Shocks & Stares » FSA http://blogs.hillandknowlton.com/shocksandstares H&K\'s Financial & Professional Services Team Blog Tue, 19 Mar 2013 08:00:56 +0000 http://wordpress.org/?v=2.9.2 en hourly 1 Friday Fiver http://blogs.hillandknowlton.com/shocksandstares/2012/03/friday-fiver-8/ http://blogs.hillandknowlton.com/shocksandstares/2012/03/friday-fiver-8/#comments Fri, 16 Mar 2012 17:06:32 +0000 Edward Jones http://blogs.hillandknowlton.com/shocksandstares/?p=598 1. In a late breaking development, FSA regulatory chief Hector Sants announced his resignation from the soon to be disbanded organisation. It’s an unfortunate end to a week when the FSA successfully stung another trader for insider trading. Where next for Hector? Some are already suggesting a high profile role in industry awaits.                                                                                                                                                                                                                                              

2. Budget fever grew nicely, with more leaks from Treasury than there are hangers-on at an Only Way is Essex party. In no particular order, scrapping pensions tax relief, scrapping the 50p tax rate, issuing absurdly long-dated bonds, tax breaks for the TV and film industry and raising the income tax threshold towards £10,000.

3. Following on from point number one, it seems insider trading is a crime, but one that is only punishable by removing half a bonus. Then again, based on this, the key to insider trading really is as simple as playing a popular after-dinner game with your client over the (recorded) landline at your desk.

4. Hell of a week for Tesco losing its UK boss and telling its employees they’ll have to work two years longer before they retire – on the latter they’re to be applauded for addressing the issue sooner rather than later, many more are likely to follow.

5.  Fitch joined Moody’s this week to put the UK economy on a negative outlook threatening the AAA rating. Some have said it’s a gift for George Osbourne before the budget as it will set the tone for continued austerity. Indeed the agencies have been clear that any deviation from austerity would be more disconcerting. Ed Balls’ line however, that you should never set policy by the credit ratings agencies might just get some traction, particularly given the criticisms they face.

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FPS’ Friday Fiver http://blogs.hillandknowlton.com/shocksandstares/2011/11/fps-friday-fiver-28/ http://blogs.hillandknowlton.com/shocksandstares/2011/11/fps-friday-fiver-28/#comments Fri, 25 Nov 2011 17:24:44 +0000 David Chambers http://blogs.hillandknowlton.com/shocksandstares/?p=436 Happy weekend all! It’s been an incredibly busy week in our financial and professional services team this week, handling everything from the forthcoming surge in Christmas shopping, to understanding the world’s expats just a little bit more. Speaking of Christmas, it’s now just one month away – something our resident Christmas Enthusiast, Karen, reminds us of thanks to this handy iPhone app every single day.

Sadly, there isn’t actually a whole amount of Christmas cheer around at the moment, particularly not if you live in Europe, or indeed the US, as Ross blogged on yesterday. With that in mind this week’s Friday Fiver covers off the continuing economic situation, as well as changes for UK bank customers, and two of the biggest video games of all time. Enjoy, and happy weekend.

BYE BYE FREE MONEY…..When is a free bank account not free? Pretty much always in the opinion of the Financial Services Authority. According to this morning’s Financial Times, the financial regulator is of the belief that free current bank accounts have “distorted the landscape and led to damaging decisions about what products are available”. In other words, the costs of providing free current accounts have been made up elsewhere by retail banks charging higher fees for other services (and by selling occasionally dubious products such as PPI).

The result of all this? The FSA believes that customers should be charged for their current account to negate this problem. It may appear a controversial idea, but the UK is something of an anomaly on bank accounts in the West – lots of other countries charge for this service, albeit at a low level, so we shouldn’t really be surprised that charging may happen here too. That would certainly make starting a retail bank far easier, something Metro and Virgin would probably welcome. Any move is likely to require concerted action though – as the FT also noted, if one bank were to unilaterally start charging, customers would simply get up and walk down the road to a ‘free’ competitor.

IS THE UK REALLY A SAFE HAVEN?…..This week, Germany failed to sell all €6 billion worth of ten year bonds, which came as a bit of a shock to many. Then again, it also provided evidence of what we perhaps should already know by now: even Germany may not prove immine from the unfolding Eurozone crisis. The lacklustre auction may be an indicator that investors and banks are spooked by Germany’s exposure to the Eurozone crisis and the fact they are intrinsically linked to the future success or failure of the Euro currency. Remember it is the bond markets that have wreaked havoc for many of the Eurozone’s failing economies, so this week’s bund auction which only raised €3.6 billion, little over half of the full allocation, is an ominous sign.

