BANKING
Online banking shift must deliver access for everyone
James Kirkup, director of the Social Market Foundation, considers the benefits of the shift toward online banking but warns of a risk that some people could be left behind by the move away from branches. He highlights data showing that around 93% of people now have access to digital banking services, up from 78% before the pandemic. He also notes polling which reveals that 38% of current account-holders are using online banking more than before the pandemic and 28% have reduced their use of branches, while 8% have stopped using branches altogether. Mr Kirkup says that as access to banking becomes increasingly important in a digital-first economy, the industry and policymakers cannot afford to allow significant numbers of people to struggle to get that access. He says banks, regulators and politicians “need to think more creatively and to work more closely together on more innovative ways to ensure access to banking.” He calls for ministers to bring together public and private experts to chart how well people are equipped for an online economy, proposing the creation of a digital economy preparedness commission.
Four banks pay just 0.01% on savings accounts
Moneyfacts analysis shows that Barclays, Citibank UK, Allied Irish Bank and the Government-backed National Savings & Investments are still offering just 0.01% interest on certain easy access accounts despite a succession of rate rises by the Bank of England that have taken the base rate to 1.25%. Banks have left savers exposed to soaring inflation by failing to pass on higher interest rates. The Bank has forecast inflation to climb to 11% this year. Sarah Coles of stockbroker Hargreaves Lansdown said: “The biggest issue is banks have so much cash at the moment after so many people deposited savings during lockdowns, and while it remains that way they have no incentive to increase rates.” She added that “savers really can’t be lulled into a false sense of hope, they really need to move for a better rate.”
Nationwide CEO lands £3.4m pay deal
Debbie Crosbie, the new chief executive of Nationwide, is being paid a salary of more than £1m and could receive as much as £3.4m a year if performance targets are met. Ms Crosbie started at the building society earlier this month after leaving TSB, where she was paid a salary of £950,000 before bonuses. At Nationwide, she will receive a salary of £1.07m before bonuses. Nationwide’s annual report shows it overhauled its pay scheme to find a replacement for Joe Garner, who was paid £2.1m in his final year as CEO. The mutual wants to shift the CEO’s pay towards long-term performance, rather than short-term bonuses.
INTERNATIONAL
Deutsche Bank staff have messages tracked
Deutsche Bank has reportedly told some employees to install an app that tracks communications on their phones. This monitoring, which involves work phones and not private devices, comes as regulators become increasingly focused on bankers’ use of messaging apps. German regulator Bafin has previously asked Deutsche Bank, Germany’s largest lender, to provide information about its employees’ communication methods. Last year, JPMorgan Chase was fined $200m by US regulators for failing to keep records of staff communications on personal devices, while HSBC and Credit Suisse have both fired bankers after discovering undisclosed communications and a senior Credit Suisse banker was removed from his post for using an unauthorised messaging app. JPMorgan Chase, UBS, Julius Baer, Jefferies and Cantor Fitzgerald are all said to have made use of software to monitor staff in heavily regulated roles, such as trading.
French bank reprimanded over handling of discrimination case
BNP Paribas was reprimanded by the Financial Conduct Authority (FCA) over how it handled complaints by a female banker who suffered sexual discrimination while working in its London office. The City watchdog held several meetings with senior members of the French bank’s HR department, with the regulator looking into how Stacey Macken’s accusations of unfair treatment and discrimination were dismissed. Ms Macken, who worked in BNP's prime brokerage division, told an employment tribunal that she suffered years of bullying and was paid less than men in comparable roles. Ms Macken made repeated internal complaints about her treatment but these were brushed aside. In March 2019, the tribunal ruled that BNP had subjected Ms Macken to “direct sex discrimination and victimisation.” She won a £2m payout over the matter earlier this year.
Citigroup recruits associates from outside finance
A pilot programme at Citigroup has seen the bank recruit US associates without banking experience or business degrees. The initiative aims to boost the firm’s diversity goals by recruiting associates from under-represented minorities and non-traditional backgrounds. In 2021, 40.6% of Citi's mid- and senior-level staff globally were women, up from 37% in 2018. In the US, 8.1% of its mid- and senior-level employees were Black, up from 6% in 2018. Data from the US Government Accountability Office shows that in 2018, about 26% of employees in the US financial services industry were women and 1% were black.
Santander names new chief executive
Santander has named Héctor Grisi as its next CEO. Mr Grisi, chief executive of Mexico and head of Santander’s North American operations, will start in January 2023 and replace José Antonio Álvarez.
