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Daily News Roundup: Monday, 22nd August 2022

Posted: 22nd August 2022

BANKING

RBS ranked worst current account provider in Britain

The Competition and Markets Authority has named the Royal Bank of Scotland the worst current account provider in Britain. RBS was ranked as the poorest overall provider based on customer service, overdrafts, branch network and online and web provision. The CMA commissioned polling firm Ipsos Mori to survey 1,000 users at each of Britain's 16 largest current account providers. Virgin Money was the second worst for overall service quality, while TSB came third from the bottom. Monzo and Starling came in joint first place, with 81% of users saying they would recommend the banks. Starling Bank ranked first for online and mobile banking services, while Monzo ranked second. Adam Land, of the CMA, commented: "These results show how banks are treating their customers at a time when many are feeling the pinch. When times are tough, you find out who's fighting your corner and if your bank doesn't match up to the competition, you can make a switch.”

Banks earn billions by failing to pass on benefits of rising rates

Britain’s biggest high street banks have parked an estimated £673.5bn in cash at the Bank of England, analysts say, potentially earning them almost £12bn over a year at current interest rates. In their most recent financial results released over the past month, the banks have all reported higher profits and increased margins between what they earn in interest and what they pay, because of rising interest rates. However, savers are not seeing the benefit, even though higher rates are supposed to be passed on to them. Mel Stride, chairman of the Treasury select committee, suggested this week that MPs could investigate whether banks were treating savers unfairly. Anna Bowes, co-founder of Savings Champion, said: “It's a disgrace big banks are pocketing the proceeds of the base rate rise and making billions from doing nothing, but not doing the same for their savers. This is not how interest rate rises are supposed to work.”

Britain’s biggest banks target wealthy mortgage borrowers

The UK’s largest high street banks have begun targeting wealthy mortgage borrowers as the cost of living crisis leaves less affluent households struggling to pay their bills. Halifax has increased its minimum loan size from £25,000 to £100,000 on some of its two and five-year remortgage deals while NatWest recently relaxed its lending limits for wealthier borrowers. It will now offer those who earn more than £75,000 per year a mortgage of up to five-and-a-half times their annual income. Earlier this month Nationwide increased its maximum loan size from £2m to £5m, a move experts said was also designed to target weather borrowers.

Homeowners suffer £200 monthly mortgage rise

New analysis from Moneyfacts shows homeowners are being hit with a £200-a-month increase to their mortgage repayments as interest rates near a 10-year high. The average rate for a two-year fixed-rate mortgage has hit 4.09%, its highest recorded level since February 2013. A year ago the average two-year fix was available at a rate of 2.45%. Mark Harris, of the broker SPF Private Clients, said: “This is going to be a big surprise for people who are about to come off their fixed deals. It will hit just as households are dealing with other elements of the cost of living crisis, including rising energy and food bills.”

FCA fines Citigroup £12.5m for trading oversight failures

The Financial Conduct Authority has fined Citigroup Global Markets £12.5m for past failures to properly apply rules aimed at spotting suspicious trading in shares and commodities. The US bank’s London-based trading arm did not properly implement the Market Abuse Regulation (MAR) trade surveillance requirements from when they were introduced by the FCA in 2016 until early 2018, the FCA said in a statement.

PRIVATE EQUITY

Cheap UK companies likely to be target of PE

‘Dry powder’ stored up by private market investors globally fell 13% this year to $3.2tn, down from $3.69tn last year as central bankers hike rate, cutting off the supply of cheap cash. Analysts at Pitchbook said the sharp fall in dry powder has been felt most keenly among private equity firms, while the wider private capital landscape had held up more firmly. Merlin Piscetelli, EMEA lead at investment data firm Data Site, comments: “With a weakening pound, and the UK stock market trading at an ever-wider valuation discount to global peers, many UK firms are attracting a high level of investment interest, especially from private equity firms, who are looking to put their significant dry powder to work.”

INTERNATIONAL

Banks on alert amid crackdown on encrypted messaging

The Securities and Exchange Commission (SEC) has embarked on a war against bankers using private messaging platforms amid concerns they are discussing potentially market-moving matters out of sight of watchdogs and side-stepping requirements for lenders to monitor and save employees' communications. The crackdown is expected to result in 10 banking giants being hit with fines totalling around $2bn (£1.6bn). So far, Barclays, Goldman Sachs, JP Morgan, Morgan Stanley and Credit Suisse have said they will each be hit with penalties of around $200m. Although the Financial Conduct Authority (FCA) is keeping a close watch on the use of encrypted messaging, analysts say the UK regulator does not look as likely to crack down on WhatsApp use as aggressively as its US counterpart.

Shareholder demands investment bank overhaul at Credit Suisse

Harris Associates, which last week disclosed a stake of more than 10% in Credit Suisse, told the Swiss lender to fix its investment bank unit or seek other options, according to a report in Bloomberg. The Zurich-based lender’s investment bank recorded a pre-tax loss of 1.12bn Swiss francs ($1.17bn) in the second quarter and was expected to lose money again this quarter before business picks up by year's end.

Nomura to axe upper second class degree rule

The Japanese investment bank Nomura is looking to scrap its requirement for graduate recruits to have a 2:1 degree. Nomura’s decision comes amid a tight squeeze in the jobs market, with 1.3m positions open according to the Office for National Statistics.