It may be Germany's turn to sweat next

Following the under-subscribed auction Germany may have lost some of its image as the safe haven of Europe. This was further compounded by the fact that charges for UK 10 year gilts dropped below the same cost of borrowing for 10 year German bunds – 2.18% and 2.26% respectively – which is the first time this has happened since 2009. This evidence points to the fact markets view the UK as a safer option than Germany right now, a point you can bet Chancellor George Osborne mentions in his Autumn Statement on Tuesday. As Osborne will inevitably say, the low gilt charges are evidence that the Coalition Government’s economic policy is working to the extent that it is repelling contagion from our numerous struggling European counterparts.

Does all this point to the fact the UK is now the European safe haven of choice? We’re not convinced. With youth unemployment now over 1 million and forecasted economic growth of no more than 1% in 2012, the UK is teetering on the edge of slipping back into recession. Whilst the Government should be applauded for appeasing the markets to date, we are no-where near out of the woods yet and certainly can’t consider ourselves a safe haven as suggested by Osborne earlier this year.

GRAPH OF THE WEEK – PROPERTY…..We always enjoy the Business Dashboard graphics created by The Times’ business team, and Tuesday’s was no exception, highlighting the internationalisation of the City’s commercial property.

The City's property by nationality of ownership (Image: The Times)

LOBBYING AND THE BANKS…..With all the threats of regulation and counter threats by financial services companies of ‘we’ll leave the country if you regulate us’, it was refreshing this week to see the mud-slinging continue, this time on the subject of lobbying. The mud in question came from Robert Jenkins, newly appointed to the Financial Policy Committee – the body responsible for spotting risks to financial stability and ways of containing them. Jenkins adopted an aggressive approach, arguing that “A profession which should stand for integrity and prudence now supports a lobbying strategy that exploits misunderstanding and fear”. Though the FT pointed out that the most interesting dynamic in this is whether this rhetoric translates into FPC recommendations, we can’t help but think we could do with less of the rhetoric and more, well,  stability, though the two aren’t apparently (we hope) mutually exclusive.

GOOD WEEK/BAD WEEK…..In the Good corner this week, it’s Infinity Ward. Never heard of them? They’re the guys behind the Call of Duty video game, which along with our client Bethesda’s Elder Scrolls V, is currently outselling Hollywood blockbusters at a rapid rate. Video games are big, big business these days, enjoying huge marketing campaigns and massive airtime. It’s all a far cry from Pong in the 70s that’s for sure. Call of Duty isn’t without its detractors though – a group of MPs this week started a petition against the game in Parliament. As The Independent noted though, support hasn’t exactly been overwhelming for the cause, while Murdoch-scourge Tom Watson MP appears to be something of a fan – probably no select committee hearing just yet then.

In a rare appearance in the Bad corner, it’s the usually all-conquering Sir Philip Green, owner of the Arcadia Group which counts Topshop and Miss Selfridge among its raft of retail businesses. Green was forced to announce a hefty plan to axe over 200 stores this week following a large drop in profits. Arcadia has been a strong retail pillar in recent times, with Topshop leading the way on the high street. With consumer spending tightening each day in the UK, it could be a bumpy ride for Green ahead.

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FPS’ Friday Fiver http://blogs.hillandknowlton.com/shocksandstares/2011/07/fps-friday-fiver-12/ http://blogs.hillandknowlton.com/shocksandstares/2011/07/fps-friday-fiver-12/#comments Fri, 22 Jul 2011 14:08:08 +0000 David Chambers http://blogs.hillandknowlton.com/shocksandstares/?p=221 Hello All! It’s been another very heavy week of news, and equally heavy rain here in London – will summer ever raise its head again? Given the weather is playing havoc with any outdoor plans for the next few hours, we’ve put together another series of five key stories of the week from the world of financial and professional services. Thanks as ever to Ed, Mel and Jo for their contributions.

When is a default not a default?…Here are two rather intriguing and perhaps contradictory headlines for you from the same news website today: ‘Greece deal sparks bank-led European share rally‘, and ‘Fitch declares Greece default‘.

Greece - lives to fight another day

So which is it? The answer, rather confusingly, is both, depending on who you listen to. What isn’t in doubt is that eurozone countries have agreed another bailout package for Greece (though some have their doubts as to whether it’s big enough). This in turn, has sparked a market rally.

