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Daily News Roundup: Monday, 20th December 2021

Posted: 20th December 2021


HSBC fined £63.9m for money-laundering failings

The Financial Conduct Authority (FCA) has fined HSBC £63.9m and rebuked Europe’s largest bank for weaknesses in its anti-money laundering controls between 2010 and 2018. Among flaws identified in the bank’s anti-money-laundering systems were a glitch that enabled a client to increase their spending activity by 500,000% without raising a red flag. Another issue saw computer systems suppress reporting of suspicious activity, with 89,000 unusual transactions ignored. The FCA said the failings were particularly serious because HSBC had been put on notice about potential weaknesses in its systems in 2012. The fine would have been £91.4m but was reduced due to the bank’s co-operation with the investigation and commitment to settle at the earliest possible opportunity. Mark Steward, director of enforcement at the FCA, said: “HSBC’s transaction monitoring systems were not effective for a prolonged period despite the issue being highlighted on numerous occasions. These failings are unacceptable and exposed the bank and community to avoidable risks, especially as the remediation took such a long time.” HSBC said it is “pleased to resolve” the matter, noting that it relates to HSBC’s legacy anti-money-laundering systems and controls in the UK. The bank added that it has “made significant investments in new and market-leading technologies that go beyond the traditional approach to transaction monitoring.”

EU tells City banks to move more staff abroad

The EU has told a number of large banks operating in London that they have not moved enough senior staff to the Continent, post-Brexit. While sources say the European Central Bank (ECB) is threatening to remove the banks’ EU banking licences if they don't move more staff and resources to the bloc, a source close to the ECB says this would be a last resort and only done if banks refused to co-operate. Global banks based in London, including JPMorgan, Goldman Sachs, Bank of America and Morgan Stanley, have set up subsidiaries in the EU to continue serving European clients.

Banks showing confidence in BTL sector

Banks and lenders are offering bigger loans to buy-to-let landlords, in a sign of growing confidence for the sector. TSB now lends up to 80% loan-to-value (LTV), up from 75%, while Foundation Home Loans, a specialist lender, has deals at 85% LTV, up from 80%. The shifts follow a change last week by Metro Bank, which added 80% LTV buy-to-let mortgages to its range. "This is a significant shift in the market," said Chris Sykes from the mortgage broker Private Finance. "The changes are indicative of the confidence lenders have and the scope they believe they have for growth."

Lloyds staff are told bank IT system is 'unfit for purpose'

The Mail on Sunday reports that a senior Lloyds banker has warned that some of its technology is “not fit for purpose” for the future. A recording of an internal meeting shows one of the bank's directors, Nick Williams, answering employees' questions about its technology. He can be heard warning staff about the bank's existing on-site technology which he said supports the vast majority of Lloyds' data and services.

Atom Bank taps investors for £40m before flotation

Atom Bank is planning to float on the London Stock Exchange as soon as next year and has kicked off its final fundraising before floating. The bank, which is backed by BBVA, Schroders and Toscafund, is holding talks with investors in an attempt to raise at least £40m.


Bumper year for bankers as bonuses jump

Banks are finalising bonus pool deals that could be up by as much as 50% compared with last year. The increases will lift bonus pay-outs to the highest levels since 2009. Experts say the leading investment bankers in the US can expect to collect $5m-$10m this year, with the banks benefitting from a surge in takeovers and mergers as they collect a percentage of the total transaction. They also collect fees for advising on flotations, private equity buyouts, and debt offerings.

JPMorgan Securities fined over record-keeping lapses

The US Securities and Exchange Commission (SEC) has fined JPMorgan Securities $125m over a failure to preserve staff communications on personal mobile devices, messaging apps and emails. The firm admitted to the charges and to violating securities laws. As well as the fine, JPMorgan Chase & Co's broker-dealer subsidiary has agreed to implement robust improvements to compliance policies. The SEC found that JPMorgan Securities violated rules that require firms to preserve written business communications when the broker was unable to produce records during the course of other investigations.

