BoE says UK’s largest lenders no longer ‘too big to fail’
The Bank of England has determined that the UK’s largest banks are no longer “too big to fail” and could cover the cost of their own collapse from the more than £500bn in accumulated capital. It also said shareholders and investors rather than taxpayers would be first in line to cover losses and ensure banks had enough capital to operate. However, the Bank cautioned that three lenders – HSBC, Lloyds and Standard Chartered – had to address shortcomings that could otherwise “complicate unnecessarily” their ability to fail safely. Meanwhile, Virgin Money, NatWest Group and Nationwide Building Society were told they had at least one 'area for further enhancement,' the second-best assessment a bank could receive. The banks will have until 2024 – when the next assessment takes place – to address the shortfalls. Dave Ramsden, the Bank's deputy governor for markets and banking, said: “The Resolvability Assessment Framework is a core part of the UK's response to the global financial crisis, and demonstrates how the UK has overcome the problem of 'too big to fail'. Safely resolving a large bank will always be a complex challenge, so it's important that both we and the major banks continue to prioritise work on this issue.” The Sunday Times profiles Sarah Mills, executive director for resolution at the Bank of England, who oversaw the publication of the BoE’s assessment of the banks’ “resolvability” plans.
Ex-Nationwide CEO saw pay boost before leaving
The former CEO of Nationwide Building Society, Joe Garner, received a performance bonus just shy of £1m before stepping down this month, while his overall remuneration jumped 71% last year to £2.1m. Under Garner, Nationwide’s profit for the past year nearly doubled to £1.6bn while assets grew to £272bn. Garner also had his pay more than halved during the pandemic. But the Mail on Sunday’s Jeff Prestridge suggests the pay boost will irk savers who “have received a pittance in interest in the past year.” Nationwide said: “Garner's pay rise reflects a reduction in the last two years. We need to compete to attract talent to ensure the long-term success of a society of this size. We've always balanced how we reward people with our values as a member-owned organisation.”
US banks concerned over EU’s bid to move staff out of London
Wall Street banks are resisting pressure from the European Central Bank to move staff from the City of London to their EU operations, preferring access to London’s deeper liquidity pools. Staff also prefer life in London, the banks say. US bank bosses plan to voice concerns to the ECB in the coming months, the Telegraph reports. The ECB conducted a desk mapping review and determined that US banks needed to shift more of their UK operations into the bloc. But some fear the ECB’s clampdown is overly political with one US bank executive warning that driving staff and operations out of London will ultimately lead to worse deals for European customers and cause less efficient and effective risk management.
Bank of London reports £48,000 loss
The Bank of London Group , which achieved a valuation of more than $1bn when it launched last November, has suffered a £48,000 annual loss. A spokesman said: “Every single company that is pre-revenue will make a loss. If you contrast the loss to that of other UK start-up banks, you will see they incurred millions of pounds of losses when building their banks.”
Metro Bank starts closing branches
Metro Bank will close three branches this week but the lender insists it isn’t walking away from its branch-first strategy. The branches to close are in Earls Court, west London, Milton Keynes and Windsor. Metro Bank said: “There are alternative stores in each location and we are pleased to avoid job losses by offering colleagues employment at other stores or customer contact centres.”
CVC maintains plans to float in the "medium term"
The Sunday Telegraph’s Simon Foy reports on the delay to CVC Capital Partners’ stock market listing, blamed on rising rates and costs. But experts say lending restrictions aren’t what they were ten years ago – private equity is funded more from private credit firms now so the restrictive covenants imposed by banks in the past are not creating the same capital constraints. Weak GDP growth and its impact on dealmaking could be a greater concern, however, notwithstanding the opportunities economic gloom can bring. Another issue for CVC, should it finally achieve a listing, is dealing with public investors, says Foy, and steering clear of scandals.
