BANKING
Contactless high street will drive decline of cash - BoE
The deputy governor of the Bank of England has warned that cash will become harder to spend as shoppers buy more goods online and high street retailers increasingly reject bank notes in favour of contactless payments. Sir Jon Cunliffe said that as cash continues to decline, new, non-bank financial institutions are likely to start issuing private money such as stablecoins. The Bank of England could use a digital pound to back these cryptocurrencies, in lieu of cash. Sir Jon told an audience at the Innovate Finance Global Summit in London’s Guildhall that the Bank may need to introduce limits on how stablecoins can be adopted at first to protect financial stability. Also speaking at the event, City minister Andrew Griffith announced a new push for Open Banking and called on finance firms to use AI to combat fraud and create chatbots to enhance customer service. In a piece for the FT, Griffith says the Government’s planned financial services reforms “will help drive growth in the economy, while maintaining crucial safeguards for financial stability.”
UK regulators back open banking advances
The Financial Conduct Authority and the Payment Systems Regulator have launched a fresh push to encourage more competition in banking services via third-party firms. As co-chairs of the Joint Regulatory Oversight Committee, the regulators issued a joint statement saying: "While significant progress has been made, there is more to be done to deliver the full benefits of open banking within retail banking markets, and beyond.” They said they would set up a new body over the next two years to help boost uptake of open banking and widen it to other parts of the economy.
INTERNATIONAL
Depositors pull nearly $60bn from three US banks as Apple raises pressure
Charles Schwab, State Street and M&T suffered almost $60bn in combined bank deposit outflows in Q1 as customers sought out better returns. Apple and Goldman Sachs obliged on Monday with a new savings account paying 4.15% a year. State Street’s shares were down on Monday after quarterly profits missed expectations while Charles Schwab reported better than expected profits but paused share buybacks. M&T did better than expected on net interest income; shares were up 6% in New York. Dozens of regional and midsized banks are due to announce their results this week, providing more detail on the fallout from the collapse of SVB and others last month.
SEC charges Bittrex and former CEO
The U.S. Securities and Exchange Commission has charged cryptocurrency exchange Bittrex and its former CEO William Shihara with operating an unregistered national securities exchange, broker and clearinghouse. The lawsuit centres on the claim that Bittrex listed digital assets that qualified as securities, which would have required the company to register with the SEC and follow its rules. In response, Bittrex accused the regulator of repeatedly refusing to state over a five-year period which assets its believed were illegally offered on its platform and described the SEC’s lawsuit as part of “a larger crusade to drive cryptocurrency out of the United States.”
AVIATION
UK aviation group says cutting emissions will raise ticket prices
The higher costs associated with reducing emissions will increase ticket prices and reduce demand for flying, the UK aviation sector has warned. Matt Gorman, the chair of Sustainable Aviation and Heathrow Airport’s head of sustainability, said predicted that less passenger traffic will account for about 14 percent of the overall cut in carbon output required and that rising costs associated with moves such as the increased use of sustainable aviation fuel would inevitably drive the trend. The group also called for further government support including subsidies funded by diverting tax revenue from emissions trading schemes to help spur growth in sustainable aviation fuel production in the UK.
FINANCIAL SERVICES
City minister reconvenes Asset Management Taskforce
Andrew Griffith, the City minister, held talks with fund management bosses on Monday after deciding to revive the Asset Management Taskforce. Attendees included Patrick Thomson, CEO of JP Morgan Asset Management and chair of the Investment Association, Peter Harrison CEO at Schroders, and Anne Richards, CEO of Fidelity International. Mr Griffith launched a technology working group examining ways to bolster the sector. Michelle Scrimgeour, the CEO of Legal & General Investment Management, will chair the group which will look at trends tokenisation, artificial intelligence, distributed ledger technology, and blockchain, and explore their potential deployment across the industry.
Brexit a factor in companies picking NY over London
Brexit has been a contributing factor in companies deciding to choosing to list in New York rather than London, according to Panmure Gordon’s head of research Simon French. UK stock market valuations had slumped since the 2016 vote to leave the EU, he told BBC Radio 4’s Today Programme. French explained: “Some of it is compositional, some of it is the fact that there are more higher growth businesses in the United States markets. The depth of liquidity in the UK is much lower than it is in the United States. But we have to mention the B word. Brexit has been a big contributing factor here. This discount did not exist in 2016. And since then, valuations have moved lower in the United Kingdom, while they’ve moved higher in both the US most obviously, but also in Europe.”
UK must maintain efforts to ensure fintech success
Writing in City AM, Chris Hayward, the Policy Chairman of the City of London Corporation, says although London’s fintech sector is thriving and “punching well above its weight” further efforts are required “to ensure that London and the wider UK remains a world-leader for years to come.” Hayward points to developments in regulation technology, which, with further advancements, “will enable all future fintech companies to succeed in the future.”
RETAIL
Retail and hospitality groups call for business rates reform
Retail and hospitality groups have urged the Government to reform business rates, claiming they are contributing to shop closures and job losses. Helen Dickinson, British Retail Consortium (BRC) chief executive, said: “Retail accounts for 5% of the economy but pays more than one-fifth of business rates. The overall industry tax take is unsustainably high and contributes to shop closures, job losses and stifled investment. There must be a permanent freeze of business rates and a cut to the multiplier in the longer term.” UKHospitality chief executive Kate Nicholls, said: “Reform of business rates, further action to tackle energy costs and suppliers, and a reduction in the burden of red-tape and other operating costs are all vital if the sector is able to gain the headroom it needs.”
Apollo approach sends THG soaring
Apollo Global Management made a preliminary approach for online retailer THG on Monday, pushing shares in the Manchester-based company up 40%. No further details were disclosed and Apollo must make its intentions clear by May 15 or walk away.
SPORT
Powerleague in play for £60m
Patron Capital has appointed finnCap Cavendish to help it find a buyer for its Powerleague five-a-side football chain.
ECONOMY
BoE “hopelessly” wrong on inflation
The Bank of England is wrong to identify the conflict in Ukraine as the driver for high inflation and this misreading is pushing the UK into recession as a result, says Tim Congdon, an adviser to Margaret Thatcher when she was Prime Minister and later the Treasury. “They’ve got it wrong — hopelessly so,” Congdon said. He told Bloomberg that excessive money supply is the cause of medium- and long-term inflation, and that a plunge in money supply and bank lending now will trigger a sharp downturn in the economy. “The evidence overwhelming, and it’s puzzling in a way that the central bank has continued to resist this,” Congdon said. “I find I’ve been commenting on the Bank of England best part of 50 years now. I have to tell you, the current lot are some of the worst I’ve ever commented on.”
Research reveals sharp rise in food inflation
Research by Which? reveals that food inflation increased to 17.2% on average in the year to March, up from 16.5% in the year to February. Sue Davies, head of food policy at Which?, said: "Our latest food and drink tracker paints a bleak picture for the millions of households already skipping meals of how inflation is impacting prices on supermarket shelves, with the poorest once again feeling the brunt of the cost of living crisis.”