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Daily News Roundup: Tuesday, 21st April 2020

Posted: 21st April 2020

BANKING

Metro Bank ‘breached CMA overdraft rules’

The Competition and Markets Authority (CMA) has ruled that Metro Bank breached Part 6 of its Retail Banking Market Investigation Order 2017, under which lenders were required to notify customers by text before levying fees for unarranged overdrafts. The bank is to return £11.4m to almost 130,000 customers, with Adam Land, the CMA’s senior director for remedies, business and financial analysis, commenting: “Metro Bank’s commitment to refund those affected – and to cover interest charges and consider claims for extra costs suffered – will put this right.” Nationwide Building Society, HSBC and Santander have previously been fined for similar breaches.

Banks predict lending criteria will tighten

The Bank of England's (BoE) latest credit conditions survey has revealed that banks will increasingly tighten lending criteria over the next three months, with approvals for credit cards and loans predicted to fall and interest-free term lengths shrink as a result of the coronavirus crisis. Andrew Hagger, founder of personal finance site Moneycomms, has said: “The appetite from lenders to take on fresh unsecured debt will wane as unemployment soars and the economy weakens,” with credit card providers such as Barclaycard, Sainsbury's Bank and Tesco Bank already reducing interest-free terms and removing some zero-interest deals from the market. Meanwhile, the BoE has told banks they will be given an extended period to rebuild their capital and liquidity buffers to meet regulatory requirements, post-coronavirus. The Bank said lenders should use the buffers that have been built up to support the economy.

Chancellor opts against full guarantee on loans

Chancellor Rishi Sunak has resisted calls for the taxpayer to underwrite 100% of loans designed to support small businesses being hit by the COVID-19 pandemic. Despite Bank of England governor Andrew Bailey saying a total guarantee on loans of up to £25,000 would help to unlock credit, Mr Sunak said he was "not persuaded" that a total state guarantee was the way to go. Despite some commentators voicing concern over whether the Coronavirus Business Interruption Loans Scheme – which provides an 80% guarantee on loans to small companies – is getting enough money to firms who need it, Mr Sunak insisted that the British government's economic response was already "more significant than almost any other developed country". Figures show that of the £2bn credit that has been provided, RBS has handed out £936m in loans, with HSBC giving £279m as of last week, while Lloyds Bank, Barclays and Santander have refused to disclose their data.

HSBC cuts investment bank jobs

HSBC has cut a number of management roles in its investment bank, removing the regional head roles in the global banking & markets business. Asia-Pacific head Gordon French will take a six-month sabbatical from the bank, while the Americas head Andre Brandao will stay on until the end of the year. in Europe, Thierry Roland will take charge of a unit focused on asset disposals.

Outbreak is first big test of post-crisis bank rules, says regulator

Chris Woolard, interim CEO of the Financial Conduct Authority, has said that COVID-19 is posing the first serious test of business banking rules introduced after the financial crisis.

INTERNATIONAL

Goldman hit by rush for payment relief

Analysis suggests between 10% and 20% of Goldman Sachs' credit card and personal loan customers are taking payment holidays, compared to 3% at Bank of America and 4.3% at Wells Fargo.

IBK settles US probes

Industrial Bank of Korea will pay $86m to settle US and New York state criminal and civil charges related to claims it allowed an illegal transfer of more than $1bn to Iran that violated US sanctions. The South Korean bank has entered a two-year deferred prosecution agreement with the U.S. Department of Justice and a non-prosecution agreement with New York Attorney General Letitia James.

AVIATION

Virgin Atlantic seeks taxpayer support

Sir Richard Branson has asked the UK government to bail out Virgin Atlantic, with some critics arguing that Sir Richard should use a slice of his estimated £4.7bn fortune to support the airline.

CONSTRUCTION

Directors at Countryside in pay cut as pandemic continues

Countryside Properties has announced that its executive committee and board have agreed to a reduction in base salary and fees of 20%. This comes as the housebuilder faces a fall in demand as a result of the coronavirus crisis, with Persimmon and Taylor Wimpey already announcing pay cuts for directors.

