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Daily News Roundup: Monday, 17th May 2021

Posted: 17th May 2021


Banks face tougher consumer protection rules

The Financial Conduct Authority (FCA) is proposing a new “consumer duty” that would see banks and other financial firms forced to ensure they are acting in customers’ best interests. The mooted reform is designed to prevent a repeat of past mis-selling scams such as those centred on endowment mortgages and PPI. While financial firms currently have to treat customers “fairly”, the new rules would obligate them to act in the best interests of retail customers when selling products or services - or to act to deliver good outcomes. Sheldon Mills, the FCA’s executive director for consumers and competition, said: “We want firms to be putting themselves in the shoes of consumers and asking, ‘would I be happy to be treated in the way I treat my customers?’” Wording of the expectations on firms will be finalised after a public consultation that closes in July, with the final version of the rules set to come into force by July 2022.

Barclays refunds 74% of scam victims

Barclays has revealed the proportion of its customers it refunded after they fell for a scam, saying it has paid back 74% of claimants in the first two months of this year. The Payments Systems Regulator last year revealed huge disparities between banks, with one refunding 99% of victims partially or in full, while two others only paid back 4% of their customers. The regulator did not disclose the identity of the banks and Barclays has become the first bank to reveal its refund rate. Gareth Shaw of consumer group Which? said: "It's encouraging that Barclays has taken this step ... There is no excuse for other banks not to follow suit." Barclays' refunds were made under a voluntary code introduced in May 2019. Other firms signed up to the code include HSBC, The Co-Operative Bank, Lloyds, Halifax, Metro, NatWest, Royal Bank of Scotland, Santander and Nationwide Building Society.

More than 500 bank branches close amid the pandemic

Analysis from Which? shows that the UK has lost more than 500 bank branches since the start of the pandemic despite the Financial Conduct Authority urging lenders not to cut the number of sites during the coronavirus crisis, “particularly where this could impact vulnerable customers”. The study shows that banks have closed 529 branches since the first national lockdown was imposed on March 23, 2020. Barclays, NatWest, Lloyds, HSBC, Co-op Bank and TSB are among the lenders to have announced cutbacks. While many lenders did pause shutdown plans in the initial lockdown, the closures resumed later in the year.

Question raised over BBRS

James Hurley in the Times looks at concerns over the Business Banking Resolution Service (BBRS), a small business redress scheme set up to provide compensation to victims of banking scandals. Some users of the scheme have voiced concern over the service, which went live in February, with small companies and advisers flagging confusing eligibility criteria, examples where staff appear uncertain of the rules and IT issues.

Lloyds faces revolt over pay report

Lloyds could see a revolt at its AGM after proxy adviser Glass Lewis suggested investors should vote against the bank's pay report, saying it could not back it due to "poor disclosures surrounding performance adjustments". Glass Lewis flagged concerns over adjustments made to the bonus of Juan Colombás, the bank’s former chief risk officer.

TSB launches mortgage with a less than 1% interest rate

TSB has launched a two-year fixed rate of 0.99% to those with at least a 40% deposit who are refinancing their home loan. Those buying a property will have to pay a higher rate of 1.09%. According to mortgage brokers, two-year fixed rates with interest as low as 0.99% have not been seen since 2017.

Santander hit by technical difficulties

Many Santander customers were unable to access banking services on Saturday after technical problems stopped cash withdrawals and online account access for much of the day.


Sanne spurns £1.3bn approach from Cinven

Private equity group Cinven has made a £1.35bn offer for Sanne, a fund administration business that provides alternative asset and corporate services. The cash offer was made on May 4 and was rejected on May 12, Cinven said. Sanne said the 830p-a-share all-cash offer was opportunistic and "not reflective of the group's ability to deliver strong operating and financial performance as the macroeconomic environment continues to recover". The firm says it has received three unsolicited, non-binding proposals from Cinven in recent months.


US banks could cut 200,000 jobs over next decade, top analyst says

Wells Fargo analyst Mike Mayo says US banks may cut 200,000 jobs over the next decade, with 10% of employees at risk in “the biggest reduction in US bank headcount in history”.

Green light for PNC's BBVA deal

The US Federal Reserve has approved PNC Financial Services Group's acquisition of the US operations of Spanish lender BBVA. The $11.6bn cash acquisition will create a bank with nearly $650bn in assets.

Caixabank pay plan divides shareholders

Some retail investors in Spain’s Caixabank have complained about the bank’s executive pay policies. Despite some voicing concern, shareholders backed a salary proposal handing new chairman Jose Ignacio Goirigolzarri a fixed salary of €1.65m and a bonus of up to €200,000. The Spanish state, which holds a 16% stake in the lender, voted against it. Bank of Spain has called on banks to be "extremely prudent" regarding bankers' bonuses.


