By ELEANOR MYERS
with HANNAH BRENTON & JAMES FITZGERALD
PRESENTED BY
| SNEAK PEEK |
— Sexism rife in the City: MPs call for more legislation.
— Think tanks give U.K. economy poor score post-budget.
— Global banks face new rules to prevent capital “window-dressing.”
Good morning and happy Friday to our readers. Today, it’s International Women’s Day, and the Treasury Committee has things to say…
| DRIVING THE DAY |
SEXISM IS STILL RIFE IN THE CITY: U.K. MPs today called for legislation to tackle a “shocking” prevalence of sexual harassment and bullying of women working in the City of London and slammed a culture of impunity for perpetrators.
Odey’s shadow: The damning intervention on the City’s culture comes after several high-profile sexual harassment cases, including allegations against hedge fund veteran Crispin Odey, leading to the closure of his firm.
City patriarchy: The Treasury Committee, in a report published on International Women’s Day, found women who are victims of sexual harassment have been silenced by gagging orders, while employers failed to protect whistleblowers. And women are still paid less than men for doing the same job.
Harriett Baldwin, chair of the Treasury Committee, said diverse companies perform better, yet “efforts to tackle sexism in the city are moving at a snail’s pace.”
No more NDAs: The group of MPs want new laws to tackle misogyny, including banning non-disclosure agreements in sexual harassment cases and stronger protections for whistleblowers.
Financial services has the largest gender pay gap of any sector of the U.K. economy. To try and close that divide, the cross-party group of politicians wants a ban on prospective employers asking for a candidate’s salary history and a legal requirement to include salary bands in job adverts.
MPs also want to lower the reporting threshold on gender pay gap data to companies with 50 employees, down from 250 staff in financial services. And bad performers would have to produce a plan.
Regulatory costs: Still, members of the parliamentary committee also called on the U.K.’s financial watchdogs to drop proposals for businesses to report more data and set diversity targets — arguing they are a costly box-ticking exercise.
FCA response: “After extensive discussion, including with the industry, our starting point was that what gets measured gets done and transparent, comparable data would benefit firms, employees and the wider economy.”
The Bank of England said: “We welcome the Treasury Select Committee’s report and will consider all the responses to the recent consultation carefully. No decisions have been made and we will report back in due course.”
And the Treasury: Baroness Charlotte Vere, Treasury Lords minister, said: “The UK’s financial services sector is world-class, but we know there is more to do to support women to succeed in this industry. Our Women in Finance Charter shows an improved picture of female representation at senior level in the finance sector, but we cannot be complacent. Discrimination and harassment will not be tolerated, and the sector must stamp it out.”
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| WHAT’S ON |
The Financial Conduct Authority closes a consultation on money market fund reforms.
Mark your calendars! Our week ahead calendar landed in your inbox Thursday. Help us to help you, and go online to export and plan your week or suggest your own event.
**A message from Nationwide: Unlike the banks, Nationwide Building Society is owned by its members, not shareholders. That’s anyone who banks, saves or has a mortgage with us. Which means we can always focus on what’s best for them. It’s our fundamental difference and what makes us a good way to bank.**
| ECONOMY |
HARD LANDING: Two influential think tanks gave post-budget presentations yesterday and the findings were, well, grim. According to the Resolution Foundation, a raft of Tory tax hikes and threshold freezes has resulted in a typical U.K. taxpayer paying £3,900 more tax since 2019/20. Since 2010, the U.K. has had the weakest GDP per capita and wage growth, and among the highest unemployment rates of any period of government since WWII. Bleak.
Budget backlash: Vanguard Europe’s Chief Economist Jumana Saleheen said that none of the spring budget measures — including the National Insurance or capital gains tax cuts — would address low growth in the U.K., adding that the global finance giant has “concerns” over the sustainability of the country’s ballooning debt levels.
Speaking of debt: The typically Tory-friendly Taxpayers’ Alliance thinks that the real level of U.K. national debt will hit £12.1 trillion by 2024/25, which is four times higher than the official figure of £2.8 trillion. To put that mind-boggling figure in perspective… it is more than the economic output of the continent of Africa, Central America, Canada, Australia and New Zealand combined.
Uh oh: The boss of the Institute for Fiscal Studies, Paul Johnson, said that both the government and Labour Party are joining in a “conspiracy of silence” by not telling the public about the scale of the choices and trade-offs the U.K. economy will face after the election, adding that both parties face a “rude awakening” in the face spiraling debt and spending on crumbling public services.
| BANKING |
BASEL CRACKDOWN ON “WINDOW-DRESSING”: The Basel Committee on Banking Supervision proposed changes today to reduce “unacceptable” attempts by the world’s biggest banks to avoid heavier capital requirements, via the act of “window-dressing.” It refers to the practice of banks deflating their balance sheets at year-end to appear smaller, which enables them to reduce or even dodge additional capital requirements aimed at the biggest lenders, known as global systemically important banks, or G-SIBs.
