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Daily News Roundup: Monday, 27th November 2023

Posted: 27th November 2023

BANKING

Report into banking scandal ‘watered down’ after pressure from regulator

Court documents show that the Financial Conduct Authority (FCA) successfully influenced an independent reviewer to dilute criticisms of its handling of a banking scandal linked to compensation for the mis-selling of interest rate swaps. The original finding, which stated that the FCA breached its "regulatory mandate" by excluding thousands of companies from compensation, was removed from John Swift's report after the FCA objected. The review, published in December 2021, focused on the FCA's agreement with high street banks, which resulted in £2.2bn in redress for SMEs. Mr Swift said he could find "no explanation" for the introduction of an eligibility cap that excluded one in three companies from compensation. A judicial review into the matter is due to go to trial next year. It comes after an application by the All-Party Parliamentary Group on Fair Business Banking.

Taxpayers face £20bn loss on NatWest stake

Taxpayers are set to face a £20bn loss on the Government's stake in NatWest if Chancellor Jeremy Hunt proceeds with plans to sell off its remaining shares. The Government has so far recovered £16.9bn from NatWest through share sales and dividend payments, but the remaining shares are expected to result in a £19.5bn loss. Richard Hunter, head of markets at broker Interactive Investor, said the Government will only make money on the sale if the shares double in value. The £46bn received by NatWest prevented its collapse during the financial crisis, and the taxpayer's ownership has been reduced from 84% to 39%.

Lloyds jobs at risk

More than 2,500 jobs are at risk at Lloyds Banking Group, with Britain’s largest high street lender reportedly considering cutting a series of middle-management roles, including analyst and product management posts. Sources says that while 2,500 roles are being reviewed, the bank’s management hope the number of total job losses will end up being lower. A source familiar with the consultation said the bank expected to create a net 120 UK jobs at the end of the process and is changing the focus of certain roles.

Barclays set to cut 2,000 jobs

Barclays plans to cut as many as 2,000 jobs as part of a £1bn cost-cutting drive. The redundancies at the bank are set to focus on back-office roles in its compliance, human resources and legal departments. Chief executive CS Venkatakrishnan recently said the bank is looking for “efficiencies” as it seeks to reduce “structural costs.” When asked about potential job losses, he said: “We always modulate the size of our workforce everywhere in the world in which we are and that's what we will continue to do.”

Short-sellers target Metro Bank

Hedge funds have ramped up bets against Metro Bank ahead of a shareholder vote on a £925m rescue plan. The plan would hand control of the lender to billionaire Jaime Gilinski, who is pumping £102m into Metro and raising his stake to 52.9%. While bondholders have already given their backing to the rescue deal, Metro must still secure majority support from its equity investors. The lender has warned it may be deemed unviable by the Bank of England and put into a process for managing failed banks if the funding package is rejected. Analysis of Financial Conduct Authority data shows that 6.4% of Metro's shares are on loan to hedge funds led by Caius and Kite Lake Capital, making the bank the second most shorted stock on the London market.

Nationwide sends mortgage rates below 4.5%

Nationwide has announced its ninth round of rate cuts in three months, offering fixed rate mortgages with an interest rate below 4.5%. The building society will reduce its mortgage rates by up to 0.43 percentage points across its fixed rate deals. Nationwide's cheapest five-year fixed rate, available to home movers with a 40% deposit, will be 4.43%. Mortgage brokers expect other lenders to follow suit in the coming weeks.

Nearly £1m 'missing' from NatWest Isa savings transfers

Savers who transferred money to NatWest's best buy two-year cash Isa have been facing transfer delays of up to four months. Analysis by the Mail shows that £941,887.84 of Isa transfer money is missing. Almost all of the cases reported to the paper relate to NatWest's two-year fixed-rate Isa, which topped the best buy tables for most of the summer. The Isa proved more popular than NatWest anticipated, with delays coming amid the increased demand. 

Bank told to brace for £6.3bn hit

Tax consultant Bob Lyddon has warned that HSBC is facing a hit of more than £6.3bn due to unsecured commercial property loans into China, describing the situation as a “disaster.”

HSBC sees online banking issues on Black Friday

HSBC customers faced disruption on Black Friday as the bank experienced an online banking outage. The bank's digital services were affected due to an issue with its internal systems.

INTERNATIONAL

Regulator probes private fund disclosures

China’s Securities Regulatory Commission says private funds including Hangzhou Yuyao and Shenzhen Huisheng are being investigated over claims that they disclosed false information. The regulator said fund managers flagged the issue and a preliminary investigation suggests personnel controlling private funds reported false information. Their conduct may, it noted, amount to criminal behaviour.

