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Daily News Roundup: Thursday, 1st July 2021

Posted: 1st July 2021


NatWest limits transfers to crypto exchanges

NatWest has moved to cap the daily amount customers can transfer to cryptocurrency exchanges on the back of concerns over investment scams and fraud. NatWest said: “To protect our customers from the criminals exploiting these platforms, we’re temporarily reducing the maximum daily amount that a customer can send to cryptocurrency exchanges as well as blocking payments to a small number of cryptocurrency asset firms where we have seen particularly significant levels of fraud-related harm for our customers.” The move comes just days after the Financial Conduct Authority said Binance cannot conduct any regulated activities in the UK.

May saw mortgage borrowing bounce back

Mortgage approvals increased slightly in May to 87,500, having dropped in April, according to the Bank of England. They have fallen from a recent peak of 103,200 in November, but remain above pre-February 2020 levels. They are also up 827% compared to May last year, when the property market came to a standstill due to the pandemic. Net mortgage borrowing reached £6.6bn in May, up from £3bn in April, having hit a record £11.4bn in March. New mortgage rates paid crept up slightly, but the typical rate on the outstanding stock of mortgages remained unchanged at a low for the Bank's records of 2.07%.

Barclays to move investment bank staff into London HQ

Barclays is to consolidate some of its office space in the capital, with investment bankers, traders and analysts to move to the bank's Docklands HQ when the lender vacates 5 North Colonnade, which is also in Canary Wharf. The workers will relocate to Barclays’ headquarters at One Churchill Place. The move will involve putting a new trading floor in its head office, a site which already houses about 7,000 employees. Barclays said the move “is the result of a long-term review, which aims to drive efficiencies across the group’s real estate portfolio and enable the group to operate more effectively.”

Banks turn to blockchains to reform costly bond market

An increasing number of banks are issuing bonds on blockchains in a move bankers believe could bring down costs by streamlining the debt selling process.


EU bank profitability hits 7-year high

The European Banking Authority’s quarterly Risk Dashboard shows that banks in the EU became significantly more profitable in Q1, with this driven by higher income from trading and loan burdens easing. Banks’ return on equity rose to 7.6% in the first quarter from 1.9% in the year ending 2020. The dashboard is based on a sample of 131 banks which represent 80% of the EU's banking sector assets.

Deutsche Bank's licence to sponsor Hong Kong IPOs suspended

Deutsche Bank will be temporarily frozen out of sponsoring stock market debuts in Hong Kong after it failed to replace two key bankers in time for it to retain its IPO sponsor licence. The licence will be removed next month and not renewed until two new bankers Deutsche has hired have been approved by Hong Kong's financial regulator.

Barclays ups junior banker pay

Barclays is expected to increase base pay for junior bankers to $100,000. The move will see rates match new pay levels announced by JPMorgan and follows an increase announced by Bank of America in April. While the changes are expected to be global, Barclays has only informed its US-based entry-level bankers of the incoming salary increase.


Sunak to outline UK roadmap for financial services

The Chancellor is expected to pledge today to make the UK the most "advanced and exciting" financial services hub in the world. Speaking at Mansion House, Rishi Sunak will outline a roadmap for the sector that aims to "sharpen" its competitive advantage. He will also unveil a plan to force companies to report their environmental impact and reveal details of the Government's plan for the UK's first ever green sovereign bond – or gilt – and the world's first green bond. It is hoped that the money raised through the new product will help finance the UK's net zero push. Mr Sunak will say: "As the baton passes to a new generation of leaders in finance, I feel optimistic about the future. Ambitious at home. Confident internationally. With a plan to make this country the world's most advanced and exciting financial services hub for decades to come, creating prosperity at home and projecting our values abroad."

Financial services set for exemption from new global tax rules

The UK’s financial services sector is reportedly set to win an exemption from new global proposals for taxing multinational companies. The UK has argued for the exemption as current regulation sees banks separately capitalised in every jurisdiction in which they operate, declaring profits and paying tax in the countries where they do business. With the UK seemingly securing backing for an exemption amid talks led by the Organisation for Economic Co-operation and Development, sources say that in turn, it will have to scrap its digital services tax. The agreement came in the first session of talks, with these focused on defining where the largest multinational firms would have to pay tax. The second half of the negotiations will see the nations involved look to agree a global minimum corporate tax rate, with a 15% bar having been mooted.

FCA calls for stronger controls on funds after Woodford scandal

The Financial Conduct Authority (FCA) has criticised firms that are supposed to oversee fund managers such as Neil Woodford. The watchdog said Authorised Fund Managers (AFMs) suffered from governance weaknesses and conflicts of interest. The FCA added that AFMs failed to focus on risks posed to investors by 'inappropriate or poor value' funds. Some referred to funds as if they were solely operated by the third-party manager, the FCA said, and did not mention their own responsibilities. Sheldon Mills, at the FCA, said: “Some firms are not sufficiently meeting FCA standards and we want to see significant improvement.  We expect firms to look at the key findings on governance structures, conflicts of interest, operational controls, and the other areas highlighted and take action.”

