Bank group accused of greenwashing
Green campaigners have warned that loopholes enable banks that have signed up to a global climate pledge to still invest unlimited amounts in coal mining and coal power, despite promises to tighten the rules on their lending. Banks involved in the Glasgow Financial Alliance for Net Zero (GFANZ) can continue to make new investments in coal until this time next year and maintain their existing investments in coal and other fossil fuels beyond 2023, subject to an eventual “phasing down and out” of these assets. Beau O’Sullivan, senior campaigner for Bank On Our Future, said: “The only real action we’ve seen from banks is to up their greenwashing budget. GFANZ has huge potential, but sadly it’s providing financial institutions with cover to continue, with a few exceptions, business as usual.” GFANZ was launched by former Bank of England governor Mark Carney at the Cop26 UN climate summit in November, bringing together more than 450 big banks and financial institutions to help the world meet its net zero emissions target.
Revolut boss criticises FCA over licence delay
Nikolay Storonsky, co-founder of fintech firm Revolut, has criticised the Financial Conduct Authority (FCA) over the speed of securing a banking licence. With Revolut holding a European Central Banking licence in 10 European countries but finding that full licences in the UK and US have not been forthcoming, Mr Storonsky said that progress on a licence application in the UK had been slow, with regulators lagging behind their international counterparts. He said: “I definitely see the process is slower compared to other regulators. I’ll give you an example – so we applied for 48 licences across the globe and we received 44, and three of the licences that we haven’t received are actually in the UK.” Consent for a full licence is needed from both the Prudential Regulation Authority (PRA), which supervises the capital requirements of banks, and the FCA. Mr Storonsky says that Revolut has completed its process with PRA but “the FCA process is a bit delayed.”
Regulator urges banks to link pay and climate risks
The final version of the Basel Committee on Banking Supervision’s climate change framework says banks should review their pay and bonus structures to ensure they align with long-term climate-related goals.
Credit Suisse adds to UK investment banking team
Credit Suisse has hired two managing directors from JPMorgan and BNP Paribas to reinforce its UK investment banking and capital markets team. Jasper Reiser and Dimitri Reading-Picopoulos will join Credit Suisse in London, reporting to Jonathan Grundy and Antonia Rowan, UK investment banking and corporate broking co-heads at Switzerland's second-largest bank.
Soaring household bills dampen used car demand
Used car retailer Motorpoint has warned investors of an expected slowdown in sales as consumers tighten their spending amid soaring energy bills. This comes after 2021 saw record valuations for used cars driven by strong demand as the supply of new cars dried up. However, Motorpoint warned that rising inflation and worldwide vehicle supply chain challenges "are likely to continue to affect our markets and all industry participants." This, it added, "is very likely to reduce overall sales and transactions in our markets."
Financial services must remember the lessons of the financial crisis
MPs have told the financial services sector it must not forget the lessons of the financial crisis, with Parliament’s Treasury Committee saying ministers and regulators should be careful of pursuing competitiveness at the expense of strong standards. The Future of Financial Services Regulation report recommends that regulators such as the Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority should be given a secondary responsibility for promoting long-term growth. MPs also recommend that the FCA should allow large firms to be more experimental in developing and selling innovative products, so long as at the start they set aside ring-fenced capital to compensate customers if issues arise. “This approach would not be without risks,” the report warns, “and would have to be carefully designed to avoid disadvantaging smaller firms.” It is, the committee suggests, “an example of the type of bold approach which the FCA should be prepared to consider.” Committee chairman Mel Stride said the sector “is at a turning point” and that it is “vital that regulators are not leant on to inappropriately water down regulations.” He added: “There are likely to be real opportunities to lessen regulatory burdens without weakening standards.” The report's other proposals include a call for the City watchdog to promote financial inclusion, with the FCA urged to publish an annual report on the issue.
Solvency II overhaul will boost competitiveness
Charlotte Gerken, an executive from the Bank of England’s financial services watchdog, says Government plans to overhaul Solvency II will increase the UK insurance sector’s competitiveness. Ms Gerken, executive director of insurance at the Prudential Regulation Authority, added that reform of the rules that govern the insurance sector will free up capital for “investment in the productive UK real economy.” Noting that UK insurers currently manage almost £890bn worth of assets, she said a shakeup of Solvency II could “support the productive investment of those funds.”
Home buyer interest falls for the first time in eight months
Demand from prospective home buyers fell in May, according to the Royal Institution of Chartered Surveyors. Property professionals reported that new buyer inquiries fell in May, with a net balance of 7% reporting falls rather than rises. This was a turnaround from April when a balance of 8% reported rises in buyer inquiries rather than falls, and May's result brings to an end eight consecutive months of positive results for new buyer inquiries. New instructions to sell homes were largely flat during May, while a net balance of 73% of professionals reported an increase in house prices during the month. Looking ahead over the next 12 months, expectations point to sales falling, with a net balance of 24% of professionals expecting declines rather than increases.
H&M posts better-than-expected rise in sales
H&M reported a better-than-expected 17% year-on-year rise in net sales for the second quarter to £4.4bn. Although this beat market expectations by 3%, it was still below pre-pandemic volumes. The Swedish high street chain said it would publish its full results for the period at the end of the month as part of its interim report. The retailer is expected to reveal a strong rebound in trade following the easing of pandemic trading restrictions.
Interest rates set to hit 1.25%
The Bank of England is expected to increase interest rates by 0.25 percentage points to 1.25% today, taking rates beyond what is already a 13-year high in an effort to rein in inflation. This will mark the fifth consecutive rate increase amid the cost of living crisis. Lord King of Lothbury, a former governor of the Bank of England, has suggested the Prime Minister should outline the realities of the situation to the public, saying: “Our leaders need to give us a clear narrative explaining why recent events will inevitably lower our national standard of living, how that burden will be shared, why it is important to bring inflation down, and why measures to raise economic growth and reduce regional disparities will take many years to come to fruition but will work only if we make a start now.”
Hammond: UK heading for recession
Former Chancellor Lord Hammond has warned that the UK is heading for a recession, saying "all the data points that way." Saying he expects the economy to slow down quite sharply in the autumn, Lord Hammond said this was the "next part of the cycle” that began with the pandemic and the "enormous government response.” "To think that we can somehow move on from that, leave the tab on the table and act as if nothing had happened is unrealistic, is naïve," he told Sky News. Lord Hammond said an economic slowdown is "probably a good thing," adding that it will mean “we stand a real chance of bouncing back next year in much better shape." Asked if ministers should increase spending or cut taxes, he said people are "looking for instant and pain-free solutions" and warned that “you can't solve an inflation problem by injecting more liquidity into the economy - that is pouring fuel on the fire.”
US announces biggest rate rise since 1994
The Federal Reserve has announced its biggest interest rate rise in nearly 30 years, with the US central bank increasing its benchmark rate by three quarters of a percentage point to a range of 1.5% to 1.75%. The Fed has already raised rates twice this year, by 0.25 percentage points in March and another half point in May. Policymakers expect their key rate to reach a range of 3.25% to 3.5% by the end of the year, the highest level since 2008. The increases come amid soaring prices, with figures released last week showing that inflation rose to 8.6% in May - the fastest pace since 1981.