Banker bonus cap to be scrapped
The cap on bankers' bonuses is being removed as of October 31. The cap, which limited the bonuses employees of banks, building societies and investment firms could receive to maximum of twice their basic salary, was introduced in 2014 in a bid to curb excessive risk-taking in the financial services industry in the wake of the 2008 financial crisis. The decision to remove the cap came following a four-month consultation by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority. The regulators said the move will address "unintended consequences" of the cap, with it shown that salaries have been increased as a workaround. The PRA added that scrapping the bonus cap would boost the “safety and soundness” of banks, which would be able to “restructure pay faster and the change would give firms further flexibility over their cost base to deal with downturns.” Paul Nowak, general secretary of the TUC, criticised the decision to lift the bonus cap when “City financiers are already enjoying bumper bonuses.” He said the “obscene” decision is “an insult to working people.”
Barclays eyes cost cuts as profits dip
Barclays has reported better-than-expected quarterly profits of £1.9bn after the bank was boosted by higher interest rates. Pre-tax profits slipped by a smaller than forecast 4% from £2bn a year earlier, with this weighed down by £433m of impairment charges for potential bad loans. The group's net interest margin climbed to 4.03% over the first nine months of the year, from 3.4% in the same period in 2022. Barclays boss CS Venkatakrishnan said the lender had “continued to manage credit well, remained disciplined on costs and maintained a strong capital position” in the third quarter. Mr Venkatakrishnan noted that the bank is considering savings in order to boost shareholder payouts, saying: "We are trying to create a more efficient organisation, you should expect us to look in all areas." He refused to rule out job cuts, saying: "We always modulate the size of our workforce everywhere in the world. That's what we'll continue to do."
Authorised payments fraud up 22%
New figures from UK Finance show that the number of authorised push payments (APP) fraud cases increased by 22% year-on-year to 116,324 in the six months to the end of June, as a result of an increasing number of consumers being conned into fake purchases online. Figures also show the volume of these purchase scams increased by 43% to almost 77,000 cases, with the total amount lost to this type of fraud rising by 31% to £40.9m The internet drove most APP scams, with 77% of these fraud cases starting online, UK Finance said. A further 17% of APP scams originated from phone calls and text messages. Paul Davis, the director of fraud prevention at TSB, said: “It’s clear from the big spike in push-payment fraud cases that online companies and telecoms firms must urgently introduce measures to protect the public from scams on their platforms.”
Small firms face justice gap due to ombudsman decision
Small companies have been left with “nowhere to turn for justice” during banking disputes following a decision not to extend the reach of the Financial Ombudsman Service, according to an employers' group. The Financial Conduct Authority (FCA) has decided that it would not be proportionate to provide access to the ombudsman's dispute resolution services to companies that do not meet the existing thresholds. The FCA had widened access in 2019 to include small businesses with annual turnover of less than £6.5m and either fewer than 50 employees or a balance sheet smaller than £5m. The Federation of Small Businesses (FSB) has called on the Government to legislate for a banking tribunal service to be funded by a levy on the banking sector, to address the lack of success of the Business Banking Resolution Service and the inability of most companies to afford action in the civil courts. "This has left a justice gap, causing much disquiet among the small business community," said FSB chairwoman Tina McKenzie.
Global banks warned over endangered animals
Global banking giants, including HSBC, Prudential, and Goldman Sachs, are investing in pharmaceutical groups that produce traditional Chinese medicines containing endangered leopard and pangolin parts, according to a report by the Environmental Investigation Authority. The report identified 62 banks and financial institutions investing in three pharmaceutical companies that make products containing leopard or pangolin.
NatWest staff face suspension over Farage
Some NatWest staff are facing the prospect of being suspended over messages 'inciting violence' against Nigel Farage. NatWest has apologised for the "unacceptable" comments and insists it will take action "as appropriate." Prominent Brexiteer Mr Farage has been seeking clarity over why NatWest-owned Coutts dropped him as a client earlier this year, sparking the de-banking scandal.
UniCredit beats profit forecasts
Italy's UniCredit has exceeded Q3 profit forecasts with a net profit of €2.3bn, with this up 36% from last year. The bank's revenue outlook for 2023 is slightly raised, but profit and investor reward goals remain unchanged. UniCredit plans to put aside €1.1bn to avoid paying the surprise one-off tax on the gap in lending and deposit rates. Provisions against loan losses more than doubled in the quarter, and loan volumes stagnated in Germany and declined in Italy.