UK and Singapore agree post-Brexit deal for financial services

Britain has said it has agreed a partnership for financial services with Singapore as part of its push for post-Brexit trade and investment deals. The agreement includes a memorandum of understanding which seeks to reduce burdens for firms operating in British and Singapore markets by recognising that their financial services regulatory regimes achieve the same outcomes. Chancellor Rishi Sunak said: "Our financial partnership will help increase investment and trade with Singapore and the Asia-Pacific region and boost collaboration on important areas such as fintech and green finance."


Factories set to raise prices

A quarterly survey of 5,800 businesses by the British Chambers of Commerce (BCC) shows that a balance of 58% of manufacturers plan to raise prices to pass on raw material costs. This not only marks a 27% increase on the previous quarter but is the highest figure since the survey began in 1989. The share of companies reporting an increase in domestic sales rose to 44%, up from 28%, while two thirds of firms said turnover was likely to increase in the next 12 months. Just over one in ten said they foresee a fall in sales. It was also found that a balance of 31% of services companies planned to raise their prices – a two year high. Suren Thiru, head of economics at the BCC, said that the “survey points to a striking rebound in underlying economic conditions”, with the economy “in a sweet spot”.


BTL landlords eye market exit

Almost a million UK landlords, more than a third of the total, will review their property portfolios in the next year, according to the Nottingham Building Society. Its report also found that a fifth plan to sell some or all of their portfolio, while just 16% plan to buy more. Meanwhile, a separate report by the University of York and the Nationwide Foundation found that many baby boomer landlords were 'ageing out' of the market - and were not being replaced at the same rate by younger landlords due to diminishing returns and more stringent regulation. Both reports noted that tax changes have been one of the main factors making buy-to-let less attractive.

Stamp duty holiday tapers as market moves toward normality

Experts believe that the property market will remain strong despite the stamp duty holiday tapering as of today. The nil rate stamp duty threshold which had been temporarily set at £500,000 since July 2020 has now decreased to £250,000 and will revert to its normal level of £125,000 on October 1.


Gap to close UK and Ireland stores

Fashion chain Gap plans to close its branches in the UK and Ireland and go online-only, shutting up stores "in a phased manner" between the end of August and the end of September. All 81 Gap stores will close, with this including 19 that were already scheduled to close in July as their leases were expiring. A Gap spokesperson said the decision followed a strategic review of its European business that will also see it offload stores in France and Italy.


Haldane: Inflation could hit 4%

Andy Haldane, the Bank of England’s outgoing chief economist, has warned that inflation could approach 4% this year. He said he expects inflation to be nearer 4% than 3%, warning that this “increases the chances of a high inflation narrative becoming the dominant one, a central expectation rather than a risk.” While the Bank’s Monetary Policy Committee last week said it anticipated inflation to peak at 3% by the end of 2021 before falling back in 2022, Mr Haldane said a speech to the Institute for Government think-tank that there are reasons to believe rising prices in parts of the UK economy would translate into a wider “significant and persistent” rise in inflation. He warned that if inflation were to surge, “everyone would lose”, saying central banks would need to “execute an economic hand-brake turn”, businesses and households would face higher costs for borrowing and living, and the Government would see rising debt-servicing costs. The most recent figures show that inflation rose to 2.1% in May, with Consumer Price Index inflation up from 1.5% a month earlier.

Economy shrinks 1.6% in Q1

Data from the Office for National Statistics (ONS) shows that the economy contracted by more than was first thought in Q1, with GDP estimated to have decreased by 1.6% in the period between January and March. This marks a slight increase on an original estimate of a 1.5%. The revised figure means GDP is 8.8% below where it was in Q4 2019, the last quarter unaffected by the pandemic. The ONS report also shows that the household saving ratio - the estimate of the amount of money that households can put away - increased to 19.9% in the first three months of 2021. This is up on the 16.1% recorded in Q1 2020 and the second highest ratio ever recorded after the 25.9% posted in Q2 2020.


UK to replace EU state aid rules

The Government has announced new laws to replace EU rules on taxpayer-funded bailouts and business support, giving ministers more power to intervene in failing industries. The Subsidy Control Bill is set to replace EU state aid rules that require its members to seek approval for government support for businesses. In rolling out new rules, the UK must follow commitments on subsidy controls set out in free trade agreements and adhere to World Trade Organisation procedures. Reflecting on the plans, Business Secretary Kwasi Kwarteng said: “While the UK’s new system will be more agile and flexible, I have been clear that we will not return to the failed 1970s approach of the government trying to run the economy, picking winners or bailing out unsustainable companies.” He added that every subsidy “must deliver strong benefits for local communities and ensure good value for money for the British taxpayer”.

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