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Daily News Roundup: Monday, 23rd January 2023

Posted: 23rd January 2023

BANKING

Anti-money laundering and crypto fines surged in 2022

Banks and other financial institutions were fined nearly $5bn (£4.04bn) for financial misconduct in 2022, a 53% increase on the year before. Data from Fenergo show the jump was linked to a 90% increase in penalties for crypto companies and sanction-linked fines related to Russia’s conflict with Ukraine. In the UK anti-money laundering fines fell, however, to $188.2m from $436.5m the year before, despite the number of fines issued more than tripling. Fladgate partner Douglas Cherry said the Financial Conduct Authority’s approach to issuing anti-money laundering fines was changing to focus more on individuals. “In the FCA world here in the UK we are seeing an increased focus on individuals with responsibility for anti-money laundering compliance through investigations and enforcement fines and/or prosecutions in very serious instances of breach,” he said.

Zopa could let bank staff work abroad for longer

Zopa has hired consultants to examine how the company can update its work-from-abroad policy, the Telegraph reports. The British bank, with more than 800,000 customers in the UK, currently allows staff to work 120 days a year outside the UK but the review raises the prospect that employees could eventually be allowed to work 130 days or more overseas. Helen Beurier, Zopa's chief people officer, said: “The world of work has undergone unparalleled change, demanding greater flexibility and the increased desire to feel that our work is meaningful. Our employees now look for jobs that come with the flexibility to support their life goals. We believe that our employer value proposition will be a huge success, as it will enable our people to experience a full and rewarding life with incredible learning and development opportunities.”

Branch closures mean law to protect access to cash now urgent

Lloyds and Halifax have announced that a further 40 branches are to close over the next six months. This comes just days after Barclays and TSB said they were also shutting their doors on several high streets. The Financial Services and Markets Bill, which seeks to introduce measures protecting access to cash, is currently going through the House of Lords. Rocio Concha, of Which?, said: “The new law to protect access to cash cannot come soon enough, but risks being undermined unless minimum levels of free access to cash are protected, so those who want to use cash don't have to spend their own money to get their hands on it.”

Banks called on to extend pandemic era support to vulnerable customers

A new report from Fair4All Finance urges banks to maintain COVID-19 support measures beyond the pandemic, arguing that it would be viable for banks and helpful for customers. CEO of Fair4All Finance Sacha Romanovitch commented: “The current cost of living is creating financial pressures for millions of people. Banks have a real opportunity to offer tailored and new services to help those in financially vulnerable circumstances. The customer loyalty this can create is an opportunity that must not be missed.”

Close Brothers’ purchase of Novitas has proved a bad bet

Close Brothers has warned that it expects to take a hit of as much as £183m from its troubled litigation funding business. Its Novitas Loans arm is in the midst of being wound down but the potential losses associated with the unit continue to rise, sending shares in Close down just over 10% on Friday.

Banks prepare for deepest job cuts since the financial crisis

Analysts expect job cuts at banks to become even more brutal following those already announced, with the Europeans expected to follow the cost-cutting exercises already underway at US banks.

Caius Capital builds stake in Metro Bank

London-based hedge fund Caius Capital has taken a 5% (£11m) stake in Metro Bank, which is fighting to restore its fortunes after an accounting scandal in 2019.

PRIVATE EQUITY

Barclays Eagle Labs awarded £12m grant in blow to Tech Nation

The Government has handed a £12m grant to Barclays to support UK tech start-ups in what is seen as a massive blow to entrepreneur network Tech Nation. Minister for Tech and the Digital Economy, Paul Scully, said: “We want to unlock the potential of the next generation of start-ups and scale-ups and boost tech businesses in all corners of the country. Barclays Eagle Labs are digital industry experts and will help tens of thousands of tech firms and founders to achieve their dreams and create jobs and economic growth.” The move has put the future of Tech Nation in doubt. CEO Gerard Grech said the organisation is “pursuing various routes and evaluating the options available to us”.

INTERNATIONAL

Brexit a net positive result for Milan

Milan’s real estate market is booming after bankers, fund managers and private equity investors flocked to Italy’s financial capital following the introduction of generous tax breaks in 2017. The city has become a popular landing spot for finance workers leaving London in the wake of Brexit, driving up the price of luxury flats. Bloomberg notes that Goldman Sachs is shifting traders from London to the northern Italian city, and investment firms Certares, Eisler Capital UK and Andera Partners opened units in town in the last few years. According to a new report from the European Banking Authority, in 2021, the number of high earners in Italy grew to 351, an 88% increase from the year prior. 

Deutsche Bank slashes investment banker bonuses

Deutsche Bank is cutting the bonus pool for its investment banking division by just under 10%, according to reports. Following a slump in deal-making, bankers working on M&A origination and advisory will face around a 40% drop in their bonuses, while traders in the bank’s fixed income and currencies business will see their bonuses rise significantly. The significant reduction in the advisory bonus pool is in line with Goldman Sachs but more substantial than JPMorgan Chase, Citigroup and Bank of America, which the FT has reported are set to cut their investment banking bonus pools by about 30%.

