Lenders braced for stress tests
Lenders are bracing themselves for the results of stress tests by the Bank of England showing how badly they would fare in a sharp downturn. Banks will have to say how much capital they would lose if unemployment soared to 9.5% and house prices fell by a third. Analysts at RBC Capital Markets said a looming fine for RBS from the US Department of Justice for crisis-era, sub-prime lending could mean it fails the test, which is based on balance sheets at the end of 2016. However, they added that RBS has generated more capital this year so should not need to raise any extra funds. RBC added that Barclays could face a bumpy ride owing to the higher hurdle rates and higher assumed consumer finance losses that the Bank of England is imposing this year. The other institutions being tested - HSBC, Lloyds, Nationwide, Standard Chartered and Santander UK - are expected to pass without any issues. The Times’ Katherine Griffiths comments on the stress tests and suggests that perhaps everyone is becoming a little bored with them. She notes that the heads of stress-testing at HSBC and RBS are both leaving their roles. Meanwhile, Iain Withers questions in the Telegraph whether the tests are really stressful enough. He points out that the biggest real world potential stress the banks face – the challenge of a potential Brexit cliff-edge – is absent from the simulated tests.
City begins to lose patience with Whitehall over Brexit
Financial institutions in the City are beginning to put their Brexit contingency plans into action despite attempts by ministers to reassure the sector. JP Morgan has now begun to tell staff whether or not they will be relocating to the EU, while Goldman Sachs confirmed last week that its post-Brexit hubs would be in both Frankfurt and Paris. Many financial institutions are said to be frustrated by the lack of detail from the government so far. Meanwhile, a report from think-tank New Financial said last week that it was hard to see how an arrangement on a transitional period after Brexit could be reached before next summer. There are other reasons, however, why City firms are looking to move, not least because of the cost of London, but also, according to one banker, the possibility that Jeremy Corbyn becomes PM.
HBOS report reveals criminal wrongdoing
The Mail’s Alex Hawkes reports on an internal study from HBOS written in 2013 which admits the bank knew about irregularities at its Reading branch from March 2004 onwards and that losses were deliberately hidden from early 2005. Executives had “committed serious criminal offences”, the study concluded. Lloyds, which took over HBOS in 2008, has denied having knowledge of wrongdoing before it bought the bank, a claim contradicted in the report.
HSBC ordered to hand over files on forex trades
HSBC has been ordered by the UK High Court to disclose documents relating to alleged manipulation of foreign exchange markets by its traders in London and New York over a decade ago. UK- ECU Group won the court order as it sought to establish whether HSBC manipulated the market to profit ahead of executing three trades for the firm worth more than $100m (£75m) a piece in 2006.
New arbitration system needed for banking disputes
The all-party Parliamentary Group on Fair Business Banking will on Thursday debate whether to put more protections in place for businesses that find themselves in dispute with their banks. Chairman Lord Cromwell told the Mail on Sunday the lack of an effective or even-handed arbitration mechanism “needs fixing, and fixing now.” He added that the Financial Ombudsman Service is not equipped to deal with complex cases.
Katherine Griffiths in the Times muses about a possible banking merger between HSBC and Standard Chartered. She says a deal could help HSBC in Asian markets outside of Hong Kong, and StanChart would help HSBC to make headway in Africa.
Libor given reprieve
The Financial Conduct Authority has said the Libor benchmark will continue to be used until at least 2021. In July FCA chief executive Andrew Bailey said Libor is “unrepresentative of the underlying market” putting its future in doubt.
Bankers plan new digital bank
Three senior City bankers are planning to launch an as yet unnamed digital bank focused on shaking up the UK savings market. The trio – Huy Nguyen Trieu, who led a capital markets team at Citi in London, his former colleague Lionel Durix, who remains at Citi, and Paul Hanks, the former CTO of Atom - plan to launch a mobile savings app that uses artificial intelligence to give savers tailored advice and offers "risk-free" products such as Isas and high interest rate savings accounts to help them reach their financial goals.
Monzo plans crowdfunding push to deepen ties with customers
Monzo plans to launch one of the UK's largest crowdfunding efforts next year, calling for between £10m and £30m in a move it says will give customers "a greater share of ownership".
CYBG agrees deal with Mastercard
CYBG has signed a new deal to exclusively work with Mastercard, extending its partnership with the payments company. The seven-year agreement will see all CYBG debit, credit and commercial cards use the Mastercard network.
UK banks prepare to share customer data in radical shake-up
The FT examines how new European regulations, known as the Payment Services Directive II, will force banks to hand over their customer data to other companies, ranging from technology groups to retailers.
Balderton seeks European tech giant
Balderton Capital has raised a new $375m (£281m) fund as it seeks Europe’s answer to Google, Amazon or Facebook. The venture capital firm said the Continent's technology sector had reached a “pivotal moment” that could produce a company with the scale to rival the Silicon Valley giants. Suranga Chandratillake, a partner at Balderton, said that while it was hard to predict what area of tech the next giant would come from, artificial intelligence "looks like a pretty good bet".
Europe’s banks shed UK-related assets
A report by the European Banking Authority states that European banks have removed €350bn of UK-related assets from their balance sheets since the vote to leave the EU – a 17% fall as banks protect themselves against a no deal Brexit. The EBA report also said banks were concerned about legal uncertainty around derivatives and other financial contracts, data protection and how court judgments might be enforced in a no deal scenario. Banks slashed their holdings of derivatives with exposure to the UK by 35%, the biggest asset class to decrease, the EBA said.
Barclays plans to send private bankers back to Asia
The FT reveals that Barclays’ private bank is looking to return to markets in Asia and the Middle East, less than two years after selling its Asian private bank to Overseas-Chinese Banking Corp.
