Watchdogs under pressure to decide Revolut's future
Experts say regulators are under pressure to decide Revolut's future, amid reports that the fintech firm’s banking licence application may be refused. Sources have suggested that City regulators intend to reject the fintech firm’s application for a UK banking licence after its auditor raised concerns over its balance sheet. Dame Angela Eagle, a member of the Commons Treasury Committee, said regulators must take their time with the licence process. Gary Greenwood, investment analyst at Shore Capital, said: “There is a lot of pressure on regulators if this goes wrong, so they need to be very careful.” Licence applications need to be approved by two regulators – the Financial Conduct Authority and the Prudential Regulation Authority. Meanwhile, senior government ministers are reportedly planning to meet the bosses of Revolut, with the proposed meeting coming amid complaints from businesses bosses over regulatory hurdles that they say could drive firms abroad.
Timeshare owners win compensation case against banks
The High Court has ruled against Barclays Partner Finance and Shawbrook Bank in a case relating to the mis-selling of timeshare investments. The banks lent money to investors who bought into timeshare schemes but the court found that they had breached consumer protection rules by failing to properly assess investors' ability to repay loans.
Nationwide boss in branches pledge
Chief executive Debbie Crosbie says that Nationwide will probably have more branches than its rivals by the end of the year as it is one of the few financial institutions not opting for closures. While admitting that only a small proportion of customers are regular users of branches, she insists the sites remain essential, noting: “Keeping those branches open is very expensive. If it was head over heart, we would shut them.”
Tech analysts exit investment bank
A team of tech analysts have quit investment bank Berenberg and are set to move to rival Cantor Fitzgerald. Berenberg last year cut its UK headcount by 25% following an exceptionally quiet year for boutique investment banks. Other smaller investment banks, including Numis, Peel Hunt, and finnCap, have also reduced the size of their workforces over the last year, either by cutting jobs or opting not to replace departing staff.
Rise of ‘shadow credit’ as consumers turn to risky loans
Bank bosses have warned that growing numbers of consumers are relying on "shadow credit" by taking out risky loans from the "murkier corners of the financial system."
Gorman to step aside at Morgan Stanley
James Gorman has announced that he plans to step down as the chief executive of Morgan Stanley within the next year. He said the board had identified three potential successors and that he expected to be executive chairman “for a period of time “after handing over to a new CEO. The leading candidates to take over are Morgan Stanley co-presidents Ted Pick and Andy Saperstein, as well as Dan Simkowitz, head of the investment management unit.
UK-EU MOU seeks to boost co-operation on financial regulation
The UK Treasury and the European Commission have published a memorandum of understanding (MoU) designed to improve post-Brexit co-operation on regulation of financial services. Arrangements set out in the MOU will allow for bilateral talks on regulatory developments, transparency, market developments and financial stability, and “enhanced co-operation” when appropriate. The agreement has seen the creation of the Joint EU-UK Financial Regulatory Forum, which will represent the joint views of the UK and EU commission. The draft notes that the MOU “does not create rights or obligations.” City Minister Andrew Griffith said the MOU marks a “significant step” toward a more constructive relationship between the UK and Brussels, “one that is built upon mutual benefit and in the spirit of co-operation.” Mairead McGuinness, the EU’s financial services commissioner, said: “The Windsor Framework allowed the EU and the UK to open a new chapter in our partnership. I am confident our relationship and future engagement in financial services will be built on a shared commitment to preserve financial stability, market integrity and the protection of consumers and investors.”
Ministers plan to tighten scrutiny of watchdogs
Financial regulators face tougher scrutiny amid plans being drawn up by ministers. The Treasury is to table an amendment to the Financial Services and Markets Bill that would heighten the powers of the Financial Regulators Complaints Commissioner (FRCC), which hears complaints about the Financial Conduct Authority (FCA), Payments Systems Regulator and the Bank of England’s Prudential Regulation Authority (PRA). The changes would also see the Treasury choose the chief of the FRCC, who is currently selected by the regulators themselves. The proposed changes are designed to enhance the independence of oversight of the regulators. Ministers have already increased the expectations on financial watchdogs, outlining a new objective for “growth and competitiveness” when making regulatory decisions. The Treasury is expected to require the FCA and PRA to report on how they are responding to the growth and competitiveness agenda after 12 and 24 months. While ministers have pulled back from demanding “call-in” powers to amend or revoke regulations if doing so was deemed to be in the public interest, officials are still eager to ensure that regulators are held accountable for their decisions.
