BANKING
Watchdog urged to accelerate account closure probe
Andrew Griffith, the Economic Secretary to the Treasury, has called on the Financial Conduct Authority (FCA) to ensure bank accounts are not closed due to concerns over political exposure, urging the regulator to accelerate an investigation into account closures involving politically exposed persons (PEPs). Financial institutions have to conduct stricter checks on prominent public positions, with these deemed more likely to be involved in corruption or bribery. Amid claims that some people have seen their accounts closed over their political beliefs, including prominent Brexiteer Nigel Farage, Mr Griffith said banks “should not be closing individuals’ accounts solely due to their status as a PEP.” While noting that stricter checks were necessary, he added that it is “crucial an appropriate balance is struck” and that the measures “do not unduly burden or prevent” democratically elected individuals from accessing essential banking services. A Downing Street spokesperson noted that the Government had passed a law requiring the FCA to review banks’ approach to PEPs to “strike the right balance" between a customer’s right to free speech and banks’ right to manage commercial risks.
Mortgage rates could hit 7%, say brokers
Brokers have warned that mortgage rates could hit 7% in the coming months. While Chris Sykes of brokers Private Finance warned: “There is every possibility we could see average rates hitting 7%. If inflation doesn’t improve, this could be reached very quickly,” David Hollingworth of L&C Mortgages added: “If the market carries on as it has been going, we will reach this level in the next couple of months.” Max Mosley, an economist at the National Institute of Economic and Social Research, has voiced concern over rising rates, saying: “The impact would be huge – hundreds of pounds added to mortgage bills.” He added that a rate of 6% is “already an extreme shock,” so rates hitting 7% would “ further the mortgage crisis.”
NatWest calls for open banking boost
NatWest has called for a “step change” in the regulation of open banking, arguing that there should be greater commercial incentives for expanding its reach. The bank’s Claire Melling said: “Banks, fintechs and regulators need to work together to design new, flexible frameworks and commercial incentives that will support a far wider range of Open Banking use cases.” NatWest says that improving commercial incentives would encourage banks to develop open banking beyond the requirements set out in the initial open banking order.
PRIVATE EQUITY
Blackstone and CVC drop out of Center Parcs sale
CVC Capital Partners and Blackstone have reportedly pulled out of the race to take over holiday resort chain Center Parcs. KSL Capital Partners and Singapore's sovereign wealth fund, GIC, are believed to remain interested. Brookfield Property Partners is seeking up to £5bn from the sale, double the amount it bought Center Parcs for in 2015.
INTERNATIONAL
Bank of America increases dividend
Bank of America plans to increase its quarterly common stock dividend to 24 cents per share, from 22 cents per share, beginning in Q3. Rivals JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley last week increased their third-quarter dividends after passing the Federal Reserve's stress test. Bank of America is in talks with the Fed over differing results between the central bank's stress test and the companies' own under the Dodd-Frank Act.
FINANCIAL SERVICES
Regulators should measure ‘burden’ of decisions
Financial service groups have called for regulators to report on a new range of metrics to ensure they are meeting their statutory obligations. With the Financial Services and Markets Bill passing into law, regulators will have greater responsibility for adapting and amending onshored EU regulations. This includes a new mandate to consider competitiveness when making regulatory decisions. UK Finance and TheCityUK have outlined measures which would help to evaluate the performance of regulators against their new objectives. UK Finance said regulators should estimate and track the “regulatory burden” of new measures, while TheCityUK said watchdogs should publish the “cumulative costs to firms” of new regulations. Daniel Wraith, strategic policy manager at UK Finance, said: “Greater consideration of the costs of regulation and a drive for increased operational effectiveness will be key to delivering on the new objective,” adding that measuring this offers the opportunity to ensure the UK remains a “thriving, internationally competitive financial services centre.”
Crypto companies warned over promotion rules
Companies that market cryptoassets have been told to ensure they comply with the financial promotion regime. Victoria McLoughlin, head of market interventions in the digital assets team at the Financial Conduct Authority (FCA), and Lucy Castledine, director of consumer investments at the regulator, said the Government has legislated to bring qualifying cryptoassets within the scope of financial promotion rules. As of October, companies marketing cryptoassets to UK consumers, including those based overseas, will need to comply with the financial promotion regime. The letter outlined the four routes to “lawfully communicate” cryptoasset promotions to UK consumers. The promotion must be communicated by an authorised person; made by an unauthorised person but approved by an authorised person; communicated by a cryptoasset business registered with the FCA under money-laundering regulations; or comply with the conditions of an exemption in the Financial Services and Markets Act 2000.
City watchdog targets trade data in post-Brexit rules overhaul
The Financial Conduct Authority (FCA) has proposed changes to the way City traders access data as part of its post-Brexit reforms that will remove red tape from the UK’s financial services sector. The City watchdog plans to create a consolidated tape for City traders which will condense multiple streams of data in one place and allow investors to make “better, more timely decisions.” In trading, a tape records all stock trades throughout the day and includes size, price and time of the transaction. The FCA said the consolidated tape will “increase transparency and access to trading data,” while also cutting costs and providing higher quality data. It has proposed that the new tape will initially cover the bonds market, followed by equities.
