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Daily News Roundup: Wednesday, 21st June 2023

Posted: 21st June 2023

BANKING

FCA monitors banks amid profiteering concerns

With banks warned against profiteering during the mortgage crisis, the Financial Conduct Authority (FCA) is understood to be monitoring the market ahead of the launch of its Consumer Duty, which will require banks to treat customers fairly. Concerns have been raised after banks were quick to pass on successive increases in the Bank Rate to mortgage borrowers but have not been as swift in upping rates for savers. With interest rate rises seeing Barclays, NatWest, Lloyds and Santander report large increases in their “net interest income” – the difference between what they charge borrowers and pay savers - MP Danny Kruger, a member of the Treasury Select Committee, has called on the FCA to take action. He said: “Something is clearly going wrong when banks are profiting from increasing interest rates but savers aren’t benefiting from them.” FCA chief executive Nikhil Rathi said the watchdog has “challenged” some of the worst offenders. Meanwhile, the Treasury Select Committee has written to the heads of Britain’s biggest banks to raise concerns as part of an investigation into savings rates.

Lenders look to help stretched borrowers

Lenders insist they are doing their “best to help” customers affected by climbing mortgage rates, with UK Finance saying: “Lenders stand ready to help anyone struggling with their mortgage payments.” Recent research by HSBC shows that only 3% of people are aware that they can contact their bank or building society to discuss their financial worries without it impacting their credit score. Alongside existing support, HSBC says it is continuing to look at ways it can help customers, while Nationwide has launched a “health checklist” which allows its members to see the options that may be available. NatWest said it understands that some mortgage customers “might be concerned” and noted that it offers “an extensive range of support measures.” A Santander spokesperson said: “We are committed to helping our customers through more challenging times.” Ele Clark, senior editor at Which? Money, said concerned borrowers should talk to their lender about what support is available, adding that they can “rest assured” that discussing options with a lender will not affect their credit rating.

Hunt rules out government help on mortgages

Chancellor Jeremy Hunt has ruled out introducing major financial support to mortgage holders, saying offering relief schemes for home loans would "make inflation worse, not better." With homeowners facing soaring mortgage costs due to higher interest rates, the Government says it is "spending record amounts" helping people and already has "specific tools" to provide support. While Mr Hunt has ruled out mortgage relief schemes, he said he intends to meet mortgage lenders to ask what help they can give to households struggling with bills. Meanwhile, the Liberal Democrats have also called for mortgage relief and a mortgage protection fund. In response, Treasury Minister Andrew Griffith took a similar stance to the Chancellor, saying such policies would delay bringing down inflation.

INTERNATIONAL

Commerzbank executive in board U-turn

Ruediger Rass, an executive with Commerzbank, has decided to remain in his current role rather than join the management board as chief risk office following discussions with the European Central Bank.

AUTOMOTIVE

Ghosn sues Nissan for $1bn

Former Nissan boss Carlos Ghosn has reportedly sued the firm for more than $1bn, accusing the carmaker of defamation and libel. Mr Ghosn, who once ran the Renault-Nissan-Mitsubishi Alliance, was ousted from the firm in 2018 and arrested in Japan on financial misconduct charges, including claims he deliberately mis-reported his earnings. Mr Ghosn, who fled Japan while awaiting trial, says the allegations against him were designed to block his plan to merge Nissan and Renault.

Board backs £465m bid for Lookers

The board of car dealership Lookers is backing a £465m bid for the company from Alpha Auto Group of Canada. Lookers was advised by Numis and Peel Hunt before it backed the bid, calling it “fair and reasonable.” 

AVIATION

Rolls-Royce ready to re-enter market for smaller jet engines

Rolls-Royce's new CEO, Tufan Erginbilgic, has said the company is ready to re-enter the market for engines for single-aisle jets once manufacturers build a new generation of planes. Rolls-Royce left the market for the jet engines used on medium-sized, narrow-body jets in 2011 with the sale of its stake in a joint venture.

