BANKING
BoE: UK banks remain ‘resilient’
The Bank of England insists that UK banks are “resilient” despite global banking turmoil, but warned of an “urgent need” for tighter rules in the market-based finance sector. While there has been uncertainty across the sector following Silicon Valley Bank’s collapse and UBS’ emergency acquisition of Credit Suisse, the Bank said: “The regulations in place for UK banks mean that they have significant financial resources to absorb shocks,” adding that UK banks “are resilient and are strong enough to continue supporting households and businesses.” While the traditional banking sector looked resilient, the Bank said there was an “urgent need to increase resilience” in market-based finance, saying the sector could be exposed to sharp movements in asset prices.
‘Sink or swim’ for Open Banking
The UK’s £4bn Open Banking sector faces a “sink or swim moment,” according to lobby group Coadec. Open Banking was launched by regulators in 2017 in a bid to make dominant high street lenders open up their customers’ data to third-party challengers – and the value of the sector in the UK has since risen to over £4.1bn, climbing by £1.5bn last year. While the regulators overseeing the sector - the Financial Conduct Authority, Competition and Markets Authority, Payments Systems Regulator and Treasury - were expected to set out the next steps for UK Open Banking over the next few weeks, the announcement has reportedly been delayed. Coadec has warned that the industry is at a crucial juncture, with fintech policy chief Luke Kosky saying: “The growth of Open Banking has been a UK-led marvel. However, we now face a critical sink or swim moment for the industry.” “We have seen this industry grow to over £4bn within 5 years and with proactive support and regulation the possibilities for Open Banking are endless,” he added.
Mortgage lending falls but approvals increase
Mortgage approvals have improved for the first time since August, with the Bank of England’s Money and Credit report showing net mortgage approvals for house purchases increased to 43,500 in February from 39,600 in January. However, lending fell to its lowest level since April 2016, excluding the pandemic. The report shows that homeowners borrowed £700m in February, down from £2bn in January. Karen Noye, a mortgage expert at Quilter, suggested people were still in "wait-and-see" mode as borrowing costs remained high – but added that the rebound in approvals meant "green shoots might be appearing" in the housing market.
INTERNATIONAL
Credit Suisse violated settlement agreement
An investigation by the US Senate Finance Committee has found that Credit Suisse violated a settlement agreement with the US Department of Justice (DoJ) by continuing to help wealthy Americans avoid paying tax. The report says the Swiss bank committed “major violations” following its plea deal with the agency. Credit Suisse pleaded guilty to assisting tax evasion in 2014. It agreed to pay $2.6bn penalty to the DoJ, with this later reduced to $1.3bn. The Senate committee has called for the DoJ to investigate whether Credit Suisse violated its plea agreement and decide whether any violations merit “further criminal prosecution.” Senator Ron Wyden, chair of the Senate Finance Committee, said: “At the centre of this investigation are greedy Swiss bankers and catnapping government regulators.” Mr Wyden added that Credit Suisse’s pending acquisition by UBS “does not wipe the slate clean.”
UBS re-appoints Ermotti to manage Credit Suisse acquisition
UBS has reappointed its former chief executive to lead the takeover of Credit Suisse after it rescued its rival lender. Sergio Ermotti, who led the group for nine years until he stepped down in 2020, will replace Ralph Hamers as group chief executive. UBS said Mr Ermotti, chairman of insurer Swiss Re, is better suited to manage the transition because of his experience transforming the bank after the 2008 financial crisis. The bank’s board said it took the decision “in light of the new challenges and priorities facing UBS after the announcement of the acquisition.”
AUTOMOTIVE
VW plans 25% pay increase for executive board members
Volkswagen wants to increase pay for executive board members by up to 25%, with the supervisory board proposing that maximum pay should climb from €12m to €15m.
FINANCIAL SERVICES
FCA boss pledges to review listing rules
Financial Conduct Authority chief executive Nikhil Rathi says the watchdog will review the UK’s listing rules after several British firms opted to list in New York rather than London. Mr Rathi says the FCA will consult on replacing the current standard and premium listing segments for shares in commercial companies with a single listing category with one set of requirements. As part of the switch to a single segment, companies would no longer be required to demonstrate a three-year record of financial performance before listing, nor would they be required to hold shareholder votes on big deals and related-party transactions. Mr Rathi said: “This change, coupled with a focus on transparency, would lead to a significant reform of the FCA’s listing rule book.” He also revealed that some investors had told the watchdog that the "premium listing standards are burdensome and deter some companies, even when allowing for the benefits of UK index inclusion." Mr Rathi noted that chipmaker Arm’s decision to list in the US had “focused minds”, adding that boosting the appeal of London had not been a “priority area for public policy for decades.”
Bank of England backs ‘substantial’ LDI cash buffer
The Bank of England has recommended that pension funds that borrow vast sums to maximise returns for clients need to keep more money aside to withstand a repeat of the financial market turmoil seen following last year’s controversial mini-Budget. The Bank said liability driven investment (LDI) funds must “increase their resilience to interest rate shocks substantially,” with experts suggesting they need to hold readily available money to prevent fire sales in debt markets hitting the economy. The Bank thinks the LDI market should be able to withstand a 250 basis point increase in UK gilt yields, saying funds “should be able to withstand severe but plausible stresses in the gilt market.” The Bank’s proposals are to be considered by The Pensions Regulator and Financial Conduct Authority.