FCA set to relax City pay rules
The Financial Conduct Authority (FCA) is set to reform pay rules for financial companies in a bid to boost the City of London’s competitiveness. The watchdog plans to give businesses more flexibility in how they pay their employees amid fears that London is falling behind rival financial hubs. The FCA is consulting on reforms to its remuneration rules, making it easier to exempt smaller financial companies from strict pay regulations. Under the plans, banks, building societies and investment firms with total assets below £4bn will no longer be forced to comply with malus and clawback remuneration rules that are designed to manage risk. These require firms to reduce bonuses - or order the repayment of those already handed out - in the event of poor performance or misconduct. Companies with assets between £4bn and £20bn will also be able to disregard certain remuneration rules on grounds of proportionality. The FCA said its proposed changes will create “a more proportionate regime for smaller, less complex” companies, adding that the measures could “improve the ability for firms to attract and retain highly qualified individuals.”
Klarna UK boss quits
Alex Marsh, Klarna’s UK boss, has announced that he is stepping down after four and half years at the buy-now pay-later firm. He said that a recent family tragedy has “brought home that life is short,” adding the experience has “underlined the importance of prioritising what matters most – our family and loved ones.”
Quilter pays £20m over unsuitable pension advice
Wealth manager Quilter has paid over £20m to British steel workers who were given unsuitable pension advice. Lighthouse Advisory Services, a firm bought by Quilter in June 2019, advised 262 workers about moving their pensions. A review found that unsuitable advice was given in 53% of cases.
Lazard chief optimistic for London
Kenneth Jacobs, chief executive of financial advisory and asset management firm Lazard, says he is a “bull” on the UK and is optimistic for the City, despite fears its standing on the international stage may be waning. Mr Jacobs believes the UK will “surprise to the positive,” highlighting that it has an “immense amount of intellectual capital in all the right places right now.”
Mortgage bills to rise as fixed terms end
Around 116,000 households will soon see the cost of their mortgage jump, with Financial Conduct Authority data showing that their fixed-rate deals will come to an end this month. If they do not secure a new deal and move on to their lender’s standard variable rate, they could face an interest rate of 7.49% or more. Moneyfacts data shows that the average two-year fixed rate mortgage in June 2021 was 2.59%, but now stands at 5.26%. For five-year fixes, the average was 2.92% in 2018 but is now 4.97%. UK Finance figures show that more than 76,600 borrowers missed payments worth at least 2.5% of their outstanding balance by March, while 750 properties were repossessed in Q1 – 50% more than in the previous quarter. More than 1.4m people are coming to the end of fixed-rate mortgages this year.
Asking prices up 1.8% in May
Data from Rightmove shows that asking prices for UK homes increased by 1.8% in May, with this the biggest increase recorded in any month this year. Rightmove’s Tim Bannister said: “One reason for this increased confidence may be that the gloomy start-of-the-year predictions for the market are looking increasingly unlikely.” Sector analysts had forecast that house prices could fall by as much as 15% by mid-2024. However, the economy has proved to be more resilient than expected and has so far avoided recession. The report also shows that buyer demand was 3% higher in May compared with the same month in 2019, the final year before the pandemic distorted the market.
Inflation and energy bills forecast to fall
UK households could be in line for financial boost this week, with analysts expecting inflation to fall and a reduction in energy prices. The Consumer Prices Index is expected to fall significantly from its current rate of 10.1% when the Office of National Statistics delivers its latest inflation data on Wednesday. Economists expect the rate to have fallen to between 8% and 8.5%, while the Bank of England has forecast that inflation will hit 8.2% over Q2. A dip in inflation could reduce the chances of a further rise in interest rates, spelling good news for mortgage holders. Lower inflation could also make tax cuts more affordable for the Government. Meanwhile, Thursday will see Ofgem announce the latest energy price cap, with Neil Kenward, the watchdog’s director for strategy, saying the cap would come “down considerably” from the current level. While a typical household is paying £2,500 per year for their gas and electricity under the existing cap, Cornwall Insight analysts suggest this could fall to £2,053, a dip of around 18%.
Future Fund sees £63m loss
The Government’s Future Fund, which was set up to provide emergency financing to start-ups during the pandemic-driven lockdowns, had made a net cash loss of £63.7m. as of the end of last year. The taxpayer-backed fund has yet to deliver any returns to cover the substantial number of failed companies it has backed. While private sector venture capital funds typically expect up to seven in 10 of their investments to fail, returns generated by successful ones usually exceed the losses from collapsed companies. British Business Bank (BBB) figures show that the Future Fund has made a profit of £26m on the 43 fund investments that had been sold by the end of 2022 but had lost £89.7m on 104 loans to companies that have gone bust. The report shows that the fund invested £1.1bn into 1,190 start-ups. At the end of March, 529 loans had converted to shares, 502 remained as loans, 49 had been sold, and 111 had become insolvent. A BBB spokesman said: “As venture capital is long-term term investment, it is too early to give an indication of the overall Future Fund performance.”