Clydesdale and Yorkshire Banks to merge with Virgin Money

Two major banking brands are set to disappear from the High Street following a Virgin Money takeover of Clydesdale and Yorkshire banks, according to the Guardian.

The £1.7bn acquisition is expected to lead to the loss of 1,500 jobs in the sector. Clydesdale and Yorkshire Banking Group (CYBG) will merge with Virgin Money to form the sixth-largest bank in the UK with a total of more than 6m personal and small business customers and a lending book of £70bn.

The merger is led by CYBG but the resulting entity will carry Virgin Money branding, marking the end of the road for two Victorian banking brands. Clydesdale Bank dates back to a first branch in Glasgow in 1838, while Yorkshire Bank was founded in Halifax in 1859. There are currently 70 Clydesdale Bank branches and 97 Yorkshire Bank branches.

Clydesdale Bank is unusual in that it issues its own banknotes, leading some to question whether the currency could be amended to feature Virgin founder Richard Branson’s visage. However it has been confirmed that the notes will continue to feature the traditional Clydesdale imagery.

The enlarged Virgin Money will seek to challenge the ‘Big Five’ UK banks (HSBC, Lloyds Banking Group, Royal Bank of Scotland, Santander). The next largest challenger bank, TSB, is half the size that Virgin Money will be following the merger.

Jim Pettigrew, the CYBG chairman, said: “It is clear to us that the combined group can transform the UK banking landscape and offer real benefits to customers and communities throughout the UK.”

FSMB consults on ‘statement of good practice’ following Libor

The FICC Markets Standards Board (FSMB) has published draft guidance on what information traders can share, in the aftermath of the Libor rigging scandal, according to Reuters.

The FSMB said the proposed guidance would set out the kind of information participants in commodities and fixed income markets can exchange in Britain.

In a statement, the board said: “The question of what information may be shared between participants in these markets is complex and recent conduct events have drawn attention to the risks associated with sharing information in an inappropriate manner.”

The Libor scandal saw banks fined billions of dollars as a result of rigging currency markets. The matter drew attention to the conversations between brokers from different bank and the exchange of information on a casual basis, by email, telephone or instant message.

The FSMB’s ‘statement of good practice’ is open for consultation. The aim of the code is to stop traders from going further than making general comment and submitting information that would enable another party to identify a client or provide investment recommendations.

The FSMB was established in a drive to clean up currency markets following the Libor scandal.

Tax havens required to build public company ownership registers

The government has said it will support a legislative amendment which will force British Overseas Territories to create public registers of company ownership, helping to address the global system of hiding places for ‘dirty money’ according to the Guardian.

Labour MP Margaret Hodge and Conservative MP Andrew Mitchell had tabled an amendment to the Sanctions and Anti-Money Laundering Bill currently going through parliament. Foreign Office Minister Alan Duncan confirmed that ministers would not seek to oppose the amendment.

The Speaker of the House of Commons John Bercow rejected a series of last-minute amendments seeking to dilute the disclosure requirements on the grounds that they were tabled too late.

The Hodge/Mitchell amendment will require the 14 overseas territories to introduce a public register of company ownership by the end of 2020, or face having a register imposed by the UK government. The territories include financial centres such as the Cayman Islands and the British Virgin Islands.

The issue of tax havens was raised with the release of the Panama Papers in 2016. Around half of the secretive companies revealed by the papers were said to be based in offshore structures registered in the British Virgin Islands, according to Transparency International.

Margaret Hodge defended the imposition of new rules on the overseas territories, which also saw interventions to abolish the death penalty in 1991 and decriminalise homosexuality in 2000.

Hodge said: “The areas on which we have intervened… are moral issues. I can’t think of another issue which is more moral than trying to intervene to prevent the traffic in cirrupt money and illicit finance across the world.”

Lloyds pre-tax profits rise 23% as bank looks to end of PPI complaints

Lloyds Bank’s pre-tax profits rose 23% in the last year, despite pressure from PPI compensation claims according to the Financial Times.

Pre-tax profits were £1.6bn, up 23% on 2017’s profits of £1.3bn. Last year the bank paid out £450m to address historic PPI claims.

Lloyds recently announced that it would set aside a further £90m for PPI claims. The mis-selling of the Payment Protection Insurance policies is by a long shot the greatest mis-selling scandal in UK banking history.

The bank has paid more than £18bn to settle PPI claims since 2011. Clydesdale and Yorkshire Banking Group is setting aside a similar sum, saying it expects the “level of complaints to remain at an elevated level for a period of time.”

The final deadline for making PPI complaints is 29 August 2019. Lloyds is making plans for its final emergence from the mis-selling scandal.

Chief executive Antonio Horta-Osorio said: “We have again delivered strong financial performance with increased profits and returns, a significantly reduced gap between underlying and statutory profit and a strong increase in capital.”

Lloyds recently announced the latest in a series of cost-cutting measures. So far in 2018 more than 2,000 jobs have been lost at the bank. Last week Lloyds announced the closure of 49 branch closures, with the loss of 1,230 staff.

Australian investigation hears evidence on banking misconduct

An enquiry into alleged misconduct within National Australia Bank has uncovered a number of revelations including impersonation of clients and falsification of forms, according to the Guardian.

National Australia Bank (NAB) and Australia and New Zealand Banking Group (ANZ) have been under the spotlight as evidence was being heard by the royal commission.

NAB top executives complained about having their bonuses reduced after employees under their supervision falsified client documents. One executive said the reduction sent the wrong message to NAB leaders.

A former financial adviser with ANZ was said to have recommended a $1.6m luxury marina apartment scheme to his clients, but siphoned off $100,000 when the scheme failed. ANZ did not compensate his clients.

