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Daily News Roundup: Monday, 24th June 2019

Posted: 24th June 2019


Bank of Scotland fined £46m

Lloyds Banking Group’s Bank of Scotland subsidiary has been fined £45.5m by the Financial Conduct Authority (FCA) for failing to report suspicions of fraud at its HBOS branch in Reading. The fine was reduced from £65m because Bank of Scotland “agreed to resolve the matter”. The watchdog said the bank had failed to be open and co-operative, with it also ruling that the bank failed to appropriately disclose information to its predecessor, the Financial Services Authority (FSA). The FCA’s Mark Steward said inaction by the financial institution “risked substantial prejudice to the interests of justice, delaying scrutiny of the fraud by regulators, the start of criminal proceedings as well as the payment of compensation to customers.” The FCA says the failings in question occurred between May 2007 and January 2009, prior to the acquisition of Bank of Scotland by Lloyds Banking Group, yet Bank of Scotland did not fully disclose its suspicions to the FSA until July 2009. Antonio Horta-Osorio, chief executive of Lloyds Banking Group, described 2007-2009 as “a dark period in HBOS’s history,” adding: “I want to apologise once again for the very deep distress caused.” The fine is the third-biggest issued by the FCA this year, with the watchdog having imposed penalties of more than £319m in 2019. This compares with just £60m for the whole of 2018.

Former Barclays boss cleared of fraud

John Varley, the former chief executive of Barclays, has been acquitted of fraud over Qatari fundraisings that helped save the bank from a bailout in the financial crisis. The Serious Fraud Office had alleged that Varley disguised £322m of payments to Qatar for rescue funding. He had denied two charges of conspiracy to commit fraud. The Court of Appeal upheld a ruling there was insufficient evidence. Three remaining ex-Barclays defendants, Roger Jenkins, Thomas Kalaris and Richard Boath, will return for a trial.

Fintech sector has challenges to overcome

The Times’ Ian Fraser looks at the challenges the fintech sector has to overcome with critics already suggesting it has peaked. Money is continuing to pour into fintech but the total fell from £2.676bn in 2017 to £2.357bn, according to Fintech Global. The number of UK fintech start-ups also appears to be in decline – with 344 launched in 2014, compared to fewer than 100 in 2017. Fraser notes that trailblazing digital banks such as Monzo and Revolut, which claim between two and four million customers apiece, remain conspicuously loss-making, according to their most recent accounts, despite being far bigger than most rivals. He also points out that the top ten banking apps by usage are still those of the established high street banks.

RBS eyes up Tesco’s mortgage book

RBS is understood to be among several parties interested in taking on Tesco Bank’s £3.7bn mortgage book. A purchase of Tesco’s mortgage book would be the largest acquisition by RBS since it was bailed out by the taxpayer for £45.5bn in 2008. Nationwide is also understood to be interested in the mortgage loan book.

Rose set to leave TSB

Helen Rose, chief operating officer at TSB, is set to leave the bank at the end of the summer. Ms Rose is TSB's executive sponsor of gender diversity, leading the Sunday Times to speculate that it could be a blow to the bank’s efforts to attract and develop female talent.

Nationwide boss’ pay questioned

Nationwide Building Society customers have questioned the £2.37m annual pay package earned by boss Joe Garner, an increase of 2.3% on the year before. The Mail on Sunday cites several who say they will vote against the directors' remuneration report, while one says he will back the pay increase if savers are offered interest of 2.3% on their money. Last year’s vote saw 9.25% of members revolt against the building society’s remuneration report.

Vanquis targets the self-employed

In a bid to gain greater market share, Vanquis Bank is looking to apply for funding to launch new products in a bid to pick up more of the self-employed market. The bank announced that it will apply to the Banking Competition Remedies' (BCR) Capability and Innovation Fund in order to accelerate their plans to address the shortage of tailored products on the market to support the self-employed population.

Lloyds freezes accounts of 8,000 clients

It has emerged that Lloyds Banking Group froze the accounts of around 8,000 offshore customers in a bid to crack down on money laundering. It was forced to act last year to meet new money laundering rules in Jersey, where its international business is based. A spokesman said: "This is also to protect the customer, as it prevents anybody else trying to use the account if the customer has stopped using it or has moved.”

Small firms short changed by coin stance

Analysis suggests that up to one in ten branches of major banks refuse to accept or offer coins, with the Mail describing it as a “blow” to small businesses that rely on bank branches for change. Lloyds Banking Group has 55 coinless branches - around 3% of its total of more than 1,700, while Santander does not offer coins in almost 10% of its branches. Mike Cherry, of the Federation of Small Businesses, comments: “Small business owners with cash takings need to be able to deposit all those takings, not just notes.”

Closed bank branches remaining empty

Analysis by the Local Data Company shows that the majority of high street bank branches that have shut since 2012 remain vacant as landlords struggle to find new tenants. In the past seven years 2,145 high street branches have closed, some 60% of which, or 1,292, are still empty. Only 4,822 bricks-and-mortar banks now remain in Britain.

Banks’ lax checks are enabling scammers

Industry experts have warned that despite a new code of conduct it is still too easy for banks that allow criminals to open or use accounts for fraudulent purposes to avoid compensating victims. Figures show that authorised transfer fraud accounted for losses of £354m in 2018.


ECI seeks sale of pet food firm

ECI Partners have appointed advisers to find a buyer for pet food company MPM. The latest company accounts filed for MPM show revenues grew by 19% in 2017 to £53m. Profits were about £4m. ECI is reportedly seeking more than £100m for the business.


