BANKING
PRA proposes "more British style of regulation"
The Bank of England's Prudential Regulation Authority (PRA) published a discussion paper on Thursday describing its proposals for policy-making now that Britain had left the European Union. "The move to a more British style of regulation, with technical rules made by regulators rather than set out in law, will enable us to deliver strong prudential standards in a manner that is proportionate, supports competitiveness and is tailored to the UK market," BoE Deputy Governor Sam Woods said. The PRA also pledged to increase the transparency of its decisions amid tensions between Threadneedle Street and the Government over plans to allow ministers to intervene in its rule-making. The proposals come after the new Chancellor Kwasi Kwarteng met with City leaders to tell them he wanted a "Big Bang 2.0" for the sector focused on an overhaul of regulation to boost growth and competitiveness.
Bank of England to lend energy industry £40bn
Liz Truss has announced a joint scheme between the Bank and the Treasury to provide emergency short-term help to energy providers as surging prices put huge pressure on their capital. The Energy Markets Financing Scheme will make up to £40bn available in Covid-style loans to energy companies in a move designed to help reduce costs and stabilise energy markets. The Treasury hopes to have the scheme up and running by the end of October or sooner. Companies who tap the loans will "have to agree to a wider set of conditions before accessing the scheme"
Atom lines up banks to advise on a London float
Atom Bank is interviewing investment bankers about work on a stock market listing after the digital lender broke off talks about going public in the US through a combination with a special purpose acquisition company set up by Wilbur Ross, Donald Trump's former commerce secretary. Depending on market conditions, a London IPO could be take place next year.
PRIVATE EQUITY
BlackRock defends engaging in ESG-related initiatives
BlackRock has hit back against accusations by nearly 20 Republican state attorneys-general who say the asset management giant is placing climate activism ahead of fiduciary duty. “Investors and companies that take a forward-looking position with respect to climate risk and its implications for the energy transition will generate better long-term financial outcomes,” Dalia Blass, head of external affairs at BlackRock, said. The defence of its ESG-related initiatives comes after Texas blocked funds from investing in companies deemed to be boycotting fossil fuel investments and Florida barred its pension fund managers from considering ESG criteria.
Darktrace buyout collapses after US private equity buyers walk away
US private equity firm Thoma Bravo has pulled out of talks to acquire British cybersecurity company Darktrace. The £6bn deal fell through hours before the Cambridge-based business said millions of pounds in revenue had been wrongly recognised in this year's accounts instead of last year's. Darktrace chief executive Poppy Gustafsson told analysts on Thursday that Thoma Bravo was not aware of the accounts restatement before cancelling the potential buyout on Wednesday evening. Thoma Bravo did not give any reasons for its decision.
FINANCIAL SERVICES
FCA rejects call to oversee financial inclusion
The Financial Conduct Authority on Thursday pushed back at suggestions that financial inclusion should be included within its mandate. The proposal was included in a Treasury Select Committee report. In a response, FCA chief Nikhil Rathi said inclusion of the clause within its mandate “might risk increasing expectations that the FCA should step in to fix problems that it does not have the power to solve”, which he said could add to confusion rather than address the root causes of exclusion. Legal experts backed the comments from the FCA. “First, it’s overreach – the FCA has no statutory powers that correspond to financial inclusion. Next, to the extent that the FCA can do anything about it, it’s largely implied through the FCA’s existing consumer protection objective,” Simon Morris, a financial services Partner with law firm CMS said. “Last, it simply can’t – financial inclusion is a complex process in the hands of half-a-dozen state agencies, and it’s no good giving the FCA a responsibility it simply can’t discharge.”
Lloyd’s of London sets aside £1.1bn for Ukraine claims
John Neal, the CEO of Lloyd’s of London, is predicting £1.1bn in claims from Russia’s war in Ukraine, adding that related losses could reach £10bn to £15bn across the insurance sector. The market, which published aggregate half-year figures on Thursday, said that despite the £1.1bn hit from Ukraine and other headwinds, it posted an underwriting profit of £1.2bn, up from £1bn in the same period last year. The market’s overall deficit of £1.8bn was entirely due to rising interest rates, which sent the value of bonds held by Lloyds down. However, Mr Neal stressed that this loss would unwind and that higher yields would deliver investment returns of £3bn a year in 2023 and 2024.
Funding Circle cuts guidance as recession looms
The UK business lender Funding Circle posted stronger than expected half-year results on Thursday, but cut its estimate for total income for the year amid concerns that smaller businesses will struggle this winter.