Banks looks to switch UAE work week

Deutsche Bank and JPMorgan Chase are changing the shape of their working weeks in the United Arab Emirates in 2022, aligning them with most global markets. They will operate Monday-Friday, instead of the current Sunday-Thursday pattern that is common in the Middle East. Bank of America and Societe Generale are said to be looking to make the same shift.


Housebuilder may snub activist call for external appointment

Despite activist investor Elliott urging Taylor Wimpey to appoint a new chief executive from outside the firm, the housebuilder says it is still considering an internal hire. In a memo to staff, chairwoman Irene Dorner said the process to hire a replacement for outgoing CEO Pete Redfern is at “an advanced stage”, adding that a “full search internally and externally” is being conducted. While US hedge fund Elliott has called on Taylor Wimpey to “focus on external candidates who have not been a party to the underperformance to date”, Ms Dorner said that the “ability to understand and embody our culture is key and is being taken into account in our thinking and consideration.”


City did not see a Brexit exodus

Analysis shows that Britain has lost just 7,400 financial jobs because of Brexit, with this far fewer than had been forecast and a tiny fraction of the 1.1m people working in finance. The report shows that investment banks have moved or plan to move 7,400 staff following the UK's exit from the single market, with this down from 7,600 a year ago. There have been around 2,800 new hires in the EU due to Brexit, avoiding the need to relocate some staff from London, with 2,200 finance jobs also created in the UK. It was also found that 44% of financial services businesses monitored by the tracker have moved, or expect to move, some operations overseas - a rise of just five businesses since the start of 2021. Dublin and Luxembourg remain the most popular post-Brexit destinations for new EU hubs, while Paris has seen the highest number of staff relocations.

BoE to discuss crypto rules with global peers

The Bank of England is set to step up talks with its international counterparts on a regulatory regime for crypto assets. Sarah Breeden, The Bank’s executive director for financial strategy and risk, said that with banks looking to offer cryptocurrency trading and custody services to clients, global regulators need to design rules to protect the financial system. Saying that the ability to get data on what institutional investors are holding presents a challenge, she said: “This is not something the UK can solve all on its own.” She added that the matter will be discussed by the Financial Stability Board, a body that unites central banks globally. The Sunday Times notes that the Treasury has proposed that the Bank should be involved in regulating stablecoins, but this system does not yet exist, adding that the Treasury is working with the Financial Conduct Authority on what the regime should be for bitcoin.

FCA looks to clean up the sector in dirty money fight

With the Financial Conduct Authority having last week handed NatWest a £265m fine for failing to prevent money laundering and issuing HSBC a £64m penalty for "serious weaknesses" that allowed criminals to transfer cash undetected for eight years, Helen Cahill in the Sunday Telegraph says these cases come as part of a wider crackdown on dirty money flowing through Britain's financial institutions. The City watchdog, she says, has issued large fines to the likes of Standard Chartered, Commerzbank and Deutsche Bank – “but investigators are still struggling to clean up the financial system.” She says the FCA hopes the NatWest case, which is the first ever criminal case brought against a British bank by the regulator, will force lenders to investigate suspicious activity. Ms Cahill goes on to look at other avenues the FCA could pursue, saying regulatory action against an individual is “an easier path and a strong deterrent in money laundering cases”, suggesting bankers found in breach of the City watchdog's conduct rules could face a fine and a ban from the industry.

Pay plan hits morale at the City watchdog

Jill Treanor in the Sunday Times looks at staff morale the Financial Conduct Authority (FCA), saying workers are unhappy over sweeping changes being driven by chief executive Nikhil Rathi. It is said that he has “won little support” for a rethink on the way employees are paid, with Mr Rathi looking to end the culture of cash bonuses and change a grading system which includes 13 job families and 77 pay ranges. Ms Treanor says the pay review has “provoked an emotional response from workers”, citing reports suggesting that vacancy levels are running at 500, compared with more usual levels of 300. Unite the Union, which is seeking recognition at the FCA, said there was considerable disquiet among staff.