BlackRock charged over inaccurate description of investments
The US Securities and Exchanges Commission has charged BlackRock Advisors with "failing to accurately describe investments in the entertainment industry." From 2015 to 2019, one of BlackRock's trusts invested in Aviron Group, a firm involved in developing advertising plans for films. It was found that BlackRock inaccurately described the firm to investors. The asset manager has agreed to pay a $2.5m penalty for its actions.
Former Credit Suisse executive Francesca McDonagh to join fund group
Former Credit Suisse chief operating officer Francesca McDonagh has agreed to join Universal Investment, a private equity-backed German fund group, as chief executive.
Pimfa calls for FCA to have a role in combating fraud
The Personal Investment Management and Financial Advice Association (Pimfa) has called for the Financial Conduct Authority (FCA) to have a greater role in combating fraud. In response to a call for evidence from the Home Affairs Committee, Pimfa said it is vital that the financial services regulator has a bigger role. Alexandra Roberts, Pimfa’s head of regulatory policy and compliance, said: “The current focus on fraud by policymakers is welcome, as is the Government’s commitment to reducing fraud by 10% by 2025.” She added: “In order to eradicate fraud, Pimfa believes there must be a role for the FCA in helping to identify instances of fraud that introduce obvious harm to financial services consumers, a more centralised approach to combatting fraud and much more international cooperation.”
LEISURE & HOSPITALITY
Online travel group urges CMA to protect consumers
A report by holiday retailer On the Beach has called on the Competition and Markets Authority (CMA) to intervene in the travel industry and protect consumers. The report criticises the "aggressive tactics" used by low-cost carriers, accusing them of removing consumer choice from the market. It also claims that carriers mistreat online travel agents' customers. On the Beach is urging the CMA to launch a market review and create a code of conduct for carriers.
Manufacturers see orders slump
British manufacturers reported the biggest monthly fall in orders since January 2021, according to a survey by the Confederation of British Industry (CBI). The CBI's monthly industrial orders balance dropped to -26 in October, its weakest level in nearly three years. Business optimism also sank to -15, its lowest since October 2022. CBI Deputy chief economist Anna Leach expressed concern over the decline in sentiment, falling output volumes, and cautious employment and investment plans among manufacturers.
Economists warn over first-time buyer support
Two leading economists have warned that measures to help first-time buyers and boost the housing market could fuel inflation and mean interest rates stay higher for longer. Willem Buiter, a former member of the Bank of England’s Monetary Policy Committee (MPC) and ex-chief economist at Citigroup, said measures being considered for the Chancellor’s Autumn Statement – such as a mortgage guarantee scheme and a new Isa – “would boost the property market, albeit modestly, and thus would stimulate the economy and put upward pressure on the inflation rate.” Martin Weale, another former MPC member, noted that policies which support house prices “are likely to add to demand and thus to inflation, so a policy of making house purchase easier would be likely to lead to higher interest rates.”
Unemployment climbs to 4.2%
Office for National Statistics (ONS) figures show that unemployment between June and August was 4.2%. This was up from 4% in the March-to-May quarter, but unchanged from last month's data. The ONS said the new data was “experimental”, with Darren Morgan, its director of economic statistics, saying the ONS has “produced a new metric, produced by adjusting our headline survey estimates using robust administrative data sources, adding that this “maintains the accuracy of our key statistics.” On the impact the latest figures will have on interest rates, Ashley Webb, UK economist at Capital Economics, said the Bank of England “will probably continue to believe that interest rates are gradually doing their job,” meaning it is unlikely to raise interest rates again. Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said the figures "added to the evidence" that rates would be held.
HSBC boss warns of global debt tipping point
Noel Quinn, CEO of HSBC, has warned that the world is at a "tipping point" on debt, which could lead to a global reckoning. Mr Quinn expressed concern about the current rate of borrowing, stating that it is unsustainable and could hit economies hard.
Flash PMI shows decline in business activity
British businesses have reported another decline in activity, with experts flagging the risk of a possible recession. S&P Global’s ‘flash’ PMI for the UK economy in October came in at 48.6 on an index where a figure above 50 indicates growth. This was a slight improvement on September’s reading of 48.5 but marks the third straight month of contraction. The services sector fell to a nine month low of 49.2, while manufacturing picked up to a three month high of 45.2. Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “The UK economy continued to skirt with recession in October, as the increased cost of living, higher interest rates and falling exports were widely blamed on a third month of falling output.” Ruth Gregory, deputy chief UK economist at Capital Economics, said the “trajectory supports our view that GDP contracted in both Q3 and Q4 and that a mild recession is perhaps already underway.” Rhys Herbert, senior economist at Lloyds Bank, said the figures show that both services and manufacturing businesses “are still being impacted by high costs and a tight labour market.”