CONSTRUCTION
Proposed merger of Shaftesbury and Capco faces backlash
Wealth manager Investec is expected to vote against the proposed merger of West End property groups Shaftesbury and Capco, as the terms did not adequately compensate Shaftesbury investors for being "lumped with" Capco's assets, which it believes will generate lower rental growth. JO Hambro and Royal London also criticised the terms of the merger last week.
FINANCIAL SERVICES
Insurance sector rules fail to protect consumers
Analysis by the Mail on Sunday suggests insurance customers are being exploited, despite the Financial Conduct Authority (FCA) rolling out new rules designed to protect policyholders. An investigation into the pricing of motor and home insurance policies shows that existing customers are still being hit by huge price hikes by some of the industry’s biggest names. While the FCA argues that its reform of the industry is having a “broadly positive effect” on consumers, consumer champion James Daley has warned that the main result of the reforms is “a bunch of premium hikes.” The Mail on Sunday analysis shows that many policyholders are still seeing their premiums increase way above the rate of inflation, while those who pay the renewal premium demanded by their insurer often pay more than those who challenge the price offered. The report also reveals that some customers can keep cover with their insurer by rejecting the renewal premium in favour of a cheaper one as a new customer. The FCA’s new rules, which came into force in January, were supposed to ban price discrimination in favour of new customers. The paper’s Jeff Prestridge says there appear to be loopholes that insurers are exploiting to get round this. He calls on the FCA to conduct an urgent inquiry into the insurance market.
FCA approves funeral plan providers covering 87% of market
The Financial Conduct Authority (FCA) has approved a list of funeral plan providers which cover approximately 87% of existing customer plans. The City watchdog has published a list of providers it intends to authorise when the pre-paid funeral plans industry comes under its remit on July 29. The full list has 24 firms and the regulator is still assessing a small number of providers’ applications. The 24 on the list will be officially approved for authorisation in July, depending on whether they have fulfilled certain obligations outlined during their application process. Meanwhile, Sir John Hayes, chairman of the All-Party Parliamentary Group for Funerals and Bereavement, has warned that an estimated 200,000 funeral plans are "at risk.” In a letter to John Glen, economic secretary to the Treasury, Sir John said authorised companies could not be expected to "foot the bill" and asked whether the Government would "put in place a financial support package to protect consumers should their plan provider fail to achieve FCA authorisation.”
BNPL rules set to be tightened
The Government plans to strengthen rules on buy now, pay later (BNPL) services, with lenders to be required to carry out checks on consumers to ensure that they can afford to take out loans. Firms will have to be approved by the Financial Conduct Authority, while consumers will be able to take complaints to the Financial Ombudsman Service. Dame Clare Moriarty, chief executive of Citizens Advice, said the Government should accelerate its plans for regulation, saying: “The buy-now, pay-later sector continues to grow at a meteoric rate, but it could now remain unregulated for years.” She added that the proposed rules will provide vital protection to many, but ministers “must turbo-charge these plans.” John Glen, economic secretary to the Treasury, said BNPL “can be a helpful way to manage your finances” but warned there is a need to ensure that people can embrace new products and services “with the appropriate protections in place.”
EU eyes clearing raid on the City of London
The Sunday Telegraph looks at EU financial services commissioner Mairead McGuinness’ campaign to boost the EU's financial services industry, “in part, by engineering a raid on the City of London.” The EU has vowed to punish banks that fail to shift clearing business to the continent and insisted the temporary extension allowing them to trade through London will not be extended beyond 2025. The paper says the threat has not been well received by Europe's banks, with the European Banking Federation saying the plans would cause "serious market disruption" and "significantly weaken the attractiveness and competitiveness" of EU clearing houses.
MANUFACTURING
Manufacturers call for support
Manufacturers have reported a slowdown in growth and orders. Orders for goods and services almost halved compared with the first quarter of this year, according to a survey of 287 companies between mid-May and early June by industry body Make UK. Make UK has urged ministers to waive or reduce business rates for the next year, allow companies to defer VAT payments, make permanent the increase in annual investment allowance and extend the tax super-deduction to encourage investment.
REAL ESTATE
House price growth set to halve, says Rightmove
The annual rate of house price growth is expected to almost halve by the end of this year, according to Rightmove. The average national asking price rose by an annual 9.7% in May, a slowdown from the 10.2% recorded in April. Rightmove says increased borrowing costs and an increase in properties on the market are set to slow the rate further to around 5% by the end of 2022. It said “there are likely to be some month-on-month price falls during the second half of the year.” Rightmove data shows that the average price of a home has hit a record high for the fifth month in a row in May, climbing to £368,614.
