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Daily News Roundup: Wednesday, 6th July 2022

Posted: 6th July 2022

BANKING

Bank of England warns of an economic storm

The Bank of England has issued a warning over the economic outlook, saying that it has “deteriorated materially” for both the UK and globally. The Bank’s latest Financial Stability Report urged banks to ramp up capital buffers to ensure they are “large enough to create capacity for banks to absorb shocks, so they are able to continue to lend through downturns." The report went on to observe that lenders are well-placed to weather even a severe economic downturn and resilient to debt vulnerabilities. The report also said that while banks' capital ratios are still strong, they are expected to decline slightly in the coming quarters. The Financial Policy Committee (FPC) warned commercial banks against making “excessive” cuts in lending to households and businesses because this would risk exacerbating an economic downturn. The FPC also confirmed that the Bank will double the counter-cyclical capital buffer rate to 2% in July next year, locking up approximately £22bn. The report also said it would begin its 2022 stress test of banks - delayed due to the war in Ukraine - in September, with the results likely to come in mid-2023. Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said the Bank's verdict seems to be that "the situation isn't as quite as bad as previous crises". Meanwhile, Sir Jon Cunliffe, deputy governor at the Bank, has suggested that households could withstand borrowing costs as high as 5% without defaulting on their debts.

Halifax keeps hold of customers despite pronouns row

A debate about the use of pronouns on staff badges at Halifax has failed to result in a customer exodus. The bank last week took to social media to suggest that customers who disagreed with its policy of allowing employees to display their chosen pronouns were free to close their accounts. It is understood that account closures have been lower than the normal daily average since the issue arose - and have been more than offset by openings.

Fintech to launch card reader

Revolut is set to launch a card reader for shops and restaurants in the UK and Ireland, marking the firm's first venture into physical devices. The reader will allow customers to make card payments and use services such as Chip & Pin, Contactless, Google Pay and Apple Pay. The news comes after boss Nikolay Storonsky last week said he was hopeful regulators in the UK would approve its full banking license. Revolut's service for businesses will be extended “in the coming months” with a point-of-sale solution that will provide larger firms with more flexibility in integrating the reader with existing systems.

INTERNATIONAL

UBS sublets London space amid WFH shift

Swiss bank UBS has decided to sublet two floors at its 5 Broadgate headquarters after more staff started to work from home, according to people with knowledge of its plans. Switzerland's largest lender introduced a global flexible working policy last summer, allowing two-thirds of its total 73,000 employees to permanently combine remote and office working.

Credit Suisse names new head of Swiss private banking

Credit Suisse has appointed Roger Suter as head of private banking in Switzerland, with him set to succeed current manager Serge Fehr on August 1. Mr Suter is currently regional head for central Switzerland.

AUTOMOTIVE

New car sales fall

Registrations of new cars fell by 24% in June compared with the same month last year, according to the Society of Motor Manufacturers and Traders (SMMT). This marks the worst June for new car sales since 1996. June saw 141,000 new cars sold. During the first half of 2022, around 800,000 new cars were sold - a 12% fall when compared with H1 2021. The SMMT said sales have taken a hit as manufacturers encountered problems fulfilling orders due to global shortages of semiconductors.

FINANCIAL SERVICES

City watchdog bolsters its leadership team

The Financial Conduct Authority (FCA) has announced the appointment of six directors. Roma Pearson has been appointed as the FCA’s director of consumer finance; Camille Blackburn will join in October to the newly created role of director of wholesale buy-side; Matthew Long has been appointed as director of payments and digital assets; Anthony Monaghan has been promoted within the FCA to director of retail and regulatory investigations; Karen Baxter will join the FCA’s enforcement team as director of strategy, policy, international and intelligence; and Simon Walls, who was appointed interim director in May, will continue in the role of director of wholesale, sell-side on a permanent basis. The City watchdog also said it has hired almost 500 people in the past six months as it looks to keep up with a rapidly expanding remit. FCA chief executive Nikhil Rathi said: “As our remit grows and to deliver on our ambitious strategy, we’re continuing to develop and bring in the skills and talent we need.”

FCA delays next step on ESG labels

The Financial Conduct Authority (FCA) has delayed the implementation of sustainable investment labels to allow it to take account of other international policy initiatives. It had aimed to consult on the sustainability disclosure requirements (SDR) in Q2 but will now undertake the exercise in the autumn. This, it said, will “allow us to take account of other international policy initiatives and ensure stakeholders have time to consider these issues." SDR will require the environmental impact of all activities financed by investment products to be outlined. It will also require justification of any sustainability claims made by these products. Analysis shows that 86% of businesses have performed an ESG assessment ahead of the implementation of SDR, with the remaining 14% saying a lack of clarity over how to perform the assessment has been one of the main things holding them back.

