Banks failing on regulatory reporting
The Bank of England has warned that some banks and building societies are not supplying enough data to enable regulators to spot threats to the financial system, saying it was “disappointed to find significant deficiencies in a number of firms’ processes used to deliver accurate and reliable regulatory returns”. In a Dear CEO letter, the Bank said this created “an increased risk of material misstatements”. It added: “It was clear that multiple firms did not treat the preparation of their regulatory returns with the same care and diligence that they apply to financial reporting shared with the market and counterparties”. The Bank has commissioned several official reports that will be paid for by the firms being scrutinised as part of a review of systems and controls on data reporting. This could see individual firms required to significantly boost investment in their processes, with the Bank saying those that continue to fall short face the threat of fines or being banned from regulated activity.
Monzo set for BNPL market move
Monzo is reportedly planning to enter the buy now, pay later market, with a source familiar with the plan saying the digital bank is finalising plans for a service which will include affordability assessments - something rivals generally do not require. This comes just days after rival challenger bank Revolut announced it is launching its own product to rival sector pioneers ClearPay and Klarna. While most buy now, pay later providers are not regulated by the Financial Conduct Authority, Monzo's banking licence means it will have to carry out affordability checks on customers.
NatWest prepares for hybrid future
The Guardian looks at NatWest's office transformation across its Bishopsgate site in London, saying this comes as part of efforts to cater to the new hybrid worker who will split their time between their home and office. While most of NatWest's 64,000 employees will return to the office for the first time since March 2020 this week, only 13% will be required to be there five days a week, while one in three will be in the office just two days per month. Meanwhile, it is noted that HSBC is planning to cut global office space by 40% as it capitalises on new hybrid working arrangements.
Goldman Sachs urges staff to get jabbed and back to their desks
Goldman Sachs has urged its entire 6,000-strong workforce in the UK to return to the office, with an internal memo from chief executive Richard Gnodde saying staff will no longer be required to socially distance. It also encourages those not yet vaccinated to get jabbed. Investment banks including JPMorgan, Bank of America and Deutsche have been encouraging staff to be fully vaccinated before returning to the office, although none have made it mandatory.
Atom Bank looks to raise more than £40m
Atom Bank is aiming to raise more than £40m from investors before the end of the year, with it set to tap existing shareholders as well as courting new investors. Atom is backed by Toscafund Asset Management and Schroders, as well as Spanish bank BBVA. The fundraising is expected to be the last before the digital bank floats on the stock market.
Scammers on the hunt for lockdown savings
New figures from UK Finance have revealed that scammers ramped up their efforts during the pandemic to prey on vulnerable savers. Staff at banks, building societies and post offices across the UK working with police managed to stop £32m of fraud during the first half of this year – a 65% rise on the first six months of 2020.
Vistry CEO: Private equity firms luring top talent
Greg Fitzgerald, chief executive of housebuilder Vistry Group, has warned that public companies are struggling to attract entrepreneurs because they cannot offer the same incentives as private equity firms. He said he is struggling with his succession strategy as he does not think “the PLC world is a great breeding place for people to come through and be entrepreneurial. I think it’s a great breeding place for people to come through and be very corporate.” Mr Fitzgerald also said that public company boards were too consumed by “stuff” such as human resources, ESG and diversity issues.
Blackstone drops $3bn takeover of property developer Soho China
US private equity group Blackstone has scrapped a planned $3bn purchase of Chinese property developer Soho China as it will be unable to secure antitrust approval in an agreed timeframe.
Villeroy: EU banking union has stalled
Bank of France Governor Francois Villeroy de Galhau has warned that European efforts to build a more unified cross-border banking system have stalled over opposition to deposit guarantee plans. He suggested Europe's banking sector remains fragmented, with lenders reluctant to merge and scale up in the face of competition from overseas. He said: "Banking union now lacks momentum and remains incomplete. Let us be frank: the project has come to a complete standstill".
Horta-Osório tightens his grip at Credit Suisse
Credit Suisse’s new chair, António Horta-Osório, has taken on more executive duties and is taking a direct role in decision making, having already added close allies to the board and executive team.
Wells Fargo hit with $250m fine
Wells Fargo has been hit with a $250m fine by the Comptroller of the Currency (OCC) for failing to meet requirements in an agreement to pay previously harmed customers. Wells Fargo admitted to opening 3.5m fake accounts between 2002 and 2017, allowing its employees to earn bonuses related to the sale of new products. It also charged unnecessary insurance premiums to customers on their car loans. In 2018, the OCC and the Consumer Financial Protection Bureau fined the bank $1bn and ordered it to reimburse customers and strengthen its risk management program.
