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Daily News Roundup: Monday, 6th April 2020

Posted: 6th April 2020

BANKING

Banks question loan scheme figures

Banks have criticised the British Business Bank (BBB), which administers the emergency small business loan scheme rolled out due to the COVID-19 outbreak, questioning data which suggests that many lenders have failed to take part. Although a report from the BBB shows that HSBC is the only large bank to have made money available through the Coronavirus Business Interruption Loan Scheme, spokespeople for Lloyds, Santander, Barclays and NatWest owner Royal Bank of Scotland insisted their banks have handed out cash. The BBB figures suggest fewer than 1,000 of the 130,000 firms to have expressed interest have benefitted from the scheme, with £91m of ultra-cheap credit given to small companies. Craig Beaumont of the Federation of Small Businesses says regular updates on the amount of loans being approved and rejected by banks are needed.

Coronavirus loan scheme updated

Chancellor Rishi Sunak has announced an overhaul of the emergency coronavirus business interruption loan scheme, banning banks from demanding personal guarantees on loans under £250,000. Under the revamped scheme, small firms will find it easier to qualify for loans while larger companies - with a turnover up to £500m - will be eligible for the first time. Michael Lassman of the Federation of Small Businesses welcomed the move but said the “devil is in the detail and there now needs to be a step change.” “Words are all very good but we need to see it being carried out.”

Government to pilot no-interest loan scheme

The Government is to pilot an initiative offering no-interest loans for people on low incomes, with a Treasury-commissioned report saying a no-interest loan scheme (Nils) would be feasible, with cash coming from either a government body or existing lenders. With the scheme primarily aimed at lower-income earners who cannot afford to repay interest on loans of between £200 and £2,000, the London Economics report notes that more than 400,000 people in Britain would be eligible. While the Treasury has said a pilot will be rolled out, a spokesperson declined to give a timetable or comment on whether Chancellor Rishi Sunak would use the Nils as a relief measure amid the COVID-19 pandemic.

Nationwide in business lending U-turn

Nationwide Building Society has halted plans to enter the market for business lending, with CEO Joe Garner saying: “COVID-19 has changed the medium-term interest rate landscape, meaning that the business case for entering the market is no longer viable." Nationwide will hand back a £50m grant that was set to fund the expansion, with the money coming from a £755m pot paid for by Royal Bank of Scotland to boost competition in the business banking market. Banking Competition Remedies, the body set up to distribute the RBS fund, will make the cash from Nationwide – and £50m returned from Metro Bank after it pulled back on expansion plans – available to other lenders.

Banks postpone overdraft rate rethink

A number of banks have delayed plans to double the interest rate that they charge customers for using their overdraft due to the ongoing coronavirus crisis. With new Financial Conduct Authority rules designed to make overdrafts simpler and cheaper coming into force from today - forcing lenders to charge a single annual interest rate for both arranged and unarranged borrowing, many banks have increased the their standard interest rate for arranged overdrafts. However, HSBC is temporarily halving its new 39.9% overdraft rate, while NatWest has frozen overdraft interest at current rates for personal customers for at least three months.

Nationwide boss volunteers to take pay cut

Joe Garner, chief executive of the Nationwide, is sacrificing around £1.2m in pay, pension and bonus in a move designed to show solidarity with staff and customers during the COVID-19 pandemic. With the Bank of England writing to chief executives of big banks telling them to axe their dividends and rein in top pay, Mr Garner has volunteered to surrender a fifth of his basic salary and pension for the coming financial year, equating to a reduction of £228,000.

Homeowners urged to remortgage amid market chaos

While the coronavirus outbreak may have caused chaos in the property market, it has also given existing homeowners an opportunity to save thousands of pounds by remortgaging. While hundreds of house purchase loans have been withdrawn from the market in recent weeks, remortgage deals are still freely available. Market analysis by the consultancy CACI has found that by moving to the cheapest rate on the market, a homeowner with a £150,000 mortgage outstanding would pay £555 a month - a saving of £3,348 a year.

UK loan freeze plan leaves customers still open to arrears letters

With the Financial Conduct Authority proposing a freeze on loan and credit card repayments, ministers are looking at how to work around consumer credit laws to deliver them.

Credit reference agencies freeze credit scores

Three of the biggest credit reference agencies say that mortgage payment holidays taken as a result of coronavirus will not affect credit scores. All the leading banks and building societies have offered some breathing space for customers who are struggling to meet their next payment on their mortgage, and now Experian, Equifax and TransUnion have agreed to protect the scores of those affected.

Millennials dip into housing savings

More than one in five millennials who had been saving for their first home are diverting the money towards coping financially day-to-day, a survey has found. Some 22% of 26 to 40-year-olds who had been hoping to get on the property ladder will be dipping into their savings instead, according to research from credit checking company TransUnion.

PRIVATE EQUITY

Rescue package planned for start-ups

Ministers are preparing to offer start-ups financial support, with one mooted model involving co-investment, whereby venture capital backers would match Government funding in a scheme administered by the British Business Bank.

