Biggest banks pass BoE stress test
The Bank of England (BoE) says Britain's financial system is healthy enough to withstand a deep recession, saying major UK banks “are strong enough to keep supporting households and businesses, even in severe scenarios”. The Bank’s annual stress test found that the country’s eight biggest lenders would not see their levels of capital drop to dangerous levels, even in a scenario where unemployment climbed to 12% and house prices crashed by 33%. Releasing the findings, the BoE said it would raise the capital requirements for UK banks next year, with the Bank also consulting on loosening affordability limits on mortgages. It also warned that it was monitoring the increasing use and popularity of cryptocurrencies. Noting that the “direct risks to the stability of the UK financial system from cryptoassets are currently limited," the Financial Policy Committee added: “However, at the current rapid pace of growth, and as these assets become more interconnected with the wider financial system, cryptoassets will present a number of financial stability risks.” Reflecting on the stress test report, BoE governor Andrew Bailey said the “system can withstand a stress that's much larger than the stress we've seen so far”. However, the Bank warned that the pandemic could still have "a greater impact" on the economy, especially in light of new variants.
NatWest fined £264m over anti-money-laundering failures
NatWest has been fined more than £264m for anti-money-laundering failures after it failed to properly monitor the activities of jeweller Fowler Oldfield between November 2012 and June 2016. The Bradford-based jeweller deposited £365m with the bank over a five-year period, including £264m in cash, despite having a predicted annual turnover of just £15m when first taken on as a client. The deposits included an incident where £700,000 in cash was paid into a branch in bin bags. NatWest, which pleaded guilty to three offences of failing to comply with anti-money-laundering regulations in October, was yesterday fined £264,772,620. Mrs Justice Cockerill at Southwark crown court ordered the bank to pay £4,297,466 in costs, and made a £460,047 confiscation order. It is the first time a financial institution has faced criminal prosecution by the Financial Conduct Authority under anti-money-laundering laws in the UK. NatWest CEO Alison Rose said: “We deeply regret that we failed to adequately monitor one of our customers between 2012 and 2016 for the purpose of preventing money laundering.” She added that while the hearing brings an end to the case, NatWest “will continue to invest significant resources in the ongoing fight against financial crime.”
Private equity groups cut exposure to China real estate as property stocks fall
Coller Capital says almost a third of private equity groups with exposure to China will decrease their investments in the country's real estate sector over the next three years.
UBS fined €1.8bn for assisting in tax evasion
UBS has been ordered to pay a €1.8bn penalty for helping wealthy French clients stash undeclared funds in Swiss accounts, with a court reducing an initial €4.5bn fine. The court of appeal in Paris upheld a 2019 finding that the bank had illegally laundered funds by providing customers with services to hide assets from tax authorities. UBS has already booked over £383m in provisions in connection with the case and analysts at Citi expect it to book another £1.1bn charge in the fourth quarter of this year, assuming it does not appeal the verdict.
Credit Suisse return for De Ferrari
Credit Suisse has named Francesco De Ferrari global head of the bank's wealth management division, with this among a series of appointments to its executive board. Mr De Ferrari, who worked at Credit Suisse between 2002 and 2018, will return to the bank in the new year after a brief stint leading Australian wealth management company AMP. Christian Meissner, CEO of Credit Suisse's investment bank division, has been appointed CEO of the Americas; Helman Sitohang and Andre Helfenstein as CEOs of Asia-Pacific and Switzerland respectively; and Mark Hannam has been named as head of internal audit.
