BANKING
2.2m Brits live in 'banking deserts'
More than 2.2m people in Britain live in areas without any banks, while millions more have access to only one branch, forcing them to travel long distances for face-to-face services. Major UK banks have closed over 80% of their branches in the past eight years. This means over half of the UK's banking network has disappeared since 2015, with 5,597 branches shut down. The decline in bank branches has hit vulnerable and older people, many of whom are not online or confident with mobile banking. The closures have also affected businesses, leaving high streets struggling and forcing them to travel long distances to make deposits. The closure trend is set to continue, with 636 sites scheduled to close by the end of December and another 42 banks earmarked for closure in 2024. The issue of bank closures and the need for local access to cash and bank branches has been raised by MPs and regulators, with Treasury Committee chairman Harriett Baldwin saying the committee "regularly raises this issue with banks and regulators." She added: "It's important people can access cash. That means local access to bank branches and free cashpoints."
FCA to 'ramp up' checks on how banks assess risks
The Financial Conduct Authority (FCA) has told banks it will "ramp up" checks on whether they are properly assessing and managing risks from large customers. In a letter to banking chief executives, the City watchdog warned that failure to properly appreciate risk can affect a bank's ability to have enough liquidity in challenging markets. FCA director Simon Walls wrote: “We will carry out supervisory testing on the embeddedness of improvements in risk management by looking at the process through which new products and some transactions are produced," adding that the regulator has “noted instances of poor management of client relationships.” Mr Walls said the FCA is “ramping up our testing programme to look at how banks are controlling these risks, including more in person supervisory assessments." The FCA said it may also check how banks deal with non-financial misconduct, such as sexual harassment. The FCA said it expects CEOs to have discussed the letter with their fellow directors and the board - and to have agreed upon actions or next steps – within 2 months.
Barclays seeks climate director
Barclays is looking to add a director to champion its climate efforts, having been targeted by campaigners over its environmental record. A job listing by the bank said the climate communications director’s responsibilities will include creating a “compelling narrative for climate transition” linked to the bank’s wider strategy, assessing “reputation and media risk” around climate issues, and working with senior stakeholders “to influence the outcome of such issues in a positive way.” While campaigners are concerned over Barclays’ support of carbon-heavy industries, the lender has stressed that it is working towards plans to reach net zero carbon emissions by 2050 and noted that its energy sector financing had dropped by 25% since 2021. Elsewhere in the sector, Canadian bank RBC recently announced it was hiring a head of climate transition, while Citigroup recently posted an advert for a vice-president for ESG stakeholder engagement.
Barclays planning to cut jobs, say sources
A source has suggested that Barclays is drawing up plans to cut as many as 400 jobs in its domestic retail business, while another insider says the bank is planning investment bank cuts that are part of annual performance assessments, The two rounds of cuts, they noted, are unrelated. A Barclays spokesperson said: “We do not comment on speculation. We regularly review our operations to ensure we meet the evolving needs of our customers and clients in an efficient and effective way.”
INTERNATIONAL
FDIC criticises bank's risk management
The Federal Deposit Insurance Corp (FDIC) has criticised First Republic Bank's risk management. The report, which said a loss of market and depositor confidence ultimately led to the bank's failure, also blames bank executives and the board for ignoring warning signs of interest rate risks. However, the report also highlights that the FDIC supervisors were too "generous" in assessing some of First Republic's risks. The report raises questions about how the agency allocated its staff and suggests that banks and regulators did not fully appreciate the risks of large concentrations of uninsured deposits. The report is likely to increase pressure on regulators to tighten rules for the industry.
UBS executives sell millions in shares after strong Q2 results
UBS executives have sold millions in shares since the Swiss bank announced its second quarter results. Since the start of September, UBS shares worth more than 14 million Swiss francs were sold in five transactions by executive members of the board of directors or members of senior management. The sales come in the aftermath of Q2 results which saw shares trading at highs not seen since 2008.
AVIATION
CMA backs CAA over Heathrow charges
The Competition and Markets Authority (CMA) has conditionally supported the Civil Aviation Authority's (CAA) rules on Heathrow Airport's airline charging structure. The CAA had previously set a maximum average fee per passenger for 2023 and 2024, which Heathrow protested against. The CMA said the CAA was "not wrong in most" of the decisions that were the subject of appeals by Heathrow and airlines British Airways, Delta Air Lines and Virgin Atlantic. The CMA did side with the airlines on "one small element" relating to the potential impact of "exceptional events" on passenger volumes and a "relatively minor aspect" of the CAA's cost of debt calculation. The CAA's fee cuts were intended to reflect the anticipated recovery in passenger volumes and lower consumer costs, but Heathrow argues that the charges will deter investment.
FINANCIAL SERVICES
Blackrock rejected Glencore’s green plans
Blackrock has criticised “inconsistencies” in Glencore’s climate policy, with the asset manager voting against the mining firm’s green strategy at its AGM. US securities filings show that 30% of Glencore’s shareholders rejected the firm’s climate report, up from 24% in 2022. MFS Investment Management, Glencore’s ninth largest shareholder with a 1.1% stake, also rejected the climate strategy. Investors including Legal & General Investment Management, Allianz, Scottish Widows, Man Group and HSBC Asset Management all backed a resolution earlier this year calling for Glencore to explain how its thermal coal production is compatible with its climate goals.