Disruption: The Basel Committee today described the behavior as “unacceptable,” stating it “undermines the intended policy objectives” of the global standard-setter, and “risks disrupting the operations of financial markets.” It proposed in a consultation yesterday that, instead of reporting financial year-end values, the biggest banks should report the average of values measured throughout the year. Big banks would still submit the data yearly, but would need to compile quarterly, monthly or even daily data to reach the average. The standard-setter is leaning towards daily data and to including all banks that take part in G-SIB assessment in the reporting requirement, it said today.
What took so long? This is hardly new information: Research published by BIS staff almost three years ago found “a large and systematic contraction in the score” of EU lenders at year-end. Several G-SIBs repeatedly lowered their score to reduce capital requirements, but, more concerningly, the research found that some banks managed to avoid the designation altogether via “window-dressing.” Looking at data from 2014 to 2020, up to 13 banks in the EU would have faced more intense supervision and higher capital requirements in the absence of the practice. Of these, three banks would have been added to the G-SIB list, and 10 banks would have been allocated to a higher G-SIB bucket in at least one year.
No more capital: Banks defined as G-SIBs are allocated a category which determines their levels of additional capital buffers, with buckets ranging from 1 to 3.5 percent. No banks are in the top, 3.5 percent bucket, with most hovering towards the lower end. The highest is JP Morgan, with a 2.5 percent surcharge.
Next steps: The Basel Committee is consulting on the rule change to June 7 and is eyeing a 2027 rollout of the rules. Smaller banks could see lighter requirements, reporting monthly or quarterly data. The U.S. already enacted a similar change last year, switching to quarterly snapshots of banks’ balance sheets to make capital requirements more sensitive to changes in a bank’s risk profile.
BUYOUT: Virgin Money has agreed to a £2.9 billion takeover by Nationwide Building Society, which would create the U.K.’s second largest banking group if approved.
What’s the deal: Nationwide has tabled a 220p-a-share deal for Virgin Money, including a planned 2p-per-share dividend payout for shareholders. Both parties said on Thursday that they had reached a preliminary agreement on the deal, with the building society currently sifting through Virgin’s finances.
The planned tie-up…would create a banking group worth around £366.3 billion, with total lending and advances of about £283.5 billion. The two companies combined would have 696 branches across the U.K., second only to Lloyds Banking Group.
Paul Mihajlovic, partner at Baringa, said: “There are two underlying factors behind this deal. Firstly, mid-tier consolidation: the UK has too many smaller banks lacking differentiation while facing high regulatory burdens, so they have begun to merge. Secondly, many retail banks are facing an ongoing struggle to break into business banking. Nationwide have previously tried to accomplish this organically; today’s deal shows they have decided to achieve it by acquisition.”
CHARITIES GETTING BAD SERVICE FROM BANKS: A survey of charity trustees has revealed concerns with banks, with 42 percent saying they have experienced poor service from their lenders in the last year. Figures published by the Charity Commission yesterday show charities face a range of difficulties.
The numbers: 6 percent of charities surveyed had their accounts blocked or frozen in the past year, and 18 percent had difficulty opening a new bank account. 32 percent of the 2,541 respondents to the survey faced issues when trying to update their charity’s contact details or signatories. The Charity Commission wrote an open letter to high street banks in November last year about the “substandard” service they receive.
Hot topic: Last month saw lots of discussion about access to finance and banking, including companies being “debanked.” Charities are no exception: UK Finance opened a project in July 2022 to address concerns raised by the charity sector, acknowledging difficulties in finding and opening suitable accounts as well as ongoing account operation. Helen Stephenson, Chief Executive of the Charity Commission said: “I’m shocked, but not surprised by these new figures, which offer undeniable evidence of the extent and impact of the appalling service charities receive from some banks.”
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| TECHNOLOGY |
NEXT STEPS ON CRITICAL THIRD PARTIES: Gareth Truran, the Bank of England’s prudential policy director, confirmed that final regulatory requirements for critical third parties like cloud-computing providers will be published in the second half of this year, in a speech at techUK’s event on Wednesday, MFS U.K. understands. Truran’s speech will be published in full this morning.
| WHAT WE’RE READING |
The U.K. seeks to ban Lex Greensill from being a director for 15 years, reports the FT.
Bloomberg reports that three more women have joined the sexual misconduct report against Crispin Odey.
Long-term sickness impacting the economy, reports The Times.
Thanks to: Kathryn Carlson, Fiona Maxwell and Izabella Kaminska.
**A message from Nationwide: Our mutual status means that Nationwide does not have to pursue profit to pay shareholders dividends. Instead, we return additional value to our members as owners through our Fairer Share products and payments, and a focus on keeping branches open. To support diversity of business models, we would like all policymakers to commit to doubling the size of the cooperative and mutual economy, and in particular strengthening mutuals in the financial services sector. Key actions could include better consideration of mutuals when making regulation and legislation, new capital instruments that work for mutuals and a dedicated “Minister for Mutuals” in Government. Find out more.**