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Daily News Roundup: Wednesday, 14th September 2022

Posted: 14th September 2022

BANKING

Greenwashing a ‘systemic problem’ at UK banks

A survey of 150 UK banking executives by technology firm Mobiquity suggests greenwashing is a “systemic problem” at UK banks. The study shows that just 59% of lenders are measuring their carbon footprint. Around a third of the executives said a lack of recognised sustainability reporting framework was a barrier to improving sustainability credentials, while a quarter said a lack of understanding of how to boost green finance activity was a problem. Peter-Jan Van De Venn, strategy director fintech at Mobiquity, said: “Greenwashing is an ongoing challenge for banks. They will only be able to protect their reputation if they fully optimise the execution of their sustainable initiatives.” City AM’s Jack Barnett notes that ministers have vowed to put International Financial Standards Foundation climate disclosure guidance at the heart of the Government’s corporate governance regime. As of next year, some listed companies and finance firms will have to publish their plans to reduce their negative impact on the climate. Mr Barnett says low levels of sustainability reporting “indicate banks will need to ramp up their disclosure standards in the coming years to avoid unwanted regulatory attention.”

Challenger banks stifled by regulation, says OakNorth CEO

OakNorth founder and chief executive Rishi Khosla says challenger banks are being hindered by regulation, with smaller digital lenders like OakNorth, Monzo and Starling Bank having to meet the same regulatory reporting requirements as long-established high street banks. He said: “Currently, the burden of regulation falls more heavily on challenger banks than on larger, systemic institutions.” Mr Khosla added: “That is generally evidenced by higher capital requirements per pound of risk exposure, particularly for those banks on the standardised approach to capital.”

INTERNATIONAL

Bank of America fined $5m

The US’ Financial Industry Regulatory Authority has fined Bank of America Corp $5m for failing to report over-the-counter options positions approximately 7.42m times. The failings occurred from 2009 to October 2020, and included 26 options positions that exceeded applicable size limits by 20% to 2,900%. Bank of America did not admit or deny wrongdoing in agreeing to settle, and has corrected the causes underlying the reporting failures, the regulator said.

UBS to boost dividend

UBS Group plans to increase its dividend by 10% and expects share repurchases to exceed its 2022 target. UBS said it expects share repurchases to exceed the $5bn goal for the year 2022, noting that as of September 9, it had bought back $4.1bn of shares. In a statement, the bank said it would provide guidance on next year's capital return with fourth-quarter earnings due in January and expects "to continue to have share repurchases and a progressive dividend."

JPMorgan’s investment banking fees could fall 50%

JPMorgan Chase president and chief operating officer Daniel Pinto says its investment banking revenues could drop by as much as 50% in Q3. He expects investment banking fees to be 45%-50% lower than the $3.3bn it achieved in the third quarter last year, with it forecast that the bank’s fees have already fallen 44% over the first six months of 2022.

Barclays is 'far along' in discussions on securities selling

Barclays CEO C.S. Venkatakrishnan says the bank is in discussions with the Securities and Exchange Commission (SEC) after it sold securities in breach of US rules. He told a Barclays investor conference: “We are very, very far along in discussions with the SEC on resolving outstanding issues with that matter.” The bank’s Q2 profit took a £1.9bn hit for regulatory issues, including having to buy back securities it sold in error. It took a charge of £1.3bn to cover the costs of buying back $17.6bn of securities it sold in breach of US regulations.

French banks to limit fee increases to 2%

France's banking groups have agreed to limit fee increases, Finance Minister Bruno Le Maire revealed following a meeting with the country's FBF banking federation. He said: “All of the banks have committed to not increasing their fees by more than 2% in 2023," adding that some banks had agreed to freeze some fees on common products like bank cards.

FINANCIAL SERVICES

Link 'does not agree' with FCA over Woodford

Link Group says it does not agree with the Financial Conduct Authority’s (FCA) finding of misconduct at London-based subsidiary Link Fund Solutions (LFS) over its handling of the collapsed Woodford Equity Income Fund. Link said LFS is exploring all options in relation to an investigation into its handling of the Woodford fund, including a potential challenge to any warning notice issued by the City watchdog. The firm suggested it could walk away from its UK-based funds administration business rather than pay compensation of more than £300m to investors. This comes after the FCA said Link may be liable for a £306m fine over its handling of the Woodford fund. The City watchdog said approval of Dye and Durham’s takeover of Link Group was subject to a condition that it commits to ensuring funds are available to make up any shortfall in Link’s ability to pay any redress imposed. As the authorised corporate director of Woodford Investment Management, Link has been under investigation by the FCA since the collapse of the Woodford fund.

