Banks, Financial

Banking app targets millennials who want help budgeting

Graduate debt, rent and high living costs have made it hard for millennials to save for a house, a pension or even a holiday. For Ollie Purdue, a 23-year-old law graduate, this was reason enough to launch Loot, a banking app targeted at tech-dependent 20-somethings who want help to manage their money and avoid falling […]

Continue Reading


Eurozone inflation climbs to highest since April 2014

A welcome dose of good news before next week’s big European Central Bank meeting. Year on year inflation in the eurozone has climbed to its best rate since April 2014 this month, accelerating to 0.6 per cent from 0.5 per cent on the back of the rising cost of services and the fading effect of […]

Continue Reading


Wealth manager Brewin Dolphin hit by restructuring costs

Profits at wealth manager Brewin Dolphin were hit by restructuring costs as the company continued to shift its focus towards portfolio management. The FTSE 250 company reported pre-tax profits of £50.1m in the year to September 30, down 17.9 per cent from £61m the previous year. Finance director Andrew Westenberger said its 2015 figure was […]

Continue Reading


Travis Perkins and Polymetal to lose out in FTSE 100 reshuffle

Builders’ merchant Travis Perkins and mining company Polymetal face relegation from the FTSE 100 after their recent performances were hit by political events. The share price of Travis Perkins has dropped 29 per cent since the UK voted to leave the EU in June, as economic uncertainty has sparked concerns among some investors about the […]

Continue Reading


RBS share drop accelerates on stress test flop

Stressed. Shares in Royal Bank of Scotland have accelerated their losses this morning, falling over 4.5 per cent after the state-backed lender came in bottom of the heap in the Bank of England’s latest stress tests. RBS failed the toughest ever stress tests carried out by the BoE, with results this morning showing the lender’s […]

Continue Reading

Categorized | Banks, Insurance

UK banks welcome liquidity swap ruling

Posted on February 29, 2012

UK banks can use complicated asset trades with insurers to help achieve tough liquidity rules, the UK Financial Services Authority announced, cheering industry groups which had feared the transactions would be banned.

The FSA has been consulting on so-called “liquidity swaps” since July and delayed several deals, including a £1bn seven-year deal between Phoenix and a high street bank and a multiyear trade that Lloyds Banking Group tried to do with its Scottish Widows life assurance arm. On Wednesday, it formally blessed the idea. “We see a role for these transactions on a sensible scale, provided the risks are properly identified and managed by both parties,” Paul Sharma, FSA policy director, wrote in new guidance.

In a liquidity swap, an insurer, pension fund or other asset manager will lend a bank a large portfolio of gilts or other highly liquid bonds typically for between three and 10 years. The loan of these gilts is secured by a larger pool of collateral that can include mortgage-backed bonds, infrastructure debt or other less-liquid assets.

The deals allow the bank to boost its stock of liquid assets, as required by new UK and global banking reforms, while giving the insurer higher returns than those achievable from gilts.

But the transactions carry risks for insurers because they may not have the expertise to manage more complicated assets and they increase the links between banks and insurers during a crisis period. The FSA said in its guidance that it will continue to study the implications for financial stability.

The FSA’s views on these transactions are particularly important because the UK has been a world leader in liquidity regulation. After the run on Northern Rock and the collapse of Lehman Brothers, the City watchdog published standards well in advance of global agreement by the Basel Committee on Banking Supervision. Since the global rules are still being adjusted and will not become mandatory until 2015, the FSA guidelines could well become the worldwide benchmark.

The guidance is substantially friendlier to the transactions than a draft version that was published last July.

“We are quite pleased … It is a big improvement over what they initially came out with. The tone has changed. There is an admission that these liquidity swaps can be a good thing,” said John Breckenridge of the Association of British Insurers.