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Daily News Roundup: Wednesday 5th December 2018

Posted: 5th December 2018


Norway-style deal will not work for City

The Bank of England governor Mark Carney and his deputy Jon Cunliffe have warned that the City could become a “rule taker” if it adopted a Norway-style deal. Speaking in front of the Treasury Select Committee, Mr Cunliffe said: “I think our financial sector is about 20 times bigger than Norway's. It's much more connected internationally, it's much more complex? I think for a financial sector this large, this complicated, it would be as the governor says, quite uncomfortable.” Mr Carney added that would be highly undesirable to be a rule taker and to lose supervisory autonomy for any long period of time. Mr Carney also dismissed criticism of his decision to report on a worst-case Brexit scenario as “entirely unfair”. He was speaking as the former governor of the Bank of England, Lord King of Lothbury, said Mr Carney’s analysis was “not plausible” and he compared it to the “Project Fear” campaign before the EU referendum. Lord King also said Theresa May’s Brexit deal was a “betrayal of Britain” and a “result of incompetence of a high order” that should now be voted down by MPs.

Tech giants pose threat to banks

Agustin Carstens, the head of the Bank for International Settlements, has said that internet and big data giants such as Amazon and Alipay pose an existential threat to traditional banks. Carstens argued that the huge amounts of data that big internet companies gather on their customers meant they potentially have advantages over established banks. He explained that the tech firms may have better information on customers’ spending and lifestyles, which might make it easier to judge the risks of providing a loan.

Rates for first-time buyers at record low

Banks are currently offering the lowest mortgage rates since records began, thanks to competition among lenders, making it easier for first-time buyers to get on the property ladder. According to the latest Bank of England figures, two-year mortgages now come with an average interest rate of 3.33%, down from 4.02% a year ago, while for five-year mortgages, the average rate was 3.89% at the end of October, compared with 4.71% in the same month the previous year.

Banks need to look at ways to share costs

Katherine Griffiths in the Times suggests that banks needs to collaborate more in order to save costs. One idea, she poses, is that banks could share the findings, and associated costs, on extensive money-laundering checks on individuals and small businesses when they take them on. Griffiths adds, however, that banks need to think hard about whether to work together. She says it is possible that pooling resources in areas ranging from taking on customers to back-office functions could lead to more commonality over pricing or products.


Sweden will be cashless society within five years

Cecilia Skingsley, the deputy governor of the Swedish central bank, has said that Sweden is likely to become a cashless society within the next five years. She said that physical cash would not be banned, but so few people and firms were likely to need to use it beyond that timeframe that it would become practically useless.

German criminal probe zeroes in on tiny unit sold by Deutsche Bank

The FT reports that the Deutsche Bank business being investigated in a money laundering probe is a barely profitable Virgin Islands-based unit which was put up for sale in 2016.

Former official embroiled in 1MDB scandal

A former justice department employee has admitted conspiring to deceive banks about millions of dollars in lobbying funds linked to the US investigation into the 1MDB scandal. George Higginbotham is said to have been hired to help to transfer tens of millions of dollars from foreign banks to the US.

Privatbank faces £7m legal bill

Privatbank, Ukraine’s largest bank, is facing a £7m legal bill after the High Court ruled that its billion-pound battle against its former oligarch owners - Igor Kolomoisky and Gennadiy Bogolyubov – cannot be decided in London. The bank has claimed that fraud under its former owners - who deny any wrongdoing - resulted in a loss of around $5.5bn (£4.2bn) before it was nationalised in December 2016.

Wells Fargo to miss estimates

Wells Fargo has warned that the firm’s net interest income (NII) would be lower than analysts have predicted. CEO Tim Sloan said NII will be flat compared with the previous three months, when the bank collected $12.6bn (£9.9bn) in interest.


Toyota warns MPs over hard Brexit

Toyota has warned that a no-deal Brexit would be “disastrous” for UK car making. Its European deputy managing director Tony Walker told the Commons' Business Select Committee that a hard Brexit could cost the firm around £10m a day and that Theresa May’s draft withdrawal agreement was preferable to the previous confusion: “To say because it is not perfect we should go back to square one is not understandable to us as business people,” he said.

Audi makes bumper electric and self-driving fleet pledge

German carmaker Audi will invest £12.5bn in electric mobility and autonomous cars over the next five years. Investments will also be made in property, plants and equipment, as the company plans to increase its research and development expenditure.


UK construction firms point to tentative recovery in November

The UK construction industry continues to expand, according to IHS Markit's construction managers purchasing index, which rose to 53.4 in November from 53.2 the prior month, despite Brexit uncertainty complaints.


More savers seeking help from watchdogs

Over 173,000 people visited the Financial Conduct Authority’s (FCA) ScamSmart website between August and October - one every 27 seconds - with pension fraud victims losing an average of £91,000 each last year. The FCA and The Pensions Regulator, which launched a joint campaign in the summer, have reported ever increasing numbers of complaints about scammers.

New EU regulations hitting IG

Spreadbetter IG Group is anticipating a revenue hit of 6% for the first half of the year, following new European rules restricting the provision of contracts for difference (CFDs) to retail clients. Revenue within the Esma region (UK and EU) is expected to be 20% lower than the same period last year.

‘London Blue’ hacker group targets chief financial officers

A hacking group called London Blue has targeted 35,000 CFOs with bogus requests for money transfers. The FBI warned in July that the scam had cost companies $12bn since 2013.


Thomas Cook shares still falling

Thomas Cook’s shares have now fallen by nearly 60% in eight days after it last week issued a second profit warning in two months. By late Tuesday morning, the firm’s equity market value had fallen to £363m, placing it on course to be demoted from the FTSE 250 mid-cap share index.


Thomson Reuters to cut jobs

As part of a plan to streamline the business and reduce costs, Thomson Reuters has said it will cut its workforce by 12% in the next two years, cutting 3,200 jobs. Co-chief operating officer Neil Masterson told investors staff had already been informed about 90% of the planned cuts. Thomson Reuters is aiming to grow its annual sales by at least 3.5% by 2020.

Sorrell acquires Mighty Hive

Sir Martin Sorrell has made his second acquisition since leaving WPP, with his purchase of US tech-based advertising firm Mighty Hive for $150m (£118m).


Wickes sale under discussion

Wickes DIY could be sold by owner Travis Perkins as part of the builders merchant’s plans to focus on trade customers in an overhaul of the company which also includes a sale of its plumbing and heating division. Travis Perkins said that it is executing a “significant cost reduction programme” at Wickes while also “looking to review the options for maximising the value of Wickes in the medium term.”


Firms yet to prepare for Brexit

The Bank of England's (BoE) regional agents survey has found that the majority of companies have made no changes to their business plans ahead of Brexit. The BoE asked 369 companies in October and November whether they had made changes to their supply chains, set up new legal entities or relocated office ahead of a no-deal scenario or a transition deal, but less than a third had made any move. Aerospace and car manufacturing firms were among the most concerned about how their business models would be affected, due to international supply chains. The report also found that businesses expect their output to fall by 7% if Britain crashes out of the EU, but will rise by almost 3% if a deal can be agreed.


One in five forced to borrow for Xmas

A new report from financial app Curve has found that one in five people will be forced to borrow from friends and family to fund Christmas. Financial pressures mean a further one in five will have to take out a bank loan.

Health and wealth biggest concern for retirees

Health and wealth top the list of biggest concerns for retirement, according to a study by Hargreaves Lansdown. The research found that people aged over 55 are most worried about not having enough money, becoming ill and losing mental capacity.

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