Interest rate turmoil would hit ‘unprepared’ banks – IMF
The International Monetary Fund (IMF) has warned that some banks and financial institutions are still “simply unprepared” for further turbulence caused by higher interest rates. It said more banks and asset managers could fail amid a punishing environment of high rates and market volatility. This comes in the wake of a crisis that saw the collapses of three American lenders and the forced sale of Credit Suisse to UBS. The IMF report says: “Market participants failed to adequately prepare for rate increases, possible disruptions in funding markets and links with the rest of the financial system,” adding: “While risks are obvious in hindsight, the systemic implications of the existing weaknesses were largely unanticipated by policymakers and investors alike.” Tobias Adrian, financial counsellor at the IMF, said: “Some institutions are simply unprepared for the higher-rate environment,” going on to warn: “The risk-management failures that have been unmasked by the recent episodes are a source of concern.” The IMF has urged policymakers to “act swiftly to prevent any systemic event that may adversely affect market confidence in the resilience of the global financial system.”
Barclays announces more closures
Barclays is to close 15 branches in July, taking the number of high street banks it is shutting this year to 84. Last month Lloyds and NatWest said they would shed more than 80 branches, with Nationwide, TSB and Virgin Money having also each announced a number of closures.
Lloyds sets disability targets
Lloyds Banking Group has pledged to double the proportion of staff with disabilities in senior management jobs. While 6% of Lloyds' employees at senior management level have reported having a disability, the bank wants to double representation to 12% by 2025. If the goal is reached, the number of senior managers who identify as having a disability would increase from around 450 to 900. Nationwide has publicly set a disability target for senior staff of 8% by March 2028.
KKR takes 29% stake in public relations group FGS Global
Private equity firm KKR has acquired a 29% stake in advertising group FGS Global. The minority investment values the financial communications company at about $1.43bn.
Swiss parliament split on UBS takeover of Credit Suisse
An emergency session of the Swiss parliament has seen authorities defend the state-brokered merger of the country’s two largest banks, UBS and Credit Suisse. Swiss President Alain Berset argued that the Federal Council “was obliged to intervene to maintain stability both in Switzerland and internationally and to protect the economy,” warning that Credit Suisse failing “would have had disastrous consequences.” UBS acquired Credit Suisse for $3.25bn in March in an attempt to protect the global financial system.
HSBC hires SVB bankers
HSBC’s US unit has hired a number of Silicon Valley Bank bankers, including David Sabow, who most recently led the technology and healthcare banking segment for the bank that collapsed last month. Other hires included Sunita Patel, who will oversee investor coverage and business development for technology and healthcare market, Katherine Andersen who will lead life sciences and healthcare, and Melissa Stepanis, who will oversee technology.
Goldman Sachs names new global head of private banking
Goldman Sachs has named insider Nishi Somaiya as its new global head of private banking, lending and deposits. She joined Goldman in 2001, was named managing director in 2011, and became partner in 2016. Her most recent position saw her serve as the bank’s global co-head of growth equity.
Firms question planned BNPL rules
Klarna and Zilch have voiced concern over the scope of planned buy now, pay later (BNPL) rules. A Government consultation launched ahead of bringing the sector under regulation later this year called on the industry to offer a perspective on plans to clamp down on BNPL firms. Klarna and Zilch said that while they backed the moves to regulate the sector, some of the planned rules involve outdated legislation, with the firms also warning that consumers can still bypass borrowing restrictions via loopholes. Klarna said it is “concerned with the suggestion to copy and paste Consumer Credit Act rules on credit agreements, which are outdated and don’t protect or inform consumers,” while Zilch CEO Philip Belamant said the rules did not close out a potential dangerous “loan stacking” loophole where firms could borrow to pay off BNPL debts. The new legislation is set to deliver tighter credit checks on borrowers. It will also expand the remit of the Financial Ombudsman Service, allowing consumers to dispute claims.
