FCA chief: Banks need to restart the mortgage market
With market turmoil and concern over potential interest rate hikes prompting lenders to pull more than 1,600 mortgage deals, Financial Conduct Authority (FCA) chief executive Nikhil Rathi says banks must explain when the deals will be back on the market. In an interview with the Sunday Times’ Jill Treanor, he says: “If a product is withdrawn for a temporary period, we want to understand when they’re going to come back to market so that those people who may need to refinance are able to proceed with their plans.” Mr Rathi, who said the City watchdog is being “incredibly vigilant” about the impact of higher rates on households, notes that lenders are not yet reporting a rise in customers falling behind on payments. The interview comes in a week that the FCA chief was involved in sanctioning a £65bn lifeline for the pension fund industry, with the Bank of England stepping in to buy government bonds – or gilts - to avoid a “material risk” to financial stability. Mr Rathi has a seat on the Bank’s Financial Policy Committee, which is charged with identifying and defusing what Ms Treanor describes as “ticking timebombs” in the financial markets, such as the one brewing in gilts.
Mortgage approvals jump 16% in August
Mortgage approvals increased by 16% in August, with Bank of England figures showing that lenders approved 74,300 homebuyer loans. This compares to 63,700 in July and represents the highest number since the start of the year. It also reverses a series of declines recorded in the past few months. Approvals for re-mortgaging also increased to 49,400 in August, up from 48,400 in July. Samuel Tombs, chief UK economist at Pantheon Macroeconomics said the “sudden leap” in house purchase mortgage approvals in August “likely reflects people attempting to secure loans ahead of expected increases in mortgage rates, rather than a fundamental strengthening of demand.” Sarah Coles, senior financial analyst at Hargreaves Lansdown, thinks the August rise could be the hike in mortgage approvals for a while, noting that 40% of mortgages have been withdrawn from sale in the wake of the mini-Budget, “and when they come back, rates will be much higher.”
Credit card spending hits £700m
New data from the Bank of England show that spending on credit cards rose by £700m in August as households borrowed heavily to cope with the cost of living crisis. The increase at a time of heightened anxiety about rising energy bills pushed the annual growth rate in spending on credit cards to 12.9%, its joint highest level since 2005. Maintaining a high level of credit borrowing was also becoming more expensive after an increase in the average interest rate 18.66% in August, above the 18.55% seen before the pandemic. The annual growth rate for all consumer credit remained at 7.0% in August; the highest rate since March 2019 when it hit 7.2%.
Chase pulls in more than 1m customers in its first year
Chase Bank has more than 1m UK customers just 12 months after it opened operations in Britain. The digital bank, which is part of JPMorgan and has 56m US customers, launched in the UK last September and has already had more sign-ups than both Monzo and Starling Bank managed in their first full 12 months combined. Chase holds more than £10bn of UK customer deposits and has processed 92m card and payment transactions since launch.
Zopa in talks to raise $100m
UK-based digital bank Zopa is in talks to raise another round of funding. It is reportedly in detailed negotiations with new and existing shareholders about raising approximately $100m in what is expected to be the last capital injection before it seeks a public listing.
EU watchdog: Banks need €1.2bn to meet capital rules
Banks in the EU will collectively need a further €1.2bn to meet a set of global capital rules in full by 2028, the bloc's banking watchdog has said. The European Banking Authority said implementing the Basel III global accord in full would result in an average increase of 15% in current core 'Tier 1' capital buffers, with much of the shortfall among smaller, domestic-focused lenders. Requirements under Basel III have largely been rolled out, but some remaining elements are due to be fully implemented by 2028 in the EU, Britain, the US and other jurisdictions. The EU plans to delay when banks should start to implement the remaining Basel III rules until January 2025.
Credit Suisse looks to ‘long-term, sustainable future’
Credit Suisse executives have sought to ease concerns over the financial stability of the bank. In a memo to staff, chief executive Ulrich Koerner said the bank had a “strong capital base and liquidity position.” The bank last week said it was pressing ahead with a strategic review that includes potential divestitures and asset sales. Shares in Credit Suisse have fallen by nearly 60% in the past year and dipped by 20% in the past month. With the board reportedly considering splitting the bank into three, Mr Koerner said bosses were in the process of “reshaping Credit Suisse for a long-term, sustainable future – with significant potential for value creation.”
SocGen to make investment banking boss CEO
Slawomir Krupa is set to become the new chief executive of Societe Generale, France's third-biggest listed bank. Mr Krupa has been with the bank since 1996. Since January 2021 he has served as head of investment banking. Mr Krupa's appointment will be proposed at the next shareholder meeting in May 2023, the bank said in a statement.