What also isn’t in doubt though, is that ratings agency Fitch have declared that because the deal involves private lenders ‘taking a haircut‘ on some of their debt, Greece has undergone a ‘restricted default’. At least in part. Confused? Quite possibly. What does it mean? That Greece continues to rage against the dieing of the light for a little longer, and that the other PIGS get some brief respite as well.

UPDATE – It seems we may have spoken too soon. According to Channel 4’s Economics Editor, Faisal Islam, Fitch is now not declaring Greece to be in restricted default.

Britain’s economy 2011 – what might we think in 2021?…What will be made of the Government’s economic policy in years to come? Will George Osborne’s approach be heralded as a masterstroke which got the nation back on its feet or criticised for paralysing the economy, engendering neither deficit reduction nor economic growth?

It’s a particularly intriguing question, given broad public support for the Government’s economic programme, both by economists and a significant proportion of the public. Are tough decisions being made now in the knowledge of public empathy undermining future economic growth? Ed pondered this issue in light of public sector borrowing figures rising last month, the corollary of this being missed borrowing targets set by the OBR, and subdued growth figures, emphasised by the depressing weather and decline in food sales.

The Chancellor has rebutted calls for a ‘plan b’ and there is little indication of a shift in his strategy. To be fair his hands are tied with the ever present threat of a downgrade in the UK’s credit rating. But it is continued suppression of growth that is alarming and the reluctance to use the domestic tools which are available, most notably VAT, to alleviate matters (something that some are pressing hard for).

George Osborne - hanging tough, but the pressure is growing (Image: Telegraph.co.uk)

Of course, by the time the General Election comes round the issue of growth may be redundant as the economic cycle picks up and returns a Conservative led Government. The alternative of a Japanese style decade of slow growth is put forward by David Miliband in the Huffington Post and an assessment Ed’s more inclined to agree with.

Whilst he hopes it is the former which comes true, the analysis closest to reality will no doubt be the subject of textbooks for years to come. The added dynamic of a supportive public and the impact this has on political economic decisions will be a particularly fascinating area of study.

A right royal row over the retail review…The first rule Mel learned as a young diplomat is that you don’t launder your dirty policy in public, as witnessed by the unedifying swift exchange of “in the public domain” letters between the Treasury Select Committee (TSC) and the FSA this week, following the former’s recommendation to a one year delay in introducing the Retail Distribution Review (RDR). But relations, of course, deteriorated there a long time ago.

The fact that the FSA, as the TSC put it so bluntly, made a “precipitate” move to circulate an embargoed response to their report does look clearly premeditated and indeed “pre-emptory” and an act the TSC “deprecates”. This is regulatory blue language…

Not so, cried the FSA – apparently misunderstood – and planning to submit a considered response to TSC by the end of September. Meanwhile, other regulatory heavyweights waded in – predictably the Association of Independent Financial Advisers quickly offered its firm support for the TSC’s calls for delay. Against this were Which? and the Financial Services Consumer Panel, urging no delay from the timetable.

At stake, a regulatory bun-fight around the pace of reform to introduce higher professional standards in the advisory community. The TSC feels that the current timetable will – needlessly – put a large number of experienced financial advisers out of business.

A lasting regulatory peace around this issue remains elusive. The question is, where does this leave the consumer in the brave new regulatory era to come?

Andy Hornby - new CEO at Coral

Good week/bad week – Andy Hornby…Perhaps we should make this a new feature of the Friday Fiver with a different candidate each week? If so, then Mr Hornby is a good contender for the first slot. Having left Alliance Boots in March saying he ‘needed a break’ from the corporate world, the increasingly Lazarus-like Hornby surfaced again in his new role as CEO of Coral on Monday.

Timing is everything though, and scarcely had the champagne been poured, then it may have turned a little flat in the former HBOS man’s glass as the FSA announced an enquiry into the former bank’s collapse.

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FPS’ Friday Fiver http://blogs.hillandknowlton.com/shocksandstares/2011/05/fps-friday-fiver-4/ http://blogs.hillandknowlton.com/shocksandstares/2011/05/fps-friday-fiver-4/#comments Fri, 06 May 2011 13:22:55 +0000 David Chambers http://blogs.hillandknowlton.com/shocksandstares/?p=104 Yes, it’s back. After a break for the Easter holiday, some glorious weather and that dress, we return with the Financial and Professional Services team’s Friday Fiver. We also have a fresh contributor this week, our new regulatory and government expert, Melanie Worthy. Other pieces this week come from regulars Ed Jones, Ross G, Karen and myself.