City Minister urged to push through post-Brexit reforms

The new City Minister has been urged to push forward with the Government’s plan to reform the UK’s financial services rulebook post-Brexit. Andrew Griffith’s responsibilities will include pushing the Financial Services and Markets Bill through parliament and tearing up EU regulations on the City. Miles Celic, chief executive at TheCityUK, said the business group is looking forward to working with Mr Griffith “to further maintain and enhance its position as a great British success story, deliver the reforms set out in the Financial Services and Markets Bill and support our role as an engine of growth for the whole economy.” Meanwhile, UK Finance chief executive David Postings said that with the Government having talked about the importance of supporting the financial services sector, the City Minister’s role is “a vital one in terms of delivering economic growth and a more competitive financial sector.”

R&Q investors fail to back activists

Activist investors have failed in their attempt to oust the boss of London-listed insurer R&Q. Shareholders Phoenix Asset Management and US investment group Brickell last month called for executive chairman William Spiegel to be removed and replaced by Ken Randall, the company's founder and former executive chairman. However, two-thirds of the company's investors voted against removing Mr Spiegel and appointing Mr Randall. J O Hambro, a top five investor in R&Q, said that any change to the company's strategy or executive leadership team would be counterproductive, while Slater Investments, which holds a stake of almost 12%, and Abrdn, which holds 6% of shares, also rejected calls to oust the chairman.

REAL ESTATE

Buyers and owners are locking in mortgage rates

Financial Conduct Authority (FCA) data shows that the majority of homebuyers and owners are locking in their mortgage rates in anticipation of increases as the Bank of England looks to tackle inflation by raising the base rate. FCA analysis shows that 95.5% of new buyers are taking out fixed rate mortgages, while the proportion of mortgaged homeowners fixing their rates is at an all-time high of 84.9%. The FCA also found that the value of new mortgage commitments made by lenders grew by 1.7% to £83.9bn in Q2. Despite the increase, the figure remains 2.6% less than a year earlier.

RETAIL

Grocery price inflation hits new record

Grocery price inflation hit a record 12.4% in August, outpacing the previous record of 11.6% which had been set the month before. The increase means consumers are paying £571 more on average for their groceries than last year, with the average annual grocery bill increasing from £4,610 to £5,181. Meanwhile, Aldi’s market share has increased, making it Britain’s fourth largest supermarket for the first time. The discounter’s sales rose by 18.7% over the 12 weeks to September 4, giving it a market share of 9.3%, while fellow discounter Lidl increased its sales by 20.9% and its market share to 7.1%. Morrisons' sales dropped by 4.1% over the same period, with its market share falling to 9.1%. Tesco still leads the way, with a market share of 26.9%, followed by Sainsbury's (14.6%) and Asda (14.1%).

ECONOMY

Economists: Boosting growth a ‘multi-year challenge’

Economists have warned that Chancellor Kwasi Kwarteng’s target of 2.5% annual GDP growth could be hampered by tax cuts he is expected to announce in next week’s emergency Budget. Mr Kwarteng has reportedly told Treasury staff that he wants his department to focus “entirely on growth in a bid to tackle the level of national debt. This comes with Prime Minister Liz Truss having spoken out over “Treasury orthodoxy” and “abacus economics” which put balancing the books ahead of wealth generation. Paul Johnson, director of the Institute for Fiscal Studies, argues against pointing the finger at Treasury officials, saying: “If this is a new form of political leadership, which is putting more focus on growth, then good. Growth is really, really important. But it’s a bizarre thing to blame it on Treasury orthodoxy, as opposed to the decisions that politicians have been making.” Meanwhile, James Smith, research director of the Resolution Foundation, says turning around sluggish growth will be a “multi-year challenge,” noting that increasing growth is “easier said than done.” He added: “This is not something they’re going to be able to do overnight. It’s not something that one set of tax cuts will achieve.” Professor Sir Christopher Pissarides of the London School of Economics said it was “old-fashioned” for the Treasury to be targeting growth rates, adding: “I think that the numbers are unrealistic, but even more unrealistic is the idea that that the Treasury will have targets for GDP growth.”

OTHER

Unemployment falls to lowest level since 1974

Unemployment hit 3.6% in the three months to July, with this the lowest level since 1974. Office for National Statistics (ONS) data shows that the number of people in employment grew by 40,000 over the period. While regular pay, excluding bonuses, grew by 5.2% over the period, when inflation is taken into account, real pay fell by 3.9% year-on-year. Total pay including bonuses was up 5.5% in the three months to July but down 3.6% with inflation taken into account. In the private sector average regular pay growth over the May through July period was 6%, while in the public sector it stood at 2%. The ONS figures also show that total weekly hours worked fell by 3.5m. Reflecting on the data, TUC general secretary Frances O'Grady called on the new Prime Minister to “get pay rising,” adding: “Boosting the minimum wage and giving public sector workers a decent pay rise would be a good start.” Kitty Ussher, chief economist at the Institute of Directors, said: “Although the effect of inflation has caused real pay to fall — by 2.8% on the year, causing difficulties for many — the jolt to family budgets from high unemployment would be significantly worse.”

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