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Daily News Roundup: Monday, 26th June 2023

Posted: 26th June 2023


Banks offer flexibility to ease rate pain

UK banks have agreed to give mortgage holders a 12-month grace period before their homes are repossessed should they fall behind with their repayments. Struggling homeowners will also be able to switch to interest-only for six months or temporarily lengthen mortgage terms for the same period without affecting credit ratings in new measures announced by Jeremy Hunt. The Chancellor met with lenders on Friday to hash out a deal amid growing alarm at rising interest rates. Mr Hunt said following the meeting: “These measures should offer comfort to those who are anxious about high interest rates and support for those who do get into difficulty.” According to UK Finance, repossessions are currently well below pre-pandemic levels with a total of 750 homes repossessed by lenders in the first quarter of this year, up from a low of 140 in the final three months of 2020. In the fourth quarter of 2019 some 1,340 were repossessed.

City warns of Britcoin bank runs

The International Regulatory Strategy Group (IRSG), which is a joint venture between TheCityUK and the City of London Corporation, has warned that the Bank of England's plans to allow investors to hold up to £20,000 in a 'Britcoin' digital currency could result in bank runs. The IRSG welcomed the general idea of the digital pound, but said the proposed upper limit on the accounts was too high, pointing out that a European Central Bank initiative was looking at a €3,000 (£2,570) ceiling. The group also expressed concern that the limits might eventually be removed altogether, given the recent bank runs that saw the collapse of a series of US banks and European giant Credit Suisse.

Labour: Force banks to pass on rate hikes to savers

The Government should push banks harder to pass on higher interest rates to savers, Labour’s Lisa Nandy has said. The shadow communities secretary argued that this would help bring inflation down because people would be more likely to save money rather than spend it. Her comments come as the average rate for an easy access savings account last week was 2.35%, compared with the average rate on a two-year fixed mortgage deal standing at 6.19%. Nandy said: “It can't be right the banks are passing on interest rate rises to mortgage payers, and not to savers.”

HSBC to move HQ from Canary Wharf

HSBC is to leave its Canary Wharf headquarters when its lease expires in 2027. The bank will relocate to the Panorama St Paul's development in Newgate Street, which has been redeveloped by Orion Capital to improve its environmental credentials and offer roof terraces with views of the nearby St Paul's Cathedral. HSBC is reducing office space globally by about 40% and in September COO John Hinshaw told staff that the bank wanted "to have an even more flexible and dynamic workspace that meets the needs of colleagues and clients.”

Alchemy considers auction of HTB

Alchemy Partners is looking to offload Hampshire Trust Bank (HTB) in the coming months, according to Sky News. The private equity firm took control of the specialist lender in 2014. HTB provides specialist mortgages and development finance but also offers lending for niche pursuits such as classic car purchases.


Citigroup warns employees over missing in-office days

Citigroup has warned its 240,000 employees their performance ratings or pay packages could be impacted if they do not adhere to their in-office days. Staff at the bank enjoy a hybrid-system where they go into the office at least three days per week and are allowed to work remotely for two days. But executives have now told managers to let workers know that those who do not comply with the policies for mandatory attendance will face consequences.

Commerzbank to book further provision for mBank

Commerzbank will book another provision of €342m following a court ruling on how banks treat Swiss franc loans in Poland. Commerzbank has a presence in Poland through its mBank unit and had already warned further provisions were likely.

BNY Mellon pushes ahead with diversity funds despite ‘anti-woke’ backlash

A series of funds launched by BNY Mellon are investing in companies that promote “women’s opportunities”, for example, and donate a percentage of the fee to a charity with similar goals.

Goldman Sachs faces loss on GreenSky deal

Goldman Sachs is likely to take a $500m writedown on its $2.2bn acquisition of GreenSky as it looks to offload the fintech lender.


Hunt to unveil plans for pension reforms next month

The Chancellor will next month outline plans to change the rules around how pension funds can invest. The long-awaited reforms, to be put out to consultation, could include freeing up funds to invest in riskier, high-growth British assets, including start-ups, private equity and infrastructure. The proposals are also expected to contain plans to consolidate the fragmented UK pensions regime. However, the Chancellor will not attempt to control what investments pension funds make. The Treasury said: “As the chancellor said at the Budget, we have the opportunity to boost returns for British pensioners by increasing investment in the UK’s highest growth sectors. This will also unlock billions for our most cutting-edge businesses and ensure they can access the finance they need to scale up and list in the UK.”

TPR accused of lax approach to LDI risks

The Pensions Regulator (TPR) has been criticised by MPs for not paying enough attention to the risks of complex derivative-linked strategies - known as liability-driven investments - used by pension schemes. A report by the House of Commons Work and Pensions Committee into the turmoil that rocked the gilt market following former prime minister Liz Truss’s mini-Budget last year found that lax oversight had allowed systemic risks to fester, despite warnings from the Bank of England as early as 2018. Sir Stephen Timms, chairman of the committee, said: “Gaps in regulation and the system for managing systemic risks must now be addressed to ensure that DB (defined benefit) pension scheme investments never again threaten the stability of the UK economy.”

BoE tells insurers to brace for persistent claims inflation

The Bank of England urged insurers on Friday to take action to ensure they can cover the rising costs of claims. “Technical provisions must be calculated based on up-to-date, credible information, and realistic assumptions. Therefore, claims inflation should be robustly considered,” the BoE said. “Underestimating future claims inflation assumptions can have a significant effect on the representation of a firm's financial strength,” it said.