One in ten Britons have bought crypto assets

Up to one in ten adults in Britain have bought crypto assets, far exceeding previous estimates. Research commissioned by HMRC found that about 6.7m people own or have bought crypto assets. This is almost three times higher than estimates from the Financial Conduct Authority (FCA), which said that 2.3m people held crypto assets at the start of last year. The analysis shows that crypto investors in Britain are typically male, under the age of 45 and have crypto holdings worth £200. It was also found that 85% of crypto investors earn less than £50,000 a year and more than 50% of investors have holdings worth less than £1,000. Around 7% have put more than £5,000 into digital assets despite repeated warnings over potential losses from the FCA. The value of the cryptocurrency market has fallen by 60% since the start of the year amid a rapid fall in the price of leading cryptocurrencies.

Hilbert Capital names Cevian's Murray as CEO

Cryptocurrency asset manager Hilbert Capital has hired former Cevian Capital executive Richard Murray as CEO. Mr Murray was previously director of investor relations at activist investor Cevian and has also worked at hedge funds Finisterre and Brevan Howard Asset Management.

Apollo and Blackstone seek Ridgeback buyer

Sources familiar with the matter say Apollo Global Management and the credit arm of Blackstone are looking to sell Canadian oil and gas producer Ridgeback Resources for more than C$1bn. Two investment banks have been hired to manage the sale of Ridgeback, with the insiders saying no deal was guaranteed and the company's assets could be sold in multiple transactions.

RETAIL

M&S shareholders rebel over Rowe’s £1.6m bonus

A significant minority of M&S shareholders protested a £1.6m bonus payout to former chief executive officer Steve Rowe, with just over 29% voting against the bonus. The retailer said all its resolutions had been approved “with substantial support,” with it highlighted that it secured 70% of votes in support of its remuneration policy. The remuneration committee said it is keen to “engage further with shareholders to understand the concerns expressed by the minority,” with an update expected within six months.

ECONOMY

Cautious consumers see services growth slow

New order growth in the services industry slowed to a 16-month low in June, according to S&P Global/CIPS purchasing managers’ index. S&P Global attributed the slowdown to higher inflation and concerns about the economic outlook, saying these factors have led to “hesitancy in relation to new orders.” The report shows services business increased prices at the second quickest pace on record to protect margins from climbing transport and worker costs, while 68% of business said they witnessed a rise in their average cost burdens in June. The sector saw activity improve in June, with the PMI recording a rate of 54.3, up from the 53.4 reading seen in May. Any score above 50 shows growth in the sector. The composite PMI - spanning services and manufacturing firms – came in at 53.7, higher than May’s 53.1.

Consumer confidence in economy hits lowest level since pandemic

Research by consumer group Which? has found that consumer confidence in the economy has reached its lowest point since the start of the pandemic, with 78% of consumers thinking the UK economy is set to worsen. The Which? Consumer Insight Tracker found that confidence in future household finances also dropped from minus 28 in May to minus 40 in June, a level last reached in March 2020. Rocio Concha, of Which? said: "The Government must ensure that support reaches the consumers struggling to make ends meet."

OTHER

Directors banned over Covid loans

Analysis of official data by law firm Pinsent Masons shows that more than a third of UK company directors disqualified in April and May had abused the Government’s coronavirus loan or job support schemes. The Insolvency Service banned 37 directors for fraudulent claims in the two month period, with these accounting for almost 35% of the directors struck off. In the year to the end of March, 140 directors were banned for abuse of Covid schemes, making up 17% of the total. The Government issued £79.3bn in support to businesses between March 2020 and the end of 2021. Fraudulent claims have cost at least £5bn, according to HMRC.

Zahawi named Chancellor as Sunak resigns

Nadhim Zahawi has been named Chancellor following the resignation of Rishi Sunak. Mr Sunak and Health Secretary Sajid Javid stood down last night, having questioned Boris Johnson’s leadership following questions about the Prime Minister’s role in appointing MP Chris Pincher, who is facing sexual misconduct allegations, as deputy chief whip earlier this year. In his resignation letter to Mr Johnson, Mr Sunak also highlighted differences of opinion over economic management between him and the PM. Elsewhere, Steve Barclay will be replacing Mr Javid, while Michelle Donelan will replace Mr Zahawi as Education Secretary.

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