Pension fund sacks boss after losses
The head of Sweden’s biggest pension fund has been ousted after it suffered £1.5bn of losses from investments in American lenders caught up in the recent crisis in the banking sector. Alecta Pensionsforsakring said chief executive Magnus Billing is leaving with immediate effect and Katarina Thorslund, Alecta’s deputy chief executive, is replacing him on an interim basis until a permanent successor is found. Alecta was a large shareholder in the parent company behind Silicon Valley Bank, as well as in Signature Bank and First Republic Bank. Silicon Valley and Signature collapsed last month, while First Republic was forced into a $30bn rescue. The pension fund says the losses “have severely damaged the trust in Alecta’s asset management.” It added that the board “has concluded that Alecta needs new leadership in order to implement the necessary changes within the asset management, and to re-establish trust.”
Money market funds inflows surge in Q1
Analysis by Hargreaves Lansdown shows that money market funds and short-term money market products saw a 5,988% increase in net flows in the first quarter. Money market funds, which invest in high-quality, short-term debt, have become more attractive to investors than bank deposits as interest rates have risen. Hargreaves Lansdown’s Danny Cox said the inflow reflected “the nervousness of committing to stock market funds and shares right now.” He added: “Over time as investor confidence improves we would expect to see people taking a longer term view and shifting across to the stock market.”
New investment trust plots £100m IPO
A new investment trust has revealed plans for a £100m float on the London Stock Exchange. Ashoka WhiteOak Emerging Markets Trust is to list an investment vehicle to back quoted firms that provide exposure to global emerging markets. Prashant Khemka, founder of the firm’s investment adviser White Oak Capital Partners, said: “This easily accessible vehicle will provide investors exposure to Emerging Markets and the opportunity to generate significant alpha through exposure to a portfolio of great companies at relatively attractive valuations.”
MJ Hudson agrees £40m sale of remaining operations
Investment consultancy MJ Hudson has agreed to sell its two remaining business operations to a subsidiary of Apex Group. The combined sale of its business outsourcing segment and data and analytics arm to Apex Consolidation Entity will raise up to £40m. Most of the proceeds will go towards repaying the £33.7m owed to its senior lender, Santander UK. MJ Hudson was forced to delay the publication of financial results in October because of auditing adjustments related to a £1.3m public sector contract. Two months later, it suspended chief financial officer Peter Connell and halted trading of its shares when further discrepancies were revealed.
Azura hires ex-Credit Suisse banker in US push
Wealth management start-up Azura Partners is launching a US office. The firm, which manages almost $4bn, has recruited former senior Credit Suisse banker Anthony Kontoleon as a partner in New York.
Property sales return to pre-pandemic levels
The number of home sales agreed is back to pre-pandemic levels for the first time since September, data from Rightmove shows. Sales in March this year were only 1% behind the levels seen in March 2019.
IMF: UK set to be among worst-performing economies
The UK is set to be one of the world’s worst performing major economies this year, according to a forecast from the International Monetary Fund (IMF). The report says the UK economy's performance in 2023 will be the worst among the G7, predicting that the economy will shrink by 0.3% in 2023 and then grow by 1% next year. The IMF's latest prediction represents a small upgrade, from a previous forecast of a 0.6% contraction. Chancellor Jeremy Hunt said: "Our IMF growth forecasts have been upgraded by more than any other G7 country,” adding: "The IMF now say we are on the right track for economic growth. By sticking to the plan we will more than halve inflation this year, easing the pressure on everyone." The IMF expects global growth to fall from 3.4% in 2022 to 2.8% in 2023, before rising slowly and hitting 3% in five years' time. Germany is the only other G7 country forecast to suffer a contraction this year, at 0.1%.
Greene to replace Tenreyro on MPC
Chancellor Jeremy Hunt has appointed Megan Greene to the Bank of England’s interest rate-setting committee. She will join the Bank’s Monetary Policy Committee (MPC) from consultancy Kroll, where she has been global chief economist, replacing Silvana Tenreyro on July 5. The Treasury said Ms Greene “will bring valuable new expertise to the MPC.” Ms Greene will be an external member of the MPC, meaning she can retain most of her existing duties. The nine policymakers on the MPC vote eight times a year on whether to adjust interest rates in response to inflation.