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Daily News Roundup: Wednesday, 22nd March 2023

Posted: 22nd March 2023


Chancellor committed to boosting City’s competitiveness

UK Chancellor Jeremy Hunt will go ahead with plans to reform banking regulation to make the City of London more competitive, a Treasury source has told the Telegraph. They said the recent crisis in the banking sector had not dissuaded the Chancellor from continuing on the path set out in his Edinburgh Reforms set out in December. These include relaxing ring-fencing rules on smaller banks, mandating financial regulators to focus on boosting economic growth and loosening rules that hold bankers personally responsible for rule breaking on their watch. Speaking before the House of Lords Economic Affairs Committee on Tuesday, Mr Hunt said: “Sticking with the status quo is not necessarily the best thing to do to ensure financial stability.” He went on to say that he had been assured by the Bank of England and the Prudential Regulation Authority that there were no risks to the UK banking system during discussions about the rescue of the UK arm of the collapsed Silicon Valley Bank. The Chancellor said UK banks were stronger and better placed to withstand a crisis than they were pre- 2008. “We do believe there is resilience in the system that there wasn't then."

Gadhia eyes sale of finance app Snoop

Dame Jayne-Anne Gadhia's moneysaving app Snoop is working with bankers at Rothschild on a fundraising or sale after receiving several takeover approaches, according to Sky News. The former Virgin Money CEO recently became chair of Moneyfarm, another UK-based fintech specialising in wealth management. A Snoop spokesman said: "We're exploring all options including strategic investment or sale. We've already had significant interest in the business, we have a very strong proposition and importantly we can demonstrate a clear path to growth and profitability."


Thousands face the axe after Credit Suisse takeover

Bankers at Credit Suisse in Canary Wharf are fearing for their jobs after the bank’s takeover by UBS. The Swiss bank employs 5,000 people at Canary Wharf, and UBS has 6,000 staff at Broadgate in the City. David Buik at Aquis Exchange said he expects 2,000 jobs in London in to go across the two banks, with Credit Suisse likely to lose more. The global picture looks worse, with a third of the combined 120,000 staff at the two banks set to be cut as UBS looks to significantly reduce the combined group's investment banking arm to avoid duplicate roles. Meanwhile, the Swiss government on Tuesday said it had imposed “remuneration-related measures” on Credit Suisse as a result of the use of taxpayer funds to facilitate its $3.25bn takeover by rival UBS. The lender will be banned from paying deferred bonuses awarded before 2022. Finally, Moody's downgraded the outlook on UBS on Tuesday following a similar move by S&P over the weekend. The ratings agency said “the transaction poses significant financial, cultural and franchise related integration challenges” to UBS.

Banks rally as Yellen promises further guarantees for depositors

Regional US bank stocks rallied on Tuesday after the US treasury secretary Janet Yellen said the protection given to depositors after the failures of Silicon Valley Bank and Signature Bank could be replicated at other institutions. “The steps we took were not focused on aiding specific banks or classes of banks,” she told an American Bankers Association conference. “Our intervention was necessary to protect the broader US banking system. And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.” Shares in First Republic, which is the subject of rescue talks by larger banks, jumped by as much as 37% after Yellen’s remarks. She went on to stress that “the US banking system remains sound” and that “aggregate deposit outflows from regional banks have stabilised.”

SVB Financial Group levels claims against FDIC

SVB Financial Group, the bankrupt parent company of failed Silicon Valley Bank, has accused the Federal Deposit Insurance Corporation (FDIC) of “improper actions” after the regulator seized $2bn of its cash when it took charge of its former banking unit. But the FDIC said in court filings on Tuesday that its actions were “a legal and necessary part of stabilizing banking operations during the transfer to new management.”


Second-hand electric car prices fall amid glut of stock

The average price of a pre-owned electric vehicle has fallen by 13% over the last year as more supply comes onto the market, according to Autotrader. The firm’s Richard Walker commented: “EV prices are falling, but it is not true to say drivers don’t want them. Consumer demand for EVs remains very robust and is up year on year, but it is simply the case that the supply of used EVs has rocketed even faster to dampen prices.”


Investors slam Brussels plot to shift City clearing houses

European investors have warned Brussels against forcing EU-based money managers to shift their business to EU clearing houses. In a submission to the European Commission, the European Fund and Asset Management Association (EFAMA), said asset managers must be able to freely choose their clearing house if they fulfil their fiduciary duties to act in the client's best interest. The EFAMA added that forcing asset managers to open accounts with clearing houses in both the EU and the UK will mean investors face the burden of extra subscription costs and setting up a dual-clearing system. Mandated active accounts would undermine the objective of maintaining a competitive and efficient clearing ecosystem, EFAMA said.