FINANCIAL SERVICES

City Minister: UK needs ‘Goldilocks’ approach to crypto rules

City Minister Andrew Griffith says officials drawing up rules on crypto must find a balance between consumer protection and innovation, suggesting that if regulation is too tight it may scare off fintech firms. He said: “The UK is on the right path to establishing itself as a global centre for crypto regulation – something I have described as a ‘Goldilocks’ approach of being not too cold, not too hot.” Ministers are set to hand regulators powers to draw up specific rules for the sector through the Financial Services and Markets Bill, which is making its way through parliament.

Crypto boss jailed

Do Kwon, the cryptocurrency boss behind the $40bn collapse of the terraUSD and Luna tokens, has been sentenced to four months in jail in Montenegro, having been found guilty of forging official documents. Mr Kwon also faces charges in the US, with the Securities and Exchange Commission alleging that he and Terraform “failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities.” In South Korea, officials have accused Terraform Labs of violating capital market rules.

Elliott accuses LME of rushed decision over cancelled nickel trades

Hedge fund Elliott Associates has accused the London Metal Exchange of rushing a decision to cancel billions of dollars of nickel trades in March 2022. Elliott is seeking $456m in compensation.

RETAIL

Firms leave underpaid staff £5m out of pocket

The Department for Business and Trade has named 202 companies that short-changed staff between 2017 and 2019. The report says that in total, around 63,000 workers were left nearly £5m out of pocket due to a “clear breach” of national minimum wage law. It was found that WH Smith underpaid 17,607 of its workers by a total of £1.02m, with a requirement to provide their own uniforms pushing staff salaries below the national minimum wage. Lloyds Pharmacy underpaid 7,916 of its staff by a total of £903,307, while M&S failed to pay £578,391 to 5,363 workers. Argos was found to have underpaid 10,399 workers by a total of £480,094, with owner Sainsbury’s citing a “payroll error.”

Grocery inflation slows to 16.5%

The pace of grocery price rises has eased to its lowest monthly rate this year, dropping to 16.5% from 17.2% last month and March’s record of 17.5%. The latest Lloyds Bank UK Sector Tracker found that food and manufacturing production costs fell in May for the first time in seven years, driving optimism that food price inflation may be starting to ease.

Frasers Group buys £22m stake in Boohoo

Frasers Group has purchased a 5% stake in Boohoo worth £22m. It comes after the retail group recently built a 9% stake in Currys and a 21% stake in AO.

ECONOMY

Experts expect rate hike

While the Bank of England is expected to raise rates by 0.25 percentage points as officials look to bring down inflation, some experts argue that it may have to rise by as much as 0.5 percentage points, taking the base rate to 5%. Sir Charlie Bean, a former deputy governor of the Bank, says it would be “amazing” if rates did not go up at least 0.25 percentage points, and possibly 0.5 percentage points, while economist Andrew Sentance, who formerly sat on the Bank’s rate-setting panel, said higher-than-expected wage growth and GDP figures mean that he would opt for a 0.5 points increase. Sir John Gieve, the former deputy governor of the Bank is in favour of the 0.5 points, suggesting that “the case for a further rise in rates is clear.” However, Charles Goodhart, another former member of the rate-setting committee, said he expects a 0.5 point rise but feels that 0.25 points would be sufficient.

OTHER

Roberts: BoE 'has a lot to learn'

The head of the Bank of England’s oversight board says it has a lot to learn from the recent surge in inflation. The Bank has faced criticism for failing to keep inflation down, having seen it soar to a high of 11.1% before dipping back to 8.7% - still well ahead of the 2% target. Rate-setters have increased interest rates from 0.1% to 4.5% since December 2021 as they look to bring prices down. David Roberts, chairman of the Bank’s Court of Directors, said: “We think there are lessons to learn. We need to stand back and ask ourselves what can we learn?” He told the Economic Affairs Committee in the House of Lords that he had instigated a review of the forecasting process which had been “readily agreed to” by Bank governor Andrew Bailey and other policymakers. He added: “We’ll have lots more shocks that we need to prepare for.”

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