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Daily News Roundup: Monday, 4th October 2021

Posted: 4th October 2021

BTG Advisory

FCA sharpens focus on wind-down plans

Sorca McGeown of BTG Advisory looks at peer-to-peer and alternative lenders, saying that while they are emerging as pillars in the finance industry, the “breakneck pace” of innovation, combined with competition and market share capture, has left the sector “saddled with regulatory non-compliance”. The Financial Conduct Authority, she says, has concerns, with the pandemic, Brexit and other pressures creating “something of a perfect storm for the sector.” The watchdog is focusing on a requirement for all P2P platforms and regulated lenders to have an orderly wind-down plan (WDP) in place. Ms McGeown says a WDP alongside broader liquidity management will help keep P2P lending platforms financially resilient and “highlight potential future issues which may not be currently apparent”. Liquidity planning and monitoring financial health is critical for lending platforms, she notes, pointing to the importance of ongoing preparation of cash flow forecasts, conducting scenario modelling and stress testing.


Chancellor considers extension of Covid loans

Chancellor Rishi Sunak is reportedly considering plans to extend the coronavirus business loans scheme, with the Treasury mulling an extension to the Recovery Loan Scheme that is due to end on December 31. The possible extension comes on the back of concerns labour shortages and cost pressures may hurt the country’s post-pandemic recovery. A source has told the Telegraph that Treasury officials will consult with banks and financial institutions on whether to extend the loan scheme and tweak its terms, with the matter being discussed in the run-up to the autumn Budget. Options said to be possible include cutting the Government guarantee, reducing the potential losses taxpayers face from unpaid debt, and reducing the personal guarantee. The Recovery Loan Scheme was introduced to replace the Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme, offering an 80% guarantee on debt of between £25,000 and £10m.

Open banking boss resigns over bullying allegations

The chair of the Open Banking Implementation Entity (OBIE), the body set up to deliver open banking in the UK, has resigned as an investigation found that the agency allowed “a culture of bullying and intimidation to prevail.” The Competition and Markets Authority (CMA) says Imran Gulamhuseinwala tendered his resignation as trustee and chair as part of a package of remedies meant to address poor culture and governance at the OBIE. The investigation into sexist and racist behaviour found that workers “feared they would lose their roles if they raised concerns”. The report from Alison White, a non-executive director for the Office of the Secretary of State for Wales, said an “overwhelming” number of people described the working environment as “toxic”. Suggesting that the probe’s findings “do not make for pleasant reading”, Ms White said it found sufficient evidence that there was not “proper management” at the OBIE. The CMA and the banks that established the body – including Barclays, HSBC, Lloyds, Nationwide, NatWest and Santander – said they “accept their share of the responsibility” and set out a number of remedies to address the failings, including appointing new non-executive directors to the board in order to “appropriate independent scrutiny and oversight.”

Hotline support limited due to phone keypads

The Times looks at a new hotline being set up to respond quickly to bank customers who fear they are being defrauded, noting that the number of banks initially involved is limited due to the number of digits on a numerical keypad. Dialling the 159 hotline number offers users nine options, one for each bank, and pressing the number for the relevant bank will put customers straight through. Stop Scams UK said it was using keypad options “to get the scheme up and running” but a move to voice activated software in 2022 will mean more banks can be added to the list. Barclays, Bank of Scotland, Halifax, Lloyds, NatWest, RBS, Santander, Starling, and Ulster Bank make up the initial nine lenders involved, with HSBC, Virgin Money, Nationwide and Monzo missing out for now. TSB wanted to join in January but Stop Scams UK said it would only be able to once voice recognition is available.

Banks may slow transfers to combat fraud

Britain's biggest banks have reportedly been in talks with regulators at the Financial Conduct Authority and the Payments Systems Regulator over a plan that could see them slow down some transfer payments in a bid to combat fraud. Most transfers go through within seconds via the Faster Payments system but this is sometimes exploited by criminals who trick victims into transferring money before swiftly moving the cash through the banking system so it cannot be easily traced. It has been suggested that slowing the process would give banks time to contact customers if a transaction appeared suspicious. A spokesman for UK Finance said the sector is “exploring a range of options including the use of enhanced data, as well as slowing down payments.”

CEO: Barclays must accelerate digitalisation to compete

Barclays CEO Jes Staley says the bank needs to “accelerate the digitalisation” of its offerings to compete with the likes of Klarna. He also called on regulators to clamp down on buy now, pay later firms, saying he feels “the regulatory parameter is going to need to widen”. He noted that in the UK, Barclays has to show regulators that when it extends credit to a consumer that that consumer can afford it, but fintech firms do not have the same obligation. “As they get bigger, the affordability issue - them extending credit to UK consumers - will become an issue for the regulators - and I think that'll change the playing field," he added.

Barclays accounts targeted by Monzo fraudsters

Millions of pounds have been stolen from Barclays accounts after the bank fell victim to orchestrated attacks by criminals using a Monzo account. The fraudsters used a new money transfer method known as a payments initiation service provider, a system that allows retail consumers to pay companies directly from their bank account rather than using a debit or credit card through a third party such as Visa or MasterCard. Barclays said all victims have been reimbursed.

NS&I complaints climb

Complaints about National Savings & Investments (NS&I) have jumped, with 820 lodged with the Financial Ombudsman Service in the first half of this year, up from 77 in the same period last year. Customer satisfaction with the Treasury-backed bank fell from 84.3% in 2019-20 to 76.1% in 2020-21, according to its annual report. The Times suggests dissatisfaction rose as the bank cut its savings rates, experienced customer service issues and opted to get rid of Premium Bonds cheques.