PayPoint delays full-year results
Payment services business PayPoint has postponed the publication of its annual results. It said its auditors had been unable to finish the required work because of a “technical accounting treatment” concerning the balance sheet of Appreciate Group, which it acquired in February. PayPoint, which provides over-the-counter payment facilities at more than 28,000 retail stores in the UK, announced the delay just a day before the results were due to be released.
LEISURE & HOSPITALITY
Prezzo restructuring gives HMRC £3.3m but hits landlords
A restructuring of Prezzo has been approved that wipes out all creditors except HMRC. While landlords across the Italian restaurant chain’s lossmaking sites will lose £32m, the tax office will recoup £3.3m of the £11.8m it is owed. Prezzo had sought High Court approval of a restructuring plan that would preserve the chain, with the exception of the 47 restaurants already closed. However, HMRC challenged the plan. The judge rejected HMRC’s arguments, highlighting that payments to the tax office would be higher than if the company had gone into administration. Private equity backer Cain International is supporting Prezzo with a secured loan note of £24.4m.
REAL ESTATE
Britain's sees steepest house price falls in Europe
Britain has suffered the worst house price falls of any major European economy as persistent inflation and rising mortgage rates deter buyers. Analysis shows that house prices in the UK fell by 3.1% on an annual basis in Q1, compared with a 1% fall in Germany and a 2.7% rise in France. Global house prices grew at their slowest annual pace since 2015 during the first three months of this year. House price growth across 56 markets slowed to 3.6% in the year to tQ1, a fall from 5.7% recorded in the previous quarter.
66% of homeowners see values increase
Two thirds (66%) of homeowners saw the value of their property increase over the 12 months to May, according to Zoopla. On average, homeowners whose home has increased in value over the year to May have seen a rise of £7,000, or £19 per day. Research also showed nearly one in five (18%) saw a decrease in the value of their home in the 12 months to May. Homeowners whose property has fallen in value over this period have seen an average fall of £7,700, or around £21 per day. Zoopla found that in the six months to May, the areas with the highest proportion of homes going up in value were concentrated in northern England and the Midlands. The highest concentration of homes falling in value tended to be in coastal locations across southern England.
RETAIL
MPs tell Asda to explain ‘unclear’ fire and hire evidence
MPs on the Business and Trade Committee have told Asda to provide more evidence over its “unclear” fire-and-rehire strategy, with 7,000 staff at the retailer threatened with the practice in May. Committee chair Darren Jones said it was “concerned about apparent discrepancies” in evidence Asda had given. Asda’s chief commercial officer, Kris Comerford, was last week questioned by MPs over fuel hikes and possible profiteering. He was also asked whether the supermarket chain was still using fire-and-rehire tactics, to which he responded these were “not something that Asda employs.” However, the committee has suggested that letters from Asda and the GMB union make the accuracy of this statement unclear. The union said Asda had issued the threat of using fire and rehire – which Asda characterised as ‘dismiss and reengage’ – as a “last resort.”
ECONOMY
Services sector growth slows in June
The S&P Global/CIPS UK services PMI showed a slowdown in growth in June, with a reading of 53.7 down from the 55.2 recorded in May on an index where anything above 50 represents growth. June’s figure marks the slowest rate of growth in three months. Services companies, which make up more than 80 % of the economy, saw staffing levels rise at the fastest pace since last September, although higher wage bills increased costs for businesses and offset falling energy and transport bills. Samuel Tombs of Pantheon Macroeconomics said: "The recovery in services output lost a little momentum in June, but it still is holding up well in the face of rising interest rates." Meanwhile, the S&P Global/CIPS UK composite PMI – which measures output in the UK’s entire private sector – fell to 52.8 in June from 54 in May.
Yield on new government debt at highest since 2007
The amount of interest the Government has to pay investors buying its newly minted debt has hit its highest level since 2007. Britain’s Debt Management Office, which issues bonds, has sold a tranche of gilts to traders with a yield of almost 5.7%. With traders expecting the Bank of England’s base rate to peak at around 6.25%, the Government has to offer a higher rate of return on its debt otherwise it is likely that investors would refuse to buy the debt. Rates on the two-year and 10-year gilt are 5.37% and 4.49% respectively, signalling that investors expect interest rates to rise in the short term. The sale raised £4bn, with this used to finance Government spending that is not generated from tax revenue.
OTHER
Increasing numbers of grandparents gifting money to grandchildren
A growing number of adults are turning to the 'bank of granddad and grandma' for financial support, new research suggests. Almost a third of grandparents surveyed by Saga said that they’ve lent or gifted money to their grandchildren, with the elderly family members paying out £2,119 on average. Grandchildren between the ages of 18 and 40 were also quizzed about what they have been spending their inherited riches on. The insurance and holiday provider found that 20% of respondents said that they had used the money on holidays and 18% said it had been spent on cars.