INTERNATIONAL

JPMorgan pays $1bn to take full control of China fund venture

JPMorgan is to buy out its minority partner in China International Fund Management. While no financial details were released, estimates suggest Shanghai International Trust’s 49% stake is worth around $1bn.

Deutsche goes digital for AGM

Deutsche Bank is to hold this year's annual general meeting online amid precautions to prevent the spread of the coronavirus.

AVIATION

Virgin awaits bailout decision

Virgin Atlantic has asked the Government for a multi-million pound bailout to help it weather the coronavirus crisis, with the Treasury and its advisers said to be reviewing the request and likely to deliver a decision within the next few days.

CONSTRUCTION

Smaller builders told to stay on site or face legal action

Construction firms are being threatened with legal action if they stop work against the wishes of their client due to the coronavirus pandemic, industry bodies have warned. According to industry estimates around a third of sites remain open – but smaller businesses have reported pressure from main contractors to keep working despite the potential health risks. The Lift and Escalator Industry Association has raised concerns in a submission to the Department for Business, Enterprise and Industrial Strategy, while the Specialist Engineering Contractors Group said subcontractors face the threat of potentially vast damages, adding: “Firms are being put in an invidious position."

FINANCIAL SERVICES

Wealthy investors switch focus to cash savings

More savers have been putting cash into online savings platforms as thousands pull money out of the stock market. The Sunday Times reports that at least 90,000 savers have put cash in Octopus Cash, Raisin, Flagstone and Hargreaves Lansdown’s Active Savings amid the current market turmoil. Octopus said that inquiries about opening accounts were up 46% from 1,086 in February to 1,588 in March, with the average deposit rising from £133,000 to £166,000. Meanwhile, Raisin said there was a 15% rise in the number of savings products opened on its platform last week and a 30% rise the previous week.

European regulator bans dividends

The European Insurance and Occupational Pensions Authority has banned payouts to shareholders, saying that insurers and reinsurers should “temporarily suspend all discretionary dividend distributions and share buybacks aimed at remunerating shareholders”, adding that it was temporarily banning insurance staff bonuses to ensure that insurers maintain their capital strength during the COVID-19 crisis. While French and Dutch national regulators backed the decision, German regulator Bafin said a payout ban for insurers and pension funds was currently not necessary.

Funds fall by 25% amid COVID-19 crisis

Analysis by the Times reveals savers in more than 350 pension funds have seen the value of their investments fall by 25% since the start of the year, with some having lost half. The market panic has seen the Financial Conduct Authority pause a 2018 rule that meant investment companies had to notify customers every time their investments fell by 10% or more.

Hughes moves to head off Woodford-style crisis for Toscafund

The Sunday Times reports that hedge fund tycoon Martin Hughes is splitting one of his funds to stave off a Neil Woodford-style liquidity problem. Toscafund has written to investors to inform them the Mid Cap fund’s harder-to-sell assets will be hived off into a separate portfolio.

Global regulators delay derivatives rules due to market volatility

New rules requiring asset managers to set aside cash to cover bespoke derivatives deals have been delayed by a year in response to the coronavirus pandemic.

HEALTHCARE

NMC faces collapse

NMC Health faces collapse after Abu Dhabi Commercial Bank, which has lent the hospitals group £792m, said it was pushing to appoint administrators after the firm "failed to respond" to requests for improved governance. Chairman Faisal Belhoul has called for a debt standstill to get the firm back on track after a series of scandals.

LEISURE AND HOSPITALITY

Hotel lobbies go quiet as demand drops during coronavirus pandemic

Considering the impact the COVID-19 pandemic has had on the travel sector, the FT notes that many hotel groups have furloughed staff, scrapped dividend payouts and cut executive pay.

MEDIA AND ENTERTAINMENT

Ad firms under pressure

The Sunday Times considers the climate for marketing and advertising firms and the toll the coronavirus crisis is taking. Looking at challenges to the sector, it says Facebook and Google threaten to make the multinational model obsolete, while the emergence of consultancies as credible rivals also poses a threat.

REAL ESTATE

Half a million house sales to be lost

Analysis suggests that more than half a million property sales will be lost this year due to the ongoing coronavirus crisis, with transactions tipped to fall from 1.18m last year to 734,000.

ECONOMY

Economists expect biggest slump in a century

Economists have warned that the economy is set to suffer its worst year for a century. Analysis from Nomura suggests the economy is set to shrink by 7.8% overall in 2020, marking the biggest hit since a 13% slump in 1921.

Services sector posts worst month on record

The IHS Markit/CIPS services purchasing managers’ index shows that the UK’s services sector – representing 80% of the economy – shrank at the fastest pace on record in March, sliding to 34.5 from February’s 53.2 on an index where a reading below 50 signals contraction.

OTHER

Regulators free up $500bn capital for lenders to fight virus storm

The FT calculates that central banks and regulators across the world have freed up $492bn of capital for lenders to help them absorb the impact of the COVID-19 outbreak.

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