Political storm erupts over banker bonuses
Labour has urged the Government to reveal whether Boris Johnson was lobbied by bankers for the cap on their bonuses to be lifted. According to reports, Downing Street chief of staff Steve Barclay has written to Chancellor Rishi Sunak with a plan for “deregulatory measures to reduce the overall burden on business” and attract companies after Brexit. The measures could include cutting restrictions on director and non-executive director remuneration. Number 10 rejected claims that the PM was trying to relax a separate cap on bankers’ bonuses, saying. “That remains in place and is the responsibility of the independent Prudential Regulation Authority.” Meanwhile, Matthew Lesh, the head of public policy at the Institute of Economic Affairs, says in a piece for the Telegraph that the EU rule restricting bankers’ bonuses was “an absurd piece of regulation” and that there’s “no good reason for the state to put limits on what people are allowed to earn.”
UK extends plan for NatWest sale
The Treasury has extended the time frame for selling down the taxpayer's stake in NatWest to August 2023 as the bleak global economy depresses the value of bank stocks. The Government still has a £11.3bn (48.5%) stake in the lender after it bailed out RBS during the financial crisis. A Treasury statement said: “The actual number of shares sold on any day under the trading plan will depend on market conditions, among other factors.” It added that, as before, Morgan Stanley would continue to have “full discretion” to conduct an orderly sale.
Rampant inflation burns through savings
Soaring inflation has meant household savings are being eroded at the fastest pace in 50 years. A saver with £10,000 in an easy access account paying the average market rate of 0.34% would accrue just £34 in interest over a year. But the real value after 9.1% inflation would be £9,197 – a loss of £837, reports the Telegraph’s Rachel Mortimer. Kevin Brown, of investment group Scottish Friendly, said: “The gulf between interest rates and inflation hasn’t been this profound since the early 1970s.”
HSBC unveils £250m fund for high-growth UK tech
HSBC has unveiled a new £250m lending fund for high growth tech businesses. Roland Emmans, Head of UK Tech Sector & Growth Lending at HSBC UK, said the bank was looking to “support ambitious tech businesses”. Growth Lending allows access of up to £15m in financing to support scale-ups as they grow, and the bank said it would now be scoping out IP and technology-rich businesses in cloud or software, healthtech, edtech, fintech and advanced manufacturing.
UK Infrastructure Bank pledges to make direct equity investments
The CEO of the UK’s new £22bn infrastructure bank, John Flint, has defended the body’s reliance on third party asset managers to identify opportunities arguing that the bank is currently building the capacity to make its own direct equity investments.
Barclays to shut 15 more branches
Barclays has announced that another 15 of its branches will close for good this year, with a total of 132 to shut by 2023. The lender blames a customer shift towards online banking.
Crédit Agricole to cut financing of oil and gas emissions
France’s second-biggest listed bank issued a strategy update on Tuesday which includes plans to cut its financing of emissions produced by the oil and gas sector and some other highly polluting industries. Crédit Agricole said emissions produced in the oil and gas sector and financed by the bank will fall 30% by 2030, while the intensity of the emissions it finances in the car industry will drop by half. The lender outlined the plans as part of midterm goals to increase revenues and profits. The bank is now targeting annual net income of €6bn by 2025 in its listed unit, up from €5.4bn in 2021.
Lebanese lenders claim IMF plan to seize assets breaks the law
A letter sent on behalf of the Association of Banks in Lebanon warned the IMF that a proposal to seize lenders’ assets from the central bank as part of a $3bn rescue plan was both unlawful and unconstitutional. However, later statements from several banks said they do not oppose the deal adding that the agreement was one of the main ways to exit Lebanon's financial crisis.
Supply of new-build London housing could halve, says Berkeley chief
Rob Perrins, CEO of developer Berkeley Group, has warned that rising construction costs and development taxes could mean the number of new homes being built in London could halve in the coming years. At the moment, extra build costs are being offset by rising house prices, Perrins said, but this was unlikely to continue. Berkeley posted a pre-tax profit of £552m for the 12 months to the end of April, up 6.4% on the previous year. This is despite operating expenses rising 18% to £157m. However, shares were down 3.1% amid rising economic uncertainty and a recent slowdown in property transactions.
Tether to launch sterling-pegged stablecoin
Tether is to launch a new stablecoin in July pegged to sterling. The British Virgin Islands-based cryptocurrency company promises that GBP₮ – its fourth pegged cryptocurrency – will be backed one-to-one by the British pound. The Telegraph points out that the launch of a sterling stablecoin should make it easier for British investors to access cryptocurrencies as it will allow trading platforms to more easily accept GBP deposits. However, Tether’s expansion to the UK is likely to draw scrutiny from regulators considering it was fined by US authorities last year for failing to have enough dollar reserves to back its stablecoin one-for-one. A Treasury spokesman said the UK was committed to “putting the UK’s financial services sector at the forefront of cryptoasset technology and innovation” while Tether’s chief technical officer, Paolo Ardoino, said: “We believe that the United Kingdom is the next frontier for blockchain innovation and the wider implementation of cryptocurrency for financial markets.”
