Bank redress scheme criticised over lack of activity
Critics are calling for the Business Banking Resolution Service (BBRS) to be scrapped, with analysis showing that the banking industry compensation scheme has produced only six financial awards almost two and a half years after it started accepting cases. MP Kevin Hollinrake, co-chairman of the All-Party Parliamentary Group on Fair Business Banking and a member of the Treasury Select Committee, said that “heavily restricted eligibility rules” were to blame for the scheme’s poor performance. He warned that the rules had “conspired to avoid the very things we’ve campaigned so long and hard for — justice and compensation for those who’ve been denied it under previous flawed redress schemes.” Noting that the “run-rate” for new complaints is around 20 per month, he described this as “pitifully low for such an expensive and complex scheme.” Antony Townsend, chairman of the service’s liaison panel, said his group was “working with BBRS to try to understand what is behind these statistics. The numbers are low and we need to know why.” The Federation of Small Businesses said the figures were “really disappointing,” calling for those involved to “work full tilt” to improve the service. A spokeswoman for UK Finance said the BBRS “provides an independent dispute resolution service for larger SMEs. Its creation means that around 99% of small businesses now have access to either the BBRS or the Financial Ombudsman Service.” The Times notes that the BBRS is thought to have cost banks more than £30m in set-up costs.
Private equity groups aim to benefit from leisure sector bounceback
The number of UK private equity deals for hospitality and leisure businesses has risen from 12 to 26 over the past year, as investors look to take advantage of comparatively low prices ahead of the leisure sector's post-pandemic recovery. Notable deals over the past year include hospitality and leisure venue operator Boxpark and pub and bar operator Punch Pubs.
China warns bankers against excessive incentives
The Securities Association of China is urging brokerages in the country to set up a sound remuneration system, warning that excessive or short-term incentives could trigger compliance risks. The guidelines say firms' remuneration systems should also be closely linked with risk management. According to the guidelines, bankers' pay must not be directly linked to the revenue of the deals they undertake and securities firms should not blindly pursue market ranking, scale, and short-term performance. The guidance says brokerages should set up a deferred remuneration payment system for chairman and senior managers, with executive pay delayed in a bid to discourage reckless risk taking that would only come to light later. The guidelines come amid rising competition for bankers and wealth managers after China fully opened up its securities industry. Goldman Sachs and JPMorgan are among western banks moving toward full ownership of their China securities businesses.
Goldman Sachs to offer senior staff unlimited holiday
Goldman Sachs’ senior staff will be allowed to take as much holiday as they want, with the investment bank announcing a "flexible vacation" initiative that will see no cap on paid leave. Junior bankers, however, will still only be entitled to a fixed amount of holiday. Goldman, which has previously been accused of overworking younger staff, has told staff they will be required to spend at least three weeks on leave annually from next year, with at least one week of consecutive days off. In a memo sent to staff, the bank said: “As a firm, we are committed to providing our people with differentiated benefits and offerings to support wellbeing and resilience.”
Nomura prepares to launch crypto subsidiary
Nomura, Japan’s largest investment bank, is planning to launch a subsidiary that combines a number of digital asset services, helping institutional clients diversify into areas such as cryptocurrency and NFTs.
FCA: Lack of diversity leads to crises
The Financial Conduct Authority (FCA) has flagged the merits of an inclusive culture, saying firms with higher gender diversity in their boardrooms incur fewer fines for misconduct and have better risk management. Sheldon Mills, the City watchdog’s executive director for consumers and competition, said that unless financial services firms become more diverse and inclusive there is a risk of “group think that leads to crises and a lack of innovation.” He advised businesses that “greater and wider representation” will enable them to “serve communities in the varied needs they have,” adding that it “isn’t about having this quota on black people or women on boards.” Reflecting on Mr Mills’ speech at the British Insurance Brokers’ Association Conference, Matthew Connell, the Chartered Insurance Institute’s director of policy and public affairs, agreed that “an inclusive culture is key” to delivering fair and suitable outcomes for consumers. Last year’s Hampton-Alexander review found women hold just 14% of executive directorships in the FTSE 100, while the 2020 Parker review found that 37% of FTSE 100 companies surveyed did not have any ethnic minority representation on their boards.
