BANKING
Review of bank scandal payouts delayed
John Swift QC’s independent review of a compensation scheme for SMEs who were mis-sold financial products by high street banks has been delayed for a third time. The review of how the Financial Services Authority and its successor, the Financial Conduct Authority (FCA), handled the interest rate swaps scandal will not be published until the end of the year. Mr Swift was appointed in June 2019 and the review was due to be completed within 15 months but it was pushed back to early 2021 and then to the summer. The FCA said the review had taken longer than expected because “of the complexity of the many issues, the number of stakeholders and witnesses involved, and the large volume of material to be considered and analysed”. Kevin Hollinrake, co-chairman of the All-Party Parliamentary Group on Fair Business Banking, said the delays must not result in “individual criticisms, accountability and culpability being watered down or removed”.
Hohn writes to regulators in climate campaign against banks
Hedge fund manager Sir Chris Hohn has called on regulators to “immediately reduce” climate-related risk in the financial system, lobbying financial bodies via his Children’s Investment Fund. As part of a campaign which aims to reduce the banking industry’s financing of fossil fuel producers, Mr Hohn wrote to the Bank of England (BoE), the European Central Bank, the European Banking Authority and the US Financial Stability Oversight Council to propose a series of “immediate steps”. In a letter to BoE governor Andrew Bailey, he said: “Not only are UK banks continuing to channel financing to fossil fuels, they are failing to provide basic levels of transparency about the extent of the emissions they are financing.” He suggested banks should be required to share more detail of the “absolute carbon emissions” in the climate disclosures of their loan books. He also called for stricter capital requirements for lending to fossil fuel projects.
Eight in 10 use fintech apps for banking and payments
Research by Plaid and The Harris Poll shows that 86% of Britons use fintech apps to manage or spend their money, with the report showing that UK consumers manage 67% of their finances online, across an average of 2.8 fintech products and services. This is expected to increase to an average of 3.5 apps and services over the next six months as 76% of people now feel confident using new technologies to manage their finances. Keith Grose of Plaid said: “A change of habits has accelerated during the pandemic that means everything is flowing through our phones now, and even older generations are using neobanks and payments online”.
NatWest to offer eco-friendly loans for small firms
NatWest has vowed to launch its first environmentally friendly business loan as it looks to help small businesses capitalise on efforts to tackle climate change, unveiling plans to offer a green loan for SMEs, with incentives for sustainable borrowing. NatWest’s Springboard to Sustainable Recovery report shows that less than 10% of small firms see climate action as a source of future growth. The bank has revealed plans to offer £100bn in green funding by the end of 2025.
INTERNATIONAL
SEC looking into how banks keep tabs on employees' communications
The US Securities and Exchange Commission (SEC) has reportedly opened a broad inquiry into how Wall Street banks are keeping track of employees' digital communications, with officials contacting banks to check whether they have been adequately documenting employees' work-related communications, such as text messages and emails, with a focus on their personal devices. The SEC and the Financial Industry Regulatory Authority require broker-dealers to keep records of all business-related communications.
AVIATION
easyJet sees £1bn losses
Airline easyJet has seen its second consecutive year of posting billion-plus losses, saying it expects to announce annual losses of up to £1.17bn. The figure announced in a trading statement after the September 30 close of its financial year comes after the £1.2bn loss it made in 2019/20. CEO Johan Lundgren said the airline would fly 70% of its normal capacity in the October-December trading quarter, commenting: “We have reduced our losses quarter by quarter and will remain disciplined on capacity.” Mr Lundgren said that easyJet's "recovery is under way".
FINANCIAL SERVICES
Treasury to revamp capital raising rules
The Government has announced a review of rights issues and other forms of fundraising in a move that could see an overhaul in the way London-listed companies tap shareholders for cash. The Treasury has appointed Mark Austin, a lawyer with Freshfields Bruckhaus Deringer, to chair a group that will examine how to revamp capital raising. The Treasury said the review will look at rule changes designed to make it easier for companies to tap investors and examine fundraising models used in other countries. It will also consider the role that technology can play. The Times’ Ben Martin says the review comes as the Government seeks to boost the appeal of London, noting that following a review of Britain’s listing rules by Lord Hill of Oareford, the Financial Conduct Authority announced rule changes to try to encourage more companies to float in London. Mr Austin commented: “Improving the efficiency of secondary capital raisings by listed companies is an important element of making the UK an even more attractive place for businesses to list.”