FINANCIAL SERVICES

Woodford investors told to reject FCA deal

A law firm litigating against Neil Woodford’s collapsed investment fund has advised investors to reject the “bad deal” tabled by the Financial Conduct Authority (FCA) and instead pursue their own compensation. Investors in the fund, which collapsed in 2019 amid a flood of withdrawals, have been chasing compensation from the fund’s administrator, Link Fund Solutions. While the FCA has backed a £235m proposed payout, law firm Harcus Parker says investors should reject the proposal as it is less generous than has been described. Harcus Parker believes that the vast majority of private investors would be better off claiming through the Financial Services Compensation Scheme, under which they could earn up to four times the amount proposed by the FCA.

UK asset managers given go-ahead to launch ‘tokenised’ funds

Asset managers will be able to develop tokenised versions of their funds after the Treasury and Financial Conduct Authority backed a blueprint for regulated funds to put their assets on digital ledgers.

LEISURE & HOSPITALITY

Entain to pay £585m after bribery investigation

Entain, the owner of Coral and Ladbrokes, will pay £585m in penalties after a probe into alleged bribery at a former subsidiary. Under the agreement with HMRC, the business will also give £20m to charity and cover HMRC’s costs with an additional payment of £10m. Entain set aside £585m in August to cover the potential penalties. The HMRC probe centred on activities at a Turkish subsidiary which Entain sold in 2017.

Carnival withdraws 'fire-and-rehire' threat

Cruise operator Carnival UK, which operates P&O Cruises and Cunard, is withdrawing a threat to use a 'fire-and-rehire' strategy in negotiations over pay and conditions for 919 crew members. In a joint statement, Carnival and trade union Nautilus said they would instead work "co-operatively towards a negotiated settlement."

MANUFACTURING

£4.5bn boost for British manufacturing

The Government has announced plans for a £4.5bn funding package for key manufacturing sectors, with ministers looking to drive growth and boost investment in the UK. In a foreword to the plan, Business Secretary Kemi Badenoch said that while other countries “have embarked on large tax and spending sprees to claim a share of the global manufacturing market,” the UK “will not be drawn into a distortive subsidy battle.” Prime Minister Rishi Sunak said the plan “will not only give the industry the long-term certainty they need to grow and invest further in the UK, but it will also lay the foundations to create more jobs and opportunities.”

REAL ESTATE

Mortgage rates to stay above 4% this year

Experts do not expect mortgage rates to fall below 4% before the end of this year. Ross Murphy, senior adviser at Capricorn Financial Consultancy, says the outlook for mortgage rates for the coming year is “optimistic,” noting that with swap rates falling, the market is “increasingly seeing rates slide into the region of 4% - 4.5% as a result.” Iwona Hovenko, a real estate analyst at Bloomberg Intelligence, does not expect mortgage rates to fall below 4% this year but says it is a possibility in 2024, especially in the second half of the year. Chris Sykes, technical director at Private Finance, says the prospect of a deal offering a rate below 4% by the end of this year is “no more than a dream.” However, he says larger lenders might be able to price products as low as 3% - 3.5% by the end of 2024. Moneyfacts data shows that the average two-year deal is currently 6.08%, while a typical five-year deal is 5.68%.

RETAIL

Black Friday ‘busiest shopping day on record’

Black Friday was the busiest shopping day on record, according to Nationwide. The building society's members made 9.92m purchases on Friday, with this equivalent to more than 114 transactions every second. The figure is 2% higher than on Black Friday in 2022 and 12% higher than 2021’s event. Meanwhile, data from Barclays shows that the volume of purchases leading up to Black Friday was higher than this time last year, with retailers launching sales earlier in the month. The report shows that spending volumes were up 1.4% in the week to Wednesday compared with the equivalent week last year.

ECONOMY

Pill: Inflation not easing fast enough

Huw Pill, the Bank of England’s chief economist, has warned that while growth is slowing, it is not slowing inflation as fast as the central bank would have hoped. He said that while there is slower growth in activity and employment, because it appears to be “more supply-driven rather than demand-driven, the weakening of activity is not as associated with easing of inflationary pressures.” Looking at data on pay growth and services inflation, Mr Pill said he saw “more evidence of the sort of stubborn, high level rates of inflation or growth that are stronger than we would really see as compatible with price stability, 2% inflation, over the medium term.”

OTHER

Lords report calls for Bank of England reform

Peers have warned that the Bank of England's internal culture, governance and appointments processes need significant reform. Noting that the Bank’s powers have "expanded substantially" since it was made independent 25 years ago, the Lords' Economic Affairs Committee has called for an overhaul in the way in which the Bank is held to account. The committee, chaired by Lord Bridges of Headley, says public confidence in the Bank “has fallen dramatically as inflation has remained well above the Bank's target over the last two years." The Peers noted that an inquiry to assess how the operational independence of the Bank was working revealed concerns regarding its “expanding remit" and that a "democratic deficit" has emerged. Among recommendations, the committee suggests that parliament could conduct a review into the Bank's remit, operations and performance every five years. A Bank of England spokesperson said the recommendations will be given “careful consideration.”

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