AVIATION

Wizz Air suspends relaunch of Russia-UAE flights

Following mounting criticism over its decision to resume flights between the United Arab Emirates and Moscow, Wizz Air has said the flights, which would be run by its Abu Dhabi venture, would be suspended. In a statement on Friday, the airline made no mention of the social media backlash, which included some calls to boycott the airline, but referred only to "industry supply chain limitations".

FINANCIAL SERVICES

FCA issues BNPL warning

The Financial Conduct Authority (FCA) has issued a warning over buy now, pay later (BNPL) products pushed by social media influencers, explaining that promotions must explain the issues of unaffordable debt and missed payments, even if the product itself is unregulated. "As we face a cost-of-living crisis, consumers are having to make difficult decisions about their finances and how they pay for goods and services," said Sheldon Mills, executive director at the FCA. "Firms need to ensure consumers, particularly those in vulnerable circumstances, are equipped with the right information at the right time, so they can make effective, timely and properly informed decisions." So far this year, the FCA said its action against firms that had breached its rules had led to 4,226 promotions being changed or withdrawn.

FCA apologises for Premier FX failings

The Financial Conduct Authority has apologised for reauthorising Premier FX months before the currency exchange group collapsed in 2018, leaving customers millions of pounds out of pocket. Following a review of complaints about the watchdog’s actions in the run-up to Premier's collapse, the FCA also apologised for how quickly and accurately it updated its register and for the way in which it had handled and shared information. “We are very sorry for the mistakes we made prior to the collapse of Premier FX,” an FCA spokeswoman said. “We are a very different regulator today than we were during the period that these complaints cover.” Barclays, which provided banking services to Premier, was fined £784,000 by the FCA for failing to “identify that Premier FX's internal controls were deficient”.

BlackRock warns SEC over ESG disclosure plans

BlackRock has warned the US Securities and Exchange Commission that new rules to fight greenwashing by fund managers could mislead investors into thinking their holdings are more socially conscious than they really are. Although BlackRock supports the SEC’s overall push to clarify asset managers’ strategies, the firm said the plan to require managers to say more about how ESG issues fit into strategies for funds that also consider myriad other factors could create confusion. Applying disclosure requirements to these strategies could mislead investors by overstating the significance of ESG considerations and lead to the disclosure of proprietary information, BlackRock said.

MEDIA & ENTERTAINMENT

Cineworld on brink of bankruptcy

Shares in Cineworld have fallen more than 60% after the cinema chain revealed that it is preparing to file for bankruptcy. Cineworld has 9,189 screens across more than 750 sites and operates in 10 countries, including the UK, the US, Poland and Israel, employing more than 28,000 people. The company, which also owns the Picturehouse chain in the UK, is struggling under $5bn worth of debt and has blamed a lack of blockbuster films for low audience numbers. Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said Cineworld had "failed to lure back enough movie goers to help pay back its enormous debts".

REAL ESTATE

Amigo founder buys into Hammerson

James Benamor, the founder of Amigo Loans, has amassed a £36m stake in the debt-laden shopping centre owner Hammerson. The 3.03% holding by Benamor’s family office Richmond Group has been built up over the last two years and was publicly disclosed last week. Benamor said the investment was a bet on a “bright future” for bricks and mortar retail.

RETAIL

Rise in UK retail sales comes with warning for months ahead

Retail sales bounced back last month but continued to show signs that consumers are holding back as the cost of food and energy soars. Figures from the Office for National Statistics (ONS) show sales volumes rose 0.3% in July. However, sales fell by 1.2% in the three months to July, reflecting a gradual decline in spending.

ECONOMY

Soaring inflation hits Britain's public finances

The cost of servicing Britain’s debt is rocketing as inflation pushes up interest payments. The Office for National Statistics said Government borrowing hit £4.9bn in July, ahead of City predictions of some £2.8bn, while debt interest payments climbed to £5.8bn, up from £3.5bn in the same month last year. Chancellor Nadhim Zahawi said: “I know that rising inflation is creating challenges for families and businesses, and it is also putting pressure on the public finances by pushing up the amount we spend on debt interest. To help people during this difficult time, Government support is continuing to arrive in the weeks and months ahead, targeted to those who need it most, like pensioners, people on low incomes, and those with disabilities.”

Departing interest rate setter rejects Truss’s target plans

Outgoing Bank of England rate setter Michael Saunders has warned that changes to the MPC’s mandate floated by Liz Truss’s campaign to target nominal GDP instead of inflation would mean “more instability, not less”. In an interview with the Telegraph, Mr Saunders warned that setting a nominal GDP target “doesn't work in practice” and suggested that a money supply target, something Ms Truss has also hinted at supporting, is a failed idea that has been “tested to destruction”.

OTHER

Decline in cash use eases after pandemic slump

The rapid decline in the use of cash during the pandemic has eased as consumers return to their preferred method of paying for things, according to a report from UK Finance. However, cash use is still forecast to drop, accounting for 6% of payments by 2031. "Rather than the UK becoming a cash-free society over the next decade, the UK will transition to an economy where cash is less important than it once was but remains valued and preferred by many," UK Finance said.

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