Mortgage arrears value reaches 12-year high
The value of mortgage arrears in the UK has reached its highest level since 2010, with £2.05bn of mortgage debt unpaid at the end of Q1, according to new data. The proportion of mortgages in arrears with no formal arrangement in place is higher than when arrears last reached this level in 2010. In 2010, 36% of mortgages in arrears had a formal arrangement in place with the lender. That figure has now dipped under 20%.
Mortgage rates could hit 4%
Average rates on two-year fixed-rate mortgages sold by the 10 biggest lenders have risen from 1.34% to 2.71% in the past six months. Analysis by broker L&C Mortgages shows that if rates continue to rise at the same pace they will surpass 4% by the end of December.
RETAIL
Asda paid £375m in interest
Asda's new owners paid £375.1m in interest last year, according to Companies House filings, after the £6.8bn takeover of the supermarket was financed by £4.06bn of debt. The Issa brothers partnered with private equity firm TDR Capital to buy Asda, putting in a total of less than £800m in equity for the grocer. Around £200m of that was funded by cash from the petrol forecourts chain EG Group, which is also owned by the Issas and TDR. The new accounts show that last year, the company paid £202m of interest on external debt, £106m on lease liabilities, £56m on intercompany loans, and £2m of additional undisclosed interest payments.
Activists to question Boohoo on wages and suppliers
Campaigners are set to challenge online retailer Boohoo over paying “very low” prices to suppliers and a lack of compensation for underpaid factory workers. Activists from Labour Behind the Label and ShareAction have estimated that staff in factories in Leicester could be owed as much as £125m in underpaid wages as some of the retailer's suppliers previously paid workers below the minimum wage.
ECONOMY
Bank of England 'underestimated' inflation, says chief economist
Huw Pill, the Bank of England’s chief economist, says it “underestimated” inflation, saying a “series of very big shocks” that it could not anticipate have had an impact, including Russia’s invasion of Ukraine and the Omicron Covid variant. Mr Pill went on to insist that the central bank had not acted too late to curb the surge in prices. He said the Bank “started earlier than some other central banks,” adding that since the first increase in interest rates in December, it has “done as much as other central banks have done more quickly in recent times.” Mr Pill also said the Bank will raise interest rates more aggressively to ease soaring living costs if there are signs of inflation becoming persistently higher for longer than expected. He told Bloomberg TV: “If we see greater evidence that the current high level of inflation is becoming embedded in pricing behaviour by firms, in wage-setting behaviour by firms and workers, then that will be the trigger for this more aggressive action.” Mr Pill is a member of the Bank’s Monetary Policy Committee, which this week voted for a 0.25-point interest rate rise, taking it to 1.25%.
National debt interest hits £100bn a year
Interest payments on the UK’s £2.3trn national debt are set to top £100bn a year, with the interest bill having more than doubled since before the pandemic. This will cost each household £2,426 a year – more than £500 higher than previously forecast. In March the independent Office for Budget Responsibility (OBR) said interest payments on the debt would peak at a record £83bn in the year to April 2023, with this double what it had predicted five months earlier. New analysis using the OBR’s own forecasting model shows the figure could instead hit £106bn as interest rates continue to rise. A Treasury spokesman said: “We’ve always been aware of risks to debt interest costs from rising inflation and interest rates, which is why we have taken a balanced and responsible approach to the public finances.”
Three quarters of CEOs expect global recession
Three quarters of global business leaders are expecting a global recession within the next 12 to 18 months, pointing to Russia’s invasion of Ukraine as a key factor in the economic decline. A Conference Board survey found that 76% of CEOs across the world expected their region to fall into recession - or feel it already has. The poll of 750 chief executives shows a shift from a year ago when just 22% expected a recession.
OTHER
Interest-free loan scheme expanded
A scheme offering interest-free loans to the financially vulnerable is being expanded. Following a successful trial in Manchester, the No Interest Loan Scheme will be rolled out across the UK from September. The Treasury-backed scheme, which will be run by credit unions and other lenders, offers emergency loans to people who would normally be turned down as they cannot afford the interest payments. The pilot is being funded with £3.8m committed from the Treasury, £1.2m from JPMorgan Chase and up to £1m of lending capital from each devolved administration, matched in England by Fair4All Finance. The nationwide pilot phase is designed to offer small scale help to 20,000 people. If this proves successful, a feasibility study suggests a full-scale roll-out could reach 500,000 people.