Banks could see ringfencing rules relaxed
Ministers are considering relaxing rules brought in to stabilise the banking system after the 2008 global financial crisis. Rules which require lenders to separate their high street operations from other activities such as investment banking or international operations could be eased as officials look to deregulate the City of London and spark a post-Brexit big bang for financial services. Under the potential changes, Britain’s largest banks, such as Barclays and HSBC, would still be ringfenced, while smaller lenders, such as TSB and Santander UK, might be released from following the rules. Since January 2019, banks including HSBC, Lloyds, NatWest and Barclays, which have core deposits of more than £25bn from retail customers and small businesses, have been required to hold more capital to allow them to absorb future potential losses in other operations. Economic secretary to the Treasury Andrew Griffith said: “We can make the UK a better place to be a bank, to release some of that trapped capital over time around the ringfence.” Financial Conduct Authority chief executive Nikhil Rathi said he was “supportive of evolving regulations” that were fit for the UK markets.
HSBC to close 114 UK branches
HSBC plans to close 114 more UK branches from April, with the bank saying the number of customers using them has fallen significantly since the pandemic. HSBC said it will try to redeploy affected staff but about 100 people will lose their jobs. The bank also said it would invest in updating its remaining 327 branches. Noting the decline in in-person banking, Jackie Uhi, HSBC's managing director of UK distribution, said footfall in many branches was at an "all-time low, with no signs of it returning," adding that banking remotely “is becoming the norm for the vast majority of us.” In March, the bank announced plans to shut 69 branches this year. Data from Which? shows that high street banks and building societies have closed more than 5,200 branches since 2015. Natwest, which owns RBS and Ulster Bank, has closed more than 1,200; Lloyds Banking Group, which owns Halifax and Bank of Scotland, has closed more than 850, with plans to close more than 70 more in 2023; while Barclays has closed more than 960 branches.
Bank of England backs strict adoption of global bank capital rules
The Bank of England plans to adopt globally agreed bank capital rules rather than opting to follow the EU in diluting regulation relating to trade finance, mortgages and lending to small companies.
FCA fines Swiss bank £18m
The Financial Conduct Authority (FCA) has fined Swiss bank Julius Baer more than £18m over its “corrupt” dealings with Russian oil company Yukos Group. The watchdog fined Julius Baer’s international business - and sanctioned three of its executives - over the private bank’s use of third-party agents in carrying out business with Yukos Group. The FCA says the bank paid $3m in fees to a third-party agent in return for introducing the bank to companies owned by Yukos Group. The watchdog said Julius Baer became aware of the commission payments made to Dmitri Merinson in 2012 but failed to report those matters to the FCA until 2014, despite suspecting a potential fraud had been committed. Mark Steward, FCA executive director of enforcement and market oversight, said: “There were obvious signs that the relationships here were corrupt, which senior individuals saw and ignored.” The watchdog fined Julius Baer an initial sum of £24m for failing to conduct its business with integrity, failing to take reasonable care to control its affairs, and failing to be open and cooperative with the FCA. As the bank opted to settle the charges at an early stage, and accept partial liability for the failings, it qualified it for a discount of up to 30%.
FCA plans simplified advice regime
The Financial Conduct Authority (FCA) will look to relax independent advice rules to make it easier for firms to advise consumers about certain mainstream investments within stocks and shares Isas. In a consultation paper, the City watchdog has proposed plans that would see it create a separate, simplified financial advice regime to improve access to financial advice. The FCA believes the changes could lead to more people moving some of their excess cash savings into investments held within stocks and shares Isas. The regulator said it will limit the regime to advice relating to investments held within a S&S Isa wrapper in order to keep the tax implications as simple as possible for investors. Sarah Pritchard, executive director of markets at the FCA, said: “Now more than ever, people across the UK should have access to useful and affordable financial products and services which can improve their quality of life and support the economy.” She added: “These proposals are part of our work to deliver a consumer investment market where people can readily access support and firms aren’t deterred from providing it.”
Hedge fund manager pockets record payout
Hedge fund manager Sir Chris Hohn paid himself a record-breaking £574m after his Children’s Investment (TCI) fund saw a spike in profits. The payout, which equates to more than £1.5m a day, is believed to be the highest annual amount ever paid to one person in Britain. The sum for the year to the end of February is up from $152m the previous year, and up from a previous record of $479m the year before. The dividend payment from TCI Fund Management is 15,000 times the average UK salary.
MEDIA & ENTERTAINMENT
Google sued over ad dominance
Google has been sued by 130,000 firms over claims that its advertising strategy has cost them up to £13.6bn in lost revenues. The competition claim at the Competition Appeal Tribunal accuses Google and parent firm Alphabet of abusing its dominant position in online advertising and earning vast profits for itself at the expense of publishers of websites and mobiles apps. Toby Starr, a partner at law firm Humphries Kerstetter, said regulatory actions will not do anything to compensate publishers who have lost billions in advertising revenue because of Google’s actions, saying: “The only way to recoup these losses is through a competition class action.” The UK legal action is being brought in parallel with an EU claim, expected to be filed in Netherlands early next year.
