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Daily News Roundup: Monday, 19th July 2021

Posted: 19th July 2021

BANKING

FCA warns bank bosses over money laundering

The Financial Conduct Authority (FCA) has warned retail banking bosses that they must do more to stop money laundering, warning that executives could be held liable if lenders fail to comply with rules. In a letter to retail banking chief executives, David Geale, the watchdog’s director of retail banking and payments supervision, said “some firms have fallen short” in following rules governing anti-money laundering and terrorist financing. He pointed to “several cases” where persistent failings resulted in regulatory interventions including enforcement action, business restrictions and formal investigations. He added that bosses could be personally liable for the failings because the senior managers and certification regime “places a responsibility on all senior management to counter the risk that their firm might be used to further financial crime”.

Crime crackdown hits innocent bank customers

Imogen Tew in the Sunday Times says a number of innocent customers are having their accounts closed, funds frozen and large transactions blocked as banks try to crack down on crime following calls from regulators. Sector watchdogs want banks to be more robust in monitoring transactions, large money transfers and payments to cryptocurrency sites. Ms Tew says more than 5,500 NatWest customers say they have been locked out of their accounts, while also noting cases at Monzo and Revolut. In the year to April, two of the Financial Conduct Authority’s steepest sanctions related to failures to act against financial crime. UK Finance says financial firms have lodged 21m alerts of suspicious activity a year. Of these, 460,000 ended up with law enforcement agencies and 45,000 resulted in a crime being stopped.

Diamond wants ring-fence removed

Former Barclays boss Bob Diamond is lobbying for an end to ring-fencing rules that prevent high street banks from making risky investments, with his Atlas Merchant Capital among firms including Lloyds, HSBC, Barclays, NatWest and Nationwide that are calling for changes to the ring-fencing scheme as part of a review being spearheaded by Keith Skeoch. Atlas says ring-fencing restrictions have killed off competition by forcing the largest banks to pump their money into safer investments – such as mortgages – rather than using the money for investment banking. UK Finance has also called for a “dismantling” of the ring-fencing rules, arguing that banks are well protected by other safety measures such, as strict capital buffers.

Low rates point to an ‘appetite to lend’

Hilary Osborne in the Observer looks at “headline-grabbing mortgage rates” that have been “coming thick and fast” since the first sub-1% deal in several years was launched earlier this month, noting that buyers can tie-in for two years at just 0.94%, or fix for five at 1.06%. Eleanor Williams at Moneyfacts says “eye-catching” rates designed to tempt new borrowers suggests “an appetite to lend from mortgage providers, and reflects an ability to price low while we remain in a low interest rate environment.” David Hollingworth, from mortgage broker L&C, says “talking about five-year fixed-rates just above 1% is astonishing really”. He goes on to suggest buyers should look at fees and charges, advising them not to be “swayed by a temptingly low rate alone” and “ensure they consider the overall, true cost of a new mortgage deal.”

Firms set out mask policies as restrictions lift

With coronavirus restrictions in England coming to an end, the Prime Minister has said that it will be left up to individual businesses to decide their policies on face coverings. The Telegraph looks at how a number of businesses are approaching the issue. A Goldman Sachs spokesperson said the US investment bank would require staff to wear masks in their London office “when not at their desk”. The bank also confirmed that it would not require staff to be vaccinated before returning to the office, It hopes that 70% of its UK staff will return to the office in the coming weeks.

NatWest to transfer Ulster Bank loans to Permanent TSB

NatWest is reportedly set to sign a memorandum of understanding on the transfer of €9bn of loans from Ulster Bank to Permanent TSB. The move could see NatWest take a 10% - 20% stake in the Irish state-backed lender.

Revolut mulls LSE listing

Revolut is considering a London Stock Exchange listing after becoming the most valuable tech company ever in Britain with a £24bn valuation following a fundraising from private equity firms Softbank and Tiger Global. Revolut's chairman Martin Gilbert said: “If we ever did list, we'd love to list in London”. However, he ruled out a listing this year and said there were “no immediate plans”.

PRIVATE EQUITY

Blackstone snaps up student accommodation firm

Blackstone has teamed up with Dutch pension fund manager APG Asset Management to buy student halls operator GCP Student Living for £969m. GCP confirmed earlier this month that it was in talks about a deal with funds backed by Blackstone and APG - GCP’s largest shareholder. The proposed will see APG hold around 61% of the group and Blackstone will take 39% through IQ Student Accommodation, a student housing provider which it bought last year.