CVC explores $2bn sale of software firm
CVC Capital Partners is working with US investment bank William Blair on the sale of VelocityEHS. The Chicago-based compliance software company could be worth as much as $2bn
UK regulator puts Credit Suisse on watchlist after scandals
The Financial Conduct Authority has put Credit Suisse on its watchlist of institutions requiring tougher supervision because of its concern that the bank had not done enough to improve its culture, governance and risk controls. In a letter to the Swiss bank last month, the watchdog asked the lender to conduct reviews on the effectiveness of its international board, risk and audit committees and asked senior executives to give evidence of steps the bank would take to prevent instances of misconduct and to improve accountability.
Ping An continues to push for HSBC break-up
Chinese insurer Ping An continues to agitate for the break-up of HSBC, citing research from a Hong Kong consultancy estimating the bank could generate £22bn of extra returns for shareholders if it spins out its Asian business. However, the report noted that there could be “temporary or technical impacts to the business or market sentiment” not captured in its calculations, due partly to HSBC’s interwoven business and technicalities around the debt it must issue for regulatory purposes to protect its savers
SEC probes Goldman Sachs over ESG funds
The Securities and Exchange Commission is investigating Goldman Sachs's asset-management arm over claims related to its ESG funds. The agency is looking into whether some investments for the funds are in breach of ESG metrics promised in marketing materials, people familiar with the matter said. The inquiry is tied to two funds in Goldman's mutual-funds business.
Wells Fargo probed over fake interviews
Manhattan federal prosecutors are investigating Wells Fargo following reports that staff had been told by superiors to conduct sham interviews with black and female candidates for roles that were already filled in order to boost the bank's diversity statistics.
European pension funds attack Toyota for not going ‘all in’ on electric cars
Pension fund investors in Europe are leading criticism of Toyota for its “negative climate lobbying” which they claim “undermines the inevitable transition away from polluting cars.”
Renault buys online car servicing start-up
Renault has bought British technology start-up Fixter, which enables car owners to get their vehicle serviced without leaving the house. Fixter claims to be the first company in Britain to offer what it calls an "end-to-end" online car maintenance service.
Shapps rejects demands for emergency visas to tackle airport chaos
The Transport Secretary is resisting demands to issue foreign baggage handlers and check-in staff with temporary visas to ease the staffing crisis at British airports. Grant Shapps has rejected pleas from the aviation industry for airport workers to be added to the shortage occupation list, which would make it easier to recruit staff from abroad. One industry insider said: “This illogical approach to labour shortfalls across the economy means that the Government has to shoulder its fair share of the responsibility for current issues despite its best efforts to deflect blame exclusively to airlines.”
FCA convicts just two insider traders in five years
A Freedom of Information (FoI) request by the Times to the Financial Conduct Authority (FCA) shows only two people have been convicted of insider dealing in the past five years. This is despite market data showing the crime is so prevalent that share prices in nearly one in five takeovers are subject to “significant abnormal movements” before an announcement. The explanation seems to be that the number of FCA investigators working on insider dealing fell from 79 in 2017 to 37 last year. Meanwhile, the number of whistleblowers reporting suspicions of insider dealing to the watchdog nearly doubled between 2017 and 2021 compared with 2012-17. The FCA did not explain why prosecutions and convictions had fallen so steeply but said a significant amount of its work now went on prevention.
Insurance bosses told to make price walking pledge
The Financial Conduct Authority has reportedly asked the bosses of all insurance companies and brokers to sign an ‘attestation’ that their company is not charging loyal customers higher premiums than new ones. The City regulator is now poised to check data on the prices that insurers are charging new and existing customers for the same cover. If there is evidence of 'price walking' – existing customers being discriminated against – it will hold the individual executives liable. Offending companies will also have to suspend policy sales until they can prove the practice has been eliminated.
Britain retains financial services FDI crown
The UK remains at the top of the European league table for foreign investment in financial services, new research finds, but France narrowed the gap last year attracting 60 projects in 2021 compared with Britain’s 63. Both nations enticed a higher number of projects in 2021 than in the previous year - up seven for Britain and 11 for France - bucking the trend for a 2.8% contraction in Europe overall. London attracted 39 projects in 2021, but this was less than half the 86 projects it recorded in 2018. Paris chalked up 38.