Crunch time for RBS and the FSA…The Treasury Select Committee and the FSA announced this week that they’ve asked City heavyweight Sir David Walker and lawyer Bill Knight to conduct an independent review of the report the FSA is producing into the failure of RBS. They will examine whether the report fairly reflects the findings of the FSA’s investigation of RBS, as well as analysis of its own regulatory activities.

Sir David Walker - charged with reviewing the demise of RBS (image from guardian.co.uk)

Walker’s unique attributes of being both a credible City figure plus a trusted Government adviser make him an obvious choice for the role. His track record helps too – he has headed Government enquiries, such as in 2009 when he examined governance at the big UK banks.

Just as well then, as he’s going to have his work cut out. However “complex” the issues were, as the FSA cites somewhat reluctantly, there will be strong media interest and expectation for answers as to the causes of RBS’ demise; the excessive cost to the public purse from bailout; and the wider malaise that played out across the banking sector as the financial crisis ensued.  Whilst Walker and Knight tread through a minefield to avoid the legal conflicts to RBS employees, they’ll be mindful of the need to show teeth and forensic review on both sides of the regulatory fence.

Nick Clegg – Stick or Bust…Most observers of the Westminster Village Ed’s spoken to in recent months have agreed on one thing: May 5th and the outcome of the AV referendum will determine the fate of the Coalition Government. As we’ve said previously, the fates of Nick Clegg and Ed Miliband appear eerily interlinked, with success for one leading to failure for the other. It seems neither will come out of this episode particularly favourably though.

It's not been a vintage week for Nick Clegg

Judging by Chris Huhne’s recent outbursts, it would seem to look more terminal for Nick Clegg, and Ben Brogan was on to something this week when he said Nick Clegg’s body language in PMQs was ominous.

Cameron, demonstrating his exceptional political judgement, was keen to move the story on and talk up the other important work the Coalition has set out. But where can it realistically go from here? If Lords reform is offered as a carrot to the Lib Dems to carry on, it’s highly likely a similar demoralising defeat will occur on it. On the flip side, Lord Knight’s suggestion that an early election to deliver the Conservative’s a majority is intriguing, but given the barriers against this, difficulties over NHS reform and the current state of the economy, this would appear wide of the mark.

Where else can the Lib Dems look?…Given the loss of 300 council seats and a probable resounding no to AV, what will be telling in the coming days is how the Lib Dem rank and file respond to defeat. Paddy Ashdown has already launched an attack at David Cameron, and Clegg may well be hoping that this and other attacks distract party members from aiming their wrath at him.

Clearly, Clegg is going to have to secure some tangible wins for the Lib Dems in order to quell the growing frustration. With this in mind, he may seek to increase the fight for a greater say on health reforms. The Health and Social Care Bill should allow for greater private provider provision of health care, but the extent to which the Tories have wanted to pursue this has caused unease amongst many Lib Dems.

The current pause in the process of passing the Bill and now the increased chance of Lib Dems demanding changes means that private equity firms are going to be increasingly turned off due to the levels of uncertainty around private provision. If the Lib Dems decide to really dig their heels in, private equity firms could lose out on what previously looked like a sure investment.

Exchange-Traded Funds – the current big thing?…Earlier this week, we enjoyed a fantastic training session with David Yates from Finance Talking. One of things he focused on was the growth of ETFs in recent years. Financial News picked up on this point earlier this week as well, noting the recenty outflow of money from four of the five largest asset managers and into ETFs – the magazine claimed $41.4bn of new money was poured into ETFs in Q1 2011 according to Blackrock.

Not everyone seems convinced though. In today’s FT, Gillian Tett examined the boom in this market, and argued that concerns are building amongst regulators about it. While not as inherently dangerous as the pre-2007 fad for ‘CDOs’, she did note that there are some striking parallels here. Clearly, others are still a big fan of them though, as FT Alchemy notes today.

This week's Big Bite was all about the future

Learning about the future…The exciting guest for this week’s FPS Big Bite was Patrick Harris from The Futures Company. He gave us some great insights into the world of futures and left us with an interesting and thought provoking debate.  As Patrick pointed out ‘the future is all around us, it’s just not evenly distributed’. We hope that gets you all thinking as much as it did our team!

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