FCA fines insurance broker over corruption failings
The Financial Conduct Authority (FCA) has fined JLT Specialty Ltd £7.9m, stating that the insurance broking firm failed to control financial crimes, including bribery involving over £2.4m. JLT placed business in the London reinsurance market for another company within the group, based in Colombia. The business had been introduced by a third party based in Panama. Between 2013 and 2017 JLT Speciality paid $12.3m in commission to JLT Colombia’s parent company, which in turn paid $10.8m to the third party in Panama, the regulator said. This third party then paid over $3m to officials at a state-owned insurer to help retain and secure their business. Mark Steward, executive director of enforcement and market oversight, said: “Lax controls by JLT Specialty meant, ultimately, that money flowed into the pockets of corrupt officials.”
New subcommittee to scrutinise changes to financial services regulation
A cross-party group of MPs are forming a new subcommittee to scrutinise proposed changes to the way City firms are regulated post-Brexit. The group will be run by Treasury committee members and advised by a panel of experts. “New forms of scrutiny will be required, given the number of regulatory initiatives is likely to grow as regulators assume additional responsibilities following the UK’s exit from the EU,” the Treasury committee said in a statement. Separately, a House of Lords committee has claimed that the breakdown of regulatory co-operation between the UK and EU over financial services has become “collateral damage” in the dispute over the Northern Ireland protocol.
UK officials weigh options to force London IPO for Arm
The UK Government has considered using the new National Security and Investment Act to coerce SoftBank to list the computer chip designer Arm in London, rather than New York, as officials fear a further weakening of the British tech sector. The Guardian’s Nils Pratley comments on the issue, asserting that the legislation wasn’t designed for such a move. Pratley goes on to recommend a primary London listing plus US-listed depositary receipts, claiming this offers a “best of both worlds” option.
House price growth soars as buyers race to lock in cheap deals
The average UK house price surged by 12.4% in April, up from 9.7% in March, according to the Office for National Statistics. Average values jumped to £281,000 in April, £31,000 higher than this time last year. In Wales and Scotland, house price growth hit 16.2%. In England, the rate was 11.9%, while Northern Ireland recorded 10.4% growth. The South West had the fastest price rises of any region in England, with growth at 14.1%, while London recorded the slowest pace of growth at 7.4%. However, due to a lag in ONS, data the figures do not reflect the current state of the cooling market. Andrew Montlake, of mortgage broker Coreco, said: “This data is not a true reflection of where the market is at right now. The era of ultra-cheap money is finished and that will soon start to feed through into house price growth.” In the six months to May, the average rate on a two-year fixed-rate mortgage with a 25% deposit has surged from 1.57% to 2.63%. Pantheon Macroeconomics forecast this will hit 3.7% by the end of this year. It expects house price growth to fall to 5% over the same period.
Boots’ bidder relying on lenders
Apollo Global Management and Reliance Industries, a consortium which is currently the sole bidder for Boots, are relying on Royal Bank of Canada, Credit Suisse, Santander and Bank of America to finance the deal. Sky News reports that people close to the bid, on which RBC is also advising the consortium, insisted on Wednesday that it remained on track even as doubts grow about the lenders' commitment to the deal. One City source suggested that the financing commitments looked "shaky". Another prospective bid from the owners of Asda - Mohsin and Zuber Issa and TDR Capital - remains uncertain.
Profits rise at JD Sports
JD Sports has reported that revenue increased to a total of £8.6bn in the 12-months to 29 January, up from £6.2bn in the same period a year prior. The retailer has also more than doubled its pre-tax profit over the course of the year, from £324m in 2021 to £654.7m. JD Sports also pledged to overhaul its governance and risk management, a month after the sudden ousting of Peter Cowgill, its long-time boss. The retailer also confirmed that it had repaid £24.4m of furlough relief.
UK inflation hits 40-year high as food prices jump
Figures released from the Office for National Statistics on Wednesday show inflation reached a 40-year high of 9.1% last month, driven by rising food and fuel prices. The price growth in May, up from 9% in April, was in line with economists’ expectations. The Bank of England expects the inflation rate to exceed 11% in October, when households receive their energy bills. Paul Dales, chief UK economist at Capital Economics, said it was not obvious in the latest data that there were signs of the “more persistent inflationary pressures” that the central bank last week said would prompt it to “act forcefully”. Rishi Sunak, the Chancellor, said following the release: "I want people to be reassured that we have all the tools we need and the determination to reduce inflation and bring it back down."
BoE: 100 days left to use paper banknotes
The Bank of England's paper £20 and £50 banknotes will no longer have legal tender status after September 30th. The Bank of England's chief cashier Sarah John is urging anyone who still has them to use them or deposit them at their bank or a Post Office before the end of September.