O’Leary says Wizz Air and easyJet must merge or be taken over
Suggesting the aviation sector will need to see consolidation post-pandemic, Ryanair boss Michael O’Leary believes rivals Wizz Air and easyJet will need to merge or be taken over.
Firms expect London to retain financial centre status
A Lloyds Bank poll has found that more than two thirds of City firms believe that London will retain its status as one of the world’s leading financial centres after Brexit. The survey of leading banks, asset and wealth management firms, insurers and intermediaries saw 32% say the competitiveness of their own sector will improve over the next 12 months, while 17% expect it to worsen. While close to half of those expecting competitiveness of financial services to improve in the next year cited regulation diverging from the EU model as a key factor, the three quarters who fear that UK competitiveness will worsen also cited regulation as a reason. The poll saw 88% of financial firms say they expect economic growth to improve over the next year, up from a fifth in 2020, while 51% expect growth in the UK financial services sector to improve over the next 12 months, compared with 13% in 2020.
FCA denies hypocrisy over LCF
Financial Conduct Authority chief executive Nikhil Rathi has defended the City regulator against criticism that its handling of the London Capital & Finance scandal has left the watchdog vulnerable to accusations of hypocrisy. He told the Treasury Select Committee that although the organisation was not subject to the senior managers regime, it had “adopted and applied the principles” of the regulations to its top bosses. This came after a report from the committee raised concerns that the LCF scandal suggested the FCA may have fallen short of the standards that it expected of the firms it supervises. In his response to the committee’s report, Mr Rathi noted the FCA’s decision to revoke bonuses for its top executives in response to issues with LCF. He said this was “consistent with our guidance on the senior managers regime”. The LCF scandal prompted severe criticism of the FCA, with the City watchdog’s handling of the matter the subject of an independent investigation conducted by retired judge Dame Elizabeth Gloster, who found that the regulator missed a series of warning signs about the company.
Bankers seek billionaires to back Spacs
Jill Treanor in the Sunday Times says investment bankers are approaching millionaire executives and entrepreneurs to front special-purpose acquisition companies (Spacs) in London in the wake of rule changes intended to make the London Stock Exchange a more attractive place to launch them. She says bankers from the likes of Citi, JP Morgan, Barclays, Deutsche and Goldman Sachs are scouring the market for opportunities, with London playing catch-up as it is “a laggard in Spacs”. Data from Refinitiv shows that New York attracted 244 Spacs in 2020 while Paris, Amsterdam and London attracted one each. So far this year, 422 Spacs have been listed on the US markets while London has attracted just two, with four in Paris and ten in Amsterdam.
MP says customers will lose out in LV deal
MPs have questioned the sale of insurer LV to private equity, warning that customers will lose out. The mutual has agreed to a £530m takeover by Bain Capital, rejecting an approach from pensions and investment firm Royal London. Bain plans to remove the life insurer's mutual status – meaning it will no longer be owned by its members. Gareth Thomas, chairman of the All-Party Parliamentary Group on mutuals, has tabled a House of Commons debate on the deal and hopes this will prompt Government scrutiny of the takeover. He commented: “It is easy to see how the chairman and chief executive of Liverpool Victoria might benefit, but as demutualisation usually lead to worse customer service and lower pay-outs, it's far from clear how anyone else will benefit.”
Loan costs fall for first-timers
Moneyfacts data shows that competition to offer low mortgage rates is starting to trickle down to first-time buyers, with costs for those with a 5% deposit falling more than a fifth in six months. The average rate for borrowers looking for a 95% loan-to-value (LTV) mortgage is now 3.57% compared to the 4.47% average recorded in April. Meanwhile, average rates for borrowers with a 10% deposit have dropped from 3.45% to 2.85%. The figures also show that the average cost of a mortgage at 60% LTV dropped from 1.77% in September 2020 to 1.63% in April, a far bigger move that that seen on 95% LTV deals, with these dropping slightly from 4.48% to 4.47%. Research by mortgage broker L&C shows that the best rate for first-time buyers is the 2.98% offering from Skipton Building Society, while the best short-term fixed rate is Santander’s 0.84%, available at 60% LTV for two years. Santander’s 0.99% five-year fix, also at 60% LTV, is the best longer-term deal.