INTERNATIONAL

Deutsche unit hires seven bankers

Deutsche Bank's international private bank unit has taken on seven bankers in the Americas, with hires from Citigroup, Bank of America and Goldman Sachs Wealth Management set to be part of the New York, San Francisco and Latin America teams.

AVIATION

Investors urged to oust Wizz Air chair

Shareholder advisory ISS has told Wizz Air investors to vote against the re-election of chairman Bill Franke for failing to hire enough women to the company’s board. Wizz will only have two women on its board when director Maria Kyriacou steps down next month, putting female representation at 20%. This falls short of the 33% target for FTSE 350 companies recommended by the Hampton-Alexander review. Meanwhile, Glass Lewis has suggested that Mr Franke should be ousted for failing to outline a clear plan or timeline for his succession, having exceeded the nine year tenure recommended by the corporate governance code.

FINANCIAL SERVICES

Women make up 32% of financial service firm boards

A report from think-tank New Financial shows that the proportion of women on the board at 200 of Britain's top financial firms has risen to nearly a third in the five years since the launch of the Treasury’s Women in Finance Charter in March 2016. Analysis shows that the number of women on the board at the companies had risen to 32% from 23%. Female representation on executive committees has increased to 22% from 14%. If the rate of increase is maintained, women would reach parity in the boardroom in 2029 and on executive committees in 2033. Report author Yasmine Chinwala, partner at New Financial, said: “While female representation is moving in the right direction, there is still a long way to go … If the industry is to maintain the pace of change in the next half decade, it will have to take on the tougher challenges."

Upsurge in FCA voluntary resignations

The cost of the Financial Conduct Authority’s (FCA) voluntary resignation programme has jumped to over £7m from £200,000 last year. The City watchdog’s annual report details the number of staff who took advantage of its Mutually Agreed Resignation Scheme, with the total for the year to April almost 35 times that recorded in 2020. The FCA spent £7.6m on 104 staff exit packages in the year to April 2021. The figures include compulsory redundancies, long-term ill health settlements and “other departures agreed” - with the resignation settlement scheme included in this bracket. The regulator says severance packages had been calculated according to base salary, age and length of service and capped at £100,000.

LSE trails Frankfurt and Amsterdam in listings proceeds

The amount raised by companies listing shares in London fell by almost two thirds during Q2. Analysis shows that the London Stock Exchange saw €3bn raised via IPOs during the three months to June. This put it behind capital exchanges in Frankfurt and Amsterdam, with the Deutsche Börse seeing €4.4bn raised and Euronext Amsterdam logging €3.5bn. Over H1, London remained the top exchange for primary capital raised, at £9.9bn. London saw the most IPO transactions in Q2, but a smaller average deal size saw it trail rivals in terms of proceeds raised.

AIM options and the IHT hit

Imogen Tew in the Times warns that investors are missing out on inheritance tax relief by putting their money into Alternative Investment Market (AIM) stocks via investment funds rather than investing in them directly. While shares in most AIM-listed firms qualify for business relief, making them exempt from IHT, more than £15bn of investors’ cash is invested in them through equity funds which do not qualify for IHT because the stocks are not held directly. Jonathan Moyes of Wealth Club, an investment service, says: “Investors may find they hold a large allocation of AIM shares in a portfolio of funds, and not realise the substantial inheritance tax benefits they are missing out on.”

Goldman boss backs post-Brexit London

Goldman Sachs boss Richard Gnodde has shared a belief that the City will remain dominant as a world-leading financial centre post-Brexit. Mr Gnodde said “there has been some movement of assets” and access to the European market “is not as free as it used to be” but said the firm has to “build and create new opportunities”. He went on to suggest that policymakers and regulators must keep the capital “competitive”, saying: “Eliminate duplication and unnecessary excessive reporting. Let’s do what we have to do to have effective regulation. But let’s cut out some of the bureaucratic elements to enable firms to use their capital resources efficiently”.

HEALTHCARE

GSK campus to create thousands of jobs

GlaxoSmithKline (GSK) plans to create up to 5,000 jobs over the next 10 years as part of its plan to create one of Europe's largest biotechnology campuses in Hertfordshire. The drug company will seek a development partner to transform land within the company's existing 92-acre research and development site in Stevenage. GSK hopes that the plans will help to unlock up to £400m in new investments from a private-sector developer as part of a partnership with the local council, the Government and entrepreneur bodies. 