Crypto exchange sued by SEC
The US Securities and Exchange Commission (SEC) is suing cryptocurrency platform Beaxy for operating an unregistered exchange, brokerage and clearing business simultaneously. SEC enforcement director Gurbir Grewal said: “When a crypto intermediary combines all of these functions under one roof … investors are at serious risk.” “The blurring of functions and the lack of registrations meant that regulations designed to protect investors were not followed or even recognised by Beaxy,” he added. The watchdog is also suing Beaxy's founder, Artak Hamazaspyan, for securities fraud. The company raised $8m through offering its own crypto token, BXY, and Mr Hamazaspyan allegedly misappropriated $900,000.
City has lost standing as pre-eminent hub, survey concludes
Research shows that London is no longer the world's top financial centre, having seen New York pull level. The City of London Corporation has called for a long-term plan to stimulate growth.
MEDIA & ENTERTAINMENT
Disney fires Marvel Entertainment chairman
The Walt Disney Company has ousted Marvel Entertainment chairman Isaac Perlmutter, saying his departure is part of cost-cutting measures. Mr Perlmutter had repeatedly backed activist investor Nelson Peltz's failed bid to join Disney's board. He had been reportedly pressing the issue since July 2022, contacting former CEO Bob Chapek, director Safra Catz and other senior executives on behalf of Mr Peltz, whose firm Trian Fund Management holds $900m worth of Disney shares. Disney is cutting 7,000 jobs – around 4% of its workforce - as CEO Bob Iger works to cut about $5.5bn in costs.
REAL ESTATE
Number of available rental homes dips
Analysis by Zoopla shows that the number of homes available to rent in the UK has fallen by a third over the past 18 months. Lettings agencies typically have 10 rentals compared to over 16 before September 2021. The dip has helped drive up rents for new tenants by 11%. Demand for rented accommodation has risen to more than 50% above normal levels, the figures show. Richard Donnell, executive director for research at Zoopla, says that while there has been a big increase in demand for rented housing, “at the same time, we just haven't seen much new investment by landlords in rented housing.” This, he added, is creating a “real crunch in availability." The report also shows that large numbers of landlords are leaving the market, with 11% of homes for sale on Zoopla previously rented out.
RETAIL
Retailers reject customers' cash
New research for ATM network Link has found that 45% of consumers have had to pay for goods with credit or debit cards after cash has been snubbed. London is the region where rejection was highest, with 58% of shoppers discouraged or not allowed to use money. This was followed by the South East and Wales. Graham Mott, director of strategy at Link, said: "There's been a broader trend with more shops and councils either becoming cashless or asking their customers to pay with card. We know many people are comfortable paying with cards or online. But there are still millions who don't use technology and where this is problematic."
Asda profits slide amid sluggish sales and rising costs
Asda has reported a slide in profits as subdued sales and rising costs took a toll. In the first full year of ownership by the Issa brothers, the UK's third-largest supermarket chain said profits fell almost a quarter to £886m in 2022. Sales were up just 0.1% to £20.5bn. Asda said sales improved significantly in the latter half of the year after it invested in price cuts as customers sought bargains. While sales fell 9.2% in the first three months of 2022, by the fourth quarter they were up 5.4% on the same period a year earlier.
Next braced for challenge as profits rise
Next has said it will put up its prices by less than expected this year. The fashion retailer said it now expected prices to rise by 7% in the spring and summer of 2023, and 3% in the autumn and winter - slightly less than the increases it warned of in January. It said shipping costs were falling and suppliers were charging better rates. It came as Next reported a 5.7% rise in pre-tax profits to £870.4m for the year to January.
ECONOMY
Next boss: Economic downturn will not last long
Next CEO Simon Wolfson does not expect the downturn in the UK economy to last long, saying he anticipates a sharp recovery in 2024. He said: “The genesis of the problem is a post-pandemic supply side squeeze," adding: “As those supply side problems begin to ease, inflation is likely to ease, and as long as there's no structural damage to the economy we can see no reason why we shouldn't see quite a sharp recovery next year.”
OTHER
£21bn lost to fraud since the start of the pandemic
Around £21bn has been lost by the Government due to fraud since the start of the pandemic, according to the National Audit Office (NAO), with the spending watchdog warning that it was “very unlikely” that most of the taxpayers’ money will be recovered. The data shows fraud losses rose from a total of £5.5bn in the two years before the pandemic to £21bn in the following two years. Of the £21bn, just over £7bn relates to support schemes introduced by the Government during the pandemic. The NAO said that the creation of the Public Sector Fraud Authority represents a chance for a “renewed focus on fraud and corruption,” but went on to argue that the authority needs to be “influential across government if it is to achieve the required changes in culture, preventive approach and robust assessment of risks.” A Government spokesman said: “We are overhauling how we tackle public sector fraud to ensure we chase down every pound stolen from British taxpayers.”