LCM sacks vice-chairman for breach of expenses policy

Nick Rowles-Davies, executive vice-chairman at Litigation Capital Management (LCM), has been fired for claiming on expenses for items he was allegedly not entitled to. Mr Rowles-Davies was sacked because of expenses claims that the company said were "made in contravention of LCM's global expense guidelines and policy". The firm said the breaches “are a significant violation of internal company policies” and amounted to "gross misconduct".


GSK picks Lewis to lead consumer spin-off

Former Tesco CEO Sir Dave Lewis is set to be appointed to lead the £40bn separation of GlaxoSmithKline's (GSK) consumer healthcare arm. He has reportedly agreed to become non-executive chairman of the unit. Sky News suggests that the appointment will be viewed as a major coup for GSK by those in the City, with the firm’s management having been under pressure from activist investor Elliott.


Lord Paul seeks UK manufacturer

Veteran industrialist Lord Paul is planning a return to UK manufacturing, with the Indian-born billionaire looking to buy a "substantial" operation. "Britain has been my home for more than 50 years and I really miss not having a factory here," the 90-year-old peer said, adding: “At my stage of life, you have to do what you want - and do it quickly, just in case.” Lord Paul does not intend to manage the acquisition on a day-to-day basis, preferring either to work with existing management or bring in his own team.


ICAEW: A quarter of audits fall short

ICAEW analysis suggests that while the quality of company audits improved slightly during the pandemic, 24% fell short of the required standard. The industry body looked at audits carried out by 538 accountancy firms between the start of 2020 and March 2021, excluding listed companies and big corporate entities, with these monitored by the Financial Reporting Council. The ICAEW study found that 76% of audits were satisfactory or generally acceptable, up from the 74% seen in 2018 and 2019. This means almost a quarter required some level of improvement, with some requiring "significant improvement". The quality of the audits carried out by the UK's seven biggest accountancy groups dipped slightly in 2020. While 88% of their audits were up to standard, this was down from 90% in 2019.


Halifax: House price boom to end in 2022

Increased pressure on household budgets is set to bring an end to a boom in UK house prices, according to Halifax, with the mortgage lender expecting prices to be “broadly flat” in 2022 compared to 6% in 2020 and 8% so far in 2021. With the Bank of England having raised interest rates from 0.1% to 0.25% on Thursday and signalling further increases may be on the horizon, Russell Galley, managing director of Halifax, said: “With the prospect that interest rates may rise further in 2022 to subdue rising inflation, and with government support measures phasing out, greater pressure on household budgets suggests house price growth will slow considerably.” While Halifax expects growth in 2022 to be between flat and 2%, Mr Galley said there is “still a large degree of uncertainty around this forecast.”


Retail sales rise in November

Data from the Office for National Statistics (ONS) shows retail sales climbed 1.4% in November, with Black Friday deals and consumers hitting high streets for early Christmas shopping driving the increase. Sales last month were up 0.8% on October and 4.7% higher than November 2020. On a quarterly basis, sales were down 0.6% in the three months to November compared to the previous quarter – but up 0.5% on the same period last year.


BoE economist: Inflation could deliver more rate hikes

With the Bank of England increasing interest rates from 0.1% to 0.25% on Thursday, the Bank’s chief economist Huw Pill has warned that the rate may have to increased further if inflation persists. The Bank has revised up its inflation forecast to predict consumer price inflation (CPI) will peak at a 30-year high of around 6% in April. CPI hit a 10-year high of 5.1% in November, more than double the Bank's 2% target.


Tourists struggle to spend cash in capital

The Telegraph looks at the declining use of cash in London, with tourists reporting that access to retailers and attractions that accept physical currency is becoming a growing problem. ATM provider Link says the number of cash withdrawals in London has fallen by 10% this year - the highest rate of any area in Britain - with cash use in the capital nearly halving since before the pandemic. Nationally, the number of withdrawals has dropped by 44% since 2019.

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