Rees-Mogg hints at merger of financial services regulators
Business Secretary Jacob Rees-Mogg has hinted the Government will merge the UK’s financial services regulators. During the Conservative leadership campaign, Prime Minister Liz Truss suggested she wanted to roll the Financial Conduct Authority, the Bank of England’s Prudential Regulation Authority and Payment Systems Regulator into one body. When asked about a potential merger yesterday, Mr Rees-Mogg said he could not comment on future announcements but added: “I’m sure the things promised in the election campaign will be delivered upon.” The Government is currently moving the Financial Services and Markets Bill through parliament and Mr Rees-Mogg has suggested that it could be amended to include the merger of regulators. The Policy Exchange think-tank has previously said having a single financial services regulator would “enable greater accountability for regulatory performance” and lead to “more talented people being put in charge of regulating the sector.”
Pensions watchdog in emergency talks over market turmoil
The Pensions Regulator is taking part in emergency talks designed to calm financial markets following the turmoil caused by the mini-budget. The watchdog is understood to have been drafted into closed-door meetings of the Authorities’ Response Framework (ARF), with these talks taking place when an “incident or threat” could cause major disruption to the UK’s financial services. The ARF was established in response to the financial crisis and sees Treasury officials and City regulators – the Bank of England and Financial Conduct Authority – address threats to financial stability. It is understood that the latest round of meetings mark the first time the Pensions Regulator has taken part in the forum. The talks come amid market uncertainty that saw the Bank of England intervene with a £65bn bond-buying programme in order to avoid a pensions crisis.
Turbulent mortgage market could see ‘massive intervention’ from FCA
Brokers believe the Financial Conduct Authority may have to intervene in the mortgage lending market for years to come on the back of the rapidly changing interest rate environment. The regulator has already entered into talks with lenders amid fears the daily repricing of mortgage interest rates has stretched many borrowers too far. Brokers fear that borrowers with 1% deals who face renewals in the next two years will come up against an environment that many lenders’ stress tests will not have taken into account. This could, in some cases, means their mortgage repayments will become unaffordable. Richard Bishop, managing director of PFEP Wealth Management, said: “In a few years’ time, there could be a massive intervention into the mortgage lending market by the FCA to prevent banks applying for repossession orders.” Simon Cutler, a director at Blackdown Financial, has voiced concern that there is a real risk of panic buying in the fixed rate market.
MPs could quiz regulators over pension fund fears
Regulators are expected to face questions from MPs after disruption in the markets caused concern over pension funds, with the Bank of England having to step in to restore order. Whitehall sources say the Treasury Select Committee is likely to seek answers from officials, with the Bank, Financial Conduct Authority and The Pensions Regulator possibly in line to be quizzed. Meanwhile, Sir Stephen Timms, chairman of the Work and Pensions Committee, is set to demand an explanation over the failings that spurred the Bank to unleash the bailout of the pension fund industry. He said the matter had “clearly raised new concerns.”
LEISURE & HOSPITALITY
Fears grow for local pubs
According to new research from Peckwater Brands, up to four in ten pubs could close by this time next year. A survey found that only 59% of pub bosses thought that they would still be trading by the autumn of 2023. Sam Martin, CEO of Peckwater, said: "The pub is a British institution. It must be supported."
MEDIA & ENTERTAINMENT
Disney calls truce with activist investor
Disney is to name Carolyn Everson to the board, adding the Coca-Cola board member who has also worked with Facebook amid a truce with an activist investor. Third Point, which currently holds a 0.4% stake in Disney, has agreed to not raise its stake in the entertainment and media business to over 2%. The hedge fund will also vote in favour of directors nominated by Disney's board. In August, Third Point said it planned to push Disney to make several changes, including spinning off cable sports channel ESPN, buying back shares and adding new board members.
House price growth slows in September
Figures from Nationwide show that house price growth has slowed for the first time since July 2021. Prices rose by 9.5% in September, marking a slowdown on the 10% increase seen in August. House prices averaged £272,259 in September, which, after taking into account seasonal effects, was virtually unchanged from August. Ten of the UK's 13 regions recorded slower annual price growth in the third quarter. The only regions to show an increase in annual house prices in September were the East Midlands, West Midlands and London. South-west England was the best performer, with the average house price up 12.5%. However, the rate of growth had slowed from 14.5% in the second quarter. London remained the weakest region with growth of 6.7% in the third quarter, up from 6% growth the previous quarter.
UK not in recession after Q2 growth
The UK's economy is not currently in recession, with a revised reading showing growth in Q2. Data from the Office for National Statistics (ONS) shows economic output was up 0.2% between April and June. The revised figure comes after a previous reading pointed to a 0.1% decline. Despite posting growth in Q2, the ONS revealed that the economy is 0.2% smaller than it was before the pandemic, with this downwardly revised from a previous estimate that it is 0.6% bigger. The report said the UK is the only economy among G7 nations yet to rise above the pre-pandemic level seen in Q4 2019. The ONS also believes that the UK economy shrank by 11% in 2020 – the year of the coronavirus outbreak – with this a more severe contraction than the previous estimate of 9.8%. The Bank of England recently warned that the UK could already be in a recession - which is defined as two consecutive quarters of GDP shrinking. The Bank’s recession warning stemmed from a forecast that the economy would shrink by 0.1% in Q3 and came before the ONS revised its Q2 reading.