REAL ESTATE

House prices rise amid record sales

Figures from Rightmove show that asking prices for British homes rose by 0.7% between mid-June and early July compared with a month earlier, hitting a record high of £338,447. The analysis shows that asking prices have risen by 6.7% over the past six months. Tim Bannister, Rightmove's director of property data, said June probably saw a record number of house sales as buyers rushed to secure deals before the June 30 deadline after which the stamp duty holiday tapered. “This has left prospective purchasers with the lowest choice of homes for sale that we've ever recorded, continuing price rises, and stretched affordability," he added. Rightmove estimates that 800,000 sales were completed in the past six months, beating the record of 795,000 seen in 2007.

Average rent outside London tops £1k a month

Rents outside of London are topping £1,000 a month for the first time ever, according to new data from Rightmove. Its quarterly rental trends tracker found that the average rental price being asked in the second quarter of this year was £1,007, up from £982 in the first quarter. At the start of the year, Rightmove had reported a flood of rental properties entering the market as many tenants chose to move out of cities during the COVID pandemic. The company said asking rents are now starting to recover in city centres across Britain as more people plan a city move ahead of more parts of the economy opening up.

RETAIL

Retailers fear pingdemic hit

Retail bosses have voiced concern over the so-called ‘pingdemic’, warning that with increasing numbers of people being told to self-isolate by the NHS Covid app, staff shortages in stores and in the supply chain could hit the availability of goods. Retailers also warn of a hit to trading as workers are forced to stay at home, with some stores having to reduce opening hours.

ECONOMY

Sunak mulls Budget move

Rishi Sunak is considering pushing back the Budget so the Treasury can gauge the economic impact of ending coronavirus support measures like the furlough scheme and other factors linked to the pandemic. Government sources say the Chancellor is set to tell MPs that he will hold a three-year spending review in the autumn but is mulling delaying tax measures until 2022. The Guardian’s Larry Elliott says Mr Sunak “has known for months that the period from September to the end of the year will be crucial to the economy” as support schemes are withdrawn. He adds that how the labour market will respond to the ending of the furlough scheme is of particular concern to officials, with official figures for October, the first month with wage support no longer in place, not available until November or December. This would make it hard for the Office for Budget Responsibility to assess the economic outlook before an autumn Budget as its forecasts require 12 weeks’ notice.

Economists expect GDP jump

A Reuters poll suggests that the UK economy will expand rapidly this quarter as coronavirus-related restrictions are lifted and further pent-up demand is unleashed. The poll suggests GDP will grow 2.5% this quarter, up from the 2.4% predicted in last month’s survey. Median data shows that pace was expected to slow to 1.4% next quarter and then to 0.9% in early 2022, matching forecasts made a month ago. On an annual basis, growth of 6.7% is expected this year, outdoing the 6.2% predicted last month. Official data shows that GDP expanded 0.8% month-on-month in May, down from April's 2% jump. Meanwhile, none of the 82 economists polled expect the Bank of England to increase borrowing costs following its next policy review on August 5. Inflation is expected to average 2.2% this quarter and hit 2.7% over the following three months.

Bridges: Time to kick the QE addiction

George Bridges, who sits on the House of Lords Economic Affairs Committee, looks at quantitative easing (QE), saying that while it “had a role to play in dealing with the financial crisis”, there are concerns its purpose has “covertly crept to becoming a means of financing government spending”. He highlights that the House of Lords Economic Affairs Committee has warned that QE “now risks being a dangerous addiction”. He points to inflation as the most obvious danger, warning that its “spectre is looming larger” as pent-up demand flows through the economy, post-pandemic. Musing on how to “kick the QE addiction”, he says cold turkey is "very unappealing" and suggests that, “as with any addiction, the first step is to admit there is a problem, and the second is to set out a proper plan to deal with it”.

OTHER

CCFF companies still owe £4.5bn

The Sunday Telegraph’s Oliver Gill looks at the Bank of England’s Covid Corporate Financing Facility (CCFF) which has been used by 107 firms and lent more than £37bn. The emergency funding was shut to new entrants in March and while most companies have now repaid their debts, 21 remain owing around £4.5bn. Mr Gill looks at the implications of this and the options open to the Chancellor if the balance cannot be repaid.

UK falling short on female firepower in economics

Ruth Sutherland in the Mail looks at a lack of “female firepower” in economics in the UK, highlighting that while Janet Yellen is Treasury Secretary in the US, Christine Lagarde is head of the European Central Bank and Kristalina Georgieva is managing director of the International Monetary Fund, the UK has never had a female Chancellor or Bank of England governor. She argues that the departure of the Bank’s chief economist Andy Haldane presents it with the opportunity to pick a female candidate. Ms Sutherland suggests candidates including Professor Diane Coyle of Cambridge University; Professor Rachel Griffith of Manchester University and the Institute for Fiscal Studies; and Treasury chief economist Clare Lombardelli.

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