Watchdog consults on dormant assets scheme expansion
The Financial Conduct Authority (FCA) is consulting on changes to its handbook following the expansion of the Dormant Asset Scheme to include insurance policies, pension pots and investments. Under the scheme, unclaimed assets are released by financial firms to charitable initiatives. However, enough is held back so rightful owners of a dormant asset can reclaim their funds in full at any time. Previously, the Dormant Asset Scheme only covered money in bank accounts deemed "dormant” - untouched for a minimum of 15 years with an untraceable owner. Expansion of the scheme is tipped to realise some £2.1bn of dormant insurance and pensions sector products. Based on existing reserve estimates, approximately £575m could be released to social and environmental initiatives as a result.
LEISURE & HOSPITALITY
McDonald's to exit Russia
McDonald's is to permanently leave Russia after more than 30 years, having made the decision to sell its around 850 Russian sites due to the "humanitarian crisis" and "unpredictable operating environment" caused by the Ukraine war. The fast food chain said it expected a non-cash financial hit of between $1.2bn and $1.4bn as a result of the sale, and has forecast an operating profit margin of about 40% for its 2022 financial year, with capital expenditure to be within a range of $2.1bn and $2.3bn.
Cheap mortgages disappear
The cheapest mortgages have disappeared from the market as the average two-year fixed deal passed 3% for the first time in seven years. The cost of an average two-year fixed loan climbed 0.17 percentage points this month to 3.03%, according to Moneyfacts. The average mortgage deal is now 0.69 percentage points higher than in December. Meanwhile, rates on five-year fixes climbed for the seventh consecutive month to 3.17%, the highest since May 2016. Consumers now have much more choice for mortgages, with the number of deals available 29% higher than last May. A further 162 deals had come to market since April, bringing the total choice of deals up to 5,087.
Average house prices hit £500k in two thirds of London areas
Average house prices have now hit at least £500,000 in two-thirds of London areas, according to new research. In 2019, nearly half of all parts of the capital had an average house price of less than half a million pounds. By 2021, this figure had shrunk by 12% to just 36%.
Bailey defends BoE over inflation
Bank of England Governor Andrew Bailey has warned that the current surge in inflation represents “the biggest test of the monetary policy framework that we've had in 25 years,” telling the Commons Treasury Committee: “It's a very, very difficult place for us to be in.” Asked by MPs if he felt “helpless” to do anything about inflation, Mr Bailey replied “yes,” saying: “To forecast 10% inflation and to say there is not a lot we can do about 80% of it, I can tell you it is an extremely difficult place to be.” Mr Bailey went on to refute criticism of the Bank's handling of inflation. He denied the Bank had been “asleep at the wheel” on inflation and said much criticism had come with hindsight, saying there was no way economists could have foreseen the conflict in Ukraine and that monetary policy decisions are “based on the facts and evidence at the time.” Noting the impact of Covid cases in China and Russia's invasion of Ukraine, he added: “We have seen a series of supply shocks coming one after another, and that’s unprecedented.” Mr Bailey also warned of an “apocalyptic” surge in food prices that could have a disastrous impact on the world’s poor. Reiterating a call for pay restraint, he also said: “I do think people, particularly people who are on higher earnings, should think and reflect on asking for high wage increases.”
CBI: Chancellor must deliver cost of living support
Tony Danker, director-general of the CBI, has urged Chancellor Rishi Sunak to step in and provide assistance to households being hardest hit by the cost of living crisis, saying it is “unacceptable” that people are having to choose whether to heat their homes or eat. Mr Danker said there is a need to help people facing real hardship, describing this as “the moral underpinning of our economy and society” and insisting: “Putting pounds in the pockets of people struggling the most should not be delayed.” He also called on ministers to “start stimulating business investment now,” arguing that “we will need to ensure that there is economic growth in the pipeline to avoid any downturn in our economy that could worsen or prolong the cost-of-living crisis.” Mr Danker added: “The Chancellor’s clear intention to use a forthcoming budget to cut taxes on business investment should become a firm commitment now.” However, he warned against “big injections to economic demand that might worsen inflation,” saying the focus should be on “getting the supply side of our economy moving.”