Review says 'ring-fencing' rules need simplifying
A review led by finance industry veteran Keith Skeoch says capital rules imposed on banks following the financial crisis have not harmed competition but may need simplifying. The ring-fencing regime was introduced after taxpayers had to bail out several undercapitalised banks, with banks with deposits of £25bn or more having been required to hold extra capital around their retail divisions to protect against potential issues in their trading and investment operations since 2019. The review said the ring-fencing regime “has had no significant impact on competition in retail banking or its submarkets,” but noted: “The current rules have resulted in unintended consequences that create unnecessary rigidity for customers, banks, and regulators." While some banks have pushed for the deposit limit to be increased, the review made no reference to upping the threshold.
UK financial regulator urged to crack down on banks overcharging borrowers
Ministers are reportedly under pressure to tighten the Financial Conduct Authority’s policing of rules barring lenders from charging a majority of customers interest rates higher than those originally advertised.
Revolut launches US trading service
British-based banking app Revolut has launched a commission-free stock trading service in the US. Revolut secured a US broker license in September 2021.
€200bn moved across Irish Sea since Brexit
The Irish balance sheets of global banks that run international operations from Dublin have risen by around €200bn since the UK voted to leave the EU in 2016. The increase means the Irish capital is gradually becoming a major banking hub within the EU, with Dublin trailing only Frankfurt in regard to the total value of assets moved out of Britain to EU-based branches of European and global banks. Analysis by the Federation of International Banks of Ireland (FIBI) and the Banking and Payments Federation Ireland shows that the total amount on Irish balance sheets held by international banks was €517bn at the end of December 2021. Fiona Gallagher, chairwoman of the FIBI and chief executive of Wells Fargo Bank International, said many UK and global banking groups built-up or established new Irish entities to service EU clients post-Brexit, with this meaning an “influx of new staff, assets, risk management capabilities and investment services activities.”
Morgan Stanley sees profit climb
Profit at Morgan Stanley rose to $3.59bn in Q4, an increase on the $3.27bn recorded a year earlier, with fees from advising on a surging number of mergers and acquisitions helping drive the increase. Investment banking revenues were up 6% to $2.6bn in the quarter and 43% for the full year.
Bank of America profits rise 28%
Bank of America’s profits rose 28% in Q4 from a year earlier, hitting $7.01bn. BofA's investment banking division saw profits climb to $2.68bn from $1.6bn, while its consumer banking business recorded profits of $3.12bn – up from $2.59bn a year earlier.
JP Morgan adds $10k to junior bankers’ pay
JPMorgan is increasing pay for first-year investment banking analysts to $110,000 from $100,000. It is also raising second-year analyst pay to $125,000 and third-year pay to $135,000.
Crest Nicholson financial ‘turnaround' declared
Housebuilder Crest Nicholson has announced that profit after tax increased to £70.9m from a £10.7m loss after tax in 2020, with revenue of £786.6m, a rise from £677.9m in 2020.
FCA cracks down on crypto offers
The Financial Conduct Authority (FCA) has launched a crackdown on financial advertising, flagging concern over “the ease and speed with which people can make high-risk investments”. The FCA wants to ban incentives to invest such as refer-a-friend bonuses or new joiner giveaways, with the City watchdog also looking to beef up rules around financial marketing and risk warnings. While the mooted regulations are targeted at companies offering cryptocurrency investments, they will also apply to the marketing of other high-risk investments, such as mini-bonds or peer-to-peer loans. It is understood that the new rules will not apply to regulated businesses offering investments such as shares or ETFs. Sarah Pritchard, executive director of markets at the FCA, said: “Too many people are being led to invest in products they don’t understand and which are too risky for them.” Lisa Cameron, chair of the Crypto and Digital Assets All-Party Parliamentary Group, has called for “clear rules and guidance for the promotion of crypto and digital assets,” saying crypto firms must “know what they can and can’t do and don’t fall foul of the rules.”
TPR urges schemes to report suspected scams
The Pensions Regulator (TPR) has urged schemes to share data on suspected scams, saying “every administrator, trustee and provider should take responsibility for protecting savers”. It has called on pension funds to join its Pledge to Combat Pension Scams campaign, noting that 398 funds covering an estimated 16m pension pots have already done so since the initiative launched in November 2020. Nicola Parish, TPR’s executive director of frontline regulation, said the industry “must stand up and do all it can to protect savers from these life-shattering crimes, by joining our pledge campaign and reporting any suspected scams”. FT Adviser notes that regulations were introduced in November in a move to stop scams happening on defined benefit transfers, with trustees and scheme managers empowered to prevent a transfer request when a ‘red flag’ is present.
Unilever ‘abandons’ its GlaxoSmithKline bid
Unilever has effectively abandoned its pursuit of Glaxosmithkline’s consumer healthcare arm by insisting it would not pay more than £50bn. GSK is planning to press ahead with its plans to demerge the consumer healthcare business, which is 32%-owned by Pfizer.
GSK chief scientist joins anti-ageing start-up Altos Labs
GlaxoSmithKline’s chief scientific officer Hal Barron will leave the firm this year to join Silicon Valley start-up Altos Labs, which is hiring scientists around the world to explore how to reverse the ageing process. Mr Wood joined GSK from Pfizer in 2017.
Average house price hits £271k
Office for National Statistics (ONS) figures show that UK house prices jumped by 10% in the year to November. The report shows that the average price was £271,000 in November, an increase of £25,000 compared to a year earlier. In England, average house prices increased by 9.8% over the year, reaching £288,000, while the average in Scotland hit a record high of £183,000 on the back of a 11.4% spike. Wales saw its average property price rise by 12.1% to £200,000 and in Northern Ireland the typical price was up 10.7% to £159,000. Regionally, South West England led the way on growth as prices rose by 12.9%. At the other end of the scale, the slowest regional growth was the 5.1% annual increase recorded in London.
Inflation climbs to 30-year high
Official figures show that inflation jumped to 5.4% in December, with this the highest rate since the 7.1% recorded in March 1992. The consumer price index (CPI) measure of inflation was up from 5.1% in November, with soaring food costs and energy price increases helping drive the rate up. The Office for National Statistics (ONS) data shows that the cost of goods rose by 6.9% while services increased by only 3.1%. The rising cost of living could put pressure on Bank of England to raise interest rates in a bid to bring inflation closer to its 2% target. The Bank, which raised rates from 0.1% to 0.25% last month, expects inflation to hit 6% this spring. Reflecting on the report, Grant Fitzner, chief economist at the ONS, noted: “The closures in the economy last year have impacted some items but, overall, this effect on the headline rate of inflation is negligible.” Alpesh Paleja, lead economist at the CBI, said: "We've not seen the end of rising inflation yet,” warning that households are likely to face “a cost-of-living crunch for much of this year." Commenting on the data, Chancellor Rishi Sunak highlighted that the Government is providing support worth about £12bn this financial year and next to help families cope. Shadow Treasury secretary Pat McFadden said that families are “already feeling the crunch” and will be further hit by a “triple whammy” of a rise in the energy price cap, real wages falling and tax rises “coming down the tracks."
BoE governor: Inflation will stay higher for longer than expected
Andrew Bailey, governor of the Bank of England, has warned that inflation could last longer than first thought. Mr Bailey told MPs on the Treasury Select Committee that financial markets do not expect energy prices to start easing back until H1 2023, later than had previously been forecast. He described this as a “big shift” that could alter the Bank’s position that higher levels of inflation would be temporary. Mr Bailey also ruled out interest rates returning to levels seen before the financial crash, saying: “That's not to say interest rates won't rise, it's to put it into context of how much.”