BoE gives warning of material risks to finance sector
The BoE has warned that regulators in the EU and the UK are doing too little to mitigate the “material risks” to the financial services industry after Brexit, even if a transition deal is agreed. The Bank's financial policy committee (FPC) said new UK and EU legislation would be required to preserve the continuity of existing cross-border insurance and derivatives contracts. "While the outlook for global growth has strengthened further, there are material risks associated with interest rate volatility. The principle risks are in debt markets," the FPC said. However, the FPC repeated that Britain's banks had the capital buffers to withstand any potential cliff-edge Brexit and continue supporting the UK economy.
Goldman Sachs reports 55.5% gender pay gap
Goldman Sachs has revealed a 55.5% gap between what male and female staff get paid and a 72% mean gap for bonuses due to the lack of women in senior roles. Median bonuses for women were 40.01% lower than those for men while median hourly wages for women were 26% lower, the bank said. On Friday, the Treasury announced that Goldman Sachs and UBS were among the newest signatories to the Women in Finance Charter, which calls on firms to disclose female representation at various seniority levels and to set goals to boost it.
Brexit can boost banking competition, says Secure Trust chief
Paul Lynam, the boss of challenger bank SecureTrust Bank, has said leaving the EU provides Britain with an opportunity to cut the regulations hampering the development of small banks and help break the dominance of the big five, Barclays, Lloyds, RBS, HSBC and Santander. Mr Lynam said the UK should follow the example set by the US and deregulate to boost challenger banks. Small lenders should not have to adhere to “Basel” rules on capital buffers - a requirement of the European Banking Authority - says Lynam. It’s a costly and inappropriate approach: small banks should be allowed to fail, he adds.
Bank to re-run its “doomsday” stress-test repeat
The Telegraph reports that the Bank of England is planning to re-run its “doomsday” set of stress tests to determine how lenders would cope in a deep financial crash. This test is a repeat of last year’s, but with a twist, as a tougher pass hurdle has been set for the largest lenders judged to be “systemically important”. This could potentially put more pressure on RBS and Barclays, which both failed to pass the higher systemic hurdles set for them last year, although they passed the standard mandatory stress tests.
Barclays has work to do on controls
Barclays’ audit committee has said that the bank still has more work to do to improve controls and compliance at the bank. The committee added that senior managers need to hold individuals to account when standards slip.
Thorburn joins Barclays board
The former boss of Clydesdale Bank, David Thorburn, has been appointed as a non-executive director of Barclays. He will also become the chairman of the bank’s risk committee subject to regulatory approval.
Deutsche Bank pays out huge bonuses despite 2017 loss
Deutsche Bank said it had quadrupled bonus payouts to staff in 2017, despite booking a bigger-than-expected net loss for the year. The bank said it paid out €2.16bn in bonuses despite revising up its losses for 2017 from €512m to €751m. In a statement to shareholders, Deutsche chief executive John Cryan said he recognised that the decision to boost bonuses “was highly contentious for many given the reported net loss in 2017”. But he said the compensation was necessary to hold onto the best talents.
BofA European chief to step down amid Brexit frustrations
Bank of America Merrill Lynch’s European head Alex Wilmot-Sitwell has resigned. He has been instrumental in the bank's preparations for Brexit and although his departure was amicable, there are reports he had become increasingly frustrated with the progress of Brexit negotiations and that his departure was related in part to the changes to his role and the bank’s structure after Brexit.
Latvia vows to crack down on unscrupulous banking
Latvia’s finance minister Dana Reizniece-Ozola has said that the country will overhaul its offshore banking system and drastically reduce foreign deposits in a bid to appease US and European regulators.
China names Yi Gang as new central bank governor
Yi Gang, a vice governor of the People's Bank of China (PBOC), has been nominated to replace Zhou Xiaochuan as the head of the Chinese central bank.
Berenberg unfazed by new European rules on equity research
The FT profiles Berenberg, which has built a sizeable equity research presence in London. The bank’s global head of investment banking, David Mortlock, said he is unfazed by Mifid II.
Heathrow investors face dividend halt
The Civil Aviation Authority (CAA) is considering a series of measures to force Heathrow Airport to strengthen its finances, according to the Sunday Times.
Hammond lays out plans for fintech future
The Chancellor, Philip Hammond, will this week unveil a plan to instigate two giant infrastructure projects to boost Britain’s fintech sector. He will say that the Financial Services Trade and Investment Board has been told to identify two areas where industry and government can work together to improve the country's prospects in the digital economy. Mr Hammond will also unveil details of a planned “fintech bridge” with Australia, which will establish closer links between regulators, governments and industries , making it easier for companies from one country to trade in the other’s markets.
Luxembourg tells EU to give City a fair deal
Luxembourg’s finance minister Pierre Gramegna has called on the EU to "be creative" and offer a unique deal that will protect financial services in both Britain and on the Continent. Mr Gramegna told the Sunday Times that despite European cities, including Paris and Frankfurt, battling to attract business from London, a bad Brexit deal makes it increasingly likely that companies will "repatriate" activities to centres outside the EU, such as New York, Singapore and Hong Kong.
Company bosses face prison for looting pension funds
Theresa May has announced tough new measures to combat bosses who profit at the expense of company pension schemes. Rogue business leaders would be liable to up to two years in prison for risking the pension savings of their employees, while the Pensions Regulator will be given “the powers it needs to crack down on the minority of businesses who shirk their responsibilities.” The PM said: "It is absolutely vital that people who work hard and contribute to society throughout their career have the confidence that their pension will pay out in retirement."
