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Daily News Roundup: Monday, 26th September 2022

Posted: 26th September 2022


End of the bonus cap will spur bankers to move to London

London could soon see an influx of bankers from abroad after the Government announced plans to scrap the cap on bankers’ bonuses. American banking sources told the Sunday Telegraph that removing the cap helps banks manage their fixed costs better and so will encourage American banks to send staff from their New York offices to Britain. Miles Celic, chief executive of The City UK, also welcomed the move saying the change shows Britain is open for business. Meanwhile, financial services workers in Scotland worry that the cutting of England’s top rate of income tax to 40% - well below Scotland’s 46% - could lure bankers out of Edinburgh. Benny Higgins, a Scottish banker and former business adviser to Nicola Sturgeon, said: “A 1p gap may be seen by me and my peers as tolerable and understandable, but a 6p gap would be different. The effect on high earners means jeopardy for the Scottish business community. The Scottish government doesn’t have to close the gap completely but should do something to reduce it.”

Banks plan for blackout threat

Banks are drawing up contingency plans to deal with potential rolling blackouts in Britain this winter. They are discussing how best to cope with the risk of load shedding, or organised power cuts, amid fears that the energy crisis could leave National Grid unable to keep the lights on. London-based banks could move to alternative sites or revive homeworking arrangements put in place during the pandemic. While banks have always planned for cuts, and most have generators that can supply them for at least 72 hours, bad weather affecting electricity lines has been the main cause of potential disruption. UK Finance is co-ordinating talks between its members to discuss potential power outages because of supply shortages.

BoE raises fees for City clearing houses

The Bank of England is to increase supervisory fees for UK clearing houses by 12% from next year blaming recent market turmoil, which created “higher levels of supervisory intensity”. The Bank's new stress testing regime also requires additional resources, as do new supervisory powers it has received post-Brexit. Threadneedle Street will also give clearing houses and other financial market infrastructure it supervises a one-off rebate in light of lower than expected costs incurred by the Bank for its supervisory work.

NatWest offers new fathers a year off

Male bankers at NatWest have been told that they can take a full year off when they become a father as the bank seeks to reinvent itself as more family friendly. A policy that allows all new parents to take up to a year off regardless of their gender, of which half will be fully paid, will be introduced next year. Alison Rose, the chief executive, said NatWest hopes to support "wider cultural change by promoting a shared approach to childcare responsibilities early on".


Citi to slash lending to buyout funds as new capital rules bite

Citigroup is cutting back on subscription-line financing from current totals of $65bn to about $20bn in the coming months, as the US bank races to meet tough new capital rules.


Goldman Sachs chief used company private jet for DJ side gig

Goldman Sachs has defended its chief executive's use of the bank’s private jet to help with his hobby as a part-time dance music DJ. In late July, David Solomon flew to Chicago on Goldman’s privately owned Gulfstream G650 to meet with clients and employees, before playing a set at the Lollapalooza music festival. Solomon’s use of the jet was considered both a business and a personal expense, a Goldman spokesman said.

Investors pile into insurance against further market sell-offs

Institutional investors have spent $9.6bn on put option contracts in the past week as strategists cut year-end forecasts and equity investors take the view that a hard landing for the US is inevitable.


Aviva backing female stars of fintech

Aviva has invested $10m into a venture capital fund aimed at backing female-run UK financial technology businesses. The money will go to the world’s largest female-focused fintech fund, the New York-based Anthemis Female Innovators Lab fund, which was jointly founded in 2019 with Barclays Bank. According to Anthemis, only 4% of UK fintechs are led by women, yet it says that female founders demonstrated a 63% better performance than all-male founding teams. Ben Luckett, chief innovation officer at Aviva, said “We are looking for access insights, collaboration [and] partnership opportunities with this ecosystem. As a 300-year old company, if we’re going to continue to compete and understand where to participate and partner with the right players, then we need to be very much in this world.”

Finance companies should be barred from blocking partisan clients

PayPal and other finance companies could be banned from blocking the accounts of campaign groups for political reasons under a new law being proposed by Conservative MPs. The move comes after three accounts linked to the Free Speech Union (FSU) were blocked by PayPal for ‘violating terms of service' - although no concrete reason has been given. UsForThem, which campaigned to keep schools open during the pandemic, also had its account blocked. Dozens of Tory MPs, including Michael Gove, David Davis and Sir Iain Duncan Smith signed an open letter to Jacob Rees-Mogg's business department calling for a ban on the practice by financial services companies. Toby Young, the FSU's founder and general secretary, told the Telegraph: “The withdrawal of banking services from an individual or an organisation because they aren't toeing the right political line is something you'd expect to happen in Communist China or North Korea, but not in a supposedly free country.”

Amigo switches chiefs before new capital bid

Amigo has parted company with chief executive Gary Jennison before an investor roadshow aiming to raise as much as £300m of fresh capital. He will be succeeded by chief financial officer Danny Malone.


Homeowners face being locked out of cheaper mortgage rates

Hundreds of thousands of homeowners face a remortgage crisis next year as rising interest rates make deals unaffordable even for wealthy borrowers, new research suggests. The Bank of England this week raised interest rates for the seventh consecutive time, bringing the Bank Rate up to 2.25% in a move that will push mortgage rates even higher. Further increases are in the pipeline. Economists’ consensus is that the Bank Rate will peak at around 3.5% next year, but markets have priced in a Bank Rate peak of 4.5%. In this scenario, homeowners could see their bills surge by more than 50% when they remortgage next year. Mortgage rates will be so high that experts have warned that large numbers of homeowners could fail to meet lenders’ affordability criteria to remortgage and be forced to pay higher rates as a result.


Burberry finance chief to depart

British fashion house Burberry has announced that Julie Brown, the finance head and chief operating officer, will leave the company in April.


Kwarteng hints at more tax cuts: ‘There is more to come’

The Chancellor hinted on Sunday that more tax cuts could be in the pipeline as he denied claims his shake-up of taxation on Friday helped the rich more. Kwasi Kwarteng told the BBC: "We've actually put more money into people's pockets. We're bringing forward the cut in the basic rate [of income tax] and there's more to come.” He added: “I want to see over the next year, people retain more of their income, because I believe it's the British people that are going to drive this economy.” Friday’s announcement sent the pound to a 37-year low against the dollar and Asian markets on Sunday night meted out more punishment pushing sterling down further to $1.035. Pressure will be growing on Andrew Bailey, the Bank of England Governor, to intervene amid growing concern over the UK's credit rating being cut. But Gerard Lyons, chief economic strategist at Netwealth and an external adviser to the Prime Minister, said: “The markets have wrongly misread the fiscal stance. What we have is a fiscal environment and policy that will stabilise the economy in the near term. Moreover, the feature that would have blown our public finances out of the water would have been a very deep recession, and the policy has effectively ruled out the deep recession that markets feared."

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