Top stories

  1. Industry commits to Code of Practice for victims of financial abuse
  2. Bank of England warns EU to act on Brexit risk to derivatives clearing
  3. European countries lobby to preserve Iran’s Swift access

Stat of the day
£41tn – the estimated total value of derivatives contracts at risk from Brexit, absent action by EU regulators (Financial Times, £, p1).

Industry commits to Code of Practice for victims of financial abuse

The Daily Mirror (p36) reports that the financial services industry has committed to providing further support to victims of financial abuse with the introduction of a voluntary Code of Practice. The new Financial Abuse Code of Practice, designed to take forward the Financial Services Vulnerability Taskforce recommendations, will bring increased awareness and better understanding of what abuse looks like for firms, colleagues, victims, potential victims and their families, ensuring more consistency in the support available for those who need it. The Code has been developed with input from representatives from charities, victim support groups and government departments, alongside UK Finance’s Financial Abuse Project Group and Consumer Advisory Group. Over the next 12 months, eleven of the largest high street firms have committed to implementing the voluntary Code with more firms expected to follow, raising awareness, training colleagues and introducing other initiatives to help victims regain more control over their finances.

Eric Leenders, Managing Director of Personal Finance at UK Finance, said: “Financial abuse does not discriminate – it can happen to anyone and whether you or a person you know is a victim of financial abuse, taking those first steps to seek help is very brave. The financial services industry can play a key role in helping combat financial abuse, offering support to victims to help them regain control of their money. This new voluntary Code provides further guidance for banks and building societies and, once rolled-out, will help raise awareness amongst staff so that victims of financial abuse can be confident that they will be treated sympathetically and positively in these particularly difficult circumstances.”

Bank of England warns EU to act on Brexit risk to derivatives clearing

The Bank of England’s Financial Policy Committee yesterday warned that the EU must take swift action to ensure legal certainty on an estimated £41tn worth of derivatives contracts set to mature after the UK leaves the EU (Financial Times, £, p1). In its quarterly report on financial stability, the Committee said that unless EU regulators announce before the end of the year that banks based in the bloc will continue to be able to clear derivatives through London-based clearing houses, such banks will have to conduct their derivatives trades within the EU, incurring substantial costs in doing so (The Times, £, online only).

Stephen Jones, Chief Executive of UK Finance, said:

“The Bank of England is right to underline the pressing need for UK and EU regulators to work together and avoid a serious breakdown in cross-border financial services in the event of a ‘no deal’ Brexit.

“It is crucial that cliff-edge issues surrounding the continuity of contracts and transfer of personal data are addressed to minimise disruption for firms and their customers on both sides of the Channel.

“Decision-makers in the EU should treat these critical business disruption issues with appropriate urgency, given the potential economic consequences for both sides if adequate solutions are not found in good time.

“Ultimately, we believe a no deal scenario must be avoided and efforts focused on securing an appropriate transition period, as well as an extensive future economic partnership that allows for cross-border trade in financial services.”

In other Brexit news, The Times (£, p1) reports that the Prime Minister will propose that the whole of the UK remains in an effective customs union with the EU, but with “clear process” of steps outlined for an eventual exit. This shift in position is thought to be motivated by a desire to avoid either border checks between Northern Ireland and the Republic of Ireland or between the island of Ireland and Britain. It comes as David Davis, the former Brexit Secretary, warned Theresa May in a letter that her approach to leaving the EU risks “dire electoral consequences” for the Conservative Party (The Guardian, p9).

Meanwhile, the Managing Director of Germany’s BDI industrial lobby group, Joachim Lang has warned that “Europe is in danger of sliding into a disorderly Brexit” that would damage businesses and consumers on both sides of the Channel, unless a breakthrough on Brexit talks is made at the October EU Council Summit next week (Bloomberg, online only).

European countries lobby to preserve Iran’s Swift access

The Financial Times (£, online only) reports that the UK, France and Germany are lobbying the USA not to cut off Iran’s access to Swift, the global messaging and payments system for banks, as part of its sanctions regime. The European countries fear that such a move would “send Iranian transactions underground” making it more difficult to tackle money laundering and other types of economic crime in the country.

Meanwhile, The Times (£, p2) reports that more than 20 banks have signed up to the Duke of Cambridge’s initiative to tackle illegal trade in ivory from poached elephants, with a commitment to train their staff to spot money laundering transactions that facilitate the trade.

Latest from UK Finance

Dr Iris Kapelouzou, Manager, Financial Inclusion & Capability, blogs on the new set of nine principles and recommendations agreed by the Vulnerability Taskforce.

News in Brief

The Daily Telegraph (£, B1) reports on the Chief Executive of UK Finance, Stephen Jones’ appearance before the Treasury Select Committee yesterday, in which he said “a tiny levy on each payment” made in the UK could be a potential solution to meet the rising cost of payment scams and other economic crimes.

An IMF report into the public finances of the world’s major economies estimates that the UK government has a negative net worth of £2tn, with assets at roughly £3tn, and liabilities at £5tn (Financial Times, £, online only).

The United States is considering blocking the UK’s initial application to rejoin the Government Procurement Agreement in its own right after Brexit, due to concerns that the application is “outdated and needs to be revised” (Bloomberg, online only).

In its quarterly report on financial stability, the Bank of England’s Financial Policy Committee raised concerns over the “£31bn of loans made this year to companies that already had a high level of debt”, but reported that the banking sector is much more resilient than prior to the financial crisis (BBC News, online only).

The Competition and Markets Authority has opened a review of the UK’s audit sector, in which it will examine whether the ‘Big Four’ accounting firms have become “too big to fail” (Reuters, online only).

What the commentators say

Writing in The Times (£, p41) David Smith argues that recent warnings from the likes of the former Prime Minister Gordon Brown that debt levels risk another financial crisis are useful insofar as they keep policymakers and regulators “on their toes”. He points to the” Bank of England’s “reassuring” Financial Stability Report, which reports that the UK’s financial system is resilient enough to withstand the risks posed by a no-deal Brexit and disruption to global trade.

Assistant Editor Jeremy Warner argues in the Daily Telegraph (B2, £) that despite recent concerns highlighted by the IMF over growing uncertainty in the global economy, things are not as bad as they seem. He points to financial indicators that suggest the pre-crisis relationships between interest rates, growth, inflation and asset prices have been at least partially restored. Warner emphasises that when yields on bonds are greater than yields on equities, as is currently the case in the US, this is a sign of healthy economy. However, he stresses that the same cannot be said of the UK, where equity yields remain stubbornly higher than bond equivalents, possibly because of the continued economic uncertainties around Brexit.

Calendar

  • Prime Minister’s Questions.
  • John Glen, City Minister, gives evidence to the Lords’ EU Financial Affairs Sub-Committee.
  • The ONS publishes its first estimate of GDP for August.
  • Halifax House Price Index: Regional Breakdown, Q3.

For a full list of upcoming UK Finance statistics releases, please click here.

News in brief – 10 October 2018