In early 2017, an internal NAB review found 353 staff had falsely witnessed signing of client documents despite not being present at the meetings in which they were signed. The false witness was to support colleagues who had not completed financial forms properly.

NAB executive Andrew Hagger said falsification of documents was ‘common practice’ in NAB working culture, and staff perceived it to be helping clients by speeding up the process.

The commission also heard that Donna McKenna rejected advice from celebrity adviser Sam Henderson, who stars on a TV show. The advice would have cost or $500,000 in superannuation. McKenna claimed that a member of Henderson’s staff had impersonated her on phone calls in order to gather information about her super fund.

Credit Suisse CEO defends bank’s stance on sanctions

Credit Suisse’s chief executive has defended its stance on sanctions following criticism of big banks by US senators, according to Reuters.

Chief executive Tidjane Thiam spoke out after two senators demanded that big banks should disclose links to Russian oligarchs.

Thiam said: “I can’t comment on the [senators’ request.] But what I can tell you is we are in full compliance with every regulation in every jurisdiction we are present in.”

Thiam continued: “When there are sanctions, we are fully compliant with the sanctions, of course, and we have invested a lot of resources in continuously upgrading our ability to monitor.”

Switzerland is the world’s largest centre for managing offshore wealth. Its neutral status means it has long been seen as a safe haven for those looking to keep funds out of reach internationally.

However, Switzerland has recently begun to exchange information about clients with foreign tax authorities.

Two US Democratic senators wrote to banks including Bank of America, JPMorgan Chase, Citibank, Barclays, Deutsche Bank, UBS, HSBC and Credit Suisse.

On 6 april the US government announced sanctions on Russia in response to Russian interference in the 2016 US elections and other actions by the Russian government.

UBS chief executive Sergio Ermotti recently claimed the US sanctions on Russia were having a limited impact on its business, as the world’s largest wealth manager.

TSB banking app chaos nears resolution

The TSB banking app is now up and running for customers after a disastrous five-day period of customers being locked out or experiencing problems using the service, according to BBC News.

The bank has limited the number of people who can use the app at any one time, in anticipation of a surge in customers trying to log on. A weekend upgrade in the bank’s systems caused unforeseen problems that have caused chaos for customers.

Chief executive Paul Pester has said he is “deeply sorry” and pledged to pay customers compensation.

On Tuesday the bank’s mobile app and online banking platform were taken down for several hours amid a backlash from angry customers. The bank had warned customers that the upgrade may make services unavailable over the weekend, but users complained that the problems were occuring outside this window and expressed concern about being able to make payments and access cash.

Customers have also reported being able to see other users’ data on TSB sites, a claim which is being investigated by the Information Commissioner’s Office.

The Financial Conduct Authority said: “We are working with the firm to ensure customers are properly communicated with and are not left out of pocket.

“We will be talking to the firm to understand exactly what went wrong and the steps that they are taking to ensure something like this does not happen again.”

HSBC settles US private Libor claims

HSBC Holdings Plc has agreed to pay $100m (£71.3m) to settle private litigation over the Libor rigging scandal in the US, according to Reuters.

The bank is the fourth major company to settle claims that employees conspired to manipulate the Libor benchmark interest rate. The settlement is subject to court approval and was filed at the US District Court in Manhattan, New York.

HSBC has denied wrongdoing in the affair, but said it had settled the claims to reduce risk and avoid the cost and distraction of ongoing litigation.

The London Interbank Offered Rate or Libor is used to set rates on a vast array of products including credit cards, mortgages, student loans and other transactions. It sets the cost of banks borrowing from another.

Bankers were accused of fixing the rate by investors including the city of Baltimore and Yale University. The UK Financial Conduct Authority has said Libor will be phased out by the end of 2021.

Fed reveals interest rate rise

The US central bank has announced an interest rate rise to a target range of 1.5% to 1.75%, according to BBC News.

The Federal Reserve said the 0.25% change was being made to reflect a strengthened economic outlook. It was also hinted that interest rates would be raised twice more this year, while forecasts were also raised for increases in 2019.

The chairman of the Federal Reserve, Jerome ‘Jay’ Powell also expressed concern about trade tensions following the US government’s announcement of tariffs on steel and aluminium entering the US and the threat of sanctions targeted at China.

At a press conference, Powell said bankers and business leaders see the trade tensions as “a risk to the outlook.”

Members of the Federal Open Markets Committee, the body that votes on rate changes, forecast that the US economy will grow by 2.7% in 2018, above the 2.5% predicted in December 2017.

Members also expect higher interest rates in 2019 and 2020 than was the case in December 2017, which Brian Coulton of Fitch Ratings described as a “firming up of the future trajectory of policy tightening.”

Following the ultra-low interest rates put in place following the financial crisis, the Federal Reserve has been slowly increasing rates since 2015. The challenge for the central bank is to balance low unemployment with the potential for higher inflation.

Goldman Sachs drops from top three banks for commodities revenue

Goldman Sachs is no longer among the top three commodities banks, according to Reuters.

The US-based investment bank has been in the top three chart since Coalition, a data analytics firm, started compiling figures in 2010. In 2017 the top three banks for commodities-related revenue were JPMorgan, Morgan Stanley and Citibank.

Last year saw Goldman Sachs post one of its worst results on record. The bank has recently appointed a new commodities finance team to improve performance by developing a stronger corporate client base.

The banks with the largest revenue in commodities for 2017 were JPMorgan and Morgan Stanley, according to Coalition. In the previous year, Goldman Sachs had top ranking while JPMorgan and Citibank were in third place.

More stringent regulation and poor performance have been exerting downward pressure on revenue from commodities trading in recent years. In 2017 the sector stood at $4.3bn, the lowest in a decade. At the peak of the commodities cycle in 2008, revenue stood at $15.9bn.