The Monetary Policy Committee (MPC) of the Bank of England (BoE) cut interest rates from a 16-year high at their August meeting after a tight vote by its policymakers who were split over whether inflation pressures had eased sufficiently. BoE Governor, Andrew Bailey, led the 5-4 decision to reduce Bank Rate by a quarter-point to 5.0% and said the BoE would move cautiously going forward. Nevertheless, investors are betting on another interest rate cut this year with the chance of another move at its next meeting in September seen as a 55% probability although some analysts believe that better news on services inflation and wage growth could unlock a possible further two interest rate cuts by the year-end.
The Prudential Regulation Authority (PRA) has said that it will not publish rules for implementing tougher global bank capital requirements until after the summer which has raised questions about whether a July-2025 start date remains feasible. The standards were written by the global Basel Committee and member jurisdictions such as the UK, the European Union and the U.S. are adapting them for their national rulebooks. The European Union has already said that it won’t roll out a core plank of the rules until January 2026 to avoid unfair competition due to likely implementation delays in the United States.
The Financial Conduct Authority (FCA) has stated that it will give motor finance companies more time to provide data in connection with overcharging of commission allegations when buying a car spanning 14 years as it considers a possible motor finance redress scheme. This will also allow time to assess the outcome of the Barclays judicial review of the Financial Ombudsman’s decision to uphold a DCA complaint. Key providers include Barclays Group; Close Brothers Group; Lloyds Banking Group; and Santander UK Group. Analysts have estimated the banking sector’s total compensation bill could reach £16.0 billion.
The UK Payment Systems Regulator has reported that more than 252,000 cases of ‘authorised-push-payment’ (APP) scams were reported last year (worth circa £341 million) where people lost money from their accounts to fraudsters posing as genuine payees with 67% of money lost to such scams being reimbursed to victims. However, the data showed that reimbursement for victims still largely depended on which bank they use. The UK’s payments sector has called on the Regulator to roll back and delay by a year the introduction of tough new compensation rules due to start in October, saying that significant changes were needed to avoid damaging competition. The report said that Nationwide Building Society fully reimbursed 96% of the APP scam cases while AIB UK plc fully reimbursed only 3% of cases.
UK Chancellor, Ms. Reeves, has scrapped plans for the sale of the UK Government’s remaining 19.97% stake in NatWest Group plc to the general public on cost grounds. However, Ms. Reeves said the UK Government still intends to fully exit its shareholding by 2025-26, but that a retail share offer would mean having to offer the public discounts worth hundreds of millions of pounds. Meanwhile NatWest Group plc has announced the £2.4 billion purchase of a residential mortgage portfolio from Metro Bank plc. In addition, the Competition and Markets Authority (CMA) has cleared the £2.9 billion purchase of the Virgin Money Group by Nationwide Building Society as it found that the proposed deal did not give rise to a realistic prospect of a substantial lessening of competition.
During the month, Moody’s upgraded the long-term credit ratings of the Yorkshire Building Society to reflect its improved profitability, solid risk weighted capitalisation, low leverage, strong liquidity and well-managed asset quality as well as reflecting a large and stable retail deposit base and diversified wholesale funding profile with established market access. Meanwhile Fitch raised the outlooks for the Bank of Ireland and its Parent to “Positive” to reflect an improvement in the operating environment that has strengthening the Group’s business profile as well as reflecting agency expectations that the strong franchise will lead to sustainably better earnings prospects in the medium term. Fitch also upgraded the long-term credit rating of Landesbank Baden-Württemberg (LBBW) to reflect the agency view that the likelihood of support for the Bank from its owners has increased as a result of the recent reform of the institutional protection scheme (IPS) of the German savings bank sector.