Rothesay chief Loudiadis to step down after 15 years
The chief executive of pensions insurance specialist Rothesay is stepping down. Addy Loudiadis, who co-founded the group 15 years ago as a unit within Goldman Sachs, is replaced by managing director Tom Pearce.
Vanguard trounces iShares’ August US ETF inflows
Data from Morningstar show Vanguard led the US industry in ETF flows last month, taking in $24.2bn in August, nearly four times as much as iShares, its closest competitor.
HEALTHCARE
Spire Healthcare profits from record NHS waiting lists
Record NHS waiting lists are driving a surge of new patients to private healthcare companies, including Spire Healthcare which said revenue from private patients had risen by more than a fifth in the first half of this year compared with the same period in 2021. This was up by almost a third compared to before the pandemic. Justin Ash, chief executive of Spire, said the NHS delays were “not good news for anybody” but it has contributed to a “fundamental shift in consumer thinking”.
LEISURE & HOSPITALITY
Hospitality bosses call for chancellor to take action
Nearly 300 chief executives have signed an open letter asking the new Chancellor, Kwasi Kwarteng, for “a plan that cuts business costs, stimulates demand and tackles inflation”. Signatories, including the bosses of Just Eat, Marriott International, Mitchells & Butlers, Pizza Hut and Caffè Nero, warned that one in five businesses in the sector will not survive the current crisis and that hundreds of thousands of people will be left without jobs unless Government support is received.
REAL ESTATE
RICS: Fewer homes on the market lifts prices
Figures from the Royal Institution of Chartered Surveyors show buyer inquiries fell at the sharpest pace since the beginning of the pandemic last month as rising interest rates and a surge in the cost of living put buyers under pressure. But despite the sharp drop in interest, house prices were driven up by a record low number of houses for sale. The August residential market survey from RICS found there was an average of 34 homes available for sale per estate agent branch, the lowest level since the survey began in 1978. Housing stock reached a high of nearly 200 homes per branch in 1990. A net balance of 53% of agents reported an increase in house prices, down from 62% in July but well above the long-term average of 13%. Since the start of the pandemic, house prices nationwide have risen by nearly 25%.
Evergrande crisis deepens after lender seizes headquarters
Receivers have taken charge of Evergrande’s Hong Kong headquarters after the Chinese property developer defaulted on a loan, thought to be owed to China Citic Bank International.
ECONOMY
Liz Truss unveils £150bn UK energy plan
Prime Minister Liz Truss has announced a support package to protect households from soaring energy prices. Bills will be capped at £2,500 annually until 2024 at a cost of up to £150bn. A previously announced £400 energy bill discount will be retained and green levies costing £150 will be temporarily removed, meaning that average household bills will remain at roughly their current level of £1,971. As part of a plan to make Britain energy independent again by 2040, Ms Truss also pledged to increase domestic oil and gas production and lifted a ban on fracking with immediate effect. Additionally, renewable power generators have agreed in principle to accept new long-term contracts at fixed prices well below current rates. Businesses and public sector bodies such as schools will also receive assistance, but only for six months. After this period support will be focused on those industries deemed vulnerable, Ms Truss said.
ECB raises rates by 75 basis points and promises more to come
The European Central Bank has announced its biggest ever interest rate rise in an effort to tackle record inflation. Policymakers unanimously agreed to the 75 basis points rise, taking the bank’s benchmark deposit rate from zero to 0.75% - the highest level since 2011. Christine Lagarde, the ECB’s president, suggested that rates would need to keep rising for "several meetings'' to bring inflation back in check.
OTHER
Notes featuring Queen Elizabeth II will remain legal tender
Following the announcement of the death of Queen Elizabeth II, the Bank of England confirmed that notes featuring the late monarch will remain legal tender and that a “further announcement” will be made once the period of mourning is over. Paying tribute to Her Majesty, BoE governor Andrew Bailey said: "It was with profound sadness that I learned of the death of Her Majesty The Queen. On behalf of everyone at the Bank I would like to pass on my deepest condolences to the Royal Family. For most of us, she is the only head of state we have ever known, and will be remembered as an inspirational figure for our country and the Commonwealth.” There are 4.5bn sterling bank notes in circulation with the Queen’s face on them, worth a combined £80bn. According to the Guardian, replacing them with alternatives featuring the head of the new monarch is likely to take at least two years.