Big banks clear first hurdle in Fed’s stress tests

The Federal Reserve has said that America’s largest banks would be able to weather a severe global recession, despite losing hundreds of billions of dollars, after conducting the first round of its annual “stress tests”. The Fed said that America’s 18 largest lenders would collectively lose $410bn in the event of a sharp downturn, but would be able to continue lending to households and businesses. Randal Quarles, who is in charge of banking oversight at the Fed, said: “The results confirm that our financial system remains resilient. The nation’s largest banks are significantly stronger than before the crisis and would be well positioned to support the economy even after a severe shock.”

Deutsche Bank quizzed over bad bank plans

US regulators have asked Deutsche Bank to explain their “bad bank” proposals amid concerns about the German bank’s operations in the country.


Odey ramps up bet against BCA

Fund manager Crispin Odey has ramped up his bet against BCA Marketplace, despite a £1.9bn takeover approach for the owner. According to the Telegraph, Odey believes an approach for BCA from private equity firm TDR Capital will collapse.


BA facing court action as pilots sue

British Airways is facing a legal battle after pilots launched High Court action against the airline. Legal fillings show that union Balpa is alleging a breach of contract.


Businesses push government to complete HS2

In an open letter, more than 20 business leaders have called on the next Prime Minister to commit to delivering HS2 in full. Construction of the first HS2 link between London and the West Midlands is currently under way and business leaders want to see the line linking Birmingham, Manchester and Leeds completed as well.


Hargreaves bosses defer bonuses

Mark Dampier, research director at Hargreaves Lansdown, and Lee Gardhouse, its chief investment officer, have deferred their annual bonuses in the wake of the investment scandal centred on the suspension of Woodford Equity Income Fund. Chief executive Chris Hill said last week that he would defer his £2.1m bonus until the Woodford fund reopens. Meanwhile, the Telegraph reports that Mr Dampier still has his own money in all three Woodford portfolios and entrusted more of his personal savings to the fund manager just days before the Equity Income fund was forced to suspend withdrawals on June 3rd.

Carney: Fintech may help small firm finance

Bank of England Governor Mark Carney has suggested a boost to start-ups is on the cards, saying the Bank is to open up its balance sheet to a new generation of payment providers. He also pointed to the potential for fintech to improve the ability of small businesses to access finance, noting that smaller firms face a £22bn funding gap. Mr Carney said that part of the issue stems from the fact the assets that small businesses seek to borrow against are “increasingly intangible” and that many lack the historic data that lenders require for credit scoring. Technology, he added, could give lenders and borrowers a broader set of information by looking at data generated by online activity.

Facebook faces grilling over currency

Facebook is set to be hauled before Congress next month to explain its new cryptocurrency, which threatens to undermine the governments that are seeking to regulate the social media giant. Meanwhile, the Bank for International Settlements has said that big tech groups such as Facebook could “rapidly establish a dominant position” in global finance and pose a potential threat to competition, financial stability and social welfare.

Payday lender on the brink of collapse

Instant Cash Loans, which owns The Money Shop, is on the brink of collapse and ready to make 427 staff redundant.


Firms eye British Steel

French engineering firm Systra is reportedly in talks to buy part of British Steel, with it said to be considering a bid for wholly-owned subsidiary TSP Projects. Evraz, a steel and mining group owned by Russian billionaire Roman Abramovich, is said to be considering a bid for British Steel’s French business. British Steel is under control of the official receiver after it went into insolvency last month.

Manufacturers question industrial strategy

New research suggests manufacturers are increasingly frustrated that uncertainty over Brexit is stalling the Government's industrial strategy, with 74% saying not enough progress has been made in the 18 months since the strategy was announced. Many of the 200 firms surveyed also voiced concern over an ongoing shortage of skilled workers.


Phone firms face collusion claims

Mobile phone networks EE, O2 and Vodafone face allegations of price-fixing and collusion as part of a £1bn High Court claim over the collapse of Phones4u.


Lenders offer flexibility for fixed-rate deals

Some lenders are allowing borrowers trapped in an expensive fixed-rate mortgage deal to move onto a cheaper rate before their mortgage is up for renewal, as banks are coming up with new, flexible ways to keep mortgage customers on their books. However this is not an official policy, so it is at the discretion of the lender. Barclays, Nationwide and Santander are among those offering flexibility.


Hunt pledges wider business rates exemptions

Jeremy Hunt has said that if he becomes PM he will exempt hundreds of thousands of firms from business rates, scrapping taxes for nine out of ten high street shops. This, he says, will “give a new lease of life to the British high street”.

Game Digital agrees Sports Direct takeover

Game Digital has agreed to a £52m takeover by Mike Ashley’s Sports Direct, who previously bought a 26% stake in the company in 2017 and has built its holding to nearly 40%.


Budget deficit grows

Public borrowing rose by £1bn to £5.1bn last month compared to May 2018, figures from the Office for National Statistics show. Britain’s deficit has reached £11.9bn for the financial year so far, with this total £1.8bn - or 18% - higher than it was for the same period (April-May) last year. The figures also show that the Government has spent net cash of £9.2bn this financial year so far. This is £8bn more than last year.


Carney: 150,000 firms not ready for no-deal Brexit

Bank of England Governor Mark Carney said that while the financial system is prepared for a no-deal Brexit, around 150,000 businesses still do not have the paperwork they need to keep exporting to the EU if Britain exits the EU without an agreement. He said that businesses “will be reliant on what the governments are able to do in order to keep the ports open, the trade flowing.” Mr Carney said that while around three-quarters of firms have done as much as they could do to prepare for a no-deal scenario, “it doesn't mean they are fully ready, in fact far from it.”

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