Fed probes Goldman over consumer business

The consumer business of Goldman Sachs is being investigated by the US Federal Reserve over whether the bank had appropriate safeguards in place as it ramped up lending. The central bank is concerned Goldmans did not have proper monitoring and control systems inside Marcus, its consumer unit, as it grew larger.

Signature sets Binance transaction minimum

The world’s largest exchange, Binance, has told customers that one of its fiat banking partners, Signature Bank, would no longer honour SWIFT transfers below $100,000 as of February 1, 2023. The move comes as Signature Bank continues to reduce its exposure to crypto.

Morgan Stanley cuts CEO James Gorman’s pay

Morgan Stanley trimmed chief executive James Gorman’s pay to $31.5m for 2022, down from $35m a year earlier after the Wall Street bank reported lower revenues and profits.

UBS to raid boutique banks for M&A dealmakers

UBS is planning to poach dealmakers from investment banking rivals as part of efforts to bolster its capabilities in mergers and acquisitions, just as competitors lay off thousands of staff.

UniCredit chief executive Orcel slashes bill for consultants

UniCredit’s CEO Andrea Orcel has halved the bank’s bill for external consultants since he took over, slashing costs by at least €75m .

FINANCIAL SERVICES

Insurers fear PRA could hamper Solvency II change

Insurance industry executives are worried proposed post-Brexit reforms to the EU’s Solvency II capital regulation could be watered down, Bloomberg reports. Regulators strongly opposed the reforms and now the Treasury has proposed extra powers for the Prudential Regulation Authority (PRA), which is in charge of implementing the new approach. The watchdog will be able to impose extra requirements on senior managers and stress test firms, burdens that are likely to shrink appetite for riskier investments, according to some. Others were more optimistic, saying if industry and regulators came together the reforms could be up and running as soon as January 2024. City AM also reports on the reforms. Adam Winslow, the chief executive of Aviva’s UK & Ireland general insurance business, told the paper the company is “very happy with where the reform landed” adding that Aviva will be able to invest an extra £25bn over the next decade as a result.

Hargreaves Lansdown launches digital voting service

The UK’s largest retail investment platform has launched a digital service to make it easier for customers to cast their votes as shareholders. Hargreaves Lansdown clients can now vote and request to attend meetings online. The proxy voting service is being provided via a partnership with Broadridge, which already runs a similar service for rival platform Fidelity International. Tom Lee, head of trading proposition at Hargreaves Lansdown, said: "Retail investors are taking a keener interest in having the power to influence corporations on important issues such as board diversity, climate change and sustainability. Providing a new digital capability for this self-service system gives retail investors a greater say in the governance of the companies in which they hold shares and the democratisation of markets."

Gadhia lands new role as Moneyfarm chair

The former CEO of Virgin Money will today be unveiled as chair of Moneyfarm, according to Sky News. Dame Jayne-Anne Gadhia’s appointment to the British-based digital wealth manager will fuel speculation the business is preparing the ground for a stock market listing. Moneyfarm has about £2.5bn of assets under management, and roughly 90,000 active investors as customers.

Hedge fund industry lost $125bn worth of assets in 2022

Hedge Fund Research (HFR) data showed on Friday that the industry witnessed a net outflow of $55bn in assets in 2022, making it the largest capital flight from hedge funds since 2016. Plummeting returns meant the industry lost a total of $125bn overall, or 4.2%, the worst performance since 2018.

Saga puts underwriting business up for sale

Saga is looking to sell its in-house underwriting business in the hope of raising up to £90m to pay down some of its £721m debt. Saga has been reducing the number of its products it underwrites itself and now underwrites just 30% of the policies it sells.

Insurers in talks on adding state-backed cyber to UK reinsurance scheme

Insurance industry executives have held talks with the Treasury on whether the Government’s terrorism reinsurance scheme, Pool Re, should be expanded to cover state-sponsored cyber-attacks.

Steven Cohen’s Point72 finally gains UK regulatory approval

The Financial Conduct Authority has given Steven Cohen’s hedge fund, Point72, approval to operate directly in the UK, a decade after the US trader’s previous firm SAC Capital for insider trading.

LEISURE & HOSPITALITY

Oasis takes 5% stake in The Restaurant Group

The Hong Kong-based hedge fund Oasis Management took a 5% stake in The Restaurant Group in November, a company filing shows. The FT suggests the move could lead to an overhaul of the casual dining and pub operator. The Restaurant Group has more than 420 restaurants and pubs across the UK, including chains such as Frankie & Benny’s, Chiquito and Brunning & Price.

MANUFACTURING

Chancellor set to sign off on support for UK steel groups

Chancellor Jeremy Hunt is poised to grant a £300m funding package for British Steel following requests from Business Secretary Grant Shapps and Levelling-up Secretary Michael Gove. Jingye Group, British Steel's Chinese owner, would be obliged to make £1bn worth of investment into the business by 2030 and make commitments relating to job retention in return for the cash, Sky News reported. The £300m aid package would be handed to British Steel in instalments and would be ringfenced for investment in new technology - in particular a new greener, cleaner and cheaper to run blast furnace for Scunthorpe. 