Financials Acquisition launches SPAC to access Lloyd's market
Financials Acquisition has launched London Innovation Underwriters (LIU), a special purpose acquisition company, to provide investors with access to the Lloyd's of London Insurance market. LIU plans to access the Lloyd's insurance marketplace through London Bridge 2, a platform that facilitates dealing with insurance-linked securities investors.
Home insurance quotes up by a quarter
The average quoted price of home insurance has risen by 25.7% annually, according to research by Consumer Intelligence. The average premium quoted for a buildings and contents policy was £212 in July, up from £168 in July 2022. Georgia Day, senior insight analyst at Consumer Intelligence, noted that people who have made claims “are likely to feel the pinch even more.” The study shows that older householders have seen lower quotes for their home insurance, with average quoted premiums for over-50s at £199, compared with £222 for under-50s.
Investment transfer market needs a regulatory crackdown
Moira O’Neill in the FT urges the Financial Conduct Authority to deliver tighter regulation of investment transfers, arguing that 14 days “needs to be a requirement, not a voluntary goal.”
Crypto boss jailed for fraud
Cryptocurrency boss Faruk Fatih Ozer has been jailed for 11,196 years for defrauding investors, having fled with investor assets after his Thodex exchange suddenly collapsed in 2021. He was extradited back to Turkey in June and found guilty of money-laundering, fraud and organised crime.
LEISURE & HOSPITALITY
TRG in talks over divesting its leisure business
The owner of Cafe Rouge is in talks over the acquisition of Chiquito’s and Frankie and Benny’s from Wagamama-owner The Restaurant Group (TRG). The Big Table, which is backed by private equity group Epiris, is in negotiations over a bid for the casual dining chains. TRG has been challenged by activist investors who have demanded that the company sells off some of its divisions to pay down its £180m debt pile. TRG's biggest shareholder, Columbia Threadneedle, has sold nearly half of its shares to a group led by activist investor Oasis Management. Oasis now holds an 18% stake, while Columbia holds just under 10%.
ECONOMY
End of rate hikes on the horizon, experts predict
While markets had previously predicted that interest rates could peak at 6%, economists say it now appears unlikely that the rate will climb that high. While interest rates have risen a record 14 consecutive times to 5.25% since December 2021, Michael Saunders, a former member of the rate-setting Monetary Policy Committee (MPC), believes that another base rate increase this month would “probably” be the last in the current cycle. Stephen Millard, deputy director at the National Institute of Economic and Social Research, said a “best guess” was one more rise, either in September or November. However, Willem Buiter, a former external member of the MPC and ex-chief economist at Citigroup, believes that difficulties in controlling both the headline and core inflation rates mean it is “very likely that we’ll see Bank rate at 6% by early 2024.” Andrew Bailey, governor of the Bank of England, last week told the Commons Treasury Committee that the period when it was “clear that rates needed to rise going forwards” was now over.
Lord King: Net zero obsession ‘has fuelled inflation’
Former Bank of England governor Lord King says the Bank weakened its ability to fight inflation due to the amount of time and effort it has dedicated to net zero. Lord King said it made “absolutely no sense” to add net zero to the Bank’s growing list of responsibilities, saying it “can do nothing about climate change.” He added: “It’s not even obvious that the biggest and most immediate risks to the stability of the banking system are coming from climate change, as opposed to pandemics or cyber security or excess lending to commercial property. So to have a special focus on that doesn’t in my view, make any sense.” Lord King, who led the Bank from 2003 to 2013, also questioned the scale of the Bank’s growing list of responsibilities, saying: “In my view, the range of its responsibilities has been expanded too far.” “I think there is a real danger that just if you keep adding things, eventually the straw breaks the camel’s back,” he added, going on to argue: “What you’ve now got is a body in which there are an awful lot of people in different jobs at the top who are not doing monetary policy.”
Analysts: GDP dip reflects ‘one-off setbacks’
While official figures are expected to show that the economy shrank by up to 0.4% in July, City experts are confident that a longer-term slump will be avoided. Samuel Tombs, chief UK economist at Pantheon Economics, said that while growth was “sluggish,” the economy was still not “sliding into recession.” He said that a breakdown of July's GDP figures will show that the decline “reflects one-off setbacks rather than a broad-based downturn.” While the economy grew 0.5% in June, Investec expects a drop of 0.4% for July, while Pantheon Economics predicts a drop of 0.2%.
OTHER
Bank of England report points to greedflation
Analysis suggests that inflation may not fall as quickly as the Bank of England has estimated due to a rebound in corporate profit margins. A study by Bank economists shows that 45% of companies plan to increase their profit margins in the coming 12 months, while 32% expect “no material change” to margins and only 23% expect to see a decline. With the top 10% of profitable businesses having successfully driven their margins to approaching 30% and set to make further progress towards this target over the next year, the researchers said: “Margin rebuilding could make some contribution to inflation persistence.” The survey found that on average, firms are on course to increase margins to a record high of almost 10%. Sharon Graham, general secretary of Unite, said: “Ever since the greedflation crisis began, the Bank of England has been attacking workers’ wages while downplaying corporate profiteering. Now the central bank’s own analysis supports what Unite has argued all along about inflation.” She added: “Companies are raising prices simply to boost their own profit margins.”