Banks call for more time to implement duty of care rules
UK Finance has called on the Financial Conduct Authority (FCA) to give banks longer to prepare for an overhaul of its consumer rules. While the City watchdog has said it would confirm its final rules by the end of July and allow financial services business until the end of April 2023 to implement changes, UK Finance said both businesses and the regulator need at least two years to prepare for and implement the regulator’s new consumer duty. UK Finance said that while it has supported the regulator’s plan from the beginning, “such a fundamental rewiring of conduct regulation . . . will be a significant undertaking for firms and not without risks for consumers”. It added that these risks “will be exacerbated if implementation of the duty is rushed.” The trade association went on to warn that the FCA “currently proposes to give firms just nine months to interpret its finalised requirements, assess their full suite of products and services against them and undertake change programmes, alongside changes to governance processes and IT systems that underpin them.”
Savers have no inflation-beating account options
There are currently no cash accounts on the market beating inflation, according to financial information website Moneyfacts. In February 2021 there were 100 deals, including Isas, easy access and notice accounts, and fixed-rate bonds, that could beat the January 2021 rate of inflation. The analysis shows that there are now no standard cash savings accounts that better the 5.5% rate of inflation recorded in January, based on a £10,000 deposit. Rachel Springall, a finance expert at Moneyfacts, said: “Savers have been dealt another blow this month as inflation rises once more and is unbeatable with any standard savings account.” She added: “While the Bank of England predicts such a level to be temporary, even the Government target of 2% cannot be beaten unless savers lock into a five-year fixed bond.”
Lenders pull cheapest mortgage deals
Lenders have withdrawn dozens of the best mortgage deals from the market ahead of an expected Bank of England rate rise next month. Six banks and building societies have pulled deals since the start of this week. Platform, part of the Co-operative Bank, has increased rates on some of its mortgages by up to 0.58 percentage points, while HSBC has increased rates on certain fixed and variable-rate mortgages by 0.35 and 0.3 percentage points respectively. The latest changes to rates come after other lenders made changes earlier in the week. Among these, TSB withdrew its market-leading five-year fixed-rate of 1.59%, with the best deal now being offered by Yorkshire Building Society at 1.67%.
Banker pay points to unequal recovery
Analysis shows that bankers, private equity dealmakers and other financier pay is growing three times as fast as wages for nurses and teachers. Office for National Statistics (ONS) labour market data shows that average pay in the finance and business services sectors rose 8.1% in Q4 2021, outpacing the 2.6% increase seen in public sector professions and the 2.4% rise in the construction and manufacturing sectors. Simon Hunt in the Evening Standard says the data suggests Britain is seeing an “unequal recovery as it bounces back from the coronavirus slowdown”. Luke Hildyard, director of the High Pay Centre think-tank, said: “The pay culture in financial services is a key reason why the UK is one of the most unequal countries in Europe with bonus payments in the sector mostly accruing to a small number of very high earners.” Noting that bonuses in the financial services sector are increasing while the rest of the country faces a cost of living crisis, Mr Hildyard says it “highlights how the incomes of the super-rich don’t really trickle down to the rest of us.”
SEC probing Wall Street trades
The US Securities and Exchange Commission is looking into whether banks and hedge fund traders have broken the rules by tipping off hedge funds ahead of large sales of shares. The SEC watchdog is looking at whether traders are getting upfront information on block trades and improperly profiting by shorting the shares as they expect prices will fall.
Santander appeals Orcel pay-out
Santander has reportedly appealed against a court ruling ordering it to pay Italian banker Andrea Orcel €51.4m in compensation for a withdrawn offer to hire him as CEO three years ago. Mr Orcel and Santander ended up in court after the Spanish bank dropped plans to make the former UBS investment banker its CEO as a result of a disagreement over his pay. Mr Orcel had already left UBS to prepare for the new role.
BA staff to land sweeteners
With airlines looking to keep and recruit staff as the aviation industry prepares for activity to return to pre-pandemic levels, British Airways is to offer staff one-off sweeteners worth 10% of their salaries. It has told staff they will see a one-off payment of 5% of their annual pay next month, with another 5% equivalent next autumn. BA said the offer, which does not increase the workers' annual salary or pensionable income, has been made in “good faith”. It has also warned that payments are dependent on its financial performance. The offer covers cabin crew, staff at check-in, baggage handlers, engineers, call centre workers and admin staff. BA pilots are getting a 5% increase in their salaries.
Housebuilders face £3.2bn hike in construction costs
Housebuilders are set to pay £3.2bn per year more as new-build construction costs soar, with the average cost of construction for a new-build property set to rise by almost £18,000 from £174,444 per property to £192,237. Analysis by property debt adviser Sirius Property Finance shows that total costs across the industry could near £35bn. Overall build costs are set to rise 10.2% annually, with the cost of materials climbing 18.7% and labour costs up 2.5%. Soaring energy costs are also expected to have an impact.