Scottish Mortgage chairman quits

The chairman of the London-listed investment trust Scottish Mortgage is to step down after a row over corporate governance at the FTSE 100 company. Fiona McBain was recently criticised in a board meeting by non-executive director Amar Bhidé, a business professor at Tufts University in Massachusetts, who later accused McBain of lacking independence. In allegations first published in the Financial Times, he said McBain was “long past the point at which she had any independence and her role so far as I can see is to protect managers from criticism and questioning”. Mr Bhidé has been forced out over the spat and Scottish Mortgage said McBain would step down at its annual meeting in June, adding that changes were the result of “succession planning” developed over the past year.


Oxford Nanopore could switch to US

Oxford Nanopore Technologies could add a secondary listing in the US if the company decided it was in its best interests. CEO Gordon Sanghera said he was not happy with the life science company’s share price, which hit a low of 176½p yesterday, but added: “We feel lucky in that we’re well capitalised at £558m cash or cash equivalents, and we’re not out there trying to raise money.” Oxford Nanopore said it expected life-science research tool revenue growth of more than 30% this year and in the medium term “consistent with our performance over the last three years”.


Just Eat to axe around 1,900 UK jobs

Takeaway delivery firm Just Eat is to cut 1,870 jobs in the UK after a slowdown in sales. The firm said it would stop employing its own couriers and use contractors instead, resulting in 1,700 job losses. About 170 operational roles will also go. The drivers and riders affected have been given six weeks' notice. "We have proposed to transition away from the worker model for couriers, which is a small part of our overall delivery operations - running in certain parts of six UK cities," a spokeswoman said.


Rolls-Royce courts international buyers for mini-reactors

Rolls-Royce’s nuclear power business is looking to build mini-reactors in Sweden and Finland with the Czech government also considering purchasing the technology. The news sent Rolls-Royce shares up 6%. The UK Government has yet to decide on whether to buy the reactors with the Chancellor recently saying a competitive tender would be run on the projects.


Meta sued for failing to address sex trafficking, child exploitation

A group of pension and investment funds are suing Mark Zuckerberg and other Meta executives over their failure to stop sex trafficking and child sexual exploitation on Facebook and Instagram. The complaint argues that Meta's leadership and board failed to protect the company's and shareholders' interests by turning a blind eye to "systemic evidence" of criminal activity. Given the board's failure to explain how it tries to root out the problem, "the only logical inference is that the board has consciously decided to permit Meta's platforms to promote and facilitate sex/human trafficking," the complaint said. Meta rejected the basis for the lawsuit, which was filed in Delaware.


House sales fall nearly a fifth in February

New figures reveal house sales fell by nearly a fifth (18%) in February 2023 compared with the same month a year earlier. A report from HMRC said: “Towards the end of last year mortgage and interest rates increased and we are starting to see the impacts of those changes within these statistics. Seasonally adjusted residential property transactions appear depressed, indicating a slowing of the housing market.”

JPMorgan Asset Management chief warns on commercial real estate risks

George Gatch, the CEO of JPMorgan Asset Management, has warned that commercial real estate could be the next sector hit by the aggressive monetary tightening by the US central bank.  


BoE should maintain focus on curbing inflation - Hunt

The Times’ shadow Monetary Policy Committee, which includes the likes of Karen Ward, chief market strategist at JP Morgan Asset Management, and Andrew Sentance, former external member of the Bank of England MPC, believes the Bank should carry out another interest rate rise this week with a majority opting for a 25 basis-point change. Sentance explained his reasoning: “It is quite appropriate for the MPC to keep tightening gradually until we see inflation coming down more significantly. It is not clear that the issues in the banking sector are sufficiently widespread or severe to require a monetary policy response.” Meanwhile, Jeremy Hunt told the House of Lords economic affairs committee on Tuesday that he thought the Bank should remain focussed on bringing down inflation. The Chancellor accepted that the speed of recent interest rate rises was “the root cause of the volatility we have seen in recent months” but added: “Inflation is itself destabilising. It’s not an answer to say we are suddenly going to change our minds and says it’s acceptable to have a rate of inflation that is as destabilisingly high as 10%.”

UK borrowing rises to a new February high

Figures from the Office for National Statistics (ONS) show government borrowing in February rose to its highest level for the month since records began in 1993. Borrowing hit £16.7bn last month, an increase of £9.7bn compared with the same month in 2022. Interest on government debt came in at £6.9bn, £1.3bn less than a year earlier. The amount borrowed exceeded expectations and followed a surprise surplus in the public finances in January. The increase was driven by a £6.4bn rise in spending on subsidies such as the energy price guarantee, which caps the average household energy bill at £2,500 a year. Jeremy Hunt, the chancellor, said: “Borrowing is still high because we’re determined to support households and businesses with rising prices…What will bring these costs right down is lower inflation, which is why it remains one of our top priorities to halve it this year, alongside growing our economy and reducing debt.”

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