Scotland the fastest-moving market for £1m-plus sales
Scotland has overtaken London as the fastest moving market for £1m-plus homes, according to research from Rightmove. The analysis shows that million-pound properties in Scotland typically find a buyer within 61 days, 25 days quicker than before the pandemic. The research, which looked at the year before the pandemic compared with the year since the property market reopened, shows that million-pound homes in London have taken an average of 67 days to find a buyer over the last year. While this is faster than 85 days seen pre-pandemic, it means the English capital has slid from being the fastest-selling region to being fifth, behind Scotland, the East of England, the South East and the East Midlands. London has also seen a drop in its overall share of the million-pound sales market, with 40% of such sales taking place in the capital compared with 47% before the pandemic.
Prices and demand climb while delays persist
The Times’ Carol Lewis considers the climate for the property market, saying that there is “no end in sight” for the pandemic property boom and warning that the system is “still plagued by delays” that are hitting estate agents, conveyancing solicitors, mortgage lenders and search departments. Among issues having an impact is a surge in demand that saw August record a 28% increase in buyer demand compared to August 2019 while supply has dipped 15%. Rightmove figures suggest agents have 16 properties each to sell on average, a record low. Data from TwentyCi shows that the number of sales agreed but not yet completed is 34% higher than it was in June, when a record 213,000 transactions went through. Ms Lewis notes that the average time from offer accepted to completion is now 19 weeks, with this average down from a high of 22 weeks earlier in the year. On prices, Halifax says house prices rose 7% in the year to August, hitting a record average of £262,954, while Nationwide said prices, based on its mortgage lending, were up 10.5%.
Sainsbury's agrees 13 store purchases
Supermarket Income has confirmed its joint venture with the trustees of British Airways Pension Fund has sold half of the Sainsbury's stores it owns to the supermarket chain. The real estate investment trust said that Sainsbury's had exercised its option to buy 13 of the portfolio's stores, with the deal completing in March 2023 when the current rental agreement ends.
Economic growth stalls in July
Data from the Office for National Statistics (ONS) shows that the UK economy grew by just 0.1% in July. While this marks the sixth consecutive month of growth, the increase is far lower than the 1% growth recorded in the previous month and means the economy remains 2.1% below its pre-pandemic peak. The ONS report shows that the main contributor to growth was a 1.2% rise in production output. The data also shows that GDP grew by 3.6% in the three months to July. Jonathan Athow, the ONS’s deputy national statistician for economic statistics, said: “After many months during which the economy grew strongly, making up much of the lost ground from the pandemic, there was little growth overall in July”, while Chancellor Rishi Sunak said the figures showed the recovery was "well under way". Professor Jagjit Chadha, director of the National Institute of Economic and Social Research, commented that while July’s increase was "lower than most people expected", the economy is slowly getting back to its pre-pandemic level and “there were always going to be potholes along the way." Alpesh Paleja, lead economist at the Confederation of British Industry, said: “The UK’s economic recovery continued in July against the backdrop of the pingdemic gathering pace.”
Inflation expected to reach three-year high
Inflation is expected to surge this week, with experts predicting the steepest annual increase in nearly three years. Economists surveyed by Bloomberg expected a year-on-year increase of 2.9% for August, with this coming after a slowdown to 2% recorded in July. The expected increase will stem in part from the VAT cut and Eat Out to Help Out scheme rolled out last year. Andrew Goodwin of Oxford Economics, who believes the projected rise in August is likely to be surpassed by further peaks later in the year, comments: “Obviously the comparison with that big fall in prices last August creates quite a substantial base effect … So almost all of the pick up between July and August will be due to that.” It is noted that the Bank of England expects inflation to hit around 4% in Q4, with price growth likely to stay strong through the early months of 2022. With data released last week showing GDP expanded just 0.1% in July, Capital Economics’ Paul Dales believes “stalling GDP and rising inflation will leave a whiff of stagflation in the air”. Mr Dales expects consumer price inflation to rise to 3.1%.
Cheap funds lead global stocks boom
More money is likely to be invested into global stocks in 2021 than in all the previous 20 years as markets continue to hit record highs. The amount poured into global stocks this year is predicted to hit $1trn according to the Bank of America. That figure eclipses the $800bn of inflows into global stocks between 2001 and 2020. Interactive Investor said that the most popular passive global equity funds with its customers included the Vanguard LifeStrategy 80% Equity fund, the iShares Global Clean Energy ETF and the iShares Core FTSE 100 ETF.