Hill builds on sales

Hill has reported turnover, including from joint venture projects, of £582.7m in 2019, up from £509.6m, while pre-tax profits were down to £42.6m from £48.3m due to planning delays. CEO Andy Hill stated: “A new homes pipeline takes years to come to fruition, so to have these sorts of delays, which can be easily overcome, poses a real risk to the supply of much needed new homes across the capital.”

FINANCIAL SERVICES

Financial advice industry grew in 2019

New research shows that the financial advice industry grew last year despite rising costs and widening regulation. According to the survey by FE fundinfo, the sector’s growth has been driven by ever more complex financial needs, low growth in DIY investing and a lack of alternatives to spending time with a professional adviser. Nearly eight in 10 IFAs reported an increase in new client numbers last year, with only 1.4% reporting a reduction. More than half of advisers said turnover increased at least 5% with almost 30% reporting turnover increased more than 10%. Despite the rise in demand for financial advice, IFAs have been hit with rising costs and a greater regulatory burden. Almost 85% of advisers surveyed reported that their operational costs had increased over the last 12 months and over half cited cost and regulatory burden as the main concerns for their businesses.

Business interruption data collated by Lloyd's of London

Lloyd's of London is in talks about a government backstop to cover future pandemics such as the coronavirus crisis, as the insurer collates details of firms’ business interruption coverage for the Prudential Regulation Authority. Lloyd's of London member Hiscox is among insurers criticised for not paying out as governments around the world ordered lockdowns as a result of coronavirus.

LEISURE AND HOSPITALITY

Marston's in debt waiver from HSBC

Marston's has secured a waiver from HSBC for potential violations of its debt commitments, after the brewer and pub operator shut down its national network of bars and restaurants as a result of the coronavirus crisis. The firm will be allowed to fully suspend its business for 30 days with the possibility of extending the period.

MEDIA AND ENTERTAINMENT

Future acquires TI Media for £140m

TI Media has been bought by publishing group Future for £140m, with the latter warning of a “significant” reduction in print sales as a result of high street store closures. The company’s net debt now stands at £93m, but it has signed a new £30m revolving credit facility in a bid to boost its working capital.

PROFESSIONAL SERVICES

City jobseekers increase by 43%

Morgan McKinley’s Spring London Employment Monitor has revealed that the first three months of the year have seen the number of finance professionals seeking employment in London increase more than 40%, with coronavirus affecting salaries and vacancies. The professional services recruitment consultancy’s director Hakan Enver predicted “Once the initial shock wears off we will see jobs begin to trickle back through.”

REAL ESTATE

London home listings plunge

The COVID-19 lockdown has hit London’s property market, with all of the capital’s boroughs suffering a decline in the number of new homes on the market. Research by property platform Get Agent shows that outer boroughs saw the steepest declines, with new homes for sale falling 91% in Hillingdon and Bromley. At the other end of the scale, the decline in new listings in Greenwich since restrictions were rolled out is 29%. Across the UK, Woking suffered the biggest decline, at 94%, while West Lancashire saw the smallest dip, with 25.8% fewer listings.

ECONOMY

BoE deputy governor: 35% GDP fall not unrealistic

Bank of England deputy governor Ben Broadbent has said the economy could shrink by as much as 35% in the second quarter. Echoing comments made by BoE governor Andrew Bailey who last week said he didn’t see “anything implausible” in a scenario set out by the Office for Budget Responsibility where GDP drops by a third, Mr Broadbent said such an occurrence is not “unrealistic”. The deputy governor for monetary policy said the BoE cannot be sure if the economy will see “scarring” or experience a quick rebound. On scarring, he said “the entire thrust of public policy as I see it is directed towards minimising those effects.” He also said monetary financing, when a central bank directly funds government spending, is not taking place as the BoE is not being forced to support spending.

OTHER

Furlough scheme covers 1m workers on day one

The Government's online application system for furloughing employees has launched, with huge numbers of employers expected to apply for inclusion in the scheme under which 80% of the wages of staff temporarily laid off as a result of the coronavirus pandemic will be paid, up to a maximum of £2,500 a month. Chancellor Rishi Sunak, who last week extended the furlough scheme until the end of June, announced that more than 140,000 companies employing a total of a million workers applied to the scheme on its first day of operation – with 67,000 claims in the first 30 minutes.

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