Regulator to test firms' remote working arrangements
The Financial Conduct Authority (FCA) is to evaluate firms considering remote or hybrid working on a case-by-case basis, saying firms will be required to prove that the remote working does not - or is unlikely to - cause detriment to consumers, damage the integrity of the market, increase the risk of financial crime and reduce competition. The watchdog said firms should be able to prove that a hybrid working model will not prevent the FCA receiving information about a company, nor will it reduce the accuracy of the Financial Services Register. Firms must also prove there is appropriate governance and oversight by senior managers under the Senior Managers regime. The FCA notes that under Principle 11 of the its Principles for Businesses, any material changes to how a firm intends to operate may require the company to notify it first.
Harry and Meghan join Ethic
The Duke and Duchess of Sussex have become "impact partners" and financial backers in tech-driven asset manager Ethic. The firm, which manages a $1.3bn fund, says it only invests in businesses that meet its "social responsibility criteria", including on racial justice, climate issues and equal and fair pay.
Steelworker pensions scandal stirs demand for probe into FCA's role
Labour MPs Nick Smith and Stephen Kinnock have called on the National Audit Office to investigate the Financial Conduct Authority over its handling of a pension mis-selling scandal involving thousands of steelworkers.
HEALTHCARE
Activist investor calls for Symonds to quit GSK
Activist investor Bluebell Capital Partners has called for the resignation of GlaxoSmithKline’s Sir Jonathan Symonds, writing to the chairman to express disappointment with his explanations for GSK’s underperformance. Marco Taricco and Giuseppe Bivona, partners at Bluebell, said the company needs a “more radical change agenda”, saying this includes “the appointment not only of a new CEO but also of a new chairman.” The letter said Sir Jonathan appeared not to have a “precise understanding of the causes of the prolonged and severe underperformance of GSK share price”, with the Bluebell partners adding that they were “puzzled” by the chair’s “inexplicable support of the existing leadership”.
MEDIA & ENTERTAINMENT
Blackstone in tune with music investment fund
Blackstone is to deploy around $1bn in partnership with London's largest music investment fund to buy music rights and song catalogues. Blackstone will take an ownership stake in Hipgnosis Song Management, the investment adviser to the listed fund owned by music executive Merck Mercuriadis.
REAL ESTATE
Housing market could be set for a 'winter of discontent'
Inflation could be set to drive up mortgage costs, prompting experts to warn that the housing market may take a hit. Scott Taylor-Barr of Carl Summers Financial Services pointed to the impact of the stamp duty holiday and furlough schemes ending, as well as rising living costs, tax and National Insurance, saying: "Add in the usual Christmas slowdown and we can expect the market to lose some of the wind from its sails." Shaw Financial Services founder Lewis Shaw said the market has yet to see “the true impact” of the pandemic or Brexit, suggesting there are “all the ingredients for a winter of discontent." Noting the possibility of base rates rising, ThinkMarkets market analyst Fawad Razaqzada said: "If we see wages data catch up with inflation, then the Bank of England will have even less reason to keep current interest rate policy."
ECONOMY
IMF expects economic growth to hit 6.8%
The International Monetary Fund (IMF) expects the UK economy to see growth of 6.8% this year. Although this is slightly lower than the 7% predicted in July, it would still represent the fastest growth in the G7. The IMF also believes the UK will see growth of 5% in 2022, a 0.2% increase on its previous forecast. The IMF said the global economy is set to grow 5.9% this year and 4.9% next year – with these 0.1 percentage points lower than previously suggested. The IMF expects most advanced economies to return their pre-pandemic growth trends next year as supply chain issues ease, and to exceed it by about 1% in 2024, while merging and developing economies (excluding China) could fall back and remain 5.5% below their pre-pandemic forecast by 2024. Despite outlining the levels of growth it expects, the IMF’s latest World Economic Outlook warns that there is “great uncertainty” about economic performance, pointing to the potential impact of inflation. The report said issues “could materialise if pandemic-induced supply-demand mismatches continue longer than expected”, adding that this would lead to “more sustained price pressures and rising inflation expectations”, forcing “faster-than-anticipated” rises in interest rates. “Monetary policy will need to walk a fine line between tackling inflation and financial risks and supporting the economic recovery,” the IMF said. Chancellor Rishi Sunak commented: “These new forecasts show the strength of our recovery, with the UK having the fastest growth forecast in the G7 this year.”
OTHER
Job vacancies hit record high
Office for National Statistics figures show that job vacancies hit a record high of almost 1.2m in September. The data also reveals a 207,000 increase in the number of people on payrolls, with the total hitting a record 29.2m. This is 120,000 above pre-pandemic levels and up 207,000 on the previous month. The report shows that vacancies grew across most sectors in the three months to September. While unemployment continued to fall, hitting 4.5% in September on the back of a 0.4% decline, the rate is likely to increase due to the furlough scheme winding up at the end of last month. The analysis found that average weekly earnings in the June-August period were 7.2% higher than in the equivalent three months of 2020, down from the previous reading of 8.3%. Excluding bonuses, earnings rose by 6.0%.