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Daily News Roundup: Thursday, 21st July 2022

Posted: 21st July 2022

BANKING

Banks need to prepare for tougher times

Bank of England executive director Nathanael Benjamin said on Wednesday that investment banks need to revisit their risk controls as persistent inflation will inevitably lead to higher interest rates and more costly borrowing for client businesses. "It is highly probable there are individual businesses or marginal players that have relied upon the easy conditions of the past decade who might struggle to adapt when the new tide comes in," Benjamin told an event held by UK Finance. "Risk concentration should not only be assessed on a client by client basis, but across all clients combined," he added. "Whilst this information may not be readily available, the onus is on firms to demand of their clients the information they need to assess the risks they are exposed to." Benjamin said it was for the banks, not the regulator, to ask the right questions, and if clients don't want to give an answer then "maybe you need to draw a conclusion from that".

Loan scheme for small firms to be extended by two years

Kwasi Kwarteng has announced that a scheme offering government-backed loans to small businesses will be extended by a further two years. The Business Secretary said on Wednesday: "Small businesses are the lifeblood of the British economy, which is why we are determined to support our traders and entrepreneurs in dealing with worldwide inflationary pressures. The extension of the Recovery Loan Scheme will help ensure we continue to provide much-needed finance to thousands of small businesses across the country, while stimulating local communities, creating jobs and driving economic growth in the UK."

Big banks keep savings rates low

The Daily Express reports on how many of Britain’s biggest banks are still snubbing savers with their current accounts paying out barely any interest despite rates rising to 1.25%. The paper points to Barclays' Everyday Saver account, which is still paying just 0.01%, and HSBC, Lloyds and NatWest, which have increased their easy access rates to typically just 0.2%, well below today's best buy rates of more than 1.5%. Elsewhere, the Mirror reports that MoneySavingExpert's Martin Lewis says savings rates have risen to a 10-year high of 3% - but many banks are still getting away with not paying enough. Lewis says if your bank isn't paying 1.5%, it's time to switch.

Virgin Money gives thousands of staff cost of living bonus

Virgin Money is handing out a one-off cash bonus of £1,000 to thousands of staff in an effort to help with the cost of living. The banking group said that workers who earn £50,000 a year or less will get the cash. The move comes after Lloyds Bank last month revealed 99.5% of its staff would also receive an extra £1,000 in their August wage packet.

PRIVATE EQUITY

Blackstone raises record new real-estate fund

Blackstone has closed on commitments totalling $24.1bn for the latest iteration of its main real-estate fund. The private equity giant is committing about $300m of its own capital to Blackstone Real Estate Partners X and already has allocated an additional $5.9bn to investors, which will bring the fund to $30.3bn when it is finalized.

FINANCIAL SERVICES

Insurers issue warning as post-Brexit reforms of City unveiled

The post-Brexit overhaul of the rules governing the insurance sector, put forward by the Bank of England’s Prudential Regulation Authority, would increase capital requirements for some providers and dash Government hopes for a boost to infrastructure investment, insurance companies have warned. Although welcoming the proposed overhaul of Solvency II rules, the Association of British Insurers said that, for life insurers, the changes to how their liabilities were calculated would more than offset the benefit of reducing their risk margin. The changes are included in the new Financial Services Bill, which Chancellor Nadhim Zahawi said would see hundreds of pieces of burdensome EU regulations repealed and the UK seize the benefits of Brexit “to ensure the financial sector works in the interests of British people and businesses.” The legislation also gives the Financial Conduct Authority and the PRA new secondary mandates to promote competitiveness and growth and new power to oversee stablecoins.

BoE boss 'failed to protect' British Steel pensioners, MPs find

MPs have accused the Governor of the Bank of England, Andrew Bailey, of failing to protect British Steel pensioners while he was boss of the City watchdog. Whilst head of the Financial Conduct Authority (FCA), Mr Bailey did not do enough to prevent “unscrupulous financial advisers” from robbing steelworkers of their savings, the Public Accounts Committee (PAC) found. Around 7,800 British Steel employees were mis-sold pensions when the Government introduced “pensions freedoms” in 2015, which allowed them to transfer savings into riskier defined contribution schemes. They lost an average of £82,600 each – with some losing up to £489,000. The PAC said the FCA was “consistently behind the curve”, and “failed to take preventative action to protect consumers.” MPs said that the case pointed to wider problems within the FCA’s regulation of financial advice, such as the authorisation and oversight of small firms, access to data and intelligence to identify problems, and the use of enforcement powers.

Morses Club shares tumble 40% on compo news

The doorstep subprime lender Morses Club saw its share price slump by over 40% on Wednesday after it revealed plans to enter a “potential scheme of arrangement” to address customer compensation claims that “could jeopardise the group's future”. Shares were down 42.40% or 3.60p to 4.89p by midday, having fallen over 90% in the past year.

Calpers records first loss since 2009 in ‘tumultuous’ markets

The California Public Employees’ Retirement System, the largest public pension plan in the US, has reported a preliminary 6.1% loss for the financial year to June 30 - the fund’s first annual loss since the global financial crisis in 2009. At year end, its total assets stood at $440bn, down from $469bn a year ago.

REAL ESTATE

Fear of interest rate rise spurs house price surge

The average UK house price rose to £283,000 in the year May, a jump of 12.8% compared to 12 months ago, according to the Office for National Statistics. This was up from 11.9% in April and marked the highest rate recorded since the stamp duty holiday rush last summer, when growth hit 13.2%. The surge in prices is said to be driven by buyers racing to purchase homes with cheap mortgage deals before interest rate rises shut them out of the market. However, Samuel Tombs, of Pantheon Macroeconomics, said official figures had not registered the slowdown in house price growth reported in recent months as it is based on completed transactions.

RETAIL

Premier Foods sees Q1 boost as Brits opt for "value" products

Premier Foods reported a 6% rise in sales in the first quarter, compared with the same period two years ago, to £197m. The consumer goods giant said the rise was driven by increasing demand for "value" products as "household budgets become ever stretched".

ECONOMY

Rising fuel and food costs push UK inflation up to 9.4%

A 42% year-on-year increase in petrol prices, and an increase of almost 10% in food prices pushed June's inflation figure to an annual rate of 9.4%, the Office for National Statistics (ONS) said. This is up from May's reading of 9.1% and marks a fresh 40-year high. The prices paid by factories for materials and energy were 24% higher last month than a year earlier - the biggest increase since records began in 1985 - while prices charged by factories jumped by 16.5%. The Bank of England is expecting a further acceleration - beyond 11% - in October when the energy price cap is adjusted again.

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