Pendragon facing pay revolt

Car dealer Pendragon is facing a shareholder backlash after paying its chief executive a large bonus despite cutting jobs and using taxpayers' money to furlough staff amid the pandemic. More than 40% of shareholders opposed Pendragon's remuneration policy last year. Proxy adviser ISS has told clients that despite last year's protest vote, Pendragon "does not appear to have addressed the underlying concerns in any meaningful way". Legal & General Investment Management says it plans to vote against several resolutions, including the remuneration report.

Aston Martin set to see bonus backlash

Aston Martin faces an investor revolt for handing bonuses to chief executive Tobias Moers after accessing £13m in emergency funds amid the pandemic. ISS has advised shareholders to vote against the carmaker’s pay plans, criticising the firm for paying a £142,000 bonus to Mr Moers, who received a total of £1.48m in 2020. The payout comes despite Aston Martin's revenue falling almost 40% to £612m and losses hitting £419m. ISS said the pay plans see a “material disconnect” from the firm's performance.


EasyJet chairman set to step down in 2022

EasyJet has announced that chairman John Barton is preparing to step down in May 2022, a point where he will have completed nine years in the post. In announcing plans for Mr Barton to step down, the airline, which has already started the search for a successor, noted that a nine-year term is the recommended maximum for best practice in corporate governance.


Government looks to rewrite financial rules

The Government is drawing up plans to scrap swathes of pre-Brexit financial rules amid the expectation that Brussels will not grant the City widespread access to the single market. The Treasury has begun scrutinising the whole suite of finance regulations which were kept in British law after the UK's departure from the EU, with a view to cutting red tape and enhancing London's role as a global trading hub. The European Commission has demanded details of Britain's plans to diverge from EU rules before it considers granting access through equivalence. However, senior figures in Brussels are suspected of seeking to stall the equivalence process in a bid to win business from London or extract concessions in other areas.

FCA to ban ‘phoenix’ advisers

Plans set to be unveiled by the Financial Conduct Authority (FCA) this week will see financial advisers who mis-sell products and then shut down their business banned from helping victims make compensation claims. The City watchdog is cracking down on “phoenixing” – a scenario where the owners of failed advice firms set up a claims management company to profit from past misconduct. Under the plans, owners of failed advice firms will be barred from helping ex-customers lodge claims with the Financial Services Compensation Scheme (FSCS). Analysis shows that 1,319 FSCS claims over the last six years have involved a phoenixed firm.

Money ‘sucked’ from the City post-Brexit

Professor Iain Begg of the London School of Economics has warned that money is being "sucked" away from London and into EU capitals post-Brexit. Analysis shows that the City of London lost £2.3trn in its derivatives trading market in a month while the percentage of euro-based swaps carried out on venues hosted by British platforms dipped from 40% in July to just 10% in March. Prof Begg said: “That's financial activity that needs to be inside the eurozone being sucked away from London, at the same time the City is reinventing itself and looking at where it has markets globally.” He added that there is as yet no “clear indication that the City is a loser from Brexit, but it may be that some European centres are marginal winners.” He went on to suggest that if “the trickle turns into a flow” it would be damaging for the British economy.

Marex confirms anti-laundering alert

Commodities broker Marex has warned that it faces potential scrutiny from the Financial Conduct Authority (FCA) over problems with its anti-money laundering systems. It is suggested that the firm, which is planning a £500m stock market flotation, could face questions about the robustness of its internal controls from prospective investors. In a filing accompanying its listing announcement, Marex disclosed that a review last year had identified weaknesses in its anti-money laundering systems. The firm reported the problems to the FCA and has launched a “self-remediation programme” but warned that it could face “significant regulatory consequences” if the City watchdog is unhappy with its changes.

Funding Circle investors urged to dismiss chairman

Proxy adviser Glass Lewis has urged investors to sack Andrew Learoyd, chairman of peer-to-peer platform Funding Circle, pointing to concerns around poor succession planning and the amount of time he has been on the board. While Mr Learoyd has served on the board since 2010 and took up the role of chairman in 2016, the corporate governance code recommends that a chairman should not remain in post beyond nine years from the date of their first appointment to the board. A Funding Circle spokesman said: "Andrew was appointed as chairman in May 2016, prior to the company's IPO in 2018. The board is of the view that the chair's tenure resets at IPO when they take on new roles and responsibilities as a director of a listed company.”

