Banks face grilling over personal debt
Lenders are facing tough talks with the Bank of England this week over the recent surge in consumer loans. BoE officials fear that the boom in personal debt could leave Britain’s big banks over-stretched and vulnerable to a crunch. The Sunday Telegraph speculates that lenders could be told to tighten up standards, beef up tests to make sure borrowers can afford their debts, or reallocate more capital to their consumer loan books. Meanwhile, Sir Vince Cable has warned that Britain is “sleepwalking” towards another economic crisis and has become hooked on unsustainable debt. The former business secretary said the UK economy needs a new approach to prevent it being dragged into recession as Britain edges closer to Brexit. The Liberal Democrat leader said: “Banks are now safer and better capitalised, and the Liberal Democrat policy in government of splitting retail banking from more risky ‘casino banking’ has added to stability. But despite progress made during the coalition years, the country has still not fully recovered from the economic heart attack it suffered a decade ago.”
Barclays’ head of whistleblowing to leave
Barclays’ head of whistleblowing, Jonathan Cox, is leaving after dropping an employment case against the bank, according to Reuters. His departure comes as the bank’s chief executive, Jes Staley, is investigated over his attempts to unmask a whistleblower. However, the detail of the employment case or if it has any connection to the Staley investigation is not clear.
FCA demands justice for small firms
The head of the Financial Conduct Authority has said that small firms are unable to obtain justice in their complaints against banks, and the system needs an urgent overhaul. Andrew Bailey wants politicians to set up a new independent process to deal with disputes between firms and lenders. The Mail on Sunday’s Ruth Sunderland backs Mr Bailey’s view, calling for the introduction of a small firms ombudsman, or a tribunal that can hear cases. She points out that most business banking is done by the Big Four of Lloyds, HSBC, RBS and Barclays, so firms “don’t have much choice of provider, and they don’t have much negotiating power.”
Cardholders exposed to fraud risk
An investigation by the Telegraph has claimed that cardholders with Barclays, American Express and Co-op Bank are putting customers at risk of fraud after it emerged that they are allowing shoppers to make card payments without PINs. The probe found that customers can make payments with a signature if they do not know their PIN. In contrast, customers of other banks have their card frozen if they enter the wrong PIN three times.
Libor rates still open to rigging
A whistleblower has claimed that Libor is still open to manipulation, despite reform of how the benchmark rate is calculated. Behzad Goharian, who was responsible for Libor submissions at UBS until recently, alleges there are still “catastrophic” failings in the way the interest rate is set and monitored.
Harrods Bank shuts down
Harrods Bank has closed the doors on its only branch on the second floor of its department store. Harrods said it was closing the branch after a strategic review of its operations. The bank has endured losses recently after launching new savings products and a money transfer service.
Capitalworks to launch London finance business
Capitalworks, the South African private equity firm, plans to launch a London-based business to provide financial and operational support for hedge funds. The new venture, called Sephira Investment Advisors, marks the first major foray into Britain for Capitalworks.
Central bankers warn of $13trn hole in global debt calculations
The Bank for International Settlements (BIS) has warned that as much as $13trn (£9.6trn) of foreign exchange derivatives may not be accounted for on balance sheets, because international standards do not require them to be included. Economists at the BIS said: “The debt remains obscured from view. Accounting conventions leave it mostly off-balance sheet, as a derivative, even though it is in effect a secured loan with principal to be repaid in full at maturity. Only footnotes to the accounts report it.” The BIS also warned that there are signs of “credit market exuberance” in international capital markets.
ECB says banks may attempt to avoid supervision after Brexit
Two regulators for the ECB have warned that European banks might try to exploit loopholes and differences in national rules to get looser regulation or evade ECB rules altogether, particularly after Brexit. Sabine Lautenschlaeger and Daniele Nouy renewed their calls for closing gaps in European rules that put investment firms and bank branches outside the ECB’s banking supervision. Ms Lautenschlaeger said: “In the wake of Brexit, many banks will decide to relocate from the United Kingdom to the euro area. And they might choose to set up third-country branches. At the same time, investment firms might also relocate. So I think it would make sense to regulate and supervise them at European level.”
Goldman seeks to tap into retail banking
The Times’ Harry Wilson examines the reasons behind Goldman Sachs’ push into retail banking. Harvey Schwartz, the bank’s chief operating officer, revealed last week that the bank plans to boost revenues by $5bn, of which at least a fifth will come from retail banking. Wilson notes that last year Goldman launched Marcus, its personal lending and savings business. He adds that raising retail deposits is part of a strategy to make the bank less dependent on wholesale markets to finance its day-to-day operations.
Scandal costs Sofi chance to become a bank, says ex-SEC head
The former head of the Securities and Exchange Commission, Arthur Levitt, has said SoFi’s application to become a bank has no chance of approval after CEO Mike Cagney left the business last week.
Alphabet considers Lyft investment
Google parent company Alphabet is understood to be considering a $1bn investment in cab-hailing firm Lyft. It follows an announcement in May that Google-owned Waymo and Lyft were working together on testing self-driving taxis.