UK car insurance renewal costs rise up to 70%

UK motorists are complaining that prices are soaring by as much as 70% when their insurance policy comes up for renewal. Figures from the Office for National Statistics show the price of car insurance has risen 43.1% in the last 12 months, but some drivers are reporting 75% increases. The Association of British Insurers explained that insurers faced extra costs that were becoming “increasingly challenging to absorb”. 

M&G seeks partners for European fund drive

M&G is seeking to widen the distribution of its key £58bn PruFund range outside Britain. Andrea Rossi, chief executive of M&G, is seeking partnerships in France and Germany, where the PruFund investment model would be used to sell products under new names. He has told the City that he wants to build on last year’s expansion into Italy and Ireland via the brand name Future.

Retail investors snap up gilts as yields surge ahead of UK savings rates

Government debt has become a hot target for retail investors as returns hit 15-year highs of 5%-plus – easily exceeding the 4.54% average for a one-year fixed bond from UK bank accounts.


GSK not out of the woods yet with Zantac

GSK reached a settlement ahead of a key trial in the US alleging that its old heartburn drug Zantac caused cancer. However, GSK continues to face thousands of lawsuits and analysts at Shore Capital said it believed that potential liabilities of up to $30bn continued to be priced into the company’s share price.


TikTok admits US user data stored in China

The ByteDance-owned social media app TikTok has admitted that some user data is held in China, despite previously denying this. In a letter to two US senators, the company said that “certain creator data” including contracts and “related documents” are held in the country. TikTok has repeatedly insisted it is not working with Beijing but Western governments data gathered by TikTok is being accessed by the Chinese government. US senators Marsha Blackburn and Richard Blumenthal said in a statement: “TikTok’s response makes it crystal clear that Americans’ data is still exposed to Beijing’s draconian and pervasive spying regimes – despite the claims of TikTok’s misleading public relations campaign.”


UK’s property downturn expected to be worst in the West

Oxford Economics is forecasting that the UK will have the longest house price downturn in the Western world as a shock rise in interest rates rocks the mortgage market. The consultancy believes property values across Britain will keep falling until the second half of 2025 with prices forecast to plunge by 11% compared with their peak in 2022. But in the US, France, Germany and Italy prices have fallen but are expected to start rising again this year and throughout 2024.


Calls grow for return of tax-free shopping

More major retailers have joined calls for the Chancellor to reinstate tax-free shopping for overseas tourists as the economy stumbles amid high inflation and rising interest rates. More than 320 leading businesses have now signed a letter to Jeremy Hunt, with the latest signatories including Primark, Jigsaw, and the department store Fenwick. A host of major attractions and hotels have also added their support. Beth Butterwick, head of Jigsaw, said: “The UK’s retail sector is 5% of our economy and employs over three million people. But this tourist tax makes us less competitive and means that London is falling behind major competitors like Paris, Rome and Dubai.”


UK economy loses momentum amid high inflation and growth fears

This month’s data from the S&P Global’s Composite Purchasing Managers’ Index (PMI) shows high interest rates, persistent inflation and negative expectations for growth are weighing down businesses across the UK’s services and manufacturing sectors. The index fell to a three-month low of 52.8 in June – down from 54.0 in May. The UK’s services sector grew at its slowest pace in three months amid faltering consumer spending, while the manufacturing sector contracted by the most in six months. Hiring saw the strongest growth since September last year. But this contributed to wage growth stoking inflation in the service sector. Chris Williamson, chief business economist at S&P Global Market Intelligence, said the survey suggested “the economy had lost momentum after a brief growth spurt in the spring and looked set to weaken further in the months ahead.”

Investors bet on higher rates, sending sterling and bonds down

Markets are expecting the Bank of England to continue to aggressively raise interest rates with swaps markets now implying an interest rate of 6.25% in February. After BoE governor Andrew Bailey said on Thursday that the central bank was willing to do “what is necessary” to bring inflation down, the two-year gilt yield climbed to the highest since 2008 as investors sold off government debt in anticipation of more rate rises. Furthermore, the pound lost value amid worries that the economy will be weaker over the coming year. Normally when rates rise sterling would go up. The weakness in sterling will push up the cost of imported goods, potentially hampering the BoE’s efforts to curb inflation.

PM pleads with borrowers to hold their nerve

Rishi Sunak has given the Bank of England his full backing after rates were raised again to a 15-year high of 5%. Speaking with the BBC’s Laura Kuenssberg on Sunday, the Prime Minister urged homeowners and borrowers to "hold their nerve" in the face of soaring borrowing costs, insisting that the measures being taken would eventually bring inflation down. Mr Sunak went on to say he is prepared to make unpopular decisions to keep public sector pay from ballooning and would refrain from bailing out homeowners struggling with mortgages. The Bank is facing heightened criticism over its predictions last year that inflation would be transitory and for moving too slowly to increase rates to dampen rising prices.  


Cut public spending or boost taxes to help tackle inflation, says BIS

The Bank for International Settlements (BIS) has advised central banks to raise taxes or cut public spending in order to curb inflation and offset the risk of a financial crisis. The BIS warned in its annual report, published on Sunday, that the global economy is at a critical juncture and the challenges of inflation must be addresses. BIS general manager Agustin Carstens said: "The time to obsessively pursue short term growth is past. Monetary policy must now restore price stability. Fiscal policy must consolidate.”

Eurozone economy slows sharply

The latest Purchasing Manufacturers’ Index (PMI) survey from S&P Global shows the eurozone economy has slowed sharply since May, falling from a reading of 52.8 to 50.3 in June - its lowest level in five months.

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