FCA raises concerns over Binance deal
The Financial Conduct Authority (FCA) has raised concerns over Binance gaining access to a UK payments network. Following a deal with payments group Paysafe, Binance has told customers they can deposit sterling via the Faster Payment Service which is used by banks to rapidly process money transfers. The City watchdog, which last year banned Binance from offering regulated services in Britain after the firm failed to answer basic questions about its structure, said its "concerns about Binance remain". An FCA spokesman said: "We received a notification of this business partnership but have limited powers to object to arrangements of this kind.” They added that Paysafe is aware of the regulator’s concerns “and is subject to close ongoing supervision consistent with our approach for firms of its size”. A Binance spokesman insisted: "We take our compliance obligations very seriously and work proactively and collaboratively with regulators,” while a Paysafe spokesman said: "We take our regulatory obligations extremely seriously and comply with the highest industry standards.”
International watchdog voices crypto concerns
The Financial Stability Board (FSB), which monitors financial authorities in 24 countries, has warned that the booming crypto assets market could pose a serious threat to financial stability if regulators fail to take action. The watchdog has warned: “Although the extent and nature of use of crypto assets varies somewhat across jurisdictions, financial stability risks could rapidly escalate, underscoring the need for timely and pre-emptive evaluation of possible policy responses.” The FSB added that “if the current trajectory of growth in scale and interconnectedness of crypto assets to these institutions were to continue, this could have implications for global financial stability.” Its report concluded that “given the international and diverse nature of the crypto asset markets”, authorities need to prioritise cross-border and cross-sectoral co-operation. The FSB is not the first watchdog to voice concern over the matter, with regulators including the Financial Conduct Authority having previously warned over the risks in buying cryptocurrencies.
Liontrust shareholders stage large revolt over executive pay
Almost 46% of votes at fund manager Liontrust’s AGM opposed a proposal to increase CEO John Ions’ base salary by 58% to £550,000, while 44.4% opposed a five year bonus plan.
Average house price climbs £27k in 2021
Office for National Statistics (ONS) figures show that the average UK house price rose by £27,000 last year, hitting a record high of £275,000. House prices increased by 10.8% over the year to December, with this slightly higher than the 10.7% increase recorded in November. In England, property values increased by 10.7% over the year to December, taking the average price to a record high of £293,000. The average house price in Scotland rose by 11.2%, with the average price hitting £180,000 at the end of 2021. In Wales, the average price jumped by 13% to a record high of £205,000. In Northern Ireland, property values increased by 10.7% to £159,000. Separate ONS data shows that the private rental prices increased by 2% in the 12 months to January. Excluding London, private rents increased by 3% year-on-year. Nitesh Patel, strategic economist at Yorkshire Building Society, said: “A key challenge in the current housing market is the lack of supply of homes for sale whilst demand continues to remain strong.” Alan Fitzpatrick of mortgage company Habito commented: “Mortgage applicants’ affordability is likely to decline in the coming months. Even though average wage growth picked up in January it failed to keep up with inflation.”
Inflation hits 5.5% in January
Inflation data from the Office for National Statistics (ONS) shows that the cost of living hit a new 30-year high in January as energy, fuel and food prices continued to soar. The rate of Consumer Price Index inflation, which hit 5.4% in December, increased to 5.5% in January, far exceeding the Bank of England’s 2% target. The Bank believes inflation will continue to climb as energy prices increase, hitting a peak of 7.25% in April. This would mark the highest level of inflation since August 1991. Economists at JPMorgan, Citi and Capital Economics have warned that inflation could go higher still, pointing to a possible peak of almost 8%. Having already increase interest rates to 0.5% in the first back-to-back increase since 2004, officials are expected to increase rates further as the Bank looks to rein in inflation. Reflecting on the ONS’ inflation figures, Chancellor Rishi Sunak said ministers “understand the pressures people are facing with the cost of living,” noting the Government is “providing support with the cost of living worth over £20bn across this financial year and next.” Meanwhile, Isabel Stockton, an economist at the Institute for Fiscal Studies, said the rise in inflation will add another £11bn to the Government’s debt interest bill this year, taking the total to around £69bn.
Business confidence falls from a record high
The ICAEW’s quarterly business monitor shows that business confidence has been hit by a shortage of skilled workers, concerns about tax rises, and an expectation that salaries will see a sharp increase. Business confidence, which reached a record high in 2021, had declined for the second consecutive quarter. While companies reported domestic sales growth of 5.3% in the past year, this is expected to slow compared with the previous quarter, according to the survey of 1,000 accountants between mid-October and mid-January. Michael Izza, chief executive of the ICAEW, said: “After record-breaking confidence in 2021, it’s unsurprising that the index has fallen as companies look to the future. Nevertheless, confidence remains strong and is returning to the levels we saw before the pandemic.”