Unite voices concern over FCA shake-up
Union Unite has written to the Financial Conduct Authority (FCA) over fears that a proposed restructuring could hit take-home pay for staff at the watchdog. The union says members fear CEO Nikhil Rathi has been running a consultation that "lacks transparency". There are also concerns that staff departures in the wake of the mooted changes could seriously damage the regulator's ability to carry out its work. Meanwhile, James Moore in the Independent says the FCA’s plans amount to a pay cut upon a “substantial chunk” of its staff that will be achieved by replacing the bonus scheme with performance related pay – describing this as “another bonus scheme” that is harder to get and “with a different name to make it look more palatable to outside observers.” Mr Moore urges Mr Rathi to rethink his plan. Separately, the FCA has reportedly hired private law firms to help process job applications and paid out almost £1m on headhunters this year as it looks to fill an abnormally large vacancy pool following a series of departures. A source has revealed that while vacancy levels at the City watchdog normally run at around 300, they currently stand at around 500.
MEDIA & ENTERTAINMENT
Big budget production spending hits record £6bn
The amount spent making large film and TV projects in the UK this year is on track to hit a record £6bn. The investment in making films and high-end TV shows costing at least £1m an episode in the UK will be more than double the £2.8bn seen in 2020 and two-thirds more than the previous record set in 2019. Spending on high-end TV shows hit £3.3bn in the year to the end of September, according to British Film Institute (BFI) figures, with this far exceeding the £1.4bn committed to making feature films in the UK. The figures highlight the growth of streaming led by Netflix, Amazon and Disney, with this in turn forcing broadcasters such as Sky, the BBC and ITV to invest significantly more in big-budget content. Ben Roberts, chief executive of the BFI, said: “The streamers have been taking huge amounts of studio space in the UK. And the number of streamers making content here is expanding; for a long time it was only Netflix, which means we are seeing considerable growth in content demand.”
Housing market set to be busy but less frantic in 2022
Rightmove expects the housing market to stay busy but return to more normal levels of activity in 2022, saying it believes that following a “frenzied” 18 months, the market is heading for a “less frenetic” period. The property platform noted that one sign of a return to more traditional conditions was the appearance of the usual “December dip”, with the average asking price falling by 0.7% over the past month. Rightmove’s Tim Bannister said that an interest rate rise was likely next year, and that while a rate rise was often regarded as unhelpful to the market, “a slowing of the fast pace of sales, and associated pace of price rises, will help the return to more normality that will suit many movers”. Rightmove data shows that the average asking price of a UK home is now £340,167 compared with £342,401 a month ago, with the annual rate of price growth static at 6.3%. It has predicted that house prices will rise by 5% next year, with buyer demand and market momentum “remain strong going into 2022”.
Frasers launches £70m share buyback
Mike Ashley has announced the launch of a £70m share buyback plan for his Frasers Group which aims to reduce the number of shares in circulation, thus boosting the company's share price. The share buyback will run until April 24 next year. The move follows a similar spending spree earlier this year in which Frasers spent £60m on its shares. Mr Ashley currently holds a 68% stake in the group and is set to benefit the most from the deal.
Full lockdown would see economy slip below pre-pandemic size
A full lockdown designed to reduce the spread of new coronavirus variants would derail the UK’s post-pandemic economic recovery, according to Pantheon Macroeconomics. The economists believe a renewed shutdown of the retail, leisure and hospitality sectors would cause the economy to shrink to 6% below its pre-pandemic level. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “In a plausible worst-case scenario, in which retail and consumer services businesses are forced to close again, GDP would revert to being about 6% below its January 2020 level while the restrictions were in place.”
Half of families £110 a year worse off since 2019
Analysis from the New Economics Foundation (NEF) shows that half of UK families have seen their disposable incomes shrink in the last two years, with the poorest half of the population seeing their incomes squeezed by £110. The report also shows that the richest 5% are £3,300 a year better off. The NEF analysis found that since 2019, the poorest half of the population in every region apart from London and the east of England have seen their incomes squeezed by an average of £110 per year, after accounting for increases in the cost of living. Alfie Stirling, director of research and chief economist at the NEF, commented: “With prices expected to continue increasing, the threat of a rise in interest rates and ongoing effects of Brexit, things could get a lot tougher for families that have already suffered most.”