Light-touch regulation history, says FCA chief
Andrew Bailey, the CEO of the Financial Conduct Authority, has insisted that the regulator is not soft on financial misconduct after recent criticism of the way it has handled several high-profile cases.
Schroders boss enjoys 12% pay rise
Schroders CEO Peter Harrison saw his total pay packet jump by 12% last year to £7.1m, including £6.6m in bonuses. The Sunday Times notes that last year the fund manager faced an investor rebellion over the salaries paid to its top team.
Rivals could join Nex Group bidding race
Analysts have suggested that CME’s pursuit of Nex Group could be derailed by rival exchanges. Potential rivals could include the London Stock Exchange, Singapore Exchange, Frankfurt's Deutsche Boerse and New York Stock Exchange owner Intercontinental Exchange.
Philip Hammond eyes new patient capital EIS funds
The Chancellor has launched a consultation into new EIS funds that could see investors gain new tax relief for investing in higher risk start-ups.
LEISURE AND HOSPITALITY
Wetherspoon profits perk up
Tim Martin, the boss of JD Wetherspoon, has said the pub chain is weathering tough times in the restaurant trade. He said that, although half-year sales and profits rose more than expected, future trading would be tougher. He was speaking as the group posted a 36.1% rise in pre-tax profit to £54.3m in the 26 weeks to January 28, with revenue rising by 3.6% to £830.4m. Mr Martin added that there has been a backlash against “trendy-type, restaurant-type” chains which are now seeing higher costs and tougher competition.
M&B embroiled in pensions row
Mitchells & Butlers has become embroiled in a High Court row with its pension trustees over a plan to cut retirement benefits for more than 20,000 people. The pubs operator has told the trustees that it wants to reduce the level of annual increases paid to members of its defined benefit scheme. M&B said it believed it had the power to make the change unilaterally. However, the trustees disagreed, and started legal action last month.
Siemens to pump £27m into 3D printing
Siemens is planning to invest £27m into what will be Britain's biggest 3D printing factory, in Worcester. The German industrial group will make the investment through Materials Solutions, a company it acquired in 2016. The plant’s opening in September will lead to the creation of 55 jobs.
MEDIA AND ENTERTAINMENT
Head of TalkTalk ultrafast broadband joins Virgin Media
Virgin Media has named Richard Sinclair, currently general manager of ultrafast broadband at TalkTalk, as its next executive director of connectivity.
Mitie to book higher cost savings amid turnaround
Outsourcing group Mitie has said that its turnaround plan remains on track and it will deliver higher cost savings than previously expected. The group said that its transformation plan will now see it trim costs by £50m a year by 2020.
Mortgages most affordable in a decade
Mortgage payments reached their most affordable levels in over four years in the last three months of 2017, analysis has found. Typical mortgage payments accounted for less than a third (29%) of homeowners’ disposable income in the period, compared with nearly half (48%) in 2007, Halifax said, driven by historically low mortgage rates. Borrowers at the end of last year were repaying on average £669 a month from a £2,309 take-home wage. While mortgage payments are at their lowest as a proportion of disposable earnings in Northern Ireland (19%), Scotland and the North East (both 20%), they are highest in London (45%) and the South East (40%).
BoE warns of mortgage debt bubble
More than a quarter of house buyers are now borrowing more than four times their annual income, the Bank of England has warned. This is the highest figure on record – and double the proportion eight years ago, leading to fears that thousands have over-reached to afford a property, fuelling a debt bubble. The BoE said there has been a sharp rise in borrowing at income multiples of between 4 and 4.5, with 17.65% of all mortgage lending in the third quarter of last year going to borrowers in this bracket – while another 10.65% of mortgages went to borrowers at even higher multiples.
Credit insurers tighten terms for Poundstretcher’s suppliers
Credit insurers are tightening terms for suppliers to Poundstretcher. Euler Hermes is understood to have reduced cover for Crown Crest Group, Poundstretcher's parent. Crown Crest is used as the counterparty by many suppliers because Poundstretcher has a weaker balance sheet.
Why retail chains have suffered such a mauling
The FT’s Daniel Thomas argues that many of the high-street casualties in recent months have one thing in common: they are owned by private equity.
Economists predict rate rise in May
Analysts believe some members of the Bank of England’s MPC could vote to raise interest rates as early as this week despite figures expected to show inflation easing to 2.8% from 3.0% in January, the Sunday Times reports, although the Bank is widely expected to keep the cost of borrowing on hold. Traders are now pricing in a roughly 70% chance of a May increase, says the paper’s Tommy Stubbington, noting that increased wage growth could lead to more persistent above-target inflation. Official figures on Wednesday are expected to show a 2.6% year-on-year increase in average weekly pay, up from 2.5% in January.
G20 leaders plan crypto currency clampdown
The G20 group of leading economies plans to examine the digital currency sector's impact on “financial stability, tax evasion and financing illegal activities” at this week's meeting in Buenos Aires, the Sunday Times’ Danny Fortson reports. Elsewhere, Reza Moghadam, vice-chairman for sovereigns and official institutions at Morgan Stanley, writes in the FT that a “central bank coin” would help to stabilise the extreme price volatility of bitcoin and other cryptocurrencies.
Dormant accounts to help unemployed
Theresa May has announced that about £90m from dormant bank accounts will be used to tackle high rates of unemployment among young people from ethnic minorities.