Ryanair cancels flights
Ryanair cancelled 82 flights yesterday after admitting it had “messed up” the planning of its pilots’ holidays. The airline said that it would cancel 40-50 flights every day for the next six weeks. The cancellations could affect up to 285,000 passengers, who will be offered alternative flights or refunds.
Ministers must regulate the regulators
Writing in the Telegraph, Lord Leigh argues that the FCA’s £41m PPI advertising campaign encapsulates what is wrong with financial regulation. He says the campaign sees the FCA moving past neutrality and “into the realm of the litigious,” by encouraging claimants and seeking to “pursue expansionist policies in the name of budget maximisation.” He concludes that ministers should intervene accordingly to ensure democratic accountability and adherence to the rule of law.
Deadline set for OMGI bids
Suitors for Old Mutual’s asset management, Old Mutual Global Investors, have until September 29 to submit tentative bids for the business, according to people close to the situation. TA Associates and Hellman & Friedman are said to be keen on the business.
Schroders and Janus Henderson to pay for research after Mifid II
Schroders, Janus Henderson Investors, Union Investment and Invesco have all backtracked on their decision to pass research charges after Mifid II on to investors.
Investment consultants brace for competition probe
The FT looks at how investment consultants are preparing for a probe by the Competition and Markets Authority, after the Financial Conduct Authority cited “serious concerns” about how the industry operates.
Wood mulls sale of Esure
City sources have suggested that Sir Peter Wood is looking to orchestrate a sale of Esure, the online insurer. A tie-up with a US insurer is considered the most likely exit for Sir Peter, although large private equity firms are also said to be interested in the business.
Currency dealer seeks funds
Peer-to-peer currency dealer WeSwap is looking to raise £10m in fresh investment to accelerate its growth, through increased marketing, and to develop new products.
Spire Healthcare drops plans for private hospital
Spire Healthcare has halted plans for a new £500m private London hospital amid a slowdown in health tourism and rising property prices.
LEISURE & HOSPITALITY
Pub industry under pressure
The ratings agency Moody’s says that the UK’s pub giants are beginning to struggle because of a squeeze on earnings and rising costs. Analysts said the sectorias under pressure amid a perfect storm of rising business rates, labour costs and inflation, as well as falling beer consumption and fears about a consumer spending downturn.
Gym chain flexes its muscles
The Gym Group has purchased 18 gyms from rival Lifestyle Fitness in a £20.5m deal. The sites – which are across the Midlands and the North – secure the company’s position as the country’s second-biggest budget gym operator.
Burger chain brings in advisers
The burger chain Byron, which is owned by private equity firm Hutton Collins, has hired City advisers to work on a “cash management” plan, as it prepares to close sites and cut costs.
Dyson: Teachers need attitude shift on manufacturing
Sir James Dyson has accused “luvvies” and the London Olympics opening ceremony of creating a negative image of manufacturing. He said one problem was that teachers did not do enough to portray manufacturing in a positive light. Children were not being presented with a balanced view since the great literary figures who are studied in schools, such as Charles Dickens, had a gloomy view of industry.
Britain rises to eight in industrial league
A report from the EEF reveals that the UK is now the eighth largest industrial nation, after manufacturing returned to growth last year. Annual manufacturing output is now worth more than £183bn. The North West remains the biggest regional powerhouse, producing more than £24bn output. Manufacturing also helps power the engine of the West Midlands (£17.5bn) and East Midlands (£15.9bn), with their strength across the aerospace and automotive sectors.
MEDIA & ENTERTAINMENT
STV extends funding deal
The Glasgow-based broadcaster STV has extended its £60m revolving credit facility with Santander and Barclays.
Purplebricks’ American dream
Purplebricks has launched in the US. The online estate agent’s first set up in Los Angeles includes a local website and 30 agents, before extending across California, with other states also planned.
Tesco expected to play role in rescue of P&H
The Sunday Telegraph claims that Tesco is expected to play a pivotal role in the rescue of wholesaler Palmer & Harvey (P&H) as it looks to persuade the Competition and Markets Authority (CMA) to approve its takeover of Booker. P&H has been hunting for cash since the summer and has narrowed down takeover talks with Carlyle and Brookfield Business Partners. However, any new investor is keen to want assurances from Tesco to extend its distribution agreement with P&H.
Pound hits highest level since Brexit vote
The pound has hit its highest level against the dollar since the Brexit vote after a senior Bank of England official fuelled speculation it could raise rates in the coming months. Gertjan Vlieghe, who has previously argued against a rate rise, said the “moment is approaching” when interest rates might need to go up. Sterling rose more than 1% against the dollar to hit $1.3610, its highest level since 24 June.
Worst pay decade for a century
The Resolution Foundation think-tank has calculated that Britain is poised to experience its worst decade for pay growth since 1913. It said that the growth in average real-term wages over the course of the 2010s is likely to come in at -0.2%.