MEDIA & ENTERTAINMENT

Google owner Alphabet to cut 12,000 jobs

Google's parent company Alphabet will cut 12,000 jobs, in the latest staff redundancies to hit the tech industry. The cuts will affect 6% of Alphabet's workforce worldwide, in teams including recruitment and engineering. This comes days after Microsoft announced 10,000 jobs would be lost, and weeks after Amazon announced 18,000 job cuts. The cuts push total tech job losses in the past 12 months above 200,000, according to the FT. Google and Alphabet CEO Sundar Pichai said he took "full responsibility" for the cuts, in an internal email. Google has more than 5,500 staff in the UK. But it is unclear how many of these will be affected by the cuts.

Preoccupation with diversity threatens the future of books

The Telegraph speaks with publisher Stephen Rubin on how the future of books is threatened by an “almost bizarre reliance on diversity and inclusion”. Mr Rubin, a consulting publisher for Simon & Schuster, has published more than 4,000 books, including 23 of John Grisham’s novels and Dan Brown’s The Da Vinci Code. He says writers are having “potentially wonderful books” rejected because publishers are preoccupied with being politically correct. “The almost knee-jerk response to diversity and inclusion has ultimately – and ironically – made publishers less diverse,” he explained.

REAL ESTATE

More than half of Britain’s homes fell in value in Q4 2022

Research from online estate agent Zoopla found more than half of Britain’s homes fell in value in the fourth quarter of last year, as high borrowing costs and spiralling inflation weighed on the housing market. Across the whole of 2022, however, 92% of UK houses increased in price by an average of £19,000. The almost 16m homes that lost value between October and December – by an average of £3,900 – were therefore well cushioned by their pandemic-driven price gains. The total value of the UK housing market increased by £700bn to £10.5trn in 2022, the report added.

RETAIL

Retail sales fall as shoppers rein in festive spending

Retail sales in Great Britain fell by 1% last month as the cost of living crisis forced households to cut back on spending in the run-up to Christmas. The Office for National Statistics said the surprise decline in sales volumes – economists had forecast a rise of 0.5% – was down to various factors including spiralling food prices. Online sales also fell as consumers worried about a wave of postal strikes affecting Christmas deliveries. The ONS said retail sales fell by 5.7% year on year in the three months to the end of December, with sales in the final month of the year 1.7% below pre-pandemic levels. Food store sales fell by 0.3% in December, after a 1% rise the previous month. Overall, food store sales were down 5.9% last year, as the lifting of Covid restrictions led to the hospitality industry reopening and consumers targeting more of their budget on eating and going out.

Asda tycoons line up £12bn merger with EG Group

The billionaire owners of Asda, the brothers Mohsin and Zuber Issa and the London-based private equity firm TDR Capital, are exploring a merger of the supermarket and their UK petrol forecourts business, EG Group. Bankers at Barclays and Rothschild are understood to be advising the brothers and TDR on the potential deal, which is said to be worth between £11bn and £13bn. The Sunday Times points out that EG Group has £7bn of debt falling due in 2025. A merger would enable the Issa’s and TDR to refinance the debt on better terms.  

ECONOMY

CBI to call for growth push

The director-general of the Confederation of British Industry will today call for the Conservatives to start focussing on promoting growth as the UK falls behind its competitors. Tony Danker will say today: "Our international competitors in Europe, Asia and the US are going hell for leather on green growth and getting firms investing. We are behind them now and seem to be hoping for the best." The CBI is calling for more generous tax relief for businesses to be set out in the spring Budget. Companies should be allowed to offset half and eventually all investment costs against their taxable profits, says the CBI. "Across the country, I'm speaking to firms putting their investment plans on ice because they need to divert cash to deal with higher energy costs, higher wage bills and higher tax rates," Mr Danker will say. The UK will fall from fifth to 30th in OECD rankings for tax competitiveness in April when existing incentives come to an end, according to the CBI. British business investment is now ranked alongside Turkey and Greece, it added.  Mr Danker will also say that the immigration system is exacerbating the labour shortages and plans to scrap thousands of EU-derived laws risks adding to the complications facing businesses.

Eurozone set to avoid recession this year as economists’ gloom lifts

A survey of analysts by Consensus Economics has recorded a turnaround in sentiment regarding the eurozone’s economy, with growth of 0.1% now expected in 2023 instead of the recession previously forecast.

OTHER

Senior Tories push for tougher laws on fraud and money laundering

A group of MPs led by former justice secretary Sir Robert Buckland has proposed a series of amendments to the Economic Crime and Corporate Transparency Bill that would make it easier to hold companies and managers responsible for economic crime. The amendments include a new duty to prevent economic crime, meaning businesses could be prosecuted if they do not take steps to stop offences such as fraud. They would also mean senior executives could be jailed for up to seven years for failing to prevent economic crime. Justice Committee chairman Sir Bob Neill , who has co-sponsored the amendments, said: “It's something which prosecutors in the UK have been calling for a very long time, including current and previous DPPs support it and current and previous heads of the Serious Fraud Office. The Law Commission has already said it's a good idea, the evidence is overwhelming, the legal profession thinks it's a good idea. We don't have to hang around.”

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