BlackRock gives more investors voting choice
Blackrock is expanding its "voting choice" initiative, which offers clients invested in index funds the opportunity to participate in the shareholder votes of companies and may extend it further to include individual investors in funds.
LEISURE & HOSPITALITY
Awaze Holiday being prepared for sale
Platinum Equity Partners is preparing to put UK holiday cottage booking firm Awaze Holidays up for sale. The American private equity firm bought the company for £925m in 2018 and sources say it could now be worth more than £1.5bn.
MEDIA & ENTERTAINMENT
CMA to probe mobile ecosystem dominance
The Competition and Markets Authority (CMA) said on Friday that it is planning to launch an investigation into the “effective duopoly” that Apple and Google hold over the mobile ecosystem. The regulator said it found the two companies were dominant across mobile ecosystems, which allowed them to exercise a stranglehold over some markets, including operating systems, app stores and web browsers on mobile devices.
Ericsson probed over Iraq corruption scandal
The US Securities and Exchange Commission has started a probe into the Ericsson's handling of a corruption scandal in Iraq. The company admitted it may have paid the ISIS terror organization to gain access to transport routes in a scandal that goes as far back as 2011. Ericsson had to pay a $1bn fine in 2019 as part of settlement of a bribery case but US agencies are continuing to investigate and fresh fines are on the table.
House prices to cool as rate rises
Britain's soaring property market will be cooled by this week's expected interest rate rise, according to mortgage brokers. Economists are forecasting that the Bank of England will raise interest rates by 0.25% on Thursday, although some do not rule out a rise of half a percentage point to 1.5%. The Bank is desperately trying to rein in inflation, which is running at its highest level in 40 years at 9%. Lenders have begun raising their mortgage rates in anticipation; rates for two and five-year fixed mortgages have doubled on average since October, according to broker London & Country. Lloyds Banking Group raised some of the fixed rates it offers to new customers by 0.81 percentage points while Halifax hiked costs for borrowers by as much as 0.6 percentage points. Mortgage brokers predicted that increased borrowing costs will dampen demand and affect prices. "The expectation is that you'll see a slowing in price growth or even a flattening off," said David Hollingworth of London & Country. Buying agent Henry Pryor agreed that the rate rise would cool the market. "It will dampen enthusiasm but it won't cause prices to fall. House price inflation this time next year will be 2% rather than 5%," he said.
Public confidence in BoE at all-time low
A survey by the Bank of England reveals that, for the first time on record, more people were dissatisfied than satisfied with the performance of the central bank when it comes to controlling prices. Only 25% of Britons said they were happy with the job the BOE is doing with respondents also declaring themselves more pessimistic about inflation than at any time since the survey began in 1999. Adrian Lowery, financial analyst at investing platform Bestinvest, said the data meant that “people don’t believe the Bank of England will succeed in its forecast of bringing inflation back down to its 2% target in a couple of years”. The results increase pressure on the Bank’s Governor, Andrew Bailey, to deliver a fifth consecutive interest-rate increase next week. Economists anticipate a quarter-point hike, taking the rate to 1.25%.
Rail strike will cost UK economy £100m
Analysis by the Centre for Economics and Business Research (Cebr) estimates that the three days of rail strikes due to hit Britain later this month could cost the economy nearly £100m with the biggest hit being felt by London. “The national strike will likely see further economic disruption by causing a loss of earnings for the workers and rail companies involved with the walkout, reducing spending by those who travel by rail to shop, knock-on effects for tourism spending, and the potential to significantly intensify existing supply chain disruptions,” Cebr said.
Former CEO of Meinl Bank accuses CIA of baseless plot
Austrian banker Peter Weinzierl, the former chief executive of the Vienna-based Meinl Bank, is facing extradition from Britain to the United States on money laundering charges. He has been charged in connection with a case of money laundering and tax evasion in Brazil. But his lawyers say he is the victim of a CIA plot to trace billions of dollars of American government money that disappeared from Ukraine several years ago and is suspected of having passed through the Austrian banking sector.