the REC, said employers may be holding back on hiring until the new year.

OTHER

Labour recruits City grandees to help steer policy

Labour has hired almost a dozen top City figures to advise the party as it attempts to shore up its pro-business image. Tulip Siddiq, the shadow economic secretary, has recruited advisers such as London Stock Exchange chief David Schwimmer, Prudential chair Baroness Shriti Vader and Bank of England director Sir Ron Kalifa to sit on a new panel that will advise the party on its new policy for the sector. Ms Siddiq told the FT she and shadow chancellor Rachel Reeves were concerned about post-Brexit trading arrangements and what they consider to be some reckless deregulatory moves by the Tories. Sir Keir Starmer and Reeves will launch a review of financial services in Edinburgh today where they will unveil the panel of City leaders.

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