Borrowing by US firms continues to slow
Borrowing from US banks by businesses has reached its lowest level of growth since the first quarter of 2011, according to data released by the Federal Deposit Insurance Corporation.
Monarch reveals debts of £466m
A report by administrators has revealed that Monarch Airlines collapsed owing £466m to passengers and businesses. The carrier’s former owner, Greybull Capital, is likely to walk away with a loss, according to the report which was published last week. As the main secured creditor, Greybull has first call on any assets. It is owed £157m of secured debt, with the Pension Protection Fund owed £7.5m.
StanChart plans further aviation finance joint ventures
Standard Chartered’s head of corporate finance, Sumit Dayal, has said the bank is considering launching another “one or two” aviation finance joint ventures.
L&G to build on budget boost
Legal & General’s housebuilding arm is to push ahead with a scheme that will deliver 1,500 prefab homes near Wokingham, with the firm saying the Budget had given it confidence to invest in housing. Chief executive Nigel Wilson said measures announced by the Chancellor have created “the right backdrop for a real boost” to housing supply.
City makes record tax payment
The UK’s financial services sector paid its highest recorded tax bill last year, with the industry shelling out a total of £72.1bn in tax contributions in the year to March 31. It marks a 1% increase from a year earlier and represents the highest amount that the sector has paid in the 10 years that data has been collected. The report, compiled for the City of London Corporation, showed that the sector’s contributions currently account for 11% of all government tax receipts, with employment taxes making up the bulk at £31.4bn.
Aviva to buy back shares
Aviva is preparing to buy back more than £1bn of its shares after building up huge capital reserves. CEO Mark Wilson is expected to reveal the plans at an investor day this week. He is also expected to signal the repayment of expensive bonds, and possibly make further small corporate acquisitions. Meanwhile, Aviva has said it will offer both men and women six months of fully paid parental leave. Sarah Morris, chief people officer at Aviva, who is on the steering committee of the 30% Club, said she hoped other organisations would follow suit.
Thomas Cook set to offer savings
Thomas Cook is considering offering savings products such as ISAs to help customers manage the cost of their holidays. CFO Anth Mooney that the firm could eventually offer customers credit to help them purchase holidays, as it is looking at how it can help people spread the cost.
Big asset managers step up gender diversity drive
Pimco, Fidelity International, Vanguard, Royal London Asset Management and Allianz Global Investors have joined the Gender Diversity Partner Programme, which will meet for the first time this week under the leadership of CFA UK.
Specialist UK infrastructure manager’s assets hit £1.75bn
The Pensions Infrastructure Platform has agreed to pay £400m to acquire a portfolio of projects from Standard Life Aberdeen.
Johnson & Johnson pulls out of plan for UK research centre
Johnson & Johnson has delayed plans to build a new research and development facility in the UK amid concerns about the economy. The healthcare company had reportedly identified a site for its JLabs concept, which helps fledgling pharmaceutical manufacturers to develop their products, just outside Cambridge. However, the plans have been put on hold over concerns that the UK is both politically and economically weak while negotiations to leave the European Union are ongoing.
LEISURE & HOSPITALITY
Vue Cinemas plots bid for Odeon
Vue Cinemas is considering launching a takeover offer for Odeon, in a deal which could create an enlarged company worth £3bn. City sources have also suggested that sovereign wealth funds or private equity companies could try to buy both chains at once. CVC, Blackstone and Advent International are all speculated to be eyeing leisure deals.
Pub group calls for business rates system overhaul
Fuller, Smith & Turner has warned that rising business rates are piling pressure on the pub chain as it faces forking out an extra £2m next year.
Capital bars booming
Analysis from Reuters shows that London’s bars and restaurants have not been hit hard by the EU referendum, with the sector showing strength despite the Brexit vote.
Dip in mortgage approvals expected
Ahead of the Bank of England releasing figures on mortgage activity, consultancy Capital Economics has forecast that approvals are set to fall to 65,000 from 66,100 last month. The Mail says further declines are expected as the impact of a higher interest rate hits. It adds that the impending end of the BoE’s term funding scheme – which offers banks cheaper finance - is likely to push up mortgage rates.
Insurers cast doubt over future of Maplin
According to the Telegraph, the future of electricals retailer Maplin is in doubt after credit insurers cut their exposure to the company. QBE pulled cover last month, while fellow insurers Euler Hermes and Atradius are also understood to have scaled back their exposure. The insurers are said to be concerned about the wider retail downturn and falling profits at Maplin.
Black Friday spending up
Britons are forecast to have spent just under £2.6bn in store and online during Black Friday, 8% more than last year, according to new research. Barclaycard also estimated that Black Friday purchases finished up 8% on 2016.
Santander halts F1 Ferrari deal
Santander has said it will not renew its Formula One sponsorship of Ferrari at the end of this year, after spending €280m (£250m) over seven years.
Jobs boom deflates in key sectors
Bank of England data show key sectors of the economy are experiencing a slowdown in hiring, with estate agents and oil and gas companies laying off staff while financial firms are reluctant to hire amid the uncertain economic and political climate. Data from the Office for National Statistics also suggests that hiring is flattening off.
Get off your phone and get back to work
An in-house blog for Bank of England staff written by senior analyst Dan Nixon points out a link between Britain’s abysmal productivity and the rise of smartphone use. People were spending so much time checking their devices that a "crisis of attention" might lie behind the country's sluggish productivity, he said.
Glint app brings gold into digital age
Fintech group Glint has teamed up with Lloyds Banking Group and MasterCard to create an app that allows people to pay for goods in gold.