EU Financial services talks must accelerate

Chris Blackhurst in the Independent says talks between Brussels and London over a deal for financial services “are dragging” and must accelerate. Reflecting on the impact Brexit has had on the City, he notes that while Morgan Stanley, Goldman Sachs and Barclays are among firms moving senior bankers to EU centres, “dire predictions of a mass flight” of finance professionals from London after the referendum “have not yet been realised”, with analysis suggesting 7,600 financial services jobs had relocated from London in the period to March this year.


NMC Health under investigation

A number of law enforcement agencies and regulators are investigating alleged fraud at private healthcare group NMC Health. While the Serious Fraud Office in Britain and the Department of Justice in the US are looking into matters at the firm, administrators have also received information requests from the US Securities and Exchange Commission, the Financial Conduct Authority and the Financial Reporting Council.

Big investors back GSK

Three major investors have backed GlaxoSmithKline's board amid fears that US hedge fund Elliott Management is planning to force a shake-up of the firm. While there is speculation that activist Elliott could seek to have the FTSE100 firm sold off in parts, BlackRock – GSK's biggest investor – has reportedly contacted the pharmaceutical firm's chairman to pledge support. Its fifth largest shareholder Dodge & Cox, along with Royal London, have also taken a similar stance.


Average house prices hit new record

According to Rightmove’s House Price Index, May has delivered a new record for the price of property coming to market. Analysis shows that the cost of the average property has risen 1.8% this month, hitting £333,564. While regions including Wales, the north-west of England and Yorkshire have all seen prices climb by more than 10%, London has seen more muted growth, with the average up just 0.2%. While the average property in the capital is still 2.9 times the cost of that outside London, this is the smallest ratio recorded by Rightmove since 2013. Reflecting on the figures for May, Tim Bannister, Rightmove’s director of property data, said: “Last year’s unexpected mini-boom is rolling on into 2021, with new price and market activity records again defying many predictions”.

BTL sales fall 36% amid tax changes

Analysis from estate agents Hamptons suggests the Government's crackdown on buy-to-let has seen landlords buy a third fewer properties in the last five years. While property investors have bought more than 700,000 homes since April 2016, the report says that without the introduction of a 3% stamp duty surcharge on buy-to-let purchases and the tapering of mortgage interest tax relief, investors may have snapped up 36% more properties. Hamptons estimated that investors would have bought an additional 249,800 homes in the past five years, with the firm’s Aneisha Beveridge saying the tax changes “have undoubtedly taken the heat out of the buy-to-let market”.

Number funding their own deposits soars in wake of pandemic

The pandemic has led to a surge in the number of first-time buyers able to pay their own mortgage deposit in full, according to Purplebricks. The estate agent revealed that 43% of first-time buyers are now self-funding their entire deposit compared to 29% in 2016. However, the value of the deposits they plan to put down has decreased, despite house prices having increased since 2016. First-time buyers will put down an average deposit of £29,943 - a decrease of almost 10% from £32,954 five years ago. This could be due to the recent resurgence of 5% deposit mortgages, following the launch of a Government mortgage guarantee scheme last month.


Last Debenhams stores close

The last remaining Debenhams stores closed their doors on Saturday, more than 240 years after the department store began trading. The chain went into administration in 2019 and, with the pandemic hitting business in 2020, its owners announced the business was being wound down with 12,000 job losses in December. The Debenhams brand will continue to trade online after it was bought by Boohoo for £55m in January.


Brits to spend £2.5bn as restrictions ease

Consumers are expected to boost the economy by spending billions this week, with indoor dining and entertainment reopening in England as of today. A study by VoucherCodes and the Centre for Retail Research predicts that people will make 104m visits to pubs, restaurants and cafes, spending up to £2.5bn between them. Friday and Saturday are set to be the busiest days, with more than 16m people planning to head out on Friday and over 18m doing so on Saturday, spending in excess of £389m and £426m, respectively. Around 13.6m people are set to visit venues today and spend £297m. The analysis suggests sales in the coming week are set to be up 34% compared to the same week in 2019. Consumers are predicted to spend £426.2m on Saturday, 41.2% more than the £301.84m spent on the same day in 2019.

Will blistering growth spark serious inflation?

Ambrose Evans-Pritchard in the Telegraph says global banks are “scrambling” to raise growth forecasts for the UK, with many expecting the economy to “roar back to life” over coming months and hit pre-pandemic levels of output far sooner than had been expected. He points to a Goldman Sachs forecast of “blistering” growth of 8.1% prompted by signs of “an explosive economic reopening”, while Bank of America has raised its forecast for this year from 5.9% to 7.4%. Mr Evans-Pritchard says the “unknown question” is whether the economic rebound will set off serious inflation, with Bank of America saying UK inflation could temporarily spike by 3% later this year and warning: “It's going to be a bumpy ride”.

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