NatWest’s Irish exit a “multiyear” process

NatWest has suggested that its phased withdrawal from the Irish market will take at least two more years, with the transfer of loan books to buyers AIB and Permanent TSB taking up to 18 months. CEO Alison Rose told a Bank of America virtual conference that investors should look at its closure of Ulster Bank and exit from the Irish market as a “multiyear” process.

Virgin Money exec to exit

Virgin Money’s chief brand officer, Helen Page, is reportedly leaving the challenger bank.


Miller Homes sale could net Bridgepoint £1.3bn

Bridgepoint is gearing up for the sale or float of Miller Homes after a rise in valuations on the back of an exceptionally strong housing market. The private equity firm has appointed investment bank Rothschild to advise on the matter. Any deal is expected to value the builder at more than £1.3bn. Bridgepoint bought the company from GSO Capital Partners, part of Blackstone, for £650m in 2017.


Record Nordea dividend

Finland's Nordea Bank has approved a record dividend pay-out after the relaxation of restrictions imposed by the European Central Bank. The bank's board approved an ordinary dividend of €0.72 per share. The pay-out includes €0.33 per share from 2019 and equates to a total of €2.92bn, also a record high for a Helsinki-listed company.

Rabobank CEO to leave in a year

Dutch co-operative bank Rabobank has announced that chief executive Wiebe Draijer intends to step down on October 1, 2022. Rabobank chair Marjan Trompetter thanked Mr Draijer for his work in a statement, adding thanks for the long-lead time he had given the bank to "find a worthy successor."


Investors surge into VCTs ahead of dividend tax increase

UK venture capital trusts have raised £128m since the start of the tax year in April, the fastest pace since 2006. Analysts believe an upcoming increase in dividend taxes could boost the sector.


Community venues to host NHS catch-up clinics

A network of 40 one-stop shops for NHS scans and tests will be set up in community venues in England, including shopping centres and a football stadiums, to help tackle the growing backlog in hospital treatment. Around 2.8m scans will be provided in the first full year, with £350m going towards the project, the Government said. 


Wetherspoon to create worker directors

JD Wetherspoon is planning to promote a number of “worker directors” to its board, with the move designed to kick back against corporate governance rules it argues “often diluted or even destroyed” the DNA of a company by forcing frequent changes of directors. Tim Martin, the pub chain’s founder and chairman, said: “The pattern of a low level of executive representation and non-executives who stay, on average, for short tenures, is bound to have a deleterious effect on the DNA.” He added that under a nine-year maximum tenure rule, he and two of the four non-executives would be replaced by independents, arguing that this would destabilise the company and jeopardise its DNA. Wetherspoon said it will add worker directors who are experienced pub or area managers to board positions.


Shortages hit manufacturing as growth slows

Factories felt the impact of supply chain problems and staff shortages hitting manufacturers in September, recording the weakest month since February. The IHS Markit/CIPS Purchasing Managers' Index came in at 57.1 for September, down from 60.3 in August on an index where a reading above 50 indicates growth. September’s reading marked the weakest performance since February and the fourth consecutive month of decline. New export work fell for the first time in eight months, while jobs growth was the weakest since January. Despite pressure in the sector, the majority of manufacturers surveyed are optimistic about the next 12 months, with 62% expecting to see growth in output. Rob Dobson, director at IHS Markit, said the figures highlight the "risk of the UK descending towards a bout of stagflation", with growth in output and new orders slowing while costs and selling prices climb.


New Liverpool film studios to bring economic boost

Liverpool is aiming to become "the Hollywood of the North" as The Depot, the city's £17m film and TV studios, open. It is predicted the studios will bring a £24m economic boost to the region and create 360 new jobs.


White-collar staff shortages drive 'fierce war for talent'

Professional services businesses have warned of labour shortages as the economic recovery increases demand for talent, with some accounting, consulting and law firms turning away work due to a lack of staff.


Private equity firm wins £7bn Morrisons auction

Private equity firm Clayton, Dubilier & Rice (CD&R) has won the battle to buy supermarket giant Morrisons, with the stock market's Takeover Panel announcing that the auction procedure had ended and CD&R had offered more per ordinary share than rival Fortress, with the bid amounting to an offer of almost £7bn. Shareholders will vote on the bid on October 19. CD&R made an initial approach for Morrisons in June, with Softbank-backed Fortress making an offer of £6.3bn in July. Shareholders felt the bid was too low, prompting Fortress to up its offer to £6.7bn in August. This in turn saw a fresh, £7bn offer from CD&R. As neither side made a formal bid, the Takeover Panel launched an auction process.


Chancellor urged to go for growth

With the Office for National Statistics having upgraded GDP growth for Q2 from 4.8% to 5.5%, economists, business groups and campaigners have urged Chancellor Rishi Sunak to pursue a growth-oriented Budget. Federation of Small Businesses national chair Mike Cherry, who said the Conservatives are “losing the trust of small firms which are bracing for a rise in the jobs tax at the same time as having to deal with haywire input cost rises across the board”, says the Budget must see the Government “step up to the plate, rediscover its entrepreneurial zeal, and offer more than tax grabs to fund growing public sector spend.” With concern over supply chain issues, staff shortages and the impending National Insurance increase, experts suggest lower taxes could put the post-pandemic recovery back on track. Julian Jessop, economics fellow at the Institute of Economic Affairs, believes the Government “should focus on supporting growth, rather than finding even more ways to raise the burden of tax.”

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