Truss refuses to rule out scrapping the bankers’ bonus cap
The Prime Minister has refused to rule out lifting the cap on bankers’ bonuses as part of a post-Brexit shake-up of City rules. Speaking to journalists in New York, Liz Truss defended reports that Chancellor Kwasi Kwarteng will scrap caps on bankers' bonuses during a mini budget announcement on Friday as she blamed the UK's "relatively low growth" on a lack of capital investment. Commentators say the move could be tricky politically and may trigger a return of the high risk behaviour that sparked the global financial crisis.
Value of private equity-backed ‘carve outs' triples
Research from Mayer Brown reveals the value of private equity-backed “carve out” deals has more than tripled over the past year. James West, a partner Mayer Brown, says: “As we head into choppier economic waters, corporates looking to sell non-core parts of their business are likely to find plenty of willing private equity buyers. For private equity funds carve outs can be an attractive opportunity. Acquiring an unloved business unit from a corporate brings with it opportunity for relatively substantial turnaround if the right strategy for growth can be implemented.”
Private equity may become a ‘pyramid scheme’, warns Danish pension fund
Mikkel Svenstrup, chief investment officer at ATP, claims the practice of private equity groups selling portfolio companies to themselves could constitute a pyramid scheme as he revealed ATP is reducing PE investments.
Morgan Stanley pays $35m fine over data-security
Morgan Stanley has agreed to pay $35m to settle a case brought by the US Securities and Exchange Commission alleging that its Smith Barney unit disposed of thousands of devices without ensuring they had been properly wiped of personal information. The electronics contained identifying information of about 15m customers and many of the devices were resold on an internet auction site, the agency said. “Customers entrust their personal information to financial professionals with the understanding and expectation that it will be protected,” said Gurbir Grewal, director of the SEC's enforcement division. He called the findings “astonishing.”
Jamie Dimon warns capital rules pose ‘significant economic risk’
JPMorgan CEO Jamie Dimon has warned US lawmakers that capital requirements for large banks pose “a significant economic risk” and handicap their ability to lend “at precisely the wrong time”. Dimon’s comments will form part of a series of testimonials by US bank CEOs to Congress this week. Citigroup CEO Jane Fraser will join Dimon in warning of storm clouds ahead for the economy stating that the challenges ahead are "no less daunting" than during the COVID-19 pandemic.
Banks struggle to offload Citrix debt glut in sign of weak credit market
Lacklustre investor interest in a pair of bond sales to fund the leveraged buyout of software company Citrix is a sign of increased fragility in US credit markets, observers say.
Goldman Sachs hunts new revenues in EU transaction banking push
Goldman Sachs is expanding into transaction banking in the EU as part of a group-wide strategy under CEO David Solomon to grow beyond the investment bank’s core areas of trading and advisory.
Treasury looks to appoint growth-minded directors to FCA
The Chancellor has begun a search for two new directors to help the Financial Conduct Authority (FCA) promote “growth and competitiveness” as part of a push to make the City more competitive. Candidates for the two non-executives roles will have “an appreciation of the role of regulation as a driver of growth and competitiveness” according to the job advert. Kwasi Kwarteng and Prime Minister Liz Truss are heaping pressure on regulators to help unleash a “Big Bang 2.0” - a bid to make the UK’s financial services industry more attractive. According to the Telegraph, the Treasury is also looking for candidates with digital markets expertise in a sign of the growing importance of regulating crypto assets for the FCA.
FCA increases scrutiny of new applicants
The Financial Conduct Authority (FCA) is rejecting a greater number of applications from financial firms wanting to do business in Britain after criticism of the authority over its authorisation of mismanaged financial firms. Over the past 12 months, the proportion of firms that failed to gain authorisation has grown from one in fourteen to one in five, according to Emily Shepperd, the FCA's chief operating officer and executive director of authorisations. Shepperd said: “We have increased scrutiny, now conducting a complete review of firms' business plans, risks, budgets, resources, systems, controls and whether key staff have the necessary qualifications and experience to act effectively.”
LEISURE & HOSPITALITY
Butlin’s bought back from private equity
The Harris family has bought back Butlins for £300m. The move comes just 19 months after last year’s sale by the family of Butlin’s parent company Bourne Leisure for £3bn to Blackstone. Bourne also operates the Haven and Warner Leisure holiday businesses, which will remain in Blackstone’s hands. However, the Harris family will not own Butlin’s property assets as they were sold to pension manager Universities Superannuation Scheme for £300m in July.
Sainsbury's in talks to offload £500m store portfolio
J Sainsbury is in talks to offload a portfolio of prime retail sites to a London-listed real estate investor for about £500m. Under the deal, LXi REIT will acquire the freeholds to nearly 20 stores, which the grocer then intends to lease back.
Retail and hospitality call for rates freeze, reform
The British Retail Consortium (BRC) has written to the Chancellor calling for an immediate freeze in business rates. The tax is set for an inflation-linked increase which could add an extra £800m to retailers’ bills this year. “Rising costs are starting to feed through into prices,” said BRC chief executive Helen Dickinson in her letter to Kwasi Kwarteng. “Consumer spending will be considerably constrained this winter with inflation continuing to climb and energy bills rising further.” The BRC is also calling for a fundamental reform of the tax. The calls were echoed by the Retail Jobs Alliance, UK Hospitality, the British Beer and Pub Association and the Campaign for Real Ale.
Holland & Barrett owner proposes £890m debt buy back
LetterOne, the owner of Holland & Barrett, is planning to buy back nearly £900m of debt as part of a restructuring of the health food retailer. The restructuring consists of a tender offer in which the retailer's lenders can opt to participate.
BIS warns ditching Russian oil risks global food crisis
The Bank for International Settlements has warned that plans by Western economies to wean themselves off Russian oil and gas risks substantially raising global oil prices and worsening a global food crisis. “Persistently high oil prices may add upward pressure to the price of grains and oilseeds by boosting their use in the production of biofuels, such as ethanol and biodiesel,” it said. “Shifts in the price of these crops, which are key livestock feedstuffs, could quickly propagate into other food prices.” The BIS has urged central banks to keep aggressively raising interest rates to prevent inflationary pressures from becoming embedded. Claudio Borio, head of the monetary department at the BIS, said: “We know that if you wait and allow inflation to become entrenched, this will raise the costs [for the economy] down the road. It is important to act in a timely and forceful way.”
Bank of England expected to opt for hefty interest rate rise
Analysts predict the Bank of England will increase interest rates by 0.75 percentage points when the Monetary Policy Committee meets on Thursday, taking them to 2.5% in the biggest increase since Black Wednesday in 1992. Markets are also pricing in 2 percentage points of rises over the next three meetings, implying that rates will jump from the current rate of 1.75% to 3.75%, their highest level since 2008. Sam Lynton Brown, of BNP Paribas, said: "We find arguments for a 75bp rate hike compelling." He added that Liz Truss's plan to slash taxes and cap energy bills meant the Bank was more likely to retain its hawkish guidance" and keep rates higher for longer.
Rees-Mogg to announce energy rescue package for businesses
The Business Secretary is expected to announce a cap on energy prices for businesses that would cut the rates they pay by up to half this winter. Jacob Rees-Mogg will today cut the rate for electricity and gas for non-domestic users by about 50% and 25% respectively, compared with current contracts for winter. The cap is expected to limit the rate businesses can be charged by their energy provider to around 21.1p per kilowatt hour for electricity and 7.5p per KWh for gas, substantially below expected wholesale costs. The Government will pay providers to make up the difference.