Twitter could face ban under EU rules
Twitter owner Elon Musk has been told that the social network could face a ban if it fails to comply with new European rules on disinformation. EU Commissioner Thierry Breton has told Mr Musk that Twitter would have to address issues such as content moderation, disinformation and targeted adverts. This comes as part of the Digital Services Act, which places obligations on companies to prevent abuse of their platforms. If firms are found to be in violation, they face fines of up to 6% of global turnover - or a ban in the case of repeated serious breaches.
Tracker mortgage nearly £1k cheaper than fixed-rate deals
The cheapest mortgage rates have now fallen to nearly 3% as borrowers eye tracker deals. Yorkshire Building Society has launched a two-year tracker mortgage at 3.29%, reduced from 4.15% and the cheapest of its kind on the market. Skipton Building Society has a two-year tracker deal available at 3.39% and both are significantly lower than the average two-year tracker rate of 4.29%, according to analyst Moneyfacts. Brokers have reported demand for tracker deals is at the highest level in more than a decade as borrowers wait for interest rate drops on fixed-rate deals. A buyer taking out a £400,000 home loan at 3.29% will pay £1,097 per month in interest – a £973 monthly saving compared to if they take out a two-year fix at the average rate of 6.21%.
Food inflation hits a record high
Food prices rose at a record rate in the year to November, with British Retail Consortium (BRC) data showing that food inflation hit 12.4% last month. This was up from the 11.6% recorded in October, with the increase coming on the back of a sharp rise in the price of meat, eggs, dairy and coffee. Fresh food prices were up by 14.3%, compared with 13.3% in October. Overall shop price inflation accelerated to 7.4% year-on-year in November, up from 6.6% in October. This is the fastest rate since the index began in 2005. BRC boss Helen Dickinson said winter looked "increasingly bleak" as price pressures continued "unabated," going on to warn: “Christmas gifting is also set to become more expensive than in previous years.”
Tax as a share of the economy hits 33.5%
Organisation for Economic Co-operation and Development (OECD) data shows that taxes as a share of the British economy rose by 1.4 percentage points to 33.5% in 2021. That was the biggest rise among G7 economies apart from Germany, with the increase also exceeding those seen in traditionally high tax countries Sweden, Finland and Denmark. Britain's tax burden is at its highest since 1988 and the figures do not take into account the tax increases set out in Chancellor Jeremy Hunt's Autumn Statement. Despite the increase, the UK's overall tax burden remains lower than those of its European counterparts. France's tax-to-GDP ratio currently stands at 45.1%, while Italy's hit 43.3% in 2021. Across all countries measured, the average tax-to-GDP ratio rose by 0.6 percentage points in 2021, hitting 34.1%. This marks the second-steepest year-on-year increase since 1990.
BoE chief economist: Brexit played a part in surging inflation
The Bank of England’s chief economist believes Brexit may have played a part in driving up inflation. Huw Pill said Brexit has reduced trade between the UK and Europe, with this having a knock-on effect on labour, productivity and prices. Warning that Brexit “has probably reduced some of the competitive pressure in the goods market” as it is harder to import things from Europe, he said: “Some of that loss of competitive pressure probably means there is greater pricing power at some points in value chains in the UK, and that has probably proved to be somewhat inflationary.” Asked to what extent he feels Brexit is to blame for the UK’s current economic position, Mr Pill told an economic summit run by the ICAEW: “I think Brexit plays a part, but I don’t think it’s necessarily the whole story, probably only part of the story.”
Consumer confidence declines in Q3
Soaring inflation had a negative impact on consumer confidence in Q3, according to a survey by Danske Bank. The bank's consumer confidence index shows that 56% of respondents felt worse off than last year, while just 18% felt their finances had improved. The survey reveals that consumers felt less confident about current finances, future finances, job security and expected spending on expensive items. While 63% of respondents thought their finances would worsen in the next year, just 15% thought they would improve. Danske Bank chief economist Conor Lambe said: "Looking forward, demand in the economy is projected to be weaker in 2023 and the rate of inflation is expected to decline gradually. However, the rate of price rises is still expected to exceed the 2% target when averaged over the year, with annual consumer spending being squeezed as a result."
Confidence slips among London firms
Lloyds Bank’s latest Business Barometer shows that optimism among businesses in London fell 27 points over the last month to 22%, with this marking one of the biggest falls on record. Despite the decline, firms in the capital are the second most confident in the UK. Overall, UK business confidence dropped five points to 10%. Becci Wicks, regional director for London at Lloyds Bank commercial banking, said: “While it’s disappointing to see London firms’ confidence take a knock, overall they remain optimistic about their trading prospects and what the year ahead will bring.” The survey shows that a net balance of 16% of companies in the capital are increasing recruitment, with this down more than 20 points over the last month.