PM backs down in battle with Bank of England over financial regulation
Rishi Sunak has bowed to pressure from the Bank of England and U-turned on his bid to introduce new powers allowing ministers to over-rule City regulators. The Treasury confirmed on Wednesday evening that it would “not proceed with the intervention power at this time”, noting that the Government was “committed” to the independence of City watchdogs, which include the Financial Conduct Authority. “Having consulted further we are of the view that the existing provisions in the bill are currently sufficient and will already allow us to seize the opportunities of Brexit by tailoring financial services regulation to UK markets to bolster our competitiveness,” the City minister, Andrew Griffith, said in a statement on Wednesday. But the climbdown sparked an immediate backlash from Tory backbencher Jacob Rees-Mogg. The former business secretary said: “This is a loss of democratic accountability. The power exists to override the Bank of England in extremis and it is a sensible emergency provision to deal with over mighty regulators, I am surprised the Government has backed down.”
Virgin pulls first-time buyer mortgages
Virgin Money has pulled all mortgages requiring a 5% deposit, joining a growing number of lenders limiting products for first-time buyers. Homeowners with small deposits are most at risk of negative equity and widespread forecasts of double-digit price falls in the coming years are expected to force first-time buyers into a credit crunch. Samuel Mather-Holgate, of mortgage broker Mather and Murray Financial, said 5% was a “wafer thin layer of equity” in a falling property market. He said: “I would expect to see the end of these types of mortgages for the next 12 months.
Nationwide latest to restrict crypto payments
Nationwide has followed Starling Bank, Santander and Virgin Money in restricting customer payments to cryptocurrency exchanges. The building society said it would be introducing a daily limit on payments to crypto assets in the near future. The tighter controls by lenders come in the wake of the collapse of crypto exchange FTX, which filed for bankruptcy protection with an $8bn black hole in its accounts amid claims customer deposits were secretly misused.
Thousands defrauded in £48m web hoax
An international spoofing website defrauded about 200,000 victims in the UK alone, the Metropolitan Police have said, after an anti-fraud operation brought the crime spree to an end. More than £48m was taken from victims as a result of the platform, the force said. The website allowed criminals to pose as high street banks including Barclays, Santander, HSBC, Lloyds, Halifax, First Direct, NatWest, Nationwide and TSB. At one stage, officers found that almost 20 people a minute were being contacted by scammers hiding behind false identities. The biggest loss to a single victim was more than £3m while every victim lost £10,000 on average.
US regulators identify ‘serious weaknesses’ in Citi’s resolution plan
In a review of Citigroup’s so-called “living will” – which details how the firm would be unwound in the event of bankruptcy - US banking regulators said problems with the bank’s data governance could adversely affect its ability to produce timely and accurate data during a period of financial stress. The US Federal Reserve and the Federal Deposit Insurance Corp gave Citi a January 2023 deadline to submit its plan to address the shortcomings, while giving the all clear to seven other large banks that submitted resolution plans. The problems relate to earlier concerns the Fed had identified in October 2020. The Office of the Comptroller of the Currency imposed a $400m fine on Citi during the same year, also due to poor internal controls.
Credit Suisse forecasts $1.6bn loss as wealthy clients withdraw funds
Credit Suisse warned on Wednesday that it was on course to make losses of £1.3bn in the fourth quarter, leaving it £3bn in the red over the full year. The Swiss bank revealed clients have pulled £56bn from its wealth management arm and £4.6bn from the domestic Swiss bank since the start of October as fears over its future mount. The loss equates to 10% of AUM leaving its wealth management unit, something Vontobel analyst Andreas Venditti describes as “deeply concerning.” The bank’s shares fell 6% in trading on Wednesday to SFr3.62, its lowest price for at least 30 years.
Pensions experts ‘shocked’ at hidden borrowing across UK schemes
Pensions experts have expressed shock at the level of “hidden” borrowing across UK pensions schemes, which nearly toppled some funds during the bond market crisis in September. Speaking to politicians on the work and pensions committee on Wednesday, academics and pensions experts laid bare the risks that certain kinds of liability-driven investing (LDI) posed for retirement savings. John Ralfe, an independent consultant, said he was worried about how much leverage was used by pensions schemes as part of their LDI strategies. UK rules bar pensions schemes from borrowing money to fund investments, but experts such as Ralfe and Henry Tapper, executive chair at Agewage, have said LDI hedging arrangements are the same as borrowing.
Brussels demands share of London derivatives clearing
Systemic banks trading large volumes of derivatives in London should start using accounts at clearing houses in the EU for some of their transactions, according to measures outlined by the European Commission.
LEISURE & HOSPITALITY
Hospitality bosses say rail strikes will devastate business
Pubs and restaurants could lose £1.5bn in sales as a result of walkouts by the Rail, Maritime and Transport workers union (RMT) just days before Christmas, hospitality bosses have said. Kate Nicholls, chief executive of UK Hospitality, said the strikes will be devastating for a sector already facing soaring bills, staff shortages and a cost of living crisis.
Halfords cautions over full-year profits
An increase in costs and a drop in consumer spending will lead to full-year profits coming in at the lower end of forecasts, Halfords said on Wednesday. Revenues rose 10.2% to £765.7m over the first half but retail like-for-like sales were 6% lower year-on-year. As a result, full-year underlying pre-tax profits would be at the lower end of previous guidance for between £65m and £75m, the company said.
Pets at Home profits hit by rising energy costs
Higher freight and energy costs have taken a chunk out of Pets at Home's profits. The company reported a 9.3% fall in pre-tax profit in the 28-week period to October 13 to £59.2m from £65.3m last time. However, revenue was up 6.4% and guidance for full-year pre-tax profit remains in line with analysts’ consensus estimates of £131m.
Barclays signs deal with Wimbledon
Barclays has signed a deal to be the newest sponsor of Wimbledon. The multi-year partnership will see the bank make an annual contribution to the Wimbledon Foundation and sign up top 20 player Frances Tiafoe as an Ambassador.
Pill: More rate hikes needed to control inflation
The Bank of England’s chief economist Huw Pill said on Wednesday that further increases to the Bank of England’s base rate will be needed to tame inflation. Mr Pill said that the shrinking workforce represented one of two severe inflationary shocks to hit the economy, alongside a shortage of natural gas. However, the increases are unlikely to take the rate up to the 5.25% predicted by some economists. Pill told an audience at the Institute of Directors: “I do not anticipate the levels of bank rate priced in financial markets when the forecast's conditioning assumptions were frozen will be required."
EU Court of Justice reverses anti-money laundering rules
Several EU countries have started closing their public beneficial ownership registers after the Court of Justice of the European Union (CJEU) ruled that providing the general public with access to information on beneficial ownership constitutes a serious interference with fundamental rights. The case was sent to the CJEU from a Luxembourg court after challenges to the Luxembourg Business Registers, which disputed the compatibility of this provision with the right to privacy. Maíra Martini, corrupt money flows expert at Transparency International, said: “Access to beneficial ownership data is vital to identifying – and stopping – corruption and dirty money… At a time when the need